Report: Unemployment fraud costs $5.4B, states must act now to stop it

State unemployment agencies — including Ohio — have paid $5.4 billion in potentially fraudulent unemployment benefits nationwide, and more should be done to prevent the theft, according to a federal report released Wednesday.

The U.S. Department of Labor Office of Inspector General identified fraudulent payouts made from March through October 2020 nationwide. That included:

  • $3.5 billion to people using the same Social Security number in multiple states.
  • $2 billion to suspicious email accounts.
  • $98.3 million to federal prisoners.
  • $58.7 million to the Social Security numbers of dead people.

The total amount being lost to fraud is likely much higher, the report notes. In January, California reported it paid at least 10 percent ($11 billion) of its unemployment benefits to fraudulent claims since the pandemic began, and believes the amount could be up to 27 percent ($29 billion).

ExploreExperts: Ohio lags other states in stopping huge unemployment fraud

If those rates hold true across the country, the $400 billion states paid out in CARES Act unemployment benefits could be losing between tens of billions — or over $100 billion — to fraud.

Ohio Department of Job and Family Services officials reported to the U.S. Department of Labor in December that it identified more than $330 million lost to fraud last year.

“ODJFS certainly welcomes any additional guidance on enhanced fraud detection methods from the U.S. Department of Labor. Identity theft is a widespread national issue that every state is dealing with. Ohio is appreciative of any assistance from our federal partners to combat fraud and protect our citizens,” said Tom Betti, a spokesman for the state agency.

Many Miami Valley residents this year are learning someone fraudulently filed for benefits in their names — or in some cases benefits were paid in the names of deceased spouses. The state has flagged more than 800,000 claims as potentially fraudulent.

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The new OIG report says states and federal agencies can do more to detect and prevent fraud, working together to focus on cross-state claims, suspicious email accounts, incarcerated people and identifying Social Security numbers of dead people.

The inspector general found 226,829 Social Security numbers used to apply for benefits in multiple states. One number was used to file a claim in 40 states and received $222,532 in benefits from 29 states. The report says all state unemployment agencies have the ability to perform cross-state matches, but not all were doing so.

The report also found over 91,000 Social Security numbers for deceased individuals were used to obtain benefits, as well as the numbers of 13,446 federal prisoners. The report says the federal Employment and Training Administration needs to help states cross-check Social Security numbers with those of people who are deceased or incarcerated.

ExploreMassive fraud slows legitimate unemployment claims, state says

Many claims were filed using email account types that enable users to hide personal information, such as their identity, the inspector general said. Claimants using one such provider received $269.7 million in benefits. In total, federal investigators identified 276,194 suspicious email addresses used to file for claims.

“Additional controls are needed to mitigate the use of suspicious email accounts to commit fraud,” the report says. This can include requiring states to request identity verification from people using such accounts or prohibiting such accounts from being used to file for unemployment.

“(The Employment and Training Administration) needs to take immediate action and increase its efforts to ensure (states) implement effective controls to mitigate fraud and improper payments,” the report says.

U.S. Sen. Rob Portman, R-Ohio, said Wednesday that funding to focus on combatting fraud and better administering unemployment programs should be included in the next coronavirus relief bill.

“What we found is these state unemployment insurance entities are just overwhelmed and they have not kept up with the fraud issues, particularly with regard to the expansion for people who are self-employed,” he said.

Portman said in addition to wasting taxpayer money, this fraud is impacting countless Ohioans whose identities were used by scammers to apply for unemployment, and who now have to prove that they don’t owe money to the state and IRS.

“It’s just a real mess,” he said. “So we need to tighten up on the screen as to who is eligible, and I think some federal funding for that purpose is appropriate.”

Are you the victim of ID theft-related unemployment fraud?

Hotline: State officials launched a hotline for people who suspect their identity was improperly used to file for unemployment benefits. The number is 833-658-0394.

Website: Individuals and employers can visit unemployment.ohio.gov to report suspected unemployment fraud and obtain information on what to do if you or your employee’s identity may have been compromised.

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