The Washington Post: ‘A magnet for rip-off artists’: Fraud siphoned billions from pandemic unemployment benefits

Identity theft and other sophisticated criminal schemes contributed to potentially $163 billion in waste, while inflicting harm on unwitting victims.

Sareena Brown-Thomas had just arrived home from her shift as a custodian when she noticed an envelope in the mail from the D.C. government. Bearing her name, address and the last four digits of her Social Security number, the letter inside said she had been awarded unemployment benefits — a problem, she later recalled, since she had never applied for them.

The 32-year-old soon notified her bosses, believing last summer that she had put the matter to rest. But the real trouble wouldn’t start until September: When Brown-Thomas did actually find herself out of a job, she couldn’t get the financial support she needed. Mired in bureaucratic battles, she said she faced a months-long struggle just to prove her identity to the city.

“I’m still trying to figure out how to get a lot of stuff paid,” Brown-Thomas, who warred at one point with D.C. over her eligibility, said in an interview this spring. “It was so easy for them to use my Social Security number to get unemployment.”

Brown-Thomas is part of a sprawling community of victims caught up in a massive series of attacks targeting the nation’s generous coronavirus aid programs. The more than $5 trillion approved since the start of the pandemic has become a wellspring for criminal activity, allowing fraudsters to siphon money away from hard-hit American workers and businesses who needed the help most.

The exact scope of the fraud targeting federal aid initiatives is unknown, even two years later. With unemployment benefits, however, the theft could be significant. Testifying at a little-noticed congressional hearing this spring, a top watchdog for the Labor Department estimated there could have been “at least” $163 billion in unemployment-related “overpayments,” a projection that includes wrongly paid sums as well as “significant” benefits obtained by malicious actors.

So far, the United States has recaptured just over $4 billion of that, according to state workforce data furnished by the Labor Department this March. That amounts to roughly 2.4 percent of the wrongful payments, if the government’s best estimate is accurate, raising the specter that Washington may never get most of the money back.

In many cases, the criminals stole the unemployment funds using real Americans’ personal information. They bombarded states with applications filed in the names of actual workers or people in prison — sometimes to such a degree that, in the case of Maryland, fraudulent claims came to outnumber real requests for help, according to state correspondence reviewed by The Washington Post.

Criminals employed tools known as botnets to fire off thousands of applications, federal officials say, often with a single computer click. And they openly swapped tips for defrauding the government on popular websites and apps, including the messaging service Telegram. That has continued this year, as research showed at least two dozen groups with nearly 200,000 members openly discussed ways to avert states’ defenses and siphon funds just over an eight-week period in March and April.

The tactics are laid bare in a wide array of federal documents, congressional testimonies, technical reports and court filings, as well as interviews with roughly two dozen government officials and outside experts. Some of the malicious actors potentially even avoided detection, at least for a time, after the Labor Department refused to supply information needed to assist federal fraud investigations — a hurdle the White House intervened to resolve last year.

The troubles date to the earliest days of the pandemic, when roughly a million Americans were being thrust out of work daily. Congress responded with a series of massive rescue packages, which greatly augmented the jobless aid available nationally. Totaling nearly $900 billion, according to the Labor Department, the federal funds helped blunt the toll of the worst economic crisis since the Great Depression, allowing families to keep their homes and pay their bills.

Read the full article in The Washington Post

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