Unemployment fraud overwhelms states across the U.S., a look at the scope of the problem in Indiana

Coronavirus

INDIANAPOLIS — Across the country, fraud is overwhelming many states’ unemployment systems and causing a more complicated situation for millions of Americans already out of work, including thousands of Hoosiers.

The U.S. Department of Labor Office of the Inspector General estimates at least $63 billion has been paid out improperly through fraud or errors nationwide, with a ‘significant’ portion of that attributed to fraud. While many states have released figures, estimating the amount of money distributed in fraudulent payments, Indiana has not.

For weeks, FOX59 has pressed the Indiana Department of Workforce Development (DWD) for answers on how much money has been paid out in fraudulent unemployment claims, but officials refused to provide that answer.

A spokesperson for the DWD said, “it would not be prudent to give an estimate until the cases are actually investigated and established.”

Instead, the DWD provided data on how many claims the state has received, as well as the overall amount of money paid out in unemployment claims.

From Mar. 2020 through Feb. 18, 2021, the DWD says it received nearly 1.3 million claims for unemployment and paid over 800,000 ‘unique’ claimants. The department confirms that amounts to a total of $6.9 billion, including $5.4 billion in federal money.

On average, the DWD says 85% of weekly claims filed are resolved, which means they are either paid or denied. An estimated remaining 15% have fraud indicators.

The Indiana Attorney General’s (AG) Office said they are aware of more than 11,400 identity theft complaints related to unemployment fraud since Mar. 2020, but believes the number could be higher.

The following numbers include reported complaints filed by Hoosiers to a variety of agencies, including the Indiana AG’s Office, the Federal Trade Commission (FTC) and other agencies who report to the FTC:

Due to a potential lag in reporting institutions uploading their data, the AG’s office said the number of complaints for January and February 2021 may be greater.

Many people have opened their mail to find a 1099-G tax document for unemployment benefits they never applied for, or received, only to discover they have become a victim of unemployment fraud.

HOOSIERS IMPACTED BY UNEMPLOYMENT FRAUD EXPRESS FRUSTRATIONS OVER DWD’S HANDLING OF CLAIMS

Brad Snodgrass, a division manager at Horner Fan and Fabrication, found out, while he was at work, that someone filed an unemployment claim in his name.

“I got a call from personnel and they had asked me if I quit and I said no, I’m actually on the job right now,” Snodgrass explained. “They said, well there’s been an unemployment claim made under your name and I said, well I know nothing about that. I have not quit. I have no intentions of quitting.”

Snodgrass said his employer responded on that day, in June 2020, and said Snodgrass is gainfully employed and has never filed a claim.

“She wrote ‘fraud’ on the top of the document and said, ‘do not pay this claim,’ sent it back to the Department of Workforce Development and she sent me a copy of all of her paperwork so I have a file of it.”

Fast forward nearly five months, and Snodgrass received a notice of overpayment in the mail from the Department of Workforce Development, saying they overpaid him by almost $1,000.

The problem was, Snodgrass neither filed for unemployment nor received any payment from the state. He and his employer tried telling the state that months prior.

“You owe $990. This very aggressive letter said pay now, we’re gonna turn you over to collections, we’re gonna garnish your wages, you know, we’ll garnish your tax returns,” said Snodgrass. “Literally no mention of any kind of appeal process. There was a fax number on that document and a phone number.”

Snodgrass said he called the DWD repeatedly, but was never able to get someone on the phone. “I responded via fax on that letter with all of the documentation saying this is not correct,” he said. “I never heard a word back. I just assumed it was taken care of.”

He later found out, he was wrong. Another letter came in from the DWD in Dec., saying he owed the money and it would be turned over to collections if he didn’t pay it.

Snodgrass said he tried everything to dispute the claim, even going to the DWD in person.

He said he was told he should have filed a claim, even though his employer did the day he received a notice. Snodgrass then said he was told to file a report with agencies including the FBI, Indiana State Police, and more, which he also did.

“She said, somebody may be in touch with you in six months to a year,” he said.

Snodgrass wrote to his state representative, whose office responded they would help, along with our station. It was only after those measures that the DWD reached out to Snodgrass and wrote off his claim as fraud.

“It’s almost like the burden of proof is on me to go out of my way to prove that I did not receive any money than for them to understand that where their process broke down,” he said.

Snodgrass said he estimates he invested between 20 and 30 hours calling the DWD, filling out reports, faxing and re-faxing documents, and mailing his disputes.

“It’s just frustrating,” he said. “You just get absolutely nothing. You know, you don’t get any response from the other end.”

Snodgrass said he’s frustrated with the lack of communication on the DWD’s end throughout the entire process.

“I don’t know who’s responsible for the agency, I don’t know who’s responsible for different departments in the agency, but clearly there’s a massive breakdown in accountability, responsibility and it really needs to be corrected,” he said.

FOX59 asked the DWD numerous times for an interview to answer Hoosiers’ concerns over rising unemployment fraud and the frustrations over the department’s communications with fraud victims. The agency declined an interview.

Michael Carroll, who works for a company that focuses on cybersecurity for a government agency says it was also his human resources representative that contacted him about a fraudulent unemployment claim in his name.

“Interesting enough I was at work and got a call from my HR representative asking me why I was filing for unemployment insurance,” he said. “Which was a surprise to me because obviously I have not been negatively impacted by the pandemic and I’ve still been working.”

Carroll said he tried contacting the phone numbers listed and did not get any responses.

“I didn’t get much of a response from the Department of Workforce Development so I actually had to reach out to both my state senator and my state representative to get escalation on the issue,” he said.

He said within two weeks of his state representative’s office getting involved, he was told the issue was handled.

“Even the resolution itself is not very satisfying,” said Carroll.

He told FOX59 the department said the best they can do is lock his account so nobody can open a new unemployment claim in his name. “It kind of also blocks me from being able to open up a claim myself if something were to happen,” he said.

“Nobody’s collected money on my unemployment status, but it’s still a fraudulent account sitting out there with the DWD.”

Carroll said he is disappointed in the security of the state’s unemployment system. “It’s very disconcerting that there were just no checks to keep the claim from going into place in the first place.”

He said he is thankful to his HR representative, as well as his state representative’s office for stepping in, but would like to know why it took weeks for the DWD to provide him with some answer — any answer.

“I do go the extra step that most people don’t do to secure their information,” he said. “For me you know I think the biggest thing that’s got me scratching my head still is why the state didn’t enforce some sort of two-factor identity authorization.”

THE SCOPE OF THE PROBLEM IN INDIANA

Although the Department of Workforce Development would not talk about the specific numbers related to fraudulent payments, the Indiana Attorney General’s Office spoke with FOX59 about the general scope of the issue statewide.

“It’s been an unprecedented situation, kind of the perfect storm for crime,” said Doug Swetnam, Section Chief of the Data Privacy & Identity Theft Unit of the Indiana AG’s Office.

Swetnam said the pandemic, combined with economic damage that caused a sudden influx of unemployment claims, and extra money from the federal government, was a combination crooks saw as an opportunity and took advantage of.

“It’s an unprecedented amount of fraud that we’ve seen, especially in the last three months.”

Swetnam said as hard as Indiana has been hit with fraud in the unemployment system, it cannot compare to states like Ohio, Illinois or California.

But the problem does cross state lines, and many Hoosiers have fallen victim to that.

“We have a lot of victims in Indiana who have received notices from Ohio that they received unemployment benefits when they didn’t,” he said. “In order to sort that out, they have to follow up with the Ohio Employment Agency. It’s not a good situation.”

“We think the number of people who are impacted by this are probably much higher than the reports we received. A lot of people just don’t know it yet,” Swetnam said.

He believes as people file their taxes, many more will discover they owe more money, and that could be the point at which they find out they have become a victim of unemployment fraud.

“The pandemic has been like Christmas for crooks. It has given them so many opportunities that normally wouldn’t be there just because of the size and scope of the economic harm that happened with the pandemic,” Swetnam shared.

“The amount of federal money that is being pumped into the system. They’ve never had this many opportunities and all at once where they know that there are no law enforcement agencies that are set up to handle that scale of problems.”

“We’ve worked with the DWD enough that I know they’re working really, really hard and long hours to try and get it sorted out,” said Swetnam. “It’s frustrating for people and everyone understands and doesn’t blame anyone when they’re frustrated with them, but Indiana has done better than our neighboring states.”

THE CRIMINALS BEHIND THE CRIMES

“We are starting to get some idea of who some of the people are that are behind it,” said Swetnam.

“It’s basically every criminal element you can imagine, even down to prisoners in penitentiaries who are working with recently paroled prisoners.”

But how are these criminals accessing a person’s information?

“There are a number of ways that they gain it. I think most of it, they’re just buying it wholesale on the dark web,” said Swetnam.

“Typically these are syndicates,” said Michael Hathaway, Chief Operating Officer and owner of Certified Fraud and Forensic Investigations.

“They’re really smart-minded criminals who are putting all of these assets together, who are buying the data, going on the dark web,” he said. “You can buy one person’s identification for five cents basically. That’s the lowest rate.”

Hathaway explained a bit more of the lengths these criminals will go to.

“They buy these in the hundreds of thousands because some of these are from a data breach. So much information is out there being sold,” he said. “They buy the information, create your little syndicate and start filling all of these unemployment claims. They made it so easy to do because all you have to do is jump online and have WIFI access.”

He said he cannot speak to the security or controls the DWD has in place, but this is generally how these criminals are committing acts of fraud across the nation.

“It may be that some of them and some of the funds may be going overseas but there’s probably an accomplice here in the U.S. that helped them,” said Swetnam. “Eventually those people will be identified.

Swetnam said some data breaches have taken several years to track down the individuals behind the crimes, and said, “They won’t necessarily escape accountability but it can take time.”

“The government has all that money. Of course, they’re gonna be huge targets for scammers like this. That’s where the money is,” said Hathaway.

Swetnam said, “the majority of fraud attempts aren’t successful in getting money, which kind of makes that number enormous and it just shows how big the fraud problem is if the most of their attempts didn’t work.”

He said with a new wave of funding with the extension of the CARES Act, there is reason to believe this could be another wave of claims for scammers to target.

“A new batch of money is coming into the pipeline and we have every reason to think that all of the same crooks will make as great an effort to get those as they can,” he said.

Earlier this week, the Department of Labor Office of the Inspector General (OIG) released a report, estimating state agencies have lost tens of billions of dollars.

In the OIG’s report, it’s estimated the potential fraudulent benefits were paid in four major areas:

  1. Multi-state claimants: total of $3.5 billion in unemployment insurance benefits paid

According to the CARES Act, a person who works in more than one state and became unemployed due to COVID-related reasons, can only apply for benefits in one state. However, in one instance, investigators revealed a claimant used a social security number to file a claim in 40 states and received a total of more than $222,000 in unemployment insurance benefits from 29 states.

2. Social security numbers of deceased individual: total of $58.7 million in unemployment insurance benefits paid

The official report determined more than 91,000 social security numbers of deceased people were used to file claims for unemployment benefits.

3. Federal prisoners: total of $98.3 million in unemployment insurance benefits paid

The report revealed that social security numbers of 13,446 potentially ineligible federal prisoners were used to file for unemployment claims, totaling more than $98 million in unemployment insurance benefits. Officials say the problem is still occurring at state prisoner level as well.

4. Suspicious email accounts: total of $2 billion in unemployment insurance benefits paid

The Office of the Inspector General’s report said email service providers that provided accounts offering anonymity were used to extensively file unemployment insurance claims.

“These particular account types enable users to establish email addresses that can hide personal information, such as the user’s identity,” read the report. “The suspicious email addresses can also be used to apply for multiple UI benefits.”

HOW TO PROTECT YOUR IDENTITY AND MINIMIZE THE RISK OF BECOMING A VICTIM

Government officials have provided a resource on how you can take steps to protect yourself against identity theft and what you should do, should it happen to you.

Some of the tips include securing your social security number (SSN), collecting your mail every day, not sharing personal information just because someone may ask for it, and reviewing bank account and credit card information to monitor for any unauthorized transactions.

Experts also share that people should create complex passwords that identity thieves cannot guess and recommend you change those passwords, should a company you do business with have a breach of its databases.

It’s also recommended people review their credit reports once a year and be certain those don’t include any accounts you did not open yourself.

Additionally, you can freeze your credit to prevent someone from applying for, or getting approval for a credit account or service in your name.

Hathaway told FOX59 another way consumers can take steps to protect their identities is by being vigilant of phishing schemes. He says don’t click on certain links or text messages that say they’re from PayPal or a similar company, alleging there’s a payment ready.

He said scammers tend to succeed in their criminal efforts with both younger and older individuals because they’re not as well-versed in safeguarding their identities, but that it can happen to anyone.

If you do find out that a fraudulent claim has been opened in your name in Indiana, you can visit the DWD’s resource page on identity theft, which provides a list of resources.

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