Half of the pandemic's unemployment money may have been stolen

Criminals may have stolen as much as half of the unemployment benefits the U.S. has been pumping out over the past year, some experts say.

Why it matters: Unemployment fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended in the hands of foreign crime syndicates — making this not just theft, but a matter of national security.

Catch up quick: When the pandemic hit, states weren't prepared for the unprecedented wave of unemployment claims they were about to face.

They all knew fraud was inevitable, but decided getting the money out to people who desperately needed it was more important than laboriously making sure all of them were genuine. By the numbers: Blake Hall, CEO of ID.me, a service that tries to prevent this kind of fraud, tells Axios that America has lost more than $400 billion to fraudulent claims. As much as 50% of all unemployment monies might have been stolen, he says.

Haywood Talcove, the CEO of LexisNexis Risk Solutions, estimates that at least 70% of the money stolen by impostors ultimately left the country, much of it ending up in the hands of criminal syndicates in China, Nigeria, Russia and elsewhere. "These groups are definitely backed by the state," Talcove tells Axios. Much of the rest of the money was stolen by street gangs domestically, who have made up a greater share of the fraudsters in recent months. The Treasury Department declined to comment on these estimates.

How it works: Scammers often steal personal information and use it to impersonate claimants. Other groups trick individuals into voluntarily handing over their personal information.

"Mules" — low-level criminals — are given debit cards and asked to withdraw money from ATMs. That money then gets transferred abroad, often via bitcoin. The big picture: Before the pandemic, unemployment claims were relatively rare, and generally lasted for such short amounts of time that international criminal syndicates didn't view them as a lucrative target.

After unemployment insurance became the primary vehicle by which the U.S. government tried to keep the economy afloat, however, all that changed. Unemployment became where the big money was — and was also being run by bureaucrats who weren't as quick to crack down on criminals as private companies normally are. Unemployment fraud is now offered on the dark web on a software-as-a-service basis, much like ransomware. States without fraud-detection services are naturally targeted the most. The bottom line: Many states are now getting more sophisticated about preventing this kind of fraud. But it's far too late.

I don’t know how the unemployment system works in all states but here in PA when an employee files for unemployment, I get a form to complete, sometimes multiple forms for the very same claim requesting information that includes my verification of the person having been an employee, the termination date, termination reason, their first and last day worked, whether they were full or PT, last pay, wage information for the last year, whether they were paid out vacation or pension or severance, etc. and several opportunities to dispute the claim, i.e. the former employee states they were laid off or were fired when in fact they quit or just failed to come to work anymore or were fired for cause, i.e. theft or willful destruction of company property, failing a drug test, physical fights with other employees, etc.

I also get a monthly statement of all unemployment claims charged to our account.

Sometimes the reason for termination can be hard to prove without documentation.

I myself was fired from my last job for questioning my manager and the HR Director about workload and expectations when our company acquired two additional companies, but our PR department staff was not going to be increased, even though at the time I as working 60+ hours a week under very stressful conditions.

When I questioned this and how we were going to handle the additional workload and casually mentioned that this might be more than I could handle, a week later I was told “you are no longer a good fit”, given termination paperwork, a 2-week severance and outsourced job placement services.

Yet when I filed for unemployment, they contested and said it was job abandonment, that I had just stopped coming to work and that I had previously missed too much time (not true). I had missed a few days a few weeks prior because of elevated and dangerously high BP but had a doctor’s note with a return-to-work clearance.

I had a telephone hearing but since it was in March of last year and in the middle of lock downs, I hadn’t been able to fax the documentation I had to the hearing master and my former boss lied, I lost my case and received no unemployment.

I’ve also seen it go the other way. I had an employee at my current job call in sick for having COVID, provided his positive test results and we told him to stay off (with pay) until he tested negative or no longer had any symptoms for 2 weeks. He stayed in communication for a week and then disappeared.

I even attempted to contact him by phone and text and even contacted his mother, who was his emergency contact, also a former employee herself, not only to find out his return-to-work status but also our concerns as to if he was OK.

But despite several messages, we go no answers and he never returned to work. A few weeks later I got an unemployment claim stating he was laid off due to lack of work. I contested and provided documentation and the dates and details of our attempts to reach him, yet he was awarded unemployment.

Only recently did I get an unemployment claim that was suspicious beyond the dispute of how the termination came about.

In that case the person had been an independent contracted outside salesperson who owned his own company providing sales services to us and to other companies and had last performed any services for us over 5 years ago, yet the claim stated “laid off due to lack of work” six months ago. It was also suspicious because although it was mailed to our address, the company listed was the previous contractor’s company and not our company and that was a big red flag to me that this may be a fraudulent claim.

I completed the claim form along with a letter stating the facts and documentation including his last invoice and a form 1099 proving he was never an employee and am waiting to see what happens.

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