Labor Department watchdog identifies $45 billion of potential pandemic unemployment fraud

The Labor Department inspector general on Thursday identified $45.6 billion in potential unemployment insurance fraud during the pandemic, a figure that far exceeds past estimates.

A sweeping federal relief package signed by former President Trump in March 2020 expanded the ability for individuals to receive unemployment benefits, leading more than 57 million people to apply in a matter of months.

The watchdog said fraudsters allegedly filed claims using suspicious email accounts or Social Security numbers of the deceased and federal prisoners ineligible for the benefits. Some also filed claims in multiple states, according to a press release from the inspector general.

The office in June 2021 outlined $16 billion of potential fraud during the pandemic, and it warned in a memo this week that increased assistance is needed from the Labor Department in timely reporting unemployment insurance (UI) data to mitigate the fraud.

“Hundreds of billions in pandemic funds attracted fraudsters seeking to exploit the UI program — resulting in historic levels of fraud and other improper payments,” Inspector General Larry Turner said in a statement. “I am extremely proud of how our team has responded to this unprecedented crisis, despite significant resource constraints and data access issues.”

Turner’s office said its 190,000 unemployment fraud investigations since the start of the pandemic have now led to more than 1,000 charged individuals. Turner said the number far exceeds the watchdog’s pre-pandemic work on unemployment claims and highlights the problem’s magnitude.

“I applaud [the inspector general office’s] extraordinary response to this unprecedented fraud,” said Associate Deputy Attorney General Kevin Chambers, who leads the Justice Department’s COVID-19 fraud enforcement.

The watchdog’s memo also took aim at the Labor Department’s Employment and Training Administration (ETA), which manages unemployment benefits, accusing the administration of reporting unemployment data in an untimely fashion.

The inspector general’s office pinned some of that blame on the department’s implementation of relevant regulations but noted that the ETA is exploring interim solutions.

“ETA’s lack of sufficient action significantly increases the risk of even more UI payments to ineligible claimants,” the memo stated. “Our identification of the additional potentially fraudulent payments emphasizes the need for increased ETA engagement and assistance to mitigate fraud and protect the UI program’s integrity.”

When reached for comment, a Labor Department spokesperson referred to an ETA response letter contained in the memo.

The letter outlines multiple points of disagreement, including that individuals may file claims in multiple states in certain circumstances, and ETA says in those cases state agencies determine which state should pay the benefit.

“ETA is concerned that the [inspector general’s] mischaracterization of the Department’s efforts to provide the [inspector general] access to state UI data portrays ETA as opposing or obstructing the effort to provide such access,” the agency wrote in its letter. 

“This characterization is not fair and is not reflective of ETA’s actions,” it continued, saying the agency is limited in what it can do under federal law. 

— Updated at 5:46 p.m.