Covid-19 Unemployment Fraud May Have Topped $45 Billion, Watchdog Estimates

People used Social Security numbers from dead, imprisoned to get money from program meant to help those laid off during pandemic

By David Harrison and Joseph Pisani of The WSJ. 

"Criminals potentially stole an estimated $45.6 billion by making fraudulent unemployment insurance claims meant for people laid off during the Covid-19 pandemic, a government watchdog said.

The new tally is nearly three times last summer’s estimate of over $16 billion in fraudulent payments.

More than half of the potential fraud identified between March 2020 and April 2022 stemmed from individuals filing for benefits in multiple states. Fraudsters also used the Social Security numbers of people who were dead or in prison, as well as suspicious email addresses, the Labor Department’s inspector general’s office said in a report released Thursday. 

More than 1,000 people have been charged with crimes involving unemployment insurance fraud since March 2020, the report said. 

The inspector general’s office said it didn’t have access to the most current federal prisoner data for its report and focused on other high-risk areas of fraud. 

The pandemic unemployment insurance program, started in March 2020, gave those who lost their jobs an extra $600 a week in federal aid at first, which was later reduced to $300 a week. The supplemental benefit expired last year.

More than $872 billion in pandemic aid has been paid out since March 2020, according to the inspector general’s office.

The hundreds of billions in pandemic funds attracted people seeking to exploit the unemployment program, “resulting in historic levels of fraud and other improper payments,” said Larry Turner, inspector general for the Labor Department, in a statement Thursday.

A spokesman for the Labor Department, when asked for a comment, referred to a letter the agency drafted in response to the investigation. The letter said the agency agreed with the inspector general’s assessment regarding an increase in fraud across the U.S. during the pandemic. The department is also committed to finding new tools and strategies to combat fraud, the letter said.

The report only covered a few specific areas of fraud. The overall amount of fraudulent payments made during the pandemic is likely much higher, said Matt Weidinger, a senior fellow at the right-leaning American Enterprise Institute think tank.

“While these [numbers] are shocking and huge, they fall far short of what we expect these numbers to be,” he said.

Overall, about 19% of unemployment insurance money was misspent during the pandemic, up from around 9% before the pandemic, according to a Government Accountability Office report released in June. Some of that overspending was likely due to people who mistakenly were sent benefits after they had returned to work rather than outright fraud, the report said.

Speaking before Congress in March, Mr. Turner said such a large improper payments rate represents about $163 billion in overpayments “with a significant portion attributable to fraud.”

States across the U.S. began to grapple with unemployment fraud shortly after the pandemic hit in early 2020. Surging unemployment claims—which hit record highs at the onset of Covid-19—was one reason states were more vulnerable to fraud.

Many states also entered the pandemic with antiquated technology that left them underprepared to detect and weed out fraudulent claimants. 

Criminals often use stolen Social Security numbers, birth dates and other personal information to apply for benefits. Fraud led many states to temporarily freeze unemployment payments, at times affecting hundreds of thousands of claims, including legitimate ones for laid-off workers.

Lawmakers on both sides of the aisle said the report should prompt state and federal officials to better prevent fraud in the future.

“I’ve long said we need a national set of technology and security standards for state systems to better prevent this kind of fraud and we’re going to keep working to get our reforms passed,” said Sen. Ron Wyden (D., Ore.), who chairs the Senate Finance Committee.

“The government has an obligation to taxpayers to recover as much of this stolen money as possible,” said Sen. Susan Collins (R., Maine).

In August, Ms. Collins joined with several other Republican senators to introduce legislation to claw back fraudulent payments.

The report on fraud comes as the White House is seeking $22.4 billion in new aid for Covid-19 from Congress. Federal officials have said the funding is critical to help develop and purchase more durable vaccines that prevent transmission and breakthrough infections. Republicans have so far opposed any new spending."