Watchdog raises estimate of pandemic unemployment fraud to $135 billion

Washington
CNN
—

According to a report released Tuesday by the U.S. Government Accountability Office, $135 billion in unemployment insurance fraud was likely paid out in the wake of the Covid-19 pandemic.

The whopping figure, which equals 15% of the total unemployment benefits paid out during the pandemic, is a marked increase from the $60 billion the watchdog previously estimated in January.

In comments to the draft GAO report, the Labor Department said the office likely overestimated the true amount of fraud. However, the department’s Office of Inspector General said in February in testimony before a House committee that at least $191 billion in unemployment benefits as a result of the pandemic may have been improper, with “a significant portion related to fraud.”

The GAO rejected the department’s contentions in its report and upheld the methodology used.

“Given that not all potential fraud will be investigated and resolved in judicial or other systems, the full extent of UI fraud during the pandemic will likely never be known,” the GAO report said. “Therefore, it is appropriate to rely on estimates such as ours to draw more comprehensive conclusions about the extent of UI fraud during the pandemic.”

The findings, released Tuesday, shed light on multiple schemes to steal money from a number of hastily implemented pandemic relief programs that have caught the attention of lawmakers in Congress and prompted legislative action. Last year, President Joe Biden signed two bipartisan bills aimed at holding accountable those who commit fraud on pandemic relief programs.

“My message to those fraudsters is this: you can’t hide. We will find you. We will force you to return the stolen goods and bring you to justice according to the law,” the president said then.

In May, the House of Representatives also passed a bill to help recover fraudulent unemployment insurance benefits paid out during the pandemic. However, the bill was not brought up for a vote in the Senate.

Fraud in the national unemployment system has increased dramatically since Congress passed a historic expansion of the program in March 2020. State unemployment agencies were overwhelmed by a record number of claims and eased some requirements to get money out faster for those who lost their jobs.

But high payouts and lax controls quickly attracted criminals from around the world. States and Congress have since tightened their vetting requirements in an attempt to crack down on fraud, particularly in the pandemic unemployment benefit program, which for the first time allowed freelancers, gig workers and others to collect benefits.

According to the Labor Department’s Office of Inspector General, more than $888 billion in federal and state unemployment benefits were paid between late March 2020 and early September 2021, when all pandemic raises ended nationwide.

The GAO report said that “unprecedented demand for benefits and the need to quickly implement new programs increase the risk of fraud.”

Other pandemic relief programs have also been targeted by criminals. The GAO in May flagged 3.7 million recipients of Small Business Administration funds as “warning signs of potential fraud.” The SBA has made available $1 trillion to help small businesses during the pandemic through measures including the Payroll Protection Program and the Covid-19 Disaster Loan Program. Help was provided to more than 10 million small businesses.

Some fraudulent claims were reimbursed. States discovered $5.3 billion in fraudulent overpayments of unemployment benefits and recovered $1.2 billion, the GAO reported.

A Justice Department spokesman told CNN on Tuesday that as of Aug. 30, the department had charged more than 3,000 people with fraud related to the pandemic.