COVID-19 unemployment fraud: Long Islanders allegedly stole nearly $350G during pandemic's darkest days

An acupuncturist, gang members charged with murder, a crossing guard, a college professor, an aspiring congressman — they’re all among the Long Islanders accused of stealing nearly $350,000 in jobless benefits meant to help the unemployed survive the coronavirus pandemic.

At least 16 people who live or work in Nassau and Suffolk counties allegedly ripped off the unemployment insurance program and additional pandemic-era programs that temporarily expanded eligibility and boosted weekly payments, according to a Newsday analysis of federal court cases and state administrative decisions.

Nationwide, up to $135 billion was stolen from unemployment insurance — about 15% of the nearly $900 billion distributed between April 2020 and May 2023, during the worst days of the pandemic — according to the U.S. Government Accountability Office.

That makes unemployment insurance the second-largest source of pandemic fraud, behind the Paycheck Protection Program and COVID-19 Economic Injury Disaster Loans, which together lost more than $200 billion, based on estimates from the independent inspector general of the U.S. Small Business Administration, which oversaw both loan programs.

The alleged incidents of unemployment fraud on Long Island and across the country in 2020 and 2021 are receiving renewed attention as lawmakers in Washington and state officials who oversee jobless benefits look to implement safeguards before the next crisis happens.

Experts attributed the scale of the fraud to the speed and size of the response to a record 23.1 million people being thrown out of work in April 2020, when the economy was shut down to slow the spread of COVID-19.

“The system had so many holes in it,” said Marie Springer, an adjunct associate professor at John Jay College of Criminal Justice who has been tracking pandemic fraud for years. She said state labor departments were overwhelmed by claims and the new expansion programs “didn’t have adequate controls in place to prevent fraud.”

Court filings and administrative decisions detail how individuals exploited the unemployment insurance system to collect benefits they weren’t entitled to — money that otherwise would have gone to people out of work.

Springer and others said the expansion programs were an inviting target because they dramatically boosted weekly payments overall. In New York State, the maximum payment went from $504 to $1,200 — and could be received for up to 79 weeks. 

The surge in fraud had real consequences. Money intended to help people buy groceries, pay rent or mortgages, put gas in their cars and keep the lights on was instead collected by people who were still working — and, in some cases, allegedly used to finance violent crimes, according to court filings.

“People didn’t believe they would get caught, so they took advantage,” Springer said. “There was a green light to a lot of people who are ethically challenged. They said, ‘Too bad. I got money and you didn't. I deserve it because I'm smarter than you.’”

An unfinished reckoning in federal courts

Some of the accused fraudsters with ties to Long Island are well-known, such as former Rep. George Anthony Devolder Santos, or members of notorious gangs, such as the Insane Crip Gang and Gorilla Stone Bloods. But many are rank-and-file employees in health care and government. 

Among the 16 alleged fraudsters, three have been sentenced, according to the Newsday analysis. Five have pleaded guilty and will likely be sentenced next year, and five have pleaded not guilty and are awaiting trial in federal courts in Central Islip, Manhattan and Albany, according to the analysis.

Three of the alleged fraudsters had their cases handled administratively, not criminally, through the state Department of Labor's Unemployment Insurance Appeal Board. In each case, a board member, who was appointed by the governor, upheld the decision of an administrative law judge that wrongdoing had occurred and benefits must be repaid.  

For 11 of the 16 people accused, unemployment fraud was one of multiple alleged crimes, the analysis shows.

Junyi “Jenny” Liu, the acupuncturist from Great Neck, pleaded guilty in March to orchestrating a $23 million health care fraud scheme. She ran four medical offices in New York City during the pandemic that billed Medicaid and private insurers for acupuncture and physical therapy sessions that were unnecessary or never performed, according to a federal indictment.

As part of the guilty plea, Liu agreed to repay more than $40,000 in unemployment benefits that she and an unidentified relative received by falsely claiming they couldn't work because of COVID-19. Both were employed at the medical offices while they received benefits.

Prosecutors said Liu directed office staff to submit unemployment insurance applications for herself and the relative and to file weekly certifications in 2020 and 2021 falsely stating they were jobless and available for work. The relative spent five months in China during that period, prosecutors said.

Liu is to be sentenced on Jan. 29 in Manhattan federal court. She faces up to 10 years in prison, three years of supervised release and possible deportation. Liu, through her attorney, declined to comment for this story.

Prosecutors allege stolen benefits flowed into organized crime

Of the nearly $350,000 that Long Islanders allegedly stole in pandemic unemployment insurance, about $200,000 was allegedly taken by members of the Hempstead branch of the Insane Crip Gang.

The gang allegedly used personal information obtained through computer hacks to fraudulently obtain unemployment benefits from California’s Employment Development Department. The money, along with proceeds from fraudulent business loans, was used to support acts of violence — including three murders, about 20 shootings, robbery and attempted kidnapping — in Nassau County, according to a federal indictment.  

Anne T. Donnelly, the county's district attorney, said, "This gang financed its activities by systematically stealing from government benefit programs designed to aid the unemployed and those adversely impacted by COVID."

Among the six local members of Insane Crip, four have pleaded guilty to charges ranging from attempted murder and discharging firearms during crimes of violence to racketeering. All are likely to be sentenced next year, court records show.  

Only Rob Pardo, of Mount Sinai, appears to have pleaded to wire fraud, the charge that encompasses defrauding unemployment insurance. His attorney, John Kaley, said, "Mr. Pardo has accepted responsibility for his conduct and regrets his poor decisions." 

Lawyers for the other alleged gang members didn’t respond to requests for comment or declined to comment.

California’s unemployment insurance system was not the only one targeted by organized crime. 

Roberta Reardon, New York’s labor commissioner for more than a decade, said gangs deployed computer bots and accomplices “to hammer the system over and over again with [fraudulent] claims for benefits. It was massive."

In 2019, before the coronavirus pandemic, the labor department only received 94 fraudulent applications for unemployment with payouts totaling $46,000, according to Reardon.

In comparison, she said fraudsters submitted about 500,000 applications in 2020 and 1 million in 2021. They secured more than $4 billion, or 4% of the $105 billion paid to 5 million New Yorkers between March 2020 and March 2023. An audit by the state comptroller estimated at least $11 billion was stolen in the pandemic's first year.

The department stopped $34 billion in bogus unemployment insurance claims after deploying a number of anti-fraud tools in 2021, including the identity software ID.me. The software requires applicants to upload their driver’s license, passport or other government-issued form of identification.

Benefits recouped administratively

Reardon estimated the state has recovered nearly $450 million in fraudulent payments through bank account freezes, criminal prosecutions and other means.

Some funds were recovered through the labor department’s administrative proceedings, where administrative law judges, and in some cases the Unemployment Insurance Appeal Board, review allegations of fraud. Participants’ identities are generally not publicly disclosed under state law, Leighann Brown, the board’s executive director, said in response to questions from a Newsday reporter.

Still, Newsday found three board decisions that stated the participant’s ties to Long Island: a former janitor, now living in Nassau County, who cleaned surgical rooms at an outpatient medical center; a Nassau crossing guard who also worked at a travel agency; and a Nassau Community College professor who also taught at Suffolk County Community College and served as a substitute teacher in two public school districts.

The professor received the largest amount of unemployment insurance: $21,792 between March 2020 and March 2021 after losing his Suffolk County Community College and public school jobs. However, his continued employment at Nassau Community College made him ineligible for benefits, appeal board member June F. O’Neill wrote in a 2022 decision affirming an administrative judge’s ruling that the benefits be repaid, along with a $3,269 civil penalty.

“The claimant made willful misrepresentations to obtain benefits. Each week the claimant responded that he had not worked any days” when in fact he had taught NCC students, O'Neill said.

About half the benefits the professor received came from the Federal Pandemic Unemployment Compensation program, or FPUC, according to the appeal board decision. FPUC provided weekly supplements of $600 — later reduced to $300 — to regular unemployment insurance between March 2020 and September 2021.

FPUC was one of three temporary pandemic expansions of unemployment insurance. The others were Pandemic Emergency Unemployment Compensation, which extended benefits for people who exhausted regular aid, and Pandemic Unemployment Assistance, or PUA, which covered workers ineligible for traditional unemployment insurance, including the self-employed and independent contractors.

Former Rep. George Santos, who briefly represented parts of Long Island’s North Shore and Queens, defrauded both PUA and FPUC, federal prosecutors said.

The Queens resident received nearly $25,000 by falsely claiming to have lost his job due to COVID when he was employed almost continuously in 2020 and 2021 as a regional director for the Florida-based investment firm Harbor City Capital. His monthly salary was $7,000, according to a federal indictment.

Last year, Santos pleaded guilty to defrauding the unemployment insurance program along with crimes tied to his campaigns for the House of Representatives.

“I am profoundly sorry for the criminal conduct,” Santos said at his sentencing in federal court in Central Islip in April. “Insecurities and narcissistic blind spots paved the road to my misconduct.”

He was sentenced to 7 years and 3 months in prison, but President Donald Trump commuted the sentence months later. Since Santos’ release from prison in October, he has said he doesn’t have to pay restitution of $373,750 and forfeiture of $205,000.

His attorneys didn’t respond to requests for comment for this story.

A system built for speed, not scrutiny

Santos was among thousands of people who exploited PUA. 

The program was a magnet for fraudsters because for its first nine months applicants only had to self-certify that they were eligible and weren’t required to provide proof of income or identity, according to an audit by the inspector general for the U.S. Department of Labor.

Inspectors general from 20 federal agencies, through the Pandemic Response Accountability Committee, have spent the past few years examining how criminals stole pandemic relief and ways to strengthen programs for the future.

“The focus of the federal government has been to get the money out quickly, not to get the money out quickly to the right people,” said Michael E. Horowitz, the committee’s acting chairman and IG at the Federal Reserve.

“It was easy for professional criminals to defraud PUA and some of the other [pandemic relief] programs because the guardrails were down, the controls were removed. And once word got around that this was easy money, you had people who weren’t professional criminals, who weren’t involved in gangs trying to get money they weren’t entitled to,” he said.

The accountability committee has been lobbying the U.S. Senate to pass a House bill extending the five-year statute of limitations for prosecuting pandemic unemployment fraud to 10 years. The statute for defrauding the Paycheck Protection Program loans and the COVID-19 Economic Injury Disaster Loans was extended to 10 years.

"We cannot train an entire generation of Americans and foreigners who stole or tried to steal that crime pays. That you won't be held accountable, that it's a free pass," Horowitz said.

Acknowledging the preponderance of fraud, Congress and then-President Joe Biden established the Unemployment Modernization Office and earmarked $1 billion to help state labor departments overhaul their claims processing systems, some of which date to the 1970s.

The Trump administration rescinded the money, telling Congress in a May notification, “These grants are being terminated because they no longer effectuate the [Labor] Department’s priorities for its grant funding. ... After completing its review, the Department may consider new funding opportunities to achieve these objectives.”

Andrew Stettner, who helped run the modernization office, called the pandemic a perfect storm for fraud because states had underfunded and understaffed their unemployment offices for decades.

He said the waves of fraud in 2020 and 2021 served as a wakeup call for governments to deploy technology capable of verifying the identity of the claimant, their employer and their income.

“What keeps me up at night is that we won’t have learned the lessons and fixed the unemployment insurance system before there’s another crisis," said Stettner, now director of economy and jobs at the Century Foundation think tank in Washington. "It’s hard to get people’s attention five years out from the pandemic.”