NYS: Foreign gangs ripped off billions in pandemic relief for the unemployed
International criminal gangs are responsible for much of the fraud that took place in jobless benefit programs during the pandemic — and there’s little chance that money will be recovered, according to the state’s top labor official.
Labor Commissioner Roberta Reardon, testifying before the State Legislature, said gangs based in foreign lands used stolen Social Security numbers, home addresses, employment histories and other personal information to fraudulently receive unemployment checks after the coronavirus struck in early 2020.
The fraud was pervasive in 2020 and 2021 before the Department of Labor installed computer software, such as ID.me and multifactor authentication, to verify the identity of applicants for unemployment insurance, she said.
“I want everyone to understand the money that was stolen by the international cyber rings is probably very hard to get back because it’s not here, those people aren’t [in the United States] … That is a hard pill to swallow,” Reardon said on Wednesday night, responding to a question from state Sen. Alexis Weik (R-Sayville).
WHAT TO KNOW
- Criminal gangs in foreign lands used stolen personal information to defraud unemployment insurance programs in New York State during the pandemic.
- State Labor Commissioner Roberta Reardon doubts much of the stolen jobless benefits will be recovered because the thieves aren't in the United States.
- The Biden administration wants Congress to allocate $1.6 billion to investigate and prosecute those who ripped off pandemic-relief programs.
Reardon said her department is working with the U.S. Department of Labor, Department of Justice and other law enforcement agencies to recapture the stolen jobless benefits. She said more than 1 million questionable claims have been referred to federal investigators and $500 million has been recouped so far.
Still, there is disagreement in Albany over the magnitude of the fraud.
Reardon estimated that $4 billion in fraudulent jobless claims were paid. "That represents about 3.8% of what we paid in total to support New Yorkers," which was $105 billion to more than 5 million unemployed residents, between March 2020 and December, she said.
Reardon's fraud estimate is only about one-third of the $11 billion calculated by state Comptroller Thomas P. DiNapoli.
“We do not agree with that number,” Reardon said, referring to DiNapoli’s estimate.
Asked on Thursday for a more detailed response, the state Department of Labor said its fraud estimate “is based on actual data. The comptroller’s estimate … was an extrapolation using an inapplicable formula, based on a few hundred claims out of 5 million,” the department told Newsday.
DiNapoli spokeswoman Kristina Naplatarski responded that the comptroller’s estimate is based on federal fraud data that was verified by the U.S. Department of Labor.
“Historically, the New York DOL has had one of the highest improper payment and fraud rates in the country, and this continued during the pandemic,” she told Newsday.
Naplatarski also confirmed that a November audit by DiNapoli found international criminal gangs committed fraud against the traditional unemployment insurance program and two pandemic relief programs: Federal Pandemic Unemployment Compensation, which provided an additional $600 per week to qualified individuals, and Pandemic Unemployment Assistance for gig workers, independent contractors and the self-employed.
Separately, on Thursday, President Joe Biden’s administration unveiled a $1.6 billion proposal to pursue pandemic-era fraud in unemployment as well as small-business relief programs, such as Paycheck Protection Program loans and COVID-19 Economic Injury Disaster Loans. Together, the administrations of Biden and then-President Donald Trump oversaw the allocation of nearly $6 trillion in the past three years.
Biden’s new plan, which would have to be adopted by Congress, would increase the number of investigators and prosecutors, implement new ways of preventing identity theft and help those whose identities have been stolen.
Biden also would extend the statute of limitations from the current five years to 10 years for unemployment insurance fraud, so there’s more time to go after fraudsters. The statute of limitations has already been extended for fraud involving small business aid.
“There must be a bipartisan response to punish those who engaged in major and systemic fraud against the American people during a time of national emergency, to put in place stronger fraud and identify-theft prevention going forward, and to hold harmless those Americans who were innocent victims of identity theft,” the White House said in a statement.
Fraud prevention experts applauded Biden’s proposal but said more needs to be done.
Haywood Talcove, CEO of the government group at LexisNexis Risk Solutions, said criminals have adapted to the identity verification and fraud prevention tools put in place in the past couple of years.