Law enforcement and the state Department of Labor continue to investigate growing numbers of fraudulent unemployment claims as thousands returned to work this winter, officials said.
Officials at every level of government, including police, attorneys and state or local executives, have reported heightened numbers of fraudulent unemployment cases and are warning residents to remain vigilant against potential attacks. The cases often target New Yorkers involved in past data breaches.
Johnson Newspaper Corp., which owns the Watertown Daily Times, has received multiple unemployment claims since October for workers who were still employed or never filed claims.
Officials are investigating nearly 10 potential fraud cases received since October involving Batavia Daily News and Watertown Daily Times employees. The company has received reports of two potentially fraudulent claims in the last two weeks.
“What I gathered is, scam artists were signing up for unemployment in other people’s names and having cards sent to their house,” said Matthew Crowder, Johnson Newspaper’s director of finance and human resources. “My guess is they tried to intercept them before the person checked their mail.”
Employers receive a notice from the Labor Department to verify an unemployment claim. The company was not asked to verify claims for at least two employees who each received a letter and debit card for payment of benefits.
“They said, ‘What is this? I didn’t sign up for this. I never signed up,’” Crowder recalled. “The money was supposed to go on that card.”
Other workers went to file for unemployment after losing jobs in the wake of the ongoing COVID-19 pandemic, but could not because a fraudster had already filed and improperly collected benefits in their names.
“Other people who got the cards didn’t know any better, and they have to pay that money back,” Crowder said. “They weren’t supposed to get that money in the first place.”
Johnson Newspaper Corp. owns nine daily and weekly newspapers across upstate New York, including in the north country, the southern Capital Region and Western New York.
The increased instances of fraud are not due to a breach of Labor Department systems, according to Labor Department Director of Communications Deanna Cohen, but may be from previous hacks of other institutions such as banks, insurance companies or former employers.
“If someone is the victim of unemployment insurance fraud, it means their personal information — like their full name, date of birth and Social Security number — has been compromised and used to file a false claim under their name with the (Labor Department),” Cohen said.
Johnson Newspaper Corp. was the victim of a significant cyber attack and breach of company data in early 2019, but personnel files were not impacted.
“That personal information wasn’t believed to be part of the problem,” Crowder said. “I think there is very little chance of that — an infinitesimal chance — of that being part of it, especially when this is happening all over the state.”
The nation’s unemployment rate slightly fell to 6.3% in January, or about 10.1 million people, according to the U.S. Bureau of Labor Statistics, but is significantly down from a high of 18 million people in April 2020.
About 5.7 million Americans were unemployed, or about 3.5%, in February 2020 just before the pandemic began.
“Unemployment fraud is, sadly, a scourge that we have to fight every day, but it is particularly despicable that criminals would use a global pandemic as cover to attempt to defraud our system,” according to a statement from Labor Department Commissioner Roberta Reardon. “These benefits have been a lifeline for millions of New Yorkers over the last year and every day our Office of Special Investigations is working to protect our system from fraud and abuse.
“Our team is using technology, including artificial intelligence and other sophisticated techniques, to identify fraud as quickly as possible and stop these criminals in their tracks,” she added. “We will continue to work with our law enforcement partners at all levels to bring these thieves to justice.”
The Labor Department has identified more than 425,000 fraudulent unemployment claims since last March, according to statistics from the department Feb. 5. The majority of fraudulent claims were caught before money was improperly paid to residents, according to the department, resulting in more than $5.5 billion in savings.
Labor representatives declined to provide updated figures multiple times over several days, citing ongoing investigations that take several months.
“We cannot give you a specific number as new fraud is being identified every day and we continue to work with financial institutions and law enforcement partners to recover more and more of the funds that were paid to fraudsters,” Cohen said. “These recoveries can take months, but we are committed to clawing back as much money as we can.”
The Labor Department cannot prosecute a New York state resident, and did not have statewide statistics about the number of people criminally charged in relation to unemployment fraud this year or since the pandemic began.
The Labor Department works with the U.S. Department of Labor Office of the Inspector General, Secret Service, FBI, other federal prosecutors, local district attorneys and other partners at the local, state and federal levels to investigate unemployment fraud.
“After cases are referred for prosecution, the state works with law enforcement and prosecutors to hold the criminals accountable,” Cohen said.
Charges depend on each case and the prosecuting agency.
“That depends on the specific circumstances,” she said. “You would have to ask the law enforcement (or) prosecutorial agencies who pursue those cases. The DOL’s role is investigatory.”
Law enforcement across the state have said they first saw increases in fraudulent unemployment cases last spring when thousands of people started working from home at the start of the pandemic.
Several employees returned to in-office work last summer as virus infections stayed low, but returned home in large numbers in late fall or early winter, driving unemployment fraud reports back up.
Police responded to a smattering of unemployment fraud cases before the pandemic began.
The state has paid more than $65 billion in benefits to more than 4 million New Yorkers since March.
“Compare this to California, which reported paying $11.4 billion in fraudulent claims — 10% of that paid out — with another 17% under investigation,” Cohen said. “We have a track record of stopping fraud in New York, and we will continue to do what we need to do to protect this lifeline for unemployed New Yorkers.”
Cohen added that unemployment fraud existed before the pandemic and is a battle plaguing all U.S. states and territories.
“It is a constant threat, and criminals often use times of crisis — like this pandemic — to strike,” she said. “Every state is fighting fraud.”
The Labor Department referred more unemployment fraud cases to federal prosecutors between March and August 2020 than the department handled in the last decade combined.
“You cannot stop criminals from fraudulently applying for mortgages, credits cards, unemployment benefits, et cetera,” according to Cohen. “However, we can catch the fraud before a single cent is paid and the vast majority of fraudulent claims have been caught before a single cent is paid on the claim.”
The Labor Department launched a public service announcement campaign in August 2020 to dissuade additional identity theft and false claims. The campaign, which continues indefinitely, was produced in-house with the department’s own video and graphics team, Cohen said.
“We have been proactively sharing the (public service announcement) and other messaging on social media and with the media,” she said.
Any person who receives a document about unemployment benefits from the Labor Department but did not file a claim should immediately file a report with the department at on.ny.gov/uifraud.
The department recommends New Yorkers take proactive steps to protect against identity theft, including regularly changing passwords and logins for online accounts, especially banks; placing a free fraud alert on their account with one of the three credit bureaus, Experian, TransUnion and Equifax; getting a free credit report from annualcreditreport.com; and reporting the identity theft to the Federal Trade Commission and their local police department.