The Explosion of Unemployment Compensation Fraud

     A Bronx man allegedly received $1.5 million in just ten months. A California real estate broker raked in more than $500,000 within half a year. A Nigerian government official is accused of pocketing over $350,000 in less than six weeks.

     What they all had in common, according to federal prosecutors, was participation in what may turn out to be the biggest fraud wave in U.S. history: filing bogus claims for unemployment insurance benefits during the COVID-19 pandemic. 

     U.S. Department of Labor used a single social security number to file unemployment insurance claims in 40 states. Twenty-nine states paid up, sending $222, 532.

     But the problem extends far beyond a plague of solo scammers. A ProPublica investigation reveals that much of the fraud has been organized--both in the U.S. and abroad. Fraudsters have used bots [fake people] to file online claims in bulk. And others, located as far away as China and West Africa, have organized low-wage teams to file phony claims.

     In addition, the fraud has been enabled by a burgeoning online infrastructure, whose existence has not been previously reported in the mainstream press. Much of it is geared toward exploiting aging or obsolete state employment systems whose weaknesses have drawn warnings for decades...

     Nobody has yet come close to putting a definitive number on the dollar value of fraud relating to the pandemic-era unemployment benefits. But ProPublica performed a data analysis that hints at the massive scope. In state after state, the volume of initial jobless claims has far exceeded the number of estimated job losses. Across the U.S. from March to December 2020, the number of initial claims equaled to 68% of the country's labor force, which stood at around 164 million before the pandemic. In five states--Arizona, Georgia, Hawaii, Nevada and Rhode Island--the initial claims outnumbered the entire pool of civilian workers. By contrast, about 23% of American workers were out of a job or underemployed at the peak of the pandemic, according to the Bureau of Labor Statistics...