Iowa has fielded at least 37,000 fraudulent claims for unemployment benefits since the COVID-19 pandemic began, according to state officials.
That works out to more than 87 fraudulent claims filed each day of the pandemic. Those claims are tied specifically to identity theft, wherein people have filed claims pretending to be real Iowans who may or may not be jobless.
“The last few months we saw the largest increase in those numbers, with last week having a significant decrease,” Iowa Workforce Development Deputy Director Ryan West said.
It’s not known how the total of 37,000 fraudulent claims compares to the previous 14-month period. But in fiscal year 2019, the agency said it had identified $5,362,332 in unemployment overpayments that could be attributed to fraud. In fiscal year 2020, which ended just four months into the pandemic, that number increased 7% to $5,732,627.
It’s not clear how the identities of Iowans were compromised or what state officials are doing in response to the situation. Iowa Workforce Development declined to make anyone available for an interview on the topic and West provided only partial responses to a brief, written list of questions on the topic.
Asked whether the known cases of fraud had come to the agency’s attention through internal fraud-detection efforts or through information provided by the Iowans whose identities were stolen, West said IWD “uses many fraud detection and prevention mechanisms, most of which we will not discuss publicly to (ensure) their efficacy.”
He said the first step in the claims process “requires identity-verification steps that most fraudsters would be unable to pass,” and if the questions posed during the process are not answered accurately, a claimant will be asked to provide additional documentation to establish their identity.
West said it’s “difficult to say where the personal information is obtained by the criminal elements” making fraudulent claims, it’s most likely the result of a data breach unrelated to IWD. “We do know the information is not coming from IWD as we have not experienced a data breach,” he said. “And any fraudulent claim made is made by a person or group that already possesses an individual’s private information.”
Asked how the agency is addressing cases of known fraud, and precisely which cases have resulted in criminal referrals, civil proceedings or other public actions against the perpetrators, West declined to provide any details, except to say that criminal referrals are made when the agency can identify the perpetrator.
According to federal officials, a Sioux City woman stole at least $24,235 from the U.S. Treasury last year through a COVID-19 unemployment scheme. Linda Bosquez, 59, was convicted last month of theft of government funds after admitting that from May through July of last year she falsely claimed, in her name and those of others, unemployment benefits from the states of Arizona, Georgia, Michigan and Ohio.
West said unemployment fraud is a national issue and “Iowa is fortunate not to have experienced some of the larger-scale attacks states such as California and Washington have experienced.”
West declined to say how unemployment payments can be paid out in a way that bypasses the supposed claimants’ bank accounts and is instead directed to the perpetrator, but the fraud appears to rely on IWD routing the money to a debit card that the bearer can use to access the funds.
At a recent Iowa Senate subcommittee meeting, a lobbyist for the Iowa Association of Business and Industry told lawmakers a former president of ABI, David Bywater, was himself the victim of identity theft tied to unemployment claims.
“When you push $4 billion through a fund, there is a certain uptick in fraud,” lobbyist J.D. Davis told the senators. “A former president of the Iowa Association of Business and Industry, a third-generation owner of a company in Iowa, was notified that he himself had filed for unemployment benefits. He was asked if he, himself, as the employer, would like to contest his own unemployment filing. These things happen.”
Bywater said whoever filed the claim used his name and Social Security number but the address they had was for a residence where he hasn’t lived for 20 years — an indication the identity theft could date back decades. “The person got my information from somewhere, and I have no idea where,” Bywater said.
Daniel P. Finney, a former Des Moines Register columnist and an occasional contributor to the Iowa Capital Dispatch, said it was only through happenstance that he learned of someone using his identity to collect unemployment benefits. He recently called IWD on another issue tied to his unemployment and was told his benefits had been placed on hold pending an investigation into what appeared to be fraudulent claims someone filed on his behalf.
“So there were two weeks there where, even though I hadn’t done anything wrong, I was not getting paid benefits,” he said. “It was scary because I didn’t know how long it was going to last … When you’re unemployed, that’s your only source of income.”
Nationally, the U.S. Department of Labor’s inspector general has estimated that at least 10%, or more than $89 billion, of the $896 billion that the federal government has allocated to state unemployment-insurance programs since March 2020 might have been “paid improperly” due to fraud or errors since the beginning of the pandemic.
The inspector general identified $4.5 billion of potentially fraudulent payments to people who used the same Social Security numbers to apply for benefits in different states, or who used numbers belonging to dead people or federal inmates.
The increase in fraud is believed to be a direct result of the COVID-19 pandemic, which triggered a massive influx of federal money into the states’ unemployment systems at the same time those states struggled to cope with an unprecedented spike in legitimate claims. Many states were overwhelmed by the increased workload, allowing criminals to file claims that didn’t undergo the usual time-consuming scrutiny intended to ferret out fraudulent claims.
In March, the Associated Press reported that many states have failed to adequately safeguard their unemployment systems, and some states would not publicly acknowledge the extent of the problem.
Federal prosecutors are now beginning to crack down on the fraud. Two weeks ago, a federal grand jury in Virginia indicted 23 individuals allegedly involved in a large-scale scheme to collect pandemic-related unemployment benefits. Although the fraudulent claims were made on behalf of just 37 different individuals, the amount of unearned benefits paid out totaled $499,000, according to the U.S. Department of Justice.
Last week, President Biden recommended “strengthening and reforming” the unemployment-insurance system and increasing fraud prevention using previously allocated funding. “Too often, the safeguards to prevent fraud in the system have been insufficient,” Biden’s proposal said.