As tax season rolls in, Colorado employers and employees might want to take a second look at unemployment insurance claims, fraud investigators say.
Case rates for most types of fraud seemed to stay steady during the COVID-19 pandemic. But unemployment insurance fraud is an outlier. The state, like the nation, has seen a wave of fraudulent unemployment insurance claims – while trying to help legitimate claimants affected by the unsteady economy during the pandemic.
“We do have some things that came up this past year that were not normal for us – that would be the unemployment fraud,” said Lt. Luke Harrington with La Plata County Sheriff’s Office. “There’s a lot more cases coming across our table.”
In the first months of the COVID-19 pandemic, massive federal relief money was rolling in to help millions of people filing for unemployment benefits.
Since spring 2020, the Colorado Department of Labor and Employment processed just more than 1 million valid unemployment insurance claims and paid out over $7 billion in legitimate unemployment insurance benefits, said Joe Barela, CDLE executive director.
The goal was to limit the impacts from coronavirus-related mandatory shutdowns, closures and restrictions on businesses as the country tried to slow the spread of COVID-19.
Means and opportunityBut employers and employees also began receiving notifications about unemployment claims they hadn’t made, Harrington said.
The employee would report it to the Sheriff’s Office and their employer, then the case would go to CDLE.
In June, when CDLE expected to see slower unemployment claim rates, the numbers kept rising, said Jessica Hudgins Smith, spokeswoman with the CDLE Division of Unemployment Insurance, in an email to The Durango Herald.
That’s when the division discovered that fraudulent claims were being filed.
The division flagged nearly 1 million potentially fraudulent claims from the start of the pandemic to January. The potential loss was $97.7 million. The actual loss was $6.6 million, according to the division.
Division staff members were buried. Employees were tracking down fraudulent claims individually and manually investigating them. Claimants faced a backlog in receiving benefits, Hudgins Smith said.
In January, the state launched a new system for catching fraud, while automating the fraud reporting and claim filing processes. The improvements and additional staffing are helping the division cut down the backlog, she said.
CDLE has a few hypotheses to explain the increase.
Fraudsters, such as international criminal rings or one-off opportunists, had the means. Mass data breaches of recent years, like Equifax, Target and Adobe, have caused millions of individual records to become available on the dark web and other black market avenues, Barela said.
They also had the opportunity. Federal relief programs are easier to target, and extra federal money going to weekly unemployment benefits might have encouraged fraudsters, Hudgins Smith said.
“We believe this is a big reason why we began seeing the increase in fraud over the summer as well,” Hudgins Smith said.
But unemployment fraud isn’t possible unless criminals have personal identifying information.
“If you have been subjected to a fraudulent UI claim, that is because your personal identity was compromised through an unrelated previous data breach,” Barela said in an op-ed. “If you haven’t already done so, you will need to take independent action to protect your credit.”
The La Plata County Sheriff’s Office passed 51 unemployment fraud cases to CDLE in 2020, Harrington said. But as tax season approaches, he expects to see new fraudulent claims surface.
“We’ve had more roll through since the beginning of this year, and we’re seeing an uptick in the ones that actually have monetary value,” Harrington said.
Pandemic crime and what to doUnemployment claims aren’t the only type of crime that became more popular with the onset of the COVID-19 pandemic.
The Colorado Attorney General’s Office prosecuted companies for making false or misleading claims about products such as hand sanitizer and face masks. Businesses got caught for overstating the reliability and accuracy of COVID-19 infection and immunity tests.
In January, Attorney General Phil Weiser advised Coloradans to watch out for potential COVID-19 vaccine scams.
“Generally, consumer complaints increased during the pandemic,” said Lawrence Pacheco, spokesman for the Attorney General’s Office. “We’ve had a total of 2,960 complaints specifically related to the pandemic. Unwanted robocalls and refunds for airline tickets and concerts are the top complaints.”
One thing didn’t change with the pandemic: the “relentless” phone scams ringing across the nation, Harrington said.
“They’re nonstop. A lot of people from all ages get caught up in it,” Harrington said.
In one scam, people will hear that there is a warrant for their arrest. They might even see a local number listed on their caller identification. In some cases, the number even matched those belonging to a sheriff’s office or another local agency, Harrington said.
But these are scams.
In a local case, a scammer even met a resident in the parking lot of the Sheriff’s Office to complete the scam.
One person lost about $160,000 to scammers using a different scheme, he said.
“If you don’t get on it really, really quick, there’s not a whole lot that can be done,” Harrington said.
To spot scams, people should keep an eye on their credit and avoid giving out personal information, he said. If it comes up, they should contact local agencies, banks and CDLE for unemployment insurance fraud.
Overall, the Internal Revenue Service will never call people for money. The Sheriff’s Office will never hold a warrant as ransom for you to either turn yourself in or give money, he said.
“I suggest to everybody: You need to monitor your credit,” Harrington said. “Don’t be giving out personal information. ... If it doesn’t sound right, most likely it isn’t.”