A government watchdog report released on Tuesday suggests that the more generous unemployment benefits provided during the pandemic may have attracted fraudulent activity. The Government Accountability Office stated that approximately $135 billion, or 15 percent, of the $900 billion in benefits claimed between April 2020 and May 2023, was likely illegally obtained.
In response to the economic shutdown caused by the pandemic, the federal government expanded and prolonged unemployment benefits to assist millions of Americans who lost their jobs. However, the high demand for aid and the need for speedy implementation of new relief programs by states, which administer payments, increased the risk of fraud.
Officials admit that it is unlikely that the full extent of the fraud will ever be determined with certainty.
The expanded unemployment benefits were one of several trillion dollars in relief funds distributed to individuals and businesses during the pandemic. In the rush to provide relief, a large portion of the funds was distributed with minimal oversight and few restrictions. This created an opportunity for criminals to exploit and obtain money fraudulently. In response, federal prosecutors and law enforcement agencies have implemented various methods to catch fraudsters and recover billions of dollars.
The Department of Labor, which oversees federal unemployment insurance programs, expressed reservations about the report’s methodology and suggested that the level of fraud may have been exaggerated. Officials pointed to measures taken to prevent fraud since then and highlighted the significant challenge of distributing funds due to long-standing underfunding of the unemployment benefits system.
“As a result, state agencies were unprepared for the extraordinary spike in the number of claims to be processed each week,” wrote Brent Parton, a principal deputy assistant secretary at the department, in a letter.
Last month, the Justice Department revealed that it had charged 3,195 individuals with pandemic-related fraud offenses and seized over $1.4 billion in relief funds. This followed a three-month “sweep” conducted by the department to combat Covid-19 fraud, involving more than 50 U.S. attorney’s offices and numerous federal, state, and local law enforcement agencies.
Some of those charged are accused of stealing millions in pandemic unemployment benefits through fraudulent applications. In one case, the funds were used to arrange a murder for hire, as well as purchase firearms, controlled substances, jewelry, clothing, and vacations.
Investigations into potential fraud are still ongoing. A June report from the Department of Labor’s Office of Inspector General indicated that approximately 163,000 investigations related to pandemic unemployment benefits paid out were still open.
In February, the office estimated that at least $191 billion in pandemic unemployment benefits may have been improperly distributed, with a significant portion attributable to fraud.
Fraudsters also targeted pandemic relief for small businesses. The Small Business Administration’s inspector general has estimated that over $200 billion, or at least 17 percent, of the approximately $1.2 trillion in pandemic loans distributed by the agency went to “potentially fraudulent actors.”
