Fraudsters may have stolen $1 of every $7 in covid jobless aid, watchdog finds

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Fraudsters may have stolen as much as $135 billion in federal unemployment aid during the coronavirus pandemic, according to a report released Tuesday by the Government Accountability Office, which found the theft encompassed roughly one out of every seven dollars set aside for jobless Americans during the public health crisis.

Federal watchdogs coupled the estimate with a fresh indictment of Washington, finding that the Trump administration, the Biden administration and lawmakers on Capitol Hill had failed to fully remedy some of the legal and technological loopholes that allowed criminals to steal government money in the first place.

In the earliest days of the pandemic, Congress approved a historic bipartisan expansion of the nation’s unemployment insurance system, adding hundreds of dollars to out-of-work Americans’ weekly checks while awarding benefits to those who previously wouldn’t have qualified.

The money offered a critical financial lifeline to millions of Americans during what became the worst economic crisis since the Great Depression. But the new benefits also proved to be an alluring target for scammers, who immediately seized on the government’s haste and generosity to steal unprecedented sums.

The criminals focused their efforts on states, which had struggled starting that spring to process a deluge of applications for federal unemployment aid, according to the GAO’s report on Tuesday, echoing many of the conclusions from past oversight reviews. To obtain checks they did not deserve, malicious actors often masqueraded as real people, misrepresenting themselves as Americans out of a job, people in prison and even the deceased, the watchdog found.

In total, the U.S. government may have lost between $100 billion and $135 billion, according to the GAO estimate. That equated to about 11 to 15 percent of the roughly $900 billion spent on unemployment insurance between April 2020 and May 2023, the period during which the U.S. government declared a public health emergency. The watchdog came to its figure by sampling federal data, acknowledging that the “full extent of [unemployment] fraud during the pandemic will likely never be known with certainty.”

Responding to the report, a senior Biden administration official on Tuesday pointed out that much of the theft occurred in 2020 under President Donald Trump, nearly a year before Joe Biden took office and before new oversight procedures were implemented. Since then, the Biden administration has stepped up enforcement of coronavirus fraud while sending money to states so that they can modernize their systems, the official added, speaking on the condition of anonymity to describe the White House’s thinking.

But Congress this summer opted to rescind about $1 billion in potential upgrades, after Republicans demanded steep spending cuts across government in exchange for raising the debt ceiling. States had been using that federal aid to cut down on wait times for jobless benefits, thwart identity theft and replace computer systems that in some cases were more than half a century old — the very lapses that the GAO has identified as risk factors for fraud.

The Labor Department also disputed GAO’s findings, arguing in a letter that the watchdog may have overestimated the problem. The agency’s inspector general previously projected there may be as much as $191 billion in unemployment-related overpayments, which includes stolen money as well as incorrect amounts paid to Americans who really were eligible for benefits.

“In light of these challenges, the Department has committed significant resources and taken concerted action to deter fraud and to assist law enforcement in holding perpetrators accountable while ensuring timely, equitable access to benefits,” Brent Parton, a principal deputy assistant secretary in the department, wrote in a letter appended to the GAO report.

The estimate nonetheless reflects the costly time-consuming work on the government’s horizon three years after the first known coronavirus case arrived in the United States. Only now is Washington beginning to grasp the full scope of its own losses — and commit aggressively to the task of finding criminals, recovering stolen funds and securing convictions in court.

Last month, for example, the Justice Department announced it had investigated or charged cases related to roughly $8.6 billion in alleged covid aid fraud since the start of the pandemic, including a wave of enforcement efforts this summer concerning $836 million in stolen federal aid. Heralding the developments as a “message” to criminals, Attorney General Merrick Garland still acknowledged the government’s investigative work is “far from over.”

But the ominous warnings have hardly stirred Capitol Hill. Instead, Democrats and Republicans have warred over the legacy of the roughly $5 trillion they approved to shore up the nation’s public health system, facilitate vaccine research, sustain cash-starved small businesses and help Americans under financial duress. Some GOP leaders have repeatedly refused Biden’s requests to commit new money to the Justice Department so that it can pursue cases, even as they blame the president for a wave of fraud that began under Trump.

In the meantime, the United States has recovered only a small fraction of its losses. By May, states had recovered only about $1.2 billion in unemployment benefits that they had wrongly lost to fraud, the GAO found on Tuesday. The figure only includes investigations that have been completed in full, reflecting the “long time” it takes for government officials to recoup missing money.

Much of the trouble stemmed from a program approved in 2020 that provided benefits to people who drive for Uber, deliver meals for Grubhub and labor on behalf of other “gig economy” companies. These workers normally are not eligible for unemployment insurance because they are not technically employees, but lawmakers at the height of the pandemic agreed to award them weekly aid for the first time.

In a bid to deliver benefits swiftly, however, the Trump administration did not require applicants to submit substantial documentation of their work histories. The decision opened the door for substantial fraud, the GAO said Tuesday, affirming the fears of federal watchdogs who first sounded the alarm about the problem three years ago.

A senior administration official acknowledged that states faced immense challenges implementing the program, known as Pandemic Unemployment Assistance, especially in the first nine months of crisis. But the aide stressed it still provided a financial lifeline for those who otherwise could not have obtained traditional jobless benefits.