Watchdog agency increases its pandemic unemployment benefits fraud estimate to as much as $135 billion

By Shawna Mizelle and Tami Luhby, CNN

Washington (CNN) — As much as $135 billion in fraudulent Covid-19 pandemic unemployment insurance claims were likely paid out, according to a report released Tuesday by the US Government Accountability Office.

The whopping figure, which equates to as much as 15% of total unemployment benefits distributed during the pandemic, is a notable bump up from the $60 billion the watchdog agency had previously estimated in January.

In comments on a draft of the GAO report, the Department of Labor said the office is likely overestimating the actual amount of fraud. However, the department’s Office of Inspector General in February said in testimony before a House committee that at least $191 billion in pandemic unemployment benefits payments could have been improper, with “a significant portion attributable to fraud.”

The GAO pushed back on the department’s assertions in its report and stood by the methodology used.

“Given that not all potential fraud will be investigated and adjudicated through judicial or other systems, the full extent of UI fraud during the pandemic will likely never be known with certainty,” the GAO report said. “Therefore, it is appropriate to rely on estimates, such as ours, to make more comprehensive conclusions about the extent of fraud in the UI programs during the pandemic.”

The findings released on Tuesday shed light on the numerous schemes to steal money from a range of hastily implemented pandemic relief programs, which have drawn the attention of congressional lawmakers and prompted legislative action. Last year, President Joe Biden signed two bipartisan bills into law aimed at holding individuals who commit fraud under pandemic relief programs accountable.

“My message to those cheats out there is this: You can’t hide. We’re going to find you. We’re going to make you pay back what you stole and hold you accountable under the law,” the president said at the time.

The House of Representatives also passed a bill in May that would help recover fraudulent unemployment insurance benefits paid out during the pandemic. The bill, however, has not been brought to a vote in the Senate.

Fraud within the nation’s unemployment system skyrocketed after Congress enacted a historic expansion of the program in March 2020. State unemployment agencies were overwhelmed with record numbers of claims and relaxed some requirements in an effort to get the money out the door quickly to those who had lost their jobs.

But the enhanced payments and lax controls quickly attracted criminals from around the world. States and Congress subsequently tightened their verification requirements in an attempt to combat the fraud, particularly in the Pandemic Unemployment Assistance program, which allowed freelancers, gig workers and others to collect benefits for the first time.

More than $888 billion in federal and state unemployment benefits were paid from the end of March 2020 through early September 2021, when all the pandemic enhancements ended nationwide, according to the Labor Department Office of Inspector General.

The GAO report said the “unprecedented demand for benefits and need to quickly implement the new programs increased the risk of fraud.”

Other pandemic relief programs were also the target of criminals. The GAO in May flagged 3.7 million recipients of Small Business Administration funds as having “warning signs consistent with potential fraud.” The SBA doled out $1 trillion to help small businesses during the pandemic through measures including the Paycheck Protection Program and Covid-19 Economic Injury Disaster Loan program. More than 10 million small businesses were assisted.

Some of the fraudulent claims have been recouped. States identified $5.3 billion in fraudulent unemployment benefits overpayments and has recovered $1.2 billion, according to the GAO.

A Justice Department spokesperson told CNN on Tuesday that as of August 30, the department has charged more than 3,000 people for pandemic related fraud.

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