There Has Been a Mind-Boggling Amount of Unemployment Fraud Since the CARES Act Passed

Enhanced unemployment benefits may have helped many Americans weather the pandemic, but they've also attracted the interest of some modern-day Willie Suttons.


The COVID-19 pandemic and subsequent lockdowns caused a spike in unemployment across America. Now the government's response seems to have triggered an explosion of unemployment insurance fraud.

At least $63 billion—an amount larger than the current annual budgets of 42 states—of the boosted unemployment payments distributed as part of the federal government's pandemic response has been distributed improperly, according to an estimate from the Department of Labor Office of the Inspector General. The office attributes a "significant portion" of those improper payments to fraud, and preliminary audits indicate that the actual amount of improper payments may be higher.

Since the passage of the Coronavirus Aid, Recovery, and Economic Security (CARES) Act in March of last year, the federal government has provided an estimated $630 billion in unemployment insurance payments, with the federal cash layered atop existing state-level benefits for workers who lost their jobs. The CARES Act initially provided $600 per week in boosted payments, and the most recent COVID-19 aid bill, passed in December, allows for $300 weekly, to be phased out starting March 14. President Joe Biden has proposed extending $400 weekly unemployment bonuses until the end of August.

Those enhanced benefits may have helped many Americans weather the pandemic, but they've also attracted the interest of some modern-day Willie Suttons. The inspector general reports "a forty-fold increase" in the number of fraud-related matters, which have "exploded" since the CARES Act passed.

State-level unemployment insurance programs are reporting a similar avalanche of fraud. In Ohio, some 77,000 unemployment claims were flagged as fraudulent in just the first two weeks of February, according to the Dayton Daily News. State officials told the paper that as many as half of the 1.4 million claims filed since the start of the pandemic could eventually be revealed as fraudulent. Even Mike DeWine, who is gainfully employed as the state's governor, has learned that someone filed a fraudulent claim in his name.

The same thing happened earlier this month to Kansas Gov. Laura Kelly, whose state was so inundated with fraudulent unemployment claims that it temporarily shut down its claims-processing system last month. The consequence, of course, was that people who really were unemployed had to wait longer for their benefits. Rampant fraud isn't just ripping off taxpayers; it's harming people who actually need the safety net.

States do a poor job of preventing unemployment fraud even when there isn't an economic crisis. They have little incentive to do better, because the federal government covers administrative costs for their system even when it isn't kicking in boosted benefit payments. Combined with the obligation to provide benefits first and verify eligibility later, the whole system is biased against accountability. Improper unemployment payments—not all of which are attributable to fraud—have been over 10 percent in 14 of the past 17 years, according to the inspector general's report.

That won't be fixed in the next few weeks. That means lawmakers in Washington must weigh the costs of inevitable fraud when deciding whether to extend those federal bonus unemployment payments for a few more months—particularly now that unemployment is falling and the worst of the pandemic is seemingly behind us.

Unlike a lot of other elements included in Biden's proposed COVID-19 aid bill, payments to people who can't work because of the pandemic (or due to the government's response to it) is a defensible proposal. But even defensible proposals have costs to consider. Extending the federally boosted unemployment payments through August will cost taxpayers an estimated $246 billion—and that likely means that another $24 billion, or more, will be lost to fraud.

NEXT: Lawmakers to Cable Providers: Why Are You Letting News Channels Say These Things?

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. And by “mind-boggling” you mean “completely predictable”.

    1. ^Assumes brains that don’t operate like 24 separate lettered dice in a plastic box.

      1. ^Assumes brains.

    2. Let me explain mind-boggling to you. Last week I received a form from Ohio’s Department of Job and Family Services asking me about the termination of a Joe Andrews. The problem is that we last ran payroll was in 2009. So I filled out the form and said that this person has never worked for us. My assumption was that this person was legit and made a mistake when filling out the form. He could have made a legitimate mistake identifying his employer. This week I got two more forms for different people. I have no explanation for these forms except fraud. So I filed a fraud report with Ohio for the two people who filed the forms. I am doing my job to prevent unemployment fraud. I suspect there is identity theft going on here. I expect Ohio to do its part.

    3. heck just look at how kaliforistan handled their unemployment payouts. workers in the state couldn’t get theirs but prisoners in jails and people in Nepal got billions. democrats geezeus!!

  2. Feature, not bug.

  3. You don’t say?? Shocking.

  4. Government is the problem, not the solution.

  5. At least the election was totes fair and free of fraud… right?

  6. In other news, water is wet.

  7. I’m sure it doesn’t even compare to the amount of other fraud. We’re talking trillions of dollars being thrown around with basically no oversight.

    It’s a politician’s wet dream.

    1. Don’t you know that when you get into the throwing around of trillions of dollars, it is too expensive to try to keep waste, fraud and abuse down to less than 10%.
      Think of all the people, who live off that.

    2. My town is distributing the CARES act funds it received like candy on Halloween. Every day or so it cuts a check to another group, even now, many months after it was sent from DC.

      Officials are using it as a public relations ploy. Totally corrupt.

  8. Not only are unemployment payments rife for fraud, they are also economically backwards, since they reward the recipient for not being employed. Indeed, there are many good reason to be unemployed when the government is going to pay you for the privilege. If I was a shameless grifter I would take those unemployment payments.

    If the government is going to be in the business of redistributing wealth, they should just do it in cash payments directly to individuals. Ideally they wouldn’t do it at all, but no-strings-attached payments are more equitable and less humiliating. They don’t incentivize unemployment since you receive them whether or not you work. They are easier to target since you simply don’t give them to people over a certain income threshold.

    Let’s stop incentivizing people to pump out worthless kids while we’re at it.

    1. Best comment. Rewarding unemployment with bonus money just encourages it to continue.

  9. Just found out today a friends wife who lives in PA had her SS number used for covid unemployment insurance in Kentucky..apparently this “social services” non profit is known as a fraud enterprise helping folks swindle the system. Now she has to watch her credit for the rest of her life (and even her SS payments if she gets to retire someday). Totally expected…all govt programs are full of fraud….

  10. Several coworkers have had unemployment claims filed on their behalf. Including the progressive one. It shouldn’t happen to anyone but since it did…

  11. We had one couple here in CA who was arrested for signing people up to the tune of around 11 million dollars total. They were caught, but how many more out there like them were not? Also in CA hundreds of prisoners, some on death row, got payments. The fraud totals do not include people like Tom Brady and his wife, or Joel Osteen’s Mega-Church.

    1. To be fair, if I was on death row, I’d engage in fraud to get money to my friends to put in my commissary account and pay off a gang for protection.

  12. the whole system is biased against accountability..
    Now you get it!

    The very basis of the ‘system’ using Gov-Gun threats to steal from Peter and pay Paul is criminal and had nothing to do with being ‘accountable’ from it’s very foundation.

    Every government policy is enforce by the threat of pointing GUNS at people (otherwise it would be just a run-of-the-mill organization). A MOST IMPORTANT and lost basic of understanding through incremental socialism, deceit and secretion.

    When is it okay to point GUNS at people? Well; It’s certainly not okay to be doing it to rob from one person to benefit another — that’s ‘armed robbery’. Perhaps it’s okay in the pursuit of Individual Liberty and Justice AGAINST armed robbers?

    That day government became the criminals and years of delusional narratives in sheeple-minds made it all seem A-Okay… “The Al’ Capone gang” for-hire.

  13. Unemployment insurance should be privately run with people having an ownership stake. Otherwise, it’s just welfare and people should feel some shame in taking it and have a desire to pay it back. These shutdowns resulted in me losing a ton of money and made it extremely difficult to pay my bills. But I’m a professional and found a way. I was shocked how quickly people I respected were so quick to put their hands out.

    1. Private unemployment insurance should never ever be more than an automated debit from your checking to your savings.

      Charity should be the bit beyond that.

      Unfortunately, we’ve set up a system that prefers unemployed welfare for the local populace trapped in failing schools while the rich get access to cheap foreign labor and the tax Bill.

    2. The fifth amendment says government can’t take your shit without compensation. I consider forcefully closing a biz to be “taking your shit”, and thus compensation is required.

    3. …and people should feel some shame in taking it and have a desire to pay it back.
      You mean like illegal aliens, especially the DACAsses, should feel shame at being here illegally and having a desire to go back where they belong?
      Don’t hold your breath.

  14. If people want to get together and form an unemployment insurance plan, that’s up to them. No different than health or life insurance. Sometimes there are costs that are unforeseen and it is perfectly reasonable to try and plan for them. But it’s not “insurance” if it’s run by the government.

    1. Do you know what FICA, the legislation that created Social Security, stands for?
      Look it up.
      You might laugh, before you start to cry.

  15. Name two states controlled by the Democrats which are administered efficiently, effectively, accurately, transparently and for the mutual benefit of all the residents of the state.

    I’ll wait…

    1. Wyoming and South Dakota (and several others) for those of you who want the answer for states run by conservatives.

  16. You mean, in the same way that Capt. Louis Renault’s mind was boggled by the discovery that there was gambling going on at Rick’s?

  17. They said state agencies face “the obligation to provide benefits first and verify eligibility later.” And this seems reasonable when verification takes a lot of time (let’s say weeks) and the newly unemployed person is in trouble *NOW*
    But there should be some incentive to verify eventually. And extremely severe penalties for egregious fraud. For example, a couple who helped others scam millions of dollars might be stripped naked and publicly beheaded.
    If detection is sure enough and the penalties severe enough (and their enforcement publicized enough), only the suicidally stupid will commit fraud.

    1. The verification could take minutes, if employers were required to use E-verify at hiring, with a similar computerized data entry upon firing. Then it would be easy to look up employment dates.

  18. Wow. This whole mess seemed so foreseeable back in May, from my experience.
    From the first week of the shut-down, the PA dept of state’s phone was off the hook and stayed so well into the summer. The state did notify me when the self employed program was ready for on line application. Of course the first weeks it crashed. Finally I was able to apply even thought the application still had questions that made no sense if self-employed. So I did apply for the first week when I earned nothing. The second week I made too much money to collect but apparently should have applied anyway as my account was then cancelled. So, three weeks later, when I again made nothing I found that I had to re-apply. Meanhwile, my first weeks payment had been sent to my bank account. But no matter what I did, how many emails I sent, I could not re-register.
    A couple months went by during which I missed two more full weeks and had a couple partially collectable weeks. I was not desparate for the money (thank God) and meanwhile was able to start up again (or basically, just did). But having all the semi completed acoounts out there got me nervous so I kept trying to resolve the whole thing.
    Finally, at some point in the summer I figured out to call my state rep’s office. After many phone calls and a series of helpful but clueless people calling me, I finally got a call from unemployment. They decided that they couldn’t exactly figure out what happened to my second application and simply asked me for the weeks that I wanted to apply for. I simply skipped the partial weeks and gave them the two full weeks I missed. But it was quite obvious that I could have given them any weeks from my last payment until the 2nd week in July; all verbal, no signatures. That would be worth about $15K extra.
    Me, all I wanted was to resolve the two stupid missing weeks and not do anything fraudulent.
    And amazing as it turned out that they had stopped doing the bank transfer things and supposedly were sending out payment of bank cards. But for some reason they sent me two separate checks that added up to what they owed me but was split randomly into two amounts. And then a week later I got a bank card. I still have it. Maybe some day I’ll see if it has anything on it.

  19. What’s really mind-boggling?

    You are focusing on numbers that pale in comparison to the amount of Medicare and Medicaid fraud on a scale that seems not to bother anyone. Rich doctors, hospitals, and health care executives. Including Senator Rick Scott of Florida. He was a pissant lawyer that became a multi-millionaire overnight, was investigated by the FBI, and took the 5th Amendent dozens of times during the investigation. He never did a day in jail.

    But you all are focused on pissants who steal unemployment insurance. So classic. Republicans talking about crime when it’s your own that are committing the largest fraudulent schemes in the country.

    Ignoring all the corporations that took Covid bailouts – companies that didn’t need a dime to continue to operate, but saw an opportunity to take money on a scale that makes unemployment claims seem minuscule. Particularly Yellow Freight.


  20. This unemployment PLUS debacle is a double whammy: the more obvious first part is our State coffers being emptied by otherwise fully employables who simply decided, “If they are offering it, I’m taking it.” But the second, even bigger slam is to the loss of productivity: I own a PA manufacturing business, we typically have @ 125 employees. When Emporer Wolf shut everything down, we were deemed a “life sustaining essential business” within a week and were permitted to continue working. Problem is, we permanently lost 34 employees and have been unable to find replacements. Running ads constantly, we have hired maybe 8 new people in the last 10 months. Our biggest competitor in the labor force market is the State, and daytime television…

    1. You should’ve reported the ones who refused to come back to work, for unemployment fraud.

  21. What I see in this article is an estimate of the absolute fraud but what is that in terms of the program itself. Sadly some fraud will occur and the extra money means extra fraud. The program seems necessary due to the pandemic, so I like to know is the additional fraud significant when measured against the need.

    As a comparison, there will be significant influx of FEMA and insurance money going to Texas to address the water damaged homes. I have already seem discussion of expected influxes of fake contractors looking to scam people out of the money they need to fix their houses.

Please to post comments

Comments are closed.