Ramifications of unemployment insurance fraud run deep in Colorado – About Your Online Magazine


The notice for the unemployment insurance claim arrived in December at the American Furniture Warehouse headquarters with Jackie Brookshire’s name on it.

“Basically, I run American Furniture, so it’s kind of ironic that my HR director came in and said, ‘You filed for unemployment,'” Brookshire said.

At Answers for Senior Care, letters arrived from seven people who reported having been fired from the consulting firm. Phil Hotaling and his wife, Lilly, are the owners – and only two employees,

“It looks very sophisticated,” said Hotaling. “I don’t know who those names are. They can exist. I don’t know if they’re fake names or something. “

In early December, Rich Kondo received a debit card related to an unemployment insurance claim from his mother, Hiroko. She is 94 years old and has long since retired from United Airlines.

“I was thinking that the mother would be the least vulnerable because she has been retired for almost 30 years,” said Kondo.

The ramifications are deep for an unemployment insurance system vulnerable to fraud that has already cost Colorado at least $ 10 million in lost funds.

The Colorado Department of Labor and Employment has reported to the Office of the Inspector General of the United States that at least that amount has been stolen through fraud since mid-March. The state labor department estimates that fraud prevention measures prevented nearly $ 7 billion from going to scammers, assuming that each closed claim would have paid the maximum allowable benefit. So far, these fraudsters have dodged lawsuits in Colorado.

Fraud complaints are so rampant that the labor department cannot accurately report how many people in the state are actually unemployed and claiming benefits. It has reached the point where labor department officials are considering stop reporting new claims data every week because the starting numbers are not reliable.

“At this point, it is really difficult to analyze these fraudulent claims,” ​​said state labor economist Ryan Gedney on Friday.

Along with the stolen public money, thousands of people rush to notify banks and credit bureaus to avoid financial damage. Companies, which pay premiums to the unemployment system, are concerned that false claims made in their names will increase costs and are struggling to correct the record.

Meanwhile, the Colorado Department of Labor launched a new unemployment system with multiple triggers to detect fraudulent complaints before money flies out the door. The system incorporates methods implemented to detect fraud in the highly vulnerable federal Pandemic Unemployment Assistance program launched last spring. But these fraud traps created a new problem: they ensnared people with legitimate claims, causing them to run out of money while trying to extricate themselves from a complex bureaucracy where waiting times for assistance can extend for more than a month.

Since the new system went online on January 10, the department has flagged 140,000 state unemployment claims as potential fraud. Only 1,200 people called the department to challenge containment, said Cher Haavind, deputy executive director of the labor department. Several people told The Denver Post that they failed to get through the call center lines, so it is difficult to say how many of these withholdings are real cases of fraud. But based on the experiences of other states and an extreme rise in unemployment claims in Colorado in late December, labor department officials believe that almost all of the remaining withholdings are fraud, said Haavind.

Innocent people caught up in fraud investigations suffer the most, said Michele Evermore, senior policy analyst at the National Employment Law Project, a workers’ protection organization.

“The biggest story is the innocent victims,” ​​said Evermore. “They are people who are unemployed and their claims are being flagged and they are not receiving money because of a crime syndicate.”

Haavind and other labor department officials said on Friday that they are beginning to clean up the integrity of Colorado workers until launching a new ID verification program called ID.me. Last week, 500 claimants who were contesting their restrictions were invited to participate in a pilot program, said Colorado Labor Secretary Joe Barela. This week, another 2,000 people will receive email instructions on how to use ID.me to release holds.

Ultimately, everyone in Colorado who applies for unemployment insurance will be required to use the program before receiving payment, he said.

“We will be expanding next week to go through as many integrity barriers as possible,” he said.

Experts say most of the fraud comes from international criminal groups, who know how to steal people’s names and social security numbers or buy them on the dark web. Scammers are skilled in responding to online forms to obtain approval for payment. And then they are quick enough to divert the money to bank accounts before anyone realizes that the claim is not real.

But unemployment offices across the country are so overwhelmed at a time when the pandemic has prompted tens of millions of people to ask for help that they are vulnerable to anyone willing to file a false application.

Jason Zirkle, director of training for the Association of Certified Fraud Examiners, pointed to the recent revelation that thousands of inmates at California prisons, including those sentenced to death, defrauded the state’s unemployment system last year. The Los Angeles Times reported in December that at least $ 400 million was paid to fraudulent claims filed in the names of prisoners.

“With so much money circulating now and the oppression of state agencies, I think a lot of people are turning to it because there is so much money,” said Zirkle of unemployment fraud. “I just don’t think that any county in the county was prepared for 10% of the country’s unemployment claim within a few months.”

In some cases, fraudsters send unemployment insurance cards to empty homes and businesses and then look at mailboxes to spend money, experts say. In other cases, they are just hoping that no one will pay attention to what’s in the mail while the money is electronically extracted from the unemployment department’s accounts. A Denver area owner reported receiving 21 benefit cards from the Bank of the USA, all under different names, over a period of about six months.

“This ring continues to evolve and attack other states,” said Evermore. “I compare it to a velociraptor. After mending a piece of the fence, he attacks another piece of the fence. “

When enrolling in the Colorado unemployment system, workers receive a U.S. Bank debit card by email. They can choose to have the money transferred to a bank account, but the card is still mailed.

Therefore, many people do not realize that a fraud has been committed in their names until the debit card reaches their mailbox. And if a fraudster collects a debit card in an empty mailbox or if the card is discarded before the order is closed, the fraud victim may not realize that the money has been claimed in their name until they receive a tax document from the IRS .

Jeff Jasper is among the coloradans who only learned of a false claim for unemployment after receiving a 1099 tax form from the Colorado Department of Labor. Jasper, a certified public accountant who lives in Westminster, received one earlier this month that shows $ 649 in untaxed unemployment income. He immediately called the department to request a corrected 1099 because he had never applied for or received unemployment insurance. When he finished, a customer service agent said the labor department couldn’t do this, but he attached a fraud complaint to the inactive unemployment claim filed on his behalf.

Jasper has since filed a police report, contacted the IRS and followed other recommended steps, including placing fraud alerts on his credit reports. Now he is waiting, hoping the problem will be resolved before he needs to apply for an extension to fill his 2020 taxes.

“I never found or received an incorrect 1099 from a government entity. Generally, you receive a 1099 error from a company, contact the company and it is a closed deal. Nobody wants to conflict with the IRS, ”said Jasper. “I think it is completely unsatisfactory. Yes, I know that they have a problem. This does not absolve them because they are able to correct other problems. “

Barela said on Friday that the labor department expects to send 1099 corrected to fraud victims in early February, asking for patience while the cases are resolved.

At the family home in Northglenn, Rich Kondo is delighted to have discovered what the strange debit card that came in the mail was, acted promptly to close the account, and took other steps to protect his mother’s finances as best he could then your information was compromised. Hiroko Kondo has dementia and her son manages his money.

Hyoung Chang, The Denver Post

Rich Kondo, 54, poses for a portrait at his Northglenn home on Friday, January 22, 2021.

“Certainly, I think the recommendation is that if you are taking care of an aging loved one – aunt, uncle, father, grandfather – take responsibility for checking the correspondence and if you see something like that, don’t disregard it,” he said. “And the same goes for taking your own personal responsibility.”

At American Furniture Warehouse, Brookshire said he reported the complaint made on his behalf as fraud to the labor department, the Bank of the USA and credit bureaus. But she continued to receive paperwork on the complaint, including a recent Decision Notice, informing Brookshire that her complaint had been approved.

“What surprised me was that after we notified the state that it was a fraud, we continue to receive the cards,” said Brookshire. “And then we got this warning and it really pushed me over the edge. The problem is not hearing anything and continuing to receive paperwork on your application, that is the horrible thing. “

Brookshire said his human resources department had detected several false claims made on behalf of his employees. These have also been reported as fraud and the company is offering a free credit protection benefit to its workers.

In March and April, when many companies were closed by Governor Jared Polis, the American Furniture Warehouse released hundreds of employees. This means that its unemployment premiums are likely to increase, and Brookshire does not want a pile of false claims to raise rates. She has a team working to solve the problem. They also use a website to check complaints against people who have left the company. She worries about smaller companies that don’t have the staff to deal with the problem like her.

“I’m sure there are tons of small employers out there who have been stuck with claims, and they don’t even know,” she said.

Hotaling at Answers to Senior Care would fall into that category. His company, which helps families guide elderly care, received claim notifications for seven non-existent employees. Each letter offers a name and social security number and says that the person notified the state that the company was fired. The letters say he must respond in 20 days, and each complaint generates two letters that require an answer.

Hotaling said he spends hours every week dealing with false claims, including sometimes waiting on hold for 30 minutes or more to speak to someone in the labor department.

“It takes time to make copies, fill out forms, sign things, send things back to the state,” he said. “It’s more paperwork and I bet this is getting buried somewhere. It looks like you’re entering a black hole with no way out. “

Westminster-based StaffScapes provides third-party payroll, benefits and human resources services to more than 100 small and medium-sized businesses in Colorado. Since the start of the pandemic, the company has had to dedicate a full-time employee to handle unemployment claims on behalf of customers, said founder and president Jim Thibodeau. Generally handling 20-30 unemployment claims per year, StaffScapes has processed more than 530 claim notices on behalf of its clients since March. At least 34 of them were fraudulent.

“Fraud is very frustrating for all of our customers who are having to deal with it,” said Thibodeau, noting that it can sometimes take weeks or even months to get a call back from the labor department to address bad claims. “At that time, if it is fraud and you are unable to prevent it, the employer may have paid $ 10,000 to $ 14,000 in fraudulent unemployment.”

This can impact companies’ financial results by increasing their unemployment insurance premiums, even if the labor department ultimately corrects the company’s record. Unemployment insurance rates have already increased to 2021, although Thibodeau expects them to return when the labor department finds out about the fraud and filing.

Capturing and prosecuting scammers is difficult.

The Colorado Attorney General’s Office sues unemployment fraudsters when they are caught. But bringing charges against offenders during the pandemic proved to be a difficult task, without a single public action against a scammer during the pandemic, according to state officials. With that in mind, Attorney General Phil Weiser said his team is focused on education and prevention, keeping the Stopfraudcolorado.gov website as a means of providing people with information and resources to protect themselves.

“It’s a big problem,” said Weiser of unemployment fraud. “If you put this in a broader context, scammers will look for some way to take advantage of the system and attack people. Please stay tuned. Be careful. Any automatic call, any phone call, any email you receive can be a scammer. Don’t just share personal information if you’re not sure who you’re sharing it with. “

Local law enforcement agencies don’t even try to catch the perpetrators, leaving the job to federal and state authorities. In September, the US Department of Justice launched a National Unemployment Fraud Task Force to combat the problem.

“First of all, the number of reports we received was astronomical,” said Ginger Delgado, a spokesman for the Arapahoe County Sheriff’s Office. The sheriff’s department receives reports, but closes cases as soon as they are brought, she said, also noting that she was also the victim of a fraudulent complaint.

In the labor department, the criminal investigation unit has doubled since the pandemic began. The priority for these agents is to close the cases of fraud, Haavind said. They are working with the FBI, the Secret Service, the Colorado Bureau of Investigation and labor departments in other states, she said.

In the past, state labor departments focused on individuals who tried to circumvent the system, Evermore said. But such cases are rare because unemployment insurance doesn’t pay enough money to risk a criminal charge, she said. In Colorado, the maximum weekly benefit is $ 618.

“What is really ironic is that, for the past 10 years, states have increased systems to avoid any overpayment,” she said. “In all the time that states have added these signs of fraud, the number of erroneous denials has doubled.”

Rebecca Sicilia is one of those who waits for money because of fraudulent fraud.

Sicilia lost her job as a call center agent in late October and had regular unemployment until December. When the state labor department launched its new online complaints system, however, Sicilia found her account blocked because of a “integrity retention”, which is the state’s language for investigating fraud. And she also received notification that she owes the labor department $ 3,297, which is the amount paid after she was fired.

“I said, ‘I am not a fraudster, but I am being investigated for fraud! ’”, Said Sicilia.

Between 11 and 17 January, Sicilia, 72, made 33 calls to several hotlines in the labor department, but was unable to unlock her account. She was told it would take 10 weeks. She says the problem started with the new unemployment insurance system, which was launched on January 10. Somehow, wrong information about her job history automatically filled her information into the system to make it look like she was working the last time she applied for benefits.

“There was no way to appeal online because I was … blocked,” she said. “You just need to wait.”

Sicilia’s biggest fear is losing her home in Loveland, which she owned for 23 years. In addition to the mortgage payment, her expenses are low, as she stays at home due to the pandemic.

“My family is sending money. That’s how I’m doing it, ”she said. “But I can’t allow them to send money forever.”

The fraud epidemic is also a headache for banks, said Jenifer Waller, president of the Colorado Bankers Association.

Banks already have sophisticated fraud detection systems, but they still need to update their defense to combat fraud against unemployment. In addition to fighting fraud, banks are reporting an increase in customer service calls from concerned account holders. Everything just requires a lot of resources to deal with, she said.

“The people who committed the fraud are using all kinds of systems to do this,” said Waller. “In some cases, banks certainly lose money on this.”

Like many people interviewed for this story, Waller was a victim of fraud, receiving a debit card at home and opening the letter to the bankers’ association notifying the organization that she had applied for unemployment.

Correcting the record took half a working day.

“I was shocked at how long it took me to go through all the steps to fix everything and I knew where to go for everything,” said Waller. “I was thinking how difficult it would be if you didn’t know where to go yet.”

If you are a victim of unemployment fraud

  • Visit : cdle.colorado.gov/unemployment
    Click on “Report Fraud”
    Click on “Did you receive unemployment paperwork or a debit card without claim”
  • Contact all three credit bureaus – Experian, Equifax, TransUnion – and place a “fraud alert” in your name and / or social security number.
  • Get a free copy of your credit report from each credit bureau and review it. If something inaccurate appears in a report, a dispute must be filed directly with the credit bureaus.
  • If a Labor Department inquiry from another state appears on a credit report, there is a good chance that the victim was the target of fraudulent SD action in that state.
  • File a police report with the police department closest to where you live, informing the police that you have been a victim of identity theft and that a fraudulent UI claim has been made on your behalf.
  • Additional resources can be found at Stopfraudcolorado.gov.

Paula Fonseca