Washington state claws back $300 million from unemployment fraud scheme as many jobless workers await benefits

A week after acknowledging fraud losses of “hundreds of millions of dollars” in Washington’s unemployment insurance system, state officials announced Thursday they had recovered more than $300 million of the stolen funds and blocked thieves from stealing “hundreds of millions” of additional dollars in benefits.

But state officials haven’t said how much of the total fraud that $300 million represents.

They also said their efforts may mean further delays in legitimate benefits for tens of thousands of workers who lost jobs in the coronavirus pandemic, said Suzi LeVine, state Employment Security Department (ESD) commissioner, during a Thursday news conference.

LeVine also said she didn’t know when payments would resume to workers whose legitimate jobless benefits were paused while the agency conducts stepped-up anti-fraud and identity verification measures.

State officials also acknowledged a rule change that lets ESD deny unemployment benefits if the agency “suspects [a jobless] claim has been fraudulently filed” — even if that denial halts a legitimate payment during the investigation.

The prospect of additional payment delays will be more unwelcome news for the many Washingtonians swept up in one of the largest frauds in state history — reportedly orchestrated by a Nigerian criminal group dubbed “Scattered Canary,” that used stolen personal data to file bogus claims for jobless benefits.

Among those sideswiped by the fraud scandal is Sharon Rose Robbins, an unemployed airline worker from Federal Way who says unemployment claims she began filing in early April were put on hold again after ESD suddenly demanded more documentation to verify her identity. “I’ve talked with three different people at ESD and gotten three different explanations,” said Robbins, a single mother of two who says she is making ends meet with food stamps and her $2,200 federal stimulus payment.

Another victim is Bart Simons, owner of Greenlake Sports Physical Therapy in Seattle, who recently discovered that fraudulent unemployment claims had been filed in his name. Simons worries that any funds the state may have sent to criminals could end up interfering with the federal Paycheck Protection Program loan he took out to keep his business afloat during the shutdown. “Whether we keep the clinic open or not depends on that” loan, said Simons.

Many people whose identities were used in fraudulent claims say they’re receiving letters from the ESD warning that they may have to pay back the stolen funds.

“I was a victim of unemployment fraud several weeks ago and reported it immediately to ESD,” wrote Seattle area resident Robert Bolger in a message to The Seattle Times. “Today I got a letter from ESD demanding I pay back the 2370.00 they sent me. …. I think they have a large technology problem at ESD.”

Fraud victims won’t be liable for funds lost to thieves, nor would employers see any increases in unemployment taxes due to bogus claims filed on behalf of their workers, LeVine said.

LeVine also emphasized efforts to recover stolen funds, which were led by federal law enforcement agencies in collaboration with financial institutions, which returned some of the stolen funds.

Levine said ESD is “continuing to ratchet up countermeasures” to stop continued attacks by fraudsters. “We’re also aware … that the criminals have not gone away, because we continue to see significant highly suspicious traffic,” LeVine said. She declined to provide details about those countermeasures, in part to avoid giving “a road map to the criminals themselves.”

LeVine pointed to a sharp decline in new, or “initial,” claims for unemployment, which fell nearly 63% last week over the prior week — the first drop in three weeks — as evidence of “significant fraud prevention measures that were put in place over the past two weeks,” according to an ESD statement.

During Thursday’s news conference, LeVine said the agency had recently used anti-fraud technologies, including “filters,” to flag roughly 55,000 claimants for additional scrutiny by fraud investigators.

Critics have asked why the agency hadn’t ratcheted up those countermeasures before fraudsters used stolen personal data to file bogus claims. LeVine offered an explanation that ESD officials have used repeatedly: Because the agency was dealing with an unprecedented volume of unemployment claims, it had to strike a “balance between preventing fraud and easing access to benefits.”

As of May 23, Washington had paid out nearly $4.7 billion in benefits since the start of the coronavirus crisis, with most of the money coming from the federal government’s $2.2 trillion pandemic relief measure.

Stepped-up countermeasures also highlight another dilemma as ESD attempts to keep new fraud in check while continuing to process hundreds of thousands of legitimate claims.

Anti-fraud efforts have complicated the state’s ability to pay the roughly 323,000 individuals, or around 28% of all individuals, who have filed state jobless claims but haven’t received benefits. While most of these claims have been held up by non-fraud issues, a small number are being scrutinized for possible identity issues, ESD officials said.

In addition, anti-fraud efforts have interrupted payments to many individuals who were receiving benefits before the fraud was uncovered but are now on hold because their claims were flagged for fraud review. ESD spokesman Nick Demerice said the agency is unable to say how many individuals fall in this category, but hopes to release a number soon.

On May 20, ESD issued a rule change allowing the agency to deny benefits for suspect claims. Before that change, Demerice said, agency policy was to “conditionally” pay a claim “while we make a final determination,” and then demand repayment if the claim was ultimately denied.

The change came after impostors took advantage of ESD’s policy to conditionally pay some claims before they could be verified. On Thursday, LeVine said claimants affected by this pause “will be paid when we’ve been able to verify their information and their documentation to ensure that it is not identity theft.”

But she acknowledged that verification was adding time to the claims process. “We have paused payments for those individuals while we are trying to evaluate if they are who they [say they] are,” LeVine said.

The extra scrutiny means some unemployed workers will wait even longer before receiving benefits.

For many jobless workers, that also means more stress — and anger.

“I am gonna lose my house without the two payments that unemployment owes me,” wrote a Shelton area resident in a message to The Seattle Times. “I took in my sister in law and her kids because she lost her apartment when they closed the Malls and she lost her job. We are all gonna be thrown out [if] I don’t get those 2 checks.”

“After 7 weeks on unemployment I was cutoff,” read another of scores of messages sent to The Seattle Times, this one from a Kent area resident. The “explanation was that they cannot verify my identity. I am who I say I am. I have a legitimate unemployment claim and was cut off from benefits 2 weeks ago without warning…. I have a 6.5 mo. pregnant fiance! This is wrong.”

The headline on an earlier version of this story incorrectly implied that all 323,000 of workers who have filed initial claims for unemployment benefits but had not received any benefits yet were being delayed by the fraud investigation. Many simply haven’t filed the necessary additional claims for federal or state benefits.