Washington state’s unemployment agency is reviewing its hiring and oversight policies after a former staffer with a criminal record was accused of using his agency position to defraud the state of at least $360,000 in jobless benefits.

Reyes De La Cruz III, 47, who was charged Friday in a 20-count federal indictment with orchestrating brazen insider fraud, already had a criminal record and was facing a felony theft charge when he was hired in April 2020 by the state Employment Security Department to help process the surge in pandemic-related jobless claims.

ESD screens job candidates for any history of unemployment fraud, which is automatically disqualifying. But the agency doesn’t require background checks for other criminal activity for claims specialists, ESD spokesperson Nick Demerice said.

Whether ESD will start requiring extra background checks “is absolutely something that we are evaluating right now,” Demerice said.

De La Cruz’s indictment has also highlighted concerns about how ESD supervises staff who process unemployment claims.

De La Cruz was one of several hundred people ESD hired as the agency grappled with hundreds of thousands of unemployment claims as the pandemic shut down vast swaths of the Washington economy. He was initially tasked with customer service inquiries, prosecutors say. But he “quickly progressed to an unemployment insurance specialist with responsibilities that included processing basic and complex claims, fact-finding research … to determine eligibility, and adjudicating basic claims to allow or deny benefits,” according to the indictment.

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ESD doesn’t require “secondary review” of claims that staff have approved, which “creates an opportunity for [ESD] staff to abuse their positions by possibly approving ineligible claims for friends or family, or even submitting and approving ineligible claims for personal benefit,” states an April report by the state Auditor’s Office on the $650 million in unemployment fraud that struck Washington last year.

Federal prosecutors said De La Cruz, who was arrested Friday in Moses Lake, was able to steal at least $130,000 for himself in part by using other people’s personal information to file bogus jobless claims.

De La Cruz also arranged for hundreds of thousands of dollars in improper benefit payments for family, friends and acquaintances, and used bribery and extortion to receive kickbacks, prosecutors said.

De La Cruz was fired after ESD discovered the fraud and the case was referred to federal law enforcement and reported to the state auditor. De La Cruz worked at ESD from about April 1, 2020, to about Oct. 1, 2020, prosecutors say. De La Cruz had previously worked for ESD from 1996 to 2003, prosecutors said.

According to ESD, De La Cruz is the only department employee alleged to have carried out fraud during the pandemic.

The agency has changed how it pays claims, eliminating automatic payments of backdated claims, Demerice said. During the pandemic, automatic payment of multiple weeks of claims often resulted in single payments of $20,000 or more in Washington and other states.

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It’s unclear whether De La Cruz’s criminal record would have been potentially disqualifying for the ESD job.

Under Washington state law, job candidates can be rejected for state or local government jobs if they have a prior conviction for a felony that “directly relates to the position of employment sought” and if it has been less than 10 years since the conviction.

When he was hired by ESD in April 2020, De La Cruz was facing 2019 charges for felony theft and bail jumping, but he wasn’t convicted until May 2020, Washington court records show.

Jason Rittereiser, a Seattle employment law attorney and former King County prosecutor, said that because the ESD job represented a “position of public trust,” ESD also could have been justified in disqualifying De La Cruz based on the pending felony charge. “At a minimum they could have sought additional information and likely should have,” Rittereiser said.

“Most financial institutions are required by statute to inquire of someone’s criminal history if placed in a position trust and it’s unclear why ESD would not take the same level of care when placing someone … who would have access to public funds,” Rittereiser said.

Prior to his hiring, De La Cruz had convictions for domestic-violence assault, violation of a protection order, harassment and controlled substance violations, Washington court records show.

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Although the ESD is reviewing how it hires and supervises employees, the agency must also consider the potential costs of more stringent policies, Demerice said.

One potential downside of background checks, Demerice said, is that they can bring racial bias into the hiring process. According to a 2012 report by the U.S. Equal Employment Opportunity Commission, “criminal record exclusions [can] have a disparate impact based on race and national origin.”

Adding a secondary review for claims approval would also add to processing time, which could negatively affect those who are waiting for benefits, Demerice said.

The ESD fraud is the subject of an ongoing investigation by the state Auditor’s Office, which is expected by the end of the year.

De La Cruz is the third suspect to be charged in Washington’s unemployment $650 million scam last year. But his case differs substantially from two earlier cases, which involved Nigerian citizens using stolen identities to file fraudulent unemployment claims, federal prosecutors said.