Identity crisis: Fraudsters trying to scam unemployment system
At its high point, Jack Kravitz received tote fulls of mail from the Ohio Department of Job and Family Services to verify the unemployment of people who, as it turns out, never worked at his delicatessen or cafe.
“Somehow we got on some kind of list or whatever and we had people applying for unemployment saying they used to work here and we were literally getting 100 to 150 letters a day from unemployment …” Kravitz said.
“Literally, they would bring the mail in cartons to us,” he said.
Of course, none of those people worked at Kravitz Deli in Liberty or Garden Cafe at Mill Creek Park. He responded and informed Ohio JFS, causing the tidal wave of applications to slow to a drip and eventually stop when the state flagged his account for fraudulent activity.
Fraudsters at an alarming rate are trying to scam the unemployment system, a problem that has worsened during the viral outbreak as states, including Ohio, adjusted to mass layoffs caused by the pandemic, created a new benefit system for gig workers and hurried to install safeguards to stem the activity.
The problem is affecting businesses and individuals like Tracey Willmitch of Youngstown, who received a 1099-G tax form from the IRS for unemployment benefits she didn’t receive, leaving her puzzled and concerned.
In early February, Ohio JFS announced an increase in initial jobless benefit applications by nearly 200 percent to 140,444 from the previous week, leaving the state agency to suspect scammers and fraud were the culprit.
Then, the state flagged 44,000 claims for suspicion of fraud and to be reviewed. The latest numbers last week show the state flagged about 3,700 of the 44,985 initial claims as potential fraud.
To combat the staggering rise, the state engaged experts from the top banking and insurance companies in the state for short- and long-term fraud detection solutions, said Ohio JFS spokesman Bret Crow.
“With their help, we made some really good progress,” Crow said. “We’re using Experian technology and LexisNexis technology to help us verify the identity of unemployment applicants. We want to make sure you are who you say you are, not a fraudster, scammer (or) criminal trying to get unemployment benefits they didn’t earn or deserve.”
A week after the state introduced the new safeguards in March, initial applications in the traditional unemployment system dropped 45 percent and 65 percent in the new Public Unemployment Assistance (PUA) program, created by the federal government early on in the pandemic for self-employed and gig workers.
“Just installing more locks on the front door of unemployment for sure helps,” Crow said.
Issues with data collection and reporting at Ohio JFS prevent Crow from saying how much money has been overpaid during the pandemic through fraud or in error. The agency is reviewing overpayment numbers it reports to the U.S. Department of Labor and will file amended, accurate reports, said Crow.
The state will also release a public accounting of the overpayments.
As of late March, the labor department’s inspector general was estimating at least $89 billion, or about 10 percent of the nationwide unemployment benefits paid out during the pandemic were either fraudulent or in error. The office said it had identified $4.5 billion of potentially fraudulent payments to people who used the same Social Security numbers to apply in different states or using the numbers belonging to deceased people or federal inmates.
“We’re seeing an immediate harm and then an anticipated future harm. The immediate harm is that some individuals have been unable to claim unemployment compensation because their identifying information, such as their Social Security number is already in use with a fraudulent claim and they are having to go through more than the usual hoops in order to get a claim filed,” said Michelle Wrona Fox, staff attorney with Community Legal Aid. “So someone who is actually in need is getting a very delayed response in getting the unemployment they need.”
The anticipated harm is “actually the greater harm” because people accessing needs-based programs — those previous to the pandemic and those because of the pandemic — could have their benefits lessened or eliminated because the assistance is based on income and assets.
If a fraudulent claim is filed under a person’s name, it appears that person received jobless payments when actually he / she did not. That looks dishonest on the victim’s part and “it could cause a reduction in benefits, overpayment of benefits and in some situations for people, stopping benefits,” Wrona Fox said.
She recommends victims keep the paperwork documenting the fraud for at least seven years.
“It will be the best proof they have that they reported it and that it’s not their income,” she said.
Also, in a “wild departure,” the Ohio Department of Taxation and the IRS are advising people not to include the misguided income on their taxes, “but I think there is an understanding on the widespread issue at this point to try to minimize the harm to people,” she said.
Willmitch, 60, said in January she received emails regarding unemployment, but she never applied. Her income is through Social Security disability.
“I knew that was kind of odd … so I went online and notified unemployment regarding receiving emails regarding an unemployment case that I had not opened,” she said.
“It still didn’t stop because I received a 1099-G, went online and reported that and received two more emails from unemployment. It wasn’t until I decided to contact someone I know at Legal Aid and forwarded all my emails and copies of my stuff that they were able to get that to stop.”
The payment on the tax form was for $960.
She did later receive a corrected 1099-G after reporting the fraud and is watching her credit report, but so far hasn’t noted anything out of the ordinary. But will have to wait until January, when 1099-G forms are sent out, to see if more fraud was committed using her name.
“My main concern was why was I chosen. How did my information get out there? I still to this day don’t know how my information got out there or how this person doing this was attracted to me,” Willmitch said.
Their are a lot of moving parts with unemployment, said Marcy Angelo, director of client relations with White Glove Payroll in Liberty.
Because of the pandemic, she said, Ohio and other states waived the work search requirement as a condition of collecting unemployment. Also, she said, employers stopped receiving employer separation paperwork to verify separation for benefits; instead, it was automatically assumed the job loss was related to pandemic.
Now, those requirements have returned, she said.
“So these requests to separate from employers are starting to come out, but what is happening is, one, it’s in your name, but you are not actually unemployed or two, the other thing would be is Joe Smith filed for unemployment under (a company’s name), but Joe Smith never ever worked for the company in the history of the business,” Angelo said.
One of White Glove’s clients, she said, received more than 1,000 filings in six weeks, and the kicker is, he doesn’t have employees, but pays everyone by 1099.
“We don’t want our clients to have a bunch of unemployment filings tied to their name because it could affect their rates,” Angelo said. “Every company pays unemployment taxes to the state of Ohio and that rate can be affected based on how many people file unemployment in your company’s name.”