"Unemployment Insurance Fraud Is the Latest Epidemic"
Updated: Jul 1
No, former governor Howard Dean has not been filing unemployment claims over and over — but somebody apparently has in his name. Dean is one of many Vermonters who have been mailed information packets about unemployment benefits that they never sought. The former gov actually received no fewer than 10 large booklets for new claimants from the Department of Labor.
The department is reporting a huge increase in fraudulent claims this spring, part of a national wave. The scope of the fraud is “unprecedented,” said the U.S. Department of Justice, which has set up a task force to combat it.
As many as 70 percent of the claims filed this month in Vermont are fraudulent, state Labor Commissioner Michael Harrington said Monday.
Under the schemes — which are now being investigated by an alphabet soup of federal and state agencies, as well as banks and state attorneys general — scammers use unsuspecting people's personal information to collect benefits.
Harrington said Monday it's not clear how many Vermonters have received claims books they didn't ask for. Those who do should report the matter to the department, he said.
Dean, a Democrat who served as governor from 1991 to 2003, said Sunday that he didn't know how the scammers obtained his Social Security number. He was more immediately concerned with the cost of the mailings, which he estimated at about $8 per booklet. He planned to drop them off at the Department of Labor's Burlington office in hopes they could still be used.
Dean noted that he called the department last week to report the fraud, and was assured the mailings would stop. But they didn't, he said. "This is crazy," he said. “What is the matter with the agency?”
Before COVID-19, unemployment claimants had to call the department to file for benefits. "That was a fraud prevention tool," said Cameron Wood, the head of unemployment insurance services. "It's inefficient to have to call to steal someone's identity."
The state instituted online filing to speed up the process as the number of weekly claimants soared from 6,000 to nearly 100,000 last spring. Fraud is "much easier to do so online, where it's done anonymously or using bot technology to hit a system multiple times in a row," said Wood.
The strain produced long delays in processing claims and hours-long wait times for calls. In January, the department accidentally mailed thousands of Vermonters’ 1099 tax forms to the wrong recipients, forcing it to reissue about 180,000 of them.
On Monday, the state auditor’s office released its report on the 1099 mistake. It said, as Harrington earlier predicted, that the error probably happened during the manual part of the printing job. One person was involved, the report said.
More recently, the department erroneously notified some companies that their unemployment insurance contributions were incorrect.
Dean acknowledged that the fraud problem is widespread nationally, but criticized the department’s response.
“This is going to cost the state millions and millions of dollars,” he said of the fraud.
Harrington said the booklets are sent out automatically as soon as the claims are filed.
"It's costing states a lot of money," he said of fraud.
Much of the department’s work is processed on a decades-old mainframe computer that it would cost an estimated $35 million to replace. The obsolete tech — and the complexity of using it in coordination with a newer system — was blamed in part for the costly 1099 error earlier this year.
“We just took in a billion dollars,” said Dean of the state’s share of the latest federal COVID-19 relief bill. “Surely $35 million can be spent on a new computer system so people don’t get scammed.”
That wouldn't solve the problem, said Harrington.
"The states that have newer systems are still struggling with fraud," he said. "They weren’t designed to manage this volume."
He said it was impossible to estimate the amount of money the state has paid out in fraudulent claims, but noted the department has stopped suspicious benefit payments of as much as $700,000.
"I’m assuming we’re not batting 1,000 here, so there is fraud going out the door," he said. "But we don’t know it until we find it."
In its weekly report to lawmakers, the DOL said 30,528 unemployment insurance claims were filed in the week ending April 10.