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Audit: Fraudsters stole more than half the PUA money

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Illinois

Fraudsters stole more than half the money paid out by the state from a special pandemic unemployment fund, pilfering nearly $2 billion in federal money that was supposed to help out-of-work Illinoisans, according to a state audit released Thursday.

The audit offers the first estimate for Illinois’ share of the mammoth fraud that swept the country during the pandemic as states were hit with a deluge of unemployment claims. The audit covers much of the period the program was in use, from July 2020 through June 2021. […]

“The fraudsters illicitly got federal money — not state — because the Trump administration designed a uniquely flawed system,” the agency said.

But a Tribune investigation published a year ago found the problems in Illinois were exacerbated by IDES’ failure to follow federal recommendations to adopt free fraud-fighting tools made available before the pandemic, while also being slow in developing other processes to ferret out fraud.

The audit didn’t review those failures, let alone determine how much they may have boosted the fraud tab. But the audit found that, of the $3.6 billion in Pandemic Unemployment Assistance paid out from July 2020 through June 2021, nearly $1.9 billion was tied to fraud, the vast majority in the form of identity theft.

The audit can be found here.

* CBS 2…

CBS 2 asked the Illinois Auditor General if the issues it found with the PUA system in Illinois could be preventing IDES from figuring out how much money was lost to fraud.

“While we cannot speak with any certainty to the cause of the Department’s challenges regarding calculating the extent of fraud, it is our opinion that the inability of the Department to provide complete and accurate PUA claimant data to our auditors indicates that it would be very difficult to calculate, with any certainty, the extent of fraud in the PUA system,” the auditor general’s office said.

* Leader McConchie…

Senate Republican Leader Dan McConchie issued the below statement following the release of the Auditor General’s June 16 audit of the Illinois Department of Employment Security:

“This report is just further evidence of the mismanagement within IDES that has been so clearly evident throughout the pandemic.

“Governor Pritzker had a responsibility to the people he put out of work. While thousands were waiting for a dysfunctional and chaotic system to issue them the benefits they were owed, fraud was running rampant throughout the system leaving hundreds of thousands of residents victimized by fraudulent claims.

“The Pandemic Unemployment Assistance program was so poorly run that the Auditor General’s office couldn’t even conduct a proper audit to determine the amount of fraud that occurred. The saddest thing is, Illinoisans are on the hook for this disaster.

“Had Pritzker prioritized the issue and not been so focused on arbitrarily shutting down businesses and then criminalizing them for noncompliance of his mandates, these problems could have been mitigated.”

* Governor’s office…

Throughout the COVID-19 Pandemic, every state in the nation was plagued by fraudulent attacks on their unemployment system by organized criminals, with recent federal estimates claiming at least $163 billion in national unemployment fraud. The federal Pandemic Unemployment Assistance (PUA) program, that is the subject of this audit, was the epicenter for this fraud. The fraudsters illicitly got federal money – not state – because the Trump administration designed a uniquely flawed system.

Since the Trump administration launched the PUA program in Spring 2020, IDES has sounded the alarm over insufficient and flawed federal guidance. This included the Trump administration stripping IDES of its best tools to stop fraud, such as requiring income or employment verification before paying out claims.

The PUA program is 100% federally funded and the findings highlighted in the audit do not impact the state’s UI Trust Fund. The system used to manage the PUA program is independent of the system used to manage regular UI benefits that are funded under state law. From the start of the pandemic through the end of 2021, IDES stopped roughly $40 billion in fraudulent payments across state and federal programs. IDES has saved tens of billions in government funds through enhanced integrity measures, including implementing new login software that utilizes security industry best practices and launching new data analysis tools to verify applicant identities and claims.

Background:

• As the audit itself notes, ‘Unlike in regular UI, the PUA program does not provide for a database of earnings and wages to support the program, and consequently, there are unique and pervasive opportunities for fraud within PUA.’
• Federal watchdog reports and information from other states emphasize that UI fraud was concentrated in the PUA program due to poor federal guidance.
• As the GAO timeline shows below, the program was changed hastily and repeatedly to respond to states’ concerns. Numerous recent federal reports describe at the length the poor guidance from the previous federal administration. See the following:

- Testimony of Larry D. Turner, Inspector General, USDOL: Pandemic Response and Accountability: Reducing Fraud and Expanding Access to COVID-19 Relief through Effective Oversight
- USDOL OIG: OIG Oversight of the Unemployment Insurance Program
- Government Accountability Office: Pandemic Programs Posed Challenges, and DOL Could Better Address Customer Service and Emergency Planning
- Government Accountability Office: Pandemic Unemployment Assistance: Federal Program Supported Contingent Workers amid Historic Demand, but DOL Should Examine Racial Disparities in Benefit Receipt

Furthermore, evidence shows that UI fraud in other states was also predominantly concentrated in the PUA program – often at a scale larger than what was seen in Illinois. For example:

- California shared it lost at least $20 billion to fraud. California estimated that 95% of confirmed fraudulent payments were associated with PUA. (EDD, AP)
- Michigan lost roughly $2.8 billion to “imposter” fraud, and $5.7 billion to “misrepresentation” fraud. Of the dollars lost to fraud, 97% came from federal programs. (UIA Audit; NPR)
- Pennsylvania lost $6 billion to fraud. 94% of those dollars were from federal programs. (CBS Pittsburgh; WFMZ)
- A small number of additional states have released estimated fraud totals, such as Arizona ($4.4 billion, September 2021), Florida ($1.9 billion, July 2021), Texas ($2.5 billion, November 2021), and Kansas ($700 million, August 2021). The USDOL Office of the Inspector General estimates that at least $163 billion in pandemic UI benefits could have been paid improperly across all states.

posted by Rich Miller
Friday, Jun 17, 22 @ 9:09 am

Comments

$163 billion is almost impossible to imagine. That it got siphoned off by fraud is breathtaking. With that much money, there has to be clues as to where it went and who stole it. North Korea? Iran? Russia? This doesn’t feel like a bunch of independent hackers, this feels like a military/foreign espionage case.

Be nice if the FBI had some leads. $163 billion. Wow.

Comment by 47th Ward Friday, Jun 17, 22 @ 9:37 am
Blaming Trump isn’t going to work on this one.

Comment by Chicagonk Friday, Jun 17, 22 @ 9:41 am
Maybe this will be a wakeup call for the state and federal legislators, policymakers and law enforcement officers who laugh off citizen complaints about the constant barrage of fraud attempts we all experience every day. It’s striking that none of the stories or statements contain any information about the suspects or attempts to recover the funds.

This is what’s been missing from the retail theft/bail reform/police reform discourse. Large swaths of white collar crimes are de facto legal now because they don’t get investigated or solved. Everyone with a cell phone or email address is subject to regular criminal fraud attempts. People get fake law enforcement notices, dire warnings about car warranties they don’t have, and even death threats every week. But walk one of those into your local police station and they’ll tell you to block the number, as though the scammers won’t call back from a different number the next day. It’s maddening.

Comment by vern Friday, Jun 17, 22 @ 9:42 am
In October 2020, my HR department sent me an email asking if I had applied for unemployment benefits. Someone had filed a fraudulent claim in my name. IDES sent an email to my employer asking if the application was legit.

Spent hours trying to get hold of IDES, freezing credit reports, filing ID theft reports, etc.

Have paper copies of everything on the floor next to my desk.

Comment by Huh? Friday, Jun 17, 22 @ 9:49 am
It feels like half our office had a fraudulent claim made in their name in 2020. It was rampant.

Comment by Montrose Friday, Jun 17, 22 @ 9:54 am
OK, blame is cool.
But, how about prosecuting and getting back the money?
Did I miss it, but didn’t see anything about getting back the money from the crooks?

Comment by Bruce( no not him) Friday, Jun 17, 22 @ 9:56 am
==But a Tribune investigation published a year ago found the problems in Illinois were exacerbated by IDES’ failure to follow federal recommendations to adopt free fraud-fighting tools made available before the pandemic, while also being slow in developing other processes to ferret out fraud.==

Wow.

Comment by SAP Friday, Jun 17, 22 @ 10:12 am
Early in the program I remember a commenter posting about the amount of fraud and this message board blew up telling her/him to go back to facebook. Partisans are too quick to turn a blind eye when their guy is in charge. Fraud shouldn’t be a political football to be tossed around. It should be taken seriously by all and addressed.

Comment by Franklin Friday, Jun 17, 22 @ 10:13 am
The only method for reporting fraud to IDES was by leaving a voice mail. That was the only system they offered for nearly 2 months.

Comment by SIL Friday, Jun 17, 22 @ 10:28 am
Not surprised in the least at the magnitude of this criminal activity. Someone filed a false claim in my name. Reported to the local police who took a report and I also reported online to AG’s office. Never even got a response from AG. Since then there have had two other instances of fraudulent filings to a different agency and to a bank. Still tying to resolve. I suspect there will be more. Both IDES and Illinois AG failed us miserably on this one. Where did the money go? Does anyone care?

Comment by Responsa Friday, Jun 17, 22 @ 10:33 am
As the pandemic hit, the wife and I were looking to purchase rural land to build a retirement home. Ironically, as the pandemic got worse, land prices went up, way up, eventually to the point everything was cash offers well over asking price. Several realtors told us much of the money being thrown around was pandemic-related funds. Investigating those that received funds based on need and then purchased real estate (or other items, such as equipment) shortly afterwards should be an easy thing to do. I emailed Senator Durbin’s office twice suggesting this be done, received only a standard prepackaged reply.

Comment by Wading in... Friday, Jun 17, 22 @ 10:47 am
Unfortunately, this is a nationwide issue. I didn’t get any filing in Illinois, but got one from Ohio.
But at least Ohio offered me 12 months free identity theft coverage.

Comment by Bruce( no not him) Friday, Jun 17, 22 @ 11:12 am
It’s enough to make you lose faith in your fellow man.

Seriously the gutting of State government and the dumbing down of much of the State workforce has consequences. There’s not enough people, especially people as smart as the fraudsters, to stay on top of this.

Comment by Sir Reel Friday, Jun 17, 22 @ 11:15 am
The Pritzker administration declined to make the head of the state unemployment agency Kristin Richards available to answer questions about the audit Thursday

Truly amazing

Comment by Lucky Pierre Friday, Jun 17, 22 @ 11:22 am
Of course - Trump is responsible. Oh what fools we employ at the State agencies

Comment by Sue Friday, Jun 17, 22 @ 11:31 am
“PUA program is 100% federally funded and the findings highlighted in the audit do not impact the state’s UI Trust Fund”

JB using the FEDs as an excuse is not a good look - he was called out Mautino on the La Salle Vet home COVID deaths - JB pointed the finger at the Vet Admin away from his responsibility. Same playbook here - so since it was Fed money it is no big deal. Anything but a closely looking at his IDES staff failures that allowed the fraud to go on for months after first becoming aware of it - and when there were national initiatives that many other states use to share info that would have prevented this fraud.

Comment by Donnie Elgin Friday, Jun 17, 22 @ 11:32 am
This is really bad news. I think we all knew IDES under Team Pritzker was having problems, but this is awful and the fact that Pritzker did not disclose the extent of the problem is perhaps the greater sin.
We need our state government leaders to be transparent and honest with us.
Again we see Pritzker refuse to take responsibility and attempt to shift his consistent management incompetence to a third party.
Not only does he demonstrate his immaturity in not accepting responsibility but he continues to show he lacks empathy for the victims of his incompetence.

Comment by Back to the Future Friday, Jun 17, 22 @ 11:33 am
Give the Pritzker administration credit for not blaming Governor Rauner for this one just the Trump administration

Comment by Lucky Pierre Friday, Jun 17, 22 @ 12:01 pm
==Governor Pritzker had a responsibility to the people he put out of work.==

Pritzker was responsible for the Covid that “put people out of work”? Was, was he sitting in a high-backed chair and petting a white cat while he did that? /s

Comment by Lester Holt’s Mustache Friday, Jun 17, 22 @ 12:30 pm
That State agencies are understaffed, underfunded, and use outdated systems predates JB. BUT this does not mean JB if off the hook; agencies should do what they can with what they have to improve security; some of it consisting of ensuring basic security and recovery methods are in place and working. Do the “dumb stuff” like make sure software and utilities are up-to-date and secure across the enterprise; close unneeded system ports, make sure anti-malware is running on EVERYTHING at high-protection settings unless approved by SysAdmin, delete unneeded employee access (fired/quit/no need for access, etc.), making sure audit logs are active and accurate. But I’m guessing the State doesn’t even have the tools to do that enterprise-wide across its systems, let alone the people to do it at this point. At least put up a fight with the hackers; the scammers filing false claims are another issue (maybe those free fraud-fighting tools would have helped after all).

Comment by thisjustinagain Friday, Jun 17, 22 @ 12:56 pm
If these numbers are correct, it appears JB Pritzker was Governor during the greatest theft of taxpayers money in the history of the State of Illinois.
The numbers are huge and it is hard to believe the degree of incompetence that Pritzker permitted to happen on his watch.

Comment by Back to the Future Friday, Jun 17, 22 @ 2:56 pm
===during the greatest theft of taxpayers money in the history of the State of Illinois.===

Seems as though a once in a century kind of disaster-pandemic brought out some of the worst elements of society too.

Comment by Oswego Willy Friday, Jun 17, 22 @ 3:02 pm
OW
Certainly a lot of truth in your comment.

Comment by Back to the Future Friday, Jun 17, 22 @ 3:07 pm
It looks like JB is improving in his perpetual whining…

“Give the Pritzker administration credit for not blaming Governor Rauner for this one just the Trump administration”

Comment by Lurker Friday, Jun 17, 22 @ 3:26 pm