PROVIDENCE — Fraudulent unemployment insurance claims are so widespread in Rhode Island that victims include the head of the State Police and at least three of the state senators who held a hearing on the problem Monday night.
“I was a victim of this and, as you may well know, so was the colonel of the State Police,” said Senator Stephen R. Archambault, a Smithfield Democrat. “It doesn’t show any discretion. It hits everybody. Of all people, they pick him – Colonel (James M.) Manni.”
Senator Louis P. DiPalma, chairman of the Senate Committee on Rules, Government Ethics, and Oversight, said he and Senator Dawn Euer, a committee member, also have had fraudulent claims filed in their names.
“I suspect, as well, many of those folks who are watching have been victims or know of somebody who has been a victim,” DiPalma said.
Indeed, state officials say Rhode Island is receiving 800 to 1,000 complaints per day about unemployment insurance fraud now that the federal government has extended a COVID-19 relief package and boosted weekly unemployment checks by $300.
“For sure, we have been seeing, since January, a huge uptick in fraud,” state Department of Labor and Training Director Scott R. Jensen told the committee.
But, he said, “We have also kept up, in a corresponding way, with a much more robust hold on many, many, many claims. So we are seeing enormous claim levels right now, and a lot of those claims are fraud, and we are stopping them.”
The state has confirmed $23 million lost to unemployment insurance fraud since the pandemic began, Jensen said. But he said the state has paid out $2.6 billion in unemployment benefits during that time frame, so the fraud amounts to less than 1 percent of the amount paid out, which is in line with past levels of fraud, he said.
Senator Jonathon Acosta, a Central Falls Democrat, said, “One way of framing it is we have seen a sharp increase in fraud, but we saw a sharp increase in unemployment claims in general.” He noted that fraud comes to 0.88 percent of the total claims, saying, “So actually what we saw was a proportional increase.”
Acosta said he wanted to know how the state is doing in processing valid unemployment claims. “Is the effort and the amount of resources that we are investing in trying to get at these fraudulent claims at all affecting the processing time for real claims of real workers?” he asked.
Jensen told Acosta that Rhode Island is among the top three states “in terms of paying people” unemployment benefits. He said he gives the state a grade of C-plus for how quickly it gets people benefits and serves them, but said that if you grade on a curve compared to other states, Rhode Island gets an A.
“It’s just that there are so many claims, and we do have to balance protection of the (unemployment) trust fund,” he said.
Jensen said Rhode Island has seen an “onslaught” of unemployment insurance claims over the past 11 months. To put it in context, he said, the prior record week for unemployment insurance claims came at the start of the state banking crisis in the 1990s.
“We had 5,300 claims in a week, and people thought the sky was falling,” Jensen said. “We had 40,000 claims one day. We beat that weekly record in a day, every day, for like two months. The governor had to shut down the economy in order to keep people alive. That has never happened before.”
Also, Jensen noted that the Rhode Island chapter of the American Civil Liberties Union filed a class-action lawsuit in May, challenging the Department of Labor and Training decision to freeze unemployment payments to hundreds of Rhode Islanders. The suit claimed the failure to provide recipients with notice violated their constitutional right to due process.
“I’ve got to say, (the ACLU) has not made our job easier at the DLT in the last several months,” Jensen said. “But I’m glad they did what they did because it would be the wrong thing to do to simply shut down claims so that you could protect the trust fund. That’s not what we are doing. That’s not the way to do it. And you’ve got to do both missions.”
Jensen sought to dispel the notion that the unemployment insurance fraud stems from thieves hacking into “an old computer in the basement held together by duct tape, maybe smoking a little bit.” He said, “It’s not a technological issue in the sense of warding off the bad guys. It’s that they are coming in and they look like the good guys.”
The fraudsters are plugging in the correct Social Security numbers, the correct dates of birth, and the correct employers, Jensen said.
The problem stems from the “imposter fraud” that has plagued not only unemployment insurance payments but also tax returns and Paycheck Protection Program loans, he said.
In December, the federal government boosted unemployment checks by $300 a week as part of a COVID-19 relief package, and Jensen said, “Those richer benefits really make a tempting target to fraudsters.”
Fraudsters are able to file unemployment claims in other people’s names because they have obtained personal identification information through past data breaches, such as the 2017 Equifax data breach that exposed the personal information of 147 million people, he said.
“In addition to the criminals doing whatever they are doing with your information, unfortunately they also aggregate it and sell it,” Jensen said. “And when they do that, they are able to get it, usually, to organized crime groups who employ folks to apply for unemployment insurance. And they present with stolen personal identifications, so it is really difficult to tell a real person from a fraudulent person.”
Jensen said the state is now using automated algorithms to detect fraud. “We are curious about the bank or IP address a fraudster used, and many other factors,” he said. “We are looking for that profile, and when we see that profile come to use again, we are going to stop that claim.”
So it remains crucial that people contact the State Police if they receive an unemployment insurance letter in the mail from the Department of Labor and Training and they didn’t file those benefits, he said.
The Department of Labor and Training website spells out what to do if you or your employer receive an email or letter regarding unemployment benefits that you never applied for.
The State Police recommend that victims also report the identity theft to the Federal Trade Commission at www.identitytheft.gov and visit www.annualcreditreport.com, which allows one free credit report inquiry with one of the three larger credit reporting agencies.
Jensen said that the state is using a “pretty sophisticated” computer-based identity test that helps to determine if unemployment insurance claims are legitimate. Also, as part of negotiations with the ACLU, the state has set up dedicated call lines to lift holds on unemployment payments, he said.
“So we think we have a pretty good system for trying to figure out who is the real person as quick as we can and pay them as quick as we can,” Jensen said.