Pandemic fraud syndicates consider their next targets for theft of taxpayers’ money

Investigators are still trying to determine how much was stolen from government programs during the pandemic, but major fraudsters have already sought new targets.

The same identity theft schemes that defrauded the unemployment insurance system of perhaps $250 billion are already being used in state disability payment programs.

Earlier this year, California revealed it had frozen more than 300,000 claims due to fraud concerns, saying “states have not experienced such scams so far”.

The food stamp program has also shown a surge in identity fraud, and analysts say other programs are also vulnerable. They include rent assistance, state tax refunds, and even Medicaid, the federal state health care program that pays to provide medical coverage for the poor.

“We’re all sitting on the edge of our seats trying to wait and see what that response will be,” said Jarrod Carnahan, senior director of government solutions at Appriss Insights. “I predict we’re going to see a number of these fraudsters using these sophisticated methods and focusing on these programs – if they haven’t already.”

California disability fraud suggests they already have.


SEE ALSO: Unemployment benefits deemed a ‘high risk’ program after massive fraud during COVID-19 pandemic


Using the same kinds of stolen identity hoards built during the pandemic, criminal syndicates have flooded California’s Employment Development Department, or EDD, with bogus claims. The state insists it spotted the scam in time and was unaware of any bogus paid claims, but legitimate claimants say they were trapped in the freeze and had to wait months to get the checks they deserved.

Disability was an obvious next target.

Not only can the same style of identity scam be used, but payouts can be as high as $75,000. The average total unemployment benefits paid per person during the pandemic was $26,000.

“If I were a criminal, I would be absolutely sure about anything disability-related, because the numbers are huge,” said Haywood Talcove, CEO of government affairs at LexisNexis Risk Solutions, who warned of the evolution fraud.

The pandemic may have turned out to be blood in the water.

Fraudsters who focused on defrauding businesses or individuals and only dabbled in government fraud through things like IRS refund scams have now seen what is possible, especially at the level of State.

“What happened with unemployment insurance was the canary in the coal mine,” Mr. Talcove told The Washington Times in an interview earlier this year.

He estimates that about $250 billion was stolen from the unemployment program. Congressional investigators say nearly $100 billion more was stolen from Small Business Administration programs, which were inundated with bogus emergency loan applications.

Rather than a one-time windfall, the scammers realized they had ignored many government programs that were equally sensitive and carried large salaries.

Mr Carnahan said food stamps, officially known as SNAP or the Supplemental Nutrition Assistance Program, are a juicy target. The program offers cash-loaded benefit cards, similar to unemployment.

He said Medicaid, the federal health care program for the poor, is likely being exploited. During the pandemic, Congress pushed hard to make sure people kept their coverage. No one has been struck off the rolls.

Yet that meant people who ended up with other care, like those who went to jail, still had Medicaid coverage.

He said Medicaid will have to go back at some point and recheck everyone on the rosters during the pandemic. Still, recovering money that was wrongly disbursed would be a huge undertaking, even if states have an incentive to do so.

Mr Talcove said states should watch out for tax refund fraud. The Internal Revenue Service has been battling the problem for years, but fraudsters now know that states are also vulnerable.

Mr. Carahan said solutions are available, but it takes awareness and motivation.

“We’re not talking about problems that can’t be solved,” he said. “We are talking about problems that can be solved through the use of technology.”

As analysts look to the future, the federal government is trying to figure out what went wrong with pandemic programs.

The special House subcommittee on the coronavirus crisis will hold a hearing on Tuesday to dig deeper into the fraud. The government’s top pandemic inspector general, top Social Security officer in charge of pandemic fraud and a new federal prosecutor charged with prosecuting the cases are due to appear.

The Democrats, who lead the panel, say the fraud happened under President Trump’s watch, early in the pandemic, when Congress squeezed out money with little regard for the integrity of the program. Democrats say the Biden administration deserves credit for imposing “common sense safeguards” to weed out bogus calls for pandemic relief.

It remains to be seen whether these same guarantees will be applied to other programs likely to be targeted.

The Government Accountability Office said in a recent audit that people who administer state unemployment programs have many reasons why they are being targeted, and even have solutions.

Employees said the number of cases exceeded staff and there were not enough investigators.

Fraudsters operating overseas also have little fear of being caught, the GAO said.

So far, the Justice Department has announced only one extradition of a pandemic fraud suspect, and it was an American who lived in Florida and fled to Europe. after learning that the authorities were pursuing him.

GAO investigators said an unemployment program staff member told them that “additional investigative resources to track international fraudsters and a renewed focus on prosecuting these individuals would have a deterrent effect.”

It also doesn’t help that the government has been singularly unable to recover the fraudulent payments.

GAO investigators said only about $1.3 billion in Pandemic Unemployment Program overpayments had been recovered through December.