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Pandemic Unemployment Fraud Estimates Double to $100-$135 Billion; Smith and Crapo Call for Action.

September 12, 2023

WASHINGTON – Official government estimates of fraud in pandemic-era unemployment insurance (UI) programs have doubled within the last six months, reaching a staggering sum of $100 to $135 billion according to a newly released U.S. Government Accountability Office (GAO) report. The report, issued in response to a request from House Ways and Means Chairman Jason Smith (R-MO) and Senate Finance Ranking Member Senator Mike Crapo (R-ID), doubles the original estimate provided in testimony to the Ways and Means Committee in February. This range means anywhere from 11 to 15 percent of total UI benefits paid during the pandemic were fraudulent. Outside experts put the number much higher at $400 billion.

According to GAO, as of May 1, 2023, states have reported fraudulent overpayment recoveries of only about $1.2 billion.

Ways and Means Chairman Smith said:

“I am extremely alarmed by these findings and even more convinced that immediate action is needed to recover as much taxpayer dollars as possible. Unemployment fraud punishes workers and families by taking resources away from law abiding Americans who deserve assistance and puts those resources directly in the pockets of criminals. The unfortunate reality is that every day President Biden spends ignoring this problem, the chances of recovering stolen tax dollars on behalf of these fraud victims grow less.

“The fraud detailed in this report represents the greatest theft of taxpayer dollars in American history, and underscores the dire need for Senate Democrats to take immediate action, as our Committee did in the Protecting Taxpayers and Victims of Unemployment Fraud Act which passed the House in May with bipartisan support.

“I appreciate the partnership of Senator Crapo in introducing a companion bill that will tackle UI fraud head on by incentivizing states to go after fraudsters and improving prevention measures so this never happens again.”

Senate Finance Ranking Member Senator Crapo said:

“These shocking estimates continue to grow, and, as GAO notes, we may never know the full scope and scale of fraudulent pandemic payments. Unfortunately, the Administration’s efforts to address over one hundred billion dollars in fraud in the UI program have fallen woefully short.  Congress should pass the Protecting Taxpayers and Victims of Unemployment Fraud Act to recoup stolen funds for victims and prevent similar large-scale theft from happening in the future.”

This release comes on the heels of a Biden Administration report released on August 21 regarding overpayments in the Pandemic Unemployment Assistance (PUA) program. According to the report, “the PUA program had a total improper payment rate of 35.9 percent.” The report offered few details about the misspending or how much has been recovered.

While the Administration highlights the $2 billion initially provided to the U.S. Department of Labor (DOL) in the American Rescue Plan Act as helping to prevent fraud, Chairman Smith and Senator Crapo have raised serious concerns about the lack of transparency in how the funds have been used, including diversion of hundreds of millions for “promoting equity” and specifically how the Department prioritized the use of these funds for fraud prevention and recovery.

In response, Acting Labor Secretary Julie Su failed to provide basic documentation requested about how these funds have been used, including grants for “Tiger teams” and “Equity grants,” and whether these were effective in preventing fraud or recovering stolen dollars. DOL also did not answer several key questions relating to the total amount of overpayments in pandemic UI programs and how much the Department has recovered.

Background: During the pandemic, UI benefits were significantly expanded to support workers who were laid off through no fault of their own due to COVID-19 related shutdowns. Supplemental federal benefits of $600 and $300 per week made UI benefits a lucrative target for both domestic fraudsters and organized international crime rings. However, lax oversight and refusal to implement stronger protections by House Democrats contributed to one of the greatest theft of taxpayer dollars in American history.

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