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Pondera Solutions (Thomson Reuters)

A Thomson Reuters subsidiary scored nearly ten million pandemic-era unemployment claims for California. The state stopped paying 1.1 million of them, and the Legislative Analyst's Office later reported that 600,000 were legitimate. California's own assessment credits the tool with $6.1 billion of "Fraud Mitigated" in 2020.

Vendor or contractor

Unemployment insurance
Type
Company or group
Role
Vendor or contractor
Programs
Unemployment insurance
Updated

The profile

Individuals and companies whose conduct was challenged or called into question during or after the pandemic. See sources: California LAO report, Feb. 15, 2022 EPIC complaint to the FTC, Jan. 3, 2024

Pondera Solutions was founded in 2011 and based in Sacramento, with an office in Florida; Thomson Reuters (TSX/NYSE: TRI) announced its purchase on March 19, 2020, without disclosing terms.1 It sells fraud-detection software to benefit programs. It was not a lender and did not decide claims. The executive in the record is Jon Coss, "CEO and founder, Pondera Solutions" in the 2020 release and "Vice President of Risk, Fraud and Compliance Thomson Reuters" in April 2021.12

California's Employment Development Department (EDD) lists three Thomson Reuters offerings: "Fraud detection screening; Business intelligence; and Investigations management."3 The software flagged claims; in the LAO's words, "EDD stopped payments for these claims." By the LAO's account, workers were not told ahead of time and had to verify their identity through ID.me or have their accounts closed permanently.4 The LAO's 600,000 and EDD's 703,378 "Fraud Claims Prevented" in 2020 measure different things.45

In the archive

Before the pandemic

Thomson Reuters' release of March 19, 2020 described Pondera Solutions as "a leading provider of technology and advanced analytics to combat fraud, waste and abuse in healthcare and large government programs." It named the company's core detection system, FraudCaster, and said the acquisition would add to Thomson Reuters' "risk, fraud and compliance" offerings for government agencies.1

During the pandemic

California

EDD prepared its Fraud Tools Assessment for the Legislature under Assembly Bill 138, with help from Accenture. It states that "TR was implemented in December 2020," two months after ID.me.3 EDD says it used the Thomson Reuters service "to screen new UI customers for non-identity related fraud risk (e.g., mailing address, county and federal incarceration status)." It also used it alongside manual screening of paper and phone claims.3

The LAO describes itself as "a nonpartisan office that provides fiscal and policy information and advice to the Legislature." It described the first use in a report dated February 15, 2022.6 "In December 2020, EDD hired Pondera, an investigation consulting firm owned by the Thompson Reuters news service, to review nearly 10 million claims issued during the pandemic, but before ID.me came online, for potentially fraudulent characteristics. EDD and the contractor identified 1.1 million claims as potentially fraudulent."4 (The LAO spells the parent company's name "Thompson" throughout.) The same report dates the suspension to January 2021 and gives the outcome: "Ultimately, more than half of the claims (600,000) flagged as fraudulent were confirmed as legitimate."4

The LAO concluded: "The department's use of the Thompson Reuters software to suspend 1.1 million claims, of which at least 600,000 were legitimate, raises concerns that EDD has not internalized the strike team's fraud-related recommendations."7

What the tool does, by EDD's account

EDD assessed the tool against eight industry-defined features and marked all eight as met. The list: claimant validation against shared values such as home address, IP address and e-mail address, deceased participants and behavioral patterns; employer validation; procedural flagging; geospatial analysis; street view; data matching against "multiple lists used for fraud detection"; a scorecard giving users "ready access to claimants and their associated risk score"; and detection of fictitious employer schemes.8 Its conclusion: "The TR tool remains a valuable resource that plays an important role in EDD's overall fraud prevention strategy."8

EDD's table of "Fraud Mitigated" by the tool lists 703,378 claims and $6,109,869,842 for 2020, 247,220 claims and $4,379,141,875 for 2021, and 50,725 claims and $125,787,258 for 2022.5 The assessment calls these the "estimated amount of fraud mitigated." They are the department's estimates, and the document does not tie them to the LAO's 1.1 million claims. The two sets of numbers cannot be added or netted.

EDD's later assessments give smaller estimates, for unemployment insurance only: 21,837 claims and $62,288,834 for 2023 through November 30 (Fraud Tools Assessment, 2023), and 5,526 claims and $19,325,063 for 2024 through September 30 (Fraud Tools Assessment, annual report 2025). The 2025 assessment says the Thomson Reuters tool and ID.me, both adopted in 2020, "continue to be key in preventing fraud."

The assessment also records limits on what EDD could examine. "While some information remains proprietary, EDD will request changes to terms and conditions to gain full access to items needed for evaluation purposes, including information held by third party."9 It also records a change. In January 2022 EDD worked with Thomson Reuters on "Binary Alert Enhancement and Result Based Rule Calibration." By EDD's account the second "ensures fewer legitimate customers are improperly impacted by the alert while maintaining the effectiveness of the alert in preventing fraud."9

The company's own account

On April 7, 2021 Thomson Reuters announced ID Risk Analytics, a product that "combines Pondera Solutions, an AI analytics platform purchased by Thomson Reuters in March 2020, and CLEAR." The release said the product was "currently analyzing over 30% of all unemployment insurance claims across the United States." It said the product "has already been implemented in the state of California where they helped to identify and prevent up to $60 Billion in fraudulent claims," citing an EDD fact sheet.2 EDD's own table for the tool, for 2020 through 2022, sums to about $10.6 billion. The release quoted Coss: "ID Risk Analytics is allowing state agencies to capture anomalies and detect fraud before it is paid out in taxpayer dollars."2

A Thomson Reuters product sheet is hosted on the website of the National Association of State Workforce Agencies. It marketed "Pondera, part of Thomson Reuters" to unemployment agencies as a tool that "combines agency data with Thomson Reuters CLEAR data to deliver investigation-ready leads." The sheet carries a notice that Thomson Reuters "is not a consumer reporting agency" and that its data may not be used as a factor in establishing a consumer's eligibility for government benefits.10

After the pandemic

The 2022-23 Governor's Budget asked for $29.8 million from the General Fund for six third-party anti-fraud contracts at EDD. Two were Thomson Reuters contracts. The LAO described "Automated Batch Review" as the "Same tool used in January 2021 to suspend 1.1 million claims." "Identity Risk Analytics" was "to allow EDD to review new UI claims daily instead of weekly."4 The LAO recommended that the Legislature reject both. Its reason: "because the state's use of these programs adversely impacted the experience of several hundred thousand unemployed workers with legitimate claims and are not likely to be useful now that automated identity verification is in place."7 EDD's budget request for 2025-26, signed by its director in August 2024, says the department received limited-term funding in 2022-23 for fraud-mitigation vendor contracts, through June 30, 2025. It asks to continue "Automated Batch Review," at about $2.0 million a year for unemployment insurance and $1.6 million for disability insurance, and "Identity Risk Analytics," at about $1.6 million and $575,000 (EDD Budget Change Proposal, 2025-26). The request does not name the vendor; those are the names the LAO gave the two Thomson Reuters contracts in 2022. It does not say how the Legislature acted on the LAO's recommendation on the two contracts.

On January 3, 2024 the Electronic Privacy Information Center (EPIC) filed a complaint with the Federal Trade Commission naming Thomson Reuters Corporation, West Publishing Corporation and Pondera Solutions, LLC. The complaint alleges unfair and deceptive practices under Section 5 of the FTC Act and violations of the Fair Credit Reporting Act. Its subject is a fraud detection system it says is marketed under the names "FraudCaster," "Fraud Detect," "ID Risk Analytics" and "Fraud Detection as a Service." It asks the Commission to investigate and to order relief.11 The complaint is an advocacy group's request and contains allegations; we found no response from Thomson Reuters and no Commission action.

EPIC's separate research page on Pondera draws on public-records requests to agencies in eleven states and the District of Columbia. It says FraudCaster scores benefits applicants using data "from data brokers, social media scrapers, credit reporting agencies, location servicers, and government records databases," and states: "Pondera does not make public any of its error rates."12

Source notes

Primary documents in this archive

External references

Notes

  1. Thomson Reuters, "Thomson Reuters Acquires Pondera Solutions," March 19, 2020; the same text as distributed by PR Newswire. ↩
  2. Thomson Reuters, "Thomson Reuters Announces ID Risk Analytics to Fight Government Fraud," Folsom, California, April 7, 2021. ↩
  3. California EDD, Fraud Tools Assessment, PDF pp. 3–4 (Assembly Bill 138 and Accenture at p. 3; "Fraud Prevention Tools in Scope" table at p. 4). ↩
  4. California LAO, "The 2022-23 Budget: Assessing Proposals to Address Unemployment Insurance Fraud," PDF p. 4 (timeline figure at p. 2). ↩
  5. EDD, Fraud Tools Assessment, § 5.3.3, PDF pp. 9–10. ↩
  6. LAO report, PDF p. 8 (office description). The LAO's web page for the report carries the date February 15, 2022 and the note "Update (5/16/24): Assessment section has been updated"; the PDF cover reads "February 2022 (Updated May 16, 2024)." The quotations here are from the updated text. ↩
  7. LAO report, PDF p. 6. ↩
  8. EDD, Fraud Tools Assessment, §§ 5.3.1–5.3.2, PDF pp. 8–9. ↩
  9. EDD, Fraud Tools Assessment, § 5.3.4, PDF p. 10; a similar sentence appears at PDF p. 13. ↩
  10. Thomson Reuters, "CLEAR for unemployment insurance" (© 2020), one page. ↩
  11. EPIC, Complaint and Request for Investigation, Injunction, and Other Relief, In re Thomson Reuters Corporation, January 3, 2024, PDF pp. 1–2 (caption, ¶¶ 1–2 and note 2). ↩
  12. EPIC, "Screening and Scoring Spotlight: Pondera's Fraud Prediction Algorithms for Public Benefits," page at epic.org/pondera-surveillance. ↩
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