Memorandum For: Henry Mack
- Date
- 2026-06-08
Summary
Exhibit A, filed June 8, 2026 as Document 733-10 in Case 3:21-md-02992-GPC-MSB, is an alert memorandum dated January 30, 2026 from the U.S. Department of Labor Inspector General to Henry Mack, Assistant Secretary for Employment and Training. It states that unemployment insurance benefits paid on prepaid debit cards during the COVID-19 pandemic remain held by Financial Institution 1 or have been escheated to state unclaimed property administrators. The memorandum reports $738,475,819 remaining on 4,369,061 prepaid card accounts and $266,853,492 already escheated from 914,527 accounts. It states the OIG identified $714,626,297 in potentially fraudulently obtained funds on 3,139,091 accounts. It proposes that ETA issue guidance to state workforce agencies within 30 days, and an attachment presents three data tables.
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Case 3:21-md-02992-GPC-MSB Document 733-10 Filed 06/08/26 PageID.61499
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Exhibit A
Case 3:21-md-02992-GPC-MSB Document 733-10 Filed 06/08/26 PageID.61500
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U.S. Department of Labor Office of Inspector General
Washington, DC 20210
January 30, 2026
MEMORANDUM FOR: HENRY MACK
Assistant Secretary
for Employment and Training
FROM: ANTHONY P. D’ESPOSITO
Inspector General
SUBJECT: Alert Memorandum: The Employment and Training
Administration Needs to Ensure State Workforce
Agencies Take Action to Recover Significant
Unemployment Insurance Holdings Still Held by
Financial Institution 1’s Prepaid Card Program
The purpose of this memorandum is to alert you to an urgent concern regarding
the potential upcoming loss of more than half a billion dollars the Office of
Inspector General (OIG) has identified through its ongoing work with financial
institutions. During the COVID-19 pandemic, certain financial institutions
contracted with state workforce agencies (SWA) to disburse unemployment
insurance (UI) benefits on prepaid debit cards. Currently, a substantial amount of
these funds remains unspent, including upwards of $76,000 on a single prepaid
card account. These funds are being held by the respective financial institutions
with significant amounts linked to potential fraud. The OIG assesses that—if swift
action is not taken—taxpayers risk losing these funds. 1 0F
Many SWAs provided financial institutions with information on improper UI
payments, including fraud, in accordance with Employment and Training
Administration (ETA) guidance. However, SWAs do not appear to have
adequately managed millions of prepaid card accounts with remaining balances
from COVID-19-era UI claims. Continued inaction will likely result in SWAs not
fulfilling their programmatic responsibilities to prevent and detect improper
payments and recover potential overpayments, including fraud. Further, this
situation is worsened as the funds on these prepaid cards may still be targeted
by capable adversaries or the funds may have to be escheated (surrendered) to
1 The OIG assessed the share of state versus federal UI funding by examining UI Program Letter
(UIPL) 13-25, Attachment 1: State Reimbursements - Program Allocation Chart. This examination
of the 53 SWAs’ UI funding mix showed approximately 22 percent of pandemic-related UI funding
sourced from state UI funds and 78 percent of pandemic-related UI funding sourced from three
key pandemic UI programs: Pandemic Unemployment Assistance, Pandemic Emergency
Unemployment Compensation, and Federal Pandemic Unemployment Compensation.
Working for America’s Workforce
Case 3:21-md-02992-GPC-MSB Document 733-10 Filed 06/08/26 PageID.61501
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Alert: ETA/SWA Action Needed on UI Funds Held or Escheated by Financial Institution 1
state unclaimed property administrators, 2 as some funds have already been,
1F
further complicating potential overpayment recovery.
Background: OIG Work to Combat the UI Fraud Crisis
In March 2020, among other relief, the Coronavirus Aid, Relief, and Economic
Security (CARES) Act created three key temporary UI programs: Pandemic
Unemployment Assistance (PUA), Pandemic Emergency Unemployment
Compensation (PEUC), and Federal Pandemic Unemployment Compensation
(FPUC). 3 Later, the Continued Assistance for Unemployed Workers Act of 2020
2F
and the American Rescue Plan Act of 2021 reauthorized and extended these
programs. The OIG has previously reported more than $888 billion in total federal
and state UI benefits were paid for benefit weeks during the pandemic period. 4 3F
While providing relief to eligible workers affected by the COVID-19 pandemic,
these benefits were distributed amidst a perfect storm—millions of claims, a
vulnerable system, and motivated offenders. CARES Act UI programs became a
high-value, low-risk target for criminal actors. For example, the U.S. Department
of Labor reported an improper payment rate of 35.9 percent for the life of the
PUA program. Further, criminal enterprises took advantage of the situation,
increasing their fraud schemes with readily available stolen identities. According
to Inspector General Congressional Testimony, of the $888 billion in UI benefits,
at least $191 billion could have been improper payments, including more than
$76 billion paid to fraudsters. 5 4F
Starting in April 2020, to combat this crisis, the OIG initiated over 200,000
investigative matters to bring perpetrators to justice. Further, the OIG conducted
targeted audits, issuing reports with recommendations to mitigate program
vulnerabilities. As of September 30, 2025, the OIG’s pandemic UI-related
criminal investigations have resulted in more than: 2,300 individuals charged,
1,700 convictions, 42,000 months of incarceration, and $1.6 billion in monetary
results. Further, the OIG’s pandemic UI-related audit activities have resulted in
2 In this alert memorandum, the term escheatment refers to the mandatory obligation for financial
institutions to surrender unclaimed funds. These requirements and their deadlines vary by state,
and funds from a single account may not be transferred all at once but rather determined by the
date of deposit against the state’s required time period. These funds are not surrendered directly
to SWAs, but instead go to state unclaimed property administrators.
3 While this alert memorandum refers to PUA, PEUC, and FPUC, the OIG’s concern extends to
outstanding UI funds in all UI programs, including pandemic UI-related state programs.
4 “The Greatest Theft of American Tax Dollars: Unchecked Unemployment Fraud,” Hearing,
Statement for the Record of Larry D. Turner, Inspector General, U.S. Department of Labor,
House Committee on Ways and Means (February 8, 2023), available at:
https://www.oig.dol.gov/public/testimony/02082023.pdf
5 “Waste, Fraud, and Abuse Go Viral: Inspectors General on Curing the Disease,” Hearing,
Statement for the Record of Larry D. Turner, Inspector General, U.S. Department of Labor,
House Committee on Oversight and Accountability, Subcommittee on Government Operations
and the Federal Workforce (March 9, 2023), available at:
https://www.oig.dol.gov/public/testimony/03092023.pdf
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Case 3:21-md-02992-GPC-MSB Document 733-10 Filed 06/08/26 PageID.61502
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Alert: ETA/SWA Action Needed on UI Funds Held or Escheated by Financial Institution 1
over 100 UI program recommendations and more than $75 billion in monetary
results. Access to CARES Act UI program data and associated financial data
from financial institutions has been vital to the OIG’s pandemic UI-related
oversight.
OIG’s Findings regarding UI Funds Still Held by Financial Institution 1
Based on the OIG’s continued work with various financial institutions responsible
for administering prepaid cards during the pandemic, the OIG learned Financial
Institution 1 and three other financial institutions were the largest prepaid card
providers and significant UI funds: (1) are still being held and soon may be
escheated or (2) have already been escheated.
In August 2025, to further examine the nature of these UI holdings, the OIG
issued Inspector General subpoenas to these four financial institutions pursuant
to its authority under the Inspector General Act of 1978, as amended. The OIG
sought financial institution records pertaining to: (1) all prepaid cards with
remaining UI balances and (2) prepaid card balances already escheated to state
unclaimed property administrators. In late September 2025, Financial Institution 1
provided records to the OIG that detailed remaining and escheated balances
specific to client SWAs.
With these records, the OIG assessed both available and escheated UI balances
for potential fraud via comparative analysis with the OIG’s UI claimant data.
Specifically, the OIG’s analysis included crossmatching against high-risk
indicators, including those the OIG has used in previous work. 6 5F
As of October 2025, OIG data analytics had
identified the following information in relation Overall, the OIG Identified
to Financial Institution 1’s holdings based on about $715 Million in
the provided records. Overall, the OIG Potential Fraud
analyzed more than 5 million prepaid card
The OIG found $522,499,034
accounts and identified $1,005,329,311 in
(about 71 percent of $738,475,819)
affected funds. Specifically, the OIG
in potentially fraudulently obtained
examined two categories of affected funds:
funds was being held on 2,679,741
(1) funds remaining on the prepaid card
Financial Institution 1 prepaid cards,
accounts and (2) funds that have been
escheated to state unclaimed property and
administrators. The OIG found: The OIG found $192,127,263
(about 71 percent of $266,853,492)
• $738,475,819 remained on in potentially fraudulently obtained
4,369,061 prepaid card accounts (see funds have been escheated to state
Attachment, Table 1) and unclaimed property administrators.
6 COVID-19: ETA Needs to Improve Its Oversight of States’ Efforts to Identify Multistate UI Fraud,
Report No. 19-25-004-03-315 (August 4, 2025),
https://www.oig.dol.gov/public/reports/oa/2025/19-25-004-03-315.pdf
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Alert: ETA/SWA Action Needed on UI Funds Held or Escheated by Financial Institution 1
• $266,853,492 in already escheated UI funds from 914,527 prepaid card
accounts (see Attachment, Table 2).
Further, these findings include $351,992,389 in taxpayer dollars (48 percent of
the $738,475,819 not yet escheated) about which the OIG had previously notified
ETA in September 2022 after flagging the underlying claim as suspicious (see
Attachment, Table 3). 7 6F
In summary, a total of $714,626,297 in potentially fraudulently obtained funds
was held or is currently being held on 3,139,091 UI prepaid card accounts and
require swift action to recover those taxpayer dollars.
$714,626,297 of These UI Funds Being Held Were
Potentially Fraudulently Obtained and
Require Swift Action to Recover Taxpayer Funds
Conclusion
As a result of this analysis, the OIG assesses a substantial risk of potential loss
of taxpayer funds. An opportunity exists for ETA to issue guidance within 30 days
to SWAs to commence engagement with ETA, the OIG, and relevant financial
institutions to assess these findings. This will allow SWAs to detect improper
payments and recover potentially fraudulently obtained UI funds held by financial
institutions or various state unclaimed property administrators. In doing so,
taxpayers may be able to recover these taxpayer funds.
The OIG provided a draft of a non-public version of this alert memorandum to
ETA for technical review. ETA responded timely with no corrections or other
comments on the draft. We also issued further details to ETA. We look forward to
continuing to work with ETA personnel on this urgent concern and appreciate the
cooperation and courtesies ETA has extended to us.
Attachment
7 Alert Memorandum: Potentially Fraudulent Unemployment Insurance Payments in High-Risk
Areas Increased to $45.6 Billion, Report No. 19-22-005-03-315 (September 21, 2022),
https://www.oig.dol.gov/public/reports/oa/2022/19-22-005-03-315.pdf
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Case 3:21-md-02992-GPC-MSB Document 733-10 Filed 06/08/26 Attachment
PageID.61504
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The following three tables are sourced from OIG Data Analysis, Crossmatching
of 2025 Financial Institution 1 Data and OIG UI Data Warehouse.
Table 1: Financial Institution 1 UI Funds Held on Prepaid Cards
(Not Yet Escheated), March 1, 2020–September 30, 2021*
Number of Prepaid Total Balance
Total Current
Number of Prepaid Cards Related to Related to
Total Balance on Prepaid
Cards with Balance OIG-Identified OIG-Identified
Cards
Potential Fraud Potential Fraud
Total 4,369,061 $738,475,819 2,679,741 $522,499,034
*The sums may not total due to rounding.
Table 2: Financial Institution 1 UI Funds Escheated to State Unclaimed
Property Administrators, as of September 25, 2025*
Total Balance
Number of These
Number of Prepaid Total Escheated Related of Escheated
Prepaid Cards with
Total Cards with Funds from Prepaid Funds with
OIG-Identified
Escheated Funds Cards OIG-Identified
Potential Fraud
Potential Fraud
Total 914,527 $266,853,492 459,350 $192,127,263
*The sums may not total due to rounding.
Table 3: Not Yet Escheated UI Funds on Financial Institution 1 Cards OIG
Identified in 2022
Number of Prepaid Cards Total Balance on these Cards
Total Related to Claims Related to Claims
OIG Identified as Potential Fraud in 2022 OIG Identified as Potential Fraud in 2022
Total 950,227 $351,992,389
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