Letter to Chairman Neal — Criminal Fraud in Pandemic Unemployment Insurance (UI) Programs (February 22, 2022)

Summary

This letter, dated February 22, 2022, to Chairman Richard Neal of the Committee on Ways and Means requests that the House Ways and Means Committee immediately schedule an oversight hearing on criminal fraud in pandemic unemployment insurance programs. It says the White House recently estimated a 19 percent improper payment rate in the Federal-State UI program, equating to nearly $80 billion in lost funds in fiscal year 2021, and that federal spending on enhanced unemployment benefits exceeded $850 billion as of February 12, 2022. It says the Labor Department's Inspector General's initial audit and investigation indicate improper payments could be at least $87 billion. The signature block names Kevin Brady as Ranking Member, along with two other ranking members of subcommittees.

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Full text

                                        February 22, 2022


Delivered via E-mail


The Honorable Richard Neal
Chairman, Committee on Ways and Means
1102 Longworth House Office U.S. House of Representatives
Washington, D.C. 20515


Dear Chairman Neal:

We write to request that you immediately schedule an oversight hearing before the House Ways
and Means Committee to investigate the size, scope, and severity of criminal fraud in pandemic
unemployment insurance (UI) programs enacted in response to COVID-19.

Despite repeated calls for oversight hearings, including a letter we sent you on March 15, 2021,
which received no response, Democrats continue to turn a blind eye to what is possibly the
greatest theft of taxpayer dollars in American history, allowing cybercriminals and international
crime rings to rob the American people and divert funds from unemployed workers.

The White House recently estimated an astounding 19 percent improper payment rate in the
Federal-State UI program equating to nearly $80 billion in lost funds in fiscal year 2021 alone.
This partial estimate does not include the period of greatest fraudulent activity when generous
federal supplements made unemployment a lucrative target for fraudsters.

Yet, Congressional Democrats have failed to hold even a single oversight hearing on
unemployment fraud.

Republicans strongly believe this Committee has a responsibility to hold oversight hearings
to determine the extent and amount of fraud in CARES Act unemployment insurance
programs, including preventing further abuse and recovery of taxpayer dollars.

In the absence of action from Democrats, today Committee Republicans are holding our second
roundtable on pandemic unemployment fraud to hear from federal agencies investigating the
size, scope, and severity of unemployment fraud, including ongoing efforts to prosecute and
recover stolen funds. Our roundtable will include testimony from the Government Accountability
Office, Pandemic Response Accountability Committee, and the U.S. Secret Service.
As of February 12, 2022, federal spending on enhanced unemployment benefits authorized under
the Families First Coronavirus Relief Act, the Coronavirus Aid, Relief, and Economic Security
(CARES) Act, and Consolidated Appropriations Act exceeded $850 billion, in a period of less
than two years.1 This includes funding for Pandemic Unemployment Assistance, Emergency
Relief for government entities and non-profits, Federal Pandemic Unemployment Compensation,
Pandemic Emergency Unemployment Compensation, full funding for the first week of regular
compensation, and 100% federal funding for Extended Benefits.

It is well documented that throughout the pandemic, criminal organizations, including
international cybercrime rings and opportunistic foreign actors, used stolen identities to falsely
claim unemployment benefits. Fraud delayed legitimate payments to unemployed workers and
turned thousands of Americans into unwitting identity theft victims who are now on the hook for
taxes and unable to reach a backlogged IRS.

Since the summer of 2020, repeated alerts from federal law enforcement agencies warned of
targeted efforts to obtain fraudulent unemployment benefits:

    •   The Labor Department’s Inspector General and the Government Accountability Office
        have both issued repeated warnings about the vulnerability for abuse of CARES Act
        unemployment insurance programs.23
    •   The Labor Department’s Inspector General’s initial audit and investigation indicate
        improper payments could be at least $87 billion, with a significant portion attributable to
        fraud.4
    •   The Secret Service circulated a memo to its field offices last May saying an international
        crime ring has been filing unemployment claims in different states using Social Security
        Numbers belonging to identity theft victims, including first responders, government
        personnel and school employees.5
    •   California state workforce officials confirmed that they paid out fraudulent
        unemployment claims totaling over $11 billion and identified another $20 billion in
        claims still under investigation.6
    •   Department of Justice issued a warning that fraudsters are creating websites to mimic
        unemployment benefit websites to capture consumer’s personal information.7

1
  U.S. Department of Labor: https://oui.doleta.gov/unemploy/docs/cares_act_funding_state.html
2
  U.S. Department of Labor, “DOL-OIG Oversight of the Unemployment Insurance program,” February 3, 2021;
“Alert Memorandum: The Employment and Training Administration (ETA) Needs to Ensure State Workforce
Agencies (SWA) Implement Effective Unemployment Insurance Program Fraud Controls for High Risk Areas,”
February 22, 2021.
3
  “COVID-19: Critical Vaccine Distribution, Supply Chain, Program Integrity, and other Challenges Require
Focused Federal Attention,” Government Accountability Office, January 28, 2021. (GAO-21-265)
4
  U.S. Department of Labor, Office of Inspector General: https://www.oig.dol.gov/doloiguioversightwork.htm
5
  “Massive Fraud Against Unemployment Insurance Programs, U.S. Secret Service, May 5, 2020, Alert:
https://www.documentcloud.org/documents/6891584-GIOC-Alert-20-027-I-State-Unemployment-Fraud-002.html
6
  “McCarthy, Steel, and CA Republicans Condemn Newsome Administration for Mismanagement of $11.4 B in
Taxpayer Funds,” February 5, 2021.
7
  Department of Justice, “Justice Department Warns About Fake Unemployment Benefit Websites,” March 4, 2021.
Now, the Biden Administration has taken unilateral action to sweep suspected fraud under the
rug, releasing new guidance allowing states to waive large numbers of suspicious claims and
forgo restitution for taxpayers. Recent guidance issued by the Department of Labor allows states
to apply blanket waivers to forgo recovery of overpayments using seven different loopholes,
including failure to provide documentation of eligibility. Allowing use of blanket waivers lets
states off the hook for due diligence and fact finding for large volumes of suspicious
unemployment claims potentially involving billions of fraudulently obtained taxpayer dollars.

In the absence of leadership from the majority, we will continue to highlight and investigate
pandemic unemployment fraud to provide the transparency and government accountability that
American taxpayers deserve.

We look forward to your prompt response.

Sincerely,




Rep. Kevin Brady
Ranking Member




Rep. Jackie Walorski
Ranking Member, Subcommittee on Worker and Family Support




Rep. Tom Rice
Ranking Member, Subcommittee on Oversight



Cc:    Rep. Danny Davis, Chair, Subcommittee on Worker and Family Support
       Rep. Bill Pascrell, Chair, Subcommittee on Oversight


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