West Virginia committee receives report on pandemic unemployment fraud

Christopher F. Carney, a senior research analyst for PERD, said the state paid out approximately $83 million in fraudulent unemployment claims during calendar year 2020. (Photo courtesy of WV Legislative Photography)

CHARLESTON — West Virginia lawmakers learned Sunday how much unemployment compensation was fraudulently paid during the 2020 COVID-19 pandemic shutdowns.

The Legislature’s Post Audit Committee met Sunday on the first day of December legislative interim meetings before the start of the 2021 legislative session in January.

The committee received a special report from the Legislature’s Performance Evaluation and Research Division looking at WorkForce West Virginia unemployment claims data during the COVID-19 pandemic.

According to the report, WorkForce West Virginia paid about $83 million in fraudulent unemployment claims during calendar year 2020 due to the overwhelming numbers of claims the agency processed. While the vast majority of the $83 million was federal funds, $800,000 of unemployment claims were paid out of the state’s unemployment trust fund and are lost.

“The amount paid for fraudulent regular unemployment benefits, however, is state money that comes out of the state trust fund,” said Christopher F. Carney, a senior research analyst for PERD. “According to WorkForce, any employers’ accounts in the state trust fund charged for fraudulent claims will be credited for the charged amount during the next quarter. Since the fraudulent charges came out of the state trust fund, the state has lost those monies for future economic downturns.”

Gov. Jim Justice issued a state of emergency for the coronavirus pandemic on March 16, 2020, and started issuing executive orders limiting what businesses could be open. After the Department of Health and Human Resources reported the state’s first positive coronavirus case on March 17, Justice ordered all restaurants and bars closed except for carry-out or drive-thru, followed with the closure of gyms, recreational facilities, barbershops, hair salons and nail salons.

By March 23, 2020, Justice issued a stay-at-home order that limited nonessential travel except for medical needs, groceries and supplies and travel to work. Nonessential businesses were either closed or employees had to work from home when possible. That order remained in place until the end of April 2020 with a phased reopening of business with limitations on occupancy. Many of those restrictions remained in place until the spring of 2021 when COVID-19 cases began to plummet.

Unemployment numbers have recovered to pre-pandemic lows, but the number of claims during 2020 were overwhelming for WorkForce West Virginia. According to the audit, unemployment claims increased by 766 percent, from 52,816 claims in 2019 to 457,399 in 2020.

“When the pandemic hit, it challenged everything,” said Jeff Green, deputy director of WorkForce West Virginia. “The load was just beyond anything we could ever imagine was possible.”

West Virginia received more than $1.8 billion from the federal Coronavirus Aid, Relief and Economic Security Act passed in March 2020 for unemployment assistance. The C.A.R.E.S. act created three programs: the Pandemic Unemployment Assistance program, the Federal Pandemic Unemployment Compensation program, and the Pandemic Emergency Unemployment Compensation program.

The influx of unemployment claims and the billions provided by the C.A.R.E.S. Act created the perfect opportunity for scammers to submit fraudulent claims not just in West Virginia but nationwide, though WorkForce officials said West Virginia had the fourth lowest fraud rate in the country.

“WorkForce was faced with an unprecedented number of unemployment claims. The agency did not have sufficient administrative capacity, technology, fraud prevention and improper payment detection to properly process the large volume of claims from both unemployment programs,” the report stated. “Other states also experienced similar fraudulent activity in their unemployment insurance programs.”

Prior to the COVID-19 pandemic, WorkForce West Virginia manually processed unemployment claims, but that process could not keep up once the flood of claims came. The agency didn’t implement automatic fraud detection systems until April and May of 2020.

“State unemployment benefit fraud prevention was challenging due to the limitations of the technology used to process claims and the overwhelming volume of claims,” WorkForce West Virginia told auditors.

“Once WorkForce realized the level of fraud that was taking place, it established security measures in an effort to try to stop the fraudulent activity,” the auditors wrote. “WorkForce implemented its ‘fraud unit’ along with automated fraud detection and prevention controls in the spring of 2020. Eventually, the (U.S. Department of Labor) and many state Unemployment Insurance programs became aware of the extent of fraud and added documentation requirements for claimants self-certifying.”

The Legislature’s Joint Committee on Government and Finance led by House of Delegates and Senate leadership. The committee, which oversees legislative agencies, including the Legislative Auditor’s Office, received 22 fraudulent unemployment claims filed under the names of current and former employees, including under the name of Post Audit Director John Sylvia.

“These claims represent 16 percent of the Joint Committee staff,” the report stated. “These claims were filed as early as July 2020 through May 2021, each claiming unemployment status during the pandemic months of 2020. In one example, a current Joint Committee employee who had a fraudulent unemployment claim filed in his name, received a UI benefit debit card in the mail after unsuccessful attempts to notify WorkForce of the fraudulent claim.”

According to the U.S. Department of Labor’s Office of Inspector General, pandemic unemployment fraud could be as high as $87.3 billion.

Since the pandemic shutdowns, WorkForce uses both a manual and automated fraud detection system. Information is cross-checked across state agencies and law enforcement. WorkForce also has a fraud unit, a cross-match unit, and an investigations unit.

Steven Allen Adams can be reached at sadams@newsandsentinel.com.