Of more than 1.4 million new claims for traditional state unemployment benefits March 8 and Nov. 23 at least 187,160 were denied because they were deemed ineligible, according to the state Executive Office of Labor and Workforce Development.
The fraud has been even more widespread in the federally backed Pandemic Unemployment Assistance program, which was created to cover jobless workers, such as the self-employed and "gig economy" workers, who normally don't qualify for traditional benefits.
More than 60% of the 880,115 claims filed under that program since April 16 have been rejected because they were deemed ineligible, according to the state agency.
Massachusetts and many other states have been targeted by international criminal gangs making large numbers of illegitimate jobless claims using stolen financial information from commercial data breaches.
Meanwhile, state officials say they've become aware of recent online "phishing" scams where unemployment recipients get text messages directing them to enter their login and password on a website that looks similar to the state's.
The state Department of Unemployment Assistance, which oversees the program, has hired a forensic accounting company to investigate fraud and help recover money.
But the agency said the added layers of security may delay payments for some jobless workers.
To date, the agency says it has recovered more than $242 million from payments later deemed to be ineligible. It did not disclose how much money it has lost overall to fraudulent claims.
U.S. Attorney Andrew Lelling has enlisted a special prosecutor to probe allegations of unemployment fraud involving federal pandemic funds.
Greg Sullivan, a former state inspector general and senior analyst at the Pioneer Institute, a Boston-based think tank, said the hasty rollout of pandemic unemployment relief meant it didn't include the usual checks and balances to receive benefits, and "opened the floodgates" for potential fraud.
"If the government has a program that gives away money, and there's a crack in the system a quarter of an inch wide, hundreds of thousands of people are going to try and squeeze through the crack," he said. "This was an emergency response where the highly regulated procedures were thrown out the window."
Sullivan said unlike traditional state unemployment, where an employer pays into the system and must approve benefits for a laid-off worker, there are no such protections for the federal program.
"There is no employer to verify claims because the people are self-employed," he said.
More than 22 million Americans are receiving jobless benefits, according to federal data, as economic fallout from the pandemic continues to shutter businesses and put people out of work.
Sullivan said fraudulent claims worsen the situation, and businesses that pay into the unemployment system will likely end up covering the losses.
"Unless the Legislature intervenes, they're going to have to rebuild an unemployment trust fund that is not just insolvent but a mountain deep in a hole," he said.
©2020 The Eagle-Tribune, Distributed by Tribune Content Agency, LLC.
