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Fraudulent Jobless Claims Slow Relief to the Truly Desperate

When Alexandria Preston had to leave her job as a medical assistant to care for her two children during the pandemic, she didn’t encounter endless delays like so many others trying to get unemployment benefits.

But three weeks later, the payments stopped coming. Then her account was canceled entirely — forcing her to dip into the savings she had set aside for dental work for her 12-year-old daughter, who has cystic fibrosis.

Ms. Preston’s claim had been flagged with the date 9/9/9999 — an indication that it was being reviewed for identity fraud, a vexing problem for an already strained unemployment system that has delayed payments to hundreds of thousands of jobless people.

“It was two weeks of not knowing anything and not getting any answers,” said Ms. Preston, who lives in Bangor, Maine.

More than 40 million workers have filed for unemployment benefits since the early days of the coronavirus pandemic — over seven times the number of requests in all of 2019. And all of those claims have been convenient cover for identity thieves filing bogus applications that could cost billions of dollars.

“Fraudsters have been able to hide in the flood of data,” said Pam Dixon, executive director of the World Privacy Forum, a public interest research group. “It is a perfect storm of identity fraud. Anyone who has experienced a major breach in the past three or four years could fall victim to this.”

The coronavirus has made the unemployment system, which is administered by the states, an attractive target in other ways, too: The CARES Act relief package added an extra $600 a week to successful claims and expanded eligibility to self-employed and similar workers, who are not subject to the same employment verifications that typically apply.

Having your application flagged for review doesn’t necessarily mean someone else tried to pose as you — it just means your state thought it warranted further inspection. Fraudulent claims have forced states to dial up their scrutiny and deploy systems that mark potentially suspicious claims. And those reviews take time.

Ms. Preston, 29, said she had been told that a review of her account would delay payments for at most 72 hours, but that wasn’t even close. “I had called hundreds of times every day for the following week and still didn’t get anything,” said Ms. Preston, whose daughter has to be completely isolated during the pandemic.

The Maine Labor Department said in a Facebook post that claimants should email their identification — an idea that made Ms. Preston nervous, because officials have warned against exactly that in the past. She did it anyway.

A little less than a week later, her payments resumed.

“It was very stressful going without any payment for three weeks and not having any idea when it would be fixed,” she said.

Officials in Maine said they did not comment on specific cases, but added that everyone whose claim was being flagged would now receive instructions on how to verify their identity through a mailed letter.

Improper payments nationwide could cost up to $26 billion this year, largely because of fraud, according to congressional testimony from Scott Dahl, who just retired as inspector general at the Department of Labor. The department is investigating more than 400 matters related to unemployment insurance, and it expects that number to continue to rise.

The damage to families can be life changing — far more consequential than having to cut up a compromised credit card. Some have gone without income for months, consumer advocates said.

“People are losing their cars, their homes, and they are moving back in with other family because they cannot pay for things,” said John Tirpak, executive director of the Unemployment Law Project, a nonprofit advocacy and legal services organization in Washington State. “It is quite a crisis for many people, and it is not a few isolated incidences.”

Washington may have been the hardest-hit state: Criminals collected as much as $650 million in benefits, although the state has already recouped about $350 million with the help of federal law enforcement, according to a spokesman for the state’s Employment Security Department.

Roughly 200,000 claimants in Washington were flagged for identification fraud in mid-May, and in mid-June 50 members of the National Guard started to help process the remainder of those claims, which were recently resolved. But there are still 71,000 people who have filed since March and have not received benefits.

Michael DeMaddalena said the delays had made him homeless. He was about to start a job as a cook at T-Mobile Park, home to the Seattle Mariners, on March 24 before the virus put the major-league baseball season on hold. He filed more than three months ago, but the $835 a week he appeared to be eligible for has never arrived.

In mid-April, Mr. DeMaddalena lost the room he had been renting for $100 a week, and with shelters on lockdown because of the pandemic, he had nowhere to go. He set up a tent close enough to a Starbucks to get free Wi-Fi so he could keep tabs on his application.

Since then, he has twice provided Washington’s Employment Security Department proof of his identity — by faxing and uploading copies of his Social Security and identification cards. But his disqualification remains unexplained.

State officials declined to discuss Mr. DeMaddalena’s case, but a Seattle law firm took a statement from him as part of a legal action demanding prompt payment of benefits that it said had been halted in response to fraudulent filings from overseas.

“I have done everything they have asked — and no response, no nothing,” Mr. DeMaddalena, 50, said. He said he had little more than the clothes on his back. “It is one thing to visualize my story, and another to walk in my shoes and sleep in my tent and not have running water.”

In a memo obtained by The New York Times in May, the Secret Service suspected a well-organized Nigerian crime ring for the problems in Washington, and said there was evidence of coordinated attacks in at least six other states: North Carolina, Massachusetts, Rhode Island, Oklahoma, Wyoming and Florida.

But the agency said it was likely that other states would be vulnerable. Michigan has cleared about 220,000 of the 340,000 active claims it stopped paying in late May, but tens of thousands more need to be analyzed, according to state officials. New York identified roughly 9,000 impostor claims, which would have cost up to $160 million.

Pennsylvania initially flagged 58,000 claims, all through its pandemic unemployment system, which covers self-employed workers and others who typically do not receive benefits. The majority of those have been verified as authentic, the state said. It declined to provide additional details, citing an active investigation.

Julia Simon-Mishel, a supervising attorney at the unemployment compensation unit at Philadelphia Legal Assistance, said fraudsters had used stolen personal information to have benefits deposited into accounts they controlled. The state responded by switching to paper checks, she said.

“That has caused significant delays,” she said. “It has been really traumatic for clients who live in neighborhoods where the mail is not secure and not consistent.”

Some applicants have been unable to collect benefits because identity-theft problems from years past continue to haunt them.

“They can’t complete an application — and they are not receiving any money even though they are entitled to it, even though they are on the verge of eviction,” said Laurie Yadoff, director of an economic advocacy and community health project at Coast to Coast Legal Aid of South Florida, who has worked with several clients with lingering problems.

One of them, Kristina Guzman, tried to file for benefits immediately after she was furloughed in mid-March from her job at a casino near Hollywood, Fla. But she was blocked because someone else had filed in her name nearly six years ago. She told officials back then that it was fraudulent and thought that was the end of it.

Ms. Guzman, 31, said she had tried to call the state unemployment’s identity theft line daily — starting two minutes before it opened, at 7:28 a.m. — but could never get through.

“It goes straight into ‘This line is busy,’ and there is no call-back number,” she said.

Ms. Guzman said she had twice tried paper applications and filed a complaint to have a supervisor call her back. Then she received a letter saying that if she didn’t get in touch by phone, her application would be closed. In early May, she started trying the governor’s office.

Florida’s Department of Economic Opportunity, which was reviewing more than 20,000 potentially fraudulent claims, said it could not comment on specific accounts because of privacy concerns, but told The Times that it would look into Ms. Guzman’s case.

Last week, she was informed that her account had been unlocked — the department told her it had received her contact information from the governor’s office — and that her payment was on its way.

But Ms. Guzman is still dealing with the repercussions of the three-month delay: Her landlord is trying to evict her and her 11-year-old daughter from their apartment.

“I am basically in a hole,” she said.

If you’re having trouble resolving an identity theft issue with your unemployment claim — or want to prevent one in the future — privacy experts and legal advocates have some suggestions:

  • First, immediately report the bogus claim to your state labor department. The World Privacy Forum offers a guide with links to each state’s unemployment fraud page.

  • Notify your employer of the claim, too, because it will also need to file documentation, said Pam Dixon, the privacy forum’s executive director.

  • File a complaint at the National Center for Disaster Fraud on its website or call 866-720-5721.

  • Check your credit report for unusual activity. Each of the Big Three credit reporting companies — Equifax, Experian and TransUnion — is offering a free credit report weekly at through April.

  • Freeze your credit files at each of the bureaus, which will prevent fraudsters from opening new credit-related accounts in your name.

  • Use a new email address for financial and government transactions.

  • Be on high alert for other fraud. If criminals have enough information to file an unemployment claim, they could try to apply for other benefits — or even try to file a tax return to collect a refund.

  • Reviews like this take time, but long delays can be frustrating. You may be locked out of your account or simply unable to get a representative on the phone. In that case, legal advocates suggest, contact your state or federal representatives. Legal Aid may also be able to help.

  • A delay shouldn’t keep you from collecting what you’re owed. If you return to work before getting benefits that you were eligible to receive, you are still entitled to collect that money.

  • Consider creating an online benefits account with your state even if you are employed and do not need to file a claim. That makes it more difficult for scammers to create a new account with your information — and if they try, their behavior is more likely to be detected.

  • The U.S. Department of Labor’s and the Federal Trade Commission’s websites have more resources about identity theft.