A preliminary state Labor Department analysis shows at least one in every 14 applications for unemployment benefits in Connecticut during the first year of the coronavirus pandemic was fraudulent.
But the full scope of that fraud — including the numbers of individuals involved, the monetary value of the attempted fraud, and what benefits might have been paid out to ineligible filers — likely won’t be known until this fall, Labor Commissioner Kurt Westby said.
The agency is conducting this review while continuing to administer an unemployment benefits caseload five times that of pre-pandemic levels.
“Fraud has not stopped in any state,” Westby told the CT Mirror last week, adding that as millions of dollars in additional federal benefits flowed into Connecticut over the past year, people stepped up efforts to access them improperly or illegally.
“Regardless of the technology, they’re going to go after it,” he said.
Department officials estimate that of the 1.4 million applications for unemployment benefits received over the past year, approximately 100,000 have so far been identified as fraudulent by department staff.
Most of the fraudulent applications involved identity theft and false information, labor officials said.
A big part of the challenge, they added, is that to conclusively confirm fraud, each suspected application must be screened individually.
“Fraud is particularly expensive,” Westby said. “Not only does it cost money that businesses ultimately have to pay back to the [federal unemployment] trust fund, but it also creates delays by pulling staff away from processing legitimate applications.”
The agency still must review thousands of cases it flagged for overpayment. But this category isn’t automatically indicative of likely fraud. Overpayment can occur for legitimate reasons.
One example that occurred commonly during the pandemic involves laid-off workers who legitimately filed for unemployment — but then were quickly rehired because their employer received an emergency federal Payroll Protection Program loan. The department paid out benefits before these workers were reclassified and then had to recoup the funds.
“This is fluid, and we’re continually updating any and all cases.” Westby added.
The commissioner also noted that 100,000 fraudulent applications does not equate to 100,000 individuals attempting to perpetrate fraud.
One person can file multiple applications for various reasons, including to correct an error in an earlier form, to request an extension of benefits, or to access any of the federal enhanced relief programs.
The department estimates that the 1.4 million applications received during the first year of the pandemic involved about 580,000 unique filers.
The department normally processed about 130,000 applications in a typical pre-pandemic year and faced a “monumental challenge” last spring when it received about 400,000 applications in just a few weeks after COVID-19 struck Connecticut, Westby said.
Officials scrambled to redirect and bolster staff in the most vital areas, including phone banks to help process applications and technology teams to upgrade the agency’s aging software.
“The Connecticut Department of Labor faced extraordinary circumstances over the past year, and it isn’t over yet,” Gov. Ned Lamont said. “I commend Commissioner Westby and the [departmental] leadership and staff for the work they’ve done on behalf of the more than half a million unemployed who needed them. Unemployment benefits are critical safety net programs during normal times; during this pandemic, these benefits have prevented additional disaster for many of our neighbors.”
Deputy Labor Commissioner Daryle Dudzinski said the federal government has made progress helping to prevent fraud but must do more, adding that most states’ labor departments lack the resources for a full-scale effort.
And recent developments will again test the Labor Department’s capacity.
The latest pandemic relief bill enacted by Congress, the American Rescue Plan act, extends four unemployment programs including an additional $300-per-week benefit for all claimants.
And because Connecticut recently reported an 8.5 percent unemployment rate for February — up from 8.1 percent in January — it triggered an additional seven weeks of enhanced federal benefits for claimants.
These become available whenever a state’s average unemployment rate across three months exceeds 8 percent.