State Halts Unemployment Payments Due to Mass Fraud

  • Pennsylvania delayed Pandemic Unemployment Assistance payments after a 300% increase in applications.
  • Over 10,000 inmates were illegally submitting unemployment applications from behind bars. 
  • Once again, the multimillion-dollar modernization project for the unemployment system is going to miss its deadline.

Last week, the Pennsylvania Department of Labor and Industry delayed Pandemic Unemployment Assistance (PUA) payments to new applicants due to an overwhelming number of fraudulent claims. 

The decision came after a sudden 300% increase in unemployment applications, with many originating from out-of-state. A previous crackdown reduced the number of daily applications to the normal average of 5,000, but the rate recently jumped to 20,000. 

The payment suspension also follows the U.S. Justice Department’s (DOJ) finding that state prison inmates engaged in PUA fraud. In August, when the DOJ charged 33 inmates with fraud, Scott Brady, U.S. Attorney for the Western District of Pennsylvania, stated that the defendants represent, truly, the tip of the iceberg.” Last week, another 18 inmates were charged with submitting fraudulent PUA applications. According to investigators, more than 10,000 inmates have made fraudulent claims behind bars.  

Incarcerated recipients of government checks include Allegheny County’s Clifford Yoders, who asked a relative on a jail phone to file for unemployment compensation on his behalf. Such use of a third party to make fraudulent applications is not uncommon. 

Other individuals, like Jessica Rae Conrad and Homer Mizenko from Armstrong County, were recently charged for helping ineligible people sign up for unemployment compensation in exchange for a $1,000 payoff per application.  

According to Brady’s estimates, illegal unemployment claims have cost Pennsylvania taxpayers almost $250 millionThe 18 inmates charged last week were accused of illegally collecting over $300,000. 

This surge in illegal claims isn’t the first time that Pennsylvania’s unemployment compensation system was penetrated by fraudulent activity during the pandemic. In May, scammers used the stolen personal information of approximately 58,000 Pennsylvanians to file PUA applications.  

multimillion-dollar effort to modernize Pennsylvania’s unemployment compensatiosystem, contracted to Geographic Solutions in 2017, was slated to go live in April 2019. The project’s advisory committee, however, pushed the deadline to this October. This month, testimony from  Secretary of Labor and Industry W. Gerald Oleksiak to the House Labor and Industry Committee suggested that the project will again miss its deadline. 

According to Oleksiakthe dramatic increase in unemployment claims during the pandemicin conjunction with the implementation of new federal programs“diverted staff time and resources away from BenMod [Benefits Modernization project].” As a result, a member of the modernization projects’ oversight committee warned that the program will not be ready to launch in October. 

“As shown from a hearing last week, Pennsylvania's unemployment system has been woefully inadequate and unprepared to handle this economic downturn and repel fraud,” said Commonwealth Foundation Vice President Nathan Benefield. “Thousands of unemployment individuals still haven't received benefits and the funding needed for many of them is being stolen. And this after millions of taxpayer dollars wasted trying to modernize the system over decades.” 

The state Department of Labor and Industry plans to delay payment to all new PUA applicants until it improves anti-fraud detection and identity verification. As soon as this surge was detected, L&I staff immediately notified its law enforcement partners and met with third party vendor Geographic Solutions Inc. to develop stronger identity verification methods,” said Sarah DeSantis, a department spokesperson. 

The purpose of PUA is to provide 39 weeks of payments to workers who lost their jobs due to COVID-19 but are not eligible for regular unemployment compensation. While administered by the state Department of Labor and Industry, the program is funded by the federal CARES Act.