Business & Economy

Labor Department suspends online claims system to curb surge of fraud

Michael Harrington, commissioner of the Vermont Department of Labor, speaks at a press conference in Barre on Monday, March 16, 2020. Photo by Glenn Russell/VTDigger

Fraud has forced a shutdown of the Vermont Department of Labor’s online system for filing initial unemployment benefit claims.

Cameron Wood, the labor department’s unemployment insurance director, told VTDigger on April 16 that 80% of initial claims processed by the department each day had been fraudulent since the start of April. In a Friday press release, the department said that figure had recently jumped to 90%, prompting the shutdown of the online filing system Wednesday.

“The most secure solution was to remove the application and make the criminals have to call to open a claim,” said Labor Commissioner Michael Harrington. “When we did this, the number of claims being filed dropped by 90% and so too did the fraud.”

Vermonters who need to file a first-time claim or open a new benefit year may still do so by calling the Unemployment Insurance Claimant Assistance Center at 877-214-3330, according to the press release.

Fraudulent initial claims have surged nationwide and in Vermont during the pandemic, as states switched from phone-only filing systems to web-based ones to accommodate a sharp rise in claims brought on by the pandemic-induced recession.

That activity probably increased even more in April, according to Wood, because overall claims rose as people rushed to file new initial claims to qualify for the new benefit year. When total claims rise, fraudulent ones typically do too, he said, as digital criminals look to capitalize on states’ overwhelmed systems.

In early April, Vermonters began contacting VTDigger after receiving materials from the labor department related to benefits they had not filed for. Even former Vermont Gov. Howard Dean received a pile of booklets on how to collect benefits from the labor department, Seven Days reported.

According to Wood, department issues are not at fault for Vermonters’ information being used to fraudulently file unemployment claims. Instead, he blamed massive corporate data breaches — such as the 2017 Equifax breach that affected 140 million U.S. residents and a more recent Facebook breach that affected 530 million people — for Vermonters’ personal information being used by internet criminals to file fraudulent claims.

While the problem has become more pronounced in recent weeks, it is not exactly new. The department was fielding virtually zero fraudulent claims before the pandemic, Wood said. Since the pandemic began and the labor department opened the online system, it has been a different story.

“As the unemployment insurance programs are overwhelmed with the vast number of people trying to access our systems, criminal organizations are taking advantage of that and trying to get through,” Wood said. “That has been consistent throughout the past 12 to 13 months.”

VTDigger reported this week that the Labor Department is under fire from the federal government for lifting a handful of eligibility triggers from the process it uses to determine whether people may receive benefits, in an effort to speed up the arrival of money to laid-off Vermonters during the pandemic.

Gov. Phil Scott is standing by the decision, which led the federal government to ask the labor department in early April to re-process thousands of benefit claims dating back to spring 2020. The labor department first lifted the eligibility requirements in March 2020.

“We were in a crisis situation at the time, through no fault of our own,” Scott said Friday at his regularly scheduled press conference. “And because of our 50-year-old mainframe and all the hoops and hurdles that we would have had to go through, we just couldn’t make it work without having Vermonters suffer. That’s why we’re in the position we’re in today, and I’ll take some responsibility for that. But I still think it was the right thing to do.” 

The cost of pandemic unemployment fraud to Vermont taxpayers remains unclear. 

Wood told VTDigger that the department has tracked neither the rise in fraudulent claims nor the amount of money the department has paid fraudulent claimants since the pandemic began. A labor department spokesperson did not return multiple inquiries from VTDigger this week on how much money the labor department has paid out in fraudulent claims.

The department urged Vermonters on Friday to report unwanted mailings or other instances of suspected fraud by submitting an online fraud report or by contacting the UI Fraud Tip Line at 802-828-4104.

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James Finn

About James

James is a senior at Middlebury College majoring in history and Spanish. He is currently editor at large at the Middlebury Campus, having previously served as managing editor, news editor and in several other roles there. James was a reporter this summer at the Mississippi Center for Investigative Reporting and earlier was an intern at the Addison County Independent.

Email: [email protected]

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