The Vermont Department of Labor has paid out hundreds of thousands of dollars in fraudulent unemployment claims during the pandemic, according to the state’s labor commissioner.
A massive surge of fraudulent activity struck the department’s system in April. The department announced Friday that it had shut down its online portal for filing claims earlier in the week after finding that up to 90% of entries coming through that system were fraudulent.
Fraud has been a persistent problem for the department since last year. Labor Commissioner Michael Harrington estimated Monday that fraudulent claims during the pandemic range somewhere from hundreds of thousands to millions of dollars.
“Just in terms of the volume of what we’re catching, recognizing we’re not catching everything that’s out there and recognizing what we have caught after it’s been paid out, it’s certainly in the hundreds of thousands,” Harrington said at a press briefing.
Unemployment fraud was nearly nonexistent in Vermont before spring 2020. In a given pre-pandemic year, the state typically had between five and 10 fraudulent benefit claims, according to Harrington. At that point, claimants had to call the department manually to file for benefits.
Fraudulent claims appeared immediately when the department first opened the online filing system at the onset of Covid-19, trying to accommodate a surge of unemployment claims. By April 2021, as Vermonters had to file new claims to qualify for a new benefit year, as many as 80% of the 500 to 800 claims coming through the department’s system each day were fraudulent, according to Cameron Wood, the department’s unemployment insurance director.
Nationwide, officials estimate tens of billions of dollars in fraudulent unemployment insurance payouts could be lost by the end of the pandemic. Looking at all Covid relief efforts, not just unemployment benefits, fraudsters could have ripped off more than $100 billion during the pandemic.
Officials in Vermont and nationwide believe international digital crime syndicates have taken advantage of states’ overwhelmed digital systems.
Harrington said Monday that if the cost of unemployment fraud to Vermont is not already in the millions, it likely will be by the end of the pandemic. But he said an exact estimate of the fraudulent claims is difficult.
“It’s a constantly moving number,” the commissioner said.
Vermont’s losses are relatively low compared to larger states, Harrington said. California, for example, has paid at least $11 billion in fraudulent claims, according to news reports. In New York, officials have referred more than 400,000 fraudulent claims to federal investigators, totaling $5.5 billion in claims, most of which were caught before they were paid, The Hill reported.
The cost to Vermont “will be in the millions by the time this is all said and done, versus in other, larger states where they’ve shown tens if not hundreds of millions of dollars” in losses, he said. “I think we’ll be on the lower side of that.”
The number of fraudulent claims — and the number of claims filed with the department overall — have dropped by 90% since the labor department deactivated its online portal, Harrington said Monday.
On Tuesday, 2,300 claims entered the department’s system, according to Harrington. On Wednesday, the day the department deactivated the portal, 1,700 new claims entered the system.
That number was down to 159 people who called to file claims on Thursday and 154 on Friday. Harrington said he’s not sure when the system will go back online.
“What we have said internally is that we’re not going to put it back online until we’re as sure as we can be that we’ve taken every step to prevent fraud from going into the system,” he said.
Correction: A previous version of this story overstated the amount of money New York state paid in fraudulent claims.
