Fraudsters foiled by Colorado’s unemployment office as number of new out-of-work claims decline

A crackdown on fraudulent unemployment claims in Colorado resulted in a 42.1% drop in people seeking the $600 benefit paid weekly out of federal coronavirus relief funds.

The state Department of Labor and Employment declined to share how scammers were able to claim millions in benefits, but said new fraud detection measures and limiting backdating a claim to one week had the intended result, with 10,385 new Pandemic Unemployment Assistance claims made the week of June 20, compared with 17,945 the week before.

“The PUA claims we reported today are to be expected, and somewhat normal levels,” Cher Haavind, the labor department’s deputy executive director, said Thursday during a call with the news media. 

Colorado also saw the number of new regular unemployment claims drop below 10,000 for the first time since people were ordered to stay home to slow the spread of the coronavirus, causing many businesses to temporarily close. There were 9,882 new unemployment claims for the week of June 20. That’s down from the high of 104,217 during the week of April 11.

New claims for regular unemployment have mostly been in decline for weeks. But continued claims — or the number of people still receiving unemployment benefits — increased slightly for the week of June 13 and have averaged around 254,000 people. That number could go down soon as more businesses reopen and people head back to work.

“On the positive side I think there’s a chance continued claims for the week of June 20 will fall below 240,000 for the first time since late April,” said Ryan Gedney, senior economist at the labor department.

The state labor department signed a contract with Google to help offload customer service calls coming to the busy call center. A new virtual agent would help users with general questions about filing for unemployment and receiving benefits. If there’s no resolution, a live agent calls the applicant at a scheduled time.

Colorado is still paying record amounts of unemployment benefits — about $90.4 million in regular benefits were paid last week. That’s taken a toll on the state’s unemployment trust fund, which survives on employers paying employment insurance premiums.

The trust fund started with $1.1 billion before the coronavirus struck. It’s now estimated to have around $250 million to $400 million. While that’s higher than previously predicted, the fund will likely run out of money by September, at which point a federal loan would kick in to pay benefits, Gedney said.

But there are many workers who don’t pay unemployment insurance and don’t qualify for regular benefits. These self-employed, contract or gig workers, however, do qualify for the $600 weekly Pandemic Unemployment Assistance, thanks to the federal CARES stimulus packages. So far, Colorado paid out $327 million in federal PUA benefits.

Haavind said many state labor agencies had to quickly build a system to manage the federal PUA payments. There’s no vetting by an employer and the applicant just submits tax forms. The PUA system is what was attacked by fraudsters. “Unfortunately the system does lend itself to a greater incidence of fraud,” she said. 

Last week, the agency discovered that about 5,600 PUA claims made in the prior week were likely fraudulent. Applicants were allowed to backdate their claims to February, resulting in a large amount of money paid on the first claim. Half of the 5,600 payments were stopped, preventing $34 million in payments.  

Haavind said the same scam is hitting other states with thieves using stolen personal identities of residents who still have a job. The victims often learn about the identity theft after receiving unemployment documents in the mail. 

Fraudsters also are targeting retired people who don’t receive W2 forms anymore. PUA claims are validated based on tax forms, she said. 

Labor department officials said they did not know if more fraudulent claims were made in the past week. But they’re looking at more than 1,000 tips that have come in, some of which are probably duplicates or for claims that were already stopped.

“Again, we’re not going to get into the specifics of the measures that we’ve taken, but we do know that fraudsters evolve,” said Jeff Fitzgerald, the state’s unemployment insurance director. “We continue to evolve our practices.”

Since March 29, Colorado has paid out $2.74 billion in unemployment benefits, most of which is covered by the federal government. Approximately $971 million in regular unemployment benefits have been paid out by the state during this time.

Nationwide, there were 1.48 million new unemployment claims filed for the week ending June 20, a continued decrease in recent weeks, according to the U.S. Department of Labor. The nation’s unemployment rate was at 13.4% for the week ending June 13.