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Colorado stops nearly $1 billion in unemployment benefits from being paid to scammers

The state is working with federal and local agencies to try to recover nearly $40 million that was wrongly doled out

The Colorado Department of Labor and Employment office in Denver's Capitol Hill neighborhood on March 21, 2020. (Eric Lubbers, The Colorado Sun)
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By adding a mysterious 18th fraud prevention mechanism in late August, Colorado’s unemployment office prevented $750 million to $1 billion in benefits from being paid to scammers.

That measure stopped nearly 50,000 false claims from being approved in the past two weeks, said the Colorado Department of Labor and Employment, declining to further elaborate for fear of  tipping off criminals. The new measure also helped the state review past claims, and it kicked out 48,206 previous new unemployment claims between July 18 and Aug. 22.  The state is also working with the FBI, Secret Service and local and state law enforcement agencies to try to recover $40 million already paid to fraudsters.

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Since at least June, cheats have been using stolen IDs and targeting the Pandemic Unemployment Assistance program, or PUA, a federally-funded program that for the first time provided unemployment benefits to freelancers, gig workers and the self-employed who don’t typically pay for the state’s unemployment insurance. But PUA was, apparently, also much easier to qualify for than regular unemployment.

“(PUA) lacks the wage-verification measures that regular unemployment has,” said Cher Haavind, the department’s deputy director. “It’s just presented an opportunity for criminals to take advantage of a program that doesn’t have a lot of safety measures in place.” 

The new numbers released Thursday are on top of previously reported fraud. Before July 18, the department had adjusted about 10,000 PUA claims due to fraud, preventing $34 million from being paid out.

Haavind did not say whether anyone has been arrested for the fraud, but said the labor department’s investigation team has doubled its staff in recent months and is eligible for $2.4 million in aid from the U.S. Department of Labor’s new $100 million program to fight PUA fraud.

The state often finds out about fraud after an unsuspecting Coloradan receives a bank card for unemployment benefits in the mail, or when an employer is notified that an existing worker has applied for unemployment. If you are a victim, you can fill out this form to report it to the state (more tips are available here). 

MORE: Fraud, ID theft in Colorado have shifted during coronavirus. Now is the time to double down on protection.

Cybercriminals using stolen personal data have been using the data to apply for PUA benefits. There are international criminal rings going after the jackpot of unemployment money made possible through the federal CARES Act to help workers who lost their jobs because of a coronavirus-related issue. One benefit, called Pandemic Unemployment Compensation, paid out $600 a week to anyone on any sort of unemployment and allowed them to backdate their claim to February. PUC ended in Colorado on July 25.

But the ongoing fraud also has hurt legitimate workers who had their claims put on hold and haven’t been paid for months. There were roughly 6,680 PUA accounts on hold as of this week, Haavind confirmed.

Many PUA claims still on hold demonstrated some fraudulent characteristics based on the 18 fraud-prevention measures, said Jeff Fitzgerald, the labor department’s unemployment insurance director.

They’re in a “sort of gray territory that we need to further analyze,” Fitzgerald said. “(We have) a queue and a dedicated team that are working through those and the individuals are contacted and (must) further identify themselves. Or, if there’s some other different hold on their claim they are given a notification, either by mail or by email stating the nature of that hold and what they need to do to resolve it.”

Unemployment claims drop

Regular new unemployment claims also dropped below 6,000 for the first time since the pandemic began affecting business operations in mid-March. At its peak, during the week ended April 11, 104,217 Coloradans filed for unemployment for the first time.

The number of folks who remain unemployed also declined to 243,028. Of those, nearly two-thirds were collecting regular unemployment, while 64,676 were receiving PUA benefits. Another 16,593 had exhausted their regular benefits and moved on to a special federal extension called Pandemic Emergency Unemployment Compensation.

To date, Colorado has paid out $4.87 billion in unemployment benefits, with the bulk of the money coming from federal coronavirus aid.

Colorado’s unemployment trust fund ran out of money in August. As of Wednesday, it has borrowed $191 billion via a federal loan that has no interest through the end of the year.

Next week, a new benefit kicks in called the Lost Wages Assistance program. Also a federally-funded benefit, the program will pay out $300 a week to anyone eligible for at least $100/week of unemployment benefits between July 26 to Aug. 29. The state has applied for a sixth week of LWA benefits, which are being paid out of the Federal Emergency Management Agency. The federal government said the program will max out for states at six weeks. 


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