Fraud contributed to record 37,000 jobless claims, Maine officials say

Widespread fraud against Maine’s unemployment system could be responsible for a surge in new jobless benefits claims, which hit a record high of 37,000 last week, according to the state Department of Labor.

About 24,500 individuals filed claims for unemployment benefits, a “sharp and suspicious increase from recent trends” the department said in a news release Thursday morning. The other 12,500 claims were duplicates, a product of overlap between two distinct state and federal jobless benefits programs.

The department said its discovery of a rapidly growing number of fraudulent claims using stolen identities points to an organized criminal attack on Maine’s unemployment system. Prior to last week, the single highest week for new jobless claims was the week ending April 4, in which about 31,000 new claims were filed in Maine as the full impact of business shutdowns hit the state.

Doug Schlichting received a letter from the labor department that said his unemployment claim was approved and benefits deposited into his account. He knew something was wrong, since he has a full-time job in New Gloucester and never received a payment.

Once he saw a newspaper story about unemployment fraud, Schlichting put two and two together. He emailed the labor department to advise them of the false claim.

Schlichting doesn’t know how or when his personal information was compromised, but the false claim had his correct Social Security Number, home address and employer information.

Identity theft was always something he saw happening to others, it’s unsettling that now he’s a target.

“I’ve always experienced it from afar and I tried to be cautious over time,” Schlichting said. “Now it is me being put out there fraudulently.”

The labor department started identifying fraudulent claims last week. It suspects the most recent weekly claims include some filed by criminals using stolen personal identification, Labor Commissioner Laura Fortman said in an interview.

“We have closed out some of the accounts, we do know that we have addressed some of the issue, (but) the magnitude of it it is too early to definitively say,” Fortman said.

To date, the department has found and canceled about 2,200 bogus claims filed using Mainers’ personal information. Another 1,000 reports of potential fraud are under investigation.

Unemployment agencies across the country are dealing with a wave of fraudulent benefits claims that could bilk state trust funds out of millions of dollars. The data used to file fake claims may have originated from one of the huge breaches of personal information in recent years.

On Thursday, The Associated Press reported that Washington state has recovered $300 million it paid to criminals who used stolen personal information to file fraudulent unemployment benefit claims amid the COVID-19 crisis.

The amount that could have been stolen in Maine is still under investigation and is not available, Fortman said.

Emergency measures enacted in March to rapidly get benefits to laid-off workers meant the department expedited initial unemployment claims, but that made the process more vulnerable to fraud. Normally, claims are verified against employer wage records to make sure workers receive the correct amount.

This week, the department paused benefits payments for 48 hours to remove suspected fraudulent claims. It also reinstated its 10- to 14-day processing period for initial unemployment claims.

A federal law that granted unemployment benefits to self-employed, contract workers and others who normally do not qualify, called Pandemic Unemployment Assistance, also is susceptible to fraud.

The state has to rely on earnings records provided by individuals to process those claims without anything to quickly check it against, Fortman said.

“One of the challenges is that Congress created a program that does not have that inherent check in there,” she said. “There are not wage records to check against – the program is specifically designed to cover people who are not covered.”

Labor department staff are experienced at probing fraudulent claims filed by workers, but not fake claims made with stolen personal data, Fortman said. State and federal law enforcement agencies are working with the department to investigate the apparent wave of orchestrated fraud.

“What we are seeing now, and what unemployment insurance systems across the country are seeing, is targeted attacks by organized criminals,” Fortman said. “That is the kind of situation that I don’t think any of the unemployment insurance programs have seen before or anticipated.”

Personal data is not being stolen from people applying for unemployment claims, Fortman added. Workers who believe they are victims of identity theft should file a report online at maine.gov/unemployment/idtheft/ and make sure their personal information is safe.

Initial claims for state jobless benefits had been trending downward steadily since mid-April. Just over 4,600 new claims were filed the week ending May 16, a drop from around 11,500 the week of April 18.

Mainers filed about 137,000 continuing unemployment claims under the state insurance program and 135,600 claims under the federal Pandemic Unemployment Assistance program last week. Some of the federal claims were for retroactive benefits going back to when people lost their jobs.

Nationally, about 2.1 million new jobless claims were filed last week, bringing the total to nearly 41 million since the coronavirus pandemic struck the United States.

Maine’s preliminary estimated unemployment rate for April shot up to 10.6 percent as the economic devastation unleashed by the coronavirus pandemic washed over the state, the labor department reported last week. The jump of 7.4 percentage points from March to April was the highest single-month increase since Maine adopted its current estimating methodology in 1976, it said.