MONTGOMERY — More than $5 billion of unemployment benefits has been blocked from being sent out in Alabama due to concerns of fraud during the COVID-19 pandemic, according to the Alabama Department of Labor.
That is an unprecedented amount and a problem seen all across the country, ADOL Secretary Fitzgerald Washington said.
“Since the pandemic, ADOL has received more claims than ever before, which has significantly increased the risks of fraud,” Washington said in a statement to Alabama Daily News. “Federal programs with increased weekly benefits made it even more appealing to criminals looking to defraud the system.”
ADOL communications director Tara Hutchison told ADN that the $5 billion accounts for the time from March 2020 to the present and is mostly coming from the new federal programs like the Pandemic Unemployment Assistance fund, or PUA, that was approved under the CARES Act.
“Basically, it took a lot of the checks and balances out that we would perform and that other states would normally perform when someone files an unemployment claim because PUA was designed for those who are self-employed,” Hutchinson said.
Those who are self-employed do not normally have wage records filed with the state so finding proof of employment in order to qualify for the unemployment benefits has been a challenge, Hutchinson said.
Washington told lawmakers in August that the amount of alleged fraud connected to the federally funded unemployment programs was one of the reasons for ending the federal programs back in June.
The federal programs Alabama halted include the additional $300 weekly payments, assistance to self-employed or gig workers, an extension of benefits once regular benefits have been exhausted and an additional $100 benefits to certain people with mixed earning.
According to ADOL’s unemployment benefits and claims paid dashboard, around $5.2 billion has been paid out to Alabamians from state and federal benefits since March 16, 2020.
Further fraud data provided to ADN from ADOL showed that approximately $1 billion in benefits has so far been identified as potential fraud, but not verified.
While the amount of potential fraud and blocked claims is very high for the state’s history, ADOL said they only had three convictions in calendar year 2020 for prosecutable fraud cases and two pre-trial diversions.
Hutchinson said that is because of the slow- down of the courts in 2020 and because there are no set guidelines of how to prosecute under these new federal programs.
“We’re working with all levels of law enforcement in order to determine what we’re going to do here,” Hutchinson said. “But that doesn’t mean in any circumstance that there are not ongoing investigations that are being worked on as we speak.”
There were also 59 warrants filed statewide in 2020 for $197,324 in fraudulent overpayments or restitution amount, which is significantly less than in 2019 when 399 warrants were filed.
Hutchinson could not say whether the fraudulent claims were coming from out-of-state or in-state groups or individuals, saying the department doesn’t share that information since investigations are still ongoing.
Federal government officials have stated that scammers in other countries like Russia, Nigeria or China are using stolen U.S. identities in order to steal billions of pandemic-related unemployment relief, NBC News reported.
Estimates have ranged from $87 billion to $400 billion that has been stolen in the U.S. in pandemic-related unemployment fraud.
ADOL also shared data on the number of fraud claims filed through their online portal that was launched in July 2020. Any individual can submit their own fraud claim and the largest single week of reporting happened in April 2021 at 4,170.
From when the portal was launched until Aug. 1, 2021, there had been 59,911 claims filed. These claims aren’t counted with the $5 billion amount of fraud claims blocked automatically by ADOL, Hutchinson said.
State lawmakers met with state labor officials last week at the State House about the concerns surrounding workforce challenges and fraud issues in Alabama. The meeting was not open to the public and host Rep. Danny Garrett, R-Trussville, asked ADN to leave.
Garrett did not return calls about the meeting, but the same day voiced concern about the state’s labor situation at another meeting.
“We have a very low unemployment rate … we can’t staff the businesses we have today,” Garrett said about the Alabama Department of Commerce hiring a company to do business recruitment.
Labor recently extended its contract with Montgomery-based ASK Telemarketing to provide call center support for those needing assistance with their pandemic-related unemployment claims.
According to Labor, there is a backlog 140,000 unemployment appeals going back to last year.
The contract that began last spring is now $3.3 million.
Rep. Chris Pringle, R-Mobile, said he still gets complaints from people who need help with unemployment claims.
“Three million dollars and we still can’t get the phones answered,” Rep. Chris Pringle, R-Mobile, said.
Sen. Chris Elliott, R-Daphne, told ADN that the meeting was not a finger-pointing session to place blame for the amount of fraud occurring but more to ask questions about what can be done to stop it.
Elliott said there are talks about legislation in the 2022 regular session to increase fraud penalties, changes to unemployment insurance in general and improving the workflow between ADOL and the Attorney General’s office for prosecuting fraud claims.
In his own coastal district, Elliott said he has seen the challenges of finding workers for various job sectors, including tourism. He is working on possible legislation for 2022 dealing with seasonal workers and how they would qualify for unemployment benefits.
He said since most seasonal workers know their employment is only for a short amount of time they should plan accordingly instead of relying on state unemployment benefits.
“That’s not really what unemployment was set up for,” Elliott said. “It’s set up to compensate someone who loses their permanent full-time employment until they can find another permanent employment.”
The 2022 regular session is scheduled to start Jan. 11, 2022.