WORCESTER — Identity thieves have used personal information of more than 550 city employees to file claims for unemployment insurance benefits, a nationwide scheme that is skyrocketing as millions of people rely on the supplemental benefits to feed their families and pay bills during the pandemic.
“We get them (notice of fraudulent claims) every day,” Dori Vecchio, Worcester’s human resources director, said last week. Between March to mid-August, the city received 40 claims. Since then, more than 500 have come in. Initially, one employee spent half-an-hour a week on the claims. Now, that person works 50 hours, and an intern that was hired works 20 hours each week to verify each individual claim to ensure the city is not paying any fraudulent claims.
“It’s incredible. It’s been a struggle here to protect our employees.”
Recently, letters to city employees purportedly from the state Department of Unemployment Assistance (DUA) listed a phone number to the scammer who was seeking additional information on the victim. Vecchio said she has advised employees to call the phone number on the DUA website, instead.
Employees in every department have been affected. The city employs about 6,800, including more than 5,000 who work for the School Department. The majority of the illegal claims are on the city-side, including about 100 who work for the Fire Department, which appears to be the hardest hit. Another 100 claims are for school employees.
“Several high-ranking officials and elected officials in the city have been compromised. There’s no discrimination amongst fraud. It’s touching everybody,” Vecchio said, adding that she is literally waiting every day to see her name on an unemployment invoice from DUA.
Superintendent Maureen Binienda said she was the first school employee to be victimized. In one case, the perpetrator was paid $10,000. Two subsequent attempts were thwarted, Binienda said.
In the first case, she received a letter from DUA in May congratulating her that she had been approved for the Pandemic Unemployment Assistance Program, and that she should have already received $10,000. The payment was likely retroactive for several weeks. The letter, Binienda said, arrived on a Friday, so she had to wait until Monday to contact DUA and tell them it was not her who applied for and received that money.
Binienda said the DUA employee told her that they had not been verifying all claims because the department was rushing to get the money out to people who needed it.
As directed by DUA and Vecchio’s office, Binienda said she notified state Attorney General Maura Healey’s office, the Worcester Police Department, her bank, and the credit bureaus.
Binienda, who did not have a fraud alert on her credit report, said the following month another attempt was made by someone to collect regular unemployment benefits in her name. However, this time Vecchio’s office intercepted it. Seeing that she was continuing to be targeted, Binienda finally placed a fraud alert on her credit.
A third fraud attempt was made when someone emailed the School Department’s payroll division pretending to be the superintendent. The scammer said Binienda had changed her bank account in which her paycheck is directly deposited, and asked that it be sent to a different account number.
Payroll forwarded the email to Binienda, who said it did not come from her. The department has since instituted a two-step process to verify that information is from the actual employee.
Binienda said she sent an email to all Worcester Public Schools employees telling them about the scheme and the new verification process and outlining what to do if they become victims. Binienda said several employees have called her to say it happened to them.
“I hope they catch the people. It’s not right. People who need it can’t get it as quickly because of these people,” Binienda said, pointing out the time-consuming process victims have to go through. “You got to stop and do a lot of work because somebody was able to get ahold of your Social Security number somehow. I still don’t know how it happened.”
City Won’t Pay Fraud Claims
Vecchio said she has contacted DUA to point out that Worcester, which is self-insured, will not pay for any of the fraudulent unemployment claims. The city gets a weekly invoice from DUA that lists the name of employees who have been determined to be eligible for unemployment. Pre-COVID, DUA would confirm the employer’s information with the city before paying the claim and subsequently billing the city.
Vecchio said during the pandemic, the city received very few inquiries on claims from DUA. In the past couple of months, DUA has resumed contacting the city before paying a claim.
“I let DUA know that we did not make this mess. We will work with them to try to resolve it. But we’re not going to have city of Worcester taxpayer money paying these fraudulent claims,” Vecchio said.
According to the state Executive Office of Labor and Workforce Development, which oversees the DUA, between March 8 and June 30, 58,616 of the 1.6 million unemployment claims and claims for the Pandemic Unemployment Assistance Program, which provides benefits to contractors and people who are self-employed, were determined to be fraudulent.
Information on claims filed since July 1 has not been made public. After several days of trying to get information about the proliferation of the fraud, Charles Pearce, spokesperson for EOLWD, told a reporter last week that an interview with state Secretary of Labor and Workforce Development Rosalin Acosta could not be accommodated.
Officials said $158 million from the fraudulent claims filed between March 8 and June 30 were recovered. But a DUA spokesperson would not say how much of the illegally-gained unemployment benefits have not been recovered.
Ernst & Young, a multinational professional services network, has been hired by the state to conduct a forensic accounting investigation into the fraud scheme.
Some of the fraudulent cases are turned over to Healey’s office for investigation, along with at least 300 complaints — 45 from Worcester County, including nine from the city — that office has received. The DUA has also partnered with the Massachusetts State Police and the state Department of Corrections on the identity verification effort.
In August, 33 inmates in Pennsylvania were charged with illegally obtaining coronavirus unemployment benefits. They allegedly used telephones to direct accomplices outside the prison to file for the benefits using prisoners’ personal identification information. The payments were sent to the prisoners’ home addresses.
“We’re taking a close look at the claims we’ve received from individuals and from our local, state and federal partners to determine the sources of the fraud and take appropriate action. The best way to prevent scammers is to stay alert and report this fraud to local law enforcement and the DUA when you identify it, and consider taking steps to freeze your credit and protect your identity,” Healey wrote in an email Thursday.
Billions could be lost
Scott S. Dahl, the recently-retired inspector general for the U.S. Department of Labor, in June warned the House Subcommittee on Government Operations about the high risk for fraud with the $110 billion Pandemic Unemployment Assistance program because of states’ reliance solely on self-certification to determine eligibility. He estimated that approximately $26 billion of unemployment benefits could be wasted with a large portion going to fraudsters.
A few weeks ago, the U.S. Department of Labor announced $100 million to help states detect, prevent and recover fraudulent unemployment payments, including supplemental programs created under the CARES Act. Massachusetts stood to receive about $2.4 million.
Healey and security experts say much of the fraud appears to be committed by scammers using personal information stolen from earlier commercial data breaches or direct attacks on state systems.
The U.S. Secret Service in May reportedly issued a memo to officers in its field offices across the country saying a Nigerian fraud ring was targeting unemployment systems in states. Washington, Massachusetts, Rhode Island, Oklahoma, North Carolina, Florida and Wyoming were the states where attacks had occurred at that time.
A Secret Service spokesperson on Thursday said the agency cannot comment on ongoing investigations. She did say that the Secret Service’s Global Investigative Operations Center along with its Cyber Fraud Task Force partners have identified criminal actors targeting state unemployment insurance program funds.
Victims often don’t know they have been affected until their employer is notified by the state unemployment agency or when they try to file a legitimate claim, said Eva Velasquez, president and CEO of Identity Theft Resource Center. The 20-year-old San Diego-based nonprofit helps people worldwide address identity theft.
Velasquez said the victims generally have had their information compromised by some kind of previous breach or by unwittingly providing their information to a scammer.
Velasquez said people can protect themselves from other types of identity theft by contacting the top three credit bureaus to put a freeze on their credit. It will stop thieves from opening new credit cards or new loans in someone’s name. It will not affect a person’s current credit cards. Credit can be “thawed” if a person wants to apply for new credit. A credit freeze, which is free, can also be done for children to protect them.
Local police inundated
When “Ken,” a longtime retired educator who lives in Shrewsbury, got a letter from DUA in May saying he had been approved for unemployment, he immediately called DUA.
“I explained that I’m retired. I’m not filing for unemployment,” said Ken who spoke on the condition of anonymity out of caution that he may again be targeted.
Ken said he took all the protective steps, recommended by the DUA worker, but that didn’t stop another fraud attack. A month later, a processor with the Small Business Administration called him to see if he had applied for a $150,000 loan for a poultry farm. He told the worker that he did not apply for the loan and he does not have any chickens.
“It gets your blood boiling for sure. You have to worry about this along with other things. Now I check my bank account four times a day and I’m constantly pulling my credit report repeatedly throughout the day,” the retired grandfather said.
Shrewsbury Police Detective Paul A. Brown said his department and others throughout the state are being inundated by the number of fraud reports that local residents are filing.
Since March 1, the Shrewsbury Police Department has documented more than 300 identity theft reports — as many as 15 on some days — involving unemployment insurance and SBA loans. Many of the local victims are in the medical and financial fields and educators.
“I’ve investigated a lot of identity theft over the years. But nothing to this magnitude with this number of victims that were compromised,” said Brown, a 20-year veteran who is the department’s sole detective.
He spends a great deal of time each day, calling victims to advise them what they should do, including filing a report with the Federal Trade Commission. The agency shares the information with other entities to see if there are patterns to pass on to law enforcement agencies.
“To me, it’s the crime of opportunity when people are preoccupied by the pandemic and everything else going on in the world,” Brown said.
Other police departments are also reporting a significant uptick in identity theft crimes involving unemployment and COVID relief benefits.
Webster Police Chief Michael Shaw said his department did not have any last year. They have had more than 30 so far this year. Charlton also had no unemployment theft cases in 2019. Now they have more than 50.
Auburn has also seen more of the cases. Police Chief Andrew J. Sluckis Jr. was one of the victims. He received a letter from DUA in June saying he had been preapproved for more than $10,000 in unemployment benefits. Sluckis said he has no idea how thieves got his personal information.
“It’s crazy. And, the old saying is true: Crime pays,” he said. “Think about it. If they make 20 of these applications a day and if only two of them end up being profitable for them, using my numbers, they’re making $20,000 tax free. For them, it’s like shooting fish in a barrel because some of the claims are bound to get through.”