Recently, Dana Peterman was indicted on numerous charges related to an alleged unemployment benefits scam. Peterman went to elderly Californians and offered them parts in remakes of the 1985 classic movie “Cocoon” and the 1981 movie “On Golden Pond,” both of which featured older actors. In the course of the “hiring” of these senior citizens for movies that would never be made, Peterman and her co-conspirators received the Social Security numbers and other personal information from their would be employees and then, it is alleged, used that information to file for unemployment benefits. According to prosecutors, Peterman received about a half a million dollars in bogus unemployment benefit claims.
Unemployment benefit scams is becoming a major money making scam for scam artists around the country. It is estimated that 5.6 billion dollars was stolen using this scam in the past year. Part of the problem is that the federal government requires the states to pay claims within a few weeks even if the employer has not responded to confirm that the applicant for unemployment benefits is indeed eligible for those benefits. As with so many identity theft crimes, this one starts with the theft of someone’s Social Security number. Armed with that ammunition, the identity thief then applies on line for unemployment benefits, which are often paid before the legitimacy of the claim is confirmed. In this way, this crime is similar to income tax identity theft where the IRS often pays out bogus refunds before comparing the W-2s and 1099s submitted by employers with the information submitted by the identity thief filing the phony tax return. The payments are generally made by debit cards or direct deposit into bank accounts controlled by the identity thieves which make this crime simple to accomplish.
A 2014 report by the Labor Department’s inspector general indicated that the unemployment insurance program is “particularly at risk for improper payments and the department’s ability to identify and reduce UI improper payments continues to be a challenge.
Although the Department of Labor points out that the rate of fraudulent payments is only 3.19%, this amount still amounts to billions of dollars and is expected to rise due to the lack of sophistication required to commit this crime and the continuing lack of vigilance by many states in the management of their unemployment insurance programs. Some states, such as Florida have made great strides in detecting and preventing unemployment insurance fraud, but other states have a long way to go. Requiring employers to confirm the employment eligibility of people claiming to have worked for them prior to processing payments would greatly reduce fraudulent claims.