CHARLESTON — It was kind of odd, if not humorous, at first.
Ellen Bullock’s company — Charleston-based Gaddy Engineering — began receiving unemployment claims last year, first sporadically, and then in clumps.
It was an otherwise normal occurrence for any business, although it shouldn’t have pertained to Gaddy Engineering. Because, as things began to sour in the early days of the COVID-19 pandemic, Bullock and her husband, John, co-owner of the business, procured federal payroll protection loans to keep their 12-member workforce employed.
So, when the first few unemployment claims rolled in on behalf of people still claiming paychecks, Bullock thought it was an honest mistake. It was downright laughable when claims rolled in for her and her husband.
Then it happened again and again.
She received claims seeking benefits for employees who had been hired as recently as three years ago; others for some who’ve been on the books since 2005. Some claims appeared multiple times, and then came the kicker: Three times over the past month she’s received claims for people who’ve never worked at Gaddy Engineering.
By then, the joke had turned stale. Her days transformed from helping run a small business to cleaning up a mess of someone else’s doing.
“There were days I’d spend four hours trying to fix this,” Bullock, 63, said. “I’d keep calling and calling. You can’t leave a message — they tell you to respond online. And I understand that they’re overwhelmed, I totally understand that. But at the same time, it’s very frustrating as an employer to go through this 12 times.”
Bullock’s story isn’t isolated.
Unemployment fraud has materialized nationally on an unforeseen level as the result of an unforeseen pandemic. For the most part, officials have had to be reactive, instead of proactive, just to minimize the damage.
Consider what’s transpired in Washington state, which has been hit for more than $500 million in fraudulent unemployment claims since March 2020. That’s only about half the amount swiped in Texas, where that state’s workforce commission says identity thieves have made off with nearly $1 billion.
What about closer to home, in Ohio? The Buckeye State has been taken for about $330 million during that same time. That total is dwarfed by the losses in other states, yet it remains an unconscionable loss for any government or private enterprise.
Scott Adkins, commissioner for Workforce West Virginia, declined to provide exact totals indicating the degree to which the state has been hit by unemployment fraud over the past 14 months. West Virginia ranks fifth nationally in proper payment rate, he said. The amount of fraudulent claims is less than 11% — a high number, although small when juxtaposed with what’s happening nationally.
There are equal amounts of blame and shame to go around.
No one could have predicted the upcoming state of the world on New Year’s Eve 2019. Everything that transpired globally did so beneath an all-encompassing cloud that flipped the definition of “normal.” Governments — just like everyday citizens — learned on the fly in 2020.
Still, there’s a high degree of culpability when it comes to governmental entities, particularly when money is involved, and even more so when those dollars are directly connected to individual welfare. And the guilt is twofold — first, in allowing the breaches to occur; second, in the inability to have cases painlessly resolved.
“This is a systemic failure on a lot of levels,” said Keith Faber, Ohio’s state auditor. “If you were a person trying to get a legitimate unemployment claim, getting (in touch with) a person, getting assistance, has been an impossibility.
“It’s just amazing. It’s a system that has failed at many levels. And it’s not just unique to Ohio — it’s a national failure. You’ve got major international groups out there hacking into and filing unemployment claims all around the country. We can’t allow hundreds of millions of dollars to go out the door in fraud.”
Officials say the leaks haven’t been as damning in West Virginia. The state is playing catch-up as potentially more losses loom.
“The actors, because of the billions of dollars involved, are pretty sophisticated,” Adkins said. “Yeah, it’s been an uphill battle, I can tell you that.”
That’s because the primary players in this recent scale of unemployment fraud aren’t local crooks performing a cash-swapping scheme at a local carryout. The majority of fraudulent claims have been traced to Nigeria, Eastern Europe, Russian states and various countries around the Pacific Rim. Together and separately, they’re able to intrude into myriad databases to collect information that’s flipped into fake unemployment claims.
Some of that intel, Adkins said, can be traced to the Equifax breach of September 2017, when 147 million Americans had their identities compromised. That’s led to a multitude of claims ostensibly from people from all walks of life, ranging from food-service and manual laborers to professors, lawyers and doctors. Adkins said even the state’s unemployment director and a previous commissioner of Workforce West Virginia had claims filed in their names.
It’s more than enough to keep his 15-person integrity division occupied.
“We have plenty of staff here to handle the fraud investigations,” Adkins said. “We have an entire unit dedicated to doing nothing but looking at fraud investigations. People might say it’s not happening quick enough, but they equate the timeliness to a lack of staff, and that’s not the case. As far as technology, we’re using state-of-the-art technology from various vendors to detect, prevent and mitigate any potential unemployment fraud.
“Look at West Virginia, compared to other states. I don’t mean to minimize the impact of fraud because, if we’re paying one dollar to somebody that’s not eligible for it, that’s unacceptable. Any fraud should be stopped and prevented, and we’re working really hard to do that.”
West Virginia Auditor J.B. McCuskey went on a fact-finding mission in Ohio to see what that state — which was hit harder and earlier than West Virginia — was doing.
The Buckeye State’s legislature had given McCuskey’s counterpart power to be Ohio’s “fraud fighter” for workers’ compensation fraud. McCuskey said he wanted to see what Ohio was doing on the front end — before fraud had been successfully committed — and what it was doing on the other side to prosecute offenders.
Ultimately, his findings would advise Workforce West Virginia if it chose to approach the state Legislature about fixing this problem.
“Our office employs very sophisticated technology,” McCuskey said. “It’s our hope we can use our data science to use Workforce West Virginia to combat this growing problem.
“But what they ended up explaining to us is, this is a huge problem that we’re potentially not equipped to handle. And there’s a good reason for that. There’s never been this must action — ever. I think there’s a massive opportunity to use this catastrophe to fix our problem forever and learn to work together to fix other problems.”
Gov. Jim Justice’s office did not respond to requests for comment.