The Department of Labor threatened to withhold funds from states if their governors didn’t take further action to combat unemployment fraud and waste.
As part of the Trump administration’s wider efforts to combat waste, fraud, and abuse, Vice President JD Vance’s Task Force to Eliminate Fraud is now focusing on state unemployment programs. Acting U.S. Secretary of Labor Keith Sonderling issued letters demanding action from the governors of 53 U.S. states and territories on Wednesday.
“We are officially putting governors on notice,” Sonderling said in a statement. “The American people will no longer tolerate the blatant waste, fraud, and abuse of their hard-earned tax dollars — no state should allow it either. If states allow it, they will suffer the consequences. This department is no longer afraid to use every lever available to ensure taxpayer money is protected.”
“The days of excuses are over. States that fail to protect taxpayer dollars should expect consequences. Acting Secretary of Labor Keith Sonderling and I will use every available enforcement tool to demand accountability, recover stolen money, and ensure unemployment benefits only go to eligible Americans,” Inspector General Anthony D’Esposito said.
The press release highlighted three of the most egregious recent examples, including California’s $20 billion debt to the federal government over the mismanagement of its unemployment insurance program, New York’s estimated loss of $2 million per day over fraud and improper payments, and Illinois having one of the highest improper payment rates in the country.
Unemployment insurance fraud reached new heights during the COVID-19 pandemic. The Government Accountability Office estimated that unemployment insurance fraud totaled $100-$135 billion, or 11% to 15% of all unemployment insurance benefits paid during the pandemic period.
Blue states such as California and New York stand out due to the scale of their fraud, but red and purple states have also experienced significant fraud. The Department of Justice charged two Georgia men with defrauding the Georgia Department of Labor in December after they received over $17 million in unemployment insurance payments.
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A July 2021 ProPublica report highlighted some of the most absurd individual cases of fraud, including a man from the Bronx receiving $1.5 million in unemployment insurance over 10 months and a Nigerian government official receiving $350,000 in under six weeks. The Labor Department found that one man applied for unemployment benefits in 40 states, receiving payouts from 29 states totaling over $200,000.
The scale of the unemployment insurance fraud during the pandemic makes it possibly the largest wave of fraud in U.S. history.