ANNAPOLIS — Officials say they uncovered an attempt to defraud the state of more than $500 million in bogus unemployment claims.
The announcement by Gov. Larry Hogan, state Labor Secretary Tiffany Robinson and federal investigators came as part of wide-ranging news conference in which the governor discussed the coming school year and called on state residents to avoid traveling to COVID-19 hot spots around the country. It was Hogan’s first news conference in slightly more than a month.
Details of the ongoing criminal investigation were limited. Hogan and Robinson said that more than 47,500 claims under the federal Pandemic Unemployment Assistance fund were all linked to stolen identities from out of state.
“It is obviously a coordinated criminal enterprise, because this is not just random people in their basement that stole somebody’s identity,” Hogan said. “It’s 47,500 fraudulent identities in Maryland and 12 other states. It’s billions of dollars. It’s a large, sophisticated criminal enterprise.”
But Hogan said the state, in freezing the suspect accounts, managed to avoid paying out the bulk of the bad claims.
“I’m sure some (payments) have slipped through that we didn’t catch, but I think we caught the bulk of it all,” said Hogan, vowing to “get to the bottom” of any fraud cases not detected.
At least a dozen other states were hit with fraudulent claims similar to the scheme Hogan said the state Department of Labor uncovered. Other fraudulent claims have been filed in all 50 states and many U.S. territories “totaling billions and billions of dollars” in benefits, he said.
Special Agent Derek Pickle, an investigator with the U.S. Department of Labor’s Office of the Inspector General, said there has been a dramatic increase in unemployment fraud in the country since the start of the pandemic. What was once about 10% of his office’s caseload now makes up about 50% of investigations, and that number is growing.
Hogan pointed to the fraudulent claims as a reason why the state has resisted calls by lawmakers and others to release payments even as the state works to adjudicate claims. More than 24,000 people are still waiting to have their claims processed and long delays have been common since March.
Just a month ago, Robinson told lawmakers that the state, by not simply releasing payments upon receipt of a claim, had managed to avoid problems experienced in other states including Washington.
The fraudulent claims announced Wednesday were discovered over the July 4 weekend, Robinson said.
Hogan said the most recent cases have nothing to do with federal subpoenas served on state labor departments across the country, including in Maryland.
“As states across the country continue to experience an unprecedented volume of claims. Fraudsters are capitalizing upon the hardships created by the pandemic and are targeting unemployment insurance programs due to the additional benefits offered by the (federal) CARES Act,” said Robinson.
Data used to file the claims is believed to have been part of a large-scale theft of personal information. State officials said no state data was breached.
The discovery did, however, result in thousands of claims, some legitimate, being frozen.
“A few real people who really need benefits got caught up in that because we had to put a hold on all those payments, but the department is working diligently to process them as quickly as possible,” Hogan said. “I think it will be very quickly that we get those resolved.”
Hogan said the number of legitimate claims that must be unfrozen “is a very small number of cases.”
Hogan also told reporters that he expects to hold a news conference next week in which he will discuss state recommendations for the coming school year. School systems, including those in Montgomery and Prince George’s counties, are beginning to finalize their plans to resume in the fall, leaning toward distance learning to start the year.
“We all want our children to get back to school as soon as possible, but only if and when it keeps our students and our teachers safe,” said Hogan.
Teachers and the state Parent Teacher Association yesterday called for schools to resume distance learning for at least the first semester with a possible phased-in resumption of in class learning with distance options later in the year.
During his news conference, the governor expressed concerns about the spikes in cases around the country. Other states, including New York and New Jersey, have ordered travelers from those hot spots to self-quarantine or face stiff fines.
Hogan did not issue a quarantine order but called on travelers from those areas who are coming into Maryland to get tested.
The governor also issued a warning about what he described as a small number of bar and restaurant owners who are flagrantly thumbing their noses at state regulations regarding reopening.
In the last week a number of bars and restaurants around the state have announced closing after employees tested positive for COVID-19.
Additionally, Hogan said there is growing concern about the growing positivity rate in cases involving people under 35, which is outpacing those over 35. Hogan stopped short of blaming bars and restaurants for those increases but noted that other states, such as Florida, Arizona and Texas and Mississippi, all opened their bars without restrictions. Those openings are being rolled back or even closed after contact tracing connected cases to the businesses.
“We never opened bars like that,” Hogan said, adding that he is concerned about owners not following the rules and vowed to “crack down on the bad apples.
The governor said he’s like to avoid closing down bars and restaurants but would if cases continue to rise.
“Look, if this gets out of control, if people continue to not follow the rules, we’ll have to take another look,” he said.