Taxpayers lost more than $100 billion in COVID unemployment insurance fraud, committee investigation finds

FIRST ON FOX: American taxpayers have lost more than $100 billion to fraud and improper payments resulting from temporary unemployment insurance programs set up in response to COVID-19, the House of Representatives has found.

Fox News Digital obtained the report from the House Oversight Committee after a months-long investigation into fraud in unemployment benefits programs during the pandemic.

The report details data, documents and communications obtained by the commission that show how states across the country, including California, New York and Pennsylvania, processed and managed unemployment claims during the pandemic with “minimal oversight.”

The commission said the lack of oversight resulted in “billions of tax dollars being lost through improper and fraudulent payments that will likely never be recovered.”

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The committee found that 11% to 15% of total benefits paid during the pandemic were fraudulent, totaling $100 billion to $135 billion. The Department of Labor’s Office of Inspector General estimated that at least $191 billion in pandemic unemployment insurance benefits may have been paid improperly, with a “significant portion attributed to fraud.”

A person walks past a storefront with a sign stating that face masks are required on Oak Street in Copiague, New York, on May 18, 2022. (Steve Pfost/Newsday RM via Getty Images)

The commission concluded that states have recovered only about $6.8 billion of these funds.

The commission also concluded that those receiving benefits “did not have to provide evidence that they were actively seeking work in order to continue receiving their benefits.”

For the first nine months of the program, applicants were not required to provide proof of income, which the committee said made the program more susceptible to fraud. In December 2020, when Congress reauthorized the program, states began requiring applicants to provide proof of prior employment and wages.

According to the Department of Labor, the overall rate of improper payments in the program was 35.9%.

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House Oversight and Accountability Committee Chairman James Comer, R-Ky., speaks during a hearing with FDA Commissioner Dr. Robert Califf in the Rayburn House Office Building on April 11, 2024 in Washington, D.C. (Anna Moneymaker/Getty Images)

In March 2021, the Biden-Harris administration extended unemployment insurance and benefits for another six months during the pandemic, even as states and businesses were open and the vaccination campaign had already begun.

“Twenty-six states decided to terminate federal benefits early because of labor shortages. They found that excessive federal benefits in those states were leading to labor shortages,” the commission concluded.

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However, the commission also concluded that organised crime played a “significant role” in unemployment benefit fraud, by targeting pre-existing vulnerabilities in the system.

“Foreigners, organized criminal gangs, prisoners, and those acting on their behalf filed fraudulent claims in multiple states,” the report said. “Insiders, including those working for state employment agencies, conspired with organized crime groups and other individuals to defraud state UI programs, and states did little to stop them.”

House Oversight Committee Chairman James Comer (R-Kentucky) blamed Democrats and the Biden-Harris administration for the fraud, saying they “spent trillions of dollars under the guise of pandemic relief.”

People line up to get tested for the coronavirus in Washington, DC in December 2021. (Ting Shen/Xinhua via Getty Images)

Comer said his committee’s first hearing on the issue revealed how “uncontrolled spending left taxpayers’ money, including unemployment programs, vulnerable to significant waste, fraud and abuse.”

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“While Democrats turned a blind eye to this waste of taxpayer dollars, Republicans were determined to expose how these taxpayer dollars fell prey to fraudsters and criminal organizations,” Comer said.

Comer said his committee’s report includes recommendations to ensure future taxpayer-funded unemployment programs “do not suffer the same fate.”

“Eradiculating waste, fraud, abuse, and mismanagement across the federal government remains a top priority for Oversight Republicans, and we will continue to work to protect all American taxpayers,” Comer said.

The committee recommends that the government require applicants in future unemployment benefit programs to provide evidence of their employment before their applications are assessed for eligibility.

“Unemployment insurance should always be linked to employment,” the report said.

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The committee also recommends that future programs “require state employment agencies” to cross-check claimants against federal databases, including federal inmate databases.

Meanwhile, the committee recommended that Congress consider extending the statute of limitations on the fraud schemes related to the pandemic relief programs, which expires in March 2025, so that criminals who defrauded taxpayers can be brought to justice.