Labor Department puts states on notice over unemployment insurance fraud

The Labor Department on Wednesday put a total of 53 states and U.S. territories on notice that they must take “immediate action” against waste, fraud, and abuse in unemployment insurance (UI) programs. 

The edict came in the form of a letters from acting Labor Secretary Keith Sonderling.  

“We are officially putting governors on notice,” Sonderling, who is a member of President Trump’s Task Force to Eliminate Fraud, said in the letter.  “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."

The department plans to partner with the U.S. Office of the Inspector General, led by Anthony D’Esposito, to mandate states’ cooperation in “protecting UI system integrity and safeguarding taxpayer dollars.”

 Sonderling also outlined some of the most grievous examples of ongoing fraud it aims to stop.

• California owes over $20 billion to the federal government due to fraud and unemployment insurance (UI) mismanagement.

• Illinois has accumulated $340 million of debt. 

• New York loses $2 million a day to the same fraud.

All three also have what the federal government calls "improper payment" rates – payments made to non-eligible parties, with insufficient documentation or with authentication issues.

The Labor Department cites in the letters “years of failed oversight, outdated technology, weak identity verification, and lax controls” as major causes of rampant fraud, and vowed to take such drastic measures as withholding state administrative funding from those that refuse to comply.

The department also said it will release further guidance to states in the upcoming weeks.