New Jersey Saves $448 Million Tackling Unemployment Fraud

August 12, 2014

The New Jersey Star-Ledger and Governing magazine have articles profiling the efforts of New Jersey Department of Labor Commissioner Harold Wirths, who since taking office in 2010 has set out to eliminate unemployment fraud. Since then, his office has blocked $448.7 million in improper payments to 300,000 people. Some of his strategies:

  • Identity Proofing. Applicants must answer a few questions verifying their personal information (such as what kind of car they have or who lives at their address), to prevent identity theft with stolen Social Security  numbers. This strategy stopped $4.4 million in payments and 650 instances of identify theft.
  • Blocking Foreign Internet Provider Addresses. This strategy stops people who claim to be New Jersey residents looking for work but are in fact overseas. It caught a couple on a Royal Caribbean cruise ship, who then had to repay $70,000 in benefits paid to them over six months. While fraudsters can still mask their IP address or get accomplices in New Jersey to file for them, New Jersey estimates this strategy has saved 12,705 claims for $65.3 million since May 2012.
  • Cross-Checking Unemployment Claims with Employer W-4 New Hire Data. Over three years, this program found 272,479 claimants who were no longer out of work, saving $323.7 million.
  • Cross-Checking Unemployment Claims with Prisoner Databases. This strategy found 7,600 inmates improperly received $10.6 million. Legal action for fraud is pending against 5 inmates who stole $100,000 in unemployment benefits while they were behind bars.

Some high-profile cases include a Newark fraud ring that used the names of relatives and friends to defraud $2 million from the state and an accountant who used clients’ names to steal benefits and bought jewelry and cars with the money.

Unemployment expert Doug Holmes of UWC estimates that 2 to 3 percent of unemployment claims nationwide are fraudulent. With states and the federal government paying out about $40 billion in unemployment benefits each year, this suggests around $1 billion a year in fraud, at a time when state trust funds are $13 billion in debt to the feds after the Great Recession. Fraud won’t solve all problems with unemployment programs (our 2011 report offers many other suggestions) but it can be a good start.

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