Over $1 Billion in Fraud Discovered and Documented by IEM’s Fraud and Forensic Investigators, Using Innovative Fraud Tools to Deliver Custom Prosecution-Ready Law Enforcement Packages

The unprecedented demand for unemployment insurance (UI) benefits during the pandemic and the urgency of the states to implement new programs significantly impacted State Workforce Agencies (SWA) across the country and their UI systems’ abilities to process applications and disburse funds. To ease the burden, emergency declarations permitted states to ease certain non-monetary requirements, such as waiving work-search requirements and allowing self-certification of wages. The easing of requirements and increased amount of federal and state funding gave criminals the incentive and opportunity to commit fraud.[1]

According to the U.S. Department of Labor’s (DOL) Office of Inspector General (OIG) an estimated $191 billion in pandemic UI benefits have been improperly paid, with an estimated 40% attributable to fraud. OIG’s audit and investigative work indicate that UI program improper payments are at 21.52%, much higher than the 10% yearly average.

Recognizing a Need

By April 2020, consistent with all states across the country, one SWA, experienced over 500,000 UI claims, a 414% increase from March 2020. Seeking to identify fraudulent claims to submit to law enforcement agencies for prosecution and recovery, this SWA contracted with IEM to provide fraud identification, investigation, and packaging services.

The IEM Approach

We deployed our team of fraud investigators, including Certified Public Accountants and Internal Auditors, Certified Fraud Examiners and Financial Crimes Investigators, former/retired law enforcement personnel, and IEM’s innovative scientists to analyze, examine, investigate, and package for law enforcement submission the fraudulent UI claims identified within the SWA’s UI claims data.

Innovating for Action

Leveraging big data and innovative tools, IEM quickly identified trends and social networks associated with fraudulent applications in the SWA’s UI claims data. These innovative tools allowed IEM to identify complex fraud schemes that included thousands of claimants connected by common fraud indicators. Large, connected fraud networks are often difficult to find using traditional claimant-by-claimant identification and investigation techniques. Once the fraud social network was identified, IEM analyzed claimant activity and documents to further evidence and track the elements of fraud present in the fraud scheme. The use of IEM’s innovative tools and investigation techniques provided for a more complete fraud investigation package that went beyond the current data analytical approach being used to identify multi-state and transnational pandemic-related fraud by law enforcement agencies such as the DOL OIG and other agency OIGs that do not have access to such information and tools.

Achieving Results

IEM identified over $1.1 billion in UI benefits paid to over 75 different fraudulent social networks that included more than 150,000 claimants. On behalf of the SWA, we prepared prosecution-ready law enforcement-centric packages that were ready for prosecutorial agencies at the federal, state, and local levels to carry forward with additional law enforcement actions (e.g., subpoenas, testimony). These fraud packages allowed prosecutorial agencies to take faster action against UI fraud and recover funds saving the taxpayers’ money.

Expert IEMers

Dora Pleasant, CPA – Fraud Program Management Practice Leader

[1] A fraud becomes a crime when it is a “knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment” (Black’s Law Dictionary).