Kansas Department of Labor paid nearly $300 million in fraudulent claims last year
While Kansans who lost their jobs clambered to file unemployment claims last year to an overwhelmed state agency, the Kansas Department of Labor paid out at least $290 million and possibly as much as $600 million in fraudulent benefits to people seeking to rip off the system during the pandemic.
The state labor agency disclosed the amount of unemployment fraud payments late Tuesday after what it called an in-depth analysis of IRS Forms 1099-G, sent annually to those who received unemployment benefits in that calendar year. Most recently, some victims of unemployment fraud in Kansas have also received a 1099-G.
KDOL estimated that it paid about $140 million in bogus claims from the regular state unemployment insurance program, and another $150 million in false claims through federal benefit programs intended to provide additional relief for workers who lost jobs in the pandemic.
A Legislative Post Audit released Wednesday, however, estimated the state could have paid $600 million — more than double the amount estimated by the department Tuesday.
The audit based its estimate on KDOL’s finding that 24% of initial claims from March to November were fraudulent. The audit applied that percentage to the $2.6 billion in total state and federal benefits paid out last year.
More detailed estimates will be provided in the next audit, the report said.
In a response Wednesday, the agency said the audit was “flawed and should be withdrawn.”
The U.S. Labor Department estimated unemployment fraud cost taxpayers across the country as much as $36 billion since the start of the coronavirus pandemic
“Fraud is unacceptable and will not be tolerated. It’s stealing from taxpayers at the worst possible time and all attempts at fraud will be referred in the strongest possible manner to law enforcement,” Gov. Laura Kelly said in a statement. “All 50 states have been overrun with coordinated, sophisticated criminal fraud attempts, and that’s why I wrote a letter with fellow Governors, calling on Congress to provide funding to secure and modernize our systems.”
Kansas has referred over 50,300 cases of potential fraud to federal law enforcement to investigate and possibly prosecute. The governor’s office said the state is working with federal agencies to hold fraudsters accountable.
At the same time, KDOL said it has stopped almost 500,000 bogus claims that could have cost the state more than $22 billion since January 2020.
Kansas cited other states that have publicly shared the amount of unemployment fraud paid out by labor departments . California officials said unemployment fraud totaled more than $11 billion there. Washington state has paid $600 million in unemployment fraud and Ohio paid $330 million in 2020. These states of course have populations far larger than Kansas.
Amber Shultz, acting secretary of the labor department, pointed some blame at Congress. She said it created the opportunity for widespread fraud when it launched massive new pandemic-related unemployment programs and at the same time stopped states from asking applicants basic verification questions.
“It was not until the Continued Assistance Act was signed into law on Dec. 27, 2020 that states were able to take more aggressive action to verify claimant information in the federal programs,” Shultz said in a statement.
At the beginning of the month, KDOL installed new fraud prevention software that it said has “drastically reduced” the number of fraudulent claims filed.
According to the Kansas Department of Labor, the agency has stopped more than 4.8 million fraudulent login attempts since the agency launched its new security system. They’ve identified more than 11,000 fraudulent accounts.
The numbers come as a Wellington woman finishes her second day of a hunger strike outside the Kansas Department of Labor office in Topeka.
Re’Nae Pherigo pledged to refrain from drinking anything until she and her husband had gotten their unemployment benefits and not eat until the situation began to improve for unemployed Kansans statewide.
Tuesday afternoon, she was sunburned and exhausted. Rather than stay overnight outside, she said a family friend offered to pay for a hotel room in Topeka.
She had not yet received any new information from the department on the status of her claim.
“It’s a staring contest and they’re not gonna win,” she said.
This story was originally published February 23, 2021 at 6:22 PM.
