With fraud bogging down the state’s unemployment system, Lawrence residents and organizations left without answers
photo by: Mike Yoder
Lawrence resident Ben Turner’s most recent meal consisted of beans and cornbread, and his two kids have been relying mostly on the cafeteria food and small cartons of milk the school district has been handing out to families during the coronavirus pandemic.
Like others, Turner has been waiting on extended unemployment benefits from the Kansas Department of Labor, which were funded by the federal coronavirus stimulus package approved by Congress at the end of December. He hopes the money will hit his account soon, but it’s been weeks, and he’s losing sleep as food runs low and expenses pile up.
“Can we eat?” Turner asked. “Can I get my truck fixed? Can I get these bills caught up, so I can not be stressed and have a good night’s sleep?”
Turner said he was laid off from his job at API Foils after the plant filed for bankruptcy in February of last year. He said he had initially been told that he could be hired back by the company that acquired the plant. After the pandemic hit, that did not happen, and other circumstances have made finding another job difficult. Turner said that his kids, ages 10 and 11, are with him at least part-time, and because they are still doing online school from home three days per week, his availability for a new job remains limited.
Turner is one of many in Lawrence and across the state whose legitimate unemployment payments have been held up as the Department of Labor strains under millions of fraud attempts and the limitations of a 40-year-old computer system that was neglected for decades. On the flip side, there are employers who have batted down dozens of fraudulent claims filed in their employees’ names and still saw fraudulent payments go out to unknown scammers.
Department of Labor officials say that though the office has caught up on processing regular unemployment claims, the widespread fraud has strained the system and staff, and it could be weeks before the extended pandemic-related benefits are paid out to everyone.
“We know the frustration; we know the challenges folks are facing out there,” said KDOL Deputy Secretary Brett Flachsbarth. “We are doing everything possible and committing every available resource to try to resolve the number of challenges we have and getting payments made to everyone who was legally entitled to receive them.”
As people like Turner wait, there are employers who have been dealing with the other side of the issue. The Lawrence Public Library was one of several organizations or businesses that recently reached out to the Journal-World saying they had numerous fraudulent claims filed in their employees’ names.
Library bookkeeper Denise Berkley said that of the library’s 80 employees, at least 30 have had fraudulent claims filed in their names, including a handful of employees who had fraudsters make multiple attempts. Each time she got a notice for a claim that was fraudulent, Berkley said she immediately reported it as such to KDOL, using both the department’s online employer platform and its dedicated fraud website.
Berkley, who works part time, said she’s spent hours making those reports and providing the associated information, only to see that some fraudulent claims appeared to have been paid out anyway.
“I’ve spent a lot of time,” Berkley said. “I’ve probably spent 50 to 100 hours in the past six months on this.”
More recently, she’s also had to deal with associated tax forms. Berkley said despite reporting the claims as fraudulent, she’s currently aware of at least a handful of library employees who have gotten 1099-G tax forms listing benefits they never sought or received. Berkley herself received a 1099-G that indicated she had received about $1,300 in benefits, which she has since gotten corrected.
She’s concerned that the fraudulent payouts could directly affect the rates that the library and employers in similar circumstances pay for their unemployment coverage, or that the widespread fraud across the system could affect rates overall.
“I don’t know how that might affect what we have to pay in,” Berkley said. In addition to that unanswered question from the Department of Labor, Berkley said she also hasn’t gotten an answer as to why some benefits were paid out even though she flagged the claim as fraudulent.
Like states across the country, the Kansas Department of Labor has been overwhelmed with fraudulent unemployment claims.
Following an internal analysis, the governor’s office announced in a statement Tuesday that the Department of Labor estimates that it paid out $290 million in fraudulent unemployment claims last year. On Wednesday, a legislative audit estimated that number could be as much as $600 million, though the department strongly disputes that and has asked that the report be withdrawn due to factual errors, as The Associated Press has reported.
In Tuesday’s statement, Gov. Laura Kelly said that all 50 states have been overrun with coordinated, sophisticated fraud attempts. According to the statement, the U.S. Department of Labor Office of Inspector General estimates that unemployment fraud has cost taxpayers roughly $36 billion nationwide since the start of the pandemic, or about 11% of total unemployment insurance payouts.
Regarding why payments may have gone out even when employers such as the library flagged the claims as fraudulent, Flachsbarth said that generally speaking the department’s staff and system have been overburdened by the volume of claims, both legitimate and fraudulent, which led to processing delays. Though he could not speak specifically to the library’s situation, he said the fact that many fraudsters had people’s names, Social Security numbers and dates of birth allowed them to get into the unemployment system without raising alerts, and lags and issues in the process likely allowed fraudulent payments to go out.
“Without knowing the specifics, I would attribute that most likely to just the massive number of claims, both regular and fraud, hitting the system, and some (system) vulnerabilities being exploited,” Flachsbarth said.
When it comes to the pandemic programs that expanded benefit eligibility to self-employed people, gig workers and others, Flachsbarth said there were certain steps and verifications that the state could not perform, which also contributed to fraudulent claims being processed. For an employer to ensure its individual rate does not increase because of fraudulent payouts, Flachsbarth said that, in addition to reporting fraudulent claims, employers should review the annual notice that details all payouts and protest any fraudulent ones. Policy questions regarding how to address the amount of money lost from the overall unemployment trust funds of Kansas and other states are still being discussed.
The Kansas Department of Labor shut down the unemployment system from Jan. 30 to Feb. 2 to implement a new identity verification component to help block fraud attempts. But still, some legitimate benefits have not been paid out.
Flachsbarth said that while there is no longer a backlog of unprocessed regular unemployment claims, there continues to be a delay in paying out the extended benefits that were approved by Congress at the end of December. Flachsbarth said the department started making those payments in phases, beginning on Feb. 19, and that all payments should be processed in the coming weeks. At this time, he said he did not have a more specific date for when all extension payments would be made, but that everyone who was legally entitled to receive benefits would.
“That’s our primary goal — every day when we come to work — is to make sure that we are getting as much valid payments to individuals who are legally entitled to receive them as possible,” Flachsbarth said. “That has been priority No. 1, and it will always be priority No. 1 as we continue to work through this crisis.”
Turner, one of several people who have spoken to the Journal-World about delays in unemployment payments, expects his claim for extended benefits is among those that are delayed, as he was told his claim was approved but just waiting on payout.
Meanwhile, it has been more than 10 weeks since Turner received his last unemployment payment, and bills are piling up. Turner said he owed a few thousand dollars in back rent, utility charges and other bills, and he’s had to borrow money — something he said he hates doing — from his dad and a friend. His cell phone has already been cut off for nonpayment, and he’s afraid his internet, which his kids need to do online school, will also be disconnected. Apart from his under-stocked pantry, household supplies are running out.
“I’m out of washing detergent finally; I’ve been using it little by little,” Turner said. “… I got one roll of toilet paper left. I’ve never been in this situation. I’ve never put myself in a situation like this neither, by depending on unemployment.”
Turner said he’s always worked, and he’s looking forward to being able to fix his truck and get another job, but the past year has deeply affected him.
“It hurts,” Turner said. “My pride is broken.”