Agency reels as claims surge
As job losses exploded, New York loosened its rules to meet crushing demand for assistance
In late March, the third floor of Building 12 at the Harriman state office campus began to resemble a boiler room.
New York’s economy was crumbling from the shutdowns ordered by Gov. Andrew M. Cuomo to stem the spread of coronavirus. Millions of people lost their jobs and many were forced to file for unemployment benefits. The normally busy office where hundreds of state Labor Department call-center workers process those claims was in triage mode.
“The surge of applications crashed on New York like a wave, pushing our systems to the brink,” state labor Commissioner Roberta Reardon testified during an Aug. 13 legislative hearing on COVID-19’S impact on the workforce. “In a typical week before the coronavirus crisis, our call center averaged about 50,000 calls, but during the peak week in late March, our call center received over 8.2 million phone calls — a 16,000 percent increase.”
Behind the efforts to handle the historic number of jobless
applications — heaped on a department using antiquated computer systems and low-paid workers — two narratives emerged from the state’s distribution of more than $41 billion in unemployment benefits and federal pandemic assistance.
The first is gleaned from a review of internal labor department correspondence and interviews over the past month with employees on the front lines of the call center. Those workers — all speaking on condition of anonymity for fear of losing their jobs — contend an untold number of claims may have been overpaid or approved for people not entitled to receive them, including an inmate just released from prison, people who had not worked in at least 18 months and others who filed unemployment applications in multiple states.
They contend that key security protocols, which verify someone’s identity and employment history, were removed to expedite the applications as Cuomo’s administration faced criticism for the backlog.
“Submit, submit, submit,” one of the workers said, describing managerial directives that the person said were guided by members of Cuomo’s Executive Chamber staff, who had set up camp on the top floor of the fivestory Harriman office building during the height of the crisis.
“People (in the office) were told to submit claims without calling claimants and to fudge things that were always important to us, like (providing) their mother’s maiden name, which is our security question,” the worker said. “We had high school students who had never worked a day in their life receiving $182 a week in benefits.”
In one case, another clerk said, an 80-year-old woman, who sounded like a teenager on the phone, filed a claim stating she had worked as a hairdresser for two days in early March. Although the claim was flagged to obtain three forms of identification from the applicant, the department’s retooled software program, which is used to process federal pandemic unemployment benefits, released 25 weeks of payments to the woman — more than $4,500 in state benefits ($182 per week) and $10,200 ($600 per week) in federal assistance.
The employees said priority also was given to the people whose state representatives, either senators or Assembly members, had provided their information directly to the Department of Labor. In some instances, the workers interviewed for this story said, they were ordered to drop what they were doing and contact those elected representatives’ constituents, sometimes only to learn the person had not even filed a claim.
“Does the federal government care that people in New York state Department of Labor are being so lackadaisical with their money?” one of the clerks said. “This has affected a lot of people — there are people who work for (the unemployment office) who drink every night. People are screaming and crying, the amount of stress. They know they are doing things they shouldn’t be doing . ... It goes against their morals and ethics.”
‘Sobbing’
The emotional fallout of
the pandemic was also felt by the unemployed people stuck in limbo for weeks, even months, waiting for financial assistance. Morale in the office sunk as mandatory overtime for the staff kicked in on Mother’s Day. Many have been forced to work evenings and weekends to clear the backlog. In what could serve as a metaphor for the pressure being felt within the agency, a pipe burst on the fourth floor of the Harriman building in mid-june, spewing water across the floor that seeped through the walls and into the third-floor call center.
“You should hear the stories of how people were sobbing on the phone, saying they had nothing to eat ... (and) they were going to be evicted despite the policies put into place to help them,” a clerk said. “Grown men begging you to please help them.”
Another recounted a man showing up in the lobby — which has been closed to the public — because his identity had apparently been stolen and used to file for both unemployment benefits and a federal Paycheck Protection Program loan.
“We got his information, looked him up, and there’s a direct deposit on the claim,” a clerk said. “He said the loan for (the) small business was for $55,000 and was also put up in his name.”
On July 17, Michelle Martone, a fraud investigator for the Labor Department, sent an email to several colleagues asking that victims not be transferred to her directly but instead to a general mailbox.
“Over the past few days, I have received calls from victims directly referred to me and my phone number,” she wrote. “We are well over 35,000
victims at this time and although we have pulled in other staff to assist, we are struggling to keep up. I am also working on a (governor’s) Chamber project that takes the majority of my day — so taking several calls each day is slowing that process down.”
The surge of applications in March prompted the agency to begin hiring more than 2,000 “vendors” and 400 new clerks, many of whom initially received only a few days of training before being thrust into a job that involves a detailed process to ensure applicants qualify for benefits and are not committing fraud.
Most of the new hires were allowed to work from their residences, including in other states, after signing “non-disclosure agreements” assuring they would keep applicants’ personal financial information confidential.
But there were apparently little or no background checks performed on the new hires, who included convicted felons and at least one fugitive with a criminal history that includes charges of identity theft, the Times Union found.
The Cuomo administration and the Labor Department have defended their efforts to get state and federal unemployment benefits to the people who lost jobs due to the pandemic. They said their rapid response plan methodically wiped out a backlog of unemployment applications, hastened the distribution of state and federal money to people in need and prevented about $1 billion in fraudulent payments.
They also removed steps that paused applications or required a verification telephone call with a state employee — an infuriating process for many of those pushed out of jobs who found themselves unable to connect with the overwhelmed call center for days, even weeks, and that usually left them sitting on hold for hours, sometimes only to be disconnected.
“These baseless allegations are rooted in fantasy — not fact. Every state’s unemployment insurance system has been stretched to the max during this crisis, but New York has moved faster than any other major state to get benefits into New Yorkers’ hands, while stopping a record $1 billion in fraudulent claims at a time when other states have admitted fraudsters stole hundreds of millions of dollars per week,” said Peter Brancato, a spokesman for the agency. “Over the last five months, we have used innovative solutions to speed processing time and increase fraud detection capabilities — and we will not apologize for our efforts to get $40 billion in benefits into over 3 million New Yorkers’ hands.”
Brancato also noted
that last month the department forwarded more than 40,000 cases of suspected fraud to federal prosecutors across the state. But many of those cases will never be prosecuted, in part because the suspects may be overseas or the amount of money that was paid out would not warrant a federal prosecution, according to law enforcement sources.
Brancato added that federal laws and regulations governing the
$600 per week in federal pandemic unemployment assistance benefits processed by the state “have different and less stringent requirements.” He said that would explain, for instance, why children were being approved to receive those benefits.
‘Fictitious’ numbers
During her testimony last month, Reardon, who was appointed labor commissioner by Cuomo in 2015, credited “our incredible state workforce” for its response to the crisis. She noted that “thousands” of state workers had been shifted to the Labor Department as the number of call center workers was increased from 400 to 7,000 to deal with the crushing backlog.
Reardon said the department, in part through a contract with Google, also developed an online platform that created a seamless way for applicants to receive the $600 weekly unemployment assistance benefit, which is administered by states. In addition, she said, the department took steps to change its verification processes so that applications would not get stuck in a “partial” or incomplete status and require a phone conversation with an agency clerk.
“This included identifying the number-one reason why unemployment applications go into partial status — which was an incorrect or missing federal employer identification number,” Reardon testified at the August hearing. “We issued a directive to all New York-based businesses reminding them of their legal obligation to provide employees with this information.”
What Reardon did not discuss during the hearing, according to clerks, was that the administration had removed that requirement and others from the process used to verify someone’s identity, their benefit qualifications and their salary and employment history.
In a related March 31 email to labor department workers, program manager Mariangela Viglucci instructed her colleagues that in order to move along “claims that have no wages on file,” they should enter two fictitious employer numbers that were coded into the system to allow the applications to proceed.
“These fictitious employer numbers should not be used if there are any wages reported for the claimant’s Social Security number,” she added.
Employees said other verification steps also were removed from parts of the approval process, including in some instances driver’s license checks or one-on-one questioning with applicants who are asked whether they may be drawing other income such as a pension, severance pay or workers’ compensation benefit.
“They went back and they put controls on after the fact,” one of the clerks interviewed for this story said. “Some of these people that are working
these claims had two days’ training.”
The result, workers said, is that many people who were approved for unemployment benefits may not have been entitled to receive that money — or to receive as much money as they were paid — and that the safeguards removed from the verification processes often resulted in someone being paid more than they had earned in their jobs.
The overtime situation also created friction in the state’s workforce that led to a lawsuit being filed in July against the Labor Department and other state agencies by the Public Employees Federation, the state’s second-largest public labor union.
The union’s complaint says workers were mandated to work 15 hours a week of overtime beginning in May but were paid at a lower pay grade than their own. The state’s overtime mandate was, in large part, driven by the rush to clear the unemployment backlog. The lawsuit is still pending in state Supreme Court in Albany.
Wrong kind of experience
The Labor Department’s contracts with the 2,500 vendors was augmented with an additional 400 “senior employment security clerks” who were hired as the pandemic peaked in April. Those employees are paid $17.61 an hour to work in the call-center jobs — which require a minimum of a high school diploma and/ or a few years of customer service experience.
A Times Union review of the employees hired by the state found some with felony criminal records, even though they are in jobs with access to sensitive personal informa
tion that includes Social Security numbers, dates of birth and other personal information.
In July, for instance, the department hired a 46-year-old Syracuse man who is a fugitive in Leon County, Fla., where he failed to show up in court after a 2017 arrest on charges of larceny and offering a forged instrument. He also was arrested in the 1990s in Florida for passing worthless checks, according to court records.
That man additionally has a criminal record in central New York, where he pleaded guilty to grand larceny in 2015 to settle more than 30 felony counts that he faced, including forgery and identity theft, according to the Onondaga County district attorney’s office. At the time of his arrest in the town of Dewitt, near Syracuse, he was also a suspect in nearly two dozen other cases involving stolen credit cards in Vermont, Virginia, Pennsylvania and New Jersey, according to published reports at the time.
Not long after his release from jail in 2015, and after serving part of a one-year sentence, he was arrested again for allegedly stealing a winter jacket from a Syracuse clothing store. Five months later, police were summoned to a Subway store in Syracuse after the owner claimed the man stole $660 from the register while working a weekend shift. He agreed to pay the owner back, and police closed the case as a “civil settlement,” according to prosecutors.
In the call center at Building 12, workers said, that same man — whose name is being withheld by the Times Union because he could not be reached for comment — has received attention for flagging applications that appear to be fraudulent. But the workers said they also noticed him writing down information such as Social Security numbers and maiden names of applicants’ mothers, which the workers said is unusual.
“He wrote ‘willful misrepresentation’ and wrote ‘fraud’ on a claim,” a clerk said. “I think that he may be, like, studying the fraud.”
Another call center worker hired this year by the Labor Department was a 26-year-old Albany woman who pleaded guilty to felony drug charges five years ago for her role in a cocaine distribution ring. She was hired in April but fired in June, her co-workers said, because of issues with her remote work that had nothing to do with her criminal history.
Not all of the department’s hiring of accused felons was pandemicrelated: A Troy man hired as a call center worker in December, three months after his arrest on charges of stealing a check from his landlord and forging it to pay himself $3,500, was fired in March for falsely saying that he had contacted a claimant before processing their benefits.
Brancato, the Labor Department spokesman, declined to say whether background checks are conducted on the people they have retained to process claims, including third-party vendors.
In response to that question, he stated: “All agents hired through vendors received confidentiality training and were required to sign nondisclosure agreements regarding confidential UI (unemployment insurance) information/data. All contracts also included language on background checks/security clearance.”
Brancato also issued a warning: “Anyone (who) works for the (department) and discusses a claimant’s case potentially faces misdemeanor charges.”
The job applications used by the Labor Department say that a criminal record is not necessarily an impediment to being hired, “depending upon the nature of the criminal offense, its relationship to the position sought, and other factors that must be considered before employment may lawfully be denied based upon prior convictions.”
The clerks and other employees interviewed for this story said that for people working at home, especially out of state or those with criminal records, the agency has no way of knowing whether confidential information is being protected or if others in those households have access to it.
They noted that while the state reported more than 42,000 fraud cases to law enforcement authorities this year, that number doesn’t reflect the fraud cases that may have slipped by undetected, or the benefits potentially paid to recipients who are not entitled to receive them.
“This is the problem with letting people, after three weeks of training, go home and work from home,” a clerk said. “They are not monitored and do not deserve to be trusted with a plethora of information that we guarantee claimants will be secure.
... The supervisors have never even met some of their staff who are working from home.”