Businesses report jobless aid fraud

State recently launched new benefits system, but violations noticed

“It is possible that fraudsters, criminal enterprises saw the weaknesses in those other systems and said, ‘Connecticut is starting up. Let’s attack it.’ ” — Rich Siegel, president of Unemployment Tax Management Corp.

Just three weeks after Connecticut unveiled a $60 million updated unemployment insurance benefits system, employers are noticing fraudulent claims.

Rich Siegel, president of Unemployment Tax Management Corp., a Wakefield, Massachusetts,

business hired by employers to respond to questions about unemployment insurance claims and handle related matters, said Friday he has seen a “huge uptick in fraudulent claims” to illegally obtain money. Of 454 claims his company received from Connecticut clients for Monday through Thursday, about 167, or 37%, were fraudulent, he said.

The claims were fraudulent because they were submitted for workers who are still on the job, Siegel said. Unemployment insurance is available to workers who lose their jobs through no fault of their own.

Before the revamped unemployment system was launched July 5, Siegel said he spotted just 1% of claims that were fraudulent.

Juliet Manalan, a spokeswoman for the state Department of Labor, said bad actors, particularly identity thieves, are testing the state’s unemployment benefits system, Reemployct, because it’s new. Reemployct is catching fraud, not causing it, she said.

Fraudulent claims are a factor in all new state unemployment systems, Manalan said.

Siegel said fraudulent claims are not “one-off ” cases of employees who lie about why they left their jobs or file claims in several states.

Instead, he said, criminal enterprises are engaging in fraud. They are probably based outside the U.S., have purchased names, Social Security numbers and other private data that were breached and are available for sale on the dark web, a part of the internet that requires special software or

authorization to access.

Siegel said he does not believe the latest burst of fraud is related to the pandemic but to the start of the new state benefits system that is similar to those that operate in Maine and Mississippi.

“It is possible that fraudsters, criminal enterprises saw the weaknesses in those other systems and said, ‘Connecticut is starting up. Let’s attack it,’ ” he said.

In April 2021, state labor officials reported that of 1.4 million applications for unemployment benefits received since the start of the pandemic the previous year, about 100,000 were identified as fraudulent. Most involved identity theft and false information.

Manalan said 115,000 claims were held and $3 billion was protected from improper claims.

It’s too early to know how successfully Reemployct has blocked fraudulent claims, she said. A claim flagged as improper may not be fraud, and those who are accused may appeal in a process that takes months.

The Connecticut Business & Industry Association posted on its website warnings about unemployment insurance fraud. It reminded employers they are the first line of defense against fraud by notifying state labor officials about claims that are valid or not.

Gov. Ned Lamont and Labor Commissioner Danté Bartolomeo unveiled the revamped unemployment benefits system July 6 following a six-year makeover of the outdated computer program that strained under the volume of unemployment claims during the early months of the COVID-19 pandemic when businesses where shut to contain the virus.

At the peak of the employment crisis in early May 2020, the Department of Labor worked through about 390,000 weekly unemployment insurance claims, or nearly one-fifth of Connecticut’s labor force.