Thousands of bogus requests blocked

State halts $34 million in disbursements

The Colorado Department of Labor and Employment said Friday morning it halted $34 million in unemployment compensation disbursements this week after flagging them as fraudulent.

The suspect payment requests were made through the state’s Pandemic Unemployment Assitance Program, (PUA) which disburses federal dollars provided under the Cares Act to independent contractors and self-employed workers who aren’t eligible for traditional unemployment coverage.

“Of the 6,500 payment requests made within the first two days of the week, about 5,600 looked suspicious to us. We stopped payment on about half of those,” said Cher Haavind, deputy director of the Colorado Department of Labor and Employment.

One red flag is that many of the suspect requests sought payments going back to February, the maximum allowed under federal rules. If claims are backdated beyond a week, the person filing must now call into the PUA call center and speak to an agent, Haavind said.

“We realize this will be a slight inconvenience,” she said. “We need to do everything in our power to identify and protect against fraud.”

Unlike the traditional unemployment call center, the PUA center has much shorter wait times, she said.

Jeff Fitzgerald, director of the state’s unemployment insurance program, said the fraud appears to involve both domestic and international actors. The department is working with federal and state law enforcement, including the FBI, to add measures to stop it.

One involves giving priority to in-state unemployment claims.

While allowed, those trying to make claims from outside the state will face more scrutiny. In the middle of the week, the state also required anyone seeking more than a week’s worth of reimbursement to call in.

“We saw about a 40% decrease in new claim activity. That was one of the more pronounced factors. We stand by that decision,” he said.

Part of the logic is that self-employed workers have had about two months to make claims. If they faced an income loss in February and March because of the pandemic, most would have likely already requested assistance. Plus, the large dislocations because of closures didn’t happen until the second half of March.

That so many new claims sought the maximum amount possible set off alarm bells. Still unanswered is how so many initial claims were able to get through the state’s identity verification safeguards.

Haavind acknowledges that a small percentage of legitimate claims may get caught up in the tighter security measures, but she urged understanding as the state tries to end a rampant scam that is draining millions in federal tax dollars.