CINCINNATI — Larry Cordell didn’t want to supply his birth certificate, driver’s license and bank account number to the Ohio Department of Job and Family Services. But he figured it would speed up the processing of his unemployment claim in June if he provided proof of his identity.
“I was leery about it, but I faxed it in,” he said. “And that’s when I got hacked.”
Cordell, a United Auto Workers member from Mason, was the victim of an “account takeover” attack, one of the newest crimes to emerge from the billions of dollars spent on pandemic recovery in Ohio. It’s a pernicious brand of identity theft in which hackers change the bank routing numbers in Ohio unemployment accounts – diverting money from intended recipients.
Cordell's unsolved case is one of hundreds reported to law enforcement since Ohio announced a criminal investigation into unemployment fraud last August. State officials have estimated Ohio's unemployment system lost $462 million to fraud. But only one prosecution has been publicly announced.
Federal case loads are on the rise in Ohio against people accused of lying to get Paycheck Protection loans or committing COVID-related health care fraud. But the value of fraud alleged in criminal cases so far is miniscule compared to the estimated fraud that took place in programs funded by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act.
"I believe they have good intentions," Cordell said of Ohio's unemployment system. "But I think they probably have more on their plate than they can handle."
Cordell is a 44-year employee of Ford Motor Co.’s Sharonville plant. He was laid off in June because of a worldwide shortage of computer chips. A week after filing for benefits, Cordell said he checked online to see if the money was available. That’s when he noticed his account information had been altered.
“It went to a MoneyLion account,” he said. “I’d never heard of MoneyLion.”
Cordell contacted MetaBank, the South Dakota-based creator of the MoneyLion debt card.
“And they said, ‘Yes, we have the money. But the ones who sent the money out has to retrieve the money.’ I can’t retrieve it,” Cordell said.
State Senator Teresa Fedor has heard the same story from dozens of Ohioans.
“Constituents are watching their money get stolen,” said Fedor, a Democrat from Toledo. “They’re watching their money stay in a bank and ODJFS can’t seem to get it and send it to them. That’s how bad it is.”
Fedor has been investigating account takeovers as part of her work on the Ohio Unemployment Modernization and Improvement Council, a bicameral legislative panel that’s looking for ways to pay jobless benefits faster and with fewer mistakes.
Despite weeks of prodding, Fedor has been unable to get answers from the agency on how account takeovers happened and how many people were victimized. And that’s just a small subset of the 325,800 reports of suspected fraud that ODJFS has received through the end of last month.
“It is not functioning. It’s ineffective,” Fedor said. “No matter how many times they say they’re looking for fraud, they’re going after it. So what? If something goes wrong, identity theft is happening. What is their contingency plan to stop it?”
Tip of the iceberg?
Ohio's unemployment insurance system isn’t the only corner of the internet where law breakers appear to be ahead of law enforcement, based on a comparison of fraud estimates from government stimulus programs to publicly announced prosecutions since the COVID-19 pandemic began in 2020.
For example, the U.S. Department of Justice announced in March that it had filed charges against 474 defendants who allegedly attempted to obtain $569 million in Paycheck Protection Loans, Economic Injury Disaster Loans and unemployment insurance benefits.
A Washington, D.C. law firm, Arnold & Porter, has been keeping tabs on COVID-related prosecutions since March. Its most recent installment of the CARES Act Fraud Tracker pegs the total value of fraud prosecutions nationwide at $822.5 million.
Preventing $822 million in fraud is a good thing. But it’s also 0.05% of the $1.8 trillion distributed through the three programs nationwide. And it’s 0.66% of the $125 billion in estimated fraud that will flow from the programs, according to the following reports:
- The U.S. Small Business Administration’s Inspector General flagged $13.4 billion in “potentially fraudulent loans” in an October 2020 report on the disaster loan program.
- The Inspector General for the U.S. Department of Labor warned Congress to expect at least $36 billion in “improper spending” in unemployment programs, “with a significant portion attributable to fraud,” according to its semi-annual report to Congress last November.
- Researchers from the University of Texas at Austin said the fraud tally in the Paycheck Protection Program could hit $76.3 billion, based on its analysis of 10.7 million loans in a study published this month.
The state of Ohio ranks 8th in the nation, with $37 million in total fraud prosecutions involving 21 defendants, based on numbers disclosed in the Cares Act Fraud Tracker. California, New York and Florida are at the top of the list. Each has more than $100 million in prosecutions to date.
“We’ll see how the dollar value, once this is all said and done, whether it equates to something in California or the bigger cities,” said Vipal Patel, U.S. Attorney for the Southern District of Ohio.
Patel’s office has secured three guilty pleas in pandemic fraud cases and is pursuing charges against six others in Dayton, Columbus and Cincinnati, where a former city council candidate is among those charged. Kelli Prather pleaded not guilty to allegations that she fraudulently obtained a Paycheck Protection loan for $19,862 and applied for five others that were declined by Fifth Third Bank.
“There’s been some success stories,” Patel said. “Some of the cases we’ve charged, you mentioned Kelli Prather, you know, the intended loss is alleged to be over a half million dollars in that case. And a lot of the money was stopped before it went out the door.”
New focus on unemployment fraud
More cases are in the pipeline, according to former U.S. Attorney David DeVillers, hired as an Ohio consultant in March to pursue unemployment fraud cases.
Ohio has identified $462 million in fraudulent payments since the start of the pandemic, but only one prosecution has been publicly announced so far. Three alleged drug dealers in Columbus are accused of illegally receiving $69,100 in Pandemic Unemployment Assistance.
DeVillers leads a team of consultants who are using data analysis to find unemployment fraud cases that can be prosecuted.
“Our goal is within a year to get all of our investigative referrals into the federal system so they can start doing their investigations,” DeVillers told reporters in an ODJFS press conference last month. “But then it’s going to take another year or two for them to do their investigations and another year or two to prosecute those cases. It’s a five-year statute of limitations for the most part to get them indicted … I think there’ll be a lot of people indicted in five years.”
DeVillers said Ohio has already recovered $150 million in fraudulent unemployment payments, but ODJFS Director Matt Damschroder said not all of that money has been returned to Ohio.
“It’s one thing to actually bring money back into the system,” Damschroder said. “There’s also money that’s gone out from ODJFS into the financial system that may be held at varying different stages. And so it’s not technically recovered and there’s a process for that. There’ll be a lot more information around specific dollar amounts and processes and methods in the very near future.”
Another state consultant who is working with DeVillers told Ohio’s unemployment modernization group that his team is doing “the detailed work” of finding “obviously fraudulent” cases that can be prosecuted.
“We’ve put together evidence packages that actually got passed through to prosecutors,” said Jeff Ficke, a Cincinnati-based managing director for the global research and advisory firm Gartner Inc. “They’re referred through the criminal network.”
ODJFS announced a criminal investigation last August, saying it was working with the FBI, the Secret Service, state and federal prosecutor offices, the Ohio Attorney General’s Office, the Ohio State Highway Patrol, and local law enforcement.
Prosecutor's offices in Hamilton, Butler, Warren and Franklin counties said they have not pursued any Cares Act fraud cases. Clermont County did not respond to the I-Team's questions. A spokesman for the Ohio Attorney General told us "DeVillers is spearheading this effort."
The Ohio Auditor’s public log of fraud reports includes eight cases that include the word “unemployment” and four with the word “COVID.” Seven of the 12 cases were closed, with no indication of whether charges were filed.
Ohio's Highway Patrol said it interviewed more than 700 witnesses alleging unemployment fraud but has not initiated any prosecutions. Instead, it forwarded the information to the state unemployment agency, which provided no information on prosecutions.
'I just wanted them to follow up'
Senator Fedor is skeptical about the team of consultants helping ODJFS reform its system to prevent fraud and improve customer service.
“The last number I’m aware of is that $89 million has been spent to try to help the system,” Fedor said. “And quite a bit of it was spent on communication relations people to try to manage the message.”
In an Aug. 5 report, the 12 companies retained by Ohio for a Public Private Partnership, or P3 initiative, pointed to solid gains on fraud prevention at ODJFS.
“By implementing new rules for (Ohio Job Insurance) fraud analytics, by the 60-day mark, there was an 87 percent reduction in new applications by April 1, 2021, and a further reduction in fraudulent initial claims after additional identity verification system was deployed,” said the report. “Additionally, Ohio’s PUA system saw a 98 percent reduction in initial claims at the 60-day mark since implementing two rounds of new fraud analytics rules.”
Those improvements do not impress Cordell, the Mason resident who said he is still owed about $1,100 for two unemployment claims from Ford plant shutdowns in June and July. Both payments were held up by an adjudication process in which Cordell will have to prove he’s not a fraudster. He also hopes to learn who hacked into his unemployment account and how much of his personal information they stole.
“That’s the biggest part I’m worried about,” Cordell said. “I’m going to have to constantly be aware of my banking information and whatever else goes on.”
Cordell said ODJFS initially blamed him for letting hackers into its system.
“They told me, ‘Your email was hacked,'” Cordell said. “They made me get another email, so I changed my email. They made me change my password. I felt like I was giving everything I could give them, and it wasn’t going anywhere.”
ODJFS has repeatedly said its computer systems have not been compromised by hackers. It says cybercrooks are using stolen information to gain access to Ohio accounts in the same way legitimate recipients can. In the meantime, the agency is preparing to take applications from account takeover victims, who will be reimbursed for any stolen funds it can verify.
Cordell argues he already did that, by finding the MoneyLion account where his benefits landed.
“I understand they have a pandemic. They have a lot on their hands. But I just wanted them to follow up, that’s all,” Cordell said. “I don’t want nothing that doesn’t belong to me. Just send it to me.”