$73 million paid out to unemployment fraudsters: audit

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DENVER (KDVR) — A state audit shared with Colorado lawmakers on Monday found $73 million in unemployment benefits may have been improperly sent to people who didn’t deserve it.

The $73 million figure, if confirmed, would be more than double the $30 million the Colorado Department of Labor and Employment has previously acknowledged in fraudulent payments.

The Office of the State Auditor report found:

  • $3.9 million was paid on behalf of dead people;
  • $5 million was paid to prison inmates;
  • $18.5 million was paid to people with suspicious bank accounts;
  • and $102,000 was paid to people who were not of working age.

The director for the state’s unemployment division, Phil Spesshardt, told FOX31 the state received 1.4 million unemployment claims flagged as likely fraud, making it difficult to weed out every bad actor.

“Do we believe that there is some in there that we will have missed on fraud? Sure, none of the tools that we have utilized have been perfect,” Spesshardt said.

But Spesshardt said Colorado has fared better than many states. California, with more than 7 times the population of Colorado, previously reported at least $20 billion in unemployment fraud. And even a much smaller state like Kansas reported $380 million in unemployment fraud, according to the auditors’ report.

Thousands of claims unresolved after months

The audit also found most customer complaints were never resolved, although the state employment department said they probably were resolved but weren’t documented properly in order to prove it.

The audit found 196,000 unresolved customer complaints from people whose claim was placed on hold because of suspected fraudulent activity. That’s 73% of the 266,000 total customer complaints, and even the 70,000 claims that were resolved took 7 weeks on average to reach a resolution.

But Spesshardt told the Problem Solvers he believes 192,000 of the 196,000 claims were probably resolved but lacked documentation, like a resolution date, to satisfy state auditors.

Still, he acknowledged many of the 4,000 unresolved customer complaints have gone months without a resolution, let alone a payment to someone who may be desperate for their unemployment payments.

“I wouldn’t want to wait a year, I wouldn’t want to wait 6 months, I wouldn’t want to wait 30 days,” said Spesshardt, who advised anyone waiting more than three months to again contact the CDLE.

Unemployment fraud figures released to lawmakers in an audit on Dec. 6, 2021 (KDVR)

Spesshardt said one of the biggest issues tends to be hijacked claims, where an individual with a legitimate claim may have been tricked into clicking a link from a scammer pretending to be a customer service agent from the CDLE. Once an innocent person clicks on a link, the scammer has the person’s personal information and takes over the account.

“Those require much more in-depth analysis, and this requires having human intervention to review and investigate those claims. Unfortunately, the number of staff available to do that continues to be a struggle,” Spesshardt said.

He estimates the state has about 50 staffers dedicated to investigating unemployment fraud but said it’s not nearly enough, given the volume of fraudulent claims.

Colorado ran out of unemployment money

FOX31 continues to receive emails from viewers whose claims have gone unresolved, including one sent to the Problem Solvers during Monday’s audit hearing.

The viewer wrote:

I have been trying to get my unemployment since 3/19/21, I have done everything they have asked of me and still I get the run around. One even told me that it usually takes 3 months and here mine is going on a year. Can you help me get answers? PLEASE…I am at my wits end.

FOX31 viewer submission

“We are pushing hard on the unemployment department to be able to resolve these issues and help people get back their lives,” said State Rep. Dafna Michaelson Jenet, D-Commerce City, who is chairwoman of the state legislative audit committee.

Colorado ran out of unemployment funds months ago and has had to borrow about $1 billion from the federal government to keep paying unemployment insurance to those who qualify.

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