Gaps in accountability led to $315,000 misappropriation by Employment Security Department employee
A former state Employment Security Department (ESD) employee misappropriated at least $315,282 in 2020, according to a fraud report released today by the Office of the Washington State Auditor. The investigation also identified $121,503 in questionable unemployment benefit payments associated with the same employee.
The subject of the investigation, an unemployment insurance specialist, was arrested in September after the U.S. Department of Justice released a 20-count indictment based on federal criminal investigations. The State Auditor's Office reviewed ESD's processes and identified weaknesses that allowed the misappropriation to occur.
“Today's report shows the serious risks created by gaps in an agency's internal checks and controls,” said State Auditor Pat McCarthy. “Much of the massive fraud that hit our unemployment system in 2020 was orchestrated by cybercriminals from across the globe, but this case is different. It's a reminder to every public agency to be vigilant in preventing fraud, whether it is perpetrated by actors on the outside or inside of government.”
No one at ESD reviewed many questionable decisions made by the employee, SAO's investigation found. Such unusual activity included:
- Using the same address for different people supposedly filing unemployment insurance benefit claims
- Designating online banks or debit cards as the claimant's payment method, allowing payments to be diverted to those accounts
- Instances in which claims were processed for people who were incarcerated
- One instance in which a fake Social Security card was used to verify a claimant's identity
The full report, including recommendations for improvement and ESD's response to the findings, can be found here.
The questionable payments were made from Jan. 1 to Dec. 31, 2020, a year during which unemployment claims surged due to the COVID-19 pandemic and emergency increases in federal support for unemployment benefits. ESD distributed more than $13.6 billion in unemployment benefits that year. A series of earlier audits showed major internet-based fraud schemes took advantage of provisions in emergency federal funding laws to defraud the unemployment insurance system in 2020. These schemes resulted in $647 million in misappropriations and $461 million in questionable costs. Those reports can be found here.
Media inquiries: Kathleen Cooper, Director of Communications – Kathleen.Cooper@sao.wa.gov | 360-890-0751