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Cyber criminals stole billions in pandemic unemployment benefits, state officials say

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  • Staff Report 

Foreign cyber criminals have stolen billions of dollars in pandemic unemployment benefits, leaving investigators with little hope of recovering the funds, according to the chief of the state Department of Labor. Roberta Reardon, the state labor commissioner, testified before lawmakers last month that $4 billion had been lost through fraudulent claims, much less than the $11 billion estimated by the office of state Comptroller Tom DiNapoli. Reardon said her agency had dispensed a total of $105 billion in unemployment benefits following a surge in jobless claims triggered by the coronavirus pandemic. Fraudulent claims accounted for about 3.8% of the total.

Fraud in the benefits program has been a long-standing problem, Reardon acknowledged, but added that the agency was taking steps to prevent further losses. Meanwhile, a coalition of business groups is urging the Hochul administration and the Legislature to address the “lingering financial burdens” triggered by the $8 billion in federal loans to the state unemployment insurance program during the pandemic.

The state has also paid more money in unemployment benefits to some individuals than they were entitled to receive, and the labor agency is seeking to recover the overpayments, Reardon told lawmakers. Ashley Ranslow, director of the New York NFIB branch, said the state should consider applying any overpayments sent out to recipients to the sums employers have had to pay in additional unemployment taxes and special assessments, noting that those businesses should bear no responsibility for the state’s overpayments.

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State Sen. Dan Stec, R-Queensbury, said it was unfair for the state to heap more costs on businesses to deal with the money lost through inadequate oversight of the unemployment fund. Sen. Peter Oberacker, R-Otsego County, suggested the labor agency should have instituted tighter controls much earlier than it did, pointing out the DiNapoli audit found the agency was put on notice several years before the benefits debacle after a 2015 audit warned the jobless benefits system was vulnerable to a workload surge and was operating with outdated technology. Oberacker has introduced legislation calling for a forensic audit of the state’s information technology systems.

Reardon told lawmakers that the state continues to seek to recoup money stolen via schemes originating within the U.S., with an estimated $500 million recovered so far. “We have referred over a million claims to the federal government,” Reardon said. “It is a federal crime to steal this money. We are working with the FBI. We work with the O.I.G. (Office of the Inspector General) on the national level. We work with the state’s Attorney General. We work with the district attorneys.”

The commissioner estimated the effort to recover the stolen money “will take a long time.” The Democratic leaders of the state Senate and Assembly have given no indication that the matter will be addressed when the two chambers issue their formal response to the governor’s budget proposal in the coming weeks.