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Unemployment investigators looking into thousands of fraud cases in Kentucky

Updated: Apr. 20, 2021 at 6:23 PM CDT
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LOUISVILLE, Ky. (WAVE) - The number of unemployment fraud victims in Kentucky has now grown well into the thousands, with investigators predicting even more cases.

It’s a problem that has affected states across the country, including Kentucky, where Gov. Andy Beshear shut the online unemployment system down for four days to try to get a handle on the fraud.

The federal government now estimates unemployment fraud has cost the country between $63 and $200 billion.

“If Kentucky is one of 50 states, then we’re a 50th of that,” Attorney General Cyber Crimes Investigator Matt Hedden told WAVE 3 News Troubleshooters. “So, I would say over a half billion dollars.”

According to the Office of the Inspector General, $63 billion is more than double the amount of money spent on the unemployment system in all of 2019.

Hedden said his life has been taken over by these fraud cases, which Attorney General Daniel Cameron’s office has tracked since January.

“The number of phone calls and emails we got grew exponentially,” Hedden said. “To where we went from a few a day to a few hundred a day and again, now, now we are over 4,000.”

Those cases include those like Hanna Kindoll’s. The Carrollton woman is a mother of four who depends on the unemployment money. But because she was hacked, she didn’t receive a check for a month.

“This is how we survive,” Kindoll said.

Her story began when her deposit was late. She logged on and realized her bank’s name had been changed.

“My questions had been changed, my PIN number had been changed,” she recalled.

From then on, it was a hair-pulling process to get it fixed.

“Get it together, Kentucky,” Kindoll said.

Hedden explained there are two main ways criminals are getting the cash. In one, they are either stealing people’s identities by buying lists online. Hedden said he also believes they are hacking into insurance systems to gain access to multiple people who work at the same place, all in one shot. Then they apply for unemployment pretending to be someone else.

In the other common scenario, he said, scammers hack into the accounts of those legitimately getting unemployment and change the banking info, which is what happened to Kindoll.

“At first I thought it was a mistake,” she said.

Hedden said the tech-savvy swindlers tend to use online banks, many of which are overseas. They work at lightning speed. And by the time the money hits the bank, Hedden said, it’s immediately converted into Bitcoin, making his job incredibly hard.

“You’re talking about a few weeks to get banking records to see where the money’s gone to,” Hedden said. “It’s long gone.”

That’s if the online bank’s host country cooperates at all.

Hedden also has found step-by-step tutorials on how to commit unemployment fraud.

“It’s fairly easy if you know where to look,” he told WAVE 3 News. Some of the online tutorials are not even on the dark web, but rather on unnamed websites that are easily accessible.

Hedden noted some criminals even use free software to carry out their plots.

“A lot of times, they use different messaging services that are encrypted end to end, so law enforcement is not going to be able to see the communication going on,” he said. “A lot of times, the company that provides the application can’t even see the communication.”

Other times, Hedden said, the bad guys communicate openly.

“Interestingly enough, when Kentucky changed their policy, changed their protocols with the PIN numbers, that chatter was discussed within a few hours,” he said.

Hedden said the brazen fraudsters also talk about what they’ll attack next, like relief funds or small businesses. He also warned people who have had their information stolen to pay attention to their 1099 tax forms. Hedden said he worries hackers may fraudulently obtain those funds, and that the real person could have an even higher tax liability because of the unemployment fraud.

“There’s a special place in hell for people like that,” Kindoll said. “You’re robbing the poor, literal poor, just because you can.”

Beshear also created a task force to deal with all the fraud, which includes the FBI. And the Inspector General’s Department of Labor Office has conducted audits looking into the process of identifying and fighting large-scale fraud.

In April 2020, the OIG shared its initial concerns with the unemployment program associated with the coronavirus pandemic. In it, the OIG said it laid out its recommendations. The next month, the agency released a report that included an alert memorandum describing how the program could fall victim to widespread fraud,

“The unprecedented infusion of federal funds into the UI program gave individuals and organized criminal groups a high-value target to exploit,” the OIG wrote in a press release. “That, combined with easily attainable stolen personally identifiable information and continuing UI program weaknesses identified by the OIG over the last several years, allowed criminals to defraud the system.”

More than 140 people have been charged and arrested federally for unemployment fraud, the OIG said.

According to the Department of Justice, there are red flags you should look for if you believe you’ve fallen victim to fraud including:

+ You file a lawful UI claim on behalf of yourself, and you receive a notice that your claim was rejected because the State Workforce Agency already has received a claim under your name

+ You did not apply for UI benefits, but you receive a determination letter from a SWA in your state of residence or another state regarding a UI claim filed under your name

+ You receive a notification that you failed the security verification process for your UI claim

+ You are told by a current or former employer that a UI claim has been submitted with your personal information

+ More information on how to report fraud

+ Report fraud first to the Kentucky Office of Unemployment Insurance

+ Then report it to the U.S. Department of Justice’s National Center for Disaster Fraud (NCDF) or by calling 866-720-5721

Attorney General Cameron’s office also recommends Kentuckians place a free fraud alert on their credit report, and put a “freeze” on their credit report at the major credit reporting agencies.

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