Ingenuity Gone Awry


Most of us believe in the American dream. All that’s required is a lot of hard work, ingenuity and a little luck, and it’s ours for the taking. Unfortunately, fraudsters usually try to avoid the work, misapply their ingenuity, and focus on the taking. And, that’s the case in today’s Fraud of the Day from about a group of scam artists who stole unemployment benefits from the state of Maryland.

The article reports that three co-defendants (we’ll call them defendants A, B and C to protect the not-so-innocent) each have pleaded guilty in connection with a scheme to defraud Maryland’s unemployment system from January 2010 until May 2012. Defendant A created five phony Maryland companies and “filed fraudulent quarterly reports with the Maryland Department of Labor Licensing, and Regulation (DLLR) under the names of fictitious Maryland companies, which falsely claimed that certain individuals had been employed and received wages at the companies during that quarter.” So, who were these employees?

They were real Maryland residents, who had no idea that their names and dates of birth were being used by these fraudsters to steal unemployment benefits. In other words, they were victims of identity fraud. Ultimately, the trio used the fake identities and bogus quarterly reports to generate a $409,000 balance in the unemployment insurance accounts of the five phony companies. (Too bad they couldn’t have applied this ingenuity and creativity to something a little less fraudulent and a little more beneficial to society.)

Of course, their next step was to use these fake companies and identities to file for very real unemployment benefits. According to the article, DLLR mailed prepaid debit cards to residences associated with the defendants. “The defendants used the debit cards to obtain approximately $88,500 in purchases and cash from ATMs in the Baltimore metropolitan area.”

Here’s the kicker: defendant A was incarcerated throughout most of the scam. However, recordings from the jail show that he “continued to oversee and coordinate” how the debit cards were used.

Defendants A and B pleaded guilty to conspiracy and aggravated theft. Defendant C pleaded guilty to conspiracy to commit access device fraud. The defendants will be sentenced separately at court dates in December and January. The three will be required to pay back the $88,500.

How could this fraudulent scheme have been prevented or stopped? Let’s think about it another way. What do the victims’ personally identifiable information, the phony companies and the defendants’ addresses all have in common? Pat yourself on the back if you guessed: “they are all public records.” That’s the answer. Public records and data analytics technology can be used to identify indicators for fraud. We can’t stop fraudsters from trying to defraud government programs; but we can find potential red flags for fraud, so we can take a second look at the applications and catch the fraud before we send out the pre-paid debit cards.

Source: Today’s ”Fraud of the Day” is based on “Guilty Plea in Unemployment Fraud Scheme,” and published by on October 16, 2012.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.