$4.4 Million Unemployment Fraud Scam Uncovered in Nevada

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There’s an old adage: ”If it looks too good to be true, it probably is.” Nearly 600 people, who relied on Francisco Garcia, Eloy Garcia, Efrain Garcia and Nabor Garcia to help them file for unemployment benefits in Nevada, learned that the hard way. According to Fronterasdesk.org, the four men ”pleaded guilty to conspiracy to commit mail fraud, money laundering, and in one case, false representation of a social security number” in connection with a major multi-million unemployment compensation scam.

The scam, which took place over a two-year period, was simple: the four men allegedly agreed to help people who were unemployed apply for benefits, but instead of sending the checks to the individuals they claimed to be helping, they allegedly sent the checks to themselves (Ok, so Help = Help Yourself.) There’s an additional twist to the case. The report indicates that many of the people allegedly ”recruited” by the defendants were unauthorized immigrants, who weren’t even eligible for unemployment benefits in the first place. The article notes they were likely using false Social Security Numbers to claim benefits. (Unbelievable, 600 people with fake Social Security Numbers are then getting them stolen and misused by criminals to illegally claim unemployment.)

The Las Vegas special agent in charge at the Internal Revenue Service (IRS), who worked with federal and state agencies on the case, said it best: ”This is a $4.4-million case. It’s a lot of money. It’s certainly a lot of money to those in the community that are struggling, trying to survive and trying to find work.” The special agent noted that it was ”greed” and a ”money paper trail” that ultimately led to the defendants’ undoing.

But why was it so easy to pull off? The article cites a couple of reasons: claims were filed by phone or online and didn’t require proof of citizenship (What?? It’s like a giveaway program. Glad it’s being corrected sooner rather than later.) Plus…”[a]t the time this was occurring we were a little more beholden to a process that we subsequently determined was less than – less than 100 percent accurate,” noted Steve Zuelke of Nevada’s Department of Employment, Training and Rehabilitation.

So…what’s changed? Nevada saysthe system ”has tightened up” and that the staff will check claimants’ applications against the Social Security Administration and ”require more face to face” appointments.

Okay…that’s the situation in Nevada, but what about the rest of the country? The article cites comments from Jane Oates, assistant secretary for employment and training at the U.S. Department of Labor, who notes that the Nevada case is an example of an organized effort and ”is definitely rare.” Even so, Oates concedes that there are improper payments made in the unemployment system across the country. The DOL estimates that specifically 11 percent or $20 billion unemployment compensation payments are improper payments. (We don’t know how much of this may be pure fraud.)

There are a lot of unemployed citizens across the U.S. right now. How many people, who really need help, could be helped with $20 billion? Here’s the question of the day: when are states going to start leveraging technology and public records to identify improper payments so the money will be there for those who are eligible for benefits? (Today would be a good time to start.)

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”Four Nevada Men Await Sentencing in $4.4 Million in Vegas Unemployment Fraud Scheme,” by Jude Joffe-Block, published by FronterasDesk.org, December 20, 2011.

LAS VEGAS — Earlier this winter, four men pleaded guilty of defrauding the state of Nevada in a massive unemployment benefits scam. Their scheme involved collecting benefits for hundreds of workers, many of whom were unauthorized immigrants.

Their case is coming to light at the same time the federal government is pushing for state agencies to crack down on improper payments of unemployment benefits, most of which are due to error rather than outright fraud or organized crime.

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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.