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Unemployment fraud still a big problem in Arizona

Posted at 5:00 AM, Feb 17, 2021
and last updated 2021-02-17 09:20:36-05

PHOENIX — Unemployment claims are on the rise and fraud is still affecting thousands of Arizonans. It's making life tough for some business owners having to deal with so many fake claims.

For more than 50 years, Stevens Engineering has been manufacturing in Phoenix, but lately they've been forced to spend a lot of time doing something else. They've had to deal with a growing number of fake unemployment claims.

On the February day that we were there, they received 19 fake claims. That makes about 150 fake claims total. None of the people listed worked at the business. Carolyn Coope and her husband have just 12 employees.

"So, my day has now been spent signing these, scanning," Coope said. Then she sends them back to the Department of Economic Security within 10 days.

Coope says she does that because of what it says on the unemployment claim form. If she doesn't send them back in 10 days, benefits will be paid immediately if allowed and you won't have any appeal to them.

A year into this, many businesses are getting hit with even more fraud claims. And they say they don't understand. Since DES requires every business to provide a complete list of current employees, why isn't someone catching this?

"They should already see that the person didn't work for me because I didn't list them as an employee on my report," says Natalie Bagnall.

Bagnall and her husband owned a construction business in Coolidge.

They've been dealing with 50 false unemployment claims and that number is growing.

"They are complete strangers to me. Obviously, they couldn't have worked for us," Bagnall says.

That's because her business shut down nearly two years ago.

"I closed that account July 1 of 2019. This was before the pandemic even started," she says.

Bagnall calls it a huge glitch if DES doesn't have a system that kicks back a fake claim before it would go to them.

"They're generating notices that go out to businesses that don't exist anymore. And that's expensive. You're printing out information, you're posting it," she says.

Coope sees the postage on each envelope is 45 cents. That's about $70 in postage paid for the fake claims she received alone.

In a statement, DES says they must contact a last employer listed "regardless if the account is closed."

And they acknowledge a fraud problem for businesses saying they "apologize for the disruption."

But they say on February 7, they implemented identity verification and the number of fraud notices "going out to employees will significantly decrease soon."

DES didn't answer who pays for all of it. Could employer insurance costs go up? Neither business owner could say exactly how the rate they pay is calculated, and they don't blame DES for the problem. But Coope and Bagnall are concerned about the wasted money, wasted time, and how it could be affecting so many Arizonans.

"This kind of stuff is clogging up the system for real people who need real help," Bagnall says.

DES is counting on this latest fraud protection to prevent fake claims, but after a year of trying to stop it, fraud continues.

Meanwhile, it seems crucial businesses contact DES if they don't want fake claims paid.

In their statement, DES told us "if no response is given, the claim is adjudicated based on the initial information submitted by the claimant."

Here's the full statement from DES:

"The Department is required to notify the last employer and the base period employer(s) when an unemployment claim is filed, regardless if the account is closed or not. The employer may have separation or eligibility information that may affect the payment of benefits and whether the employers’ account is charged.

Employers are issued a Notice to Employer for individuals who listed the employer as their former place of employment while filing for regular Unemployment Insurance (UI). These notices are issued when individuals file their claims, prior to a determination of their eligibility and payment, if they are determined eligible. Employers have ten business days from the mail date to respond and provide additional details about the separation. If no response is given, the UI claim is not held, and the claim is adjudicated based on the initial information submitted by the claimant.

In the event a criminal fraudulently applies for UI, a notice may still be issued to the employer they listed on the initial claim. Employers are advised to fill out the form accordingly, and check the box for “My records show that the claimant never worked for this firm,” sign the notice on the bottom of the back page, and return the form to DES. Additionally, employers should report the suspected fraud using the fraud reporting tool HERE.

We are taking action to minimize ongoing fraud, and we appreciate employers’ continued vigilance as well as their prompt attention to the notices they receive, which helps to eliminate UI fraud.

As shown on our UIData Dashboard, we have seen a sharp increase in the number of initial UI claims filed. With the recent implementation of identity verification within the regular UI system on February 7, fraudulent filings are now being prevented, therefore the number of notices going out to employers will significantly decrease soon. We apologize for the disruption to the business community and appreciate their assistance in identifying fraudulent claims.

Fraud detection measures and identity verification through have helped to combat fraud within Pandemic Unemployment Assistance (PUA), and we added identity verification to the UI system when it became clear that fraud was rising within this program. This work has both reduced the number of fraudulent claims received and allowed us to identify individuals with unique circumstances that need an eligibility disposition on their claim. We continue to balance fraud prevention with access to services for eligible individuals."