Software Flaw Hid Signs of $576 Million State Unemployment Fraud, Officials Say

SEATTLE - The state’s Employment Security Department took nearly a year to fix a software flaw that wound up playing a small but significant role in this spring’s massive unemployment fraud.

The disclosure comes as the agency shakes up its anti-fraud operations and personnel in the wake of the spring’s $576 million unemployment scam.

The software flaw, which ESD said resided in its three-year-old claims-processing system, meant the agency was sending out benefits payments before claims had been run through a so-called discovery process to check for fraud risk. 

“Claims were made, claims were paid and then discovery was run,” ESD Commissioner Suzi LeVine said during a Thursday interview. Even if unemployment claims were eventually flagged as having a high fraud risk, the sequencing flaw meant “they were already paid,” LeVine added.

As unemployment claims in Washington soared to historic levels during the coronavirus-triggered economic shutdown, criminals used bogus claims to siphon off state and federal benefits worth $576 million, of which $346 million has been recovered. Similar fraud schemes, some of them believed to have been orchestrated from Nigeria, have been reported in 37 other states.

In August, several lawmakers raised concerns that ESD had turned off some of its fraud controls in its claims system, known as Unemployment Tax and Benefits, or UTAB, in an effort to speed payments to jobless Washingtonians — assertions LeVine rejected at the time.

Article reproduced courtesy of the Seattle Times.

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