At first, the questionable unemployment claim notices arrived at the Washoe County Human Resources Department one or two at a time. The first came in May. Another in mid-June.
Two weeks later, the trickle of false claims had turned into a flood.
“It wasn’t until (June 29) that multiple fraudulent claims began arriving to our office daily for processing,” said Patricia Hurley, the county's human resources director.
Washoe County isn't alone. Local governments across the region are fielding hundreds of fake unemployment claims filed by fraudsters who have obtained public employee information and are using it to apply for benefits through the Nevada Department of Employment, Training and Rehabilitation, a Reno Gazette Journal investigation found.
The fraud is often spotted when DETR tries to verify with the government employer that the person asking for benefits had in fact been laid off. In the case of the false claims, the workers are still very much employed.
The problem has become so pervasive the Nevada Attorney General and U.S. Attorney's Office has formed a task force to investigate the fraud. Investigators with Reno police and the Washoe County Sheriff's Office are participating in the investigation.
"It's possible that a combination of data breaches and publicly-available data were used to connect the dots for identification," city of Reno spokesman Jon Humbert said.
Local governments said they have experienced no new data breaches. It's possible the perpetrators are using information from a past data breach, they said. Information needed to file a claim include a social security number, data of birth and mother's maiden name.
As of this week, Washoe County had received 214 false claims. Reno has fielded more than 200. Sparks has received 51 and the Washoe County School District has received about 100.
“At this point, no public employee agency appears to have been spared,” Humbert said. “We have confidence in the state system and our investigators to solve these crimes.”
Sparks City Manager Neil Krutz, former Reno City Manager Sabra Newby and Reno City Councilman Devon Reese are among the victims. Reese, however, had his information stolen from his private employer, Hutchison and Steffen law firm.
How big is the problem? DETR won't talk about it
Despite the widespread problem, DETR has repeatedly declined to answer questions from the Reno Gazette Journal regarding fraudulent claims. The questions include the total number of fraud cases, the number of active investigations and how the agency handles reports of fraud.
The question also remains open as to whether DETR has actually paid on on any of the false claims. Six Reno employees reported they were able to log into the fraudulent DETR accounts that had been created by the fraudsters and saw the state had paid between $7,000 and $12,000 to the fake claimants.
The agency also did not provide specific details on how it verifies claims to ensure their authenticity. During a media call back in May, however, DETR mentioned the verification process as one of the reasons for the high number of pending claims, particularly for “separation issues.”
“It’s required by federal and state law for DETR to determine the reason for discharge to reduce the risk to employees and employers,” said interim DETR Director Heather Korbulic at the time.
Korbulic resigned less than a month later, citing threats to her personal safety.
Payment on the false claims would quickly draw down the already overburdened unemployment trust fund maintained by the state. The fund could run dry within seven weeks given the unprecedented number of unemployment claims being filed because of the pandemic.
Nevada's unemployment rate was 15 percent in June, down from a high of 28 percent in April as many people return to work after the coronavirus shutdown.
Fraud isn't unusual in the unemployment system
While fraud is soaring as perpetrators take advantage of beleaguered unemployment agencies during the pandemic, it happens during normal times as well. In fact, Nevada's fraud rate of 5.8 percent was highest in the nation in 2019, according to data reported by the U.S. Department of Labor.
Nevada spent $30 million in overpayments last year, though the fault largely rested with the claimants and employers, according to Labor Department reports.
Fraudulent claims that go unnoticed also could affect the unemployment tax rate paid by employers.
'That's really weird'
Lyon County also is fielding fraudulent claims. Human Resources Director Eric Milavsky said 52 have been received.
“We got one and were like, ‘that’s really weird’,” he said.
Within a few days, “three, four, five came in,” Milavsky said. “Then 10 more. It became very clear at that point someone was trying to get these benefits falsely.”
Lyon County Manager Jeff Page was one of the victims.
“That’s the world we live in today,” he said. “Think about how many things you buy online. Once your information is out there, someone’s going to find a way to use that information.”
Newby said she found out she had been the victim of a fraudulent claim when someone from the city of Reno’s human resources called her to ask about a claim notice they had received.
“I really had no idea until HR called me and asked me if I had submitted a claim for unemployment and if I was unemployed,” Newby said. “Of course, I wasn’t and I didn’t submit the claim.”
Newby left her job as city manager earlier this year and now works for the University of Nevada Las Vegas.
Newby said the Reno's human resources staffer told her the department was inundated with the false claims.
“She said she was spending all of her time tracking down these claims and trying to verify them,” Newby said.
Newby reported the fraud to DETR but hasn’t heard anything back, she said.
“There are legitimate claims in the queue that need attention while these fraudulent ones are taking time of personnel to fix,” she said. “Not to mention if they do get paid out, then it’s just a stealing of public funds.”
Impact of unemployment fraud widespread
The impact of unemployment fraud was not limited to public officials and workers. Brokerage firm Wells Fargo Advisors saw several of its employees affected by the ongoing wave of fraudulent claims for unemployment insurance benefits.
“My boss came up to me on Monday morning to say, ‘I just want to let you know we had noticed that somebody tried to file an unemployment claim under your name,’” said Richard Jay, first vice-president at Wells Fargo Advisors.
“There were a number of us in the office that it happened to. That’s what we’re trying to figure out. It’s just so rampant.”
Jay, who also serves on the Reno-Tahoe Airport Authority board of trustees, says that upwards of six employees in the brokerage firm had their identities used for fraudulent unemployment insurance applications.
Unable to get a hold of anyone at DETR, Jay says he went online to fill out the agency’s unemployment insurance fraud reporting form. The form, however, primarily asks for information regarding the individual that the victim suspects is responsible for the fraudulent application.
“If I knew all of that, I would’ve turned the information over to the police,” Jay said. “That form was useless.”
Jay added that he was not upset at the agency. With DETR dealing with a flood of claimants and robocallers on top of fraudulent applications, Jay described the agency’s situation as a “thankless job.”
At the same time, Jay cautioned people to be vigilant given how widespread the fraud claims have become.
“Just realize that it can happen to any of us,” Jay said. “It doesn’t matter if you’re elected, serve on a board or an average joe.”
“That’s why as citizens, we need to be more diligent in protecting our identities than ever before,” he added.
State COVID-19 task force looking into the fraudulent claims
DETR also referred to the Nevada Attorney General’s new COVID-19 Fraud Task Force in response to a recent query by the Reno Gazette Journal about fraud. The task force was announced by Attorney General Aaron D. Ford and U.S. Attorney Nicholas A. Trutanich on July 21 in response to reports of current and former Nevada residents having their identities used to file fraudulent unemployment insurance claims.
“The COVID-19 Fraud Task Force is committed to protecting the integrity of the unemployment benefits program,” Trutanich said in a statement. “We will continue working closely with our law enforcement partners and colleagues on the Task Force to safeguard the program for Nevadans facing difficult situations who need our help.”
The AG’s office also declined to comment about the spate of fraudulent claims impacting public officials, workers and other Nevadans, citing ongoing investigations.
“As more information becomes available, there will be future announcements from the Task Force or DETR,” said Monica Moazez, spokeswoman for the Nevada AG’s office, when contacted by the Reno Gazette Journal on Wednesday.
Anjeanette Damon is the government watchdog reporter for the RGJ. You can reach her at adamon@rgj.com or follow her on Twitter @AnjeanetteDamon. If you care about shining a bright light on decisions made by your elected officials, please consider subscribing to the Reno Gazette Journal.
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