DENVER — The Colorado Department of Labor and Employment now believes it has lost between $20 million and $30 million in fraudulent unemployment claims over the course of the COVID-19 pandemic.
The estimate is a sharp increase from the $6.5 million fraud estimates the CDLE had projected in early March. The agency is planning on holding a press conference about the fraudulent claims on Friday.
In its latest reports, CDLE has paid out roughly $8.77 billion in unemployment benefits since March 2020. Of that, roughly $20-30 million have been identified as fraudulent claims, officials said Thursday.
Colorado is one of many states experiencing fraud. A report by the U.S. Department of Labor's inspector general has found $63 billion in improper payments nationwide. Other states have experienced much worse, including California reporting $11 billion in fraud and Ohio reporting $330 million in fraud.
“The reality of the world we live in right now is we see so much fraud because it’s profitable,” said Colorado Attorney General Phil Weiser in an interview Thursday.
The state has started to try to crack down on the fraudsters, announcing new identity verification measures earlier this month.
The CDLE says it has experienced a decline in the benefit payment amounts going out during the week of April 10, something it attributed that to the recent implementation of the ID.me requirement.
While the system may be keeping more fraudsters out, it’s also causing serious headaches for some families trying to file legitimate claims.
Meanwhile, Weiser announced last month the creation of a statewide task force to investigate and prosecute some of these claims. The task force is made up of district attorneys from across the state.
“Anyone who retrieves unemployment checks, debit cards, taps into the funds, has a local point of connection and we want to figure out who those people are,” Weiser said. “We’re going to work hard to get to the bottom of the situation and find any of the fraudsters out there and hold them accountable.”
Despite the tens of millions Colorado has paid out in fraudulent claims, Weiser says the state has been successful in stopping many other attempts to access the funds. The state estimates it has stopped roughly 1.1 million in fake claims, protecting more than $7 billion.
Nevertheless, Weiser says the state is still working to try to track down the fraudsters and is asking the public for help to report anything they know.
Meanwhile, the Denver Metro Chamber of Commerce says it’s concerned about the number of fraudulent payments the state has made and worries the true amount could be even higher than the latest numbers indicate.
“Both employers and employees have been catching fraudulent claims since the late spring and reporting them regularly, so it’s troubling that those are still making it through the system,” said J.J. Ament, the chief executive officer of the Metro Denver Economic Development Corporation. “The department hasn’t got the protections in place that we need to make sure only valid claims are paid.”
Ament considers the fraud a double-blow for employers in particular since the unemployment fund will be replenished by increasing payroll taxes and UI premiums. The state's unemployment trust fund became insolvent last summer, and the state is borrowing interest-free from the federal government to continue making benefit payments. The fund is now more than $1 billion in debt.
“It’s just becomes another burden to hiring the next employee because it makes it that much more expensive. Because now, you have to pay not only the insurance premium rightly due for legitimate programs, but also you have to pay what’s required to replenish all the fraud,” Ament said.
He's calling on the state legislature to dedicate some of the stimulus money coming in to help replenish the unemployment fund and help offset the fraudulent claims so that the state’s economic recovery is not impacted.
State Republicans like House Minority Leader Hugh McKean, R-Loveland, agree with the idea. He said in a statement to Denver7, “The issues will be how to overcome an almost $1.2 billion shortfall including over $20 million in fraudulent claims. While the federal government is providing financial relief at no interest currently, we must find a path to fiscal soundness.”
He called for lawmakers to do more to give tax credits to employers to help with the rising costs. Amendments to do that, however, were shot down by Democrats during budget discussions this week.
For now, Weiser says the task force is hard at work trying to figure out who the fraudsters are so they can hold them accountable.