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DES: 270 indictments linked to pandemic-related fraud in Arizona

The Arizona Department of Economic Security say 270 people have been indicted for fraud related to jobless benefits handed out during the pandemic.

PHOENIX — Since the beginning of the pandemic, Arizona has recovered more than $1.45 billion in fraudulent unemployment benefits and indicted more than 270 people for fraud, according to numbers released Thursday by the Arizona Department of Economic Services.

“Ensuring the integrity of our programs and safeguarding the personal information of our clients remains a top priority for the Department,” said Tasya Peterson, the agency's press secretary.

'A threat to our national security'

The state is playing catch-up to what was a nationwide frenzy of scams that resulted in between $100 billion and $400 billion illegally collected by thieves worldwide from states.

“Online identity theft during the pandemic has become a threat to our national and economic security,” said Blake Hall, founder of ID.me, a firm that works with state governments to combat identity theft.

After the pandemic caused lockdowns, states worked to distribute Pandemic Unemployment Assistance (PUA) and regular Unemployment Insurance (UI) payments to people as quickly as possible. But criminals pounced.

Fraudulent claims came from a variety of sources: Nation-state adversaries, organized crime rings, and lone criminals.

“Across the country, states were overwhelmed with fraud,” Hall said.

RELATED: Police arrest, charge Valley man with identity theft and PPP fraud

States were unprepared

A November report by Arizona’s Auditor General concluded DES “did not put all critical identity verification or other anti-fraud measures in place” before paying out pandemic-related jobless benefits.

It showed DES has paid out more than $4.4 billion dollars in fraudulent claims alone and was one of five states where initial jobless claims outnumbered the entire pool of workers.

An NBC review of Department of Labor data found that after states contracted with ID.me midway through the pandemic, the number of COVID-related unemployment claims plummeted by 85% in California, 91% in New York and by 97% in Arizona.

The sharp drop in claims reflects the amount of fraudulent claims happening previously.

“It just shows the extent to which state workforce agencies were unprepared and didn’t have effective identity verification in place,” Hall said.

RELATED: Phoenix police officer arrested for fraud charges

Arizona working to detect, prevent fraud

Hall credits Arizona for being one of the first states in September 2020 to partner with ID.me to require real-time identity verification for PUA claims.

The move helped Arizona slow down the bleeding.

“As soon as Arizona implemented our service, we were hit with cyberattacks from Russia, China and Nigeria and that clearly shows that there were some international groups behind this fraud as well,” Hall said.

In February 2021, Arizona also implemented the ID.me program for regular unemployment insurance.

“Arizona continues to partner with ID.me, and leverages OnPoint technology to detect, prevent and investigate fraud,” Peterson added.

DES is partnered with more than 100 law enforcement agencies and over 200 financial institutions worldwide to recover fraudulent benefits and identify suspects, said Peterson.

A September 2021 blog entry details how the department has prevented more than $75 billion in unemployment benefits fraud while pursuing criminals, Peterson added.

RELATED: 'Biggest fraud in a generation': The looting of the COVID relief plan known as PPP

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