Earlier this winter, four men pleaded guilty of defrauding the state of Nevada in a massive unemployment benefits scam. Their scheme involved collecting benefits for hundreds of workers, many of whom were unauthorized immigrants.
Their case is coming to light at the same time the federal government is pushing for state agencies to crack down on improper payments of unemployment benefits, most of which are due to error rather than outright fraud or organized crime.
The fraud case in Nevada was dubbed the “Silver Stampede” by investigators.
“This is a $4.4-million case,” said Paul Camacho, the Las Vegas special agent in charge at the Internal Revenue Service (IRS). “It’s a lot of money. It’s certainly a lot of money to those in the community that are struggling, trying to survive and trying to find work.”
According to the indictment and the guilty pleas signed by defendants Francisco Garcia, Eloy Garcia, Efrain Garcia and Nabor Garcia, the men promised to help hundreds of people who were out of work apply for unemployment benefits. But then the defendants made sure those unemployment payments went to mailboxes they controlled - and they kept the money for themselves.
“The greed that drove them to commit this fraud actually turned on them by creating a money paper trial,” said Camacho, whose team helped investigate the case, along with the Department of Labor's Office of Inspector General and several other federal and state agencies.
Investigators found that over the course of two years, defendants collected unemployment benefits for almost 600 different people. The defendants pleaded guilty to conspiracy to commit mail fraud, money laundering, and in one case, false representation of a social security number. They will be sentenced in January.
There was an additional aspect to the scam: Many of the claimants the defendants recruited were unauthorized immigrants; they were never eligible to collect those benefits in the first place. One reason the scheme initially worked was because the defendants filed the unemployment claims by phone or online, and the agency didn’t require proof of citizenship.
“When they were filing these claims, they weren't telling us these people were undocumented,” said Steve Zuelke of Nevada’s Department of Employment, Training and Rehabilitation. “They were stating they were citizens of the United States.”
The unauthorized immigrants likely had fake social security numbers that allowed them to work and apply for benefits.
“At the time that this was occurring we were a little more beholden to a process that we subsequently determined was less than - less than 100 percent accurate,” Zuelke said.
Now the Nevada system has tightened up. Staff will begin cross-checking applications with the social security administration and require more face to face appointments.
But the case raises the question of just how common this kind of unemployment fraud is.
“Oh, it is definitely not par for the course,” said Jane Oates, the assistant secretary for employment and training at the Department of Labor. “I mean that size, and that organized an effort, is definitely rare.”
But Oates says some unemployment payments do end up in the wrong place.
“Well, I think it will probably be a shocking number to most listeners,” Oates said. “The current rate 11 percent, actually means that we are paying twenty billion dollars in improper payments.”
That’s $20 billion paid out over the last three years. Those improper payments can occur when an employer disputes a former employee’s unemployment claim weeks after the state has begun making payments to that former employee, or when a claimant keeps collecting unemployment even after they start working again.
“We think that a lot of this we can drive down just by clearer information given to claimants,” Oates said. “We think that many people have no idea that they have been doing anything wrong.”
Meanwhile most state employment agencies are swamped with record high unemployment claims, shrinking staffs and outdated software.
Steve Zuelke at the Nevada Department of Employment, Training and Rehabilitation says when it comes to his agency tightening up requirements for unemployment benefits, there is a trade-off between complete accuracy and helping people as quickly as possible.
“We could force every individual who files a claim for unemployment benefits to jump through 7,000 hoops and climb 14 ladders in order to receive a week’s benefit,” Zuelke said. “That would become counterproductive and would defeat the purpose of the program.”
And that purpose is to make sure the millions of Americans who have been laid off get the help they need to pay their rent, pay their bills and buy groceries.
