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Maryland uncovers identity theft scheme involving $501M in fraudulent unemployment claims, Hogan says

Maryland uncovered a “massive identity theft” scheme leading to more than 47,500 fraudulent unemployment insurance claims totaling more than $501 million, Gov. Larry Hogan said Wednesday.

“This criminal enterprise seeking to take advantage of a global pandemic to steal hundreds of millions, perhaps billions, of dollars from taxpayers is despicable,” Hogan said.

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Maryland Labor Secretary Tiffany Robinson, appearing with the Republican governor at a State House news conference, said the division handling unemployment became suspicious when it noticed a surge in out-of-state claims.

Investigators found that people were using “stolen personal information to fraudulently attempt to obtain unemployment benefits,” U.S. Attorney Robert K. Hur said in a prepared statement. Hur’s office did not respond Wednesday to a request for further comment.

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The illegal activity was detected over the July Fourth weekend. Hogan said the state quickly notified federal authorities when it learned about the scheme, and put holds on paying out-of-state claims.

The governor said a few “real” people got their payments frozen. He said the Labor Department would work quickly now to get them their payments.

Ted Middleton had wondered for weeks why his account was frozen and money wiped from his state-issued unemployment debit card.

Middleton, who lives in Texas but was eligible to file in Maryland because his real estate license is here, has been battling both extended symptoms of the coronavirus and the unemployment system. His account was frozen July 4.

“I had most of my funds still on the card because I was home and not going into public,” Middleton said. “I probably had six weeks’ worth of payment on the card that they took back.”

Middleton received one generic email saying only that “an unusual increase in out-of-state claims” led to “select” accounts being terminated. He was unable to get further information from labor officials or the governor’s office.

“There needs to be a communications channel,” Middleton said. “You can never get a human being, you just keep going through the same phone cycle.”

The state website required Middleton to upload proof of identification, which he did, although his account had not been restored as of Wednesday.

Hogan said authorities did not know yet who was committing the crimes, nor whether they were based in the U.S. or overseas. He said it appeared a dozen other states also were affected.

The governor’s announcement came as Maryland and other states are burdened with huge volumes of unemployment claims, straining their systems. The claims result from the steep economic toll of the coronavirus pandemic.

Robinson said the risk for fraud had risen with changes due to the pandemic, namely a waiver of a requirement to have a former employer verify that the filer was now unemployed.

She praised her department for becoming a “victor” instead of a “victim.”

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Hogan indicated the stolen identities came from past national data breaches, and he and Robinson emphasized they were not the result of any breach at the state labor department, where users’ data remained secure.

Fraudulent claims have been an issue outside of Maryland. In a July 6 release, the FBI said it was seeing a “spike” in unemployment claims using stolen identities.

“U.S. citizens from several states have been victimized by criminal actors impersonating the victims and using the victims’ stolen identities to submit fraudulent unemployment insurance claims online,” the FBI release said.

Derek Pickle, special agent-in-charge of the Washington region of the U.S. Department of Labor’s inspector general’s office, said at the Annapolis news conference that there has been a surge in unemployment cases to investigate.

“More than 50% of our investigative matters pertains to unemployment insurance,” Pickle said. In a more typical period, that figure would have been 10%, he said.

Pickle praised state officials for their “diligence” in spotting the fraudulent claims and working with federal officials on the investigation.

The state continues to reel economically from the effects of the virus and the related restrictions.

Since March, the state has received nearly 625,000 claims from out-of-work Marylanders seeking unemployment benefits. As of last week, about 24,000 applicants were waiting to have claims resolved.

Tens of thousands of Marylanders have filed new claims each week during the pandemic. The peak came for the week ending May 2, when 109,000 new claims were filed.

Out-of-work Marylanders have been frustrated by the online system for seeking unemployment benefits, known as Beacon One-Stop. When applicants encounter problems, they’ve had a difficult time getting someone on the phone to help. Many have reported calling repeatedly and never getting through, or getting disconnected when the system does answer.

Hogan said Wednesday that 96.4% of unemployment claims have been processed and the proportion of cases still pending — 3.6% — is “in line with prepandemic levels.”

Hogan made his comments at his first news conference in more than a month. Over the past two weeks, Hogan has done a number of interviews, but they primarily were to discuss his forthcoming political memoir, not the pandemic.

Hogan cautioned that dozens of other states are seeing increasing numbers of coronavirus infections and deaths. He encouraged Marylanders to “refrain” from traveling to states with “escalating” numbers. Anyone who returns from out of state should immediately get tested, Hogan said.

“Only you can keep Maryland open for business by continuing to follow the public health guidelines,” he said.

Baltimore Sun reporter McKenna Oxenden contributed to this article.

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