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Fighting internal fraud in state benefit programs

While external fraudsters who absconded with billions of dollars in pandemic relief have dominated headlines, less attention has been paid to employees scamming those very same programs. Here we spotlight internal fraud at state agencies and what organizations can do to fight this pernicious type of fraud.

In the two years since the advent of the COVID-19 pandemic, news headlines have been awash with sensational stories about international crime gangs and con artists who stole billions of dollars in government relief money. But while these stories captured the public’s attention, another type of fraudster was plying their trade in state benefit agencies across the U.S. — the internal fraudster.

Take Brandi Hawkins, a contractor in Michigan’s state unemployment insurance office. She pleaded guilty to defrauding the agency of $3.8 million in pandemic aid by entering numerous false claims into the state’s employment insurance agency system, often using stolen identities. Hawkins accepted bribes in return for releasing payments on more than 700 claims to external accomplices. (See “State Contractor Pleads Guilty in $3 million Unemployment Fraud Scheme,” U.S. Department of Justice (DOJ), June 30, 2021.) And, Reyes De La Cruz III, who was employed in the Washington State Employment Security Department as an intake agent, filed fraudulent claims paid out to debit cards, impersonated claimants and accepted bribes in exchange for engineering benefit payments for friends, family and acquaintances. (See “Former Employment Security Department employee indicted for filing false claims and demanding kickbacks,” U.S. DOJ, Sept. 24, 2021.) These examples may have filled U.S.DOJ press releases but not the big national headlines. In the case of state benefit programs, internal fraud is the threat few are talking about.

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