A stock image of a person filling out an unemployment form Credit: File photo

A server in Mississippi applies for unemployment after losing her new job at an event venue that closed to prevent the spread of COVID-19. But she works on contract and a botched investigation into her previous employment deems her ineligible for Unemployment Insurance.

Another woman who hadn’t worked in nearly two years applies for Pandemic Unemployment Assistance, simply checking the box labeled “unemployed due to the pandemic” on her online claim. She begins receiving the benefits immediately.

The two scenarios illustrate the deeply complex — and often unfair — ways that states deliver unemployment benefits, especially during unprecedented disasters, according to interviews with two sources who have worked directly with the system. The Mississippi Department of Employment Security, which administers unemployment in the state, did not grant Mississippi Today’s request for an interview with top officials for this story.

Dawna Petty, the Hattiesburg server and a single mom, went without a paycheck for more than two and a half months and even received an eviction notice as she navigated the mind-numbing unemployment process.

“I was in unemployment limbo. An unemployment nightmare,” she said.

The agency didn’t even initially tell her it had denied her claim due to inaccurate information an old employer gave the agency, and for weeks she failed to get through the department’s overwhelmed call center to clear up the issue. She successfully appealed and eventually received her debit card in the mail in early June.

And yet many others, including fraudsters, have sailed smoothly through the system.

Unemployment fraud — which usually occurs when someone uses another person’s information to file claims — is more likely to go unchecked during this current crisis due to the large volumes of claims, the increased payments and the less rigorous eligibility determination the agency imposes on Pandemic Unemployment Assistance claims.

Like other states, some of which actually froze unemployment payments due to widespread fraud, Mississippi will likely pay millions on fraudulent claims during the pandemic, experts estimate.

“The scope of the likely misspending is huge,” Matt Weidinger, longtime deputy staff director of the House Committee on Ways and Means, wrote in a post for public policy think tank American Enterprise Institute in May. “Even before the crisis, UI had a high payment error rate of 10.6 percent, resulting in improper payments of nearly $3 billion in the year ending June 30, 2019. If the same error rate applies to the massive $268 billion increase in projected federal UI benefit spending over the coming year, the $28 billion misspent would exceed all state UI benefits paid last year.”

Officials from Mississippi Department of Employment Security told WLOX it has received dozens of calls from Mississippians who say someone has used their information to file unemployment claims without their knowledge. The agency said in a June 4 email to Mississippi Today that it does not have an estimate for how many fraudulent or improper claims it has paid. “There are no measurements because claim filing and payments are continuous and cannot be defined presently; but we will have it at a later date and time,” it said.

As for recouping funds paid out erroneously, “the agency is in the process of defining these measures and once they are finalized, it will be released to the media.”

In order to root out fraud, the traditional unemployment insurance system contains an exhaustive list of questions claimants must answer and a process by which agency employees verify that the information is accurate, such as by contacting employers. But the process can also cause long delays for people with legitimate claims, who desperately need timely assistance to keep afloat after losing their jobs through no fault of their own.

“There is that trade off between safeguards (to prevent fraud) and speed (of processing claims) and I’m not sure we’ve achieved that balance very well,” said State Auditor Shad White.

White said his office plans to help in ongoing federal investigations into fraud schemes within the state’s unemployment system.

During disasters, such as Hurricane Katrina in 2005, states have sometimes taken the approach of doling out funds first, to make sure people receive the help they need, then identifying and recouping any overpayments on the back end.

Like delivering water through a line, White said, some water loss is the “price you’re willing to pay” to get it where it needs to go.

White worries, however, that large amounts of money lost to sophisticated out-of-state or even international fraud schemes will be difficult to claw back.

Washington state, which made national headlines as the subject of one of the largest schemes, was able to recoup $300 million in payments made to unemployment scammers, several outlets reported.

Mass layoffs amid COVID-19 and the policies Congress enacted to help struggling families — primarily bumping weekly benefits by $600 and expanding eligibility to the self-employed and contract workers who would not have otherwise qualified for the benefit — has compounded the nation’s already deeply complicated unemployment insurance system.

Normally to qualify for unemployment in Mississippi, a person must have worked at an employer that pays unemployment insurance; made enough money in the previous year to qualify for benefits; and have been laid off or fired for a reason other than misconduct. A person who voluntarily quits their job is not typically eligible for benefits.

In determining eligibility, the department looks at the amount of wages a person earned during the previous year, prior to three months before they submitted the claim.

Even though Petty had started a new contract gig that she lost due to the pandemic, she had eligible W-2 wages from a job she left in 2019, so the state set her up with a traditional unemployment claim. The employer erroneously indicated she voluntarily quit, she said, automatically disqualifying her due to what’s called a “separation issue.”

She appealed the denial and it took roughly two months for an investigator to rectify her case.

The other woman, whose last job at a factory ended in 2018, did not have sufficient wages to qualify for traditional unemployment, so she filed a Pandemic Unemployment Assistance claim, which does not consider wages since it is designed for people, such as the self-employed, who do not have eligible wages.

Unlike the traditional Unemployment Insurance claim, the agency does not have a consistent policy to follow up with any employers or require tax records to verify that the Pandemic Unemployment Assistance applicant’s information is correct, according to sources.

The claim is simply approved and set up to start receiving payments, whereas another legitimate claim might trigger an investigation that could last several weeks, partly because the agency is sorely lacking the number of investigators needed to handle the large influx of claims due to COVID-19. By June 6, the number of people who filed Unemployment Insurance claims in Mississippi since the pandemic began soared to a record-breaking nearly 340,000. The agency separately reported it had established 81,000 Pandemic Unemployment Assistance claims by May 30.

“I do think that is very unfair and frustrating that other people were getting things I qualified for,” Petty said. “Mine was stuck and there was nothing I could do.”

People who believe their identity has been used within the fraud scheme may report the incident to Mississippi Department of Employment Security at safe@mdes.ms.gov or (800)843-8923 or to the U.S. Department of Labor Office of Inspector General at oig.dol.gov/hotline.htm, 202-693-6999 or 1-800-347-3756.

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Anna Wolfe is a Pulitzer Prize-winning investigative reporter who covers inequity and corruption in government safety net programs, nonprofit service providers and institutions affecting the marginalized. She began reporting for Mississippi Today in 2018, after she approached the editor with the idea of starting a poverty beat, the first of its kind in the state. Wolfe has received national recognition for her years-long coverage of Mississippi’s welfare program, in which she exposed new details about how officials funneled tens of millions of federal public assistance funds away from needy families and instead to their friends, families and the pet projects of famous athletes. Since joining Mississippi Today, she has received several national honors including the Pulitzer Prize for Local Reporting, the Livingston Award, two Goldsmith Prizes for Investigative Reporting, the Collier Prize for State Government Accountability, the Sacred Cat Award, the Nellie Bly Award, the John Jay/Harry Frank Guggenheim Excellence in Criminal Justice Reporting Award, the Al Neuharth Innovation in Investigative Journalism Award, the Sidney Award, the National Press Foundation’s Poverty and Inequality Award and others. Previously, Wolfe worked for three years at Clarion Ledger, Mississippi’s statewide newspaper, where she covered city hall, health care, and wrote stories about hunger and medical billing, earning the Bill Minor Prize for Investigative Journalism two years in a row. Born and raised on the Puget Sound in Washington State, Wolfe moved to Mississippi in 2012 to attend Mississippi State University, where she currently serves on the Digital Journalism Advisory Board. She has lived in Jackson, Mississippi since graduating in 2014.