ESD made UI payments without fraud checks, probe reveals

Sep 24, 2020
Written by wpengine

Investigations into Employment Security’s $576 million fraudulent claim scandal of last spring identified a software flaw that allowed benefits payments before claims go through a discovery process to check for fraud risk.

The software flaw that resided in a three-year-old claims-processing system was identified back in June 2019 but was not fixed until May 14,2020. Senior leadership was not aware of the flaw or the fix until August 2020, according to a report in the Seattle Times.

Though $346 million of the fraudulent payments have been recovered, the scandal has resulted in a departmental reorganization and the creation of a new job, fraud chief, who will report directly to ESD Commissioner Suzi LeVine.

“That way, there’s a very clear escalation path and a very clear cross-agency coordination effort,” LeVine said.

Levine added that even without the software flaw, only 14.5% of all the fraudulent claims ESD paid could be stopped because of a series of other mishaps:

  • Waiving a “waiting week” to receive weekly benefits that would have given ESD employees more time to verify possible or real fraud.
  • Federal government directives to speed benefits to needy claimants due to unprecedented claim volume brought on by the coronavirus pandemic.
  • Senior ESD staff was not made aware of the software flaw or fix for it until August 2020, according to LeVine.
  • Three years ago, ESD bought a “core” computerized claim processing system without all the security features that were available at the time.

The state auditor is conducting five separate audits of the fraud and other ESD operations. Some state legislators also have been critical of the mishandling of public funds.

Senator Karen Keiser, D-Des Moines, whose Labor and Commerce Committee oversees ESD, criticized the agency for scrimping on processing software.

She likened selling a “core” system lacking better anti-fraud protection to selling “a car without brakes. You expect the breaks to be in there, and apparently, they weren’t.

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