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State paid out $6 million in fraudulent unemployment claims during the pandemic

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Posted at 7:12 AM, Apr 07, 2021
and last updated 2021-04-07 21:43:25-04

NASHVILLE, Tenn. (WTVF) — Throughout the pandemic, many have reported having trouble getting unemployment benefits after being laid off.

But here's a new one. A Franklin woman says the state keeps telling her she's been approved for benefits, even though she's never applied and she still has a job.

It turns out, this is a case of fraud. It's happening across the country. And here in Tennessee, it's cost taxpayers millions of dollars in the last year alone.

Helen Stem has been a bookkeeper at a Franklin CPA office for 19 years. And both she and her boss were stunned last summer when he got a notice stating that she'd applied for unemployment.

"And he immediately handed it to me and said, 'What’s going on?'" Stem recalled.

She had no idea.

Stem told NewsChannel 5 Investigates that she's spent the last seven months trying to convince the state Labor Department that someone else is using her name and personal information to collect benefits.

She sent letters informing the state that she is still employed and has not been unemployed, writing, "This is fraud."

She also sent her pay history for the last year.

And, she called and called and called.

"There’s even a site on the Tennessee Department of labor site, a fraud line to report fraud, I even sent an email to that," Stem shared.

And yet still, her boss got word in February that Stem had been approved for unemployment benefits. He then fired off a letter asking, "I do not understand how this could be continuing... How many times do we have to notify you that you are being used by someone other than Helen Stem?"

"Is that the way it is supposed to work?" NewsChannel 5 Investigates asked Jeff McCord, Commissioner of Tennessee's Department of Labor and Workforce Development which runs the state's unemployment program.

"Obviously not," he said.

"Do you think your department is doing enough to stop this fraud?" we asked.

"What I will say is we are doing a lot and continue to do more. It’s akin to a computer virus. You are always having to adapt. You are always having to adjust. Because the bad guys are adapting and adjusting," McCord explained.

McCord said they've had more than 1.2 million new claims since the pandemic started. They've added 600 new staffers and automation. But when the federal government boosted unemployment benefits, suddenly crooks had added incentive to steal this money and unemployment offices across the country began seeing more and more fraud.

In 2020, according to the Tennessee Labor Department, there were 2,862 cases of fraud, resulting in $6,130,049 in fraudulent payments.

"So do you think you are doing a good job? Do you think you are doing enough to stop this?" we asked the commissioner again.

"I do! Our effort is amazing and we are up against a very large effort too and so yes I would say we are holding our own on the fraud," McCord replied.

But based on her experience, Helen Stem worries the state doesn't have a real handle on the problem or just how big it really is.

"How many times is this happening to other people? And maybe they don’t realize it. They get a piece of paper and say, 'That’s not me,' and throw it in the trash. That’s one of my concerns too is how much of this is going on. And you’ve got all of these people that supposed to be getting it but haven’t been able to get it," Stem said.

The Labor Department has a system that analyzes unemployment applications looking for potential fraud and that is how they identified those 2,800 cases. The Department does not keep track of how many people discover the fraud themselves like Helen Stem did and then report it.

As for that $6 million in fraudulent claims that was paid out last year, it's unlikely that much if any of that money will ever be recovered. The Commissioner said it is very hard to catch the criminals committing this fraud.