State laws seek to crack down on COVID fraud

New state laws aim to crack down on the historic wave of fraud that robbed New Yorkers of billions in pandemic aid and stole millions from countless people tangled in COVID-19 schemes.

The measures boost rewards for fraud whistleblowers and increase penalties for fraud committed during emergencies. Gov. Kathy Hochul on Dec. 28 signed the laws approved by state lawmakers in 2022.

Lawmakers' focus on reducing fraud comes as USA TODAY Network reported recently on the army of fraudsters who ripped off about $400 million in COVID-19 aid and unemployment benefits intended for New Yorkers.

"We are sending a clear message: New York has zero tolerance for fraud, especially in our most critical times of need," Hochul said in a statement. The new laws, she added, will "assist with recovery efforts while cracking down on bad actors and their deceitful attempts to turn a profit during emergencies."

How NY's fraud laws will change

Currently, a successful whistleblower in New York will receive between 15% and 30% of the proceeds recovered from fraud cases. That includes cases where private citizens file civil lawsuits on behalf of the government to help recover defrauded money.

The new law allows courts to increase that whistleblower reward amount by up to 5% if the government intervenes, or 10% if it does not. The disclosure must also be about the use of government funds defrauded during a state of emergency, the legislation stated.

Another new law will impose higher monetary penalties on any partnership, corporation, company, trust or association, or individual who commits fraud during a declared state of emergency. The penalties will be not more than $15,000 for each violation, or three times the actual restitution needed − whichever is greater, the law states.

What NY lawmakers are doing about unemployment fraud

Meanwhile, COVID-related fraud is expected to drive heated debate during the upcoming state budget process, which begins in January and ends in April.

One reason is a scathing audit that slammed state Labor Department officials for failing to replace the long-troubled unemployment insurance system. The audit found the system contributed to an estimated $11 billion in unemployment payments lost to fraud amid the pandemic's first year.

Some Republican lawmakers recently urged Hochul to include funding in the upcoming state budget to pay down the $7.8 billion in unemployment system debt accumulated by New York during the crisis. Business leaders have complained they have been shouldering costs related to the debt repayment linked to systemic failures.

"It is unfair and unreasonable to expect New York employers to pick up the tab for the state's mistakes," state Sen. George Borrello, R-Sunset Bay, said in a statement about the unemployment debt repayment.