Virginia Employment Commission confirms loss of $1.6 billion in identity theft

Virginia Employment Commissioner Carrie Roth had told legislators in August that potential fraud claims could reach that level, but she said Monday that the beleaguered agency has paid out that amount in cases of identity theft, while blocking $1 billion in additional benefits to people using false identities. The state has worked to separate true and false claims in a flood of requests for unemployment benefits during the COVID-19 pandemic.

"The ones we can prosecute, we will prosecute," Roth said in an interview.

As for the federal and state dollars already spent, she said, "Some of it we'll be able to recover ... a lot of it we won't get back."

The VEC's struggles remain an urgent concern for state legislators, who have themselves been flooded with calls and emails from frustrated and desperate people seeking unemployment benefits, as well as employers who pay into the state unemployment trust fund. VEC faces a backlog of almost 95,000 appeals in unemployment insurance cases, both by the people who've lost their jobs and employers who say benefits are unwarranted in some cases.

The General Assembly has tabled two bills Gov. Glenn Youngkin sought to cut in half the time that claimants and employers have to appeal VEC decisions about eligibility for benefits that affect both. The Senate Commerce and Labor Committee voted unanimously on Monday to spike legislation at the request of its sponsor, Sen. John Bell, D-Loudoun, that would have cut the time to file an appeal from 30 to 15 days. The House Commerce and Energy Committee did the same thing last week at the request of Del. Wendell Walker, R-Lynchburg, who had introduced the same bill for the governor.

The legislation ran into concerns among some Republican members of the House committee, who said the shorter appeals time was unfair, given delays in notifying claimants and employees of their right to challenge VEC determinations in their cases.

"I'm very concerned about it from the standpoint of the employers," said Del. Chris Head, R-Botetourt. "That's a quick turnaround."

Del. Joe McNamara, R-Roanoke County, also expressed misgivings about the proposal and questioned whether reducing the time for appeal would help the VEC reduce its existing backlog of appeals.

"I'm certainly concerned about shortening that time frame," McNamara said in an interview. "I'm not sure it's solving a problem."

The assembly is sending the legislation to the Commission on Unemployment Compensation, a legislative advisory panel, for study as the state continues to grapple with the effects of the pandemic on the unemployment system almost three years after the public health crisis began.

"We're glad to have a study into how we can further expedite the appeals process at the VEC," said Flannery O'Rourke, an attorney at the Virginia Poverty Law Center.

Roth, whom Youngkin appointed as commissioner a year ago, has a different perspective on the proposal to shorten the appeals window, but she said she welcomes the study.

"We firmly believe that this is the right proposal, but we also believe we need to work with everyone to move this forward," she said Monday.

When Roth took the job, the VEC was under a legislative and judicial microscope. It had just settled a federal lawsuit brought by advocates that required the state to hire more people to adjudicate disputed claims and answer calls from frustrated Virginians. The previous fall the Joint Legislative Audit and Review Commission had faulted it in a withering report over the backlog of cases.

Those backlogs included more than 246,000 late reports from employers to verify that claimants worked for them and had lost their jobs through no fault of their own, entitling them to benefits. That backlog at the front door led to long waits for adjudicating claims and investigating potential fraud, including identity theft.

VEC said it has eliminated the backlog of employer separation reports to zero, reduced the number of claims awaiting adjudication to about 10,000 and potential fraud cases to about 5,200. But now the backlog is at the other end of the process, with almost 95,000 in requested appeals awaiting initial action.

Roth said VEC, with help from the attorney general's office, has investigated 98% of potentially fraudulent claims, about 70% of those claims already paid.

The agency also has waived $226 million in overpayments made to claimants through no fault of their own, but successfully blocked a legislative proposal in this assembly session to revive the waiver program, which expired last year.

The problem of identity theft also affects legitimate claimants, who have had to endure delays and technical glitches in proving their identities to collect benefits, said O'Rourke at the poverty law center. "It continues to be a stumbling block."

Roth said the VEC has worked hard to identify legitimate claimants from those flagged for potential fraud. "We did everything we could do," she said.