The Labor Department is moving to recover more than $9 million in taxpayer funds that investigators say were improperly paid out through New Jersey’s unemployment system during the COVID-19 pandemic, according to findings from the Department of Labor’s Office of Inspector General.
The recovered money represents just a small portion of what federal investigators believe could be nearly $1 billion in unemployment fraud nationwide stemming from pandemic-era benefit programs that were rushed into operation during the economic shutdowns.
According to the inspector general’s investigation, fraudsters used stolen or improperly obtained Social Security numbers to file unemployment claims in New Jersey. The claims allegedly involved identities tied to multiple addresses and, in some cases, belonged to prisoners, deceased individuals, and even children.
Investigators ultimately identified more than 53,000 fraudulent unemployment insurance claims connected to the scheme in New Jersey alone.
Federal officials say the $9 million is expected to be returned to government accounts in the near future. The recovery effort follows a broader investigation launched after Labor Department Inspector General Anthony D’Esposito’s office warned in January that state unemployment systems remained vulnerable to fraud.
That warning led to approximately 220,000 suspicious accounts being flagged for further review nationwide. In April, investigators deployed a specialized strike team to New Jersey as part of the effort to identify and recover potentially stolen funds.
D’Esposito sharply criticized state oversight of the unemployment system.
“New Jersey’s 53,000 fraudulent accounts illustrate Governor Sherrill’s failure to safeguard funds and a complete disregard for the American taxpayer,” D’Esposito said.
“Allowing these accounts to go unchecked is unacceptable. New Jersey’s reckless approach demonstrates a profound betrayal of hardworking Americans. My office will not rest until every account has been examined and every stolen dollar is recovered.”
Gov. Mikie Sherrill took office in January, years after the pandemic-era unemployment programs were established under former Gov. Phil Murphy’s administration. Murphy served two terms that covered both the pre-pandemic and post-pandemic periods.
As part of the investigation, the inspector general’s office directed banks in May to freeze many of the accounts suspected of receiving fraudulent benefits. Officials said the unemployment insurance accounts under review span at least 12 states, including New York, Illinois, and California. Financial institutions were instructed to preserve the accounts through the end of the calendar year while investigations continue.
The case highlights ongoing efforts by federal officials to track down pandemic-related fraud years after emergency relief programs distributed hundreds of billions of dollars across the country.
“During the pandemic, criminals and bad actors exploited weaknesses to steal billions of dollars from the American people,” Acting Labor Secretary Keith Sonderling said in an earlier statement.
“We are working with Vice President Vance to ensure we use every tool at our disposal to track down stolen funds, hold fraudsters accountable, and return money to the taxpayers to ensure this program is used as intended.”
Federal officials say the recovery effort is being coordinated with the White House anti-fraud task force, which has already contributed to criminal indictments and additional attempts to recover taxpayer money.
