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Billion Dollar Scams & Foolery in Illinois

We are the laughingstock of the country. Pritzker signed the bill! People who entered the country illegally will be allowed to become police officers in Illinois. In the Illinois House, only 7 of the Republicans voted against the bill. The rest are fools.

picture of Gov. J.B. Pritzker with a Chicago Policeman
Chicago Tribune News Services/Getty Images Stacy Wescott

Here's the House Roll Call on the Vote:

Here's the Senate Roll Call on the Vote:

It's Just One Scam After Another In Illinois

A shocking report came out this week from the Illinois Auditor General which found that pandemic unemployment fraud in Illinois was $5.24 BILLION. This number is 2.5 times higher than the previous estimate of $2 billion which was shocking enough before and includes $46 million worth of payments to incarcerated criminals and deceased people. The report makes it clear that the Illinois Department of Employment Security (IDES) failed to implement both federal and state rules to protect taxpayer and employer money from fraudsters.

Specifically, the Auditor General report stated that:

  • IDES did not comply with all state and federal statutory and administrative requirements for processing and auditing claims

  • IDES did not implement one of the tools strongly recommended in May 2020 by the US Department of Labor until September 2021

  • IDES chose not to utilize the Integrity Data Hub tools because other IT-related projects were deemed to be of greater urgency during the pandemic.

By mid-May 2020, over one million Illinoisans had been thrown out of work by the government and filed for unemployment. IDES was unable to keep pace with the claims and complaints from both legislators and individuals were piling up. So were complaints of fraud. People who had a legitimate claim to unemployment found out that their personal information had been stolen and their payments “hijacked” by fraudsters. From the report:

“IDES was not prepared to respond to the needs created by the pandemic. Various delays were related to technology including the website and claims processing system. IDES’ website was not equipped to respond to the needs created by the pandemic. Hits to its website increased from 161,502 in 2019 to over 126 million in 2020. The IBIS system crashed due to overload. In addition, PUA benefits could not be processed through IBIS, so there was a delay while a new system was put in place.”

“IDES strived to pay claims as quickly as possible. However, when certain cross-matches and controls were suspended, this increased the risk of making improper payments. IDES made large payments of backdated benefits while controls were suspended which could have contributed to large overpayments and losses due to fraud and identity theft.”

In order to help process claims faster and with more accuracy, IDES hired a number of outside contractors including top names like Deloitte, in total spending over $226 million to have them put in new systems. These systems, however, according to the report did not fully integrate with other IDES systems initially. Specifically, a request for Pandemic Unemployment Assistance (PUA) required applicants to first file for regular unemployment assistance because that system had additional checks to verify identity, but the system Deloitte set up to handle PUA failed to integrate with IBIS initially.

“PUA claim applications were processed through the Unemployment Framework for Automated Claim & Tax Services (uFACTS) system, which is a system developed, owned, and maintained by Deloitte. From the time uFACTS began accepting PUA applications on May 11, 2020, to July 18, 2020, uFACTS did not check with IBIS to verify that a regular UI claim had been filed. To have been eligible for PUA benefits, a claimant was required to first be denied regular unemployment benefits. Beginning July 18, 2020, PUA claimants had to apply through IBIS and be denied regular unemployment benefits before being able to apply for PUA benefits through uFACTS. This added additional verifications to PUA claims which had initially been lacking.”

Legislators on both sides were upset with IDES and yet nothing was done to help employers and taxpayers over the last three years. While this report is helpful, it is meaningless for holding anyone accountable. In fact, Kristin Richards who was the IDES Director when all the fraud took place got moved to a new position in January 2023. Instead of losing her job for incompetence, she is now the head of the Department of Commerce and Economic Opportunity. In a committee hearing this Spring, she was asked some pointed questions by State Rep. Adam Niemerg about fraud at IDES, she got testy, refused to answer questions, and essentially said the UI fraud was a problem everywhere.

Niemerg implies that she was moved solely so she doesn’t have to answer questions about the fraud that occurred under her watch.

Listen to the two-minute exchange HERE.

As to her claim that UI fraud was prevalent everywhere, that is true – HOWEVER, fraud in Illinois is outsized in comparison to other states. In comparing Florida with a population 1.8 times that of Illinois (22.7 million vs. 12.5 million) fraud in Illinois both in percentage of fraud and overall dollar amount was substantially larger.

I looked at the Department of Labor reports on UI fraud during the pandemic. Here’s a snapshot of the report for the first year of the pandemic showing Florida with a Fraud Rate of 6.253 % and Illinois with a rate of 8.445%. In total dollars, Florida’s improperly paid amount is $922 million, and Illinois $1,04 billion.

Link for graph is HERE.

Part of the reason for Illinois having a higher dollar amount even though it has 55% of the population is that Illinois unemployment benefits are higher than Florida, so if fraudsters are looking to steal more, Illinois is a more advantageous place to commit a crime.

Hey, but what’s $5,240,000,000 to Illinois? We’ll just have employers kick in to cover the losses. And that’s exactly what they decided to do. Last Fall, the Democrats made a deal to increase the employer UI rates to cover the depletion of the fund. They could have used COVID money, which in last week’s newsletter I pointed out was being used for grants to the Peoria Chamber of Commerce, BLM Lake County, and other organizations taxpayers should not fund. But they didn’t.

And for all those crying for more money in education, $5,240,000,000 is over 14 years of the standard increase in funding ($350m) for education demanded by the funding formula every year. Hey – don’t worry, we’ll just ask for a tax increase.

More infuriating is that no one has been held accountable and the legislature even passed a law saying that overpayments will not be clawed back in many circumstances. They also passed a law giving prosecutors a longer time to go after fraudsters. Let's hope they follow through and prosecute these thieves.

The $5.2 billion of stolen IDES money doesn’t include Paycheck Protection Program money. This Sun-Times article mentions the 25 Chicago Park District employees who allegedly stole $700,000 in COVID money. The article also mentions that Cook County was the epicenter of PPP fraud:

The federal $800 billion PPP program was a free-for-all for fraudsters, according to experts.

University of Texas professors studying PPP fraud have found that Cook County was an epicenter for fraud, with a “suspicious loan rate” of more than 35% — far higher than in New York or Los Angeles.

Where's Illinois' best and brightest working on this issue? How about all those smart computer, finance, and accounting folks at our top universities? Think we can give them a grant to figure out how to prevent fraud and service legitimate claims?

And one more point, if Pritzker's money manager lost a fraction of this amount, would he just keep him or her in place?

How about Hyatt Hotels? Would they tolerate this fraud and fire no one?

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