AG Ferguson’s innovative unemployment fraud recovery initiative nets $42 million

Ferguson one of the only state AGs to use forfeiture laws to recoup stolen funds

SEATTLE — Attorney General Bob Ferguson announced today that an innovative fraud recovery initiative netted a total of $42 million in stolen funds from 26 financial institutions. 

The announcement marks the end of Ferguson’s first phase to retrieve money from banks and other financial institutions where scammers still had remaining funds. While multiple states suffered substantial losses, Ferguson was the first and remains one of the only state attorneys general who exercised state asset forfeiture powers to recover these taxpayer dollars. As a result, Washington has recovered a total of more than $420 million in stolen funds. The Attorney General’s Office will continue to assist in federal investigations to recover stolen funds, as well as investigate any liability of banks and financial technology companies for Washington’s losses.

“Our innovative use of the law to recover stolen funds led the nation,” Ferguson said. “We delivered results for taxpayers and unemployed Washingtonians.”

Beginning in April 2020, Washington's unemployment insurance program was one of the first to suffer an unprecedented and massive nationwide attack of imposter fraud. 

Sophisticated fraud rings used identity data harvested from data breaches to steal billions of dollars from 53 government programs that received federal pandemic unemployment benefits, according to a recent government accountability report. While the exact extent of the fraud is still unknown, the same report estimated losses to fraud nationally to be as much as $135 billion.

Soon after the thefts, Ferguson initiated an investigation searching for bank accounts where scammers did not withdraw all their stolen funds and launched a legal effort to reclaim these funds for the state. To date, financial institutions across the country cooperated with the investigation. Essentially, the Attorney General recovered stolen money in accounts at banks and other financial institutions that criminals were unable to withdraw.

Washington state’s Employment Security Department estimates that during the COVID-19 pandemic, fraudulent claims accounted for $647 million, or 3%, of the overall $21.7 billion in unemployment benefits paid to workers. The state has recovered $423.6 million so far – more than two-thirds of the stolen funds. The Attorney General’s innovative use of forfeiture laws brought in 10% of that total.

This leaves approximately $223.4 million lost to fraud so far, which amounts to 1% of the total $21.7 billion in benefits. Consequently, 99% of the unemployment benefits went, as intended, to support workers during the pandemic.

Other states experienced much larger losses to fraud, like California at $18.7 billion. Arizona lost $4.4 billion and Virginia lost $1.6 billion to fraud, and both have similar-sized populations to Washington state.

According to department data, it caught the fraud within the first two weeks and decided to pause benefit payments, which prevented payment on more than 100,000 fraudulent claims. Its finance team then collected and analyzed fraud data and determined that 95% of fraudulent payments went to 75 banks. From there, the department specified that it contacted each bank and attempted to recover funds. This effort included sharing fraud data with the banks and reaching resolutions on the amounts available to return.

“We're thankful for our partnership with the Attorney General," said Commissioner Cami Feek, "It’s wonderful to see our collaboration and hard work paying off. Fraud recovery has been a long road; however, our collective efforts have made us a leader in fraud recovery nationally and a resource for advice and guidance for other states.”

Searching for accounts with red flags

The Attorney General’s Office used the department’s data and subpoenaed more than 35 banks across the country to identify accounts with balances of $1,000 or more that bore red flags or indicators of fraud.

Red flags included:

• Accounts that received unemployment benefit payments from multiple states;
• Accounts that received deposits of unemployment benefits to multiple people; or
• A mismatch between the personal information of the account holder and the person who supposedly applied for the benefits deposited in the account.

Ferguson filed cases to recover stolen funds remaining in accounts at 26 different financial institutions. In part because of these forfeiture litigation efforts and the assistance provided to the department, Washington was more successful than other states in mitigating, and securing recoveries of, unemployment fraud losses — helping to preserve funds for the benefit of unemployed workers. 

The funds recovered by the Attorney General’s forfeiture initiative go back into the state unemployment trust fund and to the federal treasury.

Special Assistant Attorney General Jeff Sprung in the Complex Litigation Division is leading this effort, along with Assistant Attorneys General Martha Rodriguez Lopez, Spencer Coates, Kendall Scott Cowles, Erica Franklin, John Nelson, Lia Pernell and Nick Quijas, paralegals Sara Cearley and Kellie Tappan, legal assistant Victoria Johnson and investigator Greg Coleman.

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Washington’s Attorney General serves the people and the state of Washington. As the state’s largest law firm, the Attorney General’s Office provides legal representation to every state agency, board, and commission in Washington. Additionally, the Office serves the people directly by enforcing consumer protection, civil rights, and environmental protection laws. The Office also prosecutes elder abuse, Medicaid fraud, and handles sexually violent predator cases in 38 of Washington’s 39 counties. Visit www.atg.wa.gov to learn more.

Media Contact: 

Brionna Aho, Communications Director, (360) 753-2727; Brionna.aho@atg.wa.gov

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