Alabama deploys new money, new tools for age-old problem of unemployment fraud

“We’ve got a lot of fraud on the back end of the system,” state official says.

Updated: January 16, 2023 - 11:14pm

The Alabama Department of Labor’s portal for unemployment insurance claims is poised to get another technological upgrade, following a vote from a legislative committee, as state officials ramp up efforts to combat fraud.

The Legislature’s Contract Review Committee earlier this month authorized a request from the state agency to appropriate $20 million in federally allocated funds toward enhancements on a data station linked to the portal.

Netacent, an Idaho-based firm, has been awarded the contract for the data station upgrades. The company previously undertook the overhaul of Alabama’s obsolete unemployment insurance system at the height of the pandemic.

“It was 40 to 50 years old and was out of step with a lot of states,” Arthur Ray, assistant general counsel with the Alabama Department of Labor, said of the old setup. “Now it’s a new system.”

Ray said an ongoing relationship with Netacent was a necessity since the company owns the data station software that powers the unemployment insurance portal.

Netacent representatives must perform any changes and additions to the existing system, according to information from the department.

In the past year, as the stay-at-home impacts linked to the pandemic subsided, Ray said state officials began looking into fraud and abuse of unemployment insurance benefits – particularly those disbursed in the second half of 2020 and into 2021, as new and continuing claims were at their height.

“We’ve got a lot of fraud on the back end of the system,” Ray said of the rationale behind the new ancillary contract with Netacent.

While the state has an established agreement with Netacent, Ray said, “This is additional work and, therefore, an additional contract.”

During deliberations around the new contract, Ray confirmed the Department of Labor endured voluminous fraudulent unemployment insurance claims, particularly in the months following the onset of COVID-19 in March 2020.

Ray said he was unable to provide specific monetary estimates on the level of unemployment insurance benefits, but said the department continues to investigate cases, with assistance from the Alabama attorney general’s office.

“It was more widespread than you would imagine,” Ray said. “When you put out a honey pot, the bees come, as they say.”

During investigative work on fraudulent claims, Ray said there was a recurring theme that arose in Alabama and was mimicked in a number of other states across the country.

“There was quite a bit of identity theft,” he said. “What these people would do is assume other people’s identities.”

In some instances, Ray said the Department of Labor and Attorney General’s office are attempting to recoup since-determined fraudulent unemployment insurance payouts, per case, as high as $30,000.

“We are chasing them,” he said. “We are working on recovery.”