The federal government arrived in New York this week with unusually forceful language. The Department of Labor Office of Inspector General announced a joint strike team that will use audits, data analysis and criminal investigations to confront what officials described as rampant unemployment insurance fraud.
The numbers explain the urgency. Federal investigators identified more than $750 million in improper unemployment payments in New York during calendar year 2025, including $507 million classified as fraudulent. The Office of Inspector General calculated that fraud and improper payments were draining the system at a rate approaching $2 million each day. The strike team will now work with federal and state agencies to identify suspicious claims, trace stolen funds and pursue civil or criminal cases.
The word “crushing” appeared in the government’s headline before the New York operation had produced publicly documented recoveries, arrests or convictions. The deployment should therefore be understood as the beginning of an enforcement campaign rather than a completed victory. Its success will depend on whether investigators can recover money already dispersed while helping New York prevent the next fraudulent payment before it leaves the state treasury.
The deeper problem reaches far beyond one state. Unemployment fraud has been committed by people working while secretly collecting benefits, government employees exploiting privileged access, organized identity thieves, illegal immigrants using stolen identities and international networks operating from outside the United States. The evidence does not support reducing the crisis to a single nationality or immigration category. It reveals something more troubling: an American safety net was expanded at extraordinary speed without the technology, verification systems or administrative discipline needed to protect it.
Fraud and Improper Payments Are Not the Same Number
The New York figures require careful reading. Fraud is not synonymous with every improper payment, and the two figures should not simply be added together as though they describe separate losses.
The Government Accountability Office defines an improper payment as one that should not have been made, was made in the wrong amount or lacked enough documentation to establish that it was correct. An improper payment may result from an administrative error, missing paperwork, an employer reporting problem or a claimant misunderstanding a rule. Fraud requires intentional deception, such as concealing earnings, inventing employment, using a stolen identity or submitting applications for people who do not exist. All fraudulent payments are improper, but many improper payments are not fraudulent.
That distinction does not make New York’s problem less serious. The $507 million fraud figure alone represents an enormous transfer of public resources to ineligible recipients. The additional improper payments show that the system is also struggling with accuracy, administration and verification. A state unable to determine quickly whether a claim is valid will either pay suspicious applications too easily or delay legitimate benefits while investigators sort through the uncertainty.
The public deserves precise accounting because inflated or carelessly combined figures can undermine the same trust that enforcement is supposed to restore. New York should disclose how the federal estimates were calculated, how much of the improper payment total overlaps with the fraud total, how much money has already been recovered and how much remains realistically collectible.
A Safety Net Built as a Federal and State Bargain
The structural weaknesses of unemployment insurance did not begin during the coronavirus pandemic. They originated in a system that divided responsibility between Washington and the states nearly a century ago.
The Social Security Act of 1935 created a federal and state unemployment insurance arrangement during the Great Depression. Washington established national requirements, collected federal unemployment taxes and financed administration. States built their own programs, set many eligibility rules, collected state taxes from employers and decided individual claims. Only Wisconsin had an unemployment compensation law ready when the federal legislation was enacted, and the other states developed their systems afterward.
That structure allowed states to tailor programs to their labor markets, but it also produced a fragmented national network. Instead of one modern unemployment system, the country operates dozens of state and territorial systems with different software, procedures, staffing levels and fraud controls. Federal officials can issue standards and provide money, but state agencies receive applications and send the payments.
Ordinary fraud existed throughout this history. Claimants sometimes returned to work without reporting their wages. Employers misclassified workers or failed to report payroll. Applicants invented work histories, concealed income or used false Social Security numbers. These schemes could be expensive, but they usually moved through systems designed around employer wage records and a recognizable pool of covered workers.
The pandemic shattered those assumptions.
How an Emergency Program Became an Identity Theft Market
When businesses closed in early 2020, unemployment offices received a volume of claims that many state systems had never been built to process. Congress responded by creating Pandemic Unemployment Assistance, a temporary program extending benefits to independent contractors, gig workers, self employed people and others who did not qualify for traditional unemployment insurance.
The expansion provided essential income to millions of households during an extraordinary shutdown. It also removed one of the system’s strongest verification tools. Traditional unemployment claims can be compared with wages already reported by an employer. Many new pandemic applicants had no conventional wage record, so the original program allowed people to establish eligibility largely through self certification.
A Government Accountability Office examination of the pandemic program found that applicants initially were not required to produce documentation proving prior self employment or income. Congress added documentation requirements in December 2020, months after the program had begun. States also allowed claims to be backdated, which meant one successful application could immediately produce weeks or months of benefits. By May 2020, states had already received approximately 8 million initial applications for the new program.
The combination was combustible. State employees were expected to distribute emergency money quickly while offices were closed, call centers were overwhelmed and software systems were failing. Criminals could purchase stolen personal information, file claims in several states and route the money to prepaid cards or bank accounts before the real person knew that an application existed.
Some state systems were decades old. The Government Accountability Office found that unemployment technology being replaced in six states ranged from approximately seven to nearly 50 years old. Older software was not the sole cause of the fraud, but it made rapid data sharing, identity verification and cross state detection more difficult at the precise moment those capabilities became indispensable.
The resulting losses were historic. The Government Accountability Office estimated that fraud consumed between $100 billion and $135 billion in unemployment benefits from April 2020 through May 2023, representing roughly 11 to 15 percent of the benefits paid during that period. The Labor Department challenged the methodology and argued that the estimate was too high, while the accountability office defended its analysis. Even the lower boundary described one of the largest thefts from a federal benefit program in American history.
Unemployment insurance consequently remained on the federal government’s High Risk List, a designation reserved for programs vulnerable to fraud, waste, mismanagement or major operational failure. The emergency ended, but the weaknesses exposed by it did not disappear.
The Offenders Do Not Fit One Political Story
The public debate often searches for a single group to blame, but unemployment fraud has never belonged exclusively to immigrants, foreigners or organized gangs. New York’s own enforcement history shows how frequently the offender is a person already inside the ordinary American labor system.
During a New York crackdown announced in 2022, state investigators identified more than $11 million in fraudulent payments during one month. The cases involved almost entirely people who continued collecting unemployment benefits after returning to work. Their employers were reporting wages while the workers were still certifying that they were unemployed. This was not sophisticated international cybercrime. It was familiar claimant fraud occurring on a larger scale.
Government access can also be weaponized. Carl DiVeglia, a former New York State Department of Labor employee, was sentenced to 20 months in federal prison after using his position and system access to help submit fraudulent pandemic claims. Federal prosecutors calculated more than $1.6 million in losses, with DiVeglia personally receiving approximately $225,000.
Other schemes were organized on an industrial scale. In Manhattan, a citizen of the Dominican Republic received a 79 month federal sentence for a conspiracy that submitted hundreds of fraudulent applications. Prosecutors said approximately $16.1 million in benefits were authorized and more than $3.2 million was paid. A search uncovered 568 New York unemployment accounts, 747 pieces of mail addressed to other people and numerous prepaid benefit cards.
International distance was not a barrier. A Cameroonian national operating from the United Kingdom was sentenced in Maryland for a scheme exceeding $1.7 million. He used stolen identities to seek benefits from several state systems without needing to enter the United States. The case illustrates why border enforcement and benefit fraud enforcement, while sometimes connected, are not interchangeable. A criminal with stolen American identities and internet access can attack a state unemployment system from another continent.
These cases share a more useful common denominator than nationality. Every offender found a gap between what the government was told and what it could verify before payment.
Where Illegal Immigration Actually Fits
Immigration can be a factor in unemployment insurance fraud, and the record includes serious cases. It must still be described accurately.
New York’s unemployment rules generally treat work as covered when a noncitizen is lawfully authorized to work or is a permanent resident. An immigrant who works legally, pays into the employment system and satisfies the state’s other requirements may qualify for benefits. A person without legal authorization to work is not entitled to collect New York unemployment insurance.
Fraud occurs when an ineligible person circumvents that rule through false statements, stolen identities or fabricated employment. In Nevada, an undocumented immigrant was sentenced after using more than 100 identities to submit unemployment applications. Authorities approved at least $934,129 in benefits, and approximately $698,655 was withdrawn before the scheme was stopped.
The problem also predates the recent increase in illegal border crossings. A federal case in Illinois covered conduct from 2006 through 2012, when a Lake County woman helped hundreds of workers, many of them illegal immigrants, obtain approximately $6.8 million through false Social Security numbers and fraudulent citizenship claims. That prosecution showed that immigration related benefit fraud was possible long before the pandemic and long before the most recent border surge.
Recent cases continue to surface. Federal prosecutors in Massachusetts charged a man described as an illegal immigrant with using a United States citizen’s identity to obtain approximately $30,000 in unemployment assistance and other benefits. The charge remains an allegation unless proven in court, but its method mirrors the broader identity theft problem documented throughout the pandemic.
These prosecutions establish that illegal immigration has contributed to unemployment fraud in specific places and cases. They do not establish that the recent border surge created the national unemployment fraud crisis or accounts for most of its losses. Federal audits have instead identified the principal systemic drivers as rushed program design, self certification without timely documentation, automatic backdating, inadequate identity checks, obsolete state technology, weak data sharing and an unprecedented volume of applications. The largest national fraud estimates cover a pandemic program that began in April 2020, while the vulnerabilities underlying it had developed across state systems over many years.
An honest enforcement policy can hold both conclusions at once. Illegal immigrants who use stolen identities or false records should be investigated and prosecuted. So should citizens who hide wages, state employees who manipulate government databases, employers who falsify payroll and overseas criminals who never cross the border. The relevant distinction is between an eligible claimant and a fraudulent one.
New York Is Part of a National Enforcement Campaign
The New York deployment follows similar federal operations in states where investigators found large concentrations of suspicious payments.
In New Jersey, a joint strike team identified approximately 53,000 fraudulent claims involving more than $9 million. Federal officials also reported roughly 220,000 suspicious accounts and warned that approximately $31 million connected to potentially fraudulent claims could remain exposed without additional action. The operation combined federal investigators, state records and financial data to isolate accounts for review.
Maryland provides an example of recovery through cooperation with financial institutions. The Labor Department announced the recovery of more than $512 million in June 2026, bringing the amount returned through two major Maryland recoveries to more than $1 billion. Much of the money had been frozen before criminals could remove it from accounts, demonstrating the value of rapid communication between unemployment agencies and banks.
California illustrates the cost of allowing weak controls to persist. When federal officials deployed a strike team there in February 2026, the Labor Department cited state findings involving more than $30 billion in potentially fraudulent pandemic claims. California had borrowed approximately $21 billion from the federal government to maintain benefit payments, although that debt cannot be attributed entirely to fraud. Pandemic unemployment, benefit costs, tax collections and program management all affected the fund.
The cases show why national coordination matters. Criminals do not respect state boundaries, but state unemployment databases often do. One identity can be used in several jurisdictions before agencies discover the duplication. A bank may identify suspicious transfers faster than a state labor department. A prison record, death record, immigration record or payroll report held by one agency may expose a claim being paid by another.
The Loss Extends Beyond the Money Stolen
Fraud drains unemployment funds that exist to protect workers during layoffs, but the damage reaches further than the amount appearing in an audit.
Unemployment insurance is financed primarily through employer payroll taxes operating within the federal and state system. Fraudulent losses can place additional pressure on state trust funds, administrative budgets and the employers supporting them. When a fund becomes unstable, policymakers face difficult choices involving taxes, benefit levels, borrowing and federal assistance. Honest employers and workers are left carrying the consequences of decisions they did not make.
Identity theft creates a second victim. A worker may learn that someone used his name only after receiving an unexpected tax form or after an employer is notified of a claim he never filed. The Internal Revenue Service instructs identity theft victims to seek corrected Form 1099 G records from the state and avoid reporting benefits they never received. Resolving the problem can require repeated contact with tax agencies, employers, banks and unemployment offices.
Fraud also makes government slower. Once an agency discovers that thousands of claims may contain stolen identities, it often responds by freezing accounts, requiring additional documents or delaying payments during review. Those controls are necessary, but they can trap legitimate workers in the same investigative machinery built to catch criminals. A parent who has lost a job cannot pay rent with the promise that a delayed claim will eventually be approved.
Public trust suffers as well. Workers are less willing to support a safety net when they believe criminals can empty it with little resistance. At the same time, eligible claimants become suspicious of a government that demands extensive verification from them after paying enormous sums to fictitious applicants. Effective enforcement serves both groups by making assistance faster for the eligible and harder to obtain for the fraudulent.
What a Successful Strike Team Must Accomplish
Prosecution is necessary, but arrests alone will not repair unemployment insurance. By the time a criminal case reaches sentencing, much of the money may have been spent, transferred overseas or converted into assets that are difficult to recover.
The strongest system stops suspicious claims before payment. States need identity verification that compares applicants with authoritative records, including employer wage reports, death records, prison data and applications filed in other states. Agencies need tools that identify hundreds of claims using the same address, device, telephone number, bank account or internet connection. High risk claims should receive human review before backdated benefits are released in a large payment.
The system must also distinguish unusual claims from automatically fraudulent ones. Several members of one household may legitimately use the same address. Homeless applicants may receive mail through a shelter. Seasonal workers can have irregular wage patterns. Automated filters should generate review, not replace evidence.
Federal support is crucial because many states cannot modernize alone. Washington created the emergency programs, financed their administration and encouraged rapid distribution. It therefore shares responsibility for building common security standards, maintaining cross state data systems and helping states replace obsolete technology. A national program vulnerable at its weakest state remains vulnerable everywhere.
Transparency should be part of the New York operation. The strike team should regularly disclose the number of claims examined, the amount frozen before payment, the money recovered after payment, criminal referrals, convictions and administrative errors affecting legitimate recipients. Announcing a large suspected loss is easier than demonstrating that the loss has been prevented from recurring.
Recovery Alone Will Not Repair the System
The pandemic created a rare collision of emergency spending, economic panic and administrative weakness. Congress wanted money distributed immediately. State agencies feared that verification delays would leave families without food or housing. Criminal organizations recognized that speed had become the government’s highest priority and exploited the distance between payment and proof.
The lesson should not be that emergency assistance was inherently misguided. Millions of legitimate workers needed help after government ordered businesses to close and economic activity collapsed. The lesson is that speed without verification invites theft, while verification introduced only after fraud has spread can punish honest claimants as severely as criminals.
New York’s strike team can recover money, prosecute offenders and expose networks that remain active. Its more important contribution would be to show how a state can verify identity and eligibility before sending funds, share information without waiting for a scandal and measure fraud without confusing it with every clerical error.
Immigration enforcement has a role wherever legal status or stolen identities are part of a case. It cannot substitute for modern technology, wage matching, bank cooperation and competent administration. A government that attributes systemic failure entirely to outsiders may overlook the employee abusing internal access, the worker concealing a new job, the domestic fraud ring buying identities online and the state agency continuing to operate software written before modern cybercrime existed.
The standard should be simple and evenly enforced. People who qualify for unemployment insurance should receive it promptly. People who lie, steal identities or manipulate government systems should lose the money and face prosecution, regardless of citizenship, nationality, political usefulness or social status.
New York now has the investigators, federal attention and public evidence needed to act. Whether the state truly crushes unemployment fraud will be determined after the headlines fade, when the next fraudulent application reaches the system and the government must decide whether it can recognize the theft before the money disappears.