Pennsylvania unemployment recipients getting tax bills for money they didn’t get

According to the Bureau of Labor Statistics, Bob Gilbert, a resident of Washington County, is one of the hundreds of fraud victims in Pennsylvania whose unemployment compensation funds were stolen last year.

“All I was expecting was for the money to start showing up. When it didn’t, that’s when the alarm went off, according to Gilbert, speaking to 11 Investigates.

In a new report, the Pennsylvania Independent Fiscal Office estimates that traditional unemployment compensation monies worth around $570 million have been stolen in the state since the pandemic began. This data has an estimated fraud rate of roughly 7 percent.

Gilbert’s Pennsylvania Unemployment Compensation account was hacked in September of 2021, and his funds were transferred to a bogus bank account due to the hacking attack. To make matters worse, he was hit with a tax bill for roughly $20,000 that he did not receive this year.

“I’m not going to pay taxes on what they claim; I’ve been paid; I’m not going to,” Gilbert declared emphatically.

Not got Taxed on money.

According to Gilbert’s 1099-G form from the government, which details the amount of money in unemployment compensation, he was awarded $18,094 in 2021.

The only problem is that he did not receive that sum of money. Instead, he claims he received only $2800, which he claims is only five of the 26 payments he was meant to receive.

“My money has vanished without a trace. According to him, “my account was hacked, and the money was transferred to a separate account.”

Gilbert was completely unaware that his account had been hijacked at first. In September of 2021, he was killed, two months before he was eligible to receive Social Security payments.

At the time, he was awaiting a letter from PA UC stating that he had met the eligibility requirements. It took five months, and he anticipated the money to come shortly after receiving the letter in November 2021. When it didn’t, he knew there was a problem with the system.

The next day, Gilbert returned to his dashboard (on his UC account) and discovered that his bank account had been charged, he explained.

In the evening of September 24, 2021, he learned that, at 7:02 p.m., someone had altered his financial details to those of a bogus JPMorgan Chase account.

Recipients did not see accounts hacked.

Gilbert had no idea that his account had been hijacked like so many others.

Following up on our initial investigation last year, we learned that numerous unemployment compensation recipients compromised their accounts in a suspected widespread breach of the Pennsylvania Unemployment Compensation System (PAUCS). Many others were unaware of what had occurred until they read our stories.

Michelle, whose account was similarly compromised, informed 11 Investigates in January that she had received no correspondence regarding the account change.

Upon further inquiry, we learned that the Pennsylvania Department of Labor and Industry (L & I) failed to notify most receivers when their accounts were compromised, citing an ongoing investigation as the reason. Following our reporting, the state finally admitted that there had been a possible breach and provided all receivers free credit monitoring for some time.

Gilbert was one of those who didn’t understand he was most certainly a victim of the massive data leak until he saw our reporting about it.

“Thank heavens for WPXI; I’ll tell you that,” he told 11 Investigates in an interview. “I’m not going to know anything about it.” No, I wouldn’t have had any idea what was going on at all.”

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What to do regarding it?

Gilbert was irritated once more after receiving a large tax charge on the money he had not yet received in the mail. The man declared categorically, “I’m not going to pay it!”

He attempted several times to contact Pennsylvania unemployment customer service to figure out what to do, but he received a busy signal each time. When all else had failed, he sought assistance from his state legislator, Tim O’Neal (R-Washington County).

Channel 11 said that O’Neal described the situation as “a major issue and a huge pain that we have to solve out.” L and I were able to contact O’Neal’s personnel to receive answers.

It has been brought to my attention that you can feel comfortable filing your taxes on simply the money you got,” O’Neal stated.

He stated that the state told his office that beneficiaries would not be in trouble with the Internal Revenue Service if they just paid taxes on the amount they were given as a gift.

Although the IRS website states that you should “ONLY list the money you received” on your taxes, you will need to request an amended 1099-G form from the state and file a fraud claim if you believe you have been victimized by fraud.

Gilbert finally received the remainder of the unemployment benefits he was promised, totaling almost $15,000, which he will be required to pay taxes on beginning in the following year.

This year, he will file his taxes by the IRS website’s instructions and report the advantages he received in 2021, but he is still apprehensive about the process.

“I don’t trust anyone at this point!” he exclaimed, fearful that something would go wrong again.

More PA unemployment scam victims come ahead, the state declares changes.

Following our revelations on an increasing number of problems with the Pennsylvania Unemployment Compensation system, 11 Investigates have been contacted by more than 70 unemployed people in just the last week.

Claimants are dissatisfied with the state since they cannot respond to delays in payments and hacking into their financial accounts.

Another hacking victim

Michele requested that we not use her last name and receive unemployment benefits from Pennsylvania, but her last three paychecks have not been credited into her bank account.

The email stated that the account was being audited as of December 20, but Michele says she received no further explanation. She contacted 11 Investigates after reading our article last week about fraud in the Pennsylvania unemployment system.

She was taken aback when she discovered that the same thing that happened to Ryan in our report had also happened to her.

“It dawned on me that I was not an isolated incident, that this was a widespread problem,” she explained.

Ryan provided us with screenshots of his account, which showed that on November 28, someone going by the name of Pat McDermott modified his payment method from debit card to direct deposit into a Wells Fargo bank account, according to the screenshots. Ryan does not have a bank account with Wells Fargo. It was all a ruse.

In the end, it turned out that Michele had experienced the same thing. According to her, “the money was channeled to Wells Fargo in the name of Pat McDermott.” In my opinion, it’s impossible that this was a widespread hack, and it should have been stopped.”

On Tuesday night, Michele received an email from the Pennsylvania state treasury informing her of the security incident. “There was a scam account with WELLS FARGO enrolled to your profile, which resulted in the direct deposit on file being discontinued,” according to the email from an administrative assistant.

When 11 Investigates contacted Wells Fargo to inquire about the bogus accounts, they received the following response from a Wells Fargo spokesperson:

At Wells Fargo, security is at the center of everything we do, and protecting our customers’ accounts is extremely important. We do not go into great detail about our security methods to maintain their integrity and efficacy.

Nonetheless, it’s vital to point out that when we become aware of a problem, we work directly with our clients to resolve the situation.

We are delighted to assist customers with any potential security issues they may be experiencing, and we urge them to get in touch with us. — James Baum, of Wells Fargo & Company

No state message of breach

In Michele’s opinion, more than three weeks have gone without any communication from the Department of Labor and Industry regarding the breach, despite her persistent attempts to obtain answers from the department through phone calls.

“I did not receive any correspondence in connection with that account modification.” I was taken aback, and when I attempted to contact them, I made repeated calls to the fraud hotline, only to receive the notice, ‘Call center is currently full.’ ‘Please call back later.’ “And then the phone call was disconnected,” she explained.

The more than 70 emails 11 Investigates has received concerning unemployment difficulties since our story with Ryan, the more than a dozen people who have told us that they have also had their account payment information changed to a Wells Fargo account have been included.

Mr. Pete Smock informed us that he was “another of those Wells Fargo folks.” When his wife learned about our unemployment fraud case, he checked his bank account and discovered that the same thing had happened to him as well.

“Same date, same name, same bank, crazy,” he exclaimed, a shaky hand on his shoulder. What could have been done differently? “Why couldn’t they (the state) just tell me, rather than me finding out from you that hey, something’s wrong here?” Smock wondered.

Trying to find solutions.

Since last week, we’ve been requesting information from the state regarding the possible hack. A spokesman for the Department of Labor and Industry released an email late Tuesday afternoon, stating:

In recent months, the Department of Labor and Industry (L&I) has observed an increase in the number of fraudsters attempting to steal unemployment compensation funds through increasingly aggressive and complex tactics.

We are currently actively gathering information in coordination with the right partners to better understand the rise in fraudulent behavior. We also expect to introduce new security features in the coming weeks and months.

By Wednesday morning, L & I had issued a press release addressing the topic of fraud in the public domain.

“L&I takes seriously its obligation to protect government monies as well as the personal information of individuals. In his statement, Secretary Berrier stated that “we will continue these efforts forcefully and transparently.”

In addition, L & I indicated that it would implement a multi-factor authentication method to provide claimants with an additional layer of safety. 11 Investigators followed up with the company to determine when the extra precaution would be implemented but have not yet received a response to their inquiry.

Problems about identity fraud

Because her account had already been compromised, Michele described the state’s disclosure as “too little, too late.” “That should have been done at the beginning of the process before this (the new system) was implemented,” she stated.

In June, the state began a $35 million overhaul to its computer system, which was intended to help reduce a significant backlog of claims. However, issues have persisted, despite the investment.

Many of the victims of this most recent breach have stated to 11 Investigates that they believe the state had a responsibility to notify them immediately that their personal information had been exposed. They claim that failing to do so was negligent.

“I am concerned that these crooks have stolen other information from the unemployment system and may have engaged in other criminal actions in my name,” Michele expressed concern.

“Can you tell me what the great secret is?” Pete inquired. “Do I have to be concerned about the remainder of my financial assets being targeted now?” “How do I know?” you might wonder.

11 Investigates inquired of the state why all persons who may have been affected by the breach were not told, but a spokeswoman from L & I did not respond to the inquiry. We have followed up with the company and hope to receive a response.

Suggestion if you suspect fraud

The following information was supplied by the Department of Labor and Industry for jobless benefit beneficiaries who believe their accounts have been compromised:

Individuals are encouraged to maintain vigilance in protecting their personal and private information and to keep an eye out for signals that their information is being used fraudulently, according to L&I. Fraud can be identified by the following signs:

  • Individuals are getting unrequested unemployment documentation from the Department of Labor and Industrial Relations’ Office of Unemployment Compensation.
  • Individuals get unemployment benefits from the Pennsylvania Treasury, although they did not apply for them.
  • Employers are notified that a claim has been filed against them on behalf of an employee working diligently or an unknown individual.

Report Scam

  • The Identity Theft Form must be completed and sent to the University of California Benefits website after visiting the UC Benefits website and clicking “Report Fraud” at the bottom of the page to report suspected unemployment fraud. Please do not log in.
  • Employers should respond to the Notice of Claim Filed by stating that the claim is bogus and requesting a refund.
  • Identity theft fraud in connection with the federal Pandemic Unemployment Assistance (PUA) program can be reported using this website.

To report fraud over the phone, dial the Pennsylvania Fraud Hotline. According to Labor & Industrial Relations, individuals who believe they are the victims of identity theft should file a police report with their local law enforcement agency and submit a copy of the police report to the Office of Unemployment Compensation, according to Labor & Industrial Relations.

The United States Department of Labor also recommends that victims of identity theft should additionally report their information to the National Center for Disaster Fraud. It is also advisable for victims to consider initiating a rehabilitation plan with the Federal Trade Commission.

State provides free credit monitoring for PA unemployment recipients due to scams.

Because of the persistent problem of fraud in Pennsylvania, the state is taking the bold step of providing free credit monitoring to those out of work and unable to find work.

However, a representative for the Department of Labor and Industry told 11 Investigates that “all UC claimants who have had active accounts since June of 2021 would be provided the protection.”

June marks a watershed moment in the department’s history because it was during this month that the department conducted a substantial $35 million reform of the Pennsylvania Unemployment Compensation system.

The action follows weeks of investigation by 11 Investigates on the possibility of a widespread system compromise. The state would not reveal how many people have been affected as this writing.

A spokeswoman for the Department of Labor and Industry, Alex Peterson, told 11 Investigates that “our ongoing investigation will determine the number of accounts potentially affected by these anomalous account adjustments performed by fraudsters.”

L & I referred to the free credit monitoring as a “precautionary measure” because the company is still investigating a possible system breach, which it claims has not been confirmed.

The Pennsylvania Department of Banking and Insurance provides free credit monitoring services to Pennsylvanians while an investigation into the cause of the disturbances inside accounts continues.

“We are dedicated to collaborating with law enforcement to prevent criminals from stealing public funds and to apprehend those responsibly,” said Jennifer Berrier, Secretary of the Department of Labor and Industry, in a news release.

11 Investigates discussion points to credit-monitoring

According to the news release, L & I cited an exclusive conversation 11 Investigates conducted with the U.S. Attorney for the Western District of Pennsylvania as one of the factors that ultimately led to implementing credit monitoring services.

Assistant United States Attorney Cindy Chung praised 11 Investigates for public service by alerting unemployed people to fraud affecting the unemployment insurance system.

“It’s a service,” says the author. To be on the watch for it in the future, and to be able to defend themselves against it in the present,” Chung explained.

According to Chung, a reporter for 11 Investigates, unemployment fraud is a major problem evolving from bad actors opening fictitious accounts to more sophisticated operations.

“In the beginning, you saw a lot of stuff where people were attempting to swindle the government,” Chung said in an interview with Channel 11. According to the article, “the type of hacking you recently covered is a different type, in which hackers illegally gain access to a system, such as the Department of Labor, and then steal account information.”

A press release issued by the state today cited the interview. It stated that “Last week, the United States Attorney for the Western District of Pennsylvania openly revealed the presence of an FBI and Homeland Security inquiry into what appears to be a pretty advanced, concerted attack to infiltrate numerous government processes.”

“While L&I and the Office of Administration were previously instructed to keep the subject quiet, given the recent public disclosure, the departments can now reveal that they have been collaborating with applicable national partners on the investigation,” the L&I press statement continued.

Shortage of action

A possible major breach of the Pennsylvania Unemployed Compensation system was initially revealed about a month ago. Scores of more unemployment recipients have since come forward to detail similar account intrusions.

“If it hadn’t been for your report, I wouldn’t have realized what was going on with my account,” jobless recipient Pete Smock informed us earlier in the month.

11 Investigators discovered that the state failed to notify a large number of possible fraud victims that their personal information had possibly been exposed. Others voiced dissatisfaction with the state and criticized it for failing to notify them of the event.

The agency has previously claimed the existence of an active investigation as a reason for failing to notify some unemployment applicants that their accounts may have been compromised, according to past interactions with 11 Investigates.

According to the Department of Labor & Industry (L&I), fraudsters’ attempts to steal jobless compensation funds through increasingly assertive and complex schemes have increased in recent months.

“In coordination with the right partners, we are actively collecting information to understand the rise in fraudulent behavior better, and we expect to deploy more security features shortly,” a spokeswoman told Channel 11 two weeks ago.

There are no specifics on when those out of work can access credit monitoring services. Earlier this week, L & I indicated that claimants would be able to obtain credit monitoring in “short order.” The following update was made available to 11 Investigates on Monday.

The finalization of our credit monitoring contract is now in the works. According to Peterson, “Affected claimants will be alerted immediately about how to enroll for the free credit monitoring service.”

L & I committed more than two weeks ago to implementing multi-factor authentication for jobless recipients who wish to access their accounts to provide an additional layer of security. There is yet to be any official word from the state on when this will occur.

In a statement, L & I stated, “We plan on having more data to offer about this initiative in the coming weeks.”