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HENDERSON, Ky. — What do a county judge, an attorney and a magistrate have in common?

The answer — they’re victims of identity theft.

During a recent fiscal court meeting, Henderson County Judge-Executive Brad Schneider, Magistrate Beth Moran and County Attorney Steve Gold revealed that unknown persons had stolen their identities and used them to file fraudulent unemployment insurance claims.

“When that happened to me a month ago, I was shocked to receive a check for $600 in the mail saying they couldn’t direct deposit it so they were sending me a paper check,” Schneider said.

“I had no idea what it was all about,” he said. “I immediately called my state senator and also emailed the commissioner of the unemployment office to ask what this was. I was given the information that nearly 50 percent of all applications for unemployment insurance in Kentucky in the last year were fraudulent claims. Nearly 50 percent. This means people like us, who wouldn’t even think about it and had no reason to apply for unemployment, had unemployment insurance claims made in our names and money direct deposited to bank accounts who knows where.”

The issue doesn’t end with getting unrequested money, Schneider said.

“If we had not caught that and notified the unemployment office of that fraud, we could have received a 1099 form later saying we owed taxes on it, and the county could have been on the hook for unemployment insurance costs,” he said.

“If 50 percent of claims are fraudulent, this is affecting Kentuckians and Kentucky businesses across the Commonwealth. It is alarming. So I want to send the message … if you get notice in the mail that you’ve somehow applied for unemployment insurance; if you get money or a check that you know you didn’t apply for, immediately go to the Kentucky Career Center website and report the unemployment fraud. There’s a form through which you can upload pictures of the document you got.”

More: ‘Kick in the stomach’: Kentucky worker wins unemployment appeal then learns program out of cash

Schneider said undoing the fraudulent claim, “took me six forms … I got six different pieces of mail telling me how my unemployment application was progressing. I emailed all of those in. Finally, this week I got confirmation that they received it and understood it was fraud, and were taking steps to shut down those claims. I can only imagine what the problem will be for Kentuckians who don’t understand how to do that.

“Be watchful,” he said. “By the end of this year, and when we get into the next tax season, this is going to be a huge headache. A mess. And the state has barely touched on it.” 

Magistrate Moran said the Federal Trade Commission has helped her navigate the situation.

“The Federal Trade Commission, if you go to their website, they have an identity theft section and they lead you through all of it,” she said. “They are very helpful also.” 

“I know the unemployment office is trying to fix this, but they seem defenseless when it comes to certain types of hacking, and this is proof,” Schneider said. “This is a huge problem across the state, and I get more and more reports of Henderson countians receiving these mysterious checks.

“Meanwhile, there are people who’ve been waiting for months for unemployment checks — legitimate applicants who haven’t gotten their checks — and can’t get a phone call back (from the state unemployment office) and have a hard time getting anyone to answer their email,” Schneider said. “It’s crazy. It’s disturbing.”

More: Unemployment benefits were extended. But some Kentuckians are still waiting for the check

The overwhelming number of unemployment claims caused by the pandemic has exposed several weaknesses within Kentucky’s unemployment system — frailties highlighted through a June 2020 audit by the office of Mike Harmon, state auditor of public accounts.

More: Kentucky unemployment errors: 5 things to know about Harmon’s scathing audit

In the 138-page report released in December, Harmon details 12 “material weaknesses related to internal controls/non-compliance” related to the Kentucky Department of Unemployment Insurance, three connected to the Kentucky Office of Technology and and one involving the Kentucky Department of Revenue.

According to information obtained by The Gleaner, the Office of Technology “sets enterprise standards and policies for information technology in state government and offers infrastructure and IT development support for the business needs of state agencies.”

The Kentucky Department of Revenue, “administers tax laws for the Commonwealth of Kentucky.”

Some of those reported weaknesses specified in Harmon’s report include lax security for state computer servers and information databases, failing to make appropriate payments to claimants, paying unemployment benefits to state employees still working full-time and violating reporting requirements when a data breach occurred.

State Sen. Robby Mills (R-Henderson) said the subject of most of the calls received from constituents involves various issues surrounding unemployment insurance. 

He said a lack of communication between the labor cabinet and the legislature is leading little or no information for people needing help from their representatives.

“We don’t know how to get people answers on UI, much less on fraud. All we do is send people’s name and contact information to to the labor department. Sometimes they call people back; sometimes they don’t. So, what we’ve been telling people is to mark the envelope ‘Fraud’ and mail it back to the labor department.”

Mills said people are getting 1099 forms notifying them that they owe taxes on $12,000 to $15,000 checks they never received.

“This is because of the data breach (from the state databases) sent information to Nicaragua and other foreign countries that’s been bilking this money out of unemployment funds,” he said. “These are funds that Kentucky businesses are going to have to pay back. The UI fund is paid by the employer.”

Because of the volume of unemployment claims the state had to borrow a significant amount from the federal government.

“There’s about $680 million that we are in debt to the federal government for. And there are 80,000 claims still unadjudicated,” he said.

Mills said, in his opinion, progress could be made by open communication between two of the branches of government.

“It’s been a huge breakdown in communication between the legislative branch and the executive branch … this is a major issue that’s been boiling over for four months at least,” he said.

“Every employer, per employee pays into unemployment every year. The increase as to where we were pre-pandemic to where we are now is gonna be about $100 to $150 per employee more, per year for the next 10 years that an employer has to pay back …” Mills said, adding that the increase in unemployment costs affecting businesses will eventually be felt by consumers.

“It’s a huge debacle,” he said.

However, Democratic Caucus Chairman Sen. Reginald Thomas (Fayette) expressed hope that the situation will be rectified. 

“I’ve gotten a lot of feedback from the executive branch” on unemployment issues, he said.

“I will never say there’s no fraudulent claims, because you’re dealing with massive amounts of individuals and massive amounts of money,” Thomas said. “But I think the claims of fraud are exaggerated.”

“I think what you’re seeing now is the issues are being addressed,” he said. “They’ve hired more people; more phone calls are being returned; the number of outstanding claims are being reduced significantly than what it was (previously) … “

Thomas said, “the executive branch has made a significant amount of progress” in turning the situation around.

As for the security breaches from the databases, he said, “I don’t know a lot about the security breaches, and I can’t speak to that issue …”

Thomas said if payments have been made under false claims, “I have no doubt we will be investigating those trying to recover that money and pursue punitive actions against those individuals.”

Thomas said he is hopeful that the Commonwealth will be able to pay off the half a billion dollars borrowed from the federal government by the end of this year.

“The idea that COVID has been a bad year for Kentucky is a mistake,” he said. “We’ve increased our revenues in the 2020-2021 fiscal year. So we are in good shape financially. So we want to work hard and get that money to the feds as soon as possible.”

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