The good news: the Washington state Attorney General’s Office is going after $7.4 million in stolen jobless benefits the office contends are in accounts at Wells Fargo, one of dozens of banks allegedly used by fraudsters in last year’s $650 million wave of unemployment theft.
The bad news: those funds are just a fraction of the $43.5 million state regulators say criminals tricked the state unemployment agency into wiring to Wells Fargo.
On Wednesday, the office asked a King County Superior Court to require the forfeiture of $7.4 million held in 1,189 Wells Fargo accounts allegedly used by criminals who filed fake jobless claims with the state Employment Security Department early in the pandemic.
San Francisco-based Wells Fargo, one of 37 banks that the office claims may have received stolen benefits, has already voluntarily returned $7.7 million to the state, the ESD confirmed Thursday. A spokesperson for Wells Fargo said the bank has no comment on the case.
It’s the second time Washington has used the forfeiture process in an effort to recover funds stolen during the fraud; in October, New Jersey-based TD Bank agreed to return nearly $500,000 from accounts used by suspected fraudsters.
“We’ve proven this approach can bring money back to our state,” said Attorney General Bob Ferguson in a statement. “We will keep fighting to return as many stolen dollars as possible.”
Still, even if the state succeeds in its forfeiture case, that leaves $28.4 million that is unaccounted for at Wells Fargo. If the TD Bank case is any guide, much of that money may have been withdrawn by fraudsters before bank officials froze the accounts.
The Wells Fargo case underscores just how challenging it has been to recover all money stolen from Washington and other states during the pandemic, even as investigators claim to have succeeded in tracking down some of the thieves. Two Nigerian citizens and a former ESD employee from Moses Lake have been criminally charged.
Washington is still seeking approximately $260 million of the roughly $645 million the agency has estimated was stolen in the spring of 2020.
But the case also resurfaces questions of whether Washington’s current estimates of the amount stolen might not include everything thieves actually stole.
Much of what has been recovered so far has come through federal efforts and in the form of voluntarily returns. In mid-2020, nearly $200 million was returned to the agency by Green Dot, a prepaid debit card company allegedly favored by some fraudsters, according to a June 2020 letter from then ESD Commissioner Suzi LeVine.
But fraudsters also used accounts at conventional banks, where recovery can be a complicated process. One reason: Fraudsters often used a single bank account to hold unemployment benefits stolen from multiple states, officials have said.
Often, banks must be compelled via court order to forfeit funds. TD Bank’s agreement in October to return the nearly $500,000 in benefits marked the first time a state had used the forfeiture process to recover funds stolen in last year’s fraud, Ferguson said.
The much larger amount in the Wells Fargo case is “primarily … a function of the very different size of the banks,” said Brionna Aho, spokesperson for the Attorney General’s Office.
But both cases share features that underscore the challenges of recovery.
Although officials in Ferguson’s office were unable to say exactly what happened to the missing $28.4 million at Wells Fargo, in the case of TD Bank funds that were not either returned voluntarily or the subject of forfeiture were considered to have been removed by criminals before the accounts were locked. (Those missing funds may be included in separate federal investigations, officials in Ferguson’s office said.)
In both cases, investigators are pressing banks to return not only funds in accounts flagged as suspicious by ESD, but also from accounts that the banks had independently flagged as potentially fraudulent.
Wednesday’s filings, for example, refer to Wells Fargo accounts “that received payments categorized by ESD as the product of known or probable fraud.” But the filings also refer to Wells Fargo accounts “that had received benefits payments from ESD and that had been independently restricted — flagged, frozen, or suspended — by the bank as a result of its internal fraud controls.”
The $7.4 million in funds being sought by the state includes funds both from accounts flagged by ESD as well as accounts that were flagged and “independently restricted based on the bank’s internal fraud controls.”
Officials in the Attorney Gerneral’s Office Thursday were unable provide details about how much of the $7.4 million came from each category. But the presence of funds in those “independently restricted” accounts could raise the total amount recovered, as well as the total amount stolen.
ESD officials were unable to say Thursday how the focus on “independently restricted” accounts in the ‘investigations could affect estimates for the total amount stolen in last year’s fraud, but promised to provide more information next week.
