While thousands waited for help, state workers gamed the system to collect jobless benefits

While tens of thousands of Kentuckians were forced to wait interminably to apply for jobless benefits during the COVID-19 pandemic last year, a small cluster of state workers who never lost their full-time employment gamed the system in order to claim unemployment benefits for themselves, according to a state report.

Almost two months ago, Gov. Andy Beshear’s office was sent a state inspector general’s report alleging how at least 19 state workers at the Kentucky Education and Workforce Development Cabinet improperly collected $54,232 in state and federal unemployment benefits during April and May of 2020.

That report had not been released publicly, but the Herald-Leader obtained it through the Open Records Act. The report is redacted to conceal the names of state workers accused of wrongdoing. It does not say whether any of them were disciplined.

Asked about the Herald-Leader’s story at his news briefing Thursday, Beshear said some of the state workers have been fired. And “we’ve certainly had some inquiries” from prosecutors about criminal charges being filed, he added.

“I ordered that investigation,” Beshear said. “Because when we learned that some employees might have been getting on the systems themselves to process their own unemployment claims, it was absolutely unacceptable. I think it’s unethical. And I asked the inspector general to do a full and independent investigation and get us that information.”

“Significant action has been taken, including termination of some of those individuals depending on the culpability of them and the level of their actions. It was people taking advantage of their positions and it’s not OK,” he said.

The majority of the state workers were employed at the Office of Unemployment Insurance or the Unemployment Insurance Commission, where they were assigned to help process Kentuckians’ pandemic-related jobless claims.

In an April 17, 2020, online chat inside the Integrity Branch of the Office of the Unemployment Insurance, two employees complained about their comparatively low state wages and observed how even Kentuckians who lost a part-time job could file for unemployment benefits during the pandemic.

“WTF ... F THIS JOB,” one wrote.

“Exactly,” a co-worker responded. “Filing now ... lmao.”

“(expletive) WHY NOT FILE,” the first wrote back.

Both of them then filed for benefits using false information about part-time jobs, according to the report.

Some of the Office of Unemployment Insurance workers used their access to the state’s unemployment benefits system to check on their own claims and those of their colleagues and friends, according to the report. In some cases, they removed “stops” that were placed on their claims once suspicions arose in late April 2020.

These state workers had not lost their full-time government jobs, but they filed for jobless benefits based on the alleged loss of part-time jobs that sometimes did not exist and other times did exist but were never lost, Inspector General Maryellen Mynear wrote in her Feb. 19 report for the governor’s office.

For example, a female state employee claimed she lost her part-time job as a choir assistant at her church. But the church, in fact, received a federal Paycheck Protection Program loan and kept everyone on its payroll. And a male state employee claimed he lost his part-time gig as a basketball coach. But in truth, his league’s basketball season ended before the pandemic struck, and he already had received his stipend for the year.

Also, the state workers typically collected unemployment benefits based on their full-time government salaries, which they still were being paid, and not on the smaller part-time wages they claimed to have lost, Mynear wrote.

They were assisted by the Beshear administration’s decision to adopt the “auto-pay” model, so that benefits were automatically paid for the first two weeks without the usual effort being made to determine eligibility, she wrote.

“Individual and seemingly small decisions made in early March 2020, in a well-intentioned attempt to expedite benefits for Kentuckians, combined to weaken checks and balances intended to ensure claimant eligibility and benefit accuracy,” Mynear wrote.

“Certain experienced OUI employees appear to have exploited known or perceived loopholes within the pandemic unemployment claims process to obtain monetary benefits for part-time jobs, while still fully employed in and compensated for their state jobs,” she wrote.

Unheeded warnings

Some state workers said their claims for lost part-time wages were approved in conversations with Muncie McNamara, the Beshear political appointee who ran the Office of Unemployment Insurance, according to the report. McNamara had been a donor and Nelson County organizer for Beshear’s 2019 gubernatorial campaign.

Other employees told the inspector general that they warned McNamara the auto-pay policy would invite fraud.

McNamara was fired in May 2020 and died earlier this year. He was not interviewed for the report because he had a personnel action pending against the state over his firing, Mynear wrote.

“Multiple individuals interviewed, as well as some of the identified employees, independently but consistently described attempts to explain to then-Executive Director Muncie McNamara that an automatic payment process would generate a myriad of issues — from over-payments due to lack of wage reporting, to possible claimant fraud, to possible U.S. Department of Labor audit for failure to follow established UI protocols,” Mynear wrote.

‘Exploit the system’

In late April 2020, the human resources director at the Education and Workforce Development Cabinet was told that several dozen cabinet employees were possibly filing improper jobless claims and, in some cases, using their official access to the unemployment insurance system to check on the status of their claims.

Lt. Gov. Jacqueline Coleman serves as secretary of the Education and Workforce Development Cabinet.

“EWDC management expressed a general belief that certain experienced employees, who know how the UI program works, took advantage of McNamara’s lack of knowledge and the auto-pay process to exploit the system for personal gain,” Mynear wrote.

After cabinet managers placed a “stop” on a number of the state workers’ claims in the system, some of those employees or their colleagues went back into the system and overrode the stops, allowing their benefits to be processed, Mynear wrote. In the cabinet’s internal language, a “code 90” is required to clear a stopped benefit for payment, she wrote, and the workers knew how to enter code 90s.

By late May 2020, McNamara was fired, the Office of Unemployment Insurance was transferred to the Labor Cabinet and Beshear’s office requested a formal investigation into the episode. Mynear, who ordinarily is inspector general for the Transportation Cabinet, was assigned the job.

Among the inspector general’s findings:

▪ Office of Unemployment Insurance workers applied for jobless benefits to which they knew, because of their training, that they weren’t entitled.

▪ Certain state workers filed for jobless benefits without disclosing their continued full-time state employment on their claims, despite rules requiring all jobs and wages to be identified.

▪ Office of Unemployment Insurance workers improperly accessed their own and friends’ and colleagues’ jobless benefits claims in order to review them, and in some instances — after stops were placed on or around May 1, 2020 — to override the stops and help process them.

Mynear cited numerous violations of state policy and the Executive Branch Ethics Code.

On Thursday, Katie Gabhart, executive director of the Executive Branch Ethics Commission, said her agency has taken no public enforcement action against any of the employees identified in Mynear’s audit. Gabhart said she could not comment on any possible pending actions.