Insiders use ID access to steal from Americans

It seems stunning in hindsight that Massachusetts would have taken a chance on hiring Tiffany Pacheco in the first place.

Two months before her April 2020 hiring, she had walked out of a federal prison after serving time for aggravated identity theft and passing bad checks.

Undeterred by that history, Massachusetts hired Pacheco for its Department of Unemployment Assistance. She was put to work processing pandemic unemployment claims, with access to residents’ information.

Pacheco would go on to steal some of those identities and file bogus pandemic unemployment claims in their names, as well as file false claims under her own name and that of her husband, Arthur. All told, she took the government for nearly $200,000 in actual losses, according to court documents associated with her guilty plea.

Pacheco is not alone.

The pandemic spawned a tsunami of scams — likely the largest fraud in world history. Government employees stand out as particularly egregious cases.

U.S. Postal Service workers stole stimulus checks and unemployment benefit cards straight out of the mail, city workers billed for pandemic-related services they never delivered, and Social Security and unemployment agency employees used their access to Americans’ identities to write and in some cases approve bogus benefit applications.

“It’s a travesty that government employees took advantage of the gaps and weak spots to game the system for personal gain,” said Adam Andrzejewski, founder of OpenTheBooks.com, a spending watchdog.

“It tears, rips and shreds at the whole notion of public service when government employees are so used to wasteful spending that they view vital aid like it’s their own Monopoly money. Worse is the lack of empathy for the people truly meant to be assisted — those were fellow Americans trying to make their way through a crisis,” he said.

He said the pandemic fraud shows federal agencies lack basic financial accounting controls. He pointed to the 2.2 million stimulus checks mailed to dead people and pandemic small-business loans paid to 57,000 on the Treasury Department’s “Do Not Pay” list.

“Rightfully or not, pandemic aid was rushed into the economy with little planning or safeguards. Like most funding Congress allocates, it was plainly open to waste, fraud and corruption,” Mr. Andrzejewski said.

Sometimes the abuse was unrelated to the employee’s work or was as simple as using a government computer to file bogus benefit requests.

A high-ranking NASA employee earned an 18-month sentence for submitting bogus pandemic loan claims, claiming unemployment for himself and his retired mother-in-law and spending the money on a pool and a dog breeder.

In many of the cases, it was essentially an inside job. The government position was central to the ability to carry out the scam.

An employee at the Federal Emergency Management Agency, who was detailed over to help the Small Business Administration process pandemic loan applications, was fielding calls from business owners when he spotted a mark in one owner who had filed two applications.

Tyrese Carter told the owner to pay back money for one of the loans and gave the number of his own PayPal account, according to his guilty plea. When the owner got suspicious, Carter impersonated another SBA official to convince the owner that the scam was on the up-and-up.

In New York, one worker at the state Department of Labor pleaded guilty and another faces charges of using their positions to submit and approve more than $1.6 million in fake claims.

Some postal workers stand accused of simply stealing benefits from customers along their routes, but postal clerks in California figured out another scam. They realized that plenty of unemployment benefit cards were being returned as undeliverable and figured the payments were probably fraudulent.

Clerks started pulling those envelopes out of the return-mail stream and found ways to cash the benefits themselves, one of the clerks admitted in court.

Armand Legardy pleaded for leniency with the judge. He said he snapped under the pressure of the pandemic and blamed President Trump for waging “a very public war” on the Postal Service over claims of mailed-ballot voter fraud.

“Workers, including Mr. Legardy, felt the president and public hated them,” his attorney told the judge. “They felt underappreciated while they were being asked to work increasingly longer hours for no additional pay.”

Under sentencing guidelines, Legardy should have served up to two years in prison. Prosecutors asked for a 10-month sentence, particularly given Legardy’s abuse of his Postal Service job.

“In short, people who commit COVID-related benefits fraud against the government need to know that they will be held accountable — and will be sentenced to federal prison,” Assistant U.S. Attorney Charles E. Pell told the judge.

The judge gave Legardy three years of probation. The first 12 months were to be served in limited home confinement.

Sometimes the pandemic fraud was part of a broader pattern of graft.

In Hawaii, Honolulu’s administrator of pandemic funding and the director of the state Commission for National and Community Service worked together to embezzle hundreds of thousands of dollars in AmeriCorps money and then switched to pandemic money in a plot to file and approve assistance applications.

Both men were slapped with 46-month sentences.

It’s impossible to say how many other government employees engaged in fraud and got away with it.

In the case of Pacheco, the identity theft convict who was hired by Massachusetts, it was serendipity that authorities tipped to her in the first place.

Parole officers went to her Massachusetts apartment in September 2020 to check in on her husband, Arthur, who also had just been released from prison. Officers found Pacheco along with signs of an extensive identity fraud operation.

Authorities returned with a warrant and cataloged 100 blank ID cards, 649 sheets of blank checks, 68 hologram overlays, a laminator and an ID card die cutter. They also found $17,000 in cash and a notebook that contained stolen identities.

Poring over her work in the Department of Unemployment Assistance, investigators found Pacheco had filed bogus applications and had gone into the system to increase the amount of benefits they were getting. She pushed a bogus unemployment claim for her husband, who was ineligible to receive the money in prison.

From jail, where she was awaiting trial, Pacheco pursued the scam by arranging for a friend to access the system and pose as claimants, shifting bank accounts to try to ensure payments would still flow.

The Massachusetts Department of Unemployment Assistance fired Pacheco on Sept. 23, 2020, a day after the parole officers uncovered her activities.

The agency declined to answer why Pacheco was hired with an identity theft felony and other crimes on her record, nor would it say whether changes have been made to hiring practices.

Instead, a spokesperson pointed to the Justice Department’s announcement of Pacheco’s guilty plea last year.

Pacheco was slapped with a 42-month prison sentence this spring.

In announcing the outcome, Rachael S. Rollins, the U.S. attorney for Massachusetts, said the case was particularly troubling because Pacheco had just been given a new chance after her release from prison.

“Ms. Pacheco’s job at DUA presented an opportunity for new beginnings following her previous felony conviction. However, she ruined that opportunity by engaging in criminal behavior and refusing to change. Now she will be held responsible,” Ms. Rollins said.

For more information, visit The Washington Times COVID-19 resource page.