Part II: Billions Of Dollars Of Unemployment Aid Stolen From State Likely Won't Be Recovered

Editor's Note: This is Part II of Andy Sheehan's investigation into billions of dollars of unemployment fraud in the state of Pennsylvania.

PITTSBURGH (KDKA) -- Security experts say the money is gone and never coming back.

Click here for Part I of Andy Sheehan's report.

"That money — 70 percent of it — went overseas to transnational criminal groups that have used that money for nefarious purposes to harm our democracy, to harm our children and to purchase illicit drugs that have been sold in this country," said Haywood Talcove, the CEO of government business for the security firm LexisNexis.

After low-balling their losses, states around the country now concede they were taken by these groups to the tune of tens of billions of dollars. For example: Michigan initially estimated Pandemic Unemployment Assistance theft at $200 million and now confirms it has lost $8.5 billion. Talcove said Pennsylvania had even fewer identification checks and has lost even more.

"The fraud rate was closer to 20 percent so I would put it at $10 billion because Pennsylvania lacked any type of system to stop identity theft at the height of the pandemic," he said.

KDKA: Are you alarmed at the amount of money that has gone out of the state, apparently out of the country?

Wolf: I'm alarmed whenever I hear about fraud.

For weeks now, KDKA Investigates has been asking the Wolf administration for a figure of just how much money has been stolen, but the state has been unable or unwilling to provide it. Late last week, KDKA confronted Wolf on the staggering estimates of security experts.

KDKA: They're putting an estimate of $5 to $10 billion that's been stolen from Pennsylvania, and they fault the state for not doing enough to stop that fraud.

Wolf: Well, I don't know if that's the number at all. Fraud is an issue. On the other hand, we need to make sure people are made whole when they're unemployed. We're struggling to reconcile these two things.

WATCH: Andy Sheehan's full interview

Like other states, Pennsylvania became swamped with unemployment filings beginning in the spring of 2020, and almost immediately, residents became targets of identify thieves to file false claims, more than a million of them to date. The state blamed data breaches at private companies, but has been taken to task for lacking even basic identity verification.

KDKA: When the system started, there were basically no checks and balances.

Wolf: We've always had checks and balances.

The state implemented facial recognition software last summer requiring at least a driver's license picture. The Wolf administration said that thwarted about $1 billion in thefts, but now many legitimate users say they're having trouble using the system, and critics say cyber thieves have found ways to circumvent it. The state concedes fraud is on the rise again.

"As to the question of whether we've done everything we should do, I'm sure there are things we can do better," Wolf said. "Always trying to do better."

But Talcove said: "The only way to stop this is to prevent it. The only way to prevent it is to use the technology that's used in the private sector."

Talcove said Pennsylvania will never recover the money overseas, but could stop the bleeding by using identify verification system used by your bank or e-retailers like Amazon.

"Could you imagine if a bank or an e-retailer lost the amount of money that the state of Pennsylvania has?" Talcove asked. "They wouldn't be in business. I can tell you this as a CEO, I wouldn't have a job, and probably wouldn't have a company."