By SARAH RANKIN and DENISE LAVOIE Associated Press\r\n\r\nRICHMOND, Va. (AP) \u2014 The state agency that handles unemployment insurance in Virginia estimates it has paid out more than $40 million in benefits to individuals who submitted claims on behalf of inmates, according to a federal court filing.\r\n\r\nThe disclosure, which was first reported Friday by the Richmond Times-Dispatch, was made in a criminal complaint filed in federal court last month against two former Virginia inmates.\r\n\r\nCandice Lee Pearce, 30, and John Paul Tierney, 35, are charged with fraud and conspiracy for allegedly getting approval and payment for nearly $75,000 in unemployment benefits. A little over $51,000 of that money was to be paid to five ineligible Virginia inmates, according to an affidavit written by a special agent with the U.S. Department of Labor's Office of Investigations-Labor Racketeering and Fraud.\r\n\r\nThe complaint notes that the case is part of a broader investigation into a scheme that resulted in the Virginia Employment Commission, or VEC, paying an estimated $40 million in unemployment benefits to people who submitted claims on behalf of ineligible inmates.\r\n\r\nThe agency, like others across the U.S., has dealt with an unprecedented surge in unemployment applications amid the coronavirus pandemic and economic downturn, as well as evolving federal regulations and programs.\r\n\r\nOther states are also facing questions about fraudulent payments and whether enough was done to prevent them. An audit released last month in California found the state's unemployment agency paid at least $810 million to prison inmates, more than double the amount previously thought. In total, the state auditor found that the agency paid out at least $10.4 billion in fraudulent claims due to "significant missteps and inaction."\r\n\r\nThe $40 million figure contained in the criminal complaint in Pearce and Tierney's case might not be a full accounting of the fraudulent claims Virginia has paid out.\r\n\r\nIn December, state officials told The Associated Press that about 40,000 claims had been flagged for fraud. A commission spokeswoman said at the time that some claims had been made in inmates' names and some in the names of dead people. In other cases, she described scammers using the addresses of other people and then trying to intercept mail from the employment commission.\r\n\r\nThe commission has not responded to recent questions from the AP about the latest number of claims flagged as potentially fraudulent or the total amount of money that may have been paid out for claims later found to be fraudulent. Once claims are flagged as potentially fraudulent, they are not paid out, the state has said.\r\n\r\nEmployment commission spokeswoman Joyce Fogg didn't respond to a phone call and email Friday seeking comment about the disclosures in the case against Pearce and Tierney.\r\n\r\nThe Times-Dispatch quoted a commission spokesman as saying that the agency uses federal guidelines to determine benefit eligibility and "works diligently to prevent and address suspected incidents of fraud, including flagging the use of multiple claimants with similar bank accounts, addresses, and\/or e-mails."\r\n\r\nThe employment commission has faced persistent complaints over the past year from applicants unable to get basic questions answered about their claims and from lawmakers, who have been flooded with calls and emails from concerned constituents. It has lagged other states in rolling out programs and quickly reviewing certain claims.\r\n\r\nGov. Ralph Northam's administration has generally defended the agency, which has been hampered by an antiquated filing system and a workforce that early last year was about half the size it was during the Great Recession.\r\n\r\n"We take these cases very seriously," said Megan Healy, Northam's chief workforce adviser. "While incidents of suspected fraud are certainly not unique to Virginia, VEC is working closely with federal prosecutors to hold these individuals accountable."\r\n\r\nThe criminal complaint said the VEC began reviewing claims around June to identify cases of fraud and that officials learned from other states in August that some inmates were receiving benefits.\r\n\r\nPearce is accused of filing an unemployment claim in Tierney's name and in the names of four other inmates at the River North State Correctional Center. She's also accused of filing claims in her own name and in her mother's name.\r\n\r\nThe affidavit describes a series of recorded phone calls last summer between Tierney and Pearce, including one in which they discussed Pearce filing a claim in Tierney's name. In another call, Tierney allegedly told Pearce that he found other inmates who wanted her to file claims for them too. In another call, Tierney provided the dates of birth and social security numbers for several other inmates. The other inmates are not named in the affidavit.\r\n\r\nAttorneys for Tierney and Pearce did not return phone calls and emails seeking comment Friday.\r\n\r\n___\r\n\r\nThis story has been edited to correct that the commission's workforce size was half that in the Great Recession in February 2020, not this month.