Unemployment Payments Fraud Worth $17B Per Year

By: CBS News
By: CBS News

(AP) PROVIDENCE, R.I. — A nationwide crackdown is coming for people fraudulently drawing unemployment payments — those who were never eligible and workers who keep getting checks after they return to work — a $17 billion benefits swindle last year alone, say federal officials.

With the poor economy lingering and the jobless rate remaining high, Rhode Island and other states are stepping up efforts to stop the fraud and improper payments.

As much as 30 percent of the wrong payments in 2010 went to people who had returned to the workforce but continued to claim benefits, according to Dale Ziegler, deputy administrator for the Office of Unemployment Insurance at the U.S. Department of Labor. Those payments came even after a 2009 executive order by President Barack Obama seeking new policies to cut payment errors, waste, fraud and abuse.

Ziegler said states will be required to submit plans by Sept. 30 to the federal government on how they plan to curb such payments, Ziegler said.

"This is a national concern," said Raymond Filippone, assistant director of income support at the Rhode Island Department of Labor and Training. "States across the country are stepping up and looking at overpayments and detection."

Since last year, Rhode Island now has four investigators assigned to ferret out double-dippers scamming the system, Filippone said and will add a fifth this year. The state has also for the first time retained a collection agency to recoup incorrectly paid payments.

Filippone said the state has paid out $33 million in overpayments since 2008. The May unemployment rate in Rhode Island is the third highest in the country at 10.9 percent.

Providence resident Jose L. Roque, 43, is among 15 people charged last month with bilking the state's unemployment benefits system. He faces one count in state court of obtaining money under false pretenses for allegedly accepting more than $20,000 in benefits over nearly four years while working for a Warwick landscaping company, court records show.

He was released pending a pre-arraignment conference next month. Roque has yet to enter a plea. Officials say people convicted of this crime are usually ordered to pay restitution as punishment.

"I kept working and collected at the same time. I know that's my big mistake," Roque said in a telephone interview. "I feel real bad. I'm sorry for that. ... Before I had problems. You know, now I got more problems."

Since the economic dive began in 2008, 126 Ocean State residents have been criminally charged with defrauding the unemployment benefits system, said state police Capt. James O. Demers.

Since 2008, $8 million in overpayment shelled out by Rhode Island have been classified as fraud, officials said. Filippone said of the $33 million in overpayments paid out over that period, $16.5 million has been recovered.

Those losses are why the federal government is pressing states to keep a closer watch on the $155 billion in jobless benefits paid annually to the nation's unemployed workers.

Five states are collaborating to address a problem known as separation errors, including payments to people who file for unemployment benefits after they've voluntarily resigned from their jobs. Those individuals are not eligible to collect, but some slip through the cracks because their former employers do not respond to states' requests to verify the ex-worker's claim, Ziegler said.

Ohio, Colorado, New Jersey, Utah and Georgia have developed a web-based system to share unemployment insurance information with states, multistate employers and others, Ziegler said.

In New Jersey, officials have also come up with a system to kick the newly employed off the jobless benefits rolls faster, Ziegler said. Whenever people show up in the national directory of new hires, they are assigned a code in the unemployment benefits system that flags them if they file for weekly benefits.

Ziegler said these efforts have reduced the average overpayment from $1,200 to $472. He added the average weekly benefit is $305, indicating most abuses are identified within a week and a half.

Still, Ziegler said officials have been working for years to come up with solutions.

"This is not a simple problem," he said. "If someone who's unemployed and not looking for work, how is someone going to find that out? If you're someone who is claiming benefits and gone back to work, how quickly are they going to find that out? The idea here is prevention."

Cranston resident Patricia A. Proulx said she's been wrongfully caught up in the confusion.

Proulx was also charged last month in state court with defrauding the unemployment system of $18,992 from 2007 to 2010, court records show. She said she applied for partial unemployment benefits after her hours at an area hotel were cut back. Proulx has yet to enter a plea.

"If I was doing something wrong, I wasn't told I was," said Proulx, adding her superiors told her she was eligible to collect unemployment. "I have no idea what's going on. When I called unemployment they didn't want to discuss anything with me. Nobody's letting me know what's going on and what I owe."

Filippone said investigators use multiple methods to identify fraud. They check wage records submitted to the state tax division, the national directory of new hires, and they compare records with state child support enforcement officials. The state also runs an anonymous fraud hotline, subpoenas employer payroll records and sometimes conducts surveillance operations.

Filippone warned scammers are going to get caught and anyone who gets more than what they're owed must pay up.

"My message is to be honest with us," he said. "At a later date, it could be years later ... when you need the funds again, you're not going to be able to receive them. ... We never take an overpayment off the books."

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  • by Real bro on Jul 5, 2011 at 12:14 PM
    As long as that mail man keep bringing me that check I aint going to work.
    • reply
      by Black man on Jul 5, 2011 at 01:06 PM in reply to Real bro
      I second that dawg.
  • by truth hurts on Jul 5, 2011 at 11:53 AM
    Go get em Rick!!!
  • by Jim Location: Gadsden County on Jul 5, 2011 at 11:44 AM
    Someone has overlook the posting of my comments today in Reply to Anonymous listed at 7:31 am. Was this an oversight? The comments were not out of line as listed in WCTV commenting policy. Or was this someone at WCTV that disagreed with my comments that chose not to post my comments since they were contrary to their way of thinking. I hope not. What happened?
    • reply
      by Jim on Jul 5, 2011 at 03:40 PM in reply to Jim
      This does not replace the comments that I posted earlier. You have censored me not using the commenting policy established by WCTV. One can only assume I struck a nerve of an employee(s)that is or is familiar with people stealing taxpayers money by abusing entitlement programs...WCTV or the employee(s) are not fair or trustworthy to post all opinions that are within the set policy.
  • by DJciquondrious Location: Tallahasee on Jul 5, 2011 at 10:00 AM
    I am a Union member. I have a business agent. My agent will find me work, that is why they get a paycheck. The state of Florida, however, is just crooked. We pay into this fund and the funds should be available, if we become unemployed! Look for a big change in the midterms...And look for another Governor for this state. Mr. Scott is a 1 term Governor.
    • reply
      by GV on Jul 5, 2011 at 10:30 AM in reply to DJciquondrious
      Idiot,you do not pay into these funds.Where on your checkstub does it show that you pay?Nowhere because you don't.The employers pay into it,not you.Shows that you don't have a clue as to what you are talking about.
  • by anon Location: right here on Jul 5, 2011 at 09:41 AM
    Not! Lies! All Lies!
  • by LD on Jul 5, 2011 at 08:10 AM
    It's true that waste and fraud need to be reduced. However, instead of always blaming government for misappropriating, we should perhaps look at the unethical liars out there who are falsifying their answers in order to receive benefits. Florida already does wage audits and requires new employers to report new hires within 7 days. However, it's some of the dishonest PRIVATE SECTOR employers out there who are paying people under the table and/or as independent contractors on 1099s, when they are in fact employees. If they were reporting it properly, it would be found in the wage audits with the Dept of Revenue. The cause here is dishonest people and dishonest employers. The government is doing the best they can to detect and stop, but you can't always prevent. Just like the landscaper in the above article...I'm sure he was paid cash under the table, so unemployment could not verify he was making a wage. His fellow neighbors and citizens should have reported the fraud to the state. Citizens and employers need to be accountable as well!
    • reply
      by anonymous on Jul 5, 2011 at 08:17 PM in reply to LD
      • reply
        by LD on Jul 6, 2011 at 05:46 AM in reply to anonymous
        "anonymous" please tell me how the government enables people to be unethical liars? Please tell me how the govt encourages such behavior? Private sector pays unemployment tax, but the government reiburses penny for penny for the unemployment benefits they have to pay out instead of paying into a tax fund, so both sectors pay. Wage audits are cross matched will all wages by social security number. Also, the landscaper went 4 years before getting caught. Know your facts before you speak!
        • reply
          by anonymous on Jul 7, 2011 at 06:07 PM in reply to LD
          LD: The Govt. encourages such behavior because it hands out unearned money which of course is something some people will cheat to receive. Make them do community service for some of the money they receive and you will get a different effect from the cause. It is very simple. Don't tell me to be quiet just because you want to be a socialist and I want to be a capitalist. Once again, the landscaper did get caught making your argument mute.
  • by Georgia Boy Location: Cairo on Jul 5, 2011 at 03:04 AM
    Dee, both are heinous crimes against American taxpayers and should be corrected. It is not nor has it ever been government's responsibility to take care of the slothful. And any time you try to help someone there will be those who line up to take advantage of it so they can be slothful. To hear a woman holding a newborn talking to another tell her all she has to do is have one more baby and she'll never have to work again let's me know there is plenty wrong with the system. And the slothful are spending a great deal of time learning--not to work and earn their own way, but to game the system. Those should be cut off any form of government assistance permanently.
  • by n/a Location: n/a on Jul 4, 2011 at 05:27 PM
    i agree with crackdown on the unempolyment and everyone need to find a job and your president that you got in the white house does not know what he is doing at all and he need to sto give out money and pay off the debt that the u.s.a is in right now and someone need to put them on a hourly wage so they cant go fly fishing and things like that there are alot of jobs you just have to really look and stop take all the money they want to give you.there are alot of lazy people out there in the world they like give give give then then alot of people owe them something they need to get off there but and get a job
  • by Anonymous on Jul 4, 2011 at 02:42 PM
    Obama has given out some money for this, as well as other state governments! It comes down too, people are hurting and can't make the bills! Many hoods, and crack heads are taking advantage of the free money! Rick Scott has taken the step to stop this in the state of Florida and all of you haters: "Stop your whining and think of how much money we will save, with drug testing for more welfare grants"!
    • reply
      by Anonymous on Jul 5, 2011 at 04:29 AM in reply to
      Drug testing is not for unemployment benefits, only for TANF.
  • by johnny Location: ga on Jul 4, 2011 at 12:44 PM
    the biggest frauld of all is the 200 million in tax breaks the filthy rich got to let the poor have their 11 billion unemployment ext.
    • reply
      by Reagan Republican on Jul 4, 2011 at 03:19 PM in reply to johnny
      Johnny, I'm sure you are aware that more than 50% of Americans do not even pay federal taxes and some actually get refunds for EICC every year. We need to go to a flat tax and eliminate the IRS so everyone will be treated fairly when they are taxed for producing for the economy. Upper middle class is deeply taxed and they are NOT the filthy rich and we need to encourage Americans to get a great education, work hard and produce, not the opposite. Do you want everyone to be on unemployment???
      • reply
        by johnny on Jul 4, 2011 at 06:07 PM in reply to Reagan Republican
        no i want good jobs. i just opened my mail and there was the end of the year statement from a oil company i worked for from 98 to 09 when they laid off-fired-ran off it's usa employees and sent 98 percent of their business overseas. they were bragging how this is the fith year in a row that they made a billion dollars profit.1.3 million from the us side of the business.
        • reply
          by Reagan Republican on Jul 5, 2011 at 08:02 PM in reply to johnny
          Johnny, I am with you on GE (Obama's job Czar) and other Major Corp. not paying Federal Taxes. It turned out to be a game of chess between Corporations and Congress who sets the monetary tax rates.(largest Corp. taxes in the world) Corp. took their manufacturing departments out of this country and the numerous jobs went too. Why are you not blaming this on high taxes because that is the cause and we are feeling the effect. Not the other way around. Also, Small businesses make up the majority of GDP and they are alway hit hard with all kinds of local, state and federal taxes and now the Federal Govt. wants to hit the employers along with the employees (minorities included) who have worked their way up over numerous years. Once again, we need a flat tax to stop the control Congress has over our money and how they determine taxes and to whom. Presidential candidate Herman Cain is for a flat tax!!
      • reply
        by Anonymous on Jul 5, 2011 at 04:29 AM in reply to Reagan Republican
        Fair tax now.
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