States Crack Down on Unemployment Insurance Fraud

Job seekers wait in a line at a job fair in Southfield, Mich., Wednesday, June 15, 2011.

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 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."