UNEMPLOYMENT INSURANCE - CRIMINAL PENALTIES

A recent consultation brought up this issue. This is from the DOL web site and it is in all bold:

"If you work while receiving benefits and do not report that employment, even if it is part-time work, you may be committing fraud. You must report all full-time and part-time employment to the Labor Department or you risk criminal penalties."

So if a Claimant does not report income when a Claimant should, what happens? First, let us look at the NYS Unemployment Insurance Law:

"Sec. 594. Reduction of benefits for false statement. A claimant who has wilfully made a false statement or representation to obtain any benefit under the provisions of this article shall forfeit benefits for at least the first four but not more than the first eighty effective days following discovery of such offense for which he otherwise would have been entitled to receive benefits. Such penalty shall apply only once with respect to each such offense.

For the purpose of subdivision four of section five hundred ninety of this article, the claimant shall be deemed to have received benefits for such forfeited effective days.

The penalty provided in this section shall not be confined to a single benefit year but shall no longer apply in whole or in part after the expiration of two years from the date on which the offense was committed."

A claimant shall refund all moneys received because of such false statement or representation made by him."

What if the Claimant does not refund all moneys. The UI regulations are helpful:

"§ 470.4 Overpaid unemployment insurance benefits

The Commissioner of Labor shall, as provided for in section 18 of the State Finance Law, waive the assessment of interest and late charges on debts owed which occurred as a result of overpayment of unemployment insurance benefits.

§ 470.5 Setoff against unemployment insurance benefits

Established and outstanding overpaid unemployment insurance benefits shall be collected from a claimant's weekly benefit award as a setoff.

Priority of liquidation. In the event that more than one overpayment is established against an individual claimant, setoff amounts will be debited to such overpayments in chronological order.

Willful overpayment. A setoff of 100 percent of the weekly benefit amount will apply to one or more established and outstanding overpayments attributable to an individual claimant so long as at least one of such overpayments is determined to have been willful.

Non-willful overpayment. A setoff of 50 percent of the weekly benefit amount will apply to one or more established and outstanding overpayments attributable to an individual claimant so long as none of such overpayments are determined to have been willful"

But we must also look at another relevant section of the Unemployment Insurance Law:

"Sec. 630. Penalties. Any misdemeanor defined in this title shall be punishable by a fine of not more than five hundred dollars or imprisonment for not more than one year, or both. The penalties and misdemeanors imposed by this title are in addition to those otherwise prescribed in this entire article."

That section under the Unemployment Insurance Law will lead us to the following:

"Sec. 632. False statements or representations.1. Benefits and contributions. Any person shall be guilty of a misdemeanor who wilfully makes a false statement or representation

(a) with the effect of obtaining, either for himself or for any other person, any benefit or payment under the provision of this article or of any similar law of another state or the United States in regard to which this state acted as agent pursuant to an arrangement authorized by this article...."

But other statutes are also involved. In June of 2009, 30 New York State employees from Albany to New York City were arrested and charged with unemployment fraud after they allegedly claimed unemployment benefits while actually working for the state. According to Attorney General Andrew Cuomo, the thirty defendants were charged with some variation of the crimes of Grand Larceny in the Third and Fourth Degrees, Falsifying Business Records in the First Degree, and Petit Larceny. Thus, felony charges can be involved. And if this can happen to state employees, can it happen in the private sector? Here is a press release from the Department of Labor in January of this year:

"New York State Cracks Down on Unemployment Insurance Fraud in New York City
Department of Labor Announces 2009 Fraud Investigation Results

Albany, NY (January 13, 2010) - State Labor Commissioner M. Patricia Smith today announced 159 arrests in New York City during 2009 for the theft of $800,112 from New York State's Unemployment Insurance (UI) trust fund. The State Labor Department worked with district attorneys and other law enforcement agencies to bring these people to justice. Most of those arrested had collected UI benefits while earning a paycheck. Governor David A. Paterson said, "One of the pitfalls of having so many New Yorkers collecting UI is that there will always be somebody who will try to take advantage of the system. Fortunately, we're doing a great job to keep on top of fraud and the results speak for themselves. In fact, New York's stepped-up crackdown on Unemployment Insurance fraud saved businesses large and small more than $35 million last year alone."

"It is nothing short of shameful to think that people would steal from a fund designed to help families put food on the table, gas in their cars and clothes on the backs of their children," said Commissioner Smith. "Governor Paterson has directed the Labor Department and its partners in law enforcement to remain aggressive in bringing individuals who defraud the UI system to justice. Rest assured we will do just that."

The arrests are a direct result of a Labor Department program that emphasizes better fraud detection through data matching, more proactive investigations, and better coordination with local law enforcement and prosecution agencies.

Details by county are below:

New York City Region:

Manhattan 55 arrests $261,966

Brooklyn (Kings) 35 arrests $198,254

Queens 33 arrests $198,057

Bronx 25 arrests $81,897

Richmond (Staten Island) 11 arrests $59,938

Total NYC Region: 159 arrests $800,112

The State Labor Department administers unemployment insurance benefits for the federal government. The weekly payments assist eligible workers who have lost their jobs through no fault of their own. To qualify for UI, people must be:

unemployed
ready, willing and able to work and
searching for a new job.

When applicants cheat the system by stealing from the UI Trust Fund, it has a negative effect on businesses across the state. Employers whose accounts pay for the false claims must take on a higher tax rate. For example, the average employer in New York State (with some 14 employees) that has an undetected fraudulent claim filed against it will pay over $700 more in taxes the next year. However, if the Labor Department detects the fraud, the tax increase is not charged to the employer.

"Unemployment insurance is a safety net for those who need assistance, not a jackpot for those who would game the system and cheat their neighbors," said Deputy Secretary for Public Safety Denise E. O'Donnell. "In this economic climate, when government resources are scarce and needs are high, we must be especially vigilant to discourage and punish cheating. Governor Paterson and I applaud Commissioner Smith and local law enforcement officials for their aggressive efforts to track down cheaters and recover the money they stole from honest taxpayers."

New York State Police Superintendent Harry J. Corbitt said, "The State Police stands ready to assist in investigating and apprehending those individuals willing to engage in the fraudulent use of Unemployment Insurance funds meant to assist honest workers and their families."

Manhattan District Attorney Cyrus R. Vance, Jr. said, "At a time when so many New Yorkers depend on unemployment benefits, the Manhattan DA's Office is committed to rooting out and prosecuting those who fraudulently receive these funds. Thanks to the work of the Governor's Office, the Department of Labor and state and local law enforcement agencies, through investigations like these we can ensure that unemployment benefits are directed toward those who urgently need them. I am proud that our Office was able to restore more than $250,000 to the State."

Kings County District Attorney Charles J. Hynes said, "This kind of fraud steals funds intended to help people who are in genuine need of public assistance. We continue to be vigilant about prosecuting these crimes."

Queens District Attorney Richard A. Brown said, "The payment of unemployment benefits is intended to assist out-of-work individuals and their families struggling through these tough economic times - not to subsidize the lifestyles of those who bilk the government of scarce resources through deception."

Bronx District Attorney Robert T. Johnson said, "The Labor Department is to be applauded for enhancing its data-matching and investigative ability. We will continue to stand alongside them in their efforts to put a stop to fraud."

Richmond County District Attorney Daniel M. Donovan, Jr. said, "Unemployment Insurance fraud is a crime against the taxpayers of this state and our neighbors who are out of work in this tough economy and legitimately need temporary assistance. We will continue to work with our partners in government and law enforcement to aggressively investigate and prosecute this crime."

To make an anonymous report about fraud against the Unemployment Insurance fund, call the Department of Labor's toll-free hotline at (888) 598-2077."