Watchdog Investigation : Ignored Laws Mean Unemployment Claims O -

Watchdog Investigation : Ignored Laws Mean Unemployment Claims Overpaid

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Laws intended to detect unemployment fraud aren't enforced, many who commit fraud aren't charged, and South Carolina overpays tens of millions each year in benefits to people who don't deserve them. Laws intended to detect unemployment fraud aren't enforced, many who commit fraud aren't charged, and South Carolina overpays tens of millions each year in benefits to people who don't deserve them.

Laws intended to detect unemployment fraud aren't enforced, many who commit fraud aren't charged, and South Carolina overpays tens of millions each year in benefits to people who don't deserve them.

According to the US Department of Labor South Carolina improperly paid $54,530,921 in 2012. A report from South Carolina's Department of Employment and Workforce, which handles unemployment claims, estimates the improper payment rate for 2011 was more than $80 million. 

"If we can cut that $54 million in half, we are only paying out $22 million and if we are now collecting all of that back, that's $22 million business don't have to pay in taxes," said SC DEW director John Finan.

Finan returned to the agency after the sudden resignation of Abraham Turner in March.  Turner's resignation came as lawmakers were questioning raises for some DEW staffers while the agency laid off staff, consolidated services, and closed many rural offices.  During that time, South Carolina's rate of improper unemployment claims ranked among the worst in the country.

"We had huge volumes in the 2011, 2012 year which spiked everything.  I think people were overworked.  I think errors got made," Finan said.


7 On Your Side found as many as half of the improper payments go to claimants who have earned paychecks while also collecting unemployment benefits.  SC DEW agrees with that estimate. 

There are systems in place that could prevent many of those payments but our investigation showed they don't work.  In some cases the failure was due to simple failure to enforce existing laws.

When a new applicant files for unemployment benefits SC DEW runs that name against a statewide database called the "State Directory of New Hires" or "SDNH".   South Carolina law requires all employers to register new hires with that program which is maintained by the Department of Social Services.  Failure to report should be punished with a fine.

Glenn Hastie, assistant director of child support and enforcement at DSS,  said no employer has ever actually been punished for failure to participate.

"Actually, that's true," Hastie said. "Only two states nationwide might have imposed a fine on an employer for not complying. We don't have a mechanism that's 100%, that will identify non-compliant employers."

Without a reliable system showing who has been recently hired, the state can begin unemployment payments to applicants who are already back on the job.

This year South Carolina lawmakers strengthened penalties for fraudulent overpayments.  The measure passed the state senate with a unanimous vote.  Lawmakers said they had no idea the laws designed to catch those overpayments weren't being enforced.

"You've got an employer breaking the rules and you've got an employee breaking the rules and you've got the honest employees having to foot the bill.  It's just not right.  So we've learned recently that they aren't keeping track of that and that's one of the things we are going to have to address," said Republican Sen. Kevin Bryant of Anderson.

SC DEW does have a Benefit Payment Control unit charged with tracking those overpayments.  The primary tool is called quarterly wage cross-match which compares wage payments made by employers to a roll of those collecting benefits.

A March 2012 audit from the Legislative Audit Commission showed that cross-match system didn't work for years and failed to detect what should have been obvious cases of overpayment.

"An individual working at a state technical college was also collecting UI (unemployment insurance) benefits.  This person collected over $13,000 in UI benefits between August 2010 and July 2011, while being paid by the college at the same time."

That's because the same audit found the cross-match system didn't work for at least 6 years from 2005 to 2011.  The audit directed blame at the agency saying, "DEW staff did not notice the cross matches were not being run even though it was filing reports with the United States Department of Labor showing a significant decline in the number of claims being investigated."

"The DSS new hire report, it's good in the long run it doesn't stop things in the short term.  If the person gives us erroneous information, we take that and if they don't get anything that contradicts it, we pay it until we find out later on with the match that that's not the case," Finan said.

Getting away with fraud?

"It wasn't just one person, it was a lot of people up in here it looked to me was doing it," said 28 year old Thomasina Denise Hicks from her Pickens County home.

Investigators at SC DEW say Hicks defrauded the state of more than $10,000 by filing false unemployment claims.  The arrest report says Hicks, "the defendant while gainfully employed, certified to SCDEW that she had not worked during the period of time in question and therefore fraudulently received unemployment benefits in an amount over $10,000 to which she was not entitled."

Hicks said she's accused of taking $13,000 in improper payments although she said she did nothing wrong.

"My job was not constantly working we were always getting laid off when the season go down we would get laid off that's when I was drawing unemployment," Hicks said.

What's unusual about Hicks' case is that it's been prosecuted at all.

In 2008 SC DEW made the decision not to prosecute suspected cases of unemployment fraud. After reaching an agreement with the SC Attorney General's Office, the agency decided to refer selected cases valued at more than $10,000 for prosecution.

16 cases have been prosecuted this year, 13 faced charges the year prior.

The total amount those 29 people are accused of getting is $455,000.  That's less than one half of one percent of the money SCDEW overpaid in 2011 and 2012.

"($10,000 is) about 40 weeks of the maximum amount (of benefits) to get up to that amount," Finan said.

"I would hate to sit here and say that everyone claiming unemployment is a liar.  That's certainly not the case, but we certainly have a significant number of cases nationwide where claimants are not giving us the correct information.  You can infer what you want in that," Finan said.


Thanks to the implementation of a new system called the "TreasuryOffset Program" or "TOP" SCDEW has been much more aggressive about trackingdown some of that overpaid money.

TOP allows the state to collect some overpaid moneydirectly from federal income tax returns. 

"Now that we are doing the federal, out of the $16million we collected last quarter, $11.1 million of it was federal income taxoffset.  What we're finding is that almosteverybody is filing, even people unemployed and that they get tax credits.  We can go after that money and be successfulat collecting it back.  Even though youhave a high error rate, if you are collecting it back that's the good news forthe state," Finan said.

Finan said the state has collected an estimated $16million in the first quarter of this year. That's more than twice as much as he said the agency estimates it'soverpaid in that same time.  

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