New fine for unemployment fraud boosts Nebraska's coffers

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Posted: Monday, November 18, 2013 12:00 am

Get caught cheating on your unemployment benefits, and you’ll have to do more than pay the money back. The Nebraska Department of Labor is now fining people who deliberately misstate earnings in a fraudulent attempt to collect benefits.

The 15 percent fine went into effect Oct. 1. In the first month it resulted in an extra $27,000 assessed in 278 cases of fraud, department officials said. The department expects to bring in an extra $200,000 to $250,000 per year because of the fines.

“The penalty is one way to send a message that committing fraud against the State of Nebraska has consequences,” said Evan Littrell, program supervisor for the State Labor Department’s Benefit Payment Control Unit.

Common types of fraud include underreporting income or continuing to collect benefits after returning to work. The department has also seen people continue to collect benefits after going to jail, which is not allowed because a person must be “available to work” to get benefits.

Fines and overpayments that are collected go into the Unemployment Insurance Trust Fund. The bigger the fund, the less money employers have to contribute. The department this week will announce employer contribution rates for the next year. Rates declined this year as fewer people claimed benefits amid economic recovery.

In a more lucrative collections change, the department also has recovered an extra $2 million so far this year thanks to a new program allowing the state to offset the federal tax refunds of people who owed the department for overpayments, whether fradulent or accidental. Before, the department could tap only state tax refunds.

The federal collections were on top of approximately $2 million in annual collections through state taxes and another $2 million collected through the department’s internal collection efforts, Labor Commissioner Cathy Lang said.

Just a small number of people who get unemployment benefits commit fraud — 1 percent of Nebraska benefits cases, or about 270 a month — compared with a 2.9 percent national rate, Littrell said. Fraud cases make up about 15 percent of all the overpayment cases Littrell’s department handles.

Other payment recovery methods include billing the person who got an overpayment, negotiating a levy that comes out of the recipient’s paycheck and offsetting future unemployment benefits.

Nebraska detects an estimated 98 percent of all overpayments, and the Department of Labor has some new detection methods up its sleeve.

Littrell is now using database analysis to hone in on potential fraud cases. He hopes not only to catch more fraudsters, but also to stop accidental overpayments faster by better understanding why the occur.

For example, an accidental overpayment might occur if a recipient continues to file for benefits in a case where the recipient has already started working again but has not yet earned a paycheck. Littrell is cross-checking payments information against work records to find overpayment cases sooner. Other data techniques are still in development, he said.

Littrell said people can anonymously report possible fraud to his department at www.dol.nebraska.gov.

In one of the biggest cases the department has seen, Cortez Rhodes of Omaha this year was sentenced to community service and five years probation and ordered to pay more than $28,000 in restitution after he pleaded guilty to fraud in connection with unemployment benefits.

From April 2010 to December 2011, Rhodes got weekly benefit payments, certifying that he was not working when in fact he had a full-time job, according to court records.

Littrell said people who disregard the rules “offend those that are truly eligible and the employers that pay unemployment.”

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