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Concealment Fraud Tops UI Fraud Nationally

Comments | Posted in News | By MacIverNews | Posted May 1, 2013 11:19 AM

MacIver News Service | May 1, 2013

In a report released in April, "Who Is Concealing Earnings and Still Collecting Unemployment Benefits?" the Federal Reserve Bank of St. Louis calculated $3.3 billion of unemployment insurance (UI) fraud was committed in 2011.

Wisconsin can claim 1.26 percent of that figure. The Department of Workforce Development reported $41,607,913 worth of UI fraud for 2011. Of that the state was able to recover $15.6 million or 37 percent.

The Federal Reserve found concealed earnings fraud is the most common type of unemployment insurance fraud. Two-thirds of all unemployment insurance fraud in 2011 was due to concealed earnings.

According to the authors, David L. Fuller, B. Ravikumar and Yuzhe Zhang, "Fraud due to concealed earnings represents the largest source of fraud in the U.S. unemployment insurance system. Individuals with relatively low earnings constitute a larger fraction of those committing such fraud. High-earnings individuals, however, account for larger dollar amounts of this fraud."

"In this article, we document a few facts regarding concealed earnings fraud among various income groups. These facts may help focus efforts to deter fraud and to recover overpayments," the authors write.

In Wisconsin, a person is allowed to commit concealment fraud five times before they can face legal action. Even then, the fraudster has little chance of being convicted. In 2011 DWD detected 1,787 acts of UI fraud. Only 2 of those resulted in convictions.

The people most affected by unemployment fraud are job providers, who pay the tax that funds UI. Lately employers have also been receiving additional bills for UI. When Wisconsin's UI funds ran out in 2009, the state had to borrow money from Washington. The extra bill employers are receiving is to pay off the interest on those loans. Every day Wisconsin owes Washington another $60,000 in interest.

In Wisconsin, a group of lobbyists representing business and labor, called the Unemployment Insurance Advisory Council, act as gatekeepers for UI. They make recommendations to the legislature on what actions it should take.

Currently Republicans in the State Assembly are planning to introduce legislation that would go after UI fraud. They met with the UI Council on April 18th to answer any questions.

Those lawmakers say they did not approach the UI Council with hats in hand. They gave the council a deadline of May 2nd to provide any recommendations it might have. After that the lawmakers plan on introducing their bill with or without the council's input.