News from New York State Department of Labor

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Labor Department Announces Crackdown On Unemployment Insurance Fraud In New York City

126 Arrests Lead to $929,948 in Collections; More than $2 Million in Cases

ALBANY, NY (10/28/2008; 1215)(readMedia)-- Joined by law enforcement officials from throughout New York City, State Labor Commissioner M. Patricia Smith today announced that 126 arrests have been made in the five boroughs in relation to the theft of nearly $930,000 from New York State's unemployment insurance trust fund. The State Labor Department worked with every district attorney in New York City, as well as dozens of other law enforcement agencies, to bring these individuals to justice. Most of the individuals that were arrested collected UI benefits while they were earning a paycheck.

"Unemployment Insurance is a lifeline that keeps thousands of families afloat across New York State during difficult times," said Commissioner Smith. "As New Yorkers continue to reel from the effects of a nationwide downturn in the economy, 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. 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."

Joining the Commissioner at a press conference in lower Manhattan were New York County District Attorney Robert Morgenthau; Bronx County District Attorney Robert Johnson; Kings County District Attorney Charles Hynes; Queens County District Attorney Richard Brown; Richmond County District Attorney Daniel Donovan; and Division of Criminal Justice Services Deputy Commissioner Mary Kavaney.

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

Details by county are below:

• Queens - 39 arrests - $289,033
• New York - 29 arrests - $216,523
• Bronx - 24 arrests - $183,667
• Kings - 15 arrests - $132,025
• Richmond -19 arrests - $108,700

Total - 126 arrests - $929,948

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, there is a negative impact on businesses across the state through higher rates for employers whose accounts pay for the false claims. For example, the average employer in New York State (with approximately 15 employees) that has an undetected fraudulent claim filed against it will see a tax increase of approximately $1,000 in the following calendar year. However, the tax increase is not charged to the employer if the fraudulent claim is detected.

"In these difficult economic times, it is especially important to make sure that every dollar of unemployment insurance goes to the benefit of those individuals and families who need help and are entitled to temporary assistance," said Commissioner Denise E. O'Donnell of the Division of Criminal Justice Services. "We must make sure that the limited resources we have are not squandered on cheaters. Under Governor David A. Paterson, we are committed to ensuring the integrity of the safety nets that protect our citizens in need, and that those who abuse the system and cheat both the state and their neighbors are brought to justice."

New York State Police Superintendent Harry J. Corbitt said, "These arrests are the result of a collaborative and thorough investigation by members of our Bureau of Criminal Investigation and the Department of Labor. Together, we are bringing to justice individuals who defrauded the state's Unemployment Insurance program, ultimately, an expense that will affect business owners and the general public though increased taxes."

The Unemployment Insurance program pays more than $2 billion in UI benefits each year. As a result of the department's fraud investigations, over 600 UI cases per year result in arrests and prosecution for fraud. This new level of cooperation among the State Labor Department, law enforcement and state prosecutors will improve the ability to both identify and prosecute UI fraud, and to return fraudulent payments to the UI Trust Fund. Since January 2008, $17,500,000 has been collected and returned to the UI Trust Fund as a direct result of Labor Department investigations.

Manhattan District Attorney Robert Morgenthau said, "Unemployment insurance provides a much needed safety net for those who have lost their jobs. Especially in these days of economic turmoil, we will continue to prosecute anyone who steals from this essential program."

Bronx District Attorney Robert T. Johnson said, "Unemployment insurance fraud is a growing problem and is particularly egregious during these difficult economic times when many honest, hard working citizens suddenly find themselves in need. My office, working in conjunction with the NYS Department of Labor, will work to ensure that those who fraudulently obtain benefits for which they are not entitled are prosecuted. With government struggling to meet basic needs such as education, health care, and public safety, we cannot permit some citizens to grab more than their fair share of our limited resources."

Kings County District Attorney Charles Hynes said, "Unemployment insurance is a critical safety net for out of work New Yorkers and their families that helps them get through difficult times. Those who seek to enrich themselves by stealing these funds endanger the honest working men and women who need them in times of crisis and should face the full extent of the law. I thank Commissioner Smith and the Department of Labor for its efforts in pursuing these law breakers."

Queens District Attorney Richard A. Brown said, "In these difficult economic times, it is particularly important that our limited financial resources be distributed to those who really need them - and not to those who cheat the system. Cheating drives up the cost of benefits - and what looks like easy money to some is, in fact, a serious crime. And that is why we vigorously prosecute these cases - and will continue to do so."

Daniel M. Donovan, Jr., Staten Island District Attorney and President of the New York State District Attorneys Association said, "Crimes against the revenues of the State of New York are crimes committed against all of the people of the State of New York. They force government to cut services and budgets and they result in the hardworking taxpayers having to dig deeper into their pockets to make up for lost tax revenue. Especially in this time of a slowing economy and state budget cuts, it is important for us to redouble our efforts against these tax criminals. That is why as President of the New York State District Attorneys Association, I have made crimes against revenue a focus of our annual winter meeting this year."

At this point, the charges against the defendants are merely accusations, and the defendants are presumed innocent until and unless proven guilty.

Anyone with information that individuals or businesses have committed fraud against the Unemployment Insurance fund can call the Department of Labor's toll-free fraud hotline to make an anonymous report at (888) 598-2077.

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