Tens of thousands of people cheat New York State out of an estimated $150 million every year through unemployment insurance fraud.
Among those who have cheated the state are prison inmates, people who were on overseas vacations when they applied for benefits and people who had "off the books" jobs but claimed to be jobless.
In order to cheat the system, people commit two felony crimes - grand larceny and offering a false instrument with intent to defraud, each punishable by up to four years in prison.
Yet the vast majority of those caught, about 97 percent, are not criminally charged.
Only a handful of people - about 3 percent, according to statistics The Buffalo News obtained from the state - get criminally prosecuted.
How does the state decide which of the violators will get prosecuted?
To those who deal with the state on unemployment fraud issues, that is a mystery.
"I've seen cases where people who worked for us were criminally prosecuted for taking $3,000, and others where people who took as much as $15,000 were allowed to just pay the money back," said a human resources executive for one local company, who spoke on the condition that he and his company would not be named. "When I tried to ask someone from the Labor Department why it happened that way, the person told me, 'I don't even know.' I've been dealing with them a long time, and it's a very dysfunctional system."
John W. Greenan, Erie County's personnel commissioner for the past 10 years, also finds it confusing, and to him, disturbing.
"A part of our job is to protect taxpayer dollars. We have an individual in our office who investigates unemployment fraud [by county workers]. Several times each year, he comes up with cases where someone has taken significant amounts of money," Greenan said. "We bring these cases to the Labor Department, but I've never seen one that was criminally prosecuted."
"It bothers me," Greenan said, "because they're stealing from a program set up to help people through rough times, in a rough economy. It makes a bad statement when you let people get away with this."
Officials of the state Labor Department, who administer unemployment benefits in New York, say they work hard to investigate fraud and seek prosecution of the most serious cases.
Each fraud case is evaluated on its own merits, they said, adding that the ultimate decision to prosecute is made by the state's 62 county district attorneys, some of whom have more manpower to handle such cases.
"We go after the most egregious cases," said Leo Rosales, spokesman for the Labor Department.
Generally speaking, he said, the department seeks criminal prosecutions of the people who steal the largest amounts of money. Also, Rosales said, the department has more ironclad evidence against some people than others.
In some cases, state officials said they elect not to seek criminal prosecution when a violator admits wrongdoing and offers to repay the money.
"[But] I do not want anyone to think that, by offering to repay the money, a person can automatically avoid criminal charges," said John W. Dormin, executive director of the Labor Department's office of special investigations.
The News filed a freedom of information request in early June with the Labor Department, seeking the names of people in Western New York who have been allowed to pay back illegal unemployment benefits without being criminally prosecuted, as well as the amount they are paying back.
More than a month later, the state has not provided the information.
The News spoke to several people who deal with the unemployment system and are baffled over the way prosecution decisions are made. Those people include local human resources executives, personnel directors, payroll company executives and defense attorneys.
Hard times
With the nation and the state suffering through hard economic times, unemployment benefits are an important lifeline for millions of families, and nationally, one out of 17 Americans collected unemployment benefits at some point last year.
In New York, more than 1.15 million jobless or underemployed people collected these benefits last year, receiving up to $405 a week, for a total of $7.66 billion.
The amount of intentional fraud in New York is estimated at about 2.4 percent, well below the national average. But that still adds up to an estimated $150 million every year, according to the state Labor Department.
The vast majority of the people who get caught cheating - about 97 percent - do not get criminally prosecuted, according to state figures. Authorities told The News that most people who cheat receive a "noncriminal resolution." The state allows them to repay the money they took, and often bars them for a period of years from reapplying for benefits.
In an examination of local cases, The News found one case in Niagara Falls in which a man was criminally charged as a felon for illegally applying for and obtaining $3,240 in unemployment benefits. That man, Clarence Bradley, applied for benefits - and got them - while he was working.
But according to law enforcement officials, business executives and defense lawyers who work with unemployment fraud cases, there have been many people in Western New York who stole far in excess of $3,240 in unemployment benefits and never were criminally prosecuted.
Among the factors that influence such decisions are the amount of money stolen, the strength of the evidence and how much manpower a particular DA's office has available to prosecute unemployment fraud, Labor Department officials said.
"As a defense lawyer and also as a prosecutor, almost every case of [unemployment fraud] I've ever seen had a noncriminal outcome," said Robert N. Convissar, former president of the Erie County Bar Association. "I've seen cases where someone stole as much as $8,000, and an agreement was made that the person could pay the money back, with no criminal charges."
Convissar has been a defense lawyer since 1988, and before that, he was a top aide in the Erie County District Attorney's Office. Similar comments about the handling of unemployment fraud cases were made by three other local attorneys - Harvey P. Sanders, Steven M. Cohen and James Quinn Auricchio, a former county and federal prosecutor - in addition to the human resources executive and Greenan, personnel commissioner for Erie County government.
Depression origins
The unemployment benefits program began in the mid-1930s, during the Great Depression. State governments dispensed $106.8 billion in unemployment benefits nationwide in 2011, according to the U.S. Labor Department, to a total of 18.4 million people.
Nationally, almost $13.7 billion in unemployment benefits were erroneously paid in 2011, according to a study released in March by the U.S. General Accounting Office. The unemployment benefits program had an "error rate" of 12 percent, the eighth-worst error rate of any federal benefit program in the country, the GAO said.
In New York, the error rate of 7.3 percent was well below the national figure, and state officials estimate the amount of intentional fraud at 2.4 percent. In other words, out of every 100 New Yorkers who applied for unemployment, fewer than three people were intentionally trying to cheat the system.
Some observers say cheating got a lot easier when the state began allowing residents to apply for unemployment online or by telephone in 2006.
For decades before that, a person on unemployment would have to meet face-to-face with a Labor Department counselor and explain in person what efforts he or she had made to get work since the last weekly meeting.
Nowadays, unemployment recipients answer a series of questions by telephone or online. Among the questions:
* Did you work last week?
* If yes, how many days did you work?
* Did you refuse any job offer last week?
* Were you ready, willing and able to work every day last week?
With a quick "yes" or "no" on the telephone or keyboard, some people give false answers each week without having to look into the eyes of an inquisitive state employment counselor. And some cheats have other individuals portray them over the Internet.
Cracking down
Even some people in state prisons - and therefore, absolutely not available to work - managed to obtain thousands of dollars in unemployment pay until the state found a way to crack down on the practice last year.
State inmate Albert J. Weathers Jr., 37, of Buffalo, was convicted last year of felony grand larceny and sentenced to additional prison time of at least 18 months. While serving prison time for criminal contempt and a probation violation, Weathers was able to collect $8,700 in unemployment pay over 31 weeks.
Weathers' girlfriend, Lisa A. Conroy of Amherst, used her home computer to apply for benefits over the Internet in Weathers' name. She pleaded guilty to felony grand larceny and a misdemeanor of offering a false instrument. She was put on probation for three years and had to pay back the illegally obtained money.
"In my opinion, there's no question that computerizing the process has led to a lot more violations of the law," Convissar said. "I think it's human nature. It's a lot easier to commit fraud by lying to a computer than it is to lie to someone's face."
That may be true, but lying online creates a computerized version of a paper trail that can be used as evidence in a criminal prosecution, said Erie County District Attorney Frank A. Sedita III.
"It's kind of a dumb crime to commit for that reason," Sedita said. "I think bad judgment, stupidity and greed are some of the motivations for people who do it."
How does he decide when to criminally prosecute an unemployment fraud?
Sedita said he only decides on those cases that Labor Department investigators bring to his office. In those instances, Sedita said, the state has already decided that, in its view, the case merits a criminal prosecution.
"If the state brings us a case, and the evidence is there, we will prosecute," Sedita said. "The Labor Department is the investigating agency. They do the initial review of a case. The state only comes to our office if they have a case they want to make criminal. We do not get involved in the vast majority of the cases they investigate, because those case are handled civilly."
Choices questioned
State Sen. George D. Maziarz, R-Newfane, said he would like to know more about why the Labor Department seeks criminal charges against some violators.
Sedita said he has prosecuted about 135 cases of unemployment benefits fraud since taking office at the start of 2009. The amounts of money stolen in those cases usually range from $5,000 to $15,000, he said, but some people his office charged have stolen as little as $3,000 and some as much as $25,000.
"I believe the great majority of people who apply for unemployment benefits are doing it legitimately," Sedita said. "In a crime like this, you're stealing from your fellow citizens. We all pay taxes to help out the people who have lost a job, so they don't become destitute."
While not going into detail about why some cases are prosecuted and others are not, Labor Department officials did talk to The News about several efforts that are under way to make it more difficult to commit unemployment fraud.
The state's database of unemployment benefit applicants is now checked against the state's database of criminal inmates, and also against a federal database of people who have recently been hired to new jobs, Dormin said. The state is now using computer IP addresses to catch people who claim unemployment benefits over the Internet while vacationing in other countries.
Within the next few months, the state will begin requiring people who have made "suspicious" unemployment claims to go back to the pre-Internet days and meet regularly with a Labor Department counselor.
Last year, New York became one of the first states to take part in a new federal program that deducts from federal tax refund money the same sum of money that a person illegally receives in unemployment benefits. That money is then given to the state. So far, the program has enabled the state to recapture $62.3 million in stolen benefits.
"We are getting better and better at finding fraud," Dormin said.
In fact, through their investigations into unemployment fraud, the department's 35 investigators over the past three years recovered more than $150 million in stolen funds, state department officials said.
Tony Antoniadis is regional manager of PeopleSystems, a consulting company that helps employers deal with potential unemployment fraud. He said he has been impressed with the quality of investigators who work for the state Labor Department, but added that he gets the impression that investigators are swamped with cases.
"I can't say whether New York State is doing a good job on fraud," Antoniadis said. "What I can say is the investigators I've met seem to be overwhelmed."
