Unemployment insurance cheaters got off lightly, audit claims
Sep 28, 2018
ALBANY — Hundreds of people who cheated the state out of unemployment insurance checks got off easy because of an investigations backlog at the state Labor Department, according to a Comptroller's audit of the program released Thursday.
The audit found that the agency in 2013 implemented an "unwritten policy" — one that violated both state and federal law — not to penalize some people who had lied to get unemployment benefits.
Implemented at the Labor Department in 2013, the policy to forgo penalties stemmed from "a backlog" of such cases, according to the audit by state Comptroller Tom DiNapoli's office. The audit did not indicate how large this case backlog was, how far back it went, or whether it has since been addressed.
Four years in the making, the audit found the state failed to collect more than $311,000 in penalties from nearly 1,700 potential cheats between October 2013 and September 2016.
"DOL did not disclose how the policy came about. It was not implemented consistently among staff," according to a statement from DiNapoli's office.
"This is an issue from four years ago that has been long since been rectified," said state Labor Department spokeswoman Jill Aurora. She said the case backlogs stemmed from the aftermath of the 2008 recession and were " resolved almost entirely by January 2014."
The Times Union asked the labor department for details on the size of the backlog, but Aurora's response did not respond on that topic.
Aurora said the department decided not to penalize people who during the backlog had submitted information "in a timely fashion. ... This is not an 'unwritten policy contrary to law,' but rather an appropriate use of our authority to fairly interpret and implement the law," she added.
Federal labor officials at the Employment and Training Administration will review DiNapoli's audit and its assertions that the policy was not legal, according to a spokesman for the federal agency.
According to a "frequently asked questions" page on the state Labor Department's website, penalties for receiving undeserved unemployment benefits are not optional and "must be assessed unless it is overruled by an Administrative Law Judge, the Appeal Board, or a court."
The amount of the penalty is based on the amount of improper benefits. If $666.66 or less is collected, the penalty is $100, according to the state website.
For amounts greater than that, the penalty is 15 percent of the total benefits fraudulently obtained.
In an Aug. 17 letter, state Labor Commissioner Roberta Reardon responded to DiNapoli's office that the audit and "concerns raised by your Bureau has resulted in two years of very positive reports."
Reardon's letter also asserted that the audit contained unspecified "inaccuracies" in 39 percent of its findings.
However, the commissioner's letter did not address, confirm or deny the agency's alleged "unwritten policy" to not issue legally required penalties.
In 2013, Peter Rivera was labor commissioner, having been appointed a year earlier by Gov. Andrew M. Cuomo. In late 2014, Rivera blamed dozens of layoffs in the agency — including in the unemployment insurance and special investigations units — on federal funding cuts.
Rivera resigned as commissioner in January 2015, about five months after the start of DiNapoli's audit. Since January 2016, Rivera has been a partner at Gotham Government Relations & Communications, a Garden City-based lobbying firm.
DiNapoli's findings at the Labor Department were based on a sample of about 5 percent of roughly 168,500 such "willful misrepresentation" insurance cases between 2013 and 2016, in which people "knowingly misrepresent(ed) information" to get unemployment benefits.
Unidentified labor officials had "implemented an unwritten policy not to impose penalties" in cases where the state had evidence prior to October 2013 that a person offered false information to get benefits, but had not yet acted to impose a penalty as required under law, according to the Comptroller's audit.
Each year, the federal government provides aid to support the state unemployment insurance program, with that figure estimated at about $317 million this year.
DiNapoli's audit recommended that Reardon audit the remaining 160,000 "willful misrepresentation cases" still unexamined for potential forgone penalties. In her August response, Reardon wrote that the department would "allocate resources commensurate to the issue."
This year, the state has allocated about $2.85 billion to run its unemployment insurance program, according to the state budget. In New York, unemployment insurance pays a maximum benefit of $430 a week for 26 weeks.