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Inmates collecting millions from fraudulent unemployment checks

prison_paycheck.jpg

June 8, 2012: Inmates walk outside their cells at San Quentin state prison in San Quentin, Calif. (Reuters)

They're behind bars, but you're still paying their "salaries." 

State and federal officials say inmates across the country continue to collect millions each year in fraudulent unemployment benefits -- often the result of oversight -- with the most recent case in Pennsylvania, where more than 1,000 people collected benefits while behind bars.

Pennsylvania officials said this week the fraud occurred in county prisons because they failed to implement a system of cross-checking the Social Security numbers of benefit applicants, like they did with inmates in their state and federal prisons.

Republican Gov. Tom Corbett said his administration is correcting the problem. But the 1,162 inmates had already collected about $334 every week for more than four months, costing taxpayers roughly $7 million.

The state labor department said detecting the fraud is more difficult now that benefit checks -- once intercepted in inmates’ mail -- have largely been replaced with direct deposits to bank accounts. And the biweekly phone calls to renew benefits can be made by a friend or relative at home.

Overall unemployment fraud is now at 2.85 percent, according to the Labor Department. The agency doesn’t have a specific number for fraud payments but said overall improper payments cost taxpayers $4.9 billion from July 2011 through June 2012, the agency’s most recent reporting period.

The problem is hardly isolated to Pennsylvania. The states with the highest fraud rate over that period were Arizona at 9.21 percent; Mississippi at 9.05 percent; Louisiana at 8.29 percent; South Dakota at 5.95 percent; and Pennsylvania and New Mexico tied at 5.22 percent. The total amount of improper payments was roughly $890 million.

A recent audit in South Carolina purportedly shows the state is also paying unemployment benefits to inmates as well as children, dead people and residents of other states.

State Sen. Kevin Bryant said the percentage of claims could be as high as 25 percent. However, Bryant, a Republican, said Wednesday the sample audit was performed by a private firm and the findings cannot be released unless the state’s Department of Employment and Workforce hires it for a full audit.

In Arizona, officials purportedly found 475 inmates collected roughly $1.1 million in 2010 and 2012. To detect the fraud, the state’s Department of Economic Security used the same Social Security cross-referencing that Pennsylvania was using in state and federal prisons since 1997.

Arizona officials, like others across the U.S., are trying to recoup the money through such methods as offsetting future benefits and taking tax refunds.

A U.S. Labor Department spokesman told FoxNews.com the U.S. fraud rate continued to drop as the agency looks for new ways to detect scams, “but the goal is to insure taxpayers are not being impacted by improper payments and fraud.”

He also said New York is working on a pilot project that officials hope will find new ways for states to improve oversight efforts.  

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