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Fraud concerns officials as N.C. unemployment rises

Posted December 29, 2008
Updated December 30, 2008

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— North Carolina's unemployment rate recently hit a 25-year high at 7.9 percent, and as jobless claims go up, state officials become more concerned about an increase in unemployment fraud.

Out of nearly 300,000 people who received unemployment benefits last year, the state Employment Security Commission identified 4,000 cases of fraud, ESC Deputy Chairman David Clegg said. On average, the state recovers $6 million a year from improperly paid benefits.

"Fraud is always a concern to us because it cheats the system," Clegg said.

Some people make honest mistakes, he said, but others try to hide the fact that they're working and collecting unemployment benefits. They usually get caught when employers report worker earnings.

"Those cases are outrageous, and these are the cases we will actively prosecute," he said.

Still, he said, it's uncommon for unemployment fraud cases to go to court. Most are resolved in out-of-court settlements.

Those who collect unemployment benefits are required to actively search for work. Because 85 percent of claims are handled online or by phone, the ESC relies on the honor system that people really try to look for jobs.

"We get lots of tips," Clegg said.

While those filing claims usually account for the most cases of fraud, the biggest cases usually come from employers.

"Reasonably large employers will spin off limited liability corporations from their base of operation and move employees into these sham partnerships in an attempt to get a lower tax rate," Clegg said.

In recent years, the ESC uncovered more than $50 million in employer tax fraud.

Verne Northern, who is looking for work, said she and other unemployed people are hurt the most by fraud in the system.

"They're making it hard for everybody else," Northern said.


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  • whatusay Dec 31, 2008

    But NC is not concerned with millions of illegals getting social services, health care, education.

  • BabyS Dec 30, 2008

    The system is a joke. I was laid off in early October and have yet to receive a dime. My case went to an adjudicator for whatever reason and I finally received a letter on Dec 12 stating that I was eligible for benefits since my unemployment was through no fault of my own. I still have yet to receive any payments and cannot reach a live person when I call any of the numerous numbers listed on the website. I also sent an email over 2 weeks ago and have yet to receive a response. It's like they are hoping I find another job before they have to pay me anything.

  • OLD PIRATE 2 Dec 29, 2008

    As an employer who has worked with ESC,not for them, for over 35 years, I see their level of professionalism dropping like a rock. There new employees,some working from home with crying babies, and the stupid questions employers are asked. I have been asked "do you have a policy against lying or stealing? Why do employees have to keep their money locked in a safe? "if you don't have a policy against an action, we have to find in the favor of the employee"....quote from a recent interview. MY response was, I don't tell them to breath but most do it well! They could save millions using the internet for correspondence but send duplicate letters by mail. They say they can't do that because they don't have a paper trail yet they require all reporting by employers to be done by, You guessed it, the internet. They need a serious management overhaul and come into the 21 century. Look at the Commission and you see plenty of "pay back" to labor by the governor. Very few business people.