Lawmakers Eye Tougher Penalties for Unemployment Fraud | Eastern North Carolina Now

   Publisher's note: This post, by Matt Willoughby, was originally published in the Economy section of Civitas's online edition.

    RALEIGH     Some state legislators point to a case in Scotland County that cost a businessman thousands of dollars and affected his firm's unemployment credit rating as a prime example of why the penalty for unemployment fraud should be increased from a misdemeanor to a felony.

    In 2011 Gerri Clark, 41, was charged with over 90 counts of unemployment fraud dating back to 2009. Under state law, she could only be charged with a misdemeanor; according to the Scotland County Court Clerk she pleaded guilty to the misdemeanor on July 13, 2011 in a Scotland County court.

    Clark was working for a staffing company at the time and used the company's information to file for unemployment benefits for her husband and other relatives. Her boss, Jerry Norton, said she continued using company information to file for benefits after she left the firm. Norton said the case cost him $9,300 and affected the company's unemployment credit rating.

    Clark was placed on probation for 60 months. Although she was accused of stealing more than $100,000, court records show the court ordered her to pay back just over $17,000 -- and she had five years to pay it. Scotland County Assistant District Attorney Brandon Christian said that in early 2012, it was discovered that Clark's husband and others didn't know she was using their names to file for benefits. Therefore, she was then charged with identity theft and obtaining property under false pretense, both of which are felonies. A court date is set for May 8.

    "I would certainly love for them (the General Assembly) to make employment security fraud a felony," Christian said. "Give us more tools to combat it."

    He also noted that other types of fraud, such as Medicaid and food stamp fraud, become felonies even if the amount involved is relatively low.

    A task force formed by House Speaker Thom Tillis (R-Mecklenburg) may draft legislation to make unemployment fraud a felony.

    According to U.S. Department of Labor (USDOL) documents, in 2010 there were more than 4,700 reports from the state Employment Security Commission of unemployment fraud amounting to more than $11 million. However, only 3 percent of those cases were referred by commission investigators for prosecution, leading to only 198 convictions. At the end of 2010, more than $18.7 million in stolen benefits had not been recovered.

    That number grows even larger when considering the cases the commission labeled as non-fraud overpayments, generally regarded as mistakes. There were over 102,000 of those cases filed in 2010, totaling nearly $70 million. By the end of that year, $45.5 million of such overpayments were still outstanding. The USDOL, however, tends to believe that the real number is in fact much higher, and the department gives the state a very low rating for recovering overpayments.

    Part of that reasoning is that the state writes off the first four weeks of unemployment benefits when calculating overpayments. That is something else the task force intends to consider changing. Division of Employment Security spokesman Larry Parker says it is not a waiver but it would tie up the courts to prosecute everyone over four weeks of benefits. He says, however, the division would require repayment if there was fraud at any amount.

    The legislature made the Employment Security Commission a division of the Commerce Department and House Speaker Tillis has said he would like to see the division be more aggressive in recovering overpayments.