AP News

SD officials seek penalty for unemployment fraud

PIERRE, S.D. (AP) — South Dakotans who file fraudulent claims for unemployment benefits should have to pay back more money than they received, a state advisory panel recommended Tuesday.

People are already required to repay any unemployment benefits they receive as the result of fraud, but the proposal would make them pay an additional penalty equal to 50 percent of the benefits received. For a second or subsequent fraudulent claim, the penalty would increase to 100 percent of the benefits received.

The Unemployment Insurance Advisory Council, which advises the Labor Department on the unemployment benefit system, will ask the 2013 South Dakota Legislature to pass a law imposing the extra penalties.

Labor Secretary Pam Roberts said federal law requires states to impose a penalty equal to at least 15 percent of the improper payments, but the council decided to seek a stiffer penalty.

Council members said it makes sense to increase the fine for repeat offenses.

"The first time, cute. The second time, how dumb do you think we are?" said council member David Owen, president of the South Dakota Chamber of Commerce and Industry.

Unemployment insurance provides temporary financial assistance to people who have lost their jobs through no fault of their own. It is financed by payroll taxes paid by businesses.

Roberts said fraudulent claims are submitted intentionally, not by mistake. Fraudulent claims are typically submitted by people who say they were laid off but are still working, she said. In some cases, people claim they were laid off when they were actually fired.

"It's so flagrant. It's not like, oh poor me, I made a mistake," Roberts said.

State Unemployment Insurance Director Pauline Heier said about 700 fraudulent claims submitted last year amounted to only about $750,000 in improper payments, a small part of the $38.7 million in benefits paid to jobless people. About 12,000 South Dakotans got jobless benefits last year, she said

People who file fraudulent unemployment insurance claims also can be charged with a crime, but officials said prosecutions are rare. The department also currently imposes a delay in providing benefits if someone who files a fraudulent claim eventually has a valid claim. For every week of benefits received as the result of fraud, a person must wait four weeks to get paid on a subsequent valid claim.

Heier told the council that the trust fund used to pay claims, which was decimated by a rise in unemployment during the recession, is expected to reach about $70 million at the end of next year. Roberts said once the fund hits a target of $76 million, business payments into the fund will need to be adjusted to avoid building too large a balance.

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