Cheats infest jobless roll: Fraud cases rise with unemployment

More than 426,000 Washington workers received unemployment benefits last year. Nearly 6,000 of them were cheating.

A few may be flubbing a figure or two, stretching the truth about past wages or trying to collect benefits while working on the sly.

And then there are the doozies.

Take Gerald Bollin. The Skamania County man recently was convicted of using fake names and Social Security numbers to establish five fictitious businesses, for which he paid quarterly taxes to avoid detection.

He also tweaked his Social Security number to manufacture two aliases, which he "employed" at his businesses and subsequently "laid off" to claim their unemployment insurance.

Through a tangle of post-office boxes and multiple bank accounts that thwarted authorities for years, the 53-year-old collected 12 separate claims using the scheme, netting more than $100,000 in benefits since 1995.

Not to mention two homes, three cars, a boat, a face-lift and a hair transplant.

Then there is Jesus and Maria Silva, a Yakima-area couple convicted last year of skimming nearly a quarter-million dollars through 82 fake Social Security numbers. The pair, with other accomplices, cashed more than 1,500 checks since 2000.

As unemployment rosters across the nation have swelled for the past few years, fraud and abuse cases have risen, too, leaving many states overwhelmed as they grapple with the demands of paying out benefits quickly and accurately.

With the number of claimants and the money paid out at an all-time high, state and federal agencies are taking a closer look at the 70-year-old system. And as budgets grow taut trying to pay for it all, now — more than ever — no one likes a cheater.

"We just simply, as a nation, can't afford to have a system mired in fraud or abuse or ineffective operations," said Emily DeRocco, assistant secretary with a division of the Department of Labor.

Of the $30 billion in unemployment benefits paid nationally in 2001, overpayments accounted for $577 million, according to a U.S. General Accounting Office (GAO) study. In Washington state, of the $2.4 billion paid in unemployment-insurance benefits last year, $17 million is believed to have gone out in overpayments. Most of that, $13.3 million, was fraud.

Nationally, about one-quarter of overpayments were attributed to fraud or abuse, but the GAO estimates the level of detectable fraud at more than twice that high.

Finding fraud

Like a shame-faced kid returning stolen penny candy, even the most small-time defrauders may pay for their actions.

In Washington, those convicted not only must pay back what they collected but also are suspended from receiving benefits for up to two years. Some cheaters can wind up in prison.

In Bollin's elaborate fraud scheme, it didn't take state investigators long to catch on. But locating him was another matter.

It took a year and a half to find him at his home in Underwood, Skamania County, and make an arrest. It was then that he admitted to nearly $600,000 in additional fraud schemes involving bank credit and homeowners insurance, according to court papers.

Bollin, sentenced Jan. 27 in U.S. District Court, got nearly four years in prison and was ordered to pay $694,000 in restitution.

"He was very cunning," said Kathy Ramoska, chief investigator with the Employment Security Department. "I mean, this guy was just into everything."

The Bollin and Silva cases are considered whoppers. Investigators are more likely to be looking into simpler instances of fraud and abuse, such as:

• Falsely reported income.

• Claimants who were either fired or voluntarily quit a job.

• Eligibility issues: A claimant may not really be available for work or looking for a job, or may be an illegal immigrant.

A number of cheaters are turned in by friends, relatives or past employers who smell a scam.

Just the other day, Ramoska said she received a tip that a claimant was working at a business but hadn't reported it to the state. When she called the business to check it out, the claimant answered the phone.

Ramoska estimates she receives two or three tips a day from people who don't like to see the system bilked or who have a bone to pick with the bilker. "We see a lot of good love gone bad," she said.

Cleaning up the system

As what was once expected to be a quick-hit recession drags on, state unemployment departments are scrambling to process nearly twice as many claims as they did in 2000.

Because of that caseload, the emphasis has tipped toward quick rather than accurate payments, according to the GAO report.

Yet the real obstacle to cleaning up fraud is a weak detection system. There is no nationwide consensus on detection methods and little cooperation among agencies. There are many systems, but few communicate with one another.

Comprehensive national databases are not yet available to most state-level investigators trying to get a quick read on a new claimant.

A national Social Security database exists, as does a new-hire database, which keeps a record of everyone who starts a new job. The Department of Labor has asked for $10 million in the 2003 budget to help states gain access to that data, DeRocco said.

"We think (making the Social Security and new-hire systems widely available) will increase the number of fraud overpayments that states are able to identify," she said.

In Washington state, investigators can check Social Security records to see whether a claimant is using an unissued number or one that belongs to someone else.

The state has its own new-hire database, but it tracks only Washington residents and wouldn't pick up a claimant who filed while living or working in another state.

Washington not a magnet

Despite having one of the highest jobless rates in the nation, at 6.8 percent, Washington has a reputation as being particularly aggressive when it comes to identifying fraud.

For legitimately out-of-work filers, it can be a good place to draw benefits. With a $336 average weekly benefit, it's the most generous in the nation.

But that doesn't make it a magnet for abusers, officials say.

Claimants have always been allowed to collect benefits in the state of their choice, provided they meet all regular requirements. But it's rare for someone to purposely file in a state with higher benefits, especially in the West, according to Roger Haydon, interstate coordinator for Washington's program.

"On the West Coast, it doesn't happen as much because states are not that close," he said. "You wouldn't drive to California to file a claim as easily as you would drive from Rhode Island to the state next door."

Lisa Heyamoto: 206-464-2149 or lheyamoto@seattletimes.com