I-Team Report: Unemployment fraud costs taxpayers millions - WNEM TV 5

I-Team Report: Unemployment fraud costs taxpayers millions

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IMLAY CITY, MI (WNEM) -

John Miller, the Chief Assistant Prosecutor in Lapeer County, said he's never seen or heard of a case like the unemployment fraud committed by 62 former employees at Vlasic, a company owned by Pinnacle Foods.

"Or really heard of anything and I've lived in Lapeer really my whole life," Miller explained.

Sixty two former employees of Pinnacle Foods in Imlay City were convicted earlier this year of collecting unemployment benefits from the state as well as a paycheck from their employer.

"A lot of those people I think just got greedy," said Miller

Miller is now the Chief Assistant Prosecutor for Lapeer County, but when this case unraveled more than two years ago, he was a defense attorney for several employees charged with cheating the system.

"I remember speaking with a couple of the defendants, they both just kind of said... yeah we know we did it," Miller said. The prosecutor told the I-Team that seasonal employees legally collected unemployment when they were laid off, but when they returned to work - they doubled dipped. 

Investigators believe the fraud continued for years.

Nearly all the employees charged with unemployment fraud admitted that they were aware of what they were doing. Some feel they failed to understand how serious the crime was.

"A fraudulent claim of $3,500 or more is a felony now," explained Shawn Thomas, the Director of the Michigan Unemployment Insurance Agency.

Thomas explained that recipients of unemployment benefits are required to call a phone system referred to as "MARVIN" every two weeks to determine if they are still eligible.

"If at any time they knowingly give the wrong information...that is fraud," said Thomas.

Prior to 2011, unemployment fraud of more than $25,000 was a felony. Now committing fraud of more than $3,500 is a felony, which usually requires restitution and very stiff penalties.

"If a person is investigated for unemployment fraud, the penalty is four times the amount they defrauded the agency," Thomas said. For example, if you did $1,000 of fraud, your penalty would be $4,000 plus the original amount of $1,000... so $5,000 would be what you owe."

The agency takes a hard stance towards this type of fraud.

"We take it very seriously and once we investigate we turn it over to local prosecutors to prosecute those individual," Thomas explained.

While the 62 employees who were convicted were forced to pay back nearly $1 million in restitution and fines, some are left wondering how it was able to go on for so long.

"You would think that a fraud that was occurring on that grand of a scale would've come to light a little sooner than it did," Miller said.

Pinnacle Foods, the company who owns Vlasic, could not be reached for comment, TV5 learned the company reexamined some internal policies after this case went public.

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