The $800,000 Unemployment Fraud Scam

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Typically, articles exposing unemployment fraud involve individuals who falsely claim unemployment benefits to which they are not entitled. Fraudsters may lie on their application and say they are unemployed when – in truth – they already have a job, or they simply fail to tell the state about their change in status when they get a job – and continue to collect the checks. Today’s fraud is a little different. It involves a sophisticated effort by multiple people to defraud the California Employment Development Department (and California taxpayers).

According to the Central Valley Business Times, two individuals were recently sentenced to four years in prison in an unemployment fraud scheme that lasted from January 2000 to January 2007. The two set up ”13 fake businesses for the sole purpose of reporting false wages for approximately 150 individuals” and then filed unemployment claims based on the false income, collecting $800,000 in fraudulent unemployment compensation.

How did they get away with it? They used kids’ identities for their fake employees, knowing that claims by minors would be less likely to raise a red flag with unemployment and law enforcement authorities because ”a child is unlikely to have conflicting wages reported by a legitimate employer.’? (So, where did they steal the kids’ identities? Let’s figure this out and fix the leak.)

The two were not alone in their fraud. Three others have been sentenced in connection with this case? one received a two-year prison sentence, while the other two received a split of prison time and in-home detention. (Excellent, some time to catch up on daytime television. Come on…let’s have some real time served in the fully paid-for gated community.)

With most of the perpetrators behind bars, or monitored at home with an ankle bracelet, California taxpayers are safe from these fraudsters. So, here’s the question for the day? how easy would it be to pull this scam in your state?

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”Two sentenced in massive unemployment fraud,” published by the Central Valley Business Times, January 17, 2012.

Yvette Compito, 44, of Santa Clarita, and Karamoko Goodman, 37, of Lancaster, scammed the California Employment Development Department out of more than $800,000 in fraudulent jobless benefits. For that, they’re now headed to federal prison for the next four years.

According to court documents associated with the Tuesday sentencings, from January 2000 to January 2007 Ms. Compito and Ms. Goodman operated a ”fictitious employer” scheme, setting up 13 fake businesses for the sole purpose of reporting false wages for approximately 150 individuals.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.