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In this issue:

• Recession Planning – Don’t Forget About Integrity Issues
• Websites Charging to File UI Benefits Claims
• Massachusetts Targets Underground Economy
• Misclassification of Employees
• Missouri Department of Labor & Industrial Relations Wins Convictions
• Don’t Become a Victim of Keyboard Logging
• On Point Technology Attends NASWA UI Integrity Conference
• We Accept Articles From Our Readers

Welcome to the May 2008 issue of BullsEye, the On Point Technology newsletter. Our goal is to keep you up-to-date on the latest unemployment insurance news and developments at On Point Technology.

Recession Planning – Don’t Forget About Integrity Issues

Across the country, State UI Agencies are preparing to deal with the increased claims loads that will be produced as the Nation slips further into recession. We at On Point Technology want to put out a reminder not to overlook planning for the greater incidence of integrity issues that accompany recessions. Let’s not forget that criminals will undoubtedly take the opportunities created by the pressures on staff and systems to work their scams more intensely, knowing that the circumstances are only temporary and that they have to “get it while they can.”

On Point Technology has the tools to prevent, uncover, and manage the processing of fraud cases, and we have the experience and knowledge on how to optimize their use. If you would like us to share our thoughts, ideas, and expertise with your Agency, we are available---just contact us! If you would like further information, it would be my pleasure to assist you. You can reach us anytime at 908-526-0426 or robert.yokavonus@onpointtech.com.

Websites Charging to Files UI Benefits Claims

The State of Missouri has warned its citizens of a scam involving the filing of claims for unemployment insurance (UI) benefits. The Missouri Department of Labor and Industrial Relations discovered a website that was set up for the purpose of making money off of a service that is already available for free. The website, http://www.unemploymentbenefits.com, is charging anywhere from $3 to $10 to file a UI claim on behalf of its users. Users of the site are asked to provide a credit or debit card number. Their payment is then deposited directly into a PayPal account that does not belong to any government agency.

There are many issues that people wanting to file UI claims should be made aware of when using these unofficial sites:

• These sites are not endorsed in any way by state governments.
• They could very well become victims of identity theft.
• They may be jeopardizing their eligibility to collect benefits.
• They may have a delay in receiving benefits, if site operators attempt to follow through with their assertions.

Missouri officials quickly notified other states of the scam. As a result, Montana’s Department of Labor and the Pennsylvania Department of Labor & Industry have also warned their citizens of the unofficial websites. Newspaper articles remind residents that while the misleading sites may look official, they are not and should be avoided as the filing of claims for UI benefits is a free service. Citizens are also instructed to access the official state websites in order to file UI benefits claims.

All State UI Agencies should verify whether or not this scam is being run in their state. On Point Technology has found several suspicious sites. Contact Bob Yokavonus for the list at 908-526-0426 or robert.yokavonus@onpointtech.com.

Massachusetts Targets Underground Economy

Massachusetts Governor Deval Patrick recently signed an executive order that establishes a joint task force aimed at exposing the underground economy and stopping businesses from undermining fair competition. This puts Massachusetts on the list of a growing number of states targeting the underground economy. New York, California, and Michigan have already formed similar join task forces.

Governor Patrick stated, “This task force will strengthen efforts to prevent dishonest employers from engaging in practices that shortchange workers and undercut law-abiding businesses.”

The task force will be comprised of representatives from divisions of the following state departments:

• Labor
• Industrial Accidents
• Workforce Development
• Revenue and Public Safety

Suzanne Bump, Secretary of Labor and Workforce Development, will lead an advisory panel created to obtain feedback from employer, labor, and community groups as part of the information sharing process. She stresses the importance of the enforcement of labor laws as a priority.

In 2004 Harvard University published a study they conducted between 2001 and 2003 of the underground economy in the Massachusetts construction industry. At that time, conservative estimates indicated that the State lost close to $200 million in unpaid income tax payments and unpaid workers’ compensation contributions.

The study also indicated that 13% of employers across all industries (including construction) were found to under-report their workers’ wage and unemployment insurance tax liability. That figure nearly doubles to 24% when the focus is exclusively on the construction industry.

Misclassification of Employees

As a follow-up to the New York State Task Force to Target Misclassification of Employees article that appeared in the November 2007 issue of our BullsEye newsletter we wanted let you know of their success.

In 15 enforcement sweeps, state investigators found $19 million in wages that were not reported to the State and $3 million in underpayments to workers. Investigators also uncovered close to $1 million in UI taxes that had not been paid to the trust fund.

The sweeps focused on the construction and restaurant industries which have a history of misclassifying their workers as independent contractors. The Task Force has planned more sweeps that will focus on industries such as trucking companies, car washes, and janitorial firms.

The Task Force issued a report on their findings with regards to employee misclassification. The report states “These trends appear to be increasing over the past decade, with large numbers of employees misclassified and therefore unprotected by the most basic labor rights.” The report can be found in its entirety at the Agency’s website: http://www.labor.state.ny.us/ and performing a keyword search for Report of the Joint Enforcement Task Force on Employee Misclassification.

In a related story, we are keeping a close eye on the current situation involving Federal Express (FedEx) and the Internal Revenue Service (IRS). The case involves the IRS ruling that FedEx is facing taxes and penalties of more than $319 million for misclassifying its FedEx Ground division workers as independent contractors. The ruling holds that the FedEx Ground workers should be classified as employees instead of independent contractors. There are approximately 15,000 FedEx Ground workers across the United States in the controversy. The IRS is auditing similar issues for 2004 through 2006.

Depending on individual state UI tax laws, rules, and regulations, this case could result in significant UI tax liabilities for FedEx.

Missouri Department of Labor & Industrial Relations Wins Convictions

Last month the Missouri Department of Labor & Industrial Relations announced their recent referrals led to the successful conviction of 41 individuals accused of UI fraud. The convictions result in a restitution amount of $180,807.03.

The Department’s Division of Employment Security detected the fraudulent claimants by performing a crossmatch of their UI claimants against the National Directory of New Hires database. Most of those convicted were accused of continuing to collect UI benefits after they returned to work or purposely failing to provide information on their claims that would have deemed them ineligible to collect any longer. After detecting the fraud the Division referred the evidence over to the county’s prosecuting attorney.

These convictions are just some of many that the Division has aggressively pursued. In 2007 they successfully collected over $12 million in restitution for overpaid benefits and monetary penalties. That same year, they also collected over $106 million in delinquent taxes, penalties, and interest from employers.

Don’t Become A Victim of Keyboard Logging

For those of you that travel you should be aware of a scheme referred to as “Keyboard Logging.” The scheme involves thieves installing keystroke tracking software, similar to programs used by parents to track children’s computer activity, on hotel business center or other public access computers.

Doing this allows the thief, from anywhere in the world, to collect information on what has been done on the tampered computers. They can gather personal data including account numbers and passwords allowing them to access to your state’s unemployment insurance system, if your were to communicate with it from a computer where this software was installed.

On Point Technology Attends NASWA UI Integrity Conference

Last month On Point Technology representatives Ed Gafron, Jerry Iyall, and Bob Yokavonus attended the 2008 NASWA Biennial UI Integrity Conference in Salt Lake City, Utah. They had the opportunity to demonstrate our suite of configurable software applications: Aware, Barts, and Recover to many of those in attendance. We would like to thank all of the state agency officials who stopped by our booth to view product demonstrations, ask questions, and discuss a variety of UI fraud and overpayment issues.

We’d like to thank Rich Hobbie, Executive Director of NASWA for the excellent job that he and the staff did in putting together an informative and interesting conference. The program was relevant, the speakers expert and well prepared, and the events and meals first class. Congratulations on a job well done!

The next stop for the On Point Technology “road show” is the UWC National UI Issues Conference in Cleveland, Ohio on May 20-22, 2008. We hope to see many of our newsletter readers there!

You can find our exhibiting schedule at http://www.onpointtech.com/eventListings.htm

We Accept Articles From Our Readers

At the recent UI Integrity Conference one of the visitors at our booth mentioned that the BullsEye newsletter is the only publication they have been able to find that deals strictly with UI overpayments and fraud and asked if we accept articles from State UI Agencies. Our answer was an emphatic yes! If you have a story concerning UI that you would like to share with your colleagues across the country, you can submit it to either newsletter@onpointtech.com or BullsEye Newsletter, On Point Technology, Inc., 4 Westbrook Corporate Center, Suite 810, Westchester, IL, 60154. We hope to hear from you!

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