The U.S. Department of Labor reported that an estimated $14 billion were overspent in unemployment benefits in fiscal 2011.
The federal government and states like Indiana, one of the worst offenders, are now trying to recoup the lost money and prevent future overpayment.
According to the Census Bureau, the distributed benefits did help 3.2 million Americans in need in 2010. However, there are three types of people who have received overpaid funds: people actively searching for jobs, those who were fired or quit their job, and those who have returned to work but are continuing to claim unemployment.
Overpayment is typically an administrative error made by the government, the employer, or the employee. It can also be a combination of all parties.
Scams also contributed to overpayment with claims involving prison inmates, illegal immigrants, and deceased citizens. During fiscal 2011, there were 2,700 convictions of fraud related to unemployment insurance. Punishment typically consists of probation, community service, or an added penalty to the payback amount.
Ryan Greminger, 39, of Richmond, Indiana admits that he collected unemployment benefits while serving a two-year prison sentence for a drug-related crime. Prior to his conviction, he was laid off from a factory in 2007. He was encouraged to keep filing claims from a fellow inmate.
"It's not like some big scheme I thought of," Greminger said. "I paid this guy $50 each time to have his girlfriend — a woman I had never met — file my unemployment claims."
Greminger explained that he needed the money to provide for his fiancé and their four kids. He is now out of jail and working to repay over $14,000 to the state.