Mr. HEALY. Yes, sir. Senator CLARK (continuing). Where you make the categorical statement: In the last fiscal year, 10,200 railroad employees who were discharged or suspended for just causes drew $6 million in unemployment benefits under the Railroad Unemployment Insurance Act. How do you know that they were discharged or suspended for just causes? Is that a unilateral statement of the railroad? Mr. HEALY. No, sir, that is some actual facts and some statements prepared for me by the Director of Research, the Railroad Retirement Board. Senator CLARK. In other words, you stand on the statement that this is not a matter in dispute between the railroad and the employees as to whether he was discharged for just cause, it is a fact established that he was discharged for that cause. With respect, then, looking at the same paragraph, to the 863 who drew $556,400 for being intoxicated, there is no question of fact, the man was intoxicated? Mr. HEALY. I wasn't there, but this is a statement-that was what he was discharged for. Senator CLARK. If the railroad says he was intoxicated and he said he wasn't, I don't think the railroad should necessarily be permitted to judge the case on its own. But your statement makes it appear that this is an established. fact, and I wonder whether you would stand by that, or whether you would agree that perhaps this is a controversy which has not been determined, whether the man was or was not drunk. Mr. HEALY. Mr. Clark, may I just say that the statement, if you will look a little further down there, it says— The brotherhood officials have refused to help me. Senator CLARK. Yes. Mr. HEALY. All right. That man was fired for being drunk on duty. Senator CLARK. Yes. Did he deny that he was drunk? That is what I am interested in. Mr. HEALY. No; these figures here-and Gene Koch will correct me on this those figures were compiled from the unemployment insurance applications, weren't they? STATEMENT OF EUGENE E. KOCH, ASSISTANT DIRECTOR OF UNEMPLOYMENT AND SICKNESS INSURANCE, RAILROAD RETIREMENT BOARD Mr. KоCH. They were compiled from the unemployment insurance applications Senator MORSE. Will you identify yourself for the record, please? Mr. KOCH. My name is Eugene E. Koch. I am Assistant Director of Unemployment and Sickness Insurance in the Railroad RetirementBoard. Senator MORSE. And your testimony is what? Mr. KоCH. These figures were supplied from information furnished by applicants for unemployment insurance benefits on their applications and through interviews. Senator MORSE. On their applications and through interviews; did they admit that they were fired because they were intoxicated? Mr. KоCH. They admitted they were fired because they were intoxicated-they did not admit they were intoxicated, but that is why they were fired. Senator MORSE. That is the reason given by the carriers as to why they were fired? Mr. KOCH. Our field representative asked the man, "Why were you discharged?" And he said, "I was discharged for being drunk." Senator CLARK. Or did he say, "I was discharged because they said I was drunk"? There is quite a difference. Mr. KоCH. Well, I couldn't know about these cases, I didn't see them myself, but these are the reports of the reasons why the man. was dismissed. Senator MORSE. Well, let the record stand as it is subject to change by the Board or the carriers or the brotherhoods. Senator Clark and I-before you came in, Senator Cooper, when Mr. Healy was testifying-were a little disturbed again this year, as we were last year about the allegation that a lot of money is paid out in fraud cases, in justifiable discharges, and pilfering cases. You remember last year we suggested that if the situation could be improved by administrative procedures, we hoped it would be done. Now, it is raised again this year, and I have raised the question. Mr. Habermeyer, were you about to say something? Mr. HABERMEYER. Well, I would like to say this with respect to administrative procedures. I believe we do a good job at the Board with respect to our policing activities. Under any system such as ours, you will have individuals who will try to get around the law. Senator MORSE. That is true, but $6 million worth is an awful lot. Mr. HABERMEYER. I would say, generally speaking, we recover the vast majority of our fraudulent payments, the vast proportion of all fraudulent payments. We do a thorough, complete policing job without getting into the position of spending $2 for policing for every $1 we collect. Senator CLARK. Do you agree with that last statement, Mr. Healy? Mr. HEALY. In the cases I talked about we have not gotten half of it back. I just cited some figures which prove we do not. Senator MORSE. Mr. Healy, we are not going to argue with you gentlemen about questions of fact, we are just going to ask for the facts. Mr. HABERMEYER. I will be glad to furnish a statement with respect to it. Senator MORSE. Fine. (Mr. Habermeyer subsequently submitted the following:) Hon. WAYNE MORSE, RAILROAD RETIREMENT BOARD, Chairman, Subcommittee on Railroad Retirement, U.S. Senate, Washington, D.C. DEAR SENATOR MORSE: This refers to your request of February 9, 1959, for information concerning fraudulent claims under the Railroad Unemployment Insurance Act and claims under that act in which the claimant has been discharged or has left work voluntarily. Statutory provisions FRAUDULENT CLAIMS The provisions of the Railroad Unemployment Insurance Act relating to the points concerning which you have inquired are set out in an attachment to this. letter. With regard to fraudulent claims, you will note that section 4(a-1) (i) imposes a disqualification which excludes a claimant from receiving benefits for any of the 75 days beginning with the first day of any registration period with respect to which the Board finds that a fraudulent claim was made. This disqualification is sometimes referred to as the administrative disqualification. In addition to the administrative disqualification, the act provides for the criminal prosecution of anyone who knowingly makes a false or fraudulent claim. Under the provisions of section 9(a) such an individual is punishable by a fine of not more than $10,000 or by imprisonment not exceeding 1 year, or by both fine and imprisonment. Section 2(d) of the Railroad Unemployment Insurance Act contains specific provisions to facilitate the recovery by the Board of benefits paid to an individual who was not entitled to them. Such recovery may be made by offsetting any benefits to which the individual or his survivors may become entitled, not only under the Railroad Unemployment Insurance Act but also under the Rail-road Retirement Act. These specific provisions are in addition to the general rights of the Government as a creditor. Administration of fraud provisions In almost all cases of fraud, the claimants have failed to report that they were working on days which they claimed as days of unemployment. The Board takes steps, through its registration procedures, to prevent the payment of benefits to employees when they are working. Employees ordinarily register before railroad unemployment claims agents, usually at their last railroad work location. The claims agent thus has knowledge whether the employee worked for the railroad. In the smaller communities, the unemployment claims agents often have knowledge whether their claimants are performing other work, and this helps to assure valid claims. Fraud is usually detected by comparing a claimant's periods of claimed unemployment with wage records showing his wages as reported by all of the persons or companies for whom he worked. Such records are compiled by the Railroad Retirement Board for the railroad industry and by State unemployment compensation agencies and the Social Security Administration for other industries. Some time must elapse before the records are available. In some cases, wage records are not ready and cannot be consulted until the second quarter of the calendar year following the year in which the wages were earned. It would be impractical to withhold benefit payments until such records can be prepared and consulted. Checks for employment on claimed days are made on a spot-check basis and are directed toward cases where it seems most likely that improper claims may be found. In selecting cases to check, consideration is given to the length of the claimant's unemployment, his occupation, and any other information in the file which would indicate whether he might be likely to have obtained work. Such checks are made by the various field offices of the Board in a minimum of 2 percent of the cases. When the Board finds that a claimant has received compensation or wages during a period when he claimed that he was unemployed, a check is made of the employer's payroll to determine the days on which he worked. If the employer's payroll shows that the claimant worked on days which he claimed as: days of unemployment, the question of fraud is then considered. The 75-day administrative disqualification is applied in each case where fraud is found. In addition, many cases are referred to U.S. attorneys for criminal prosecution under section 9(a) of the act. The more flagrant fraud cases, ones in which there is most likelihood of conviction, are considered for prosecution. Other cases are not referred because in most areas of the country the large number of cases on the Federal court dockets and other factors make it impractical to do so. Convictions are obtained in many of the cases referred for criminal prosecution. Often the claimant is placed on probation with repayment of the benefits due the Board made a condition of the probation. Separate records are not kept of amounts of benefits determined to be recoverable because the claims were fraudulent or of the amounts of such benefits which are ultimately recovered. There are records of the total amount of benefits held to be recoverable for all reasons (including fraud) and of the total amount recovered. These records show that most of the money determined to be recoverable is recovered. The following table shows the percentage of unemployment benefits held to be recoverable to the total unemployment benefit payments for each of the last 4 completed years: The following table shows the amounts of unemployment benefits held to be recoverable in each of the last 4 completed years and the amounts recovered: In many recoverable cases, particularly fraud cases where the amounts are likely to be large, it takes a considerable time to complete the recovery. An amount which is established as recoverable in one benefit year may not be completely recovered until the next or a later year. Recovery of benefits erroneously paid as a result of fraud or other fault of the claimant or recoverable for any other reason is effected by cash collection from the claimant. Recovery may also be effected by adjustment in payments of benefits due the claimant under the Railroad Unemployment Insurance Act or Railroad Retirement Act and by adjustment of payments under the Railroad Retirement Act to the claimant's survivors. When the Board is unsuccessful in recovering the amount due in a fraud case, the case is submitted to the Government's General Accounting Office for whatever further action that Office may be able to take. Cases in which that Office is unable to effect collection are often referred to the Department of Justice. The U.S. attorneys to whom the cases are referred sometimes effect collection without filing suit, but in some cases such action is necessary. Data as to fraud cases Fraudulent claims under the act are not numerous. The following table shows, for each of the last four completed benefit years, the number of fraud cases under the act, and a comparison of the number of such cases with the total number of employees who received unemployment benefits: Most of these cases were developed from the spot checks for employment on claimed days referred to above. In the calendar year 1958, there were 31,016 cases in the initial check. Of these 9,991 were checked against the payroll records of particular employers. In 2,164 cases, the claimants had received pay for work performed, vacation pay or other remuneration for days claimed as days of unemployment. Some benefits were recoverable in each of the 2,164 cases, and fraud was found in 422. Comparison of fraud provisions with State laws In the following comparison, the information with regard to State laws is taken from the chapter "Disqualification for Fraudulent Misrepresentation to Obtain Benefits" in BES No. U-141, "Comparison of State Unemployment Insurance Laws as of January 1, 1958," Bureau of Employment Security, U.S. Depart ment of Labor (pp. 105-110). That work contains a much fuller discussion of the provisions of the State laws than is possible in a brief report of this nature. As indicated above, the disqualification for fraud under the Railroad Unemployment Insurance Act is for 75 days. Forty-seven of the State laws provide disqualifications for fraud. These provisions follow no general pattern. The beginning date of the disqualification and the duration vary among the State laws. In 13 States the disqualification is for at least 1 year. In four States application of the disqualification is not mandatory, but is left to the discretion of the agency. In three States the duration of the disqualification is at the discretion of the agency. Some State laws provide for cancellation of wage credits or for reduction of the possible maximum benefits because of fraud on the part of the claimant; there is no such provision in the Railroad Unemploy. ment Insurance Act. The As indicated above, a person convicted for fraud under the Railroad Unemployment Insurance Act may be fined (maximum $10,000) or imprisoned (maximum 1 year), or both. The laws of all States but six provide for a fine (maximum $20 to $1,000) or imprisonment (maximum 30 days to 1 year), or both. most frequent fine on the worker is $20 to $50 (12 States). Of the six State laws that do not provide for a specific fine or term of imprisonment, four provide that any fraudulent misrepresentation or nondisclosure to obtain, increase, reduce or defeat benefit payments is a misdemeanor, punishable according to the State criminal law. In one of the two remaining States, fraudulent misrepresentation or nondisclosure to obtain or increase benefits is a misdemeanor; in the other it is a felony. CASES IN WHICH CLAIMANT WAS DISCHARGED Absence of statutory provision relating to discharge The Railroad Unemployment Insurance Act contains no provision disqualifying an employee by reason of his having been discharged. Consequently, the Board makes no determination with respect to the cause of discharge. Repeal of disqualification for discharge for cause The Railroad Unemployment Insurance Act approved June 25, 1938 (Public Law 722, 75th Congress, ch. 680, 3d sess, H.R. 10127) contained this provision: "SEC. 4(a) There shall not be considered as a day of unemployment, with respect to any employee *** (ii) any of the forty-five days beginning with the day with respect to which the Board finds that he was discharged or suspended for misconduct related to his work; * **"" This provision was removed from the act when it was amended in June 1939. The report on the Senate bill to amend the act contained the statement quoted below about the discharge provision. This was a report by the Committee on Interstate Commerce, 76th Congress, 1st session, Report No. 325, on S. 2017, dated April 25, 1939. "Paragraph (ii) [of section 4(a)] now contains a disqualification of 45 days beginning with the day with respect to which the Board finds that an employee was discharged or suspended for misconduct related to his work. The employers covered by the act state that it would be extremely difficult to distinguish satisfactorily between misconduct relating to work and misconduct not relating to work, and the employees oppose the operation of such disqualification unless there is a clear understanding of what is misconduct within the meaning of the disqualification. For these reasons the employers and the employees join in recommending the repeal of the disqualification." Administration in discharge cases From each railroad employee who claims benefits, the Railroad Retirement Board obtains information about his separation from his last railroad employment and about his separation from any other work which he had after leaving |