In the fiscal year ending June 30, 1958, our field offices made 9,125 spot checks on unemployment insurance beneficiaries for possible employment on days claimed as idle and found that to be true in 2,070 cases, or 22 percent of the cases checked, and that is not chicken feed. The recovery possibilities were almost $300,000.

Mr. Chairman, and gentlemen, I sincerely believe that the removal of these inequities from the Railroad Unemployment Insurance Act will deprive no one of just benefits, and will definitely be in the interest of the industry, its employees, and the public welfare. The CHAIRMAN. Does that conclude your statement?

Mr. HEALY. Yes, sir.

Mr. WILLIAMS. Mr. Healy, I listened with a great deal of interest to your outlining the abuses of the unemployment compensation benefit privileges. Is that a widespread thing or are these isolated cases which you have presented?

Mr. HEALY. No, sir; they are not isolated cases at all; 10,200 people in 1 year discharged or suspended, is not isolation. It is all over the country.

Mr. WILLIAMS. Out of how many total payments or total recipients? Mr. HEALY. We had 308,000 beneficiaries last year; 10,000 drew benefits for being discharged and suspended, and 13,000 drew benefits for voluntarily quitting and that amounts to 23,000, or nearly 10 percent.

Mr. WILLIAMS. In other words, you would estimate that 10 percent of those who received unemployment, compensation benefits would fall within the category that you mentioned a few minutes ago?

Mr. HEALY. Yes, sir; based on the record for last year and on the record for the last 3 years.

Mr. WILLIAMS. What would you suggest in the way of general legislation that might correct these abuses and yet leave intact the legitimate cases? Is it possible to write legislation which would do that?

Mr. HEALY. I would immediately amend the Railroad Unemployment Insurance Act to deprive benefits to all employees who were discharged or suspended for just cause. You understand, they have an appeal.

Mr. WILLIAMS. I understand.

Mr. HEALY. To all who voluntarily quit, to those who are entitled to immediate annuities under the Railroad Retirement and Social Security Acts, to those who are guilty of fraud, and I'd take out maternity benefits.

I would probably get an argument about that, but I would take that out. I also think I would take out strikes.

Mr. WILLIAMS. On page 5 you mentioned that some $15,656,000 were paid to employees participating in strikes against the industry. Mr. HEALY. That is right.

Mr. WILLIAMS. I have often wondered what the theory might be, or justification if you want to call it that, for requiring that the railroads pay unemployment compensation to workers who are unemployed on account of strikes against the industry. What is the justification for that as it has been presented to you?

Mr. HEALY. Well, there was quite a bit of testimony on that in the 1957 hearings, but it hasn't convinced me. If a man wants to strike, let him strike, but I don't think he has a right to collect unemployment benefits from the people he is striking against.

Mr. WILLIAMS. That is a matter that concerns me a great deal. I would like to hear the moral justification for it.

Mr. HEALY. I don't see any,moral justification, Mr. Williams.

Mr. WILLIAMS. I hope that other witnesses who will appear following you will deal with that subject because I am rather curious as to where an obligation on the part of the company might lie to finance a strike against itself.

Mr. HEALY. That is actually what we are doing.

Mr. WILLIAMS. Taking these abuses out, as you related them, and basing your estimate upon the present cost of the unemployment compensation program, what would be the necessary cost of the program, assuming that these abuses could be eliminated?

Mr. HEALY. Let us put it this way

Mr. WILLIAMS. I am referring to the flagrant abuses.

Mr. HEALY. Yes. I would say we could save roughly between $25 million and $35 million for the unemployment fund by taking these and other things out.

Mr. WILLIAMS. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Bennett?

Mr. BENNETT. No questions.

The CHAIRMAN. Mr. Roberts?
Mr. ROBERTS. No questions.
The CHAIRMAN. Mr. Springer?
Mr. SPRINGER. No questions.

The CHAIRMAN. Does anyone else have any questions? Mr. Moulder?

Mr. MOULDER. Mr. Healy, are you opposed to the railroad retirement system?

Mr. HEALY. No, sir.

Mr. MOULDER. Would you favor a reduction in benefits.

Mr. HEALY. No, sir. I might say I have 30 years in it myself, Mr. Moulder.

Mr. MOULDER. Do you think the present benefits should be reduced?

Mr. HEALY. No; I think a moratorium should be declared upon any increases in benefits.

Mr. MOULDER. Your use of the figures and the totals were very impressive, such as the cost of H.R.1012. The proposal to increase the taxes on railroad workers from $21.88 per month to $27 for the period 1959 to 1961 actually amounts to an increase of 17 cents a day, does it not?

Mr. HEALY. Yes, sir. I would like to make clear that most of these additional taxes are going to be on the young men. For example, with respect to our median, which our experts term the balance between so many below and so many above, railroad employees today have a median age of 43.

That means 50 percent of them are young men under 43 that will be paying these taxes. A fellow that is 55 or 60 years old, doesn't mind paying increased taxes a couple of more years to get larger benefits.

Mr. MOULDER. I am taking the method of your argument that you used in the cost to the industry of $57 million.

Mr. HEALY. That is from the railroad side only. There would be an equal amount from the employees.

Mr. MOULDER. Likewise, that would amount to only 17 cents per day for each employee, too, would it not?

Mr. HEALY. That would be the railroad's contribution of it, yes; but 17 cents a day is $5 a month. You count it up and it is a whole

lot of money.

Mr. MOULDER. That is all.

The CHAIRMAN. Mr. Derounian?

Mr. DEROUNIAN. No questions.
The CHAIRMAN. Mr. Younger?

Mr. YOUNGER. I have only one question, Mr. Chairman.

Does the management of the railroads have any objection to putting the management of the retirement fund into private management between themselves and employees by negotiation?

Mr. HEALY. That would be a matter of policy, Mr. Younger, and I think their spokesmen will be able to answer that.

The CHAIRMAN. Mr. Macdonald?

Mr. MACDONALD. I just have two short questions.

In your description of employees participating in strikes against the industry I was wondering how an employee strikes against the industry as a whole.

Mr. HEALY. For example, if the railroad employees on X Y Z railroad go out on strike, they are striking against that railroad. This provision I am talking about does not cover where, for example, they have a steel strike and our employees are naturally unable to work. That is not what I am talking about at all.

I am talking about a strike of the employees against the X Y Z railroad.

Mr. MACDONALD. Therefore, if, for example, they were striking against the New York, New Haven & Hartford, or the Boston & Maine, you would say a strike against Mr. McGinnis or Mr. Alpert is a strike against the industry?

Mr. HEALY. That is drawing it pretty fine. How would a strike be against Mr. Alpert and Mr. McGinnis? You strike against the railroad.

Mr. MACDONALD. That is what I was wondering, if you had channels into which you put employees who were on strike, one group against a railway and one against the industry.

Mr. HEALY. No, no.

Mr. MACDONALD. The language should more properly be used then "against their employer."

Mr. HEALY. Yes, against their railroad employer.

Mr. MACDONALD. I was interested in your statements concerning taking out maternity and sickness benefits. I was wondering, if they are taken out of the unemployment insurance benefits, shouldn't they be a matter of collective bargaining between the employees and their representatives and management?

Mr. HEALY. I don't think so, not necessarily. We have a retirement system supported on a half and half basis. The railroad employees themselves do not contribute anything to sickness. Sickness is not a particular railroad hazard. It happens to you or me.

I think perhaps there might be some section set up where sickness would be administered in the same way, maybe on a 50-50 basis, like retirement. The avenues are there.

Mr. MACDONALD. Perhaps I did not follow you, but my question was, Do you think that if they come out of the unemployment insurance benefits it has to become a matter for collective bargaining between the employee and the employer?

Mr. HEALY. That is a matter of opinion.

Mr. MACDONALD. What is your opinion?

Mr. HEALY. In my opinion, no.

Mr. MACDONALD. I will ask you again if you do not think it should be under the insurance benefits and it is not a matter of collective bargaining, what happens?

Mr. HEALY. It could be under the railroad unemployment insurance insurance act.

Mr. MACDONALD. However, not under the present act?

Mr. HEALY. No, sir, it has to be amended.

Mr. MACDONALD. That is all.
The CHAIRMAN. Mr. Devine?
Mr. DEVINE. No questions.
The CHAIRMAN. Mr. Moss?

Mr. Moss. Mr. Chairman, I am very much intrigued by the statement on page 5: "Furthermore, benefits are never reduced or cancelled in cases of fraud under the Railroad Unemployment Insurance Act."

Do I understand you are without any remedy at all to deal with a fraud case?

Mr. HEALY. We have this partial remedy, Mr. Moss: We can disqualify him for 75 days and then we have to pay him all of the benefits due. There is this: If we go into court and get a conviction the court may impose a penalty. In some cases they have imposed a jail sentence, but that is the only other remedy we have.

We just say, "You can't get paid for 75 days, and then we pay you."

Mr. Moss. If you get a conviction do you then pay them?
Mr. HEALY. Yes, sir.

Mr. Moss. Even while they are serving time as a result of a conviction you continue to pay them the benefit?

Mr. HEALY. Yes, sir. Invariably a court will give them an order to return the money or in some few cases they have given small sentences, 30 or 60 days.

Mr. Moss. How widespread is this fraud?

Mr. HEALY. I wouldn't say too widespread, but it is a temptation. As I say, we made 9,000 checks and in about 22 percent of the cases we found where a guy was chiseling I use the word "chiseling"here and there by working in one position and claiming unemployment benefits from us. I say 22 percent. It ought to be stopped. Mr. Moss. Is that a defect in your enforcement program?

Mr. HEALY. No, sir; it is not a defect in our enforcement program. Contrarily, our policing program develops these cases, but we have neither the personnel or the time or the money to police every claim. We just have to spot-check them.

Mr. Moss. Have you compared the fraud rate in your system with that prevailing generally in the State-Federal programs?

Mr. HEALY. No, sir; we haven't but I understand that they automatically disqualify in most States. We have checked the comparative system, but not the percentage.

Mr. Moss. I would, after having an opoprtunity to analyze your statement, which was certainly complete with a great many interesting statistics and statements, like to discuss this further with you. Mr. HEALY. I would be happy to any time it would be convenient to you, Mr. Moss.

Mr. Moss. I would point out that much that you have given us in the way of statistics is of itself meaningless until you relate it to some other comparable operation.

Mr. HEALY. That is right. I will hold myself available until you are ready. If I am not here please get in touch with Mr. Walsh and I will be here the next morning, if possible.

Mr. Moss. The lack of that comparison I think makes the figures not overly valuable for this hearing.

Mr. HEALY. Yes.

The CHAIRMAN. Will the gentleman yield for a clarification?
Mr. Moss. Yes.

The CHAIRMAN. Did I understand you to say, Mr. Healy, that if a man was convicted of fraud or convicted in court, say, of stealing from the company you still had to pay him?

Mr. HEALY. Not if it is fraud in claiming unemployment insurance benefits. If he steals from the company and he goes to jail, we have to pay him unemployment benefits; yes, sir.

Mr. WILLIAMS. You mean he could be in a penitentiary and receive unemployment compensation?

Mr. HEALY. Yes, sir; we do. There have been actual cases of that, where the man was in jail.

Mr. Moss. Would you give us a summary of a few of those cases?

Mr. HEALY. Yes, sir. I have a hundred here, or more.

The CHAIRMAN. If the gentleman will permit, I think it would be very important to explore this some more because I see some of your associates back there shaking their heads and saying otherwise.

Mr. HEALY. Well, I have some examples.

Mr. Moss. I would like to pursue it just a little further, too. You say that in a case of fraud you continue to pay benefits when the fraud would not be that of claiming benefits when the person was not entitled to them because they were actually employed?

Mr. HEALY. Oh, no, no. He has to be working while claiming benefits.

Mr. Moss. In other words, he has to be unemployed and available and ready to accept employment and the fraud could be of a technical nature in the claiming or he could, during a period of unemployment when certifying complete lack of employment, have been doing some odd jobs or picking up a paycheck?

Mr. HEALY. That is right.

Mr. Moss. If he was picking up a paycheck, could you not deduct? Mr. HEALY. We would recover as much as we could.

Mr. Moss. In other words, you have a remedy against fraud?

Mr. HEALY. That is right, yes, sir.

Mr. Moss. And the statement here is more broadly stated than the facts would justify?

Mr. HEALY. Well, it is stated to show the existence of the fraud. Mr. Moss. You say you do have a remedy?

Mr. HEALY. Yes, sir.