DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 21-90
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	DONALD J. KULICK Administrator for Regional Management
SUBJECT	:	Role of the U.S. Department of Labor's Office of the Inspector General (OIG) in the Criminal Investigation of Unemployment Insurance (UI) Program Fraudulent Claims and Activities

1. Purpose, The purposes of this directive are to: a) Provide guidance to the State Employment Security Agencies (SESAs) about the role of the OIG in the criminal investigation of UI fraudulent claims and activities in light of the recent U.S. Department of Justice's Office of Legal Counsel (OLC) opinion; and b) Inform SESAs of the responsibility for tracking the resolution of UI fraud cases which had previously been referred to the OIG.

2. Reference. Unemployment Insurance Program Letter (UIPL) No. 10-87.

3. Background. Since February 1985, the SESAs have referred four categories of UI program fraud cases to the OIG for criminal investigation under terms of a Memorandum of Understanding (MOU) between the OIG and the ETA, dated January 3, 1985. The categories of UI program fraud cases covered by the MOU are: Federal UI program fraudulent claims; SESA employee fraud and other illegal conduct; fictitious employer schemes; and State UI fraud cases referred to the OIG by the SESAs. OIG records indicate that 1,072 UI fraud cases referred to it under terms of the MOU were pending as of March 31, 1989.

   On March 9, 1989, the OLC issued an opinion in response to the Solicitor of Labor's request for a clarification of the scope of the OIG's authority to conduct investigations. The OLC opinion concluded that the OIG has the authority to investigate the employees and operations of , the U.S. Department of Labor, as well as its contractors, grantees and other recipients of Federal funds. The OLC opinion does not provide a legal basis for the OIG to investigate cases involving non-Federal funds.

4. Effects of OLC Opinion on MOU. The OIG still has an investigative role in UI program fraud claims which involve Federal funds and SESA employee fraud and abuse because Federal funds are involved. Henceforth, the OIG will not actively investigate non-Federally funded cases (primarily fictitious employer schemes involving only State funds and State UI fraud cases referred to it by the SESAs). The OIG will return any of these non-Federally funded UI cases received from a SESA directly back to the originating SESA for appropriate action.

5. Role of the OIG. As previously stated, the OIG maintains the authority to investigate UI program fraudulent claims, including fictitious employer schemes, where Federal funds are involved, and SESA employee fraud and abuse cases. Therefore, no change in current procedures for the SESA referral of such categories of cases is necessary. For those cases it accepts, the OIG will keep the appropriate ETA Regional Office and/or SESA informed of case status.

   With regard to non-Federal cases, the OIG has provided ETA an initial listing of 263 State UI fraud cases that will be returned to the SESAs for appropriate action. These 263 cases will be returned to the appropriate SESA by ETA Regional Offices in the near future.

   The OIG remains available to provide technical assistance and advice to the SESAs in their efforts to prosecute State UI fraud and fictitious employer schemes involving State funds. Such assistance may involve instructing the SESAs on "clustering" UI single-claimant fraud cases as a means to more efficiently utilize staff resources and produce a high enough dollar threshold for prosecution, training of investigative personnel, liaison with prosecutors and coordination with investigative agencies.

6. Action Required. SESA Administrators are requested to:

   1. Furnish appropriate staff with a copy of this UIPL for their guidance; and

   2. Provide information to the appropriate Regional Office ten days after the end of each calendar quarter on the disposition of each of the UI fraudulent cases returned from the OIG to the State for prosecution. This information should include --

      1. The type of UI fraud case involved (e.g., intrastate or interstate UI);

      2. The current status of the case; and

         The result of the prosecution, including the sentence if convicted, or the reason why the case was not prosecuted by State officials.

      This information should be submitted each quarter until each of these returned cases has been prosecuted and the final result is known or until the State declines to prosecute.

   3. Inquiries. Direct: inquiries to appropriate Regional Office staff.