I will never understand why so many people wish to jump on somebody with unemployment fraud issues (even not clearly established unemployment fraud issues as yet) as if they'd robbed the national bank. There is a tendency to threaten them with incarceration, tell them to shut their mouths, get an attorney, and prepare to have the book thrown at them. This is usually not the best and most helpful way to react, especially when there is an issue that is questionable as to whether there is actually an overpayment involved. And that is the case here.
From the sound of this, this is the first contact this person will be having with the unemployment fraud and overpayment division. They have received information and are doing an investigation. There is no need and it is NOT helpful to hire an attorney at this point and take them with you to any meetings you have to work this issue out and get an overpayment decision from the department. If you are to be prosecuted in a criminal court, it will be after a lot of decisions and determinations in the department itself. That would be the time for a criminal attorney to defend you.
Let me remind you, all you all, as we say here in the south, that unemployment benefits are not based on income, even income earned while you were drawing the claim, even self-employment income in some cases, they are based on availability and actual work performed for wages generally work performed for a covered employer.
Though you are receiving benefits, your wife may be working and bringing in a million dollars a month. You may win the lottery. Your rich uncle may kick off and leave you a fortune, or you may have a yard sale and make $800 in a week. You will not be asked ever, about your income or other sources of such during an unemployment claim. If you were working as a consultant, or on commission, and the employment situation was very temporary, or a one off, for example, doing yard work for someone, designing a home for them, or a non taxed informal job, there is a pretty good chance it will not be determined to be actual fraud in any way.
While the person is drawing the claim, they are asked, each week, if they did any work for which they are paid or will be paid. They are also asked to state if they are fully able, available and actively seeking full time appropriate employment. Self employment, commission employment while still in the labor force and seeking permanent full time employment is a sort of grey area. Because you had some employment income showing from during the time you were drawing unemployment does not necessarily mean that you have committed unemployment fraud and you're going up the river before the season changes. It will tremendously depend on the individual circumstances.
The best thing that your friend could have done was, as soon as he begun to do the consulting work, have a frank discussion with the unemployment system, and report this, gotten a decision about whether he had "removed himself from the labor force by doing this job."
Since he didn't do this, it was eventually noted, it was noted that no decision is as yet in place regarding this employment, and it will have to be decided whether or not the person willfully and knowingly defrauded the unemployment system by working for pay which they did not report and being out of the labor force while continuing to draw benefits. They will want to know the dates, circumstances, hours and many other things about how this work was performed and reimbursed.
What has happened here is that in a cross matching of unemployment benefit records and income tax records, there appears to be some wages that were paid during the same time that the person was drawing unemployment benefits. The system checked, and no wages were being reported on the claims that were being filed for weekly benefits. This has raised a question, put up a flag, and they have sent him an initial contact letter requesting information. What the unemployment system needs right now is the cooperation of the claimant in determining exactly what happened, the claimant's reason for not reporting, and then they'll try to make a decision about whether or not it is going to be considered fraud.
If you lawyer up and refuse to cooperate, go all self protective and vague about it, you are seriously hurting your chances of getting this resolved in a helpful manner. They will have to push harder to obtain their necessary information, and this makes them much more likely to consider filing criminal charges against you.
Your friend needs to go to this meeting, unattended. He needs to keep careful records, bring in all the information he has about the work he has done, and have a very honest and frank discussion about whether or not he actually either intentionally or unintentionally committed fraud. There will be no "wiggle room" about what happened. They have the wage records that show when he was paid, how he was paid, etc.
What they are trying to decide is if he really did violate unemployment law by his failure to report correctly, or (and this is quite possible) due to the specific circumstances, it was not really necessary to report this income, and no fraud was committed.
I am basing this information on quite a bit of experience with unemployment fraud, and I feel relatively sure that there's no possibility that your friend will be prosecuted to the fullest extent of the law and he's going down for this, at least any time in the near future.
He does, however, need to get this resolved, immediately, respond to their contact, and start the process of getting this taken care of and of being fully cooperative. If an overpayment is determined, they'll likely let him repay the overpayment with penalties instead of working it out on the chain gang.
Many states are taking unemployment fraud more seriously in these times, but at the present, for this person, there is no unemployment fraud established, and there may not ever be. He needs to work it out with them, without panicking and expecting the worst.
