The Washington Post - by Mike DeBonis

Nearly 90 District government employees were placed on leave Monday in a prelude to their potential firing and prosecution after officials determined they had received fraudulent unemployment benefits while holding their city jobs.

Another 60 or so former D.C. workers cashed unemployment checks they were not entitled to, said Lisa Mallory, director of the D.C. Department of Employment Services. In all, the city has paid out about $800,000 in unemployment benefits to working city employees since 2009, Mallory said.

“By holding people accountable, that sends a clear message we’re not tolerating this behavior,” she said Monday.

D.C. Inspector General Charles J. Willoughby and Attorney General Irvin B. Nathan are involved in the probe; authorities anticipate referring at least some cases to federal prosecutors for criminal prosecution. Mallory also said she has worked with the U.S. Department of Labor to detect and prevent this type of fraud.

Jeff Lagda, a spokesman for the Labor Department’s inspector general, cited department policy Monday in not confirming or denying any ongoing investigation.

The employees accused of wrongdoing worked in various arms of the District government, including the D.C. Public Schools and the D.C. Council, according to a high-ranking official to Mayor Vincent C. Gray, who was not allowed to speak publicly on the investigation.

Some of the employees, Mallory said, received as much as $20,000 or more; others received only a few hundred dollars.

The alleged fraud is not complicated nor is it uncommon in unemployment insurance programs: Workers apply for checks and receive them legitimately for a time but fail to inform authorities as soon as they go back to work.

“Some are people who come in and out of government and never stopped [receiving unemployment checks]. Some may have worked in parts of an agency where for the summer months you don’t work,” Mallory said. “There are no clear patterns that we can discern. It’s just a matter of certifying you aren’t receiving income when you are receiving income.”

A Gray spokesman declined to release workers’ names Monday, citing privacy restrictions.

Mallory said her department regularly passes cases of suspected “overpayments” fraud to the inspector general for investigation and potential prosecution, but Monday’s action represents an unprecedented crackdown among the city government’s approximately 32,000 employees.

“Our focus is really on trying to deter,” she said. “We want to make sure that individuals who owe this money are actually held accountable for these overpayments.”

Mallory said her office has launched new initiative in the past year to combat this type of fraud, cross-checking lists of unemployment recipients with city payroll records and a national database of new hires. The city unemployment office now does those comparisons several times a week, she said.

The employees placed on leave Monday were informed of the allegations against them in letters delivered at least 15 days ago, Mallory said. “They are afforded an opportunity to provide the history of what transpired,” she said. “Most of these individuals, from what we can tell, did not do that.”

Monday’s actions follow ongoing probes into the District’s unemployment office by local and federal authorities.

In September, the acting director of the Employment Services unemployment division, Gaby L. Fraser, was dismissed amid fraud allegations. The inspector general continues to investigate that case, Mallory said, and Fraser has not been charged with a crime.

Mallory said Monday’s action is not related to Fraser’s dismissal. A national search remains underway for her permanent replacement.

A financial audit of the unemployment program dating to 2009, paid for by federal administrative funds, is set to get underway Monday, Mallory said.

Investigators have taken an increasing interest in the unemployment program as the volume of claims has soared alongside the District’s unemployment rate. In fiscal 2007, with the city jobless rate under 6 percent, 17,645 residents made initial claims for unemployment checks. Two years later, joblessness had risen to about 10 percent and more than 52,000 sought checks for the first time.

In a July 2011 letter to Gray, Willoughby said his office was conducting an “ongoing special evaluation” of the unemployment compensation office and that he expected to submit a report later in the year.

The letter accompanied a management alert that found “essential safeguards” in an agency computer system were “inappropriately turned off” from February 2009 to July 2010, allowing an unknown number of checks to be mailed to ineligible recipients. According to the letter, a city contractor told investigators that a former agency manager had ordered the safeguards to be disabled, perhaps to allow officials to more easily handle a record number of claims.