Payback time

Investigates

Imagine losing your income for months, relying on unemployment to pay your bills, only to now find out you have to pay all the money you received back, plus penalties for taking it in the first place. It’s “payback time” for many people in South Dakota. The South Dakota Department of Labor says it overpaid people $2.7 million in unemployment benefits and now it is demanding the money back. These cases are skyrocketing and creating even more hardship for people already down on their luck.

Many people who relied on unemployment just to get by during the pandemic, after being laid-off, are just now finding out that the South Dakota Department of Labor says they weren’t entitled to the money and they must pay it all back.

“I was sick. It made me almost sick because I was scared. It made me feel like I did something wrong and I just did what they told me to do,” Sarah Knutson said.

“It’s been several months already and I’m pregnant with my second child and it’s been incredibly stressful to have this hanging over my head right now,” Jena Haigh said.

Sarah Knutson (left) and Jena Haigh (right) have been told they must pay the state back thousands of dollars each

Sarah Knutson and Jena Haigh have both been told by the South Dakota Department of Labor that they can’t keep the money they collected in unemployment benefits.

The State says Haigh owes $9,413.

Knutson has received a notice she must pay back $5,676.

Kennecke: Do you have $6,000 to pay back?
Knutson: Absolutely not.

Knutson, a massage therapist, worked part-time and was laid off when the pandemic hit. It took weeks, but her unemployment benefits finally arrived. She was then given the opportunity to return to the job, but says she worried for her own health and she chose not to return.

She called the South Dakota Department of Labor to cancel her unemployment claim.

“I called them immediately and the guy advised me what to do: to cancel that claim and he also suggested I could maybe qualify for my small business,” Knutson said.

Her small business was giving massages out of her home, which she had also ceased to do because of the pandemic.

Pandemic Unemployment Assistance was created as part of the CARES Act by Congress in March and it provided unemployment benefits to self-employed or gig workers, who typically wouldn’t have qualified. People like Knutson were able to get the minimum benefit payment of $172 a week without any supporting paperwork.

Knutson says she was encouraged by the South Dakota Department of Labor to apply.

“I said it was a pretty small business and he said, ‘no it doesn’t matter how small. Just try to sign up for the application and see if they approve it. You should get at least the minimum,” Knutson said.

Knutson continued to check her claim online and six weeks later it still said “eligibility not decided.” However she received a deposit in her account. So she called the Department of Labor to inquire about it.

“They don’t call you back, you can’t get through, you sat on hold for two hours. It was a full-time job just calling them.” Knutson said.

She used the money to pay her bills.

“My house payment; all my utilities–it was a desperate moment,” Knutson said.

Then this month, Knutson got a letter accusing her of fraud.

“I don’t think I should have to pay it back and I don’t know how I’m going to pay it back,’ Knutson said.

Knutson has cashed in her retirement savings to survive.

“I don’t know anyone who it wouldn’t be a hardship on to get an unexpected $10,000 bill in the mail,” Haigh said.

Jena Haigh works a physical therapist for a regional health systems. She gets paid per patient, but was furloughed when the pandemic hit.

She applied for unemployment, but then got a letter from the Department of Labor, saying she had to pay it all back, plus penalties.

“I didn’t think it was real. I told my husband, is this like a phishing scam or something? What’s going on? Because it was so out of the blue and it was four months later after I had stopped applying for unemployment. So I was really blindsided by that,’ Haigh said

Finally, Haigh was able to determine it was a mix-up in paperwork by her employer.

Haigh: And so the state said, ‘you lied about your hours and so the whole thing is off.’ So we had my employer provide a statement that said, it was our mistake. We accidentally mixed up these weeks. Her reporting was correct.
Kennecke: Did it help?
Haigh: Not so far.

Both Haigh and Knutson have filed appeals in their cases.

“Some of these bills are $10,000 or $15,000 dollars,” Attorney Brent Thompson of East River Legal Services, said.

Requests for legal help to appeal unemployment benefit payback cases are up by 40 percent, much more than his office can handle.

“Yes, there are certainly cases that are appealable and we have very limited resources to take some of these cases as a legal aide. Short of that your left with the private bar and that costs money, a lot of money. And just by the nature of this work, how many people on unemployment can afford an attorney?” Thompson said.

The South Dakota Department of Labor tells KELOLAND Investigates that it overpaid $2.7 million in benefits between Oct. 1, 2019, and Sept. 30, 2020. The South Dakota Department of Labor says $416,142 of the $2.7 million in overpayments, or nearly 16 percent, was determined to be fraud.
The Department says whether it was due to an unintentional error by an employee or its fault, it still must be repaid.

However, the last $900 billion coronavirus stimulus bill that passed allows workers to keep their PUA benefit overpayments — if their state says it’s okay.

The South Dakota Department of Labor told KELOLAND Investigates in an email that it would, “waive repayment of the PUA overpayment if the state determines the claimant was not at fault for receiving it and that repayment would be contrary to equity and good conscience.”

“A lot of people just rely on the government, this department, to tell them if they apply or not and they just don’t understand,” Thompson said.

“According to that letter, they’re trying to say that I fraudulently tried to get extra money and I didn’t do that,” Knutson said.

“I feel very strongly that I did everything I was supposed to and I never tried to be fraudulent in any way. So I don’t understand why all this is happening and my dream is for it to all go away,’ Haigh said.

“It’s side effect of the pandemic that people aren’t talking about. It’s something we’re going to be suffering from for many months, if not years that’s going to be a problem for many people in the community,” Thompson said.

We asked the South Dakota Department of Labor for an on-camera interview to address this issue and these specific cases, but we were denied. They also said they couldn’t tell us how many of these overpayment cases are currently being appealed.

Of course, not all overpayments are due to simple mistakes from claimants or the government.
The Secret Service is conducting hundreds of investigations into an estimated more than $1 billion worth of unemployment fraud across the country.

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