Decision Number 1555-BH-82 - Fraud - Section 8-809(b), 8-1301, 8-1305(b)(2) - Maryland Unemployment Decisions Digest - Appeals

BOARD OF APPEALS

DECISION

Issue: Whether the Claimant has made a false statement or representation, knowing it to be false, or has knowingly failed to disclose a material fact to obtain or increase any benefit or other payment within the meaning of Section 17(e) of the Law; whether the Claimant was unemployed within the meaning of Section 20(1) of the Law; and whether a previous overpayment of unemployment insurance benefits is recoverable from current compensable claims under provisions of Section 17(d) of the Law.

- NOTICE OF RIGHT OF APPEAL TO COURT -

YOU MAY FILE AN APPEAL FROM THIS DECISION IN ACCORDANCE WITH THE LAWS OF MARYLAND. THE APPEAL MAY BE TAKEN IN PERSON OR THROUGH AN ATTORNEY IN THE SUPERIOR COURT OF BALTIMORE CITY, OR THE CIRCUIT COURT OF THE COUNTY IN MARYLAND IN WHICH YOU RESIDE.

THE PERIOD FOR FILING AN APPEAL EXPIRES AT MIDNIGHT November 21, 1982.

APPEARANCES

EVIDENCE CONSIDERED

The Board of Appeals has considered all of the evidence presented, including the testimony offered at the hearings. The Board has also considered all of the documentary evidence introduced in this case, as well as the Employment Security Administration's documents in the appeal file.

In determining the value of the Claimant's interest in OCS as a going concern, the Board has considered whether it is reasonable to infer that, since the Claimant's services were valued at $150.00 a week after August 1980, his similar services were worth that much at the time he was filing unemployment insurance claims. Although the question in this case is not how much the Claimant's services were worth but how much he was remunerated, it could possibly be assumed that the remuneration is roughly equal to the worth of the services. In the absence of any evidence on the worth of the remuneration, however, the Board declines to make this assumption, since to do so would be to make findings of fact based more upon conjecture than upon actual evidence.

FINDINGS OF FACT

The Claimant filed a claim for unemployment insurance benefits and collected twenty-six weeks of benefits between the weeks ending January 19, 1980 and July 12, 1980. The Claimant's weekly benefit amount (including allowances for dependents) was $106.00.

Simultaneously with the collection of benefits, the Claimant was performing some services on behalf of OCS Remodlers, a small business of which he later became secretary, then president. These services was performed sporadically.

Shortly after his unemployment insurance claims were exhausted, the Claimant went on the payroll of OCS Remodlers at a pay rate of $150.00 per week. This payment was for substantially increased services which were then being performed by the Claimant. Shortly after that, the other major principal of the corporation retired and the Claimant became president of the company.

The Claimant received no wages from OCS during the period in which unemployment claims were filed. No other remuneration was proven.

CONCLUSIONS OF LAW

Since the Claimant was not asked during the relevant period whether or not he was a corporate officer, and since the mere fact that one is a corporate officer does not automatically disqualify a person from receiving benefits, Gleason v Gleason, 1033- BH-81, the Board does not find a violation of Section 17(e) by the Claimant in the fact that he did not reveal his corporate officer status.

The performance of services by the Claimant for the corporation is another matter. Although the performance of incidental services without pay does not disqualify a person from the receipt of benefits, Yetta Baker, 1034-BH-81, the performance of services for wages does. The term wages means not only regular wages, but "all remuneration for personal services," as Section 20(n) of the Law makes clear.

In this case, no proof was presented that the Claimant did receive remuneration in return for his full-time personal services for the corporation. Remuneration may be an interest in a going business concern. The Board has ruled that the receipt of an interest in a business constitutes wages within the meaning of Sections 20(1) and 20(n) of the Law. Lynch, 612-SE-81. In this case, however, no proof was presented that the Claimant received an interest in the company in return for his services.

Since the Claimant was not receiving remuneration, he was unemployed within the meaning of Section 20(1) of the Law. Under Section 17(d) of the Law, he is therefore not overpaid. for all of the weeks in question.

Whether the Claimant deliberately failed to disclose a material fact in order to obtain benefits, within the meaning of Section 17(e), is a question of intent. The Board concludes that there is insufficient evidence in the record of any intent to defraud the agency and obtain benefits to which he was not entitled. The Claimant believed that he was entitled to benefits since he was not receiving wages. Although there is some evidence that the Claimant deliberately made a false statement, there is insufficient evidence of this fact, especially in the light of the fact that the claim cards themselves are absent from the file. The Referee decision, therefore, imposing a penalty on the Claimant under Section 17(e) of the Law, will be reversed.

DECISION

The Claimant was unemployed between the weeks ending January 19, 1980 and July 12, 1980. He was not disqualified for benefits under Section 20(1) of the Law during that time.

The Claimant is not overpaid under Section 17(d) of the Law for the benefits collected during that period, unless he was disqualified under some other section of the Law.

The Claimant did not make a false representation of a material fact in order to obtain or increase his amount of benefits within the meaning of Section 17(e) of the Law.

The decision of the Appeals Referee is reversed.

Thomas W. Keech, Chairman
Hazel A. Warnick, Associate Member

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DATE OF HEARING: August 11, 1981
COPIES MAILED TO:
CLAIMANT
EMPLOYER
Law Offices
Joseph Mahoney
John Zen - Legal Counsel
UNEMPLOYMENT INSURANCE - ELKTON

LOWER APPEALS

DECISION

Issue: Whether the claimant has made a false statement or representation knowing it to be false or to have knowingly failed to disclose a material fact to obtain or increase any benefits or other payment within the meaning of Section 17(e) of the Law.

- NOTICE OF RIGHT TO PETITION FOR REVIEW -

ANY INTERESTED PARTY TO THIS DECISION MAY REQUEST A REVIEW AND SUCH PETITION FOR REVIEW MAY BE FILED IN ANY EMPLOYMENT SECURITY OFFICE, OR WITH THE APPEALS DIVISION, ROOM 511, 1100 NORTH EUTAW STREET, BALTIMORE, MARYLAND 21201, EITHER IN PERSON OR BY MAIL.

THE PERIOD FOR FILING A PETITION FOR REVIEW EXPIRES AT MIDNIGHT ON February 11, 1981.

APPEARANCES

FINDINGS OF FACT

The claimant filed his initial claim for benefits effective January 13, 1980, after he was separated from his employment with the American Standard Energy Homes. He was awarded a weekly benefit of $106 plus $3 in dependents allowances and was paid twenty-five weeks of benefits at $106 a week until July 12, 1980, for a total of $2,650. For each week of benefits claimed, the claimant certified that he was not employed and that he had performed no work. In December of 1979, however, the claimant and two other associates had discussed the desirability of forming a home remodeling corporation. They organized themselves into a corporation called "OCS Home Remodlers" and, in December of 1979, OCS Home Remodlers was licensed by Cecil County to do business in that county. In February of 1980, the claimant was made Secretary of the corporation. Although he regularly performed various valuable services on behalf of the corporation, he was paid no wages. The claimant served as a general all around handy man since he has several skills used in home remodeling. He picked up material on behalf of the corporation and "drove a few nails" in helping the corporation complete its contracts for remodeling homes. On July 25, 1980, shortly after the claimant filed for and received his last weekly unemployment insurance benefit check, the claimant was placed on the corporation payroll and began to receive a weekly salary of $150. In August of 1980, the claimant became the President of the corporation and the other two members dropped out. The name of the corporations "OCS" is derived from the first initial of the first name of each of the three corporate members. Thus the letter "S" of the corporation's name is derived from the letter of the claimant's first name, i.e. "Samuel" The claimant worked for the corporation without pay because he was unable to contribute any money into the capitalization of the corporation. He hoped to gain future profit if the corporate venture proved to be successful. While he was filing and drawing benefits, the claimant provided twenty-five to thirty-five percent of the work force of the corporation. As of July 25, 1980, after the claimant had stopped filing for unemployment insurance benefits, the claimant provided substantially one hundred percent of the corporation's work force. The claimant never reported to the local office that he was a corporate officer and that he had a financial interest in the corporation.

COMMENTS

It is concluded from the weight of the credible evidence that the claimant made false statements and false representations to the local office, knowing them to be false and knowingly failed to disclose a material fact in order to obtain unemployment insurance benefits within the meaning of Section 17(e) of the Maryland Unemployment Insurance Law. The claimant worked hard and rendered valuable service on behalf of OCS Home Remodelers as his contribution to and investment in the corporation in the hope that it would succeed and become' a financial success, thereby enriching him in the not too distant future. Although the claimant was careful to point out to the local office that he received no wages for his work he did not tell the local office that he was a corporate officer and that his share of the investment in the corporation were the services that he would and did render to the corporation without immediate remuneration.  The claimant withheld this information from the local office for the purposes of getting unemployment insurance benefits which he believed would not be paid to him if he revealed this information. It was only until after the claimant stopped filing for and receiving unemployment insurance benefits that the claimant was put on the corporation payroll and began to draw a weekly salary in payment for the services he was rendering in behalf of the corporation. The claimant knew, however, that he was self-employed; that he was a corporate officer and that he had a financial interest in the corporation and that he was making a substantial effort towards the success of the corporation so that in the future and, after he was no longer filing for unemployment insurance benefits, that he could enjoy the fruits of his labor as part owner and corporate officer in a successful, profitable venture. The claimant did not tell the local office this information each week that he filed his claim for benefits, although he acknowledged that he was working for the corporation without pay. He did not mention his financial interest in the corporation because he was afraid that, if he did so, he would not receive the unemployment insurance benefits that were being paid to him. The claimant's willful and deliberate failure to report the fact that he was a corporate officer of OCS Home Remodlers, that he was making a financial contribution to his corporation and his false allegation that he was unemployed when, in fact, he knew that he was working for his corporation, incurred the penalty provided for in Section 17(e) of the Law. In these circumstances, the claimant was not entitled to the twenty-five weeks of benefits that he received and, pursuant to the recovery provisions of Section 17(e) of the Law, such overpayment must be repaid.

DECISION

The claimant made false statements and representations to the Maryland Employment Security Administration; knowing them to be false and knowingly failed to disclose a material fact to obtain or increase benefits and dependents allowances, within the meaning of Section 17(e) of the Law. Benefits are denied from October 17, 1980 until October 16, 1981.

The claimant is not entitled to the $106 weekly benefit allowance that he received for the twenty-five week period from January 13, 1980 through July 12, 1980. Accordingly, he has been overpaid $2,650 in benefits and such monies must be returned to the Maryland Security Administration.

The determination of the Claims Examiner is affirmed.

Sanford Hordes, APPEALS REFEREE

Date of hearing: January 2, 1981
Cassette: 6181A (2nd half)
COPIES MAILED TO:
Claimant
Employer
Unemployment Insurance-Elkton

Carl Riva/ Recovery
E. Barzak, Claims Investigation,
Claims Investigation Towson Office
William R. Edmondson, Tax Auditor
Elkton ESA