Fraud Investigation NJ Unemployment Fraud Scheme Linked to Trucking Firm

Stephen Pirrone’s former trucking company made him a lot of money, but not for moving freight.

The 53-year-old Paramus man — just released from federal prison in a $200,000 tax fraud that used the name of the firm to generate fake wage statements — was charged today with three others in a $180,000 unemployment scam in the name of the same now-defunct transport company.

The scheme, also based on fraudulent wage statements, went on for more than six years — continuing even after Pirrone was in prison, with some of the money wired to his commissary account, investigators said.

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Charged with Pirrone was Wilfredo Sanchez, 37, and Jose Flores, 38, both of Newark, and Andre Brown, 36, of Woodland Park.

Pirrone, Sanchez and Flores were all arrested today and ordered held on $75,000 bail. Brown was not arrested but was ordered to appear in court when arraignment is set.

If convicted, they face five to 10 years in prison and fines up to $150,000.

Elie Honig, director of the state Division of Criminal Justice, said the attorney general has been working closely with the Department of Labor and Workforce Development over the past two years targeting unemployment fraud.

“We have both the technology and the will to bring them to justice,” Honig said.

Last month, five former inmates were charged by the state Attorney General’s Office with stealing $100,000 in unemployment benefits while they were in prison.

And in one of the biggest cases to date, the state in 2012 charged 31 people with defrauding the state of more than $2 million by filing unemployment claims in the names of relatives, friends and victims of identity theft.

In the case announced yesterday, prosecutors said Pirrone, who owed a debt to Brown, came up with a scheme to file fraudulent unemployment claims based on bogus wage statements submitted in the names of Culver Transportation, a company Pirrone once operated, and a second bankrupt firm from which he had rented office and terminal space.

They said Pirrone later taught the scheme to Sanchez, who worked with Flores to file additional claims. According to the Attorney General’s Office, Sanchez and Flores paid part of the proceeds to Pirrone by wiring money to his commissary account, even while he was in federal prison after pleading guilty in November 2011 to federal tax fraud charges.

In that case, he admitted submitting false W-2 forms on behalf of himself and a family member, claiming to be an employee of Culver and other firms. According to the U.S. Attorney’s Office, Pirrone received more than $200,000 in tax refunds from the IRS as a result of the scheme. Sentenced in 2012 to 28 months in prison, he was released in May, records show.

NOT PART OF TAX PROBE

The state’s investigation into the unemployment fraud case did not grow out of the federal tax probe, a spokesman for the attorney general said, but rather developed out of the electronic auditing systems now being used by the Department of Labor.

Labor Commissioner Harold Wirths said the state’s anti-fraud measures — including software that flags efforts to log into the state’s computer network from out-of-state, and cross-checking applications for unemployment against databases of inmates and newly hired people — have saved the state $448.7 million the past three years. But Wirths estimated there were still 1,600 to 2,000 attempts to claim unemployment benefits each week by ineligible applicants or those seeking to commit outright fraud.

CLAIMS FLAGGED

The state, in its investigation of Pirrone, said it began focusing on him after his claims were flagged based on the use of the same defunct employers.

From November 2006 to March 2013, two claims in Pirrone’s name generated benefits of $46,287 and $8,336. Other claims over that period led to benefits of $59,400 to Brown, $34,827 for Sanchez and $25,505 for Flores, officials said. Sanchez and Flores also were charged with filing two other claims using stolen identities, generating benefits of $9,163.