Recession hijinks

The Federal Labor Agency confirmed Wednesday it was investigating dozens of German companies for allegedly defrauding the Kurzarbeit labor subsidy program of at least 1.2 million euros.

The scheme, which was designed to ease the impact of the recession on German companies, helps pay some of the salaries and social security contributions for employees whose working hours have been cut.

The allegations, first published Wednesday in the daily Frankfurter Rundschau newspaper, say that companies reported cutting their working hours while the employees continued to report work regular shifts.

In somecases workers were required to stamp out their time cards at noon and then return to work in the afternoon, so the company could claim subsidies without reducing productivity.

A Federal Labor Agency spokeswoman told the dpa news agency that in one case, a company actually cut workers' pay and then pressured them to apply for the salary supplements available under the Kurzarbeit program.

Small and medium-sized companies suspected

The agency was alerted to about 100 alleged scams by anonymous tips, spokesman Kurt Eikemeier told the Associated Press, adding that local authorities had already launched investigations into 59 cases of suspected fraud.

The southern state of Baden-Wuerttemberg, which is home to many small auto parts companies suffering heavily from the global recession, reported 31 suspected cases of fraud - the most for any state.

"The large, well-known automobile manufacturers aren't in the cross-hairs of the state prosecutor," said Claudia Krauth, a spokeswoman for the Stuttgart prosecutor's office, explaining that investigations were focused on small and medium-sized companies.

Probes are underway across Germany, with firms in Lower Saxony, Bavaria, Bremen and North-Rhine Westphalia also under scrutiny.

Fraud 'inevitable'

So far, the German government has allocated six billion euros for the program while approximately 1.4 million workers were estimated to be working shorter hours as of May. About 36,000 firms have applied to take part in the program, the Federal Labor Agency said.

Experts say that with the German government advertising the Kurzarbeit program widely and promoting it to companies as a way to avoid layoffs, some fraud was probably inevitable.

"Some companies might say, 'I don't need to sign up for this program, but if my competitors are doing it, they're getting an advantage with lower labor costs," Humboldt University labor economist Michael Burda told Deutsche Welle. "Then everyone else feels the need to sign up too, even if they don't really need to join the program."

The Federal Labor Agency said it was forming a 20-person task force to screen out potentially fraudulent new applications to the program.

BN/dpa/AP
Editor: Sam Edmonds