The state Labor Department says it has paid tens of thousands of dollars in workers compensation benefits to another dead person.
The state said that more than $80,000 was improperly paid on behalf of a Big Island man, who died two years ago.
The discovery comes after Hawaii News Now reported the case of California woman who allegedly collected $400,000 in workers comp payments by forging the signature of her dead father.
"The alarm bells should go off," said state Sen. Sam Slom, (R) Hawaii Kai, Aina Haina, a longtime advocate of workers compensation reform.
"Anytime there's legislation about toughening up on fraud and corruption, the state doesn't seem too interested and the unions come in to testify against it."
In the Big Island case, the state says an unidentified person submitted phony eligibility documents.The case has turned its files over the state Attorney General's office and sources say the FBI, IRS and Social Security Administration are beginning to look at this and other Hawaii cases.
State Labor Department Director Dwight Takamine says steps are being taken to prevent future fraud. The department will soon require notarized documents for people receiving benefits.
The department has said that fraud represents a small portion of its overall case load. Of the more than 6,500 contested case hearings handled by the state between 2006 and 2010, there were just 26 cases involving charges of fraud.
The alleged fraud involves the state fund for people receiving permanent total disability benefits.
Many of these are people who are seriously injured and have not worked for years. There are about 366 people covered by this form of benefits and about 50 of them live on the Mainland.
To received these benefits, people must regularly fill out disability verification forms with the state. The labor department uses these documents to find out if people are still living or able to go back to work.
State officials note that the agency that investigates these types of filings has seen drastic staff and budget cuts during the Lingle Administration.
But fraud experts said that's no excuse for failing to detect the fraud. Longtime private investigator Steve Goodenow said it's pretty simple to find out if someone is living or not.
"It's very easy to do ... a few clicks on Google and you can find out," said Goodenow.