Industry Legislation

Who Pays for Licensing Fraud?

Crime may not pay, but beauty professionals do when people cheat at getting a license, or just work without one. What’s the cost? Increased licensing fees, more rigorous application processes, and a damaged reputation for the entire industry.

Who says crime doesn’t pay? For some in this industry, it pays handsomely in the form of a job and a regular paycheck. No one knows how many people have obtained licenses fraudulently, but these people are out there. How do they get away with it? You name it and someone’s tried it from altering or tampering with documents to “buying” hours from schools, and from using stand-ins for state board exams to forging a license.

State board officials say attempts at fraud are commonplace. “It’s sort of like being a traffic cop — you get speeders all the time,” says Bill Porcel, board administrator of fireworks, explosives, and cosmetology for the South Carolina Department of Labor, Licensing, and Regulations.

Mary Manna, executive secretary for the Nevada State Board of Cosmetology, agrees: “Fraud has been going on for a while; it’s just getting more popular.” Some attempts are clever and well planned, others are less sophisticated.

“Just last month we had someone who had taken a reproduced license – it was the best I’ve seen – and put her photo on it,” relates Manna. “The inspector was on her toes and noticed that the PN number was four digits, which means the licensee would have had to be at least 50 years old. She was much younger. We also had a case three years ago where we had calls from students at a school saying another student was getting her hours when she wasn’t there. On investigation, we found that the student was working at a pharmaceutical agency when she was allegedly in class. The school owner admitted the cards were fraudulent.”

While not yet of crisis proportions, licensing fraud is increasingly a problem, state board officials report. Both beauty professionals and their customers are feeling the effects of a problem they may not even know exists. When NAILS asked several salon owners and nail technicians how they felt about the issue, they said they didn’t know of any problems. But they will notice the effects as state boards tighten up their procedures in an effort to prevent cheaters from slipping through the cracks. Approximately 1,100 nail technicians in New York certainly took notice when the New York Department of State, Division of Licensing Services, sent out a letter notifying them their licenses had been revoked until some administrative problems could he cleared up.

Robin Pilsner, a salon owner in New York, says she exploded when she got the letter saying her license had been revoked and that she must submit a request for an administrative review. “Six months later I’m told something was wrong with my application? They were surprised I drove three hours to come to the hearing, but what do they expect when I’m told I no longer have a license to do nails? I own a nail salon. What am I supposed to do, close my doors?” questions Pilsner. At an open administrative review held in June. Pilsner says a deputy director told her that some people had faked the tax records required by the state board to get a license under New York’s grandfather clause. “I was told the reason for the review was fraudulent licensing — that people had falsified records.”

Pilsner, whose license was revoked because the state board said the amount of money she claimed to have made was insufficient for her to be considered full-time and because she hadn’t sent a copy of her 1009, says she got her license reinstated — after driving six hours round-trip and missing a day’s work.

It’s not just new licensees who are feeling the effects, either. More than 400,000 licensees in California will soon be required to have a photo on their license. Licensees will be sent to centers around the state to have their pictures taken and affixed to their license — a loss of time and money for the licensee. California is the latest of a number of states to require photos on license’s, which help customers and state board inspectors ensure the person named on the license is the person performing the service. State boards hope photos on licenses will discourage license-sharing.

Most state boards are also tightening up the license application process, requiring original or certified copies of documents where they used to accept photocopies, and inspecting those documents more carefully, even calling to verily information if anything looks suspect, or just returning the application altogether for incomplete information.

If you think getting a license in your own state is hard, try relocating to another state. While most states used to offer reciprocity (where one state honors another state’s license, provided similar education requirements are met), many now require newcomers to take the state board exam, which in some states is only offered every few months. Instead of being able to apply for and receive the license before they move, enabling them to start work immediately, some technicians are waiting weeks, even months, before they can work.

Beyond these individual inconveniences, who can calculate the cost of having untrained, unlicensed workers (people who obtain a license fraudulently are considered unlicensed) servicing an unsuspecting and paving public?

Is Reciprocity Ill-Fated?

“My recommendation in the next legislative session is to remove reciprocity, but I don’t think it will fly,” says Larry Perkins, assistant executive director of the Texas Cosmetology Commission “It’s not fair to the ones who ... took their training somewhere else and then moved here. They have the right to work in our state just as they had the right to work [in the state where they lived previously]. Why not give them a license? But when you have people who cause problems ...”

Perkins’ recommendation may be belter received than he thinks. Numerous states — including California, Colorado, West Virginia, Maryland, Florida, and Ohio, to name a few — have done away with reciprocity. Instead, they’ve switched to an endorsement system, which means they will license individuals from other states who meet their education and work requirements, and who pass the state board exam. Most state applications are reviewed on a case-by-case basis.

Reciprocity is on the outs because it’s the area most ripe for fraud. Most state boards required applicants for reciprocity to provide a copy of their license, certification from the state board that issued the license, and an application. State boards found that certifications were being tampered with and licenses were being altered. For example, Cathy Wells, program administrator for the Colorado State Board, tells of an individual from Wyoming who got licensed illegally in Colorado and Wyoming. “He requested certification of his mother’s record from the Wyoming State Board, did an incredible doctoring job, and got licensed here. His ultimate goal was to get a Wyoming license, and when he applied there they endorsed him,” Ultimately his scheme was discovered and both licenses were revoked.

Larry Absten, executive director of the West Virginia State Board, tells a similar tale. “This lady had owned a shop for a few years. When she first opened she told one of our inspectors she was an electrologist. Then she shows up with a work permit for hair. When her application had come in I was out of the office; the office staff didn’t notice anything wrong so they sent it through. When the inspector questioned it I pulled the application and noticed some problems. For example, the wrong person had signed the certification. And the certification had a rubber stamp — the Arizona State Board uses a seal, not a stamp. She had gone so far as to have a rubber stamp made.

“She apparently had taken her manager’s license when she was out one day and copied it, then altered it and made more copies, altering each, to make it look like she had licenses for ’91, ’92, and ’93. She presented these copies to the Arizona State Board with falsified documents. She got a valid Arizona license. Then she made a big mistake (because she had a valid Arizona license); she turned around and tried to do the same thing here.”

Absten revoked the woman’s West Virginia license and notified the Arizona State Board, which also revoked her license in that state.

While she didn’t catch anyone in the act, Judith Dennis, licensing administrator for the Michigan State Board, suspects there were fraudulent applications for reciprocity in her state as well. “We were getting a lot of walk-in applicants for reciprocity who were bringing all of their documents with them,” says Dennis. “We’ve always been able to approve a license on the spot if they had all the documents, which most of the time they didn’t. But then they did. We realized the certifications from other state boards could be passed around so we tightened up and required the certification to come [directly] from the state that issued it.” Since then, applications for reciprocity have fallen back to normal levels in Michigan.

Most states send the certification to the individual applying for reciprocity. The applicant then forwards it to the state where she’s applying with the rest of her paperwork. But a few states, like California, will only send certifications directly to the state board. This strains state boards’ resources, say Perkins and Wells. “That’s forcing state boards to keep files that they can’t support,” argues Perkins. “What’s going to happen if all states follow suit? Each state will have to hold on to certifications until the person sends in all the other required information.” Perkins envisions rows upon rows of file cabinets, one for each state’s certifications.

Wells agrees: “It isn’t very realistic.” In her opinion, providing the applicant until the certification in a sealed envelope, with the responsible party’s signature on the seal, is an adequate safeguard against certification tampering.

Perkins also suspects that many people who are legitimately licensed in one state will apply for reciprocity in another state, only to then turn around and sell that license to an unqualified individual.

“We’re finding that they’re getting a license in one state and then sending off to all other states. We get maybe five to 10 requests from one individual for transcripts of their [school] hours,” says Perkins. Why would someone need five to 10 copies of their transcripts? Surely one person doesn’t plan to work in five to 10 states?

Are Affidavits Enough?

Proof of work experience is another problem area for state boards that have decided to require work experience for reciprocity. How do you prove work experience? For example, Illinois’ grandfathering clause allowed nail technicians to submit signed affidavits from clients or employers as proof of work experience.

The Illinois Department of Professional Regulation acknowledges that some people may have lied to be grandfathered in under the licensing law. “Grandfathering is one of those situations where you have to take their word for it,” says Tony Sanders, spokesperson for the Illinois Department of Professional Regulation. Sanders says the department hoped most people would be discouraged from attempting fraud by the section in the law that made falsifying the documentation a class B misdemeanor that carries a fine of up to $5,000.

New York recognized the potential for fraud in its new licensing law. “Client affidavits can be part of their proof [of work experience], but we require authorization to check their tax returns. They are also advised to submit statements from two of the three following sources — a client, employer, or professional association – saying they have worked as a nail technician,” says Marjorie Eilertson, spokesperson for the New York Department of State, Division of Licensing Services. However, even New York has problems, as the 1,100 nail technician who suddenly had their licenses revoked can attest to.

The Arizona State Board requires individuals who apply for reciprocity to submit proof of work experience as well. “That’s an area we’ve talked about tightening up,” says executive director Sue Sansom. “Right now [the affidavit can be signed by] someone, preferably the salon owner, who has personal knowledge of what the person worked as and her schedule.”

While Nevada also still accepts notarized statements of work experience, Manna says the state board now asks applicants for a 1099 or W2 to back up their statement. Just recently, she had one applicant say she had worked for cash and had not paid taxes. “So I asked for a letter from her saying she had worked for cash and didn’t pay taxes,” adds Manna. The applicant declined to provide the letter, so the state board denied her application.

In New York, too, many nail technicians are wishing they’d been more honest with Uncle Sam. Eilertson says that some of the 1,100 nail technicians whose licenses were revoked simply didn’t have the required 1099 or W2 to back up their claim of one year’s experience in the nail industry.

Are They Getting Away with It?

Most state board officials can tell one or two stories about people they've caught, but none have a handle on how many people get away with license fraud each year. Says Wells, "The sad part is that administratively we deal with so many records that things can happen and we don't find out until someone tells us."

Most state boards have safeguards in place to prevent questionable applications from being approved. Especially since the Georgia licensing scam, many state boards have tightened up their procedures and are tougher on what documentation they will and will not accept.

Suspect documents are not usually professional quality, says Wells. "Quite honestly, the falsified documents are easy to spot. You can tell when they're tampered with -- they might use white-out, or they use the wrong name of people from the board, or they don't use the state board seal. Most aren't really sophisticated attempts."

The clerks who process applications know what to look for when inspecting documents, say state board officials. "I have one staff person who does the review process and that person is very familiar with the forms other states use," says Wells. These clerks come to know what name should appear on the certifications from other state boards and they learn what that signature looks like; they know each state's seal; and they are familiar with the schools in their state. If they have a question, most state board officials will call to confirm the information submitted.

If the question can't be answered, the application is returned. This is why most state boards don't have a handle on how big a problem fraud is in their state.

Says Sansom, "We deny applications based on fraud more than we can identify because when we tell them we can't issue a license because of incomplete documents and then they don't clear it up, that may have been a fraudulent application."

"We've had people withdraw their application when we questioned what they sent," says Dennis. In such cases, Dennis has no proof of wrong doing so the matter is dropped.

While it's impossible to calculate what licensing fraud costs the industry, the strain it puts on state boards is acute. Already working with small staffs -- California has 17 inspectors for 40,000 salons and 400,000 licensees; Texas has 16 inspectors for 180,000 licensees -- state boards just don't have the resources to police every application for a license. The money spent on tracking down fraud could be better used for increasing nail technician education and maintaining the professionalism of the industry.

 

Keywords:   licensing     reciprocity     taxes     Wyoming  

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