State botched 6,650 more unemployment fraud cases

Michael Gerstein
The Detroit News

Lansing — The agency overseeing Michigan’s unemployment program said Wednesday that the number of botched fraud cases has risen by about a third after further review.

The Michigan Unemployment Insurance Agency has been under fire for using an automated computer system that made more than 20,000 false fraud determinations between October 2013 and August 2015. The latest review brought the agency’s total false fraud determinations to more than 26,650, about a 33 percent increase.

The agency said it botched more than 6,650 more fraud cases of an additional 14,000-plus cases it reviewed between 2013 and 2015 — a little less than half of the cases. Slightly more than half of the cases it reviewed were accurate, the agency said.

The latest review marks the halfway point for the agency’s broader look into 28,000 fraud determinations it made during that time with its fraud detection computer system and “some level” of staff review, said Dave Murray, a spokesman for the Talent and Economic Development department.

An initial batch of 20,000 cases were reviewed in the fall that were only determined by the automatic computer program. After that, the agency agreed to review another 28,000 cases, which should be done by July, Murray said.

But the number of wrongful determinations is much higher, said a lawyer representing those who allege they were wrongly accused in two separate suits. Jennifer Lord said more than 46,000 people were wrongly accused of fraud and accused the state of wrongfully seizing more than $100 million from Michigan residents.

The state disputes her claim.

Lord said she believes the agency has botched nearly all of its fraud determinations.

“I’d certainly like to see some verification of what they’re claiming,” she said Wednesday. “Frankly, I’m even more concerned that I was before.”

Michigan officials are reviewing fraud cases made with an automatic computer system and some human oversight after lawsuits brought to light that the unemployment agency had wrongfully accused tens of thousands of people of fraud, often wrongfully garnishing people’s wages over a crime they did not commit.

About 40,000 people are implicated in the cases, the agency says.

Talent and Investment Agency Director Wanda Stokes said state officials are working to repair trust. The administration of Gov. Rick Snyder has hired Michelle Beebe, who has led the Utah Unemployment Insurance Division since December 2014, to start next week as the director for the Michigan jobless insurance agency.

“We need to be a resource for people during a difficult time in their lives, and the agency is working hard to rebuild trust,” Stokes said in a statement. “We are addressing these serious problems from the past while looking forward to improve customer service and restore confidence.”

In the vast majority of the agency’s fraud determinations, the computer program used a practice now outlawed by the U.S. Department of Labor to establish that people had worked during the period they attempted to claim unemployment benefits, according to the agency.

Often, the accused were never even properly notified the agency had flagged them for fraud because staff or the computer program would send them a message on an internal unemployment benefit messaging system rather than by mail, phone or even their actual email address, Murray said. A state Auditor General’s Office report also noted this problem.

“We are always working to improve the process,” Murray said.

The state agreed to a series of broad policy reforms in February as it settled a federal lawsuit filed on behalf of residents falsely accused of unemployment fraud.

A settlement required the agency to change the way it handles fraud cases but did not award monetary damages to plaintiffs, beyond mandatory refunds of fines and penalties levied for false fraud determinations. A separate class-action suit seeking additional financial compensation remains active in state court.

Lord says many of those who are being paid refunds for mistaken fines or penalties are not being paid back everything they are owed by the state.