False fraud accusations prompt unemployment reforms

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — The Michigan House on Wednesday unanimously approved a series of reforms to the state’s unemployment insurance system in the wake of a false fraud scandal that has rocked the state Capitol and Gov. Rick Snyder’s administration.

The bipartisan package, now headed to the Senate for consideration, would reduce financial penalties for out-of-work residents accused of fraud but does not require compensation for those who were wrongly penalized in the past.

As The Detroit News reported in January, Michigan imposes financial penalties of up to 400 percent for unemployment fraud. The penalties are believed to be the highest in the nation, adding insult to injury for the tens of thousands of residents the state falsely accused of fraud over a nearly two-year period.

The legislation approved by the House would allow the UIA to recover full compensation for verified unemployment fraud but cap penalties at 150 percent for a second or subsequent offense. The current 400 percent penalty would only apply to imposters who commit identity theft.

The eight-bill package would also delay interest penalties, prohibit interest on over-payments due to agency mistakes, allow fraud determinations to be reconsidered for up to three years and give those accused of unemployment fraud access to an advocacy assistance program.

The proposal was designed to address agency failures identified by a work group chaired by Rep. Joseph Graves, R-Argentine Township, that included Democratic legislators and other stakeholders.

Wanda M. Stokes, who was appointed to lead the Michigan Talent Investment Agency in July 2016, has said the bills will “build on the work” the state is already doing to improve the Unemployment Insurance Agency.

The agency’s automated computer system made nearly 48,000 false fraud accusations against jobless claimants between October 2013 and August 2015, according to a review by the department, which said in August that it was in the process of refunding affected residents more than $20.8 million.

Other bills in the package would create a new mechanism for addressing identity theft, require the UIA to report imposter claims each year and clarify eligibility for penalty waivers for residents living in poverty.