State wrongly accused 46,000 people of unemployment fraud, collected million in penalties

The State of Michigan wrongly accused up to 46,000 people with unemployment fraud. It garnished wages, emptied bank accounts, and held tax returns without people being aware what they were convicted of. In total, $153 Million was wrongly collected with penalties and fees. (Photo Credit: Drew Moore/WSMH)

Lansing Resident Karl Williams was laid off from his job in 2011 and collected unemployment for roughly six months until he got a new job. But it wasn’t until 2014 he noticed a problem with one of his paychecks. The state of Michigan had garnished 25-percent of his paycheck. It took Karl months to figure out why it was happening. A computer system the Unemployment Insurance Agency was using, called MiDAS, had determined Karl committed unemployment fraud two years earlier. He says he never got a letter, phone call, or was served any paperwork letting him know what was going on.

“I thought either I’m going to have to find another job, get a second job, or do something to get extra money. I wouldn’t have been able to pay my rent, car payment, or eat if I didn’t,” Williams says.

The news got worse and Williams learned more about what the computer accused him of doing. MiDAS claimed that he wrongly accepted $9,000 in unemployment benefits. And two years later he now owed $56,000 in penalties and fees.

He turned to Employment Law Attorney Jennifer Lord with the first Ptt, Mcgehee, Palmer, and Rivers, P.C. based out of Royal Oak. Lord says Williams wasn’t alone.

“This is a cyber-criminal enterprise that has continued for years. What happened to Karl, and 46,000 other people, is that a computer determined they committed fraud, without any evidence, then there was a quadruple penalty, then interest charged on top of that,”

Lord is working to sue the State of Michigan with a class action lawsuit. She says the Unemployment Insurance Agency has admitted to being at fault.

“The Auditor General of the State of Michigan determined that 93-Percent of the people accused by the computer are wrong. From 2014 until 2016 the state collected $153 Million in penalties and fees from people,” Lord says.

Here’s the statement from Talent Investment Agency Director Wanda Stokes on the issue:

Statement from Director Wanda M. Stokes of the Talent Investment Agency

We are moving forward. The Talent Investment Agency took action after a hard look at every aspect of Unemployment Insurance, fixing the problems with guidance from national experts, people who use our system and our own staff who work with our residents each day. We made comprehensive changes to correct problems and ensure residents get benefits quickly and accurately.

The agency reviewed every case from the period when auto adjudication was in place and is refunding more than $20.8 million to residents who had fraud determinations reversed because of the reviews.

Many people are helping the agency. We appreciate the efforts of U.S. Rep. Sander Levin, the state Legislature and others.

Efforts include:

  • Working closely with claimant advocacy groups, lawmakers, employers, and community partners for feedback. We’ve worked with state Rep. Graves and his legislative workgroup. We are committed to listening and improving, and these conversations will continue. We value this partnership.
  • Outside assistance from national experts to review and improve all aspects of the agency’s work. The Unemployment Insurance Integrity Center, a joint venture between the National Association of State Workforce Agencies and the U.S. Department of Labor, is reviewing TIA-UI’s processes around identity verification and collections. This group is recommending best practices for customer service while protecting the integrity of the program.
  • We’ve improved methods for residents to quickly get benefits while using the computer system, working with a consultant with expertise in improving operation.
  • Improved staff interaction with residents over the phone and online to better serve customers. We’ve contracted with a process-reengineering expert to identify best practices used in other government and private organizations. Development of a new system, including consolidating agency phone numbers to make it easier for customers to navigate, is ongoing.
  • Improving communication with customers. TIA-UI is reviewing all letters sent to residents and employers as part of the claims filing process. We’re making them clearer and more helpful so residents can best connect with the agency and get the services they need.

It would be inappropriate for us to discuss individual cases. We understand that many people were affected. We feel terrible about that. But we’re fixing the processes within the Agency so it never happens again and improving our overall service.

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