Michigan Dems say they’ll tackle fraud scandal at unemployment agency

Feb. 14--LANSING -- Democratic lawmakers said Tuesday they will introduce legislation to rectify the scandal at Michigan's Unemployment Insurance Agency, requiring that all jobless claimants falsely accused of fraud be made financially whole, regardless of the statute of limitations or other restrictions.

Senate Minority Leader Jim Ananich said it's "unconscionable" that between 20,000 and 40,000 Michigan residents were falsely accused of fraud by an automated system run amok, then subjected to quadruple penalties and aggressive collection techniques that included wage garnishes and seizure of income tax refunds. In some cases, bankruptcies were forced and marriages ruined, Ananich said at a news conference, surrounded by Democratic colleagues from the state Senate and House.

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While some problems -- such as broken marriages -- can't be fixed by legislation, Ananich said, any money taken should be repaid with interest -- and legal costs associated with bankruptcies should also be paid back, along with addressing other economic hardships.

The bills would also increase weekly benefits and extend the duration of those benefits.

"In the next few weeks, you'll see these bills," Ananich said. "We're looking for bipartisan support."

Ananich, D-Flint, and House Minority Leader Sam Singh, D-East Lansing, said the bills would also:

* Extend the statute of limitation to cover a period from Jan. 1, 2007, through Dec. 31, 2016. Currently, only a period from Oct. 1, 2013, and Aug. 7, 2015, is covered. Michigan brought the $47-million Michigan Integrated Data Automated System (MiDAS) online in October 2013, but it used the system to do a six-year look-back in search of unemployment insurance fraud, to 2007. Until August 2015, nobody was verifying the fraud findings flagged by the computer system, which was later determined to have an error rate of 93%.

* Reduce the penalties imposed for overpayments and fraud to no more than 100%. Michigan's 400% penalties are the highest in the country, according to Wanda Stokes, director of the Michigan Talent Investment Agency, which oversees the UI Agency.

* Lower maximum wage garnishments to 20%, from 25%.

* Improve due process and notice requirements to claimants.

* Require state agencies to help those affected by a separate MiDAS security breach, which exposed the personal information of up to 1.9 million people to unauthorized viewers.

* Increase the maximum unemployment insurance benefit to $483 a week, from $362 currently, and add a $120 a week supplement for claimants with dependents.

* Extend the maximum number of benefit weeks to 26 from the current 20 weeks, bringing Michigan in line with other Midwest states.

* Increase oversight of unemployment insurance fraud by employers and increase penalties for delinquent employer unemployment taxes.

Stokes said in a news release her agency "welcomes the opportunity to work with its partners in the Legislature as it continues to work aggressively to make the Unemployment Insurance Agency more effective and address some of the recent challenges."

Gideon D'Assandro, a spokesman for House Speaker Tom Leonard, R-DeWitt, said "House Republicans have been working to get to the bottom of the issue and find out what went wrong."

Wendy Block, director of health policy and human resources for the Michigan Chamber of Commerce, said the agency "needs to clean up their act," and "we are not defending their actions on the auto adjudication of claims or for their failure to collect UI taxes on employers," as documented in a recent report from Michigan's auditor general.

But Block noted unemployment benefits are 100% funded through taxes on employers and said the system is still recovering from the lengthy recession of the 2000s, as a result of which employers were hit with higher taxes so the state could repay loans used to cover benefit payments.

"Michigan policymakers must carefully balance the financial integrity of the UI Trust Fund with their desire to hike benefits for claimants," Block said. "At this time we do not believe the UI Trust Fund can sustain a substantial increase in benefits or duration without a significant hike in UI taxes on employers," who already face one of the highest rates in the nation.

The state has admitted the 93% error rate and recently said it has halted collection proceedings against those who could have been wrongly accused, while a review of more than 50,000 cases involving about 40,000 individuals is under way. Stokes said in Tuesday's news release she "feels horrible about the situation related to the fraud accusations, has apologized to the people affected and is focused on improving customer service in the agency."

But Jennifer Lord, a Royal Oak attorney who has filed a class-action lawsuit in state court over the false fraud issue, said the Attorney General's Office continues to fight her lawsuit "tooth and nail," arguing governmental immunity and other defenses. Lord, who joined Democratic lawmakers at the news conference, said she has yet to hear of a case in which collection actions have been halted against a claimant, but gets calls every week about new actions, including garnishments, being taken against claimants accused of fraud.

Also, the House Oversight Committee has created a bipartisan work group and opened an investigation on the debacle.

"I find these errors unacceptable and have taken immediate steps as chair of the House Oversight Committee to investigate these mistakes, shed light on the process, and protect Michiganders," said Rep. Joseph Graves, R-Argentine Township. "I am making this a top priority for the committee."

Contact Paul Egan: 517-372-8660 or [email protected]. Follow him on Twitter @paulegan4.

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