Suit settled over false fraud claims against Michigan’s jobless

Feb. 02--LANSING -- Attorneys and state officials on Thursday announced a settlement of a federal lawsuit against Michigan's Unemployment Insurance Agency over false fraud allegations, saying it includes sweeping changes in agency practices to assure thousands of Michigan residents will never again face life-altering false fraud allegations from the state agency.

The settlement will require the agency to take real steps to make sure there is a basis to suspect fraud before taking further action, said Ann Arbor attorney David Blanchard, who represented plaintiffs in the case.

"For too long state actors and their defenders in the Attorney General's Office denied the problem and fought for a status quo that robbed unemployment beneficiaries of tax returns and income without due process," Blanchard said.

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"My clients and I are heartened by new leadership who finally acknowledge the problem and recognize that this settlement is this first step, but not the last step, of essential reform to the UIA," he said.

The federal lawsuit before U.S. District Judge Robert Cleland only sought changes in state practices, not monetary damages. A class-action suit continues in state court, seeking monetary damages for the false allegations.

Wanda Stokes, director of the Talent Investment Agency, which oversees the Unemployment Insurance Agency, said the agreement codifies practices that were put in place after the agency ceased auto adjudicating potential fraud cases in August 2015.

"We're glad to bring this matter to a close," Stokes said in a news release.

"Our focus remains on our customers, and improving our service to them as they work through a very difficult time in their lives. We want to make sure people get the benefits to which they are entitled and remain vigilant against fraud, which hurts both residents and employers."

The state has acknowledged its $47-million Michigan Integrated Data Automated System (MiDAS), which began auto-adjudicating unemployment insurance fraud cases in October 2013, had a 93% error rate when its findings weren't reviewed by humans. The state has already confirmed that more than 20,000 of about 50,000 fraud findings made between October 2013 and August 2015, were false. That number is expected to grow as the state reviews more fraud determinations during that period. The affected claims date back as far as 2007, because MiDAS was used to do a six-year "look back" at earlier claims.

Blanchard said he expects more than 35,000 people will be entitled to reversals of fraud findings and in many cases refunds as a result of the settlement.

Plaintiffs in the lawsuit included the UAW, the Sugar Law Center for Economic and Social Justice, individual UIA claimants.

Also under the settlement:

* Collection activities, including wage garnishments and seizure of income tax returns, is to cease for claimants who received fraud determinations during the relevant period.

* More due process safegaurds and procedures will be put in place at the agency.

* Additional reporting will be required to inform plaintiffs about the progress of the review and new fraud determinations over the next two years.

Stokes last month announced a three-part plan to make the agency more effective and efficient, including a top-to-bottom review of all operations, a focus on improving customer service and improving the practices related to identifying fraud. The agency director was re-assigned.

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4.

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