Michigan lawmakers grill UIA over $8.5 billion in fraudulent unemployment payouts

(The Center Square) – After Michigan’s jobless agency was defrauded or wrongly paid out at least $8.5 billion, new Director Julie Dale said she aims to focus on the road ahead, not previous mistakes.

Lawmakers grilled Dale about the agency losing billions in fraud by criminal enterprises targeting high-populated states with weak identity verification systems.

But unanswered questions plagued the Joint House and Senate Oversight hearing, including whether a fraud manager moved outside of the Unemployment Insurance Agency (UIA) while Michigan lost billions to fraud, according to a line of questioning today.

A second unanswered question is whether former UIA Director Steve Gray directly lowered fraud protections before his Nov. 2020 resignation and then, at that time, secretly pocketed an $85,872 severance deal that came with a confidentiality agreement amid months of record jobless claims.

Senior UIA staff said that former UIA Director Steve Gray “made unilateral decisions.”

Rep Steve Johnson, R-Wayland, repeatedly asked Todd Cook of the Michigan Department of Labor if a fraud manager was present during a period of rampant fraud, an answer which Cook repeatedly dodged.

“The report is bad enough, but your response has been worse,” Johnson said of the UIA.

Dale started Oct. 25, after a report found $3.9 billion in fraud. The UIA claims an “overlap” between the $3.9 billion in fraud and the $8.5 billion incorrectly disbursed but hasn’t expounded further.

Sen. Jeff Irwin, D-Ann Arbor, argued that some of the “intentional misrepresentation” counted along with fraud were real Michiganders messing up paperwork, such as a 30-year bricklayer whom the UIA threatened to garnish his wages, accusing him of “intentional misrepresentation.”

“I know this guy, and he’s not a criminal,” Irwin said. “He’s just a bricklayer who’s out of work and tried to get some support – never got any support before in his life. He’s not great at paperwork.”

Irwin warned that lawmakers should differentiate between imposter fraud and intentional misrepresentation of someone who made an honest mistake – a difficult task.

Sen. Ed McBroom, R-Vulcan, criticized the UIA bragging about halting $43.7 billion in fraud between March 1, 2020, to September 30, 2021, but downplaying losing billions lost to criminal enterprises.

This “[d]oes not reassure us that anything has changed in the culture,” McBroom said. “It’s very frustrating.”

Since March 15, 2020, the UIA has disbursed $39 billion to more than 3.3 million workers.

After more than 20 months of problems, many lawmakers appear to have lost patience with the embattled agency, which refused to answer multiple direct questions.

“I have a pretty good BS detector, and it’s going off right now,” Sen. Jack O’Malley, R-Lake Ann said.

Haywood Talcove, the CEO of a fraud prevention company LexisNexis Risk Solutions' Government Group, estimated Michigan lost close to $11 billion in fraud to transnational criminal enterprises in less than two years. Those fraudsters battered antiquated identity verification systems with thousands of fraudulent claims amid real claims before the UIA approved – fraudulent or not – many claims in spring 2020 when claims peaked at over 388,000 in one week. The UIA said that number is approximately 77 times more claims than the agency received during an average pre-pandemic week.

Dale said she plans to explain more details in the future for fraud prevention. At the start of the meeting, lawmakers voted out of the committee a plan to reform the UIA.

Sen. Lana Theis, R-Brighton, said one of her constituents has been waiting on the UIA for longer than 600 days.

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