Michigan Settles Lawsuit Over False Unemployment Fraud Cases

By David Eggert, Associated Press

LANSING (AP) – Michigan’s Unemployment Insurance Agency on Thursday settled a lawsuit filed after at least 20,000 people receiving benefits were wrongly flagged for fraud by an automated computer system and assessed high financial penalties.

U.S. District Judge Robert Cleland in Detroit dismissed the case under an agreement between the state and those who sued — including several residents who said they were falsely accused, the United Auto Workers union and the Sugar Law Center. Another suit, which unlike the federal case seeks financial damages for people affected, is pending in the state appeals court.

State officials said the deal codifies changes the agency made after ceasing “robo-” or “auto-adjudicated” cases in 2015, about four months after the federal suit was brought. The state recently agreed to halt all collection activities against people who were subject to fraud determinations between October 2013 and August 2015.

“We’re glad to bring this matter to a close,” Wanda Stokes, director of the Talent Investment Agency, which oversees the Unemployment Insurance Agency, said in a statement. “It’s important to note that this agreement reflects many of the reforms and changes that this agency has set in place since 2015. Our focus remains on our customers, and improving our service to them as they work through a very difficult time in their lives.”

A lawyer for the plaintiffs, David Blanchard in Ann Arbor, said the state and its attorneys for too long “denied the problem and fought for a status quo that robbed unemployment beneficiaries of tax returns and income without due process. 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.”

The agency is reviewing about 50,000 cases from a nearly two-year period that cover roughly 40,000 people who were determined to have committed fraud — either solely by the computer system or by a mix of the software and some level of staff involvement. That typically means they were flagged for receiving “overpayments” to which they had not been entitled.

A review of unemployment fraud cases found an error rate of 93 percent for about 22,000 cases in which determinations were solely made by computers.

The state — which admitted no wrongdoing in the settlement — will provide written notice, by mail, to claimants accused of receiving overpayments or of intentional misrepresentation. One issue had been that questions were sent to claimants’ dormant online accounts, so they did not know to respond to inquiries about potential overpayments.

Blanchard said due process safeguards will be implemented, and the state will regularly report the status of cases being reviewed and the volume of new fraud findings.

© Copyright 2017 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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