400K unemployment claims now flagged in Michigan fraud investigation

June 19: Michigan may have lost millions to over 100,000 fake unemployment claims

Michigan’s fraud investigation into unemployment benefits has restored payments to 41 percent of the people initially affected — and it’s turned up at least 200,000 new potential cases.

That leaves at least 400,000 accounts going unpaid while the state’s Unemployment Insurance Agency continues to seek accounts that may have been set up with stolen identities during the coronavirus pandemic, state officials said Friday.

Many of the frozen accounts sought jobless benefits under the federal Pandemic Unemployment Assistance, which allows part-time, contract and “gig” workers to seek payments — including a $600 weekly benefit — with little or no documentation.

“We saw a huge spike in PUA claims in recent weeks, many of which we believe are potentially fraudulent,” said Jason Moon, spokesperson for the UIA.

The UIA has received more than 40,000 complaints from people reporting unemployment fraud had been made in their names since May 1, an increase of 10,000 from the previous six weeks combined. 

According to the Michigan State Police, a state task force involving so far has: 

• Initiated hundreds of active investigations of suspected fraud from individuals based from Michigan to around the world. 
• Issued hundreds of subpoenas to financial institutions. 
• Communicated daily with financial institutions to monitor for potential criminal activity and prevent payments to criminals.

Jeff Donofrio, director of the Department of Labor and Economic Opportunity, which oversees UIA, said on June 5  the state had issued  “stop payment” notices on 340,000 active accounts, freezing payments on all of them. About 2.2 million Michigan residents have filed for jobless benefits since March 15.

The move to stop payments and launch the investigation came after national concerns grew over unemployment fraud, with several other states also starting their own investigations. The U.S. Secret Service issued a national alert in May warning about unemployment fraud by an international crime ring, and the U.S. Dept. of Labor has estimated more than $26 billion may be paid in fraudulent unemployment benefits.

Michigan residents who’d had their accounts flagged for potential fraud expressed frustration with a system that, since mid-March and the statewide stay-at-home order, had been overwhelmed with applicants and plagued by slow responses. 

They worried that the stop-payment orders would result in payment delays as each was asked to provide documents to verify their identities. The state, meanwhile, said that it was deploying 600 UIA workers to start the verification process, with another 200 to be added.

“Over the last week, the UIA was able to validate more than 140,000 legitimate accounts, with benefits resuming within days,” according to a news release issued by the department Friday.

Yet many of Michigan’s new claims filed have been flagged for suspicions of fraud, the state said Friday.  No payments have been sent to more than 200,000 new accounts, which now must also provide the additional identification verification.

Law enforcement is working with UIA as it uses data analytics and direct outreach to “identify legitimate claimants and release benefits as quickly as possible,” according to the release.

Moon said he could not release additional details on the nature of the potential fraud or results from the investigation.

However, Moon said, the next steps could involve prosecution of fraudulent accounts.

“We are … bringing in a third-party forensic accounting firm to assist in identifying fraudulent activity that can be quickly turned over to law enforcement for prosecution,” he said.

The state asks anyone who suspects identity fraud with an unemployment claim to contact the UIA. More tips are available online.

“The rise in identity theft reports coupled with suspected fraud in new unemployment claims shows that criminals are still attempting to illegally obtain the benefits. It’s extremely upsetting that the actions of these fraudsters have delayed payments meant for our working families,” said UIA Director Steve Gray.

 “While we continue to work with our state and federal partners to stop this unlawful activity, our focus remains on doing everything we can to quickly validate authentic claims and get our workers the emergency financial assistance they need.”