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

Michigan could have more than 100,000 fraudulent unemployment claims filed by scam artists across the globe, according to the Michigan State Police.

State officials aren’t saying how much money Michigan has paid out to fake accounts. But those fraudulent unemployment claims have slowed the payment of hundreds of thousands of legitimate claims by Michigan unemployed, as the state tightens the screws on verification.

In a Friday update on jobless benefits, officials said at least 60,000 unemployed workers were cleared to receive payouts over the past week as the state attempts to verify identities of people receiving benefits and works through a massive backlog.

• 400K unemployment claims now flagged in Michigan fraud investigation
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At least 540,000 accounts were frozen starting in late May as officials responded to warnings from the U.S. Secret Service that stolen identities were being used across the country to open fake Unemployment Insurance Agency accounts. Of those, 340,000 were active accounts already approved for benefits and 200,000 were accounts that had not yet been approved when they were frozen.

The fraud investigation step was the latest slowdown in a system under fire since Michigan’s jobless totals skyrocketed to 2.1 million starting in late March, resulting in lengthy payment delays and questions about the overloaded system. As UIA works through verification, Michigan residents and lawmakers continue to raise concerns about ongoing delays with payments.

However, as the number of suspected fraud cases is narrowed, the state says payments are starting to reach jobless workers caught in the investigation.

“We are doing everything in our power to pay eligible claimants as quickly as possible, while avoiding paying criminals,” UIA spokesperson Jason Moon said.

The state has paid $11.4 billion in benefits since the coronavirus crisis. The maximum weekly benefit is $962, which includes the state maximum of $362 and an additional $600 per week from the federal Pandemic Unemployment Assistance.

About 140,000 people with active accounts still need to go through an enhanced identity verification. Meanwhile, another 37,000 claims remain on hold for other reasons. 

“We are using every available resource to verify the identity of legitimate claimants whose payments are held due to increased criminal activity,” said UIA Director Steve Gray in a news release.

The state so far does not know for sure how many of the 100,000 potentially fraudulent claims will prove to be fake.

“We are trying to determine that,” said Moon.

The UIA said international criminal organizations could be responsible for the fraud, which involves stolen identities from places like Eqifax, eBay and many other sources that allowed people to set up imposter accounts, pose as workers and obtain illegal benefits. 

Forensic accountants will be working with the state to home in on the extent of the fraud. The goal, Moon said, is identifying people responsible and getting them “quickly turned over to law enforcement for prosecution.”

According to the Michigan State Police, a state task force led by Attorney General Dana Nessel 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.

Meanwhile, Gray is scheduled to testify Wednesday before the Joint Select Committee on the COVID-19 pandemic. He was asked by its chairman, Rep. Matt Hall, R-Marshall.

“I am concerned over the continued lack of transparency and forthrightness from the department regarding the number of people statewide who are still waiting on payments for their unemployment claims,” Hall wrote to Gray in early June.

The committee also met Thursday, when lawmakers raised the idea of reopening the state’s regional unemployment offices as a solution to the difficulty residents continue to express about contacting UIA and resolving sometimes easy-to-fix concerns.

State Rep. Sara Cambensy, D-Marquette,  sent a letter on June 12 to Gov. Gretchen Whitmer saying the Michigan Unemployment Insurance Agency needs to reevaluate how it’s responding to its caseload. Reopening the offices is an idea the UIA said Thursday it was considering. 

The UIA has been “completely overwhelmed by the largest number of cases filed in the history of the department,” according to the letter signed by 11 other lawmakers, 10 Democrats and one Republican. 

However, an advocate for unemployed workers said this week that the pace of verifying identities during the fraud investigation appears to be effective.

“The state does seem to be processing them quickly,” said Rachael Kohl, an attorney leading the University of Michigan Workers’ Rights Clinic. “Many people who called us a week or two ago about this have been cleared and are receiving benefits again. 

“All in all, I have seen a lot of progress and there have not been that many calls or emails about this issue. “