Michigan paid $8.5B in fraudulent pandemic jobless claims

LANSING, Mich. (AP) — Michigan likely paid about $8.5 billion in fraudulent jobless benefits over a 19-month period during the coronavirus pandemic, far more than previously estimated, according to a report released Wednesday by the state’s unemployment agency.

The figure, provided by Deloitte, came more than a year after the firm said the agency expected fraud losses in the “hundreds of millions” of dollars. State auditors have since reported that the agency improperly paid $3.9 billion to claimants who were later deemed ineligible.

There is “some overlap” between those payments — made to self-employed and gig workers who began qualifying for federal aid because of the pandemic — and the overall $8.5 billion estimate, said Julia Dale, director of the Unemployment Insurance Agency.

“My initial reaction to seeing these numbers is one of outrage and certainly frustration,” she told The Associated Press. “These are not the type of numbers that we had hoped to see or want to see.”

She added, however, that Michigan is doing a much better job blocking fraud, noting it avoided an estimated $43.7 billion in fraud from March 2020 through September 2021. The state paid $34.5 billion in benefits over that time.

The percentage of payments involving likely imposter fraud was 0.46% last fiscal year, down from 9.7% between March 2020 and October 2020. The portion paid for likely intentional misrepresentation fraud — when real claimants may fabricate income-verification documents or knowingly not report information that would make them ineligible — was 0.11%, a drop from 20.1%.

“What we have shown with this reduced fraud number is that we are prepared, that we are doing what we need to do,” said Dale, who has been on the job for two months. “As long as we remain vigilant in our efforts … the expectation is that we will continue to have this success and see greater success.”

Democratic Gov. Gretchen Whitmer, whom Republicans have criticized for problems in the agency, signed an order and directive Wednesday to solidify operational and policy changes the agency made more than a year ago to fight fraud. When the governor appointed Dale in October, she became the agency’s third leader in a year.

The pandemic ushered in widespread fraud at unemployment agencies across the country, with at least $87 billion in potentially fraudulent payments approved by states deluged with claims, according to a report from the inspector general’s office at the Labor Department. Congress quickly expanded eligibility and gave claimants more aid on top of state benefits, initially an extra $600 a week and later $300 per week.

Deloitte, which the state hired to help investigate fraud, estimates $2.7 billion to $2.8 billion was paid to imposters. An estimated $5.6 billion to $5.7 billion in benefits went to apparently legitimate claimants who appeared to misrepresent their eligibility.

Dale cautioned against classifying fraud claims in the latter category “with one broad stroke.”

“We have claimants who perhaps have misstated or overreported information but we can’t speak to each individual intent. … Certainly there was a lot of information in a very short period of time for people to really consume and digest,” she said.

GOP lawmakers and Republican groups chided Whitmer and her administration, saying at least $10 billion was squandered.

“This is absolutely unacceptable to the taxpayers of Michigan and there should be consequences for this level of gross mismanagement,” Rep. Steve Johnson, chair of the House Oversight Committee, said in a statement. He will hold a joint hearing with a Senate panel in the wake of the latest disclosure.

Roughly 97% of the fraudulent benefits were federally funded. The remaining 3%, up to $249 million, came from a state account funded by employer taxes.

In September, the governor and lawmakers allocated $150 million in discretionary federal pandemic funding to the state unemployment fund to help offset fraudulent payments.