Report: Michigan unemployment office knowingly paid out fraudulent claims

(The Center Square) – The Michigan Unemployment Insurance Agency knowingly paid out thousands of dollars in fraudulent claims during the COVID-19 pandemic, including to names such as “Kimberly Kardashian” and “Kylie Jenner,” according to a news report.

About 3.1 million Michiganders filed claims in May 2020. Michigan’s unemployment rate sprung to 22.7% in April, topping the state’s unemployment rate from the Great Recession and seizing the nation’s second-highest spot while the state shuttered in-person unemployment offices.

By June, the agency said it boosted employees from 130 pre-pandemic to 2,200 to clear a backlog of claims. Still, lawmakers said then 140,000 unemployed residents were still waiting on benefits.

The Detroit News reported Kardashian filed May 13 from Traverse City and “received eight weeks of backdated unemployment pay – more than $7,000 – before the state’s fraud management software flagged the claim on May 15 as needing additional identity verification.”

The report said a software error let the state pay out fraudulent claims, and in other cases, the agency lowered defenses to speed through a claims backlog, giving away taxpayer money to fraudsters as collateral to reach the real unemployed Michiganders.

The News obtained emails indicating the agency “released thousands of claims, knowing that 7% to 8% of them were fraudulent.” At least three employees raised an alarm about the changes to then-Director Steve Gray, who was paid $85,872 in a severance deal after he resigned Nov. 5, 2020, after months of record jobless claims.

The payout was stipulated in an agreement in which he and the state are required to “maintain confidentiality” regarding his employment and departure.

In November, a Deloitte audit estimated the agency paid fraudulent claims in the “hundreds of millions.” The Unemployment Insurance Agency has paid out $37.2 billion to 3.36 million people since March 15, 2020. It’s unclear how much was given to fraudsters.

The report follows a series of mistakes by the agency.

Last month, the agency mailed letters to approximately 648,000 recipients of federal pandemic unemployment assistance, stating they needed to file more paperwork and may have to reimburse the state for the benefits they had already received.

On July 15, the House Oversight committee opened an investigation into the agency after multiple employees schemed to steal millions from taxpayers.

Eric Ventimiglia, the executive director for the conservative Michigan Rising Action, called on Gray to repay the nearly $86,000 of severance pay and encouraged lawmakers to further investigate the agency.

“Michiganders have known for over a year that Whitmer’s unemployment agency was a complete disaster, but this most recent report that the state knowingly issued unemployment payments to fraudulent claims is a complete dereliction of duty from Whitmer and her former UIA Director, Steve Gray,” Ventimiglia said in a statement.

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