Michigan cracks down on unemployment fraud

The state is cracking down on unemployment fraudsters after a disastrous performance handling a surge of claims during the pandemic.

Why it matters: The state overpaid more than $6 billion in unemployment benefits after March 2020 for claims that should've been flagged for review as potentially fraudulent, an audit found.

• Mistakes during the pandemic led to a costly leadership shake-up, new technology investments and a beefed-up fraud detection unit at the state's Unemployment Insurance Agency (UIA).

What they're saying: "If you are a bad actor, if you are seeking to defraud public monies, Michigan is not the place for you because we will come after you," Julia Dale, who has been UIA director since October 2021, tells Axios in an exclusive interview.

The other side: Michigan House Republican Leader Matt Hall, who chaired the Joint Select Committee on the COVID-19 Pandemic in 2020, tells Axios he remains skeptical of the agency's improvements because past directors have made similar promises.

• "These failed bureaucrats haven't earned our trust, and we should all watch any changes they make with a skeptical eye," Hall says.

🔭 Zoom in: Claims for unemployment assistance overwhelmed the agency's fraud detectors in spring 2020, peaking with more than 388,000 claims in a single week from a pre-pandemic volume of about 5,000.

• Investigators are still tracking fraudsters down. A Detroit man pleaded guilty in April to submitting false UIA claims as part of a $297,000 scheme. Others in-state have been caught for similar scams.

🖼️ The big picture: Michigan's mishandling of unemployment claims is not unique. Nationally, COVID-19 relief money topped $5 trillion, opening the door to a historic level of fraud.

• The potential theft nationwide of $280 billion in pandemic relief funding is part of "the greatest grift in U.S. history," an AP analysis found this month.

State of play: The state is installing a new Deloitte computer program to expedite claims, prevent fraud and adjust more nimbly to changing economic conditions.

• It'll be fully implemented by 2025.
• The price tag is $78 million over 10 years.

Between the lines: State fraud investigators received national recognition this year for helping take down a Florida fraud ring known as the "Broward County Bunch."

• State investigators traced Michigan unemployment benefits to bank deposits in Florida with surveillance that identified suspects through a facial scar, a Pizza Hut uniform and a partial license plate number.
• Three Florida men involved in the scheme were sentenced to prison in late 2021 and early last year. The sentences were for 16, 21 and 65 months, respectively.

Yes, but: The state's Office of the Auditor General is still reviewing the UIA's effectiveness in processing pandemic assistance claims.

• The fifth in a series of five audits is expected in October.

Editor's note: This story was updated to note Dale was named UIA director in October 2021.