Unemployment agency details fraud slowing claims; one house made 102 claims

Unemployment Insurance Agency employees came forward with concerns when the agency sidelined some security measures to increase the speed at which unemployment claims were processed, according to testimony at a Wednesday Michigan legislative hearing. 

The concerns came as the state agency was attempting to balance an onslaught of claims from people laid off at the height of the COVID-19 pandemic with security concerns that would eventually prove legitimate and amount to "hundreds of millions" of dollars in fraudulent claims being paid out. 

A total of $26 billion have been paid out to 2.2 million claimants in Michigan since March. 

"I believe that there were times when staff was raising concerns that a different decision could have been made," UIA Acting Director Liza Estlund Olson told lawmakers during a meeting of the Joint Select Committee on the COVID-19 Pandemic. 

Estlund Olson, who took over last month for former Director Steve Gray, detailed the assault the agency has taken from fraudulent schemers and the resulting slowdown for processing legitimate claims. Her testimony comes a week after the agency released an independent forensic report that blamed the agency's attempts to quicken claims processing as creating weaknesses ripe for fraud. 

Lawmakers questioned Estlund Olson closely about fraud issues and criticized the time it's taken to address them.

"I have no clue why it took nine months of failure to finally decide to give the appearance of changing course," said Sen. Aric Nesbitt, a Lawton Republican and vice-chairman of the committee.

The hearing confirmed that agency officials "do not have their house in order," said Rep. Matt Hall, the Marshall Republican who chairs the committee.

"They have been slow to fulfill legitimate claims and pay people timely, and they have made decisions that have led to more fraud," Hall said in a statement. "So it’s troubling that their go-to solutions are to extend the number of allowable weeks for unemployment benefits by six and increase payments." 

Of the 85,000 claims stuck in a payment pending review process, the UIA is attempting to determine which ones are legitimate. Estlund Olson described the process as trying to remove piles of fraudulent hay to find the legitimate needles.

"We do believe a majority of those in managerial review are fraud," she said. But "we understand there are claimants who have been caught up in that process who are legitimate claimants."

Fraudsters went so far as to call legislators' offices posing as legitimate claimants asking for help and created a fake company as part of a separate scheme. As the agency released its report on fraud last week, it was subject to a phishing scheme using fraudulent UIA communications.

Estlund Olson said officials also are looking at instances of multiple claims from a single address. In one instance, 102 claims were attached to a two bedroom house in the middle of a cornfield, she said.

When the head of the agency's investigations unit was moved to a different project at the height of the pandemic and the peak of claims, there should have been "some depth of bench" to cover for him, Estlund Olson said. Eventually, the investigations director was moved back to his position but with a quarter of his staff, said Hall.

"We can sprinkle...blame dust everywhere," Estlund Olson said. "That doesn’t help the claimants now.”

The UIA's acting director also acknowledged that some contract workers who were hired at the peak of claims were not given background checks because the agency believed the contractor was performing the checks.

In response to issues at the agency, staffing has grown from 650 at the beginning of the pandemic to 3,000. The agency has now processed more claims since the start of the pandemic, 2.2 million, than it has in the past seven years.

The UIA has also set up an appointment system that is helping to move more people more quickly through the claims process.

Estlund Olson recommended lawmakers extend unemployment benefits from 20 to 26 weeks past the New Year, increase the benefit amount from $362 and find a way to continue replace federal funding that made programs like pandemic unemployment assistance and work-share possible.

Federal funding paid the majority of the $26 billion in unemployment paid out to claimants so far, but the state also bore some of the burden.

Estlund Olson said the unemployment trust fund is at about $987 million, down from $4.2 billion prior to the pandemic. When the trust fund dipped below $2.5 billion this summer, it triggered a provision in state law that increased the amount employers would have to pay for unemployment. 

With the additional measures recommended, Nesbitt asked how much it would cost businesses if the state were to extend unemployment weeks and claim amounts.

"We would be happy to calculate that for you and get that for you," Estlund Olson said.

eleblanc@detroitnews.com