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Caught in unemployment insurance "mess," Garden City man fined $25,000 for fraud he didn't commit

Feb 2, 2017

Michigan's Unemployment Insurance Agency (UIA) has wrongly accused tens of thousands of people of cheating on their unemployment claims. Then it began garnishing wages, and tax returns, often without the wrongly-accused person even knowing what he or she supposedly did.

The UIA's director has apologized for the errors. But the mistakes, pinned on a computer system, have had thunderous repercussions in homes all over Michigan.

One person affected is David Vela. For the 11 months he was out of work, he received unemployment benefits. When he went back to work, he stopped claiming those benefits.

Four years later, he discovered the UIA had decided he'd cheated the system of $6,500.

"Oh my goodness. My jaw dropped. For what? I didn't do anything wrong. I couldn't understand it," Vela told Stateside.

"Oh my goodness. My jaw dropped. For what? I didn't do anything wrong. I couldn't understand it."

Vela had moved since he'd stopped claiming benefits. He later learned the state had mailed a fraud determination notice to his previous address, and after it was sent back, the state never looked into the matter further. Instead, the penalties and interest started piling up, to a total of more than $25,000.

"As far as they were concerned, I owed the money and there's nothing they could do about it," said Vela. "I didn't get any reason for it in the first place. I was suspected of fraud, because they didn't send it to the right address. They had defaulted everything so it was like I missed that step of saying, 'Oh, I didn't do anything wrong,' and trying to prove myself. They just defaulted me."

Vela's wages were being garnished, even though his employer and his union backed his claim that he had not committed fraud.

"As far as they were concerned, I owed them money and there's nothing they could do about it."

All this took a toll on him.

"Sleepless nights. Not getting along with the wife," Vela said. "When they finally did start taking the money out, I had to work overtime 12 hours a day on top of not getting any sleep. It was a really rough time."

Finally, with help of the Unemployment Insurance Clinic at the University of Michigan Law School, Vela got a hearing before an administrative law judge to plead his case. No one from the Unemployment Insurance Agency showed up.

The judge ruled the state had wrongfully garnished over $4,800 from Vela's wages. More than a month later, he got his money back.
 

"When they finally did start taking the money out I had to work overtime 12 hours a day on top of not getting any sleep. It was a really rough time."

Earlier today, the Unemployment Insurance Agency reached an agreement with plaintiffs in a federal lawsuit over the computer-determined fraud cases.

The UIA promised to continue the reforms it has enacted since the tens of thousands of false fraud cases came to light. That includes making "all reasonable attempts" to contact people who have filed claims and revising its forms to make them more understandable to employers and people filing claims. The UIA also will delay collection efforts while someone accused of fraud is appealing a fraud determination. There is still a separate class-action suit before the Michigan Court of Claims, filed by Royal Oak attorney Jennifer Lord. She told Stateside today that the settlement of the federal suit is a "great first step, but there are large gaps that must be addressed."

It should be noted that Attorney General Bill Schuette is still fighting that class action suit.
Steve Gray is director of the Unemployment Insurance Clinic at the University of Michigan Law School. Gray joined Stateside to talk about the Michigan Integrated Data Automated System (MiDAS) computer system that was put in place to automate the unemployment system in Michigan and all of the problems its caused.
Listen to the full interview above to hear more about Vela's personal experiences, Gray's suggestions for fixing the system, and how the MiDAS system operates. 

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