The state of Michigan collected more than $100 million from innocent residents after a computer error wrongly accused 46,000 people of unemployment fraud.
Our affiliate WSMH interviewed on the victims about his experience, Lansing resident Karl Williams.
After Williams was laid off from his job in 2011, he collected unemployment for around six months until he got a new job.
But it wasn’t until 2014 after he finally landed a steady job with a great paycheck that the state of Michigan started garnishing 25-percent of his paycheck.
It took Williams months to figure out why it was happening.
The state’s automated computer system called MiDas, had determined Williams committed unemployment fraud two years earlier.
He says he never got a letter, phone call, or was served any paperwork letting him know what was going on.
The state claimed that Williams had be overpaid $9,000 in unemployment benefits and with all the added fees and penalties the said he owed a total of $65,000.
“The over-payment came to about $9,000 dollars they claim I owed and I got $65,000 dollars in penalties and fees," he says. "I never got served anything I never got anything mailed to me no emails no nothing."
In January, The Detroit News reported that the penalties imposed by the state of Michigan for unemployment fraud are believed to be the highest in the nation at over 400 percent.
With no clear way to dispute the charges on his own, he turned to Employment Law Attorney Jennifer Lord for help.
That’s when he found out, he wasn’t alone.
“This is a cyber-criminal enterprise that has continued for years. What happened to Karl, and 46,000 other people, is that a computer determined they committed fraud, without any evidence, then there was a quadruple penalty, then interest charged on top of that,”
Lord is working to sue the State of Michigan with a class action lawsuit. She says the Unemployment Insurance Agency has admitted to being at fault.
“The Auditor General of the State of Michigan determined that 93-Percent of the people accused by the computer are wrong. From 2014 until 2016 the state collected $153 Million in penalties and fees from people,” Lord says.
<h2>A very profitable mistake for the state.</h2>
U.S. Rep. Sander Levin, D-Royal Oak, told the Detroit Free Press that "the state's promise to return close to $21 million is 'a positive step,' but he remains concerned by several elements of the scandal, including the growth in an agency account where penalties and interest collected from claimants were placed.'
According to financial statements acquired by WSMH, when the automated system started in 2014 the state collected $45 million dollars in penalties. Then in 2015 they collected another $44 million dollars. Finally in 2016 the amount of fees collected from people accused of unemployment fraud was $54 million dollars.
"That unemployment contingent fund went from $3 million dollars [in 2011] to $153 million [today] dollars because of these quadruple penalties,” Lord says. She believes someone should have noticed something was out of place. “At the very minimum it should have at least raised a red flag saying let's look into this."
The money set aside in that contingency fund was allowed to go into the state's general fund which had helped the state balance its budget over the last two years.
So far the state has only refunded $20 million of the over $100 million wrongly collected.
“They've admitted that they were wrong they come out publicly and apologized an apology is great if you're really sorry, don’t' fight this,” Lord says. “Don't fight the citizens that you're supposed to protect."
As for Williams, he still hasn’t seen any of the $65,000 he lost.
“Any company in the United States if they wrong their customer they have to pay off it if it going to court the have to pay for it,” he says. “Why is the state of Michigan any different?"
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