Grilled on fraud policies

Unemployment Insurance Agency director under fire for handling fraudulent cases

By Paul Egan

Detroit Free Press


LANSING – The state official in charge of the Michigan Unemployment Insurance Agency got rough treatment from a legislative subcommittee Thursday over revelations in Sunday’s Detroit Free Press about his agency’s handling of unemployment insurance fraud cases.

The Republican-controlled Legislature late in 2011 made unemployment insurance fraud above $3,500 a felony, down from $25,000 previously.

But an agency directive in October of 2012 told fraud examiners to show up at administrative hearings for civil fraud unless the amount of improper payments was at least $15,000. The e-mail also said $15,000 was the department’s normal threshold for criminal enforcement.

“Do you make it a habit of interpreting legislation for your own convenience?” Sen. Jack Brandenburg, R-Harrison Township, asked Steve Arwood, who wears two hats as director of the Department of Licensing and Regulatory Affairs and director of the Unemployment Insurance Agency.

“You changed the legislation’s intent; don’t tell me you didn’t,” Brandenburg said at a hearing of the Senate Appropriations Subcommittee on Licensing and Regulatory Affairs, where he was a guest panelist.

Arwood said the directive was sent out as a short-term measure after the UI Agency laid off 400 of its roughly 1,200 employees on Oct. 1, 2012. He said the agency continued to go after fraud in other ways after the directive was sent out.

However, “it was handled very poorly,” Arwood told lawmakers. “It was not a good decision. If it could be made over again, it would be made differently, but the circumstances were the circumstances.”

Using records obtained under the Michigan Freedom of Information Act, the Free Press highlighted a January case at which an administrative law judge said the state had abandoned its fraud claims by not attending a hearing involving a woman who was collecting unemployment insurance while working nearly full-time at St. John Hospital.

Judge J.R. Wheatley tossed out civil penalties of about $12,000 and reversed an order canceling other unemployment benefit claims made by the woman.

Brandenburg said Senate Republicans should hold a caucus treat to decide what to do about the issue.

“In my entire legislative career, I honestly … have never come across a situation like this where the law was completely ignored,” he said.

Lawmakers told Arwood he should have come back to the Legislature and told lawmakers if staff cuts had made it too difficult to carry out the Legislature’s intent and Arwood said he agreed in hindsight that he should have.

Brandenburg said it would be difficult to reach the $15,000 fraud threshold, even with federal extensions. The maximum state benefits — $362 a week for 20 weeks – wouldn’t come close.

Sen. Mark Jansen, R-Grand Rapids, who chairs the subcommittee, struck a more conciliatory tone than Brandenburg, noting the agency had been dealing with record-high case loads, outdated computer systems, and a significant cut in federal funding.

However, “it does not justify what appeared in the newspaper,” Jansen said. “It looked like the law had been changed right in front of our eyes.”

Arwood told the Free Press on Wednesday the directive remains in place, though it’s been verbally softened with instructions to consider other factors in addition to the amount of money at stake.

“It is in place in part but it has been modified in several ways.”

“Our attitude toward fraud and improper payments has not wavered.”


Posted by Tribune News Services

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