The criminal charge of fraud can come in many forms and levels of severity, from individual tax fraud to pyramid schemes and money laundering. Often, the Internal Revenue Service (IRS) will make claims of fraud against individuals or business owners which result in investigations and/or audits. However, state agencies can also charge people within the state with fraud if they believe that people are intentionally not paying appropriate state taxes or are taking advantage of state services.
In Michigan this summer, residents are fighting against recent charges of fraud against thousands of citizens levied by the Michigan Unemployment Insurance Agency. Within a two year period, 2013 to August of 2015, between 20,000 and 40,000 Michigan residents were charged with unemployment insurance fraud, meaning that they were charged with collecting state unemployment insurance benefits illegally or without real need.
Michigan residents were charged with fraud due to a computer malfunction in the Michigan Integrated Data Automated System (MiDAS), according to an analysis of the records obtained under Michigan's Freedom of Information Act. At the time of the errors, the system was not being monitored by human oversight and may have had an error rate of up to 93% over a period of two years. Even more alarmingly, the data shows that officials who were overseeing the program had the data to notice this pattern of errors a full year before they stopped allowing the system to run without human oversight.
Residents who were charged with fraud “suffered highest-in-the-nation quadruple penalties and aggressive collection techniques, such as wage garnishment and seizure of income tax refunds.” Many of these residents, who were charged thousands or tens of thousands of dollars incorrectly under the flawed system, were already dealing with the stress of unemployment, which was further exacerbated by state fees and wage garnishment. The state of Michigan has therefore
Now, many of the victims of this error are trying to form a class action suit against the Michigan Unemployment Insurance Agency. However, a Michigan state Court of Appeals recently struck down the class action suit, ruling that the victims waited too long to bring their case against the state.
The lawyer for the plaintiffs in the case argues that the state should return funds which were illegally taken from its citizens. Jennifer Lord claims that this is "a rare example where a government basically committed theft against its own citizens,” collecting millions and millions of dollars as "a cash cow" to balance its budget.
The plaintiffs in this suit are rightfully upset about the false accusations of fraud which had been levied against them for years, and are trying to fight to recover the money taken from them. For example, a resident of Lansing, Michigan, Karl Williams was accused by the unemployment agency “of fraudulently receiving $9,000 in benefits and since has paid more than $50,000 to the state.” Another man, Guy Cerello of Plymouth, Michigan, has a daughter who was charged with $26,000 in penalties and interest from a false accusation of fraudulently receiving benefits.