Senior leaders at Michigan's Unemployment Insurance Agency disagreed over balancing fraud prevention with quickly distributing
benefits to millions of Michigan residents during the COVID-19 pandemic, resulting in "hundreds of millions" being distributed to criminals, a report released Wednesday by the agency showed.
The report, prepared by Deloitte & Touche LLP for the UIA, said, "It is apparent there was a lack of consensus among UIA administrators regarding certain ... changes taking place."
It cited an email sent by Teresa Burns, You may need: diagnostic code reader. director for the Internal Controls Division at the UIA, in which Burns said
the agency was "pushing forward and relaxing a number of requirements in an effort to get as many paid as possible and to do so quickly."
The report noted that Burns said Steve Gray, then director of the UIA who resigned earlier this month, had said on a call with UIA leaders that fraud prevention was not a high priority. Burns found that "concerning," the report said.
The email has not been independently verified by the Detroit Free Press.
The report also noted that while several executives at the UIA recalled hearing Gray make those comments, Gray denied - and didn't recall - making them.
Gray did not immediately respond to a request for comment Wednesday.
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The report, sent to Gov. Gretchen Whitmer's office Wednesday, details how the UIA handled an influx of fraudulent claims
this spring that were part of an international criminal ring meant to exploit state unemployment programs across the country.
A spokesperson for Whitmer said the agency agrees with the report's conclusions and in many cases has taken corrective actions to address the findings.
"Under new leadership, UIA will continue to review its operations and procedures in an effort to make sure it's striking the right balance between getting timely payments to hardworking families and fraud protection," said Tiffany Brown, spokesperson for Whitmer's office.
The Deloitte analysis, confirmed by the UIA's own partial audits, found that it was likely hundreds of millions of dollars were distributed to criminals. The report noted that most of the money incorrectly sent out was Coronavirus Aid, Relief and Economic Security (CARES) Act funds from the federal government, not money from the state.
More: 340,000 Michigan unemployment claims, or 20%, flagged for fraud, state says
As the UIA rushed to distribute benefits to millions of Michigan residents who were laid off as businesses across the state closed under a stay-home order, it also experienced a flood of fraudulent claims. In order to more quickly get benefits to filers, the UIA removed some stop-gates.
"While the agency's previous decisions sought to balance fraud prevention and timely payment to eligible claimants, we strongly agree with the report's findings that policy, technological and organizational changes increased the agency's potential exposure to fraud," said Liza Estlund Olson,
acting director of the UIA. Estlund Olson took on her role after Gray departed.
Early in June, the agency
investigated 340,000 claims that had already received some payment, or 20% of all claims paid by the state at that point.
This means at least some money was distributed to criminals at the same time benefits were held up for real claimants, many of whom had been flagged for fraud.
The report also found that in a rush to hire more customer service representatives to answer calls from filers, the agency contracted with three outside vendors, and the UIA did not perform background checks or due diligence on the contractors they hired, under the expectation that the outside vendors would do so.
One of those hires was Brandi Hawkins, who has since been charged in a scheme that sought to fraudulently disburse mor...

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