Michigan residents wrongly accused of unemployment fraud by glitch, allowed to sue state

Michigan residents wrongfully accused of unemployment fraud nearly a decade ago, scored a big win in the state supreme court.

More than 40,000 people plagued by a computer glitch at the state unemployment insurance office, can now sue for damages.

A Michigan Supreme Court document highlights the costly error by the state’s unemployment insurance office - which caused 1,100 Michigan families to file for bankruptcy - and 350 people to plead guilty to a fraud charge they didn’t commit.

For almost a decade, more than 40,000 Michiganders fought the state to regain their financial footing.

Some of them couldn’t pass background checks to get jobs. A few filed for bankruptcy. Many of them paid thousands of dollars to right a wrong they were falsely accused of.

A computer error said tens of thousands of people wrongly committed unemployment fraud.

"This was a $46 million dollar computer program that was allowed to run completely without oversight, and the computer was wrong 93 percent of the time," said Attorney Jennifer Lord.

A state computer handling unemployment benefits with no additional oversight — was wrong nine times out of 10.  

Over the phone, FOX 2 spoke with Lord, who is trying the case.

"I can almost guarantee there were high-level employees at the unemployment insurance agency who knew this was a debacle very early on and continued to defend it and continued to let innocent people be victimized," she said. "Three-hundred-fifty people pled guilty to a crime they didn’t commit.

"I think there’s got to be some recognition that it’s not just the dollars that were taken that need to be recognized as harm. This was really unbelievably stressful for a lot of people."

This clerical disaster unfolded during Governor Rick Snyder’s administration between 2013 and 2015. The Unemployment Benefits Office admitted it made a mistake.

Eventually, the case went to the Michigan Supreme Court, which ruled people can go after the state if they feel their rights are being violated. The 40,000 people impacted by that computer error can now sue to get their money back.

On a nice evening out in Royal Oak, we spoke to people who believe this catastrophic blunder could have easily been prevented.

"I think the question is will the state do it voluntarily or do they have to hire lawyers to do it," said Salvatore Cusumano.

The case will go back to the trial level, where the state will be open to class action lawsuits. Lord says one goal is get the state to admit its error on the record.