DECEMBER 22, 2005 - Three former employees with Michigan’s Unemployment Insurance Agency (UIA) were arrested for defrauding the state’s unemployment insurance (UI) program.

Richard Braceful and Simona Franklin, both of Detroit, and Lori Merchant of Onondaga have been charged with heading up separate unrelated plans which paid state unemployment benefits to individuals who were not entitled to them.

“The two larger schemes began in 2003 and may have been encouraged by the crisis mode the agency was then facing,” David Plawecki, a deputy director with the state’s Department of Labor & Economic Growth, noted. “At that time, the agency was trying to implement new telephone and Internet-based systems for taking unemployment claims.”

“The two systems were supposed to be ready in late 2002, when all local unemployment offices were prematurely closed,” he explained. “With offices closed and almost 40 percent of its staff leaving for early retirement, the agency started 2003 with a short supply of experienced staff, an ill-conceived new claims-by-mail program, complicated new systems to complete and implement, and hundreds of thousands of laid off workers calling the agency because their unemployment checks were months late in arriving.”

Braceful, who had worked at a UIA call center, allegedly set up false unemployment claims for 49 individuals and authorized payment of 199 unemployment checks amounting to $331,760. The checks were issued in 2003. He was subsequently dismissed by UIA.

Franklin had also worked at an agency call center and allegedly redirected unemployment checks to six family members and friends. In total, she redirected 83 checks from 24 fraudulent claims. The checks totaled $143,479 and were issued between 2003 and 2004. UIA subsequently dismissed Franklin from her job.

The Merchant case was uncovered in June 2005 during a routine review of activity reports. Further investigation uncovered that Merchant had issued improper payments in a relative’s name, totaling $10,860. Following the investigation and after meeting with her supervisor about the payments, Merchant abandoned her job and was dismissed.