Nessel exploring criminal, civil charges in payroll fraud cases

Updated 1:32 p.m.

State Attorney General Dana Nessel announced Tuesday that her office could soon file criminal or civil charges against Michigan businesses accused of payroll fraud.

In a statement, a Nessel spokesperson wrote that by the end of the week her office “will have sent letters demanding business records to at least 10 businesses operating in Michigan and plans to use subpoenas and warrants in other cases to obtain vital information from Michigan-based businesses allegedly operating fraudulent payroll schemes.”

“No family should live in poverty because greedy businesses cheat the system and refuse to play by the rules,” Nessel said in her statement. “This has gone on for far too long and Michigan isn’t going to wait any longer to crack down on these crimes.”

When asked about the 10 businesses in question, Nessel spokesperson Kelly Rossman-McKinney told the Advance that the attorney general and her team are “not naming any names until we take formal action.”

In April, Nessel formed a “Payroll Fraud Enforcement Unit” to investigate claims of such fraud, which usually takes the form of employee misclassification, failure to pay overtime and outright wage theft. Her office said Tuesday that it’s received nearly 100 complaints since its launch.

At the time the enforcement unit was formed, the response was largely split along party lines. Both Democratic caucus leaders in the Legislature pledged their support, while the spokesperson for state Senate Majority Leader Mike Shirkey (R-Clarklake) said it “may be a solution in search of a problem.”

A spokesperson from the Lansing Regional Chamber of Commerce said that while the chamber doesn’t have a position on the move to prosecute businesses suspected of payroll fraud, “It is crucial that businesses protect their workers and ensure they are taken care of to the best of their abilities. … We trust our elected officials to enforce laws that will help protect workers and businesses, while keeping the state’s economy vibrant and the business community booming.”*

A 2017 report from the liberal Economic Policy Institute said that between 2013 and 2015, payroll fraud cost Michigan residents more than $400 million. Nessel’s office cites that report and a 2009 study from Michigan State University that reported that misclassification costs the state $107 million a year in revenue through tax fraud.

The attorney general’s office said it’s collaborating in its investigation with the U.S. Department of Labor, the Internal Revenue Service, the Michigan Department of Treasury, the state’s Wage and Hour Bureau and its Unemployment Insurance Agency.

This story has been updated with comment from the Lansing Regional Chamber of Commerce.