Two Madison photographers used pandemic assistance to survive 2020. Then the state accused them of fraud.
MADISON, Wis. — Jonny Hoffner hasn’t checked his mailbox in the past year without a knot in his stomach. A basket full of hundreds of documents in his and wife Michelle’s home tells the story: an unending battle with the state of Wisconsin over thousands of dollars in benefits paid out in 2020.
Like so many others that year, the Hoffners were trying to save their livelihoods as Madison wedding photographers after the pandemic wiped out six figures’ worth of bookings.
“It came back in crumbs,” Michelle explained. “But as far as our income, our livelihood: it was completely knocked out.”
Nearly two years later, the state accused them of taking pandemic unemployment assistance (PUA) fraudulently and concealing wages. Besides asking for everything back, Jonny said, thousands more were tacked on with the state’s hefty 40% fraud penalty: a total at the time of more than $60,000.
“A small business? We’re the small business. It’s us. And the state is coming after us after we’ve just been decimated by a pandemic,” Jonny said.
Then came relief. The Department of Workforce Development’s administrative law judges said they’d found no evidence of intentional fraud or concealment, just a couple of honest errors in how they filed their paperwork–a common problem that’s resulted in massive overpayment debt for many. Rulings appeared to knock down the amount owed from filing errors to a much more manageable amount.
By mid-2022, the Hoffners thought the ordeal was over. It wasn’t.
Treated ‘immediately like a criminal’
Fraud was a legitimate issue with the theft of billions of dollars nationwide after the federal government tried to rapidly respond to the pandemic with trillions in aid doled out with, at times, minimal oversight. Organized criminals stole hundreds of thousands while individuals found ways to steal identities for benefits or take out thousands of $10,000 emergency pandemic loans from the Small Business Administration by exploiting a loophole in the application.
But caught in the cracks of thousands of ongoing fraud investigations at both a state and federal level are some like the Hoffners: tagged as fraud but with a legitimate claim to innocence.
In just a matter of days after receiving rulings seemingly in their favor from their initial appeals, the Hoffners got a new DWD letter in the mail: A single page, without details, telling them the department had “set aside” the rulings of their own internal judges siding with the Hoffners.
That’s something unemployment attorneys aren’t even sure is allowed. Legal Action of Wisconsin told News 3 Investigates they’re appealing a similar case where ALJ rulings were “set aside” by the DWD, with a number of their own cases that attorneys are handling dealing with pandemic overpayments from filing errors.
“[Administrative law judges] are not very independent,” attorney Victor Forberger with the Madison unemployment appeals clinic noted. “They’re supposed to be.”
For the Hoffners, it was back to the drawing board. Now, months later, they’re still knee-deep in the nightmare.
“They treat you immediately like a criminal,” Michelle said of the hearings.
The couple says the evidence used against them in hearings has centered frequently on a blog post they wrote at the end of 2020, thanking clients for sticking with them and showcasing about seven pandemic weddings that Jonny, mainly, had shot.
While the state is using it as proof they had in fact had income in 2020, the Hoffners said, what they say is missing from that argument is that the few weddings they had were two- or three-hour appointments for Jonny only, not the normal 12-hour packages that included them both. Weddings were short with only a few people while states clamped down on mass gatherings: in one Chicago case, Jonny served as both witness and photographer.
All in all, canceled bookings and drastically-reduced hours meant they made about a third of their normal income. They tried turning to alternatives like selling artwork (unsuccessfully) and Airbnb-ing their home to try and supplement, measures later used against their benefits claims. Still, their revenue losses were steep. PUA, of course, was designed for people in just their position: self-employed and with significantly reduced income.
With only their accountant to help sort through evidence and navigate hearing after ruling after hearing, the Hoffners have vowed to fight the claims through every appeal available to them. It’s not easy: they can’t even distinguish how much the state currently claims they owe, with amounts fluctuating on their online portal and differing from amounts listed in a stack of paperwork that’s now nearly roughly a foot high.
“It seems like the state would much rather have had us go out of business, because we’re being punished, it seems, for having stayed in business,” Jonny said.
A push to uncover pandemic fraud
A spokesperson for the state Department of Workforce Development sent a short statement in response to a request for an interview and a list of questions related to this story. Because of the pending and complex nature of both cases, she said, the department wouldn’t comment on the specifics of the case; other questions also went unanswered. Jonny’s case has been moved up to the next level of appeal at the Labor and Review Commission, the spokesperson said; the DWD is still determining how much Michelle really owes.
“As part of its work to efficiently deliver effective services, including management and oversight of Wisconsin’s unemployment insurance system, DWD bears responsibility for preventing fraud and overpayments.”
They declined follow-up requests for an interview detailing general policies of how the DWD is investigating fraud and concealment in overpayment cases.
In mid-2021 as alarms about pandemic fraud were going nationwide, a DWD spokesperson responded to a letter from congressional Republicans urging them to investigate, saying “Wisconsin has been a national leader at detecting fraud.”
Scamming unemployment benefits isn’t a new phenomenon, but one that became much easier as the federal government released trillions in aid in 2020 and 2021.
Still, a DWD report noted that in 2020, fraud actually decreased in Wisconsin’s unemployment benefits by both number of dollars and number of cases designated as fraud. In their 2022 report, the department said they’d held the fraud rate to just 1.1% in 2021.
That report also noted, however, that their fraud overpayment cases had increased: from 3,561 in 2020 to 11,474 in 2021.
“Fraud overpayments increased in 2021 as UI concluded many investigations that determined fraud occurred in the previous year that saw record amounts of benefits paid and claims filed,” the report said.
To recoup that money, the department uses liens against personal property (known as warrants), levies against wages and bank accounts, and intercepting tax refunds. In “egregious” circumstances, the report notes, the DWD will pursue criminal charges. There were no new criminal cases in 2021, but eight were referred for prosecution in 2020.
Without the DWD releasing specific information about how they’re reviewing pandemic benefit claims for fraud, it’s unclear why years-old payouts are only recently coming under scrutiny. The Hoffners’ benefits under scrutiny are largely from 2020, but it wasn’t until Christmas of 2021 that they were alerted to problems with their case.
Attorneys with Legal Action of Wisconsin say they’re handling cases where the benefits were paid out more than a year earlier. And for Victor Forberger, who has handled hundreds of pandemic unemployment cases, he says nearly all of his current cases now are being pursued as fraud and concealment, in a shift he believes started in the fall of 2021 to re-investigate older cases using different standards for showing income and expenses (in records requests, the DWD denied to him that was the case.)
“It’s reinvestigating all these claims, and looking to charge concealment,” Forberger said. No one disputes that rampant fraud happened in many states, he says, or that crime rings and identity theft were an issue. But here?
“The claim filing problems were so difficult, people are making mistakes because they don’t understand what to do and how to fill out the information.”
Mishandled hearings, collection letters
Despite administrative law judges ruling that Michelle’s filing errors were honest with no evidence of concealment, her benefits portal still shows thousands owed in concealment penalties in addition to tens of thousands more of benefit overpayments.
Jonny’s portal no longer shows active penalties, but he’s been getting collection letters threatening to take more than $10,000 from his tax returns. All in all, after judges ruled they owed a few thousand in PUA benefits back, their portal currently shows about $50,000 between the two of them in PUA and a mix of other benefits and fines.
The ordeal has put Jonny and Michelle through the wringer. At one point, Michelle needed a hearing to prove she had to miss a hearing because she and her young son were both sick with Covid.
At another hearing, the DWD presented evidence against Michelle that had been mailed the day before the hearing and didn’t arrive for several days after (News 3 reviewed the mailing date stamps on the documents). The hearing went on, despite Michelle saying she hadn’t had the opportunity to review the opposing evidence in advance– a basic standard of legal proceedings.
Now, they’re fielding collection letters from the state threatening to intercede their tax returns to recoup the money owed. They plan to appeal to the last possible opportunity: still, the nightmare doesn’t seem to have an end in sight.
“I feel so clear about–we’ve done nothing wrong,” Michelle said. “We’ve tried to survive.”
Photojournalist Lance Heidt contributed to this report.
COPYRIGHT 2022 BY CHANNEL 3000. ALL RIGHTS RESERVED. THIS MATERIAL MAY NOT BE PUBLISHED, BROADCAST, REWRITTEN OR REDISTRIBUTED.