State failed notification of false fraud charges
In an effort to save the state money, Michigan under Gov. Rick Snyder implemented a $47 million automated unemployment insurance system in October 2013.
When the Michigan Integrated Data Automated System (MiDAS) was implemented, 432 Unemployment Insurance Agency employees were laid off, dropping the number of employees working directly with customers from approximately 260 to 184.
MiDAS was also supposed to target fraudulent claims, which it had been doing since 2007.
From March 2014 to March 2015, the determination of fraud cases skyrocketed to 26,882, five times the typical number, according to a House Ways and Means Committee fact sheet.
For just that year, claimants accused of fraud were forced to pay a total of $56.9 million in fines and restitution in garnishments of wages and state and federal tax returns and placed liens on property.
By the time that public outcry, legislative scrutiny and lawsuits against the UIA forced the stated to shut down MiDAS, the system had made over 53,600 fraud determinations. But of those determinations, 93 percent were in error: accused claimants had done nothing wrong.
The automated determinations were made with little or no human oversight. Furthermore, the tactics used by the UIA to collect money from wrongfully accused claimants were in violation of both state and federal law.
An April 2016 Auditor General report stated the UIA failed to provide proper or adequate notice to those accused of fraud.
While states are required by federal law to independently verify computer-identified fraud cases, according to the report, Michigan’s UIA did not do so until August 2015.
Further, the UIA failed to provide the facts to claimants that led to the initial finding of fraud, the report stated, which is required by both federal regulation and state law.