Jobless agency testifies on false fraud fiasco

March 02--LANSING -- A Republican lawmaker says the state should assess the costs and benefits of a $47-million computer system that falsely accused tens of thousands of Michigan unemployment insurance claimants of fraud and also improperly exposed the names, social security numbers and other personal information of up to 1.9 million claimants.

State officials have not said whether the problem was the Michigan Integrated Data Automated System (MiDAS), used to detect unemployment insurance fraud, or simply the way the state used the system.

In public statements over the last several months, and again on Thursday at a hearing before the House Oversight Committee, officials from the Michigan Unemployment Insurance Agency have not placed any specific blame for the false fraud allegations -- which resulted in quadruple penalties, wage garnishes, seizure of income tax refunds, and personal bankruptcies -- on the vendor that sold the state the MiDAS system, Fast Enterprises of Colorado.

The main problem was that the "programming allowed MiDAS to make discretionary findings without the intervention of a human," UIA Acting Assistant Director Bruce Noll told the committee Thursday. "That's what was missing."

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The agency continues to use MiDAS to detect unemployment fraud, despite a 93% error rate on automated fraud findings. But since about August 2015, a human must review and sign off on the findings before any further action is taken, officials say.

On the separate issue of unauthorized release of personal information, which began in October 2016 and was identified and corrected on Jan. 30 of this year, that problem was caused by a software update provided and performed by the vendor, Tiziana Galeazzi, general manager for talent and economic development in the Department of Technology, Management and Budget, told the committee Thursday.

The update affected information at Michigan companies that use third-party vendors to do their payroll. Authorized officials with access to MiDAS at those companies -- generally top executives and human resources professionals -- who would normally only have access to personal information about their own employees were able to access such information on employees at other affected companies. An investigation continues with the Michigan State Police, but so far no criminal intent or wrongdoing has been found, Galeazzi said. Those affected can request a free credit report by calling 1-877-322-8228.

Rep. Martin Howrylak, R-Troy, vice-chairman of the House Oversight Committee, called for a cost-benefit analysis of the MiDAS system to be completed and shared with lawmakers.

"That is something we would definitely want to look at doing," Galeazzi said.

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A phone call and e-mail seeking comment from Fast Solutions were not immediately returned Thursday.

After the meeting, Howrylak said he looks forward to review, but "there's no way on God's green earth" the system has provided a cost benefit to the state, given the amount of time, money and effort now being used to rectify mistakes.

Howrylak said he's frustrated trying to establish accountability on the issue because key employees who were in place at the time the false fraud findings were made, between Oct. 1, 2013, and Aug. 7, 2015, have since been moved to other jobs. The two officials with responsibility for UIA who testified Thursday -- Noll and Talent Investment Agency Director Wanda Stokes -- were not connected with the agency when the false fraud findings were made.

"Everybody is innocent ... everybody is going to have clean hands," Howrylak said.

"I'm just really frustrated. It's an injustice to taxpayers, to employers and employees."

Noll said the agency continues to review about 28,000 fraud determinations that were made during the relevant period and expects to complete that review in June. The 93% error rate was found during an earlier review of about 22,000 separate fraud findings that had no human involvement. So far, the state has reimbursed about $6 million to people wrongly accused of fraud, Noll said.

The state has passed legislation to prevent a recurrence and recently settled a federal lawsuit that halted collections involving affected cases pending further review. A class-action lawsuit continues in state court.

The affected claims date back as far as 2007 because MiDAS was used to do a six-year "look back" at earlier claims.

The agency is undertaking a top to bottom shake-up of management responsibilities and job assignments, Stokes said.

Contact Paul Egan: 517-372-8660 or [email protected]. Follow him on Twitter @paulegan4.

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