Judge: False unemployment fraud suit can proceed

Mike Martindale
The Detroit News

 A federal judge has ruled that people whose Michigan unemployment claims were wrongfully rejected as fraudulent by a computer system can sue the developers and state officials.

Five plaintiffs filed a lawsuit in 2017 against FAST Enterprises LLC, CSG Government Solutions and five state employees, alleging the staffers' actions and the flawed computer system put them at financial risk and even bankruptcy.

U.S. District Judge David M. Lawson dismissed one plaintiff and three defendants Thursday but ruled the case will move forward.

“We just received a copy of the judge’s ruling late yesterday and are reviewing the decision with our clients,” Kelly Rossman-McKinney, a spokeswoman for the Michigan Attorney General’s Office, said Friday evening. The AG's office is representing high-ranking officials from the state’s Unemployment Insurance Agency named in the complaint, including former UIA director Sharon Moffett-Massey.

Attorneys who filed the lawsuit on behalf of Patti Jo Cahoo, Kristen Mendyk, Khadija Cole, Michelle Davison and Hyon Pak, who was dismissed as a plaintiff, and could not be reached for comment Friday. They are represented by the Sugar Law Center for Economic and Social Justice and Ernst Charara & Lovell.

At issue is the state’s robo-adjudication system that's part of the $47 million  Michigan Integrated Data Automated System (MiDAS) purchased from FAST by the state Unemployment Insurance Agency. The system allegedly made an excessive  percentage of fraud determinations between 2013 and 2015, even after the errors were pointed out by staffers, according to Lawson’s opinion.

The system, meant to identify suspected fraud, falsely accused more than 40,000 people of filing fraudulent unemployment claims. 

Moffett-Massey, who was UIA director between 2014 and 2017, eventually “directed the agency to shut down the auto-adjudication system in August 2015 because staff members alerted her to the system having been determining too frequently that people committed fraud,” Lawton wrote in his 68-page opinion.

A similar lawsuit against the state is pending before the Michigan Supreme Court.

mmartindale@detroitnews.com

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