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What went wrong with UIA fraud allegations?

The Michigan Unemployment Insurance Agency will stop collecting money from people they have accused of fraud - that means no more wage garnishments, federal and state tax refund intercepts or payment plan collections. A failed computer system known as MiDAS is blamed with 'robofraud' that made life even more miserable for those who lost work during the recession.

Fox 17 Problem Solvers have investigated the issues of questionable accusations for several years. The error rate caused by the computer system as reported by the UIA was 93 percent. This was after re-review of 22,427 cases (it reversed 20,965 of the computer-determined fraud cases).

Stiff penalties and tough collections tactics

The computer system was adopted in 2013. It was initially used to complete a six-year look back on claims as far back as 2007. As many as 50,000 people have been affected.

Concealing or misrepresenting eligibility information can amount to fraud. The UIA used a number of means to detect fraud including auditing employer records, interagency exchange of information and tips from the public to name a few.

When an allegation of fraud is leveled, any benefit paid must be returned. Then penalties for fraudulently collecting unemployment benefits are punitive:

  • In a rare event that overpayment was less than $500, the penalty is two times the amount paid (a $450 overpayment would lead to a $900 penalty)
  • Anything more than $500 triggers a penalty four times the amount overpaid (for example, receive $1,250 more than you should have and you would owe $5,000).

Apparently, the automated system worked so well that "excess" money in the unemployment insurance system was even shifted into the general state budget.

Fraud accusations and little ability to fight them

One Michigan man was hit with a $12,000 bill from the state after the automated fraud determination system flagged his claim. The agency continues to review determinations made between October 2013 and August 2015, but fewer than 2,600 have received refunds for assessed penalties.

After a lay off, unemployment compensation is an essential safety net. Paying the bills is difficult enough with lower unemployment benefits. The faulty computer program contributed to people losing their homes. Others pleaded guilty to crimes they had not committed.

Leaks of sensitive information

The issues with 'robofraud' are not the only at the UIA. Recently, it was disclosed that a glitch in the same state computer system disclosed Social Security number and names of almost two million people. Third-party payroll vendors were able to accidentally happen across this information from October 10 to January 30, when the breach was discovered.

While glitches occur and software patches have to be created, why unauthorized people were able to view the information for so long before a fix was implemented is troubling.

After a lay off and even before filing for unemployment benefits, it often is a good idea to speak with an employment attorney at NachtLaw. When a performance improvement plan had a discriminatory slant or only employees in their 50s were let go, there may be remedies available through a wrongful discharge lawsuit.

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