LANSING - A principal of a company whose software falsely accused tens of thousands of Michigan residents of committing unemployment insurance fraud says he "would be surprised" if his company has any liability for what happened.
"It's not the role of a software company to tell an agency what to do or not to do, in general," James Harrison of Fast Enterprises told the Free Press. "We can make suggestions."
Harrison noted that the Michigan Unemployment Insurance Agency continues to employ Fast Enterprises and its Michigan Integrated Data Automated System (MiDAS) software.
"If the agency had serious doubts about our software, or about our services, that probably would have come out, in three years, in some fashion or another," Harrison said. "We're committed to helping the state and we're doing that. We're going to continue to do anything and everything they ask us to do,"
He said the company would work with the state to "minimize the real fraud that is still there."
State officials have said that between Oct. 1, 2013, when the MiDAS system came on line, and Aug. 7, 2015, when the state halted the auto-adjudication of fraud determinations and began to require some human review of MiDAS findings, the system had a 93% error rate and made false fraud findings affecting more than 20,000 unemployment insurance claims. Those falsely accused of fraud were subjected to quadruple penalties and aggressive collection techniques, including wage garnishment and seizure of income tax refunds. Some were forced into bankruptcy.
The agency is now reviewing about 28,000 additional fraud determinations that were made during the relevant period, but which involved some human review. An unknown number of those fraud findings were also false.
State officials have not said whether the problem was MiDAS, or simply the way the state used the system.
Wanda Stokes, director of the Talent Investment Agency that oversees the UI Agency, told the Free Press she was not interested in assessing blame, when she was asked that question in a January interview.
But Harrison said, "I would be surprised," if the company has any liability.
"It's not our decision to do or not do these things," and "it's generally not our role to tell a government what action to take," he said.
However, "there's a lawsuit," and "it's up to the court to decide," said Harrison, who is based in the Boise, Idaho, office of Fast Enterprises, which is headquartered in Colorado.
On Thursday, a proposed class-action lawsuit was filed in federal court in Detroit against Fast Enterprises and two other state vendors involved in fraud detection.
While not denying the accuracy of the 93% error rate cited by state officials, Harrison said he wasn't familiar with that number until he read about it in recent Free Press articles.
"My understanding was quite different," Harrison said. "I had a very different understanding of what was going on in terms of the state's efforts to minimize fraud while it was still paying out benefits." However, "this is all going back a few years — my memory is not perfect on these things."
Asked whether the MiDAS system was marketed as being capable of auto-adjudicating fraud without human involvement, or whether the company had told the state that fraud findings should be subject to human review, Harrison said: "I think what they've said is they were doing some auto-adjudicating," and "one can infer from that that the product is able to do both, and it is a little bit of a choice."
There can be greater risk of error without human review and It's become apparent "some things should have been removed more quickly," he said. "The state has said as much — they've made some changes."
"What is the manpower of the agency?" Harrison asked. "Their limited manpower may have been a factor in trying to do some of these things. Governments often have limited resources."
"It's really up to the state, as you can imagine, to comment on these things," he said. "They're our customer ... we're just the service provider."
Harrison said MiDAS had done a good job of identifying actual fraud, but "you would have to get the actual numbers from them."
Fast Enterprises does bear more responsibility for a separate MiDAS problem, Harrison said.
That's the botched software update in October 2016 that improperly exposed the names, Social Security numbers and other personal information of up to 1.9 million claimants to people who weren't authorized to view that information.
The glitch was identified and corrected on Jan. 30.
Until then, it 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, Tiziana Galeazzi, general manager for talent and economic development in the Department of Technology, Management and Budget, said Thursday. Those affected can request a free credit report by calling 877-322-8228.
"We do have more responsibility for that one," Harrison said. "The investigation is still ongoing."
It wasn't a case of criminals hacking into the system to steal information, he said. Instead, it was a case of access being accidentally granted to company professionals who should not have had that access and "the state knows who looked at what."
Harrison said the same software update was introduced to other systems in other states and it did not have the same result. The glitch happened because of the way the update interacted with a software feature that was unique to MiDAS, he said.
Contact Paul Egan: 517-372-8660 or email@example.com. Follow him on Twitter @paulegan4.
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