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Incident 373: Michigan's Unemployment Benefits Algorithm MiDAS Issued False Fraud Claims to Thousands of People

Description: Michigan’s MiDAS system falsely accused over 34,000 people of unemployment fraud from 2013 to 2015, which reportedly caused financial ruin for many. The automated system was designed to cut costs, but it adjudicated fraud cases without human oversight. That led to an 85% error rate. Victims faced wage garnishments, some lost homes, and some faced bankruptcy. Despite early warnings, Michigan’s UIA defended MiDAS until lawsuits and federal pressure forced reforms. Legislators have been seeking compensation for those wrongfully accused.

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Alleged: Fast Enterprises and CSG Government Solutions developed an AI system deployed by Michigan Unemployment Insurance Agency, which harmed unemployed Michigan residents falsely accused of fraud and Michigan residents who faced bankruptcy or foreclosure due to MiDAS.
Alleged implicated AI system: Michigan Integrated Data Automated System (MiDAS)

Incident Stats

Incident ID
373
Report Count
14
Incident Date
2013-10-01
Editors
Khoa Lam
Applied Taxonomies
MIT

MIT Taxonomy Classifications

Machine-Classified
Taxonomy Details

Risk Subdomain

A further 23 subdomains create an accessible and understandable classification of hazards and harms associated with AI
 

7.3. Lack of capability or robustness

Risk Domain

The Domain Taxonomy of AI Risks classifies risks into seven AI risk domains: (1) Discrimination & toxicity, (2) Privacy & security, (3) Misinformation, (4) Malicious actors & misuse, (5) Human-computer interaction, (6) Socioeconomic & environmental harms, and (7) AI system safety, failures & limitations.
 
  1. AI system safety, failures, and limitations

Entity

Which, if any, entity is presented as the main cause of the risk
 

AI

Timing

The stage in the AI lifecycle at which the risk is presented as occurring
 

Post-deployment

Intent

Whether the risk is presented as occurring as an expected or unexpected outcome from pursuing a goal
 

Unintentional

Incident Reports

Reports Timeline

Incident Occurrence+1
Michigan unemployment agency made 20,000 false fraud accusations
+1
Michigan may pay victims of unemployment benefits blunder
+1
Michigan residents falsely accused of jobless fraud can sue, Supreme Court says
Government’s Use of Algorithm Serves Up False Fraud ChargesJudge: Companies can be sued over Michigan unemployment fraud fiasco+1
Thousands of unemployed in Michigan wrongly accused of fraud can seek cash from state
+2
The Seven-Year Struggle to Hold an Out-of-Control Algorithm to Account
DOGE Plan to Push AI Across the US Federal Government is Wildly Dangerous
Michigan unemployment agency made 20,000 false fraud accusations

Michigan unemployment agency made 20,000 false fraud accusations

theguardian.com

State apologizes for fraud fiasco, wants to reduce penalties

State apologizes for fraud fiasco, wants to reduce penalties

apnews.com

Michigan may pay victims of unemployment benefits blunder

Michigan may pay victims of unemployment benefits blunder

dailypress.net

Michigan’s MiDAS Unemployment System: Algorithm Alchemy Created Lead, Not Gold

Michigan’s MiDAS Unemployment System: Algorithm Alchemy Created Lead, Not Gold

spectrum.ieee.org

Michigan residents falsely accused of jobless fraud can sue, Supreme Court says

Michigan residents falsely accused of jobless fraud can sue, Supreme Court says

freep.com

Submission to the UN Special Rapporteur on Extreme Poverty & Human Rights Regarding His Thematic Report on Digital Technology, Social Protection & Human Rights

Submission to the UN Special Rapporteur on Extreme Poverty & Human Rights Regarding His Thematic Report on Digital Technology, Social Protection & Human Rights

hrw.org

Government’s Use of Algorithm Serves Up False Fraud Charges

Government’s Use of Algorithm Serves Up False Fraud Charges

undark.org

Judge: Companies can be sued over Michigan unemployment fraud fiasco

Judge: Companies can be sued over Michigan unemployment fraud fiasco

freep.com

Thousands of unemployed in Michigan wrongly accused of fraud can seek cash from state

Thousands of unemployed in Michigan wrongly accused of fraud can seek cash from state

freep.com

State Supreme Court says victims of jobless benefits system failure can seek damages

State Supreme Court says victims of jobless benefits system failure can seek damages

michiganradio.org

The Seven-Year Struggle to Hold an Out-of-Control Algorithm to Account

The Seven-Year Struggle to Hold an Out-of-Control Algorithm to Account

themarkup.org

Michigan will settle 2015 unemployment false fraud lawsuit for $20 million

Michigan will settle 2015 unemployment false fraud lawsuit for $20 million

freep.com

Court OKs $20M settlement in unemployment false fraud suit. What claimants need to do next

Court OKs $20M settlement in unemployment false fraud suit. What claimants need to do next

freep.com

DOGE Plan to Push AI Across the US Federal Government is Wildly Dangerous

DOGE Plan to Push AI Across the US Federal Government is Wildly Dangerous

techpolicy.press

Michigan unemployment agency made 20,000 false fraud accusations
theguardian.com · 2016

A Michigan government agency wrongly accused individuals in at least 20,000 cases of fraudulently seeking unemployment payments, according to a review by the state.

The review released this week found that an automated system had erroneousl…

State apologizes for fraud fiasco, wants to reduce penalties
apnews.com · 2017

LANSING, Mich. (AP) — A state official who is conducting a wide-ranging review of Michigan’s embattled unemployment benefits office apologized for the fiasco that led at least 20,000 people to be falsely accused of defrauding a system that …

Michigan may pay victims of unemployment benefits blunder
dailypress.net · 2017

LANSING (AP) — Gov. Rick Snyder and lawmakers are looking to create a state fund to compensate thousands of people who were falsely accused of fraudulently collecting unemployment benefits.

The proposal was not included in changes to the Un…

Michigan’s MiDAS Unemployment System: Algorithm Alchemy Created Lead, Not Gold
spectrum.ieee.org · 2018

Perhaps next month, those 34,000-plus individuals wrongfully accused of unemployment fraud in Michigan from October 2013 to September 2015 will finally hear that they will receive some well-deserved remuneration for the harsh treatment mete…

Michigan residents falsely accused of jobless fraud can sue, Supreme Court says
freep.com · 2019

LANSING – In a ruling that could affect tens of thousands of Michigan residents falsely accused of unemployment insurance fraud, the Michigan Supreme Court on Friday revived a proposed class-action lawsuit that a lower court had dismissed.

…
Submission to the UN Special Rapporteur on Extreme Poverty & Human Rights Regarding His Thematic Report on Digital Technology, Social Protection & Human Rights
hrw.org · 2019

Summary

This submission examines the human rights implications of Artificial Intelligence (AI) and other data-driven technologies in welfare benefits programs, such as cash and food assistance programs. Through a series of case studies, thi…

Government’s Use of Algorithm Serves Up False Fraud Charges
undark.org · 2020

In 2014, Carmelita Colvin was living just north of Detroit and taking classes at a local college, when she received a letter from the Michigan Unemployment Insurance Agency. The letter stated that she’d committed unemployment fraud and that…

Judge: Companies can be sued over Michigan unemployment fraud fiasco
freep.com · 2021

LANSING — Michigan residents falsely accused of unemployment insurance fraud by the state of Michigan — and subjected to harsh financial penalties that forced some of them into bankruptcy — can proceed with their lawsuit against not just st…

Thousands of unemployed in Michigan wrongly accused of fraud can seek cash from state
freep.com · 2022

Thousands of people who were wrongly accused of fraud when seeking unemployment benefits can seek financial relief from the state, the Michigan Supreme Court ruled Tuesday, breaking new ground when someone claims their constitutional rights…

State Supreme Court says victims of jobless benefits system failure can seek damages
michiganradio.org · 2022

A 7-year-old lawsuit against the state of Michigan over malfunctions in its unemployment compensation system will continue. A split decision by the Michigan Supreme Court keeps alive the class-action quest for damages that could encompass a…

The Seven-Year Struggle to Hold an Out-of-Control Algorithm to Account
themarkup.org · 2022

Hello, friends,

This week, the Biden administration released its Blueprint for an AI Bill of Rights, a wish list of principles that “should guide the design, use, and deployment of automated systems.”

The principles state that Americans sho…

Michigan will settle 2015 unemployment false fraud lawsuit for $20 million
freep.com · 2022

The state of Michigan has reached a $20-million settlement in a class action lawsuit from unemployment claimants who were wrongly accused of fraud, resulting in the seizure of their property without the right to be heard.

The lawsuit, Bause…

Court OKs $20M settlement in unemployment false fraud suit. What claimants need to do next
freep.com · 2023

A $20 million settlement in a class-action lawsuit filed by unemployment insurance claimants who were wrongly accused of fraud and then had money and other assets seized has been approved by the Michigan Court of Claims.

Claimants are eligi…

DOGE Plan to Push AI Across the US Federal Government is Wildly Dangerous
techpolicy.press · 2025

Last month, Elon Musk’s DOGE team outlined a plan to transform the United States federal government through an “AI-first strategy.”

Led by Thomas Shedd, a former Tesla engineer now in charge of the General Services Administration’s technolo…

Variants

A "variant" is an incident that shares the same causative factors, produces similar harms, and involves the same intelligent systems as a known AI incident. Rather than index variants as entirely separate incidents, we list variations of incidents under the first similar incident submitted to the database. Unlike other submission types to the incident database, variants are not required to have reporting in evidence external to the Incident Database. Learn more from the research paper.

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