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Judge: Suit over false jobless fraud can proceed in Michigan

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Michigan residents whose unemployment claims were wrongfully rejected as fraudulent by a computer system can sue the system’s developers and state officials, a federal judge has ruled.

Five plaintiffs sued FAST Enterprises LLC, CSG Government Solutions and five state employees in 2017, alleging that the staffers’ actions and flaws with the automated computer system put them at financial risk and even bankruptcy.

In an opinion issued Thursday, U.S. District Judge David M. Lawson dismissed one plaintiff and three defendants but ruled that the case will move forward.

State officials have acknowledged that at least 20,000 Michigan residents — and possibly as many as 40,000 — were wrongly accused of fraud between 2013 and 2015 by a $47 million computer system, purchased from FAST Enterprises, that the state operated without human supervision and with an error rate as high as 93%.

The system allegedly made an excessive percentage of fraud determinations between 2013 and 2015 during then-Gov. Rick Snyder’s administration, even after the errors were pointed out by staffers, Lawson’s opinion states.

Attorneys for the companies had no immediate comment on the ruling.

The Michigan Attorney General’s Office, which represents the state defendants, is “still reviewing the decision with our clients,” spokeswoman Courtney Covington Watkins said.

The lawsuit’s defendants include Sharon Moffett-Massey, who was director of Michigan’s Unemployment Insurance Agency between 2014 and 2017. Lawton wrote in his opinion that Moffett-Massey 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.”

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