- Robert Stines
Anti-Fraud Software Leads to Constitutional Claims
An unlikely lawsuit currently pending in Michigan may impact future legal issues related to automation, robots, artificial intelligence, and the need for human oversight.
Michigan's implementation of a software system to automate the detection and reduction of unemployment benefits fraud may have impacted residents' constitutional due process rights; or so says a class of plaintiffs.
In 2017, Michigan residents filed a class action lawsuit against several defendants related to the termination of unemployment benefits. The case is Patti Jo Cahoo, et. al. v. SAS Institute Inc. in the United States District Court, Eastern District of Michigan.
The Complaint alleges that to receive unemployment benefits, claimants must demonstrate certain requirements. Once claimants satisfy these eligibility requirements, they are entitled to benefits under state and federal law.
According to the Complaint, in October 2013, Michigan's Unemployment Insurance Agency ("Agency") began administering Michigan’s unemployment benefits through an automated system named MiDAS. With the help of other named defendants, the Agency designed, created, and implemented MiDAS to automate the investigation and determination of fraudulent conduct.
MiDAS searches for discrepancies in the records of individuals who were receiving or had received unemployment benefits. To do this, MiDAS accessed claimants' records from employers, state agencies, and the federal government and then “cross-checked” the information for inconsistencies.
In a classic "rubbish in rubbish out" scenario, the information that MiDAS relied on to conduct the cross-check may have contained errors or missing information, which resulted in thousands of claimants being "flagged" for possible fraud.
When a claimant was “flagged” for possible fraud, MiDAS automatically sent claimants multiple-choice questionnaires to rebut the allegation of fraud.
As alleged in the Complaint, if a claimant answered any of the questions in the affirmative, or failed to respond to the questionnaire in ten calendar days, MiDAS adjudicated the fraud issue and automatically determined that the claimant knowingly and intentionally misrepresented or concealed information to unlawfully receive benefits.
When MiDAS determined that a claimant committed fraud, the individual’s right to benefits terminated immediately. In addition, claimants were automatically assessed monetary penalties.
According to the Complaint, the Michigan Auditor General reviewed over 22,000 of MiDAS’ fraud determinations and found that 93% of them did not actually involve fraud.
Faulty Software or Faulty Information
Of course, one of the allegations in the Complaint is that the defendants negligently designed, tested, manufactured and produced the "software system" that operates MiDAS. In other words, MiDAS is a faulty product. This is interesting because the allegation is that the algorithm was faulty, but it seems that the issue was really the information upon which the algorithm relied.
If the information that MiDAS relied on was correct, it probably would not have generated false positives. Which raises the question of why was the information faulty. The glaring reason is human error. Humans probably didn't update employment records, or input incorrect information into the various employment records.
This case also presents another novel issue: are the software developers liable for professional negligence similar to malpractice claims against doctors, attorneys or architects? Last year, I posted a blog about potential professional liability claims against software developers. This case might provide more insight into this burgeoning area of the law.
The Plaintiffs also alleged that MiDAS, as an agent of Michigan, deprived residents of their due process rights under the 14th Amendment. Specifically, the section that states:
nor shall any state deprive any person of life, liberty, or property, without due process of law
The 14th Amendment provides the right to be heard, and present evidence to a neutral adjudicator before being deprived of property. Unemployment benefits are considered a property right; therefore, by MiDAS terminating property rights, the 14th Amendment became applicable.
Under the 14th Amendment, before MiDAS terminated unemployment benefits, claimants should have been given the opportunity to provide accurate information and possibly have a neutral adjudicator make a determination. In theory, this would have forced a human to review and consider whether MiDAS' decision was accurate.
I wonder if the creators of MiDAS realized they may have jinxed their creation. Those familiar with the story know that Midas was a King in Greek mythology who had the ability to turn everything he touched to gold. The gift of the golden touch eventually became a curse.
Kudos to Michigan for implementing this system and embracing technology. The intent was to stop fraud, which was probably costing the state millions of dollars. It was probably inefficient and expensive to have an entire department of people conduct the "cross-check." Michigan used technology to solve an expensive problem.
Unfortunately, this is exactly the type of issue people have been warning about with the use of technology, such as artificial intelligence or robots, to accomplish the task of humans. Although the technology will increase efficiency and production, there will be problems in implementation. Those problems may lead to issues where people are harmed. Additionally, many people may see themselves replaced by computers.
Although this case paints a horrible picture of MiDAS and technology, have some pity. MiDAS was relying on information that may have been faulty. If people had done a better job of providing accurate information, MiDAS may have been successful.
The problem wasn't MiDAS, it was people.
~ Florida Cyber Lawyer, Robert Stines, Esq., CIPP