By Zachary Gorchow
Executive Editor and Publisher
Posted: April 9, 2019 5:13 PM

It took three and a half years, but the 37,000 people wrongly found by the state of committing fraud to obtain unemployment benefits during a two-year period when the state used a computer system to handle fraud determinations will now get to argue the merits of their case in court.

The Michigan Supreme Court emphatically rejected the arguments lodged by the administration of Governor Rick Snyder via attorneys in the Department of Attorney General that the case should be thrown out on a technicality, that the plaintiffs in the case filed their case too late under state law requiring lawsuits against the state be filed within six months of the event giving rise to the case. The case was argued before Governor Gretchen Whitmer took office.

Let's not waste any more time on the legalese involving the technicality. Suffice it to say when a conservative textualist like Justice Stephen Markman writes the opinion for a unanimous court that the plaintiffs complied with the statute, it's pretty clear the Unemployment Insurance Agency fruitlessly delayed this case for years, even if it did persuade a three-judge panel of the Court of Appeals it was right (that panel ordered the case dismissed, saying it had been filed too late). One of the interesting subplots is that two former Snyder legal counsels ruled differently (Appeals Judge Michael Gadola held the case was filed too late while Supreme Court Justice Elizabeth Clement held it was filed on time).

This ruling brings to reality the potential for two significant developments: answers and money.

Answers to exactly what in the world led to such a terrible injustice could come in the form of discovery, not only in the case the Supreme Court revived last week known as the Bauserman case but also in a federal lawsuit where discovery is just getting underway (the Cahoo case).

The state has never really said what went wrong. Was it a technology problem, that the Michigan Integrated Data Automated System malfunctioned? Was it that the system worked as designed, but humans set the wrong parameters to flag fraud? Something else?

Before Mr. Snyder replaced leadership at and over the UIA, the agency refused to comment on those questions because of the litigation. Then after Michelle Beebe was named the new UIA director, she put her focus on fixing the agency's many problems and said she could not afford to spend time on figuring out what had gone wrong under previous leadership. Ms. Beebe is departing her post this month, and by all accounts, she has played an instrumental role in repairing what had been a deeply troubled agency.

Separate Freedom of Information Act requests filed by Gongwer and the Detroit Free Press unearthed some answers, one of the biggies being that the new MIDAS system lacked access to older case files, triggering all kinds of problems not only in the unemployment benefits system but also the State Unemployment Tax system for employers.

Broader FOIA requests Gongwer filed for communications involving key agency staff people during the time periods in question (MIDAS went online for jobless benefits October 1, 2013, before getting shelved in August 2015 amid mounting concerns) were met with fee estimates in the many thousands of dollars.

So, there's never really been a public airing of who knew what and when and how this happened.

And what happened exactly?

Under laws in place at the time, those found to have committed fraud were ordered to pay back their benefits, plus interest, PLUS penalties equal to four times the benefits they had received. This was frequently in the many tens of thousands of dollars.

During the period in question, the UIA wrongly accused people of fraud 70 percent of the time. Seventy. Percent. The state has said it has repaid all 37,000 for what they were wrongly forced to pay, but there is still the matter of damages.

What kind of damages? Well, of the 37,000 wrongly found to have committed fraud, 1,100 filed for bankruptcy. It's not clear how many of them filed bankruptcy because having to pay back all that money shattered their finances and how many of them weren't paying and filed because of other forces, but it is still a stunning number. Attorneys have said their clients lost houses, saw marriages collapse, among other indignities.

Of the 848 U.S. mail communities in Michigan, 95 percent had at least one person wrongly found by the UIA to have committed fraud, Gongwer has previously reported through a FOIA request.

The state could avoid a messy discovery process if it decides to settle the case. Will that now get serious consideration? One would think so. Up until last week's Bauserman ruling, the plaintiffs' attorneys in both the state and federal cases said no settlement overture from the state had occurred. This makes some sense because up until Friday, the Bauserman case was dead. Now the state knows where it stands, that it has a pair of cases filed by separate plaintiffs to decide if it wants to settle.

At least as of the past month, the UIA continued to fight the federal lawsuit vigorously even with Ms. Whitmer replacing Mr. Snyder and Attorney General Dana Nessel succeeding former Attorney General Bill Schuette. The assistant attorney general representing the UIA in the federal case submitted an interesting filing suggesting that because neither the UIA nor the state of Michigan was named as a defendant in the Cahoo case, that the state had no role in the case. The case does name several state employees, however, and while the state insists they are named as individuals, the plaintiffs' attorneys say between the employees and the state-hired vendors, the state is absolutely on the hook in the federal suit for liability.

Ultimately, this is Ms. Whitmer's call, and for now her office isn't saying anything about what she will do. She's said multiple times the state is facing hundreds of millions in liability from lawsuits filed during the Snyder era. The unemployment case is definitely part of the mix.

The price tag could be enormous. For argument's sake, what if the 1,100 who filed for bankruptcy got $50,000 each and everyone else got $10,000 each? That's $424 million. And Ms. Whitmer still must consider how the state is going to compensate the Flint water plaintiffs, which by the way, number 25,000 people. Settlement discussions already are underway there.

Answers and money. Could those finally be coming some six years after the MIDAS fiasco began?