Ruling awaited on class-action suit against UI Agency

April 28--LANSING -- An attorney suing the Michigan Unemployment Insurance Agency, alleging it has wrongly accused tens of thousands of residents of fraud and unlawfully confiscated tens of millions of dollars in benefits and penalties, says an auditor general's report released last week that was highly critical of the agency supports her claims.

In the state's response to the report released April 21, "they're admitting (the state's unemployment insurance system) is flawed in the ways we're claiming it's flawed," Royal Oak attorney Jennifer Lord told the Free Press on Wednesday.

Michigan Court of Claims Judge Cynthia Stevens is expected to rule soon on the state's motion to dismiss Lord's proposed class action. Arguments were heard on March 8.

The lawsuit, filed in 2015, alleges the automated system the agency uses for detecting and adjudicating unemployment insurance fraud "deprives UIA claimants of due process and fair and just treatment because it determines guilt without providing notice, without proving guilt and without affording claimants an opportunity to be heard before penalties are imposed."

The suit also alleges the state agency engages in unlawful collection practices when it seizes benefits and income tax returns and garnishes wages to collect the penalties it arbitrarily assesses.

In a motion filed in October, attorneys for the Unemployment Insurance Agency urged Stevens to dismiss the suit, saying the system worked the way it should because lead plaintiff Grant Bauserman appealed the agency's fraud determination against him and "the agency reconsidered its previous determinations and held Bauserman not liable for interest and penalties."

The state agency argued "Bauserman has been refunded all monies intercepted and he owes the agency no money," and therefore "there is no claim upon which relief may be granted."

But another client of Lord's, Daniel Di Gregorio, told the Free Press on Wednesday he's continued to receive letters from the UIA accusing him of fraud, even after Administrative Law Judge Stephen Goldstein threw out all allegations against him in February saying that by failing to specify details about its allegations against Di Gregorio, "the agency violate(d) the most rudimentary demands of due process of law."

Di Gregorio, a crane operator in the concrete business, said his wife Shirl took the lead in fighting the $33,000 demand he received from the state agency and "if it wasn't for my wife, I don't know what I would have done." He said he might have rolled over and found a way to pay the money.

Weeks after the judge ruled in her husband's favor, he received another payment demand from the agency, this time for $6,000, Shirl Di Gregorio said.

Lord said the report issued April 21 by Auditor General Doug Ringler supports her case because the audit details how the state's MiDAS (Michigan Integrated Data Automated System), introduced in 2013, arbitrarily makes fraud determinations based on answers to innocuous questions such as whether someone applied for benefits because they needed the money. The audit also details how the agency fails to spell out details that would allow claimants to defend themselves against fraud allegations, and says the agency fails to give proper notice of allegations and repeatedly sends notices to incorrect addresses even after letters have been returned as "undeliverable."

In each case, the agency agreed with the auditor's findings, though it says it has made changes. Di Gregorio's experience shows that even if methods have changed, similar results continue, Lord said.

Lord said she sees parallels with the state's conduct in the lead poisoning of Flint's drinking water: "The parallel I see is that there's a CEO mentality," in which the human element is ignored and "it's all based on the bottom line," she said.

Ken Silfven, a spokesman for the UIA, wouldn't comment on whether the auditor general's report supports Lord's allegations, citing the ongoing litigation.

But Silfven took issues with the Flint comparison and suggestions Gov. Rick Snyder places too much emphasis on the bottom line.

"To the contrary, the governor reminds his team constantly that everything we do is about serving people," Silfven said in an e-mail.

"I know that's what motivates him as he does his job. That's why he had the courage to lead the way on such things as the Healthy Michigan program. He's driven by compassion and a clear sense of duty. It's not just dollars and cents. He's made clear time and again that we can never forget the human element when it comes to shaping programs or policy."

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4.

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