Lansing Lines is presented in cooperation with MIRS, a Lansing-based news and information service.
AG Argues It Should Decide Venue In Medicaid Fraud Case
As the Republican-led House moved this week to curb the Michigan Attorney General’s authority — including where cases may be filed—the Attorney General’s office was simultaneously defending its venue powers before the Michigan Supreme Court.
At issue is whether the Attorney General properly brought a Medicaid fraud enforcement case in Ingham County instead of Oakland County, where the defendants argue the alleged misconduct occurred.
Appearing before the court on Wednesday, Assistant Attorney General Stephanie Seery said the state should prevail because the injury caused by the alleged fraud occurred in Ingham County, where the state government is based.
“The injury is that the state was deprived of its funds, and that occurred in Ingham County where the state is located,” Seery told the justices. She urged the court to overturn a November 2024 lower-court ruling that held the venue must be tied to where the alleged wrongdoing occurred.
Seery warned that the ruling would allow defendants to dictate venue by choosing where to commit alleged misconduct. “What this means is that wrongdoers get to choose venue by choosing where to commit their bad acts,” she said, “this leaves victims to chase wrongdoers across the state.”
She argued that Michigan law allows venue in more than one county and that the Attorney General venue statutes can be read consistently with the state’s tort venue laws.
Christopher Ryan, a Southfield attorney representing NRK Rx Inc. and its owner, Raad Kouza, countered that the Attorney General statutes cannot override the Legislature’s mandatory venue rules in the tort statute. He argued the alleged conversion occurred in Oakland County and that Kouza had no connection to Ingham County.
Chief Justice Megan Cavanagh questioned why NRK initially argued in the trial court that Wayne County was the proper venue, but now contends Oakland County is correct. Ryan responded that Oakland County is where the alleged conduct occurred, while Kouza merely resides in Wayne County.
Justice Elizabeth Welch asked about the policy implications if the court rejects the Attorney General’s position. Seery replied that such a ruling would effectively nullify the Attorney General’s venue statutes.
The statutes – MCL 600.1631 and MCL 14.102 — allow the Attorney General to initiate civil or criminal actions in Ingham County Circuit Court. Republican lawmakers argue that those provisions allow the Attorney General to bypass local venue rules.
In response, the House approved a package of bills — HB 5314 , HB 5315 and HB 5316 — to repeal MCL 14.102 and amend MCL 600.1631. The bills advanced to the Senate on Wednesday along party-line votes.
The underlying case stems from a Michigan Department of Health and Human Services (DHHS) Office of Inspector General audit alleging Kouza submitted inflated Medicaid reimbursement claims between 2011 and 2017 for drugs never purchased from an authorized wholesaler and therefore never provided to Medicaid patients. The state seeks to recover $541,590 and alleges Kouza laundered proceeds by placing millions of dollars in the names of family members, friends and shell companies.
An administrative law judge ruled in favor of DHHS and the Ingham County Circuit Court affirmed that decision in January 2021. DHHS filed suit in July 2022 to enforce its final agency decision.
Kouza and his brother were later convicted in federal court of healthcare fraud, sentenced to five years in prison and ordered to pay roughly $15.5 million in restitution.
Pharma Must Fund Drug Tracking System Under House-Passed Bill
Pharmaceutical companies would need to financially support Michigan’s existing National Precursor Log Exchange (NPLEx) tracking system for pseudoephedrine sales while allowing people (including in rural areas) to buy pseudoephedrine online with the same anti–meth monitoring safeguards in place, under legislation the House passed this month.
Rep. Brian BeGole (R-Perry) said HB 4947 responds to changes in how people access medications, pointing to the closure of many Rite-Aids and the growing role of online retailers. The bill, he said, allows consumers — particularly those in rural areas or those who are ill — to purchase certain decongestants online while maintaining existing safeguards meant to flag suspicious purchases and support law enforcement monitoring programs.
“Especially if you’re sick, and you don’t want to get out of bed, now, people would be able to get online if this should pass, and order that decongestant,” BeGole said.
He also pointed to the decline in methamphetamine production, arguing that existing tracking systems have acted as a deterrent by making it harder for potential producers to purchase large quantities undetected.
“I think just the idea of having it in place is preventative in itself,” he said. “We’re hoping that the manufacturing of it doesn’t increase. We think we’ve made some great strides, and we accredit this program to that.”
DHHS’ RFP For Mental Health Contract Ruled To Violate Of Health Code
A judge held last month that the state health department’s request for proposal (RFP) to privatize community health agencies violates state law by “inhibiting” community mental health service programs (CMHSP) from “fulfilling numerous statutory mandates.”
However, Court of Claims Judge Christopher Yates declined to issue an injunction barring the Department of Health and Human Services and the Department of Technology Management & Budget from using a competitive-bidding process to select prepaid health insurance plans (PHIP) or requiring specific action related to the 2025 RFP.
“The RFP must be brought into compliance with Michigan law, which requires, at a minimum, that sufficient Medicaid funds must be allocated to CMHSPs to allow them to perform their statutorily-mandated obligations through financial contracts with other providers,” Yates’ 19-page order reads.
Once the RFP is compliant, DHHS can continue with its competitive bidding process.
DHHS spokesperson Lynn Sutfin said the department is “reviewing the court’s decision.”
Dominick Pallone, executive director of the Michigan Association of Health Plans (MAHP), said the court’s decision “just put thousands of Michiganders who desperately desire an improved public mental health system in limbo.
“The fact that the Court believes that state law may restrict MDHHS’s ability to seek better alternatives and choices for improved services through a simple RFP for our most vulnerable population is a travesty. It is a sad day when our State Laws are interpreted to block a pathway for improved competition, choice, and access to mental health services.”
DHHS, who administers the state’s Medicaid program, contracts with 10 regional PIHPs, who then administer the Medicaid funds through contracts with CMHSPs and other service providers.
DHHS has successfully sought waivers from the federal government allowing it to contract with PIHPs without a competitive bidding process, but the PIHPs, led by Region 10 PIHP, and community mental health agencies filed separate lawsuits challenging the department’s decision to switch its single-source procurement system to a competitive one.
Yates held that “several significant conflicts exist” between MDHHS’ RFP and the state’s Mental Health Code, MCL 330.1206(1), including that it doesn’t obligate PIHPs to give priority to CMHSPs, and it bars successful bidders for PIHP “roles from paying CMHSPs for services provided through contracts with service providers.”
Benton Harbor Settles Lawsuit Over Lead In Water For $25M
The city of Benton Harbor reached a $25 million settlement in a civil lawsuit over the elevated lead levels in water from August 2018 to November 2021.
The proposed consent judgment, which needs a U.S. District Court judge’s approval, calls for the city’s insurer to pay the judgment because “the city has no money to pay a judgment,” according to a court filing.
“The only way (the city) could raise the money to do so, if permitted by state law, would be to impose additional taxes on its residents, i.e., the class,” the agreement noted.
A consent judgment for the policy limits is the “only possible path to monetary recovery for the class for claims against the city and city officials,” the agreement added.
The plaintiffs acknowledge that the $25 million “does not satisfy all of plaintiffs’ alleged damages,” it does represent “an amount sufficient to include the policy limits of the city’s insurance under” policies in effect for the period of the water crisis, according to a court filing.
The city also agreed to help prevent a similar crisis from happening again and will test for lead, E. coli and other toxins in the municipal water for five years. An independent monitor will oversee the testing and publish water test reports every six months.
The city will also follow current Environmental Protection Agency regulatory requirements that 10 parts per billion of lead at the 90th percentile triggers enforcement under the Safe Drinking Water Act – even if federal regulations change to less strict standards.
City residents filed their lawsuit in 2021 and amended it in 2022, naming the city and its mayor as well as two engineering companies, and various Michigan state individuals and entities as defendants.
The courts later dismissed some defendants, including Benton Harbor Mayor Marcus Muhammad, who has governmental immunity.
The plaintiffs’ claims included allegations that the city violated residents’ rights to bodily integrity by not doing enough to protect residents and alleged officials failed to warn them about the toxicity of the drinking water.
The consent agreement resolves two separate actions – Braziel v. City of Benton Harbor and Mitchell v. City of Benton Harbor.