December 29, 2009

Lansing -Attorney General Mike Cox today said that 2009 marked a year of great successes as the Attorney General's office continued to produce results for Michigan citizens, even in the face of budget cuts that were needed to put state spending in line with revenues.

Cox says that state government simply must do more with less, just as Michigan's families are doing as our state faces the highest unemployment rate in the nation. Thanks to the hard work and dedication of the pubic servants in the Attorney General's office, the department has done just that.

Cox said his office handles more than 100,000 citizen inquiries annually and carries a case load of approximately 45,000 active cases at any given time, an increase of 8.4% since 2003. This increasing work load comes despite the fact that the Attorney General's budget has been reduced every year since Cox took office in 2003.

In 2009, the office cut its budget by 5.5%, but because that reduction took place well into the fiscal year it was the equivalent of a 16.5% cut for the year. And, because 86 percent of the Attorney General's office budget is made up of people rather than programs like road projects that could be delayed or canceled, the office was forced to lay off staff. Other spending cuts included closing some offices and combining some divisions within the office. Cox also reduced his own salary by 4%.

"Michigan families are dealing with the worst economy in decades," said Cox. "They have to do more with less, and that is exactly what state government should be doing. We have embraced that mission in our office, and I am proud of the results we have delivered."

The following is an overview of key issues for 2009:

Prevented $276 Million in Blue Cross Rate Hikes on Seniors and Families

Using statutory powers that Blue Cross and others sought to eliminate just a year ago, Attorney General Cox fought proposed Blue Cross rate increases for seniors and families buying insurance on their own in 2009, resulting in a savings of at least $276 million. In August 2009, Cox won a $160 million reduction in Blue Cross health insurance rate requests for the 163,000 people who buy their insurance directly from Blue Cross. The Blues requested average rate increases of 56% and 41% on two categories of health insurance, both of which were reduced to 22% as a result of Cox's intervention. The Attorney General's office won two more reductions in 2009 on rate increase requests for more than 200,000 seniors who purchase Medigap health insurance from Blue Cross. In August, Cox won a reduction on the Blues interim Medigap rate increase request, saving at least $30 million. And in December, Cox won an $86 million savings on Blue Cross' long-term Medigap rate increase request, reducing it from 36.7% to only 3.8%. Those victories were based in part on Cox's argument that Blue Cross was failing to subsidize Medigap insurance at the rate prescribed by state law.

In January, Cox also proposed to the Michigan legislature a set of ten reforms to protect consumers against unreasonable rate increases, expand access to care and keep Blue Cross as a stable insurer of last resort.

Protecting Kids Online: Stings Take Internet Child Predators Offline; Legislation to Ban Sex Offenders from Facebook, MySpace

Attorney General Cox and his Child and Public Protection Unit have arrested 252 Internet sex predators since 2003, including nine in a single August 2009 undercover sting in conjunction with local police in Livingston County. In each case, defendants approached who they thought was a boy or girl online and asked for sex. Among the predators arrested this year were a karate instructor, a pizza delivery driver, an ambulance worker and a man who took a bus from Columbus, Ohio to get to the undercover sting home in Howell, Michigan.

Also in August, Cox announced Internet child protection legislation that would ban convicted Internet child sex predators from social networking websites like MySpace and Facebook, require Internet child sex offenders to appear on the state sex offender registry and mandate lengthier sentences for possession and distribution of child pornography. Cox was joined by representatives of the Michigan Sheriffs' Association, the Prosecuting Attorneys Association of Michigan, the Fraternal Order of Police and the Michigan Association of Chiefs of Police, along with bill sponsors: Senators Bruce Patterson, Alan Cropsey and Wayne Kuipers; Representatives Joe Haveman, Tonya Schuitmaker and Matt Lori.

"Make no mistake, child predators are online and looking for their next victim," said Cox. "As technology evolves, Michigan must use innovative methods to protect our children."

Transparency and Ethics Plans to Make Michigan More Attractive to Investment

Joined by well-known reformer Jim Fouts, the mayor of Warren, Attorney General Cox unveiled a new website in October that offers local governments comprehensive model resources for implementing local government ethics policies for their employees. Once implemented, the model plans can help municipalities across Michigan better attract families and job makers by setting new standards for transparency and ethical behavior in local government. The resources are available at www.michigan.gov/ethics.

In August, Cox proposed legislation that would require personal financial disclosure by the governor, lieutenant governor, secretary of state, attorney general, directors of state departments, legislators, local officials earning more than $65,000 per year and candidates for those offices (HB 5317, Rep. Paul Opsommer). Michigan is currently ranked dead-last by the Center for Public Integrity for its public official disclosure laws, which would help avoid conflicts of interest by government officials. The legislative package also included a statutory requirement that legislators publically declare when they face a conflict of interest on a vote and abstain from that vote (SB 801, Sen. Patterson).

Cox is the only statewide official to post his personal finances online for review by Michigan citizens. They can be found at www.michigan.gov/trackyourtaxes.

In February, Cox and House Republican legislators joined together to announce new transparency legislation requiring the State of Michigan to place all its spending in an easy to use online database. This information would allow citizens and even legislators to see exactly how state tax dollars are being spent, helping to more easily uncover fraud, waste and abuse. Cox was joined by bill sponsors Rep. Tom McMillin, Rep. Kim Meltzer, and Rep. Paul Opsommer. At least 16 other states now have transparency websites in place.

Cox was the first state official to place his departmental spending online for anyone to review. It is also located at www.michigan.gov/trackyourtaxes.

"Now more than ever, our government officials must send a clear message to job makers that they'll get a fair shake here in Michigan," said Cox.

Fighting Foreclosure Fraud and Winning Refunds for Consumers

Attorney General Cox has made prosecuting mortgage and real-estate fraud a priority. Cox created a mortgage fraud unit and teamed up with the Michigan State Police and other law enforcement agencies to tackle the problem, charging nearly two-dozen people or companies with mortgage fraud-related offenses in 2009. The two primary types of offenses include individuals fraudulently obtaining mortgages and so-called "foreclosure assistance" companies that charges fees before ever delivering any help to a homeowner facing foreclosure. Many victims of these companies are eligible for a refund of their fees.

Cox's office also conducted mortgage foreclosure forums in Detroit, Grand Rapids and Saginaw to help families stay in their homes during these difficult times by putting thousands of homeowners in face-to-face meetings with mortgage lenders.

Billions in Savings for Utility Customers

Attorney General Cox this year continued the office's traditional role in protecting utility customers from large rate increases. Most notable was a victory in the Michigan Supreme Court that resolved a five-year rate hike battle with utility giant Detroit Edison, saving Michigan families $2.5 billion. Since taking office, Cox has prevented more than $4.5 billion in potential rate increases.

Helping Seniors and Caretakers with SeniorBrigade.com

Attorney General Cox this year launched SeniorBrigade.com, a new one-stop website providing a wide range of helpful information for seniors, their family members and caregivers. The site provides information on selecting a nursing home, avoiding scams targeted at seniors, financial matters, veterans affairs and a senior events calendar. Presenters also travel to senior centers to educate seniors and their caretakers on important topics, such as avoiding telemarketing scammers who target seniors' retirement savings.

Pharmaceutical Settlement Nets Michigan $26.4 million

Cox was able to bring back more than $26 million to Michigan though a nationwide settlement with Eli Lilly and Company that resulted from its improper marketing and payment incentives for the use of the anti-psychotic drug Zyprexa. The national settlement includes $800 million in damages and penalties to compensate state Medicaid and federal healthcare programs and a $615 million federal criminal penalty.

Cox Files Charges in Ponzi Scheme Targeting African-American Churches

The Attorney General's office helped crack a nation-wide Ponzi scheme, resulting in the arrest of two men who were charged with defrauding twenty-one African-American churches in Detroit, Flint, Saginaw, Inkster, Ferndale, Highland Park, Port Huron and Ypsilanti of approximately $660,000.

Another $15 Million Collected for Child Support

Since its inception in 2003, the Attorney General's Child Support Division has collected more than $80 million. This has directly benefited more than 7,000 children. In FY 2009, the Child Support Division collected another $15 million. Of that amount, $1.5 million was returned to the State of Michigan, reflecting reimbursement for public assistance that the State has paid to families in need who had not been receiving child support payments. The monies returned to the State of Michigan more than pay for the Child Support Division's operations. The Child Support Division will collect more than five dollars in child support for every general fund dollar it spends this year.

Protecting Michigan Pensions and Investments

Attorney General Cox has been pursuing securities fraud cases in an attempt to recoup millions in losses to the State's pension funds.

• HealthSouth/Ernst and Young

In June 2009, Cox announced a $109 million national settlement with Ernst & Young after it failed to expose massive fraud taking place while serving as HealthSouth Corporation's auditing firm. The settlement is one of the largest ever obtained against an outside auditor in a class-action securities fraud case. HealthSouth admitted to overstating its income by more than $2.8 billion, wiping out every dollar of profit it ever reported as a public company. It is alleged that the State of Michigan Retirement Systems lost an estimated $33 million as a result of actions by Ernst & Young and HealthSouth.

• Tyco

In May 2009, Cox announced a $24.5 million settlement for Michigan pension funds with Tyco International, Tyco Electronics and related firms stemming from securities fraud charges. The settlement negotiated by Cox is approximately 15 times more than what the state would have received if a separate legal action had not been filed by the State of Michigan.

• Bear Stearns

In January 2009, Michigan was appointed lead plaintiff by the court in this case. Michigan alleges in that the Bear Stearns Companies, as well as five current and former executives and directors, issued false and misleading statements and failed to inform investors of problems that resulted in a $62 million loss from Michigan pension funds.

• American International Group (AIG)

In March 2009, Cox announced that the State of Michigan was named the lead plaintiff in a national class-action suit against American International Group (AIG), which allegedly violated federal securities law by misleading investors about the value of sub-prime related securities, costing Michigan pension funds and other investors billions of dollars.

Asian Carp: Fighting to Save Jobs and Protect our Environment

In December, Attorney General Cox went to the U.S. Supreme Court to force the State of Illinois, the U.S. Army Corps of Engineers, and the Metropolitan Water Reclamation District of Greater Chicago to close Illinois waterways flowing into Lake Michigan that contain the invasive species known as Asian carp. The carp are the biggest threat yet to the Great Lakes' $7 billion fishing industry, over 800,000 Michigan jobs connected with the Lakes, Michigan's tourism industry and a way of life for Michigan residents. In every other place Asian carp have appeared, native fish populations have been devastated, leading to economic and environmental losses. The suit also calls for an immediate and intensive study to determine exactly where Asian carp exist in the Chicago-area waterways and a long-term plan for permanently separating the Great Lakes from the Mississippi River basin.

Stopping Medicaid Fraud and Savings Taxpayers Millions

In July, Cox announced legislation to create a state Medicaid Inspector General, which would refocus efforts to stop fraud in our $10 billion Medicaid budget. Medicaid now accounts for a massive 22% of the state General Fund, and has grown by 88% since 1999. With national estimates of fraud around 10%, Michigan could stand to recover millions in fraud by implementing this idea, which other states like New York and Texas have used to uncover fraud. The key point of the plan is to give the fraud inspector independence from the agency that is being audited, in this case, the Department of Community Health. Cox was joined by bill sponsors Rep. Bob Genetski and Sen. Roger Kahn.

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