JIM FUGLIE: View From The Prairie — A Really Stupid Story

I intended to start this story with the words “This is a story about some Really Stupid People.” I thought that was a bit harsh, so I changed it to “This is a story about People who did some Really Stupid Things.” I decided that was pretty lame. So I’ve come up with a new start.

“This is a Really Stupid Story.”

It’s kind of a long one, too. Hang in there.

It starts back in 2012, when perennial political candidate ― although he’s missing in action this year, for reasons I’ll talk about later ― Duane Sand ― my favorite political punching bag ― hired some campaign staff and put them to work on his primary election challenge to Rick Berg for North Dakota’s U.S. Senate seat, the one Berg lost to now-U. S. Sen. Heidi Heitkamp.

I’m not sure what the staff did because Duane really didn’t mount much of a campaign. You can read about that in some earlier posts, here, and here and here. The primary was held June 12. When the staff woke up June 13, they were out of work.

Duane’s campaign manager, Joe Meyer, described variously as a “doofus” and “in over his head,” headed back home to Minnesota, where he promptly filed for unemployment insurance.

Well, Job Service in Minnesota contacted Job Service in North Dakota to verify that Joe was eligible for unemployment payments. There had been four people on the campaign staff, but only Meyer applied for unemployment benefits.

Job Service apparently did a little checking, found out about the four workers, and discovered that the campaign had not paid into the unemployment insurance fund. Job Service made a “determination,” based on the wages paid, that the Sand campaign owed the state for those unpaid unemployment insurance premiums. It sent an “unemployment tax due notice” for all four workers to the campaign.

The Sand campaign protested. Meyer, the campaign said, along with two others, had been hired as independent contractors, and the fourth person, a bookkeeper, had volunteered her services as a contribution to the campaign and received no pay. As an independent contractor, Meyer should not have applied for ― and should not have received ― unemployment benefits, it argued. But his application had sent up a red flag at Job Service North Dakota.

The campaign filed a formal appeal of the determination made by Job Service, saying that the paychecks to the three employees had been recorded on IRS Form 1099, the form normally used to report payments to independent contractors, instead of the normal W-2 forms used to record payments to employees. I talked to one of the employees the other night, and he confirmed that they all believed they had been hired as independent contractors.

Job Service North Dakota disagreed. They could have held an internal agency hearing to try to resolve it, but of all things, it turns out Duane Sand’s wife worked for Job Service at the time and according to the Job Service supervisor I talked to, Job Service felt it might pose a conflict of interest, so they sent the Sand campaign’s appeal to the North Dakota Office of Administrative Hearings.

The hearing officer, an administrative law judge, gave a split decision. He determined Meyer and one other staff member (the one I talked to) were independent contractors and not employees, which made them ineligible for unemployment benefits. Job Service did not appeal that decision. But the judge ruled that, for some unexplained reason, the third campaign worker, Sarah Mohler, WAS an employee, not an independent contractor. That made Duane’s campaign responsible for doing what every other business in North Dakota has to do — contribute to unemployment insurance for Mohler.

Duane’s campaign would need to pay some back taxes — probably a few hundred dollars — to Job Service, money it should have paid during the campaign.

Well, Sand, being Sand, wasn’t having any of that. He got a lawyer, named Deborah Carpenter, and they went to court, challenging the ruling that Mohler was an employee, not an independent contractor. The North Dakota District Court upheld the decision of the hearing judge. Still not satisfied, Sand appealed to the North Dakota Supreme Court, and in February of this year, almost four years after his campaign ended in the June 2012 Primary Election, the Supreme Court dismissed the appeal, on somewhat of a technicality — something about timing of the appeal and missed deadlines, which I don’t completely understand. The court didn’t rule on the merits of the case itself.

The result was the District Court’s ruling stands — the Sand campaign was employing Mohler, which means it would have had to pay into the unemployment insurance fund, even though Mohler never tried to collect unemployment payments.

I talked to Carpenter this week, and she said the campaign has never received a bill from Job Service. Which has me scratching my head — what the hell is this all about then? So I called Job Service back and asked them if that is the case. The supervisor there said he would check, but confidentiality rules may prevent him from telling me.

If you really want to know more about this, or try to make more sense of it than I could, you can click here or here for legal documents.

I called Sand a couple weeks ago and caught him on his cell phone while he was out in the oil patch loading a truck (since he left politics, he’s started an oilfield service company).

He was busy and didn’t have much time to talk, but I asked him what happens now, and he wasn’t sure. I asked him if it was over, and he said, “It’s not over until I say it is.” His lawyer said much the same thing — there could be more legal action in the future. Meanwhile, if the campaign gets a bill from Job Service, maybe he’ll pay, maybe he won’t.

But here’s the bottom line:

The amount of money involved here is likely less than $500.  The Job Service supervisor couldn’t tell me the exact amount, both because he didn’t know offhand and because that kind of information is confidential.

Sand could have just given in — agreeing he had one employee during his campaign for whom he should have paid unemployment insurance taxes — at every level: after the determination by Job Service, after the administrative hearing, or after the District Court ruling — but that’s not Sand’s nature. He believed he was right, and when Sand believes he is right, he doesn’t give up. So he went all the way to the Supreme Court.

Because he fought in court ― and lost ― he probably now stands liable for some pretty steep legal fees. According to his FEC reports, the campaign has already paid Carpenter $15,000 (most of it from money he personally loaned to the campaign in 2014), and he has a bill on his desk for $5,000 more (it’s amazing what you can find in those federal reports — you can look at them here if you want to).

I asked Carpenter if there were more fees not yet billed and she was evasive. One of the campaign workers I talked to ― not  Mohler ― told me the fees could go as high as $50,000. She said she didn’t think so. The $5,000 she hasn’t collected yet shows up on Sand’s latest FEC report as a campaign debt. More about that later.

Moreover, the state spent a lot of money pursuing a claim amounting to only a few hundred dollars. The Job Service fellow said lawyer costs were easily five figures — more than $10,000. I’m guessing it was more — way more.

I could file a FOIA request and get the amount they paid the Attorney General’s office, but the folks at Job Service have better things to do than add up lawyer’s bills. They’ve got unemployed people to take care of.

The campaign worker I talked to described the whole thing as a “witch hunt.” Sand has been a thorn in the side of the North Dakota Republican Party over the years, and this might have been “retribution” for that.

Because Sand’s wife was working for Job Service at the time, and because Job Service believed that might pose a conflict of interest, the case was quickly moved out of Job Service and into the Attorney General’s office.

A young attorney there named Mike Pitcher handled the case. He’s certainly above politics and was just doing his job, but we’ll probably never know if there was political motivation at higher pay grades than his. Job Service had to pay the bill for his time.

But the fellow at Job Service said it was the Sand campaign that dragged the case out. Once the appeal process started, Job Service had no choice but to pursue the state’s claim that the campaign was liable for unemployment insurance ― for Mohler. When the judge ruled the other two were independent contractors, the state did not appeal, although they could have.

The case has some ramifications for all North Dakota political campaigns: they better be paying unemployment insurance, or else have a good lawyer make sure that the employees really are independent contractors as defined by law and don’t go filing unemployment claims once the campaign is over.

The Job Service supervisor said he thinks it is standard practice for campaigns to set up accounts with Job Service as soon as they hire employees. He’s seen many of them over the years, and he believes that most campaigns do it. He said he’d have no way of knowing about those who don’t do it, unless, like in the case of the Sand campaign, someone files a claim. But they don’t go out checking the campaigns looking for violators.

Oh, by the way, Sand and his attorney argued in District Court that most campaigns don’t collect unemployment taxes, but the assistant attorney general pointed out Sand himself had collected them in two previous campaigns, in 2004 and 2008.

Well, it’s now the 2016 campaign season, and most candidates have access to legal advice from lawyer friends, so I hope all the 2016 candidates have their ducks in a row. (I can see a few campaign managers scrambling to talk to their bosses and checking with lawyers right about now.)

So who’s really at fault here? It’s a puzzle.

At the onset, Job Service found someone they called an “employer” who had not paid unemployment insurance taxes. It pursued that, and some legal definition found one of the Sand campaign staff qualified as an “employee” and not an independent contractor. The Sand campaign disagreed, even after an administrative law judge ruled against them. And it was the Sand campaign that filed the lawsuit and the appeal, not the state.

Unfortunately, Job Service has now spent tens of thousands of taxpayer dollars defending against the lawsuits in court, over what might end up being a few hundred dollars.

But I guess that’s what courts are for. And I guess that’s how lawyers make their living. Meanwhile, as I mentioned earlier, there’s probably a good reason Sand is not running for something this year, as he did in 2004, 2008 and 2012. There’s the matter of his campaign debt remaining from the 2012 campaign — still at about $60,000, including the $5,000 to Carpenter.

Sand owes money to a lot of people, all in amounts of $5,000 or less, from 2012. I’ve been studying that because Sand is an interesting character. His legal and financial shenanigans are something to behold. I’ve just told you about some of the legal ones. See, I told you this was a Stupid Story.

Ahead, In The Days And Weeks To Come

There’s more news about Sand. Coming up, when I get time to write:

  • He has substantially reduced his campaign debt, which stood at $145,000 at the end of 2014. We’ll look at how that happened.
  • He has been found in violation of FEC rules by the FEC a number of times for taking contributions in excess of what federal law allows. How he resolved those violations is very interesting. And maybe even legal. Or maybe not.
  • He has a counterpart in South Dakota who seems to be just as gullible — or unscrupulous — as he is.

They’re all related. I’ll try to walk you through them.

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