State’s Political Watchdog to Probe Health District Conflicts

The Bay Citizen, by Jennifer Gollan –

August 22, 2012: The state’s political watchdog agency has launched investigations into whether officials in two publicly funded health care districts in the Bay Area and Southern California were involved in decisions that benefited them financially.

The investigations by the California Fair Political Practices Commission, made public this week, will focus on whether three current and former board members violated the state’s conflict-of-interest laws.

The probes follow an investigation last month by The Bay Citizen and California Watch, which uncovered millions of dollars in questionable transactions involving companies and nonprofits with ties to top district officials. California’s 74 taxpayer-funded health care districts control multimillion-dollar budgets with little state oversight. Some operate nursing homes and hospitals. Others manage real estate and distribute community health grants.

Among those under investigation are Gerald Shefren and Arthur Faro, board members of the Sequoia Healthcare District in Redwood City, and Frank Burgess, a former board member of the San Gorgonio Memorial Healthcare District in Riverside County.

The Bay Citizen and California Watch reported that Shefren had voted to approve a grant for a nonprofit where his wife worked and that Faro held stock in two banks with district ties. In another example, meeting minutes indicate that Burgess attempted to influence members of the San Gorgonio Memorial Hospital board before it voted to hire a company that replaced Burgess North American, a moving and storage company co-owned by him and his son.

Burgess denied any wrongdoing.

“There wasn’t any conflict or dishonesty or anything,” he said yesterday. “If handing out a pamphlet that shows the pros and cons of my company, and that’s a conflict of interest, then I did it.”

Asked about the Fair Political Practices Commission’s letter last week notifying him that he was under investigation, Shefren said: “I haven’t received that letter, so I can’t comment on it.”

Messages left at Faro’s home were not immediately returned.
The Fair Political Practices Commission also is reviewing documents to determine whether to open cases against Michael Wallace, president of the Washington Township Health Care District board in Alameda County, and Nancy Farber, CEO of the Washington Hospital Healthcare System in Fremont, said Gary Winuk, chief of the commission’s enforcement division.

Winuk declined to comment further, citing the commission’s confidentiality rules surrounding pending investigations.

Wallace is chairman of the board of Fremont Bank, which received more than $1.2 million in fees over the last decade from the Washington district, where he has served on the board since 1990.

Michael Short/The Bay Citizen

Nancy Farber, CEO of the Washington Hospital Healthcare System, attends a district board meeting in Fremont in May. The district approved payments of $350,000 to a nonprofit now run by Farber’s husband.

In addition, the Washington Township Health Care District board approved two grants worth $350,000 for a nonprofit where Farber’s husband served in an unpaid board position before later becoming its CEO, earning $208,000 a year.

Neither Wallace nor Farber returned calls requesting comment.

Conflict-of-interest violations can result in punishments ranging from a warning letter to fines of up to $5,000 per violation or up to three times the amount that an individual reaped by engaging in a conflict, depending on how prosecutors decide to try the case and the severity of the violations.
The Fair Political Practices Commission aims to resolve cases within 18 months, though that varies depending on the complexity of the case. While most cases are settled, some go to trial before an administrative law judge. More egregious violations may be tried in a superior court.

In general, the California Political Reform Act prohibits public officials from participating in a decision in which they have a financial interest, including ventures affecting a spouse’s income.

Source: John & Rusty Report via Choice Admin