San Diego public hospital administrator paid over $1 million per year

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A hospital administrator in San Diego County turned up on California State Controller John Chiang’s salary database in no. 2 position, just shy of Robert Rizzo – the former City of Bell administrator accused of looting the blue-collar suburb of Los Angeles.

Michael Covert, CEO of Palomar Pomerado Health, a two-hospital public district, was paid $1.15 million in 2009. The information was only disclosed this week after The San Diego Union-Tribune questioned the hospital why its information was not reported last month with other public health care districts. Hospital representatives claimed that it has technical difficulties uploading the salary data to state computers.

Covert declined to discuss his salary with the Union-Tribune, although a hospital official, Theldore Kleiter, said “We have to compete for talent with all of the for-profit and nonprofit health systems. If you want the top management, that’s what you have to pay.”

Others were not as convinced that the million-dollar salary was justified. “Is this really rocket science?” asked Kris Vosbergh of the Howard Jarvis Taxpayers Association. “We’re talking about paying an administrator more than we pay a doctor, who makes life and death decisions.”

“Essentially, this is a bureaucrat.”

The state salary database project was begun last year to provide the public with accurate information regarding salaries earned by public servants.

“What we found in the absence of transparency is a breeding ground for waste, fraud and abuse,” state spokesman Garin Casaleggio said of the data in general, not any particular person. “This provides the public with a snapshot of what public compensation includes and allows them to weigh the figures along with the public benefit.”

Public hospital employees dominate the top end of the salary database.  Eight of the top twenty public positions are held by hospital administrators and four of the top twenty are physicians.

Other highly paid officials listed in the database include Washington Hospital CEO (Freemont, CA) at $905,084; the Orange County chief counsel at $692,768; the Upper San Gabriel Valley water agency manager at $646,902 and the Downey (pop. 107,000) Police Chief at $623,664.

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CALPERS lawyer delivers report on Board bribery and corruption

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A lawyer hired to investigate bribes and kickbacks at one of the nation’s largest pension funds, the California Public Employees’ Retirement System, said on Monday its former board member Alfred Villalobos, corrupted top officials there and likely cost the fund tens of millions of dollars in extra investment fees.

Independent attorney Philip Khinda reported that Villalobos, a so-called “placement agent,” corrupted five senior CALPERS officials including former CEO Fred Buenrostro, former board members Charles Valdes, Kurato Shimada and Robert Carlson, and former investment officer Leon Shahinian.

Both Villalobos and Buenrostro have been sued by the state’s attorney general and federal prosecutors are conducting their own investigation.

Authorities claim that a handful of investment firms paid Villalobos and his cronies over $50 million in secret fees to help make introductions and convince CALPERS executives to do business with them. Buenrostro attempted to shield Villalobos from legal liability by signing papers saying that CALPERS was aware of the fees that Villalobos was collecting.

In his 56-page report, Khinda said that Villalobos created a perception that investment firms needed to pay for connections to secure business for their firms.  The firms likely inflated their fees they charged CALPERS in order to offset the secret fees paid to Villalobos.

Since the scandal was discovered, Khinda has renegotiated deals with the investment firms that were clients of Villalobos and obtained over $300 million in fee discounts.

In a matter unrelated to the investment firms, Khinda’s report provides details about a $4 million consulting paid to Villalobos by Medco Health Solutions, a New Jersey company that handles the CALPERS employees’ drug benefit plan.

In 2005, when the drug administration contract came up for bidding, a copy of an internal CALPERS report was leaked to Medco that showed that the company was the leading contender for the contract. The contract was worth $8 million annually.

After Medco was awarded the contract, the company began paying Villalobos an additional $20,000 per month in consulting fees until 2009, when the scandal was first reported.

CALPERS has since enacted new rules and reform procedures including a prohibition on the payment of “placement” fees by investment firms.

The Sacramento Bee

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California mayor indicted on bribery and extortion charges

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The former mayor of Upland, California, a community of 76,000 just east of downtown Los Angeles, was indicted on Wednesday by a Riverside County grand jury on bribery and extortion charges, alleging he demanded money from locals businesses seeking city approvals and permits.

John Pomierski, 56, who resigned from office last week, was accused of demanding $70,000 from a nightclub owner and $20,000 from a medical marijuana cooperative in 2007, in exchange for his help in getting permits and other services for the businesses.


Pomierski was charged in an 11-count indictment, which alleges he “would demand money from the owners of businesses located in the city of Upland in exchange for the performance of official acts in connection with Upland city government business and transactions.”

Also charged in the indictment was a business associate of the former mayor, Edward Hennes, who allegedly acted as an intermediary between Pomierski and businesses looking for favorable municipal treatment. Hennes, 54, is a member of the city’s building appeals board and owner of a local construction firm.

Two other men- Jason Crebs and Anthony Sanchez- acted as middlemen in the extortion operation, communicating demands to businesses and collecting payments. Crebs and Sanchez have reportedly reached plea agreements with prosecutors.

The court documents claim Hennes and others entered into consulting agreements and contracts with businesses to “disguise and conceal” the true nature of the illegal payments. Pomierski’s company, JP Construction Co., received at least $90,000 from Hennes’ company since 2000, the year Pomierski was elected mayor.

Aaron  Sandusky, the owner of the marijuana cooperative, cooperated with the FBI in its investigation of Pomierski and Hennes.

Sandusky said that one of Pomierski’s representatives demanded $20,000 to stop an effort by the city to shut down the cooperative. He said he paid $10,000 to Hennes.

“It’s hard enough to run a business, let along this kind of business,” Sandusky said. “When this happens, where do I go? The police? The FBI? I’m in the medical marijuana business. I’m an easy target.”

If convicted, Pomierski faces a maximum of 145 years behind bars and Hennes faces 50 years.

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Anthem Blue Cross: more big rate hikes on the way

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Just a year after notifying individual policyholders of rate increases of up to 39 percent, Anthem Blue Cross of California has notified individuals that more hikes are on the way, effective May 1.

According to the San Francisco Chronicle, Alison Heath and her husband will be charged 26 percent more than currently charged, which was already raised 16 percent last year. Heath says their annual premium is expected to be about $17,700.

“I almost feel like I’m a victim of a crime,” said Heath, 55, who doubts she could find alternative coverage because of minor pre-existing conditions. “It’s like I have a gun to my head. I have to pay because I’m not willing to live without insurance.”

Last year, the company made national headlines when it told individual policyholders that it was raising rates as much as 39 percent for certain of its 700,000 customers.  After the state’s Department of Insurance asked Anthem to justify the rate increase, the company discovered errors in its calculations and reduced its planned increases.

While the rate increases are alarming to its policyholders, they certainly are not unique among insurers. Recently, Blue Shield of California notified its customers that it planned to increase rates on individual policies by up to 59 percent. Aetna has also notified many of its customers to expect large rate hikes.

Anthem and others claim that the companies lose money on individual policies and that the rate increases were reviewed by actuaries and comply with law. Some customers believe that the companies are trying to raise premiums as much as possible before 2014, when the new health care law kicks in, potentially limiting future increases.

The Department of Insurance recently requested that four insurers, including Anthem and Blue Shield, delay rate increases for a period of 60 days, so that officials had an opportunity to review their proposals. Officials at the department also suggested that another state agency, the Department of Managed Care, had jurisdiction over the individual policies.

When contacted by the Chronicle, officials at that agency said that their authority was limited to simply reviewing proposals, with no authority to approve or deny rate increases.

San Francisco Chronicle

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L.A. charter school group gets hall pass after cheating scandal

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A group of charter schools in Los Angeles is about to have its license renewed, despite findings by the Los Angeles Board of Education that it promoted cheating on the standardized state exam by which schools’ performance is measured.

A positive staff recommendation was issued for the Crescendo charter schools, a group of six schools south of downtown L.A., which was found to have shown students the questions and answers of the actual state test prior to taking it. The school’s founder and chief executive, John Allen, is said to have authorized and orchestrated the scandal.

The Los Angeles Times reported that the school’s gains on test results were 10 times what other schools would be considered strong results.

Allen ordered principals at the schools to break the seals on the tests and allow students to practice with the actual test questions. Principals at all six schools complied with the order, although during the subsequent investigation, some of the principals claimed they asked Allen if it was OK to do so.

Several teachers contacted the district school board to report the breach, while also expressing concern of retaliation from Crescendo executives.

When confronted by the district about his actions, Allen denied any wrongdoing, and when later questioned by the school’s board of directors, he initially denied it as well.

“I understand the pressure regarding test results,” said Joan Herman, director of the National Center for Research on Evaluation, Standards & Student Testing at UCLA. “But to advise your entire enterprise to cheat, that would be a serious, serious ethical breach.”

Allen received a six-month unpaid suspension and was demoted to director of facilities for the schools. The principals were each suspended for 10 days.

The L.A. Unified School District threatened to revoke the schools’ charters immediately, but backed down when the group’s board promised to undertake a series of measures including staff reorganization and ethics training, and additional review of board governance, conflicts of interest and the public records and open meetings act.

Los Angeles Times

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Oakland officials bracing for pension plan funding disaster

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In 1997, then-city officials in Oakland, California had a great idea that would take them off the hook for 15 years of pension contributions for some of its public-employee pension plans. City leaders issued a 15-year bond at a low interest rate, and invested the proceeds to potentially earn a higher rate, using the earnings to pay annual fund contributions.

Now sources say, the investments were poorly managed, and only earned an average of 4 percent annually, instead of the 8 percent that officials expected. Instead of helping its finances, the city owes $46 million that comes due on July 1.

An actuarial study commissioned by City Auditor Courtney Ruby determined that the city lost more than $250 million by issuing the bonds rather than paying the contributions as they became due.

To make matters worse, in addition to the pension bond disaster, the city is also facing a $40 million deficit on its $400 million general fund budget.

While some officials, including Councilman and finance chair Ignacio De La Fuente and City Attorney John Russo, want to rein in spending to make ends meet, others in City Hall prefer to simply issue another bond, and push the problem off for another five years.

According to the San Francisco Chronicle:

Issuing a new pension bond with another five-year holiday could have severe consequences for the future, according to Ruby.

Even if the city gets a 7 percent return on pension fund investments during a five-year holiday, the city would have to pay out $42 million to $28 million a year from the General Fund between 2017 and 2023, according to Ruby’s report. In the last years of paying back the pension bond’s obligations from 2024 to 2026 – half a century after the last eligible employee would have been hired – the city would have to pay more than $150 million per year from the General Fund.

The bonds are tied to a specific city pension plan for police and firefighters with unusually generous provisions – even by today’s standards. It provides that a retiree’s benefits are not tied to their salary when they retired, but to a salary as if they were retiring today.

For example, a police captain who retired in 1975 would receive 68 percent of the pay of a currently employed police captain in 2011- holiday pay and shift adjustments included. Currently, 1125 retirees and beneficiaries are participants in the plan.

Mayor Jean Quan is said to be favoring a plan that would have the city pay only $5 million per year into the plan for the next five years, and then increase payments when its finances are in better shape. However, Russo thinks the figure should be $20 million per year.

“People say, we should be paying this when times are better, but the problem is that when times are better, nobody pays this down,” he said. “If they roll this over again, there is no scenario I can see where they’ll be able to pay this back in 2024.”

San Francisco Chronicle

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Sacramento high school offers advanced classes with no teachers

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Rosemont High School in Sacramento, California offers advanced Japanese classes as part of its curriculum – the only problem is that they don’t have any instructors qualified to teach the class. Students are left to study on their own, watch movies in Japanese and take notes.

The school’s Japanese teacher left for maternity leave in August last year, and the substitute hired to replace her quit in November. A substitute assigned to the classes in December does not speak any Japanese, so instead is focusing on culture and history of the country.

For now, the district has hired an outside firm to take over the level 1 and 2 classes.

Even though it did not have anyone lined up to teach the advanced level 3 and 4 classes, it offered them anyways. So until April when the regular teacher returns, students will have to sit around, watching films and wondering why they are even in the class.

The Sacramento Bee

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