Calderon Scandal Could Involve Biggest Insurance Scam in State History

File photo of Sen. Ron Calderon. (Manny Crisostomo/Sacramento Bee/MCT via Getty Images)
File photo of Sen. Ron Calderon. (Manny Crisostomo/Sacramento Bee/MCT via Getty Images)

California Democrats have lost their super-majority, as state Sen. Ron Calderon, indicted on federal corruption charges, announced yesterday he was taking a voluntary leave of absence from the Legislature.

“This is not a resignation since I still have my day in court,” he said. “However, due to the nature and complexity of the charges, and the discovery materials that I will have to review, I expect this to be a lengthy period of absence continuing until the end of the session in August.”

Calderon will still be paid during the time off.

Prosecutors have accused Calderon of taking nearly $100,000 in bribes from Michael Drobot, the former owner of Pacific Hospital in Long Beach, to keep a law on the books that allowed the hospital to overbill for $500 million in spinal surgeries, passing the cost on to workers’ compensation insurers. The California Department of Insurance has called the case the largest insurance fraud in state history.

Calderon also faces money-laundering and other corruption charges.

Drobot has agreed to plead guilty and cooperate with the investigation into Calderon and his brother, Tom Calderon, a former assemblyman, accused of money laundering and conspiracy related to the same investigation. Both Calderons have pleaded not guilty.

Calderon’s leave deprives Democrats of the 27th vote that Democratic state senators need to pass legislation without any Republican help. Another Democratic senator, Roderick Wright, took a leave of absence last week after being found  guilty of of perjury and voter fraud.

For more on how Calderon’s leave of absence have shifted the senate’s political odds, KQED’s Mina Kim spoke with John Myers, political editor at KXTV News-10 Sacramento.

“The California Report’s” Rachael Myrow spoke to reporter Scott Glover of the L.A. Times this morning about the magnitude of the scheme that Calderon is alleged to have enabled.

Edited transcript: Rachael Myrow: Federal prosecutors contend Drobot submitted more than $500 million worth of fraudulent workers’ compensation claims over five years as part of this surgery scheme. Is it possible that the scheme could have continued if Drobot hadn’t sought the assistance of a state senator?

Scott Glover: The allegation is that while it was continuing, Drobot was influencing Calderon to make sure that the favorable law remained on the books. Without that law in place, it’s very unlikely they would be able to do what they were allegedly doing.

RM: We hear about workers’ comp fraud all the time. What made this alleged scheme different?

SG: For one thing, the amount of money involved. It’s a half-billion dollars. It was a long-running scheme, it was just massive. An official from the state insurance department described it as the largest in the department’s history.

RM: Drobot is also the subject of at least two other civil lawsuits, including one filed by the state insurance commission fund.

SG: Correct. I think various insurers are going to be looking to recoup some of the money that they spent over the years feeding into this $500 million worth of billing.

RM: The scale is unprecedented: the number of doctors  and chiropractors involved. Can we expect to see a lot of fallout related to the investigation of all the different people involved?

SG: I think there’s potential for a lot of fallout. It allegedly involved doctors and chiropractors who were being paid illegal kickbacks in order to send patients to the hospital. That part of the investigation is ongoing, and authorities are reluctant to talk about it and gave few details at the press conference last week. Just how widespread it is remains to be seen.

Here’s AP’s story on the latest Calderon development.

SACRAMENTO, Calif. (AP) — California state Sen. Ron Calderon, facing federal corruption charges alleging he took kickbacks while in office, said Sunday evening he has taken an indefinite leave of absence from the Legislature while he awaits trial.

The departure of Calderon deprives Senate Democrats of the two-thirds margin they need in the 40-member chamber to raise taxes, pass emergency legislation, override gubernatorial vetoes and put constitutional amendments before voters without Republican cooperation.

Calderon said in a statement that he wasn’t resigning but will take time to focus on fighting the charges against him.

“I do not want to distract from the important work of the Senate and my colleagues on serious issues affecting my constituents and the people of California,” he said.

He said that because of the complexity of the charges, he expects a lengthy leave stretching until the end of the legislative session in August.

Calderon sent Senate President Pro tem Darrell Steinberg the request for leave Sunday evening.

“I have accepted his request,” Steinberg said in a two-sentence statement.

Calderon was arraigned last Monday on charges that he accepted bribes totaling $100,000 in cash and trips, funneling some of the money to his children.

He pleaded not guilty, but his fellow Democrats had given him until this coming Monday to resign, take leave or face being suspended.

By taking leave, Calderon will continue receiving his $95,291 annual salary but not the $163 daily expense payment he would get if he were traveling to Sacramento.

Calderon, of Montebello, is the second Senate Democrat this week to take leave while he fights criminal charges.

Sen. Roderick Wright, a Democrat who represents another Los Angeles-area district, requested the leave after he was convicted of perjury and voter fraud for lying about his legal residence. Wright is seeking to have his conviction overturned before he faces sentencing in May.

Steinberg, D-Sacramento, had said senators would suspend, but not expel, Calderon because he has not been convicted of a crime. But he and other Democrats called for Calderon to step down because he is charged with activities that Steinberg said “strike at the very heart of what it means to be a public official.”

Calderon, 56, is charged with accepting bribes from an undercover FBI agent who pretended to own a Los Angeles movie studio and wanted to expand tax credits for the film industry. He also is charged with accepting bribes from the former owner of Pacific Hospital of Long Beach to back legislation involving state workers’ compensation laws.

Calderon was elected to the state Senate in 2006 and represents Montebello, Bell Gardens and other southeastern Los Angeles suburbs. Wright, 61, served in the Assembly from 1996 to 2002, and has been in the Senate since 2008. He currently represents areas including Carson, Compton, Gardena, Lawndale, Hawthorne and Inglewood, though redistricting has changed the boundaries since he was accused of misrepresenting his legal residence.

The Calderon indictments threaten a powerful Democratic political family. His brother, former Assemblyman Tom Calderon, pleaded not guilty last week to eight counts of money laundering and conspiracy resulting from the same federal investigation.

With both senators gone, a spokesman for Steinberg said their staffs will remain to help deal with issues raised by their constituents, while other senators will carry on with any pending legislation they had introduced.

Calderon is termed out of office after this year, but Wright is in the middle of a term that expires in 2016. Steinberg said he expects Wright would leave the Senate if a formal conviction is entered at his sentencing May 16, meaning a special election would then be held to replace him.

Some Republicans have not been satisfied with Wright’s decision to take leave instead of resigning, but Democrats blocked a move to expel him on Thursday.

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