In a dozen years at the state Capitol, California Sen. Ron Calderon earned a reputation as an official who liked to live large – enjoying glitzy out-of-state political fundraisers, attending conferences at high-end golf courses and beach resorts, and carrying bills to benefit specific industries.
All that may have come to an end Friday, when federal prosecutors announced that a grand jury indicted the Montebello Democrat on 24 criminal charges that allege he took nearly $100,000 in bribes in exchange for efforts to influence legislation. Calderon, 56, faces a maximum sentence of 396 years if convicted.
Senate leader Darrell Steinberg, who stripped Calderon of his committee assignments last fall after an affidavit outlining the government’s allegations leaked to the media, said Calderon should resign his seat.
Also indicted was Calderon’s brother, whom prosecutors say set up a nonprofit group that served as a vehicle to funnel money for personal use.
Former Assemblyman Tom Calderon pleaded not guilty Friday to seven counts of money laundering and one count of conspiracy to launder money. His bail was set at $25,000. He was ordered to surrender his passport, stay in the continental U.S. and appear for a jury trial starting April 15, The Associated Press reported.
“More than robbing us of money, corruption robs us of trust in government,” FBI assistant director Bill Lewis said during a Los Angeles news conference announcing the charges.
The indictment came after months of buzz at the Capitol about how far the government’s investigation would reach. Officials revealed Friday that even before Calderon’s office was raided last June, the FBI had persuaded him to temporarily wear a recording device in meetings with an unidentified person, a strategy that ultimately failed to produce any charges.
In a related case authorities called the biggest insurance fraud scheme in California history, prosecutors announced that a former hospital executive named Michael Drobot made a plea deal and admitted paying bribes to Ron Calderon. Drobot, the former CEO of Pacific Hospital of Long Beach, is pleading guilty to two counts that carry a maximum sentence of 10 years for conspiring to inflate the prices of medical hardware and paying kickbacks to doctors and chiropractors who referred thousands of patients to his hospital for spinal surgeries.
Most of the patients were going through the workers’ compensation insurance system, which – until state law changed in 2012 – allowed hospitals to double bill for inserting medical hardware in the spines of injured workers. The plea agreement says Drobot gave Calderon a “stream of financial benefits” – free flights on a private plane, outings at exclusive golf resorts, expensive restaurant dinners and summer jobs for his son – in exchange for his support on legislation concerning how much hospitals can charge workers’ compensation carriers for the cost of medical hardware.
Drobot’s business fraudulently billed insurers for $500 million in surgeries over five years, prosecutors allege. “Mr. Drobot has acknowledged and accepts responsibility for his actions,” a statement from his attorney Janet Levine says. “He is providing information to assist the government in its expanding investigations.”
Drobot has been a major donor in California politics. Since 2000, he and his his companies given more than $1.3 million in campaign contributions, nearly all of it to Democrats and the Democratic Party.
The Calderon brothers have denied wrongdoing. Their lawyers did not return calls from The Sacramento Bee on Friday.
Ron Calderon has agreed to turn himself in on Monday, U.S. Attorney André Birotte Jr. said. The 24 counts he faces include bribery, money laundering and tax fraud. The seven money-laundering counts Tom Calderon faces carry a maximum sentence of 160 years. He surrendered to authorities Friday.
The indictments came nearly eight months after the FBI raided Ron Calderon’s Capitol offices, the first such activity since the famous undercover sting in the 1980s known as Shrimpscam led to the conviction of five legislators.
“I didn’t think after we did ShrimpScam that corruption would go away. And I don’t suspect that it will go away just because of the Calderon case,” said James Wedick, a retired FBI agent who worked on the last Capitol corruption probe. “There is always going to be 2 or 3 percent of the folks under the dome who are going to do things in an illegal way and use the position for financial gain.”
Steinberg issued a statement saying that the charges against Calderon “strike at the very heart of what it means to be a public official.”
“Senator Calderon’s continued service is a cloud over all the important work that we must get done this year. It is in the best interests of the people and the Senate if he resigns. I call on him to do so,” Steinberg’s statement says.
He said that if Calderon does not resign or take a “complete leave of absence,” the Senate will take a vote to suspend him.
Unlike expelling a legislator, a suspension is not permanent. An expulsion takes a two-thirds vote by the house, a suspension only a simple majority, said Steinberg’s spokesman. A suspended legislator would still receive base salary, but not the extra per diem payments lawmakers get for working in Sacramento.
The grand jury’s indictment lays out two major policy areas that authorities allege Calderon tried to influence in exchange for nearly $100,000 in bribes: the rate at which hospitals that treat workers’ compensation patients are reimbursed for performing spinal surgery and tax breaks for film productions.
An undercover agent posed as a film studio owner and asked for Calderon’s help to allow smaller productions qualify for the California’s film tax credit. The agent created an elaborate persona as Rocky Patel, a recent transplant from Las Vegas who was trying to get into the L.A. film scene and enjoyed soccer, beer and mingling with local politicos.
Under a bill Calderon carried in 2009 and an extension passed in 2012, film productions that cost at least $1 million and are shot in California can enter a lottery to get a tax break. Authorities allege that Calderon accepted bribes from the undercover agent to lower the threshold to $750,000 – an effort that was ultimately unsuccessful in the Legislature.
“This legislation would have been a financial boon to the small independent studios, and the indictment specifically alleges that Ron Calderon agreed to support this new film tax credit legislation in exchange for his daughter being paid $3,000 a month for a job that he knew she would not perform,” said Birotte, the U.S. attorney.
Calderon also took bribes from the agent that included money for his son’s college tuition and his brother’s sham nonprofit organization, the indictment says. In exchange for the bribes, the indictment says Calderon took several actions inside the Capitol to help the man he believed to be a film studio owner – including hiring a new staff member he thought was the man’s girlfriend. In fact, she also was an undercover FBI agent.
The indictment does not name any other members of the Legislature but describes Calderon’s attempts to influence colleagues labeled Senators A, B and C on behalf of Drobot.
“On or about February 18, 2011, defendant Ronald S. Calderon met with Senator A and requested that Senator A introduce legislation in the Senate favorable to Drobot and Pacific Hospital,” the indictment says.
Legislative records show that on Feb. 18, 2011, Sen. Kevin de León introduced Senate Bill 896 that would have allowed hospitals treating workers’ comp patients to bill insurance a higher reimbursement rate for performing spinal surgery.
Less than three months later, de León dropped the bill and pursued an alternative piece of legislation that didn’t include special payments for spinal surgery.
The indictment describes Calderon sending “Senator B” an email in March 2011 discussing the importance of the extra payments for spinal fusions under the workers’ compensation system.
The indictment says Calderon and Drobot met on June 12, 2012, with “Senator C” to discuss “the negative impact Senator C’s proposed legislation would have on Pacific Hospital and other hospitals.”
By that point, Sen. Ted Lieu had introduced Senate Bill 959 that would have eliminated extra payments to hospitals for implanting hardware during spinal surgery on workers’ comp patients. State studies had said the billing policy was wasteful and created incentives for hospitals to perform unnecessary surgeries. And a Wall Street Journal investigation in 2012 pointed out the inordinate number of spinal surgeries some California hospitals were performing on workers’ comp patients.
Ultimately, Lieu’s proposal to ban the extra payments for spinal hardware was folded into another bill, SB 863, that made several big changes to the workers’ compensation system. De León carried that bill, which became one of the biggest policies to go through at the end of the 2012 session when Gov. Jerry Brown signed it in September.
De León, who is in line to become the next president pro tem of the Senate, emailed a statement to The Bee on Friday saying he is proud to have carried legislation that gives better protections to injured workers and eliminates the extra payments for spinal hardware.
“The legislation passed in 2012 – which was aggressively opposed by forces that we now know were purportedly engaging in illegal conduct – once and for all eliminated the perverse double dipping reimbursement system that cost taxpayers money and rewarded unscrupulous hospitals for pushing workers into dangerous and costly surgeries they didn’t need,” de León said in the statement.
Calderon, a moderate Democrat who has carried bills to help fireworks manufacturers, payday lenders and the makers of kangaroo skin shoes, is one of three brothers who have treated Capitol politics as a family business. He has served in the Legislature since he was elected to the Assembly in 2002, when he replaced his brother Tom in the seat representing several blue-collar communities in southeast Los Angeles County. Their brother Charles Calderon took the seat when Ron Calderon moved to the Senate in 2006. Charles Calderon’s son Ian Calderon now holds the seat.
After leaving office, Tom Calderon went into business as a consultant who helps clients navigate state government, but he did not register as a lobbyist. His clients included Pacific Hospital of Long Beach as well as the Central Basin Municipal Water District.
The money-laundering charges against him stem from his presidency of a nonprofit organization called Californians for Diversity. The indictment describes Ron Calderon asking the undercover agent to give $25,000 to the group and Tom Calderon then transferring the money to his consulting business and personal accounts.
Ron Calderon has accepted more gifts from lobbying groups than any other state lawmaker, a Bee review of lobbyist disclosure reports shows. Since 2000, he has accepted roughly $40,000 worth of gifts, more than double the amount given to any other legislator during that period. Calderon’s gifts included many dinners and golf outings, as well as airfare to Hawaii and tickets to see the Lakers, Kings and Britney Spears.
Also on Friday, the government filed a response to a motion Calderon made in federal court in November accusing authorities of leaking an FBI affidavit against him after he refused to participate in sting operation targeting other lawmakers.
Calderon wore a wire to record two conversations with another, unnamed person but canceled a third meeting shortly before the FBI raided Calderon’s Capitol office last summer, federal officials wrote in Friday’s filing.
It also says that two FBI agents told Calderon at a hotel in Las Vegas in May that they worked for a public corruption squad and had been investigating him “for quite some time.”
The government said the agents interviewed Calderon for about three hours and offered him the opportunity to cooperate in their investigation. The agents had already obtained a search warrant for his Senate office but did not execute it at the time because Calderon agreed to cooperate, the government said.
Calderon agreed to wear a wire to record conversations with other public officials, the government said. It said Calderon recorded two conversations he had with an unidentified person, and said the conversations were brief and did not result in any criminal charges against that person.
Call Laurel Rosenhall, Bee Capitol Bureau, (916) 321-1083. Follow her on Twitter @LaurelRosenhall.