During his regular conversations with a supposed film executive who was an undercover FBI agent, Sen. Ron Calderon talked repeatedly about his friend who owned a hospital in Long Beach.
The friend, Calderon told the agent, had been generous enough to employ Calderon’s son Zachary. Those summer gigs came with substantial paychecks, according to a newly released FBI affidavit detailing Calderon’s history of accepting money in exchange for seeking to influence legislation – nearly $10,000 per summer, amounting to around $28,000 altogether.
Much of the money flowed into a bank account controlled by Calderon and his wife, Ana, according to emails cited in the affidavit, and Calderon diligently checked to make sure the payments were going through.
“Hi Mike!” Calderon wrote in one email. “Thanks again for the ride up and lunch! So this is a reminder for you to arrange ... to divide pay into 2 payments.”
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Mike, according to the court-sealed affidavit obtained by Al Jazeera America, is Michael D. Drobot, the head of multiple health care businesses in California and a prolific donor to various California politicians, including a combined $167,000 to the political campaigns of Ron Calderon and those of his brother Tom Calderon, a former two-term assemblyman. It says he had a keen interest in legislation that would affect a specific spinal surgery common in workers’ compensation claims.
Drobot and his then-wife, Patricia, moved to California from Washington in the 1990s, according to news reports. He began acquiring health care businesses and eventually started pouring money into politics. Drobot and his various companies have given more than $1.3 million in campaign contributions since 2000, nearly all of it to Democrats and the Democratic Party.
Campaign records show that since 2008, one of Ron Calderon’s political action committees, Diversity PAC, has spent nearly $83,000 on nine separate dates for “fundraising events” at a swanky Oregon golf resort, Bandon Dunes, where Michael Drobot owns several properties.
Gov. Gray Davis received more than $200,000 from Drobot companies in 2001, just days before he signed a bill that would benefit Drobot’s businesses. Gov. Jerry Brown has gotten $20,000 from Drobot-related donors since 2008. Gov. Arnold Schwarzenegger garnered nearly $45,000.
And it was Drobot’s largesse that ultimately drew the notice of federal investigators, according to the FBI affidavit. The agent speaking in the affidavit recounts launching the investigation in part because of a 2007 tip from the California Fair Political Practices Commission about a $1 million payment from a company affiliated with Drobot to the Calderon Group, Tom Calderon’s firm.
Among Drobot’s businesses was Pacific Hospital of Long Beach, for which he was CEO until he sold the company recently. After he departed the Legislature and became a consultant for various businesses, Tom Calderon counted Pacific Hospital as one of his clients.
According to the affidavit, Drobot cultivated his relationship with the Calderons to protect his business interests – particularly Pacific Hospital’s pattern of treating workers’ compensation claimants with lucrative spinal surgeries. A 2012 Wall Street Journal investigation found that Pacific Hospital led all California hospitals in conducting a specialized operation known as spinal fusion between 2001 and 2010. The affidavit says Drobot stood to benefit from keeping intact the structure of California’s workers’ compensation laws, especially a provision allowing extra payments for devices surgeons implant during some spinal operations.
The affidavit alleges that Drobot was instrumental in helping Pacific Long Beach Hospital reap workers’ compensation payments by conspiring to “pay illegal kickbacks (or bribes)” to surgeons performing the operations. Federal agents searched Pacific Hospital in April, although an FBI spokeswoman said she could not address whether the raid had any links to the Calderon investigation.
Until a change in California’s workers’ compensation law in 2012, hospitals could seek separate reimbursement payments for the cost of conducting spinal surgeries and for the cost of spinal implants. That allowance disappeared as a result of a wide-ranging workers’ compensation bill signed by Gov. Jerry Brown.
Before it vanished, Drobot exploited the additional device payout option to commit “large-scale fraud,” according to the affidavit, using a scheme in which Drobot and others bought spinal implants that carried hugely inflated price tags – up to 10 times the actual cost, the affidavit says – and then channeled the profits to surgeons performing the procedures. Those payments ranged from $10,000 to $20,000 per surgery, the affidavit alleges.
Jeffrey Rutherford, an attorney for Drobot, said he could not comment extensively on those allegations, saying only that “Mr. Drobot categorically denies any wrongdoing.” He has not been charged. Rutherford declined to let The Sacramento Bee speak with Drobot, citing the sensitive nature of the case. Al Jazeera America, the network that first published the affidavit, quoted Drobot as confirming that he employed Tom Calderon but rejecting that anything illegal transpired.
“I did not bribe anyone,” Drobot told Al Jazeera America, adding that “I’ve never asked Ron (Calderon) to do anything for me.”
Pacific Hospital of Long Beach was recently acquired by College Health Enterprises Inc. Laura Salas Reyes, who had been a spokeswoman for Pacific Hospital and is now an employee of the freshly christened College Medical Center, declined to address the allegations in the affidavit given the transfer of ownership.
“We are a brand new hospital with new leadership, so I wouldn’t have any answers to” questions about the alleged kickback scheme, Reyes said.
Both Calderons, Ron and Tom, guarded Drobot’s financial interests by working to preserve the extra payments for implants, the affidavit alleges. In a conversation with the undercover FBI agent, Calderon was explicit about protecting Drobot’s bottom line.
“We’ve been keeping him in business now for the last four years, because the governor kept pushing these regs to cut the funding on these spinal surgeries for workers’ comp,” Ron Calderon said, according to the affidavit. “All we’ve been trying to do is hold off that cut so they continue paying for that.”
California’s State Compensation Insurance Fund earlier this year filed a federal lawsuit against Drobot, his son and various medical enterprises they operated. The suit describes a “broad and multifaceted plan to defraud” the fund, which the suit says has paid at least $141 million to Pacific Hospital since 2001.
“We’re doing our job and protecting policyholders by making sure the medical bills we pay are appropriate,” said Jennifer Vargen, a spokeswoman for the fund.
Citing the thousands of surgical procedures for which Pacific Hospital has billed the state over the years, the lawsuit says Drobot’s companies have “over-billed, double-billed, and defrauded” California out of millions.
In a motion to dismiss the state’s case, Drobot’s lawyers refute the charges as a “garden variety dispute” over billing and rejected the notion of fraud being involved, given that the implicated companies did perform the surgeries for which they submitted invoices.
“Were this case permitted to proceed, it would open the federal courthouse doors to workers’ compensation insurers suing medical providers” any time the carriers deem bills to be fraudulent, the document says.