Meg Whitman's plan to reduce fraud and abuse

Bob Egelko, Chronicle Staff Writer

Monday, September 6, 2010
Meg Whitman wants to create a grand jury to investigate a... Gov. Arnold Schwarzenegger has long advocated attacking w... Jerry Brown is skeptical of a new bureaucracy.

Meg Whitman has done her best to distance herself from Gov. Arnold Schwarzenegger, succeeding so well that her fellow Republican has declined to endorse a candidate in the governor's race. But they agree on at least one thing - California can dig itself out of its budget hole by cracking down on waste, fraud and abuse in state spending.

Whitman's latest proposal, aired in radio and television ads, is to establish a statewide grand jury, directed from the governor's office, that would investigate and indict those who have fleeced the state treasury of untold billions.

"A key factor accounting for the massive overspending and continuing budget deficits is state government's failure to police itself well," Whitman says on her website. A statewide grand jury, she declares, would supply the "real enforcement mechanism" now lacking in state agencies and county grand juries.

The new law she proposes would install an auditor in her Cabinet who would review state reports and citizen complaints, order investigations into misuse of funds - by state employees, contractors or recipients of benefits - and decide whether a criminal probe was justified.

Issuing indictments

The governor would then summon a California-wide grand jury that could subpoena witnesses and issue indictments. The charges would be turned over to a local district attorney or the attorney general for prosecution.

A fundamental unknown is whether a statewide grand jury would improve the oversight of programs already scrutinized by state investigators and auditors, the attorney general's anti-fraud unit and 58 county grand juries.

"What would it address that can't be addressed under the current system?" asked Scott Thorpe, executive director of the California District Attorneys Association.

He noted that the auditor and grand jury overseer would be California's "only prosecuting authority that wasn't elected by the people," in contrast to the attorney general and county district attorneys.
'A certain naivete'

"I think it's a ridiculous idea. It shows a certain naivete about how government works," said John Van de Kamp, a Democrat who served six years as Los Angeles County district attorney and eight years as attorney general.

The way to attack fraud and wasteful spending, he said, is to beef up investigative staffs that refer criminal cases to the attorney general or local prosecutors under the current system - not to set up a new mechanism to bypass that system.

Whitman spokesman Darrel Ng replied that the persistence of fraud shows that "the current system doesn't work" and that it's time to try something new.

Riverside County District Attorney Rod Pacheco said a state grand jury would have a broader perspective than local prosecutors and would tackle cases that are slipping through the system.

"There is fraud on a statewide level," said Pacheco, a former Republican assemblyman. "People are not concentrating on it, and there is no mechanism to handle it."

In fact, there are anti-fraud mechanisms in state government, though none with the all-encompassing scope that Whitman envisions for a statewide grand jury.

For example, the Department of Health Care Services reviews complaints of Medi-Cal abuses and refers suspected fraud cases to a unit of the attorney general's office. The attorney general can sue or file charges against doctors, hospitals and other providers, convene a county grand jury or refer cases to local prosecutors.

The attorney general's office filed 165 criminal charges against Medi-Cal providers last year, the most in the 32-year history of the fraud unit, and recovered more than $200 million from providers in a recent 12-month period, said Mark Zeiger, the unit chief.

Whitman's campaign is unimpressed. It cites a report by the California Taxpayers Association, a business-funded nonprofit, asserting that state government has wasted $18.9 billion since 2000.
Hard to verify

The figure is hard to verify - it includes, for example, the entire $1.25 billion cost of a state education program that failed to improve test scores, and media reports alleging large-scale fraud in welfare, Medi-Cal and workers' compensation. It also includes such well-documented examples as the $3.4 billion cost overrun on the Bay Bridge eastern span reconstruction that a state audit disclosed in 2004.

It's not clear which of these expenditures would be reined in by a state grand jury. But David Kline, spokesman for the taxpayers association, said he thinks a statewide panel of concerned residents might be "more vigilant than government officials" at policing abuses.

Whitman, who has separately proposed eliminating 40,000 state jobs, insists a statewide grand jury could use existing staff without increasing spending. Her Democratic opponent, Attorney General Jerry Brown, derides that position.

This is "a proposal to root out government waste by creating a new government bureaucracy," said Brown's campaign spokesman, Sterling Clifford.

Brown hasn't spelled out his plan for erasing the $19 billion state deficit, saying only that he would bring all sides together and wouldn't raise taxes without voter approval. Clifford said details will emerge as the campaign unfolds.

Schwarzenegger has maintained since taking office in 2003 that increased attention to waste and fraud would ease the state's budget problems, though he has never endorsed a statewide grand jury.

His prime target has been in-home support services, the rapidly growing program of domestic care for the low-income elderly and disabled.

Declaring that the program suffers from a fraud level as high as 25 percent - a figure also cited by Ng, Whitman's spokesman - Schwarzenegger has imposed new background checks and fingerprint requirements for caregivers and has tried to cut workers' pay and reduce or eliminate services for nearly a third of their clients.

Courts have blocked the wage and service cuts, and a state audit of 24,000 in-home care cases in 2007 found potentially fraudulent overpayments in only 1 percent of them.
More audits

Undaunted, the governor has called for more audits, and is urging the Legislature to approve funding to fingerprint the program's 420,000 recipients.

Schwarzenegger's spokesman, Aaron McLear, says the governor has had "tremendous success" in curbing waste and fraud by increasing access to state records, appointing an inspector general and tightening welfare standards.

Brown, and advocates for workers and recipients of benefits, say Schwarzenegger was never able to document his claims of widespread overspending and fraud in state services.

At last month's state Republican convention, however, Whitman made the same assertions. She said fraud is costing California $8 billion to $10 billion because the state lacks the technology that was her bread and butter as eBay's CEO.

"We're going to put in great systems, we're going to find that waste, fraud and abuse, we're going to convene a grand jury," the candidate said. "And if you rip off the taxpayers of California, we're going to send you to jail."

Chronicle staff writer Joe Garofoli contributed to this report.

E-mail Bob Egelko at begelko@sfchronicle.com.

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