U.S.

FBI: California state senator aided alleged multimillion-dollar fraud

Ronald Calderon influenced legislation that protected a worker's compensation scheme, according to government affidavit

In exchange for payments to family members, Calderon protected the interests in Sacramento of Michael Drobot, who ran a busy spinal surgery clinic in Long Beach, Calif.
Al Jazeera's Investigative Unit

LOS ANGELES — State Sen. Ronald Calderon accepted bribes from a Southern California hospital executive who ran an alleged workers’ compensation scheme that brought the executive tens of millions of dollars, according to a sealed FBI affidavit obtained by Al Jazeera’s Investigative Unit.

In exchange for payments to family members, Calderon, a Democrat who represents a suburban district here, protected the interests in Sacramento of Michael Drobot, who ran a busy spinal surgery clinic in Long Beach, Calif., the affidavit says. The document says Calderon ensured that changes to state law would not injure Drobot’s lucrative business of providing spinal fusion surgery, which joins two or more vertebrae.

The California State Compensation Insurance Fund, a quasi-governmental organization that makes payments on workers’ compensation claims, filed racketeering charges against Drobot and his medical companies earlier this year. The complaint alleges that he received $161 million through inflated surgery room and spinal implant reimbursement fees in what the state calls “multiple fraudulent schemes.” The allegations are contained in a lawsuit filed in U.S. District Court, Santa Ana, Calif.

Until now, Calderon’s alleged behind-the-scenes role in the workers’ compensation payment controversy has never been revealed.

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According to the affidavit, Calderon concealed bribe payments from Drobot through his brother, former Assemblyman Thomas Calderon, and his son, Zachary, a student at Berklee College of Music in Boston.

Thomas Calderon received a monthly consulting fee of at least $10,000 from Drobot, plus a one-time payment of $1 million. The affidavit says Drobot paid $28,000 to Ronald Calderon through his son, who worked a summer job at Drobot’s hospital, although most of the money went directly into the state senator’s bank account.

Ronald and Thomas Calderon did not respond to requests for comment about their relationship with Drobot.

In an interview with Al Jazeera, Drobot said Ronald Calderon had never assisted him and he adamantly denied paying off the legislator.

“I did not bribe anyone,” he said.

But he acknowledged making payments to Thomas Calderon and employing Ronald Calderon’s son.

“Thomas Calderon has been a legislative consultant for my companies for many years,” Drobot said in an email.  “He advises me on the proper method of scheduling meetings with our state politicians so I can support or object to any legislation that affects my organization. I don’t believe this is illegal, as every business does the same.” He also said he had never overbilled the State Compensation Insurance Fund.

Drobot, who lives in a $6 million mansion on the Pacific Ocean in the Corona del Mar section of Newport Beach, Calif., formerly owned Pacific Hospital of Long Beach, a 184-bed facility. He allegedly overbilled the State Compensation Insurance Fund for tens of millions of dollars through an insurance claims process known as “upcoding,” which results in the submission of charges substantially higher than set rates, according to a racketeering lawsuit the State Compensation Insurance Fund filed against Drobot and his companies in Santa Ana.

Through upcoding, Drobot billed excessive amounts for Pacific Hospital and then entered into negotiated settlements with state officials as a matter of practice, according to the FBI affidavit.

The hospital executive frequently invoked the Calderon name during these negotiations, said a state investigator interviewed by Al Jazeera who asked not to be named. According to the affidavit, Drobot walked away with $27.5 million in workers’ compensation payments after a settlement in 2004. He paid Thomas Calderon’s company $1 million for his assistance, the document says.

Drobot has been accused of creating a shell company to artificially inflate the price of spinal implants. Those operations were reimbursed separately under California law and allowed him to cheat state taxpayers for millions more, according to the lawsuit.

“Of course I’m milking the system,” Drobot allegedly told a state investigator, according to the FBI affidavit.

Drobot, in the interview, denied making such a statement.

The affidavit describes how Calderon’s influence in Sacramento was critical to ensuring that Drobot’s alleged reimbursement scam continued for years. During an undercover sting operation in which FBI agents posed as movie studio executives (see “Hollywood Sting”), Calderon purportedly boasted that he was keeping Drobot’s scheme alive.

“We’ve been keeping him in business now for the last four years, because the governor kept pushing these regs (sic) to cut the funding on these spinal surgeries for workers’ comp,” Calderon was quoted as telling an agent during a conversation on Nov. 2, 2012.

“All we’ve been trying to do is hold off that cut so they continue paying for that. The way it is now, they are leaving it up to the administrator at workers’ comp to decide how much they pay for these implants, and if they get cut out of that, they are out of business. So that’s what we’ve been working the last four or five years. You know, we’ve kept them going. We’ve pushed it off, pushed it off, pushed it off.”

Drobot said he couldn’t explain why the state senator would make such a statement.

“I’ve never asked Ron to do anything for me,” Drobot told Al Jazeera. “I have asked his brother to assist me. That’s for sure. I’ve never met with Ron Calderon to try to develop any strategy to change any of the legislation.”

If the California State Legislature had closed the loopholes by defining surgery room fees and not allowing for implants to be reimbursed separately, Drobot’s business would have suffered.

Year after year, Calderon allegedly protected Drobot’s interests. During a feverish legislative session in 2012, the state senator was responsible for modifying legislation that would have undermined Drobot’s implant reimbursement scheme, the affidavit says.

The wrangling went into full swing in March 2012, the FBI document says. State Sen. Ted W. Lieu, who represents Los Angeles, introduced a bill that would have eliminated separate reimbursement payments for spinal implants. Drobot needed Ronald Calderon and his brother Thomas to pressure Lieu to alter or drop his proposed bill, according to the affidavit.

In the interview with Al Jazeera, Drobot acknowledged that he and Thomas Calderon lobbied Sen. Lieu to abandon his bill. Asked if he or Calderon pressured Lieu, Drobot said they merely explained the problems the bill created for California’s medical industry. Lieu, who declined to comment to Al Jazeera dropped his sponsorship of the bill.

On Aug. 24, 2012, state Sen. Kevin de Leon, a Calderon ally who represents Los Angeles, took over Lieu’s bill. But de Leon, who declined to comment for this article, made a significant change. While Lieu’s bill eliminated separate reimbursements for spinal implants, de Leon’s allowed reimbursements to continue through 2013 — a big benefit to Drobot and others. Calderon was responsible for the language change, according to the affidavit. The new bill became law this past Jan. 1.

In early October, a few months after the FBI raided Calderon’s Sacramento office, Drobot sold Pacific Hospital of Long Beach to a Southern California healthcare management company. The state’s racketeering claims against him are pending.

“I will have my day in court soon,” Drobot told Al Jazeera.

Josh Bernstein and Katie Lannigan of Al Jazeera’s Investigative Unit contributed to this report.

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