Report I2012-1 Summary - December 2012

Investigations of Improper Activities by State Agencies and Employees: Bribery, Conspiracy to Commit Mail Fraud, Improper Overtime Payments, Improper Use of Lease Proceeds, Improper Travel Expenses, and Other Violations of State Law


State agencies and employees engaged in improper activities, including the following:


The California Whistleblower Protection Act (Whistleblower Act) empowers the California State Auditor (state auditor) to investigate and report on improper governmental activities by agencies and employees of the State. Under the Whistleblower Act, an improper governmental activity is any action by a state agency or employee related to state government that violates a law, is economically wasteful, or involves gross misconduct, incompetence, or inefficiency.1

This report details the results of nine particularly significant investigations completed by the state auditor or undertaken jointly by the state auditor and other state agencies between April 1, 2011, and June 30, 2012. This report also outlines actions taken by state agencies in response to the investigations of improper governmental activities described here and in previous reports. The following paragraphs briefly summarize the investigations and the state agencies' actions, which this report's individual chapters discuss more fully.


A Franchise Tax Board (board) employee, an Office of the Secretary of State (secretary of state) employee, and a courier service owner engaged in an elaborate scheme that enabled the courier service owner to steal nearly a quarter of a million dollars from the State. The three individuals were convicted of bribery and ordered to pay more than $227,000 in restitution to the secretary of state and the board. The failure of these state agencies to maintain adequate controls contributed to the individuals' ability to perpetrate the fraud.


A former Employment Development Department accounting technician and two accomplices were convicted of conspiracy to commit mail fraud for executing a scheme to redirect unemployment insurance (unemployment) benefits from the State to ineligible recipients. By falsifying information related to a bankrupt company's laid-off employees, the accounting technician enabled her two coconspirators to file unemployment claims against those wages. During the duration of their scheme, the two accomplices illicitly received nearly $93,000 in unemployment claims for wages to which they were not entitled using the U.S. mail to deliver their benefits from August 2008 through October 2010. The accounting technician and one of her accomplices were sentenced to serve time in federal prison. The second accomplice was sentenced to three years of probation.


The California State Athletic Commission overpaid a total of nearly $118,700 to 18 of its athletic inspectors from January 2009 through December 2010 because it inappropriately paid them an hourly overtime rate rather than an hourly straight-time rate for work they performed.


A supervisor with the Department of Fish and Game improperly implemented an agricultural lease agreement. He directed the lessee to use the state funds derived from the lease to purchase more than $53,800 in goods and services that did not provide the improvements and repairs the lease required. In addition, he required the lessee to provide the State with $5,000 in Home Depot gift cards, but he could not demonstrate that the purchases he and other state employees made with the gift cards were used for required improvements or for any other identifiable state purpose.


A manager with California Correctional Health Care Services (Correctional Health Services) improperly authorized Department of Corrections and Rehabilitation (Corrections) employees to use rental cars and receive mileage reimbursements for commutes that Corrections approved improperly. The manager also authorized these employees to receive reimbursements for improper expenses they incurred near their homes and headquarters, and Corrections inappropriately approved for payment. As a result, the State paid 23 employees a total of more than $55,000 in travel benefits to which they were not entitled.


From January 2009 through June 2011, an executive with the Natural Resources Agency (Resources) circumvented state travel regulations by improperly reimbursing an official and an employee approximately $48,000 in state funds for commutes between their homes and headquarters. In addition, Resources improperly reimbursed the official approximately $200 for lodging and meal expenses incurred near the Resources headquarters.


A supervising registered nurse at the California Training Facility in Soledad (facility) falsely claimed to have worked 183 hours of regular, overtime, and on-call hours that would have resulted in overpayments totaling more than $9,700. However, because staff at the facility's personnel office made numerous errors in processing the nurse's time sheets, the State ultimately overpaid the nurses roughly $8,600. In addition, the nurse's supervisor neglected her duty to ensure that the nurse's time sheets were accurate, thus facilitating the nurse's ability to claim payment for hours she did not work. The nurse returned to work at the facility in July 2012 after a nearly two-year absence on medical leave but left again after only one month. Staff at the facility's personnel office reported that they have begun the process to collect the overpayments identified in this report.


In December 2009 we reported that California State University, Chancellor's Office had wastefully reimbursed a high-level official more than $152,400 between July 2005 and July 2008 for expenses he improperly claimed. In July 2008—before the issuance of our report—this official accepted employment from the Office of the President at the University of California (university). Our review found that the university reimbursed the official approximately $6,100 in wasteful travel expenses from July 2008 through July 2011. Specifically, the official incurred $4,200 of the wasteful expenses before we issued our report in December 2009, and he incurred $1,900 after that date. We also determined that, although the university increased its monitoring of the official's travel expenses, its absence of defined limits for lodging expenses led to some of these excessive travel expenses.


An employee at the California Department of Education misused state time and equipment when he posted nearly 4,900 comments on The Sacramento Bee's news Web site during state time. The employee also performed work for a third party using state resources during state time. Further, the employee's former supervisor failed to appropriately supervise the employee, thus enabling the employee's misuse of state time and equipment.


In addition to conveying our findings about investigations completed from April 2011 through June 2012, this report summarizes the status of certain findings described in our previous reports. Chapter 11 details the actions that the respective agencies took—or declined to take—for 11 previously reported investigations. The following updates have particular significance:

Table 1 summarizes the improper governmental activities appearing in this report, the financial impact of the activities, and their status.

Table 1:
The Issues, Financial Impact, and Status of Recommendations for Cases Described in This Report
Status of Recommendations
Chapter Department Date of Our Initial Report Issue Cost to the State as of June 30, 2012* Fully Implemented Partially Implemented Pending No Action Taken
New Cases
1 Franchise Tax Board and the Office of the Secretary of State December 2012 Bribery $227,430 X
2 Employment Development Department December 2012 Conspiracy to commit mail fraud 92,826 X
3 California State Athletic Commission December 2012 Improper overtime payments 118,650 X X
4 Department of Fish and Game December 2012 Improper use of lease proceeds 58,813 X
5 California Correctional Health Care Services and Department of Corrections and Rehabilitation December 2012 Improper travel expenses 55,053 X X
6 Natural Resources Agency December 2012 Improper travel expenses 48,153 X
7 California Correctional Health Care Services and Department of Corrections and Rehabilitation December 2012 False claims, inefficiency, inexcusable neglect of duty 8,647 X X
8 University of California, Office of the President December 2012 Waste of state funds 6,074 X
9 California Department of Education December 2012 Misuse of state resources, inexcusable neglect of duty NA X X
10 Various December 2012 Misuse of state resources 6,408 X
Previously Reported Cases
11 Department of Corrections and Rehabilitation September 2005 Failure to account for employees' use of union leave 3,500,00 X
11 Department of Fish and Game, Office of Spill Prevention and Response April 2009 Improper travel expenses 71,747 X
11 California State University, Office of the Chancellor December 2009 Improper and wasteful expenditures 152,441 X
11 Department of Corrections and Rehabilitation January 2011 Improper overtime reporting 446 X X
11 Department of Corrections and Rehabilitation January 2011 Delay in reassigning an incompetent psychiatrist, waste of state funds 366,656 X
11 Department of Transportation August 2011 Inexcusable neglect of duty. NA X
11 Department of Industrial Relations August 2011 Failure to monitor adequately employees' time reporting. NA X
11 Department of Fish and Game August 2011 Misuse of state vehicle, improper travel reimbursements. 8,877 X X X X
11 Department of Corrections and Rehabilitation August 2011 Misuse of state resources. 212,261 X X
11 State Controller's Office August 2011 Failure to report absences, failure to monitor adequately an employee's time reporting. 6,591 X
11 California Energy Commission August 2011 Falsification of time and attendance records. 6,589 X

Source: California State Auditor.

NA = Not applicable because the situation did not involve a dollar amount or because the findings did not allow us to quantify the financial impact.

* We have estimated the cost to the State as noted in individual chapters of this report.

1 For more information about the state auditor's investigations program, please refer to the Appendix.