Capitol Alert

The latest on California politics and government

November 15, 2013
Steinberg had ties to law firm that represented younger Drobot

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Senate President Pro Tem Darrell Steinberg, D-Sacramento, worked for a law firm representing the son of a health care executive linked in an FBI affidavit to Sen. Ron Calderon, D-Montebello.

In response to a leaked FBI affidavit charging that Calderon had accepted $28,000 in bribes from Michael D. Drobot, formerly the CEO of Pacific Hospital of Long Beach, Calderon's attorney sought to deflect blame this week in a court filing claiming that Steinberg was the true target of the investigation given his "financial activities" with Drobot.

On Thursday, Steinberg repudiated Calderon's allegations, calling them "beyond the pale" and saying he had "no relationship" with Drobot, outside of the fact that the prolific Democratic donor had attended Senate Democratic fundraisers.

But Michael D. Drobot has a son, Michael R. Drobot, who is currently being represented in an insurance fraud case by a law firm, Roxborough, Pomerance, Nye, & Adreani, that Steinberg listed as a source of income in a filing covering 2012. Steinberg is an "attorney of counsel" for the firm, according to the filing, and received between $10,001 and $100,000 in 2012.

Attorneys from the firm are representing the younger Drobot in a lawsuit California's State Compensation Insurance Fund brought against both Drobots, father and son, earlier this year alleging "a broad and multi-faceted plan to defraud State Fund in connection with the submission and collection of fraudulent insurance bills."

Steinberg started working for the firm last year but severed his affiliation on Thursday after learning that the younger Drobot had become a client, according to spokesman Mark Hedlund.

"He became affiliated with them on a very limited part-time basis last year and was going to be developing a mediation practice with them," Hedlund said, adding that Steinberg's schedule has prevented him from spending much time on the project.

In a November 14 email to Nicholas Roxborough, an attorney at the firm, Steinberg resigned his position, writing that " given that my good name has been unfairly dragged into the Calderon mess and Drobot senior, I am concerned about any appearance of a connection, even though there is not one."

The state insurance fund's complaint alleges that the Drobots and a web of companies they oversee have sought to defraud the state fund by overbilling for surgeries and by erecting "shell companies" used to inflate the price tags of medical devices for which the Drobot-affiliated companies seek reimbursement.

An affidavit given by an undercover FBI agent depicts a similar scheme. According to the document, Michael D. Drobot funneled money to Ron Calderon and his brother, former Assemblyman Tom Calderon, so they would preserve certain provisions in California's worker compensation laws allowing Drobot to reap more money from spinal surgeries. Drobot's lawyer has said the allegations are baseless. The affidavit mentions only Michael D. Drobot, the father, not Michael R. Drobot, the son.

"Drobot and others had conspired to use the existing provisions in the worker's compensation laws, as well as several other means, to commit widespread health care fraud, including paying illegal kickbacks (or bribes) to surgeons performing spinal surgeries at (Pacific Hospital Long Beach)," the affidavit alleges.

PHOTO: Senate President Pro Tem Darrell Steinberg, center, and the Senate Rules Committee voted unanimously to strip Sen. Ron Calderon of all committee assignments on Tuesday, November 12, 2013 at the state Capitol in Sacramento, Calif. The Sacramento Bee/Randy Pench.

November 15, 2013
California releases proposed fracking regulations

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California got its first glimpse Friday morning of proposed hydraulic fracturing regulations that will likely be heavily debated over the coming year.

In a conference call with reporters, California Department of Conservation Director Mark Nechodom heralded a proposal he said would strike a balance between strong safeguards and ensuring that California's oil and gas industry can "remain productive and competitive."

The release of the draft rules kicks off a yearlong process, with the goal of having final regulations in place by Jan. 1, 2015. Nechodom said he anticipates "a very active public regulation" process that could yield "substantial changes" to the current proposed language.

Hydraulic fracturing, commonly known as fracking, involves blasting a pressurized cocktail of chemicals and water underground to dislodge the gas trapped in rock formations. While many have praised fracking as a way to wean America off of foreign oil, environmentalists warn that fracking represents a public health hazard.

Pointing to fracking booms in other parts of the country and warning of a potential explosion of activity above California's Monterey Shale, several lawmakers introduced fracking bills in 2013. Of those, only Sen. Fran Pavley's bill received the governor's signature, with more stringent measures that included statewide moratoriums falling by the wayside.

The Pavley law will now guide the regulatory process. The draft rules released on Friday will require well operators to notify people living near new wells, create a groundwater monitoring regime, spur a statewide scientific review of fracking and mandate disclosure of the types and concentrations of chemicals used in fracking.

Despite the chemical disclosure requirement, the new law allows companies to invoke trade secret protections in some cases. Nechodom said it remains unclear how broadly that exemption will be used.

"It's hard to tell at this point how many trade secret claims may be made," Nechodom said. "There may be few or there may be many."

In the intervening year before final regulations take effect, well operators will need to certify to regulators in advance that they are in compliance. Starting in 2015, they will need to go through a specific permitting process that could trigger environmental review.

Nechodom tried to rebuff concerns that well operators will have free reign in the gap year, saying that operators will still have to win California Environmental Quality Act approval via county-level applications for conditional use permits.

"That has been a misperception, that CEQA does not apply in 2014," Nechodom said, adding that "by the time we get to 2015 that permitting event will essentially require some CEQA review."

In the final days of the 2013 legislative session, environmental groups abandoned Pavley's bill en masse, with many saying that a provision of the bill allowing for broad reviews that cover multiple wells would weaken oversight. Regulations governing the grouping of permits were not released Friday.

But Tim Kustic, state oil and gas supervisor for the Division of Oil, Gas, and Geothermal Resources, said during Friday's conference call that the division already has to be selective in the reviews it conducts.

"We have to prioritize," Kustic said, adding that "fields that have extensive hydraulic fracturing and they're doing, say, the 3,000th in the field" will be a lower priority than an initial exploratory well.

"It's unrealistic to think the division will be out there for every well stimulation," Kustic said.

PHOTO: In this March 29, 2013 file photo, workers tend to a well head during a hydraulic fracturing operation at an Encana Oil & Gas (USA) Inc. gas well outside Rifle, in western Colorado. AP/ Brennan Linsley.

November 15, 2013
AM Alert: California's new fracking law yields draft regulations

JV_061013_FRACKING_214.JPGAfter last session's fierce dispute over the future of hydraulic fracturing in California, the initial product of a new fracking law will flow into view this morning.

The state's first successful piece of fracking legislation got signed into law despite satisfying neither of the key interests: it drew opposition from both the environmentalists warning of an unfettered fracking boom and the energy industry bemoaning cumbersome rules. This morning, the California Department of Conservation plans to announce the first draft of regulations resulting from the bill.

And while environmentalists ended up unhappy with the final bill, many concede that regulations guided by Sen. Fran Pavley's bill are an improvement over the rules drafted last year by the department's Division of Oil, Gas, and Geothermal Resources, which lawmakers and advocates alike criticized as lacking. So now the months-long process begins of shaping and finalizing the new regs, with representatives of Sierra Club California, Clean Water Actions and other environmental groups weighing their next steps during a 10:30 a.m. conference call.

VIDEO: Dan Walters takes a bite out of Gov. Jerry Brown's "reality sandwich."

November 15, 2013
Dan Walters Daily: Jerry Brown gets real with UC regents

Dan takes a look at the harsh funding truth that Gov. Jerry Brown offered to leaders at the University of California.

Have a question you'd like Dan to answer? Post it on our Facebook page.

See other Dan Walters Daily clips here.



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Capitol Alert Staff


Jeremy White Jeremy B. White covers California politics and edits Capitol Alert's mobile Insider Edition. jwhite@sacbee.com. Twitter: @capitolalert

Amy Chance Amy Chance is political editor for The Sacramento Bee. achance@sacbee.com. Twitter: @Amy_Chance

Dan Smith Dan Smith is Capitol bureau chief for The Sacramento Bee. smith@sacbee.com

Christopher Cadelago Christopher Cadelago covers California politics and health care. ccadelago@sacbee.com. Twitter: @ccadelago

Micaela Massimino Micaela Massimino edits Capitol Alert. mmassimino@sacbee.com

Laurel Rosenhall Laurel Rosenhall covers the Legislature, the lobbying community and higher education. lrosenhall@sacbee.com. Twitter: @LaurelRosenhall

David Siders David Siders covers the Brown administration. dsiders@sacbee.com. Twitter: @davidsiders

Dan Walters Dan Walters is a columnist for The Sacramento Bee. dwalters@sacbee.com. Twitter: @WaltersBee

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