I was watching “Eyewitness News” last Thursday night (Oct. 13), and saw this segment by Nanette Miranda on a bunch of old folks (even older than me…) who had been bilked out of most of their savings by a scam. No, not by the con artist-by the agency that’s supposed to protect them from having lost their life savings. Along with other travesties by the Golden State (well, at least politicians can still mine gold here), this one infuriated me, so I did a little investigating.
According to an article by Dan Morain , in a suit filed in May of 2010 a disbarred lawyer named James A. Walker, then the host of a radio talk show, claimed to be a financial adviser catering to elderly people. Walker and his accomplices promised senior citizens financial security and guaranteed health care through Medi-Cal for the rest of their life if they would sign over their money to Senior Care Advocates, Inc., of Roseville. After bilking hundreds of seniors out of hundreds of thousands of dollars, Walker declared bankruptcy and disappeared, along with his corporation. Let’s not bother to talk about the radio station who put this guy on without checking his credentials.
Fortunately, their was a cavalry troop waiting in Sacramento to ride to the rescue. The Victims of Corporate Fraud Compensation Fund was created by AB 55 under Assemblyman Kevin Shelley, and the bill tacked on an additional $2.50 fee per year for corporations. It was signed into law in 2002 by then Governor Arnold Schwarzenegger. Started in reaction to the Enron and other corporate scandals, the current holding is approximately $15 million. The fund is sanctioned by the state of California and overseen by current Secretary of State Debra Bowen. So, with less than a million owing to these victims, there was no problem getting them reimbursed…right?
Oh, you know what’s coming! At last count, individuals have filed 701 claims seeking up to the maximum permitted by the law, $20,000. Of those claims, ten people have been paid. The total payout has been $112,496. (Note: figures according to Morain; Miranda’s figures were seven people and $92,000 paid out.) That’s worse than the odds on hitting the lottery.
So what’s the problem? First, a court must agree that fraud has been committed. Second, in order to be “fair” to all possible victims, the payout can only occur once a year, in July, in a sort of “class-action” scenario. How many hoops are there to jump through? Enough so that between 50-60 of those fraud victims have died while trying to collect the money set aside for them by state law, according to the group’s attorney, Lawrence Salisbury. And no relief in sight for the remaining plaintiffs.
Why is that money just sitting there in limbo? Actually, it isn’t. In 2010, Gov. Schwarzenegger and the legislature appropriated $10 million from the fund to pay other state bills. And that was not the first time the state took money from the people to pay their mounting debts, most of which have been caused by irresponsible spending. As a retired teacher, I know the schools had to fight to get back billions of taxpayer dollars that were supposed to go to school districts, but were again diverted to pay off state debts.
Proposition 98, an amendment to the state Constitution passed in 1988, established a minimum funding level for K-12 education and community colleges. The problem started in 1976, when a lawsuit (Serrano v. Priest) took property taxes away from local school districts and gave it to the state to redistribute as they saw fit (see the link to my article on that below). Any time you give the government control of your money, you’re in trouble. Prop. 98 attempted to rectify the fact that the state very often failed to reapportion many of those tax dollars to the schools.
During the 2004-05 and 2005-06 fiscal years, budget deficits were crippling California. Gov. Schwarzenegger and the legislators decided our schools did not really need that money as much as they did to pay-once again-for their bloated administration and complete fiscal mismanagement. They diverted billions of dollars earmarked for the schools to cover their bills. Is this a recurring story with all states? After agreements to pay the money back were ignored, Superintendant of Schools Jack O’Connell and the California Teachers Association were forced to sue Schwarzenegger and the director of the California Department of Finance to recover the funds. The agreement restored $2 billion immediately, and provided an additional $3 billion to be paid in installments between fiscal year 2006-07 and fiscal year 2013-14, or until paid in full. We’re still waiting.
Ironically, current Gov. Jerry Brown filed a civil lawsuit recently intended to recover hundreds of thousands of dollars allegedly embezzled from city coffers in a “civil conspiracy” to defraud the citizens of Bell, CA. The former City Administrator of Bell, Robert Rizzo, was charged along with seven other city officials of misappropriating millions of dollars in public funds from a financially crippled community while managing to have the city council pass a staggering $800,000 a year salary for himself. I wrote an article recently about some of the corruption in San Francisco (link below). Is what these people in Sacramento are doing that much different from those in Bell, San Franciso, and every other city and every other state and unquestionably in the federal government as well?
Because James Walker was a private citizen who stole money from a group of citizens, he is labeled as a criminal. Schwarzenegger and his cohorts in the capitol “diverted” funds away from school children, in spite of the fact that most politicians claim education is a top priority. Until the state was sued, they had no intention of repaying those billions of dollars. More recently, the state took money that was not even in the public domain, in that it was paid as a fee by corporations specifically to protect citizens who are defrauded, and merely held in trust (isn’t that an ironic term?) by the Secretary of State. In my mind, fraud is fraud, and victims are victims. Will it take a lawsuit against the state to have those funds put back where they belong and paid out to the senior citizens who already live on the edge of poverty? That is, those who remain alive, of course.
In 2010, Virginia closed its fiscal 2010 budget with a $220 million budget surplus. Texas closed with an amazing $11 billion state budget surplus, despite having no income tax. When Gray Davis took the California governor’s office in January of 1999, the economy was booming, with a budget surplus of $8 billion in 1999-2000. Davis started a spending spree amounting to an increase of $20 billion within two years. Much of that may have been well-intended, but subsequent governors-in spite of the continuing slow down in the ecomony-continued to splurge. Today, California has a $20 billion budget deficit. Both in how they manage the budget and in the way they steal from defenseless funds to pay their absurd expenditures, the people who sit fat and happy in Sacramento are criminal in their treatment of California citizens.