Michael Wallace, president of the Washington Township Health Care District board, is also the chairman of the board of Fremont Bank, which has received more than $1 million in fees from the taxpayer-funded district. Wallace declined to comment on the investigation.
The California Fair Political Practices Commission's decision to investigate Wallace, made public last week, is the latest in a series of probes it has initiated following a July report by The Bay Citizen that uncovered millions of dollars in questionable transactions involving companies and nonprofits with ties to health care district officials across the state.
Gerald Shefren and Arthur Faro, board members of the Sequoia Healthcare District in Redwood City, and Frank Burgess, a former board member of the San Gorgonio Memorial Healthcare District in Riverside County, also are under investigation for possibly violating state conflict-of-interest laws.
California’s more than 70 taxpayer-funded health care districts control multimillion-dollar budgets with little state oversight. While some operate hospitals or nursing homes, others manage real estate holdings and distribute community grants.
Since 1990, Wallace has served on the board of directors of the Washington Township Health Care District. Over the past decade, the district has paid Fremont Bank more than $1.2 million in fees.
During the same period, Wallace held a variety of leadership roles at the bank, where he is now board chairman. As recently as last year, his salary was more than $100,000, while he held more than $1 million of stock in the bank’s parent company.
In a statement issued to The Bay Citizen in July, Wallace defended his actions, saying, “I did not participate in the district’s selection of Fremont Bank in 2001 and abstained from the board’s vote.
But state conflict-of-interest laws generally prohibit public boards and commissions from entering into a contract that could benefit any member financially, even if the member does not participate in the contracting decisions. Punishments for conflict-of-interest violations can range from warning letters to fines.
The commission decided not to investigate Nancy Farber, CEO of the Washington Hospital Healthcare System. As CEO, Farber reports to the Washington Township district’s board, which oversees Washington Hospital and various outpatient clinics that serve residents primarily in southern Alameda County. The hospital district board approved two grants worth a total of $350,000 to the George Mark Children's House, a nonprofit where Farber’s husband, Peter Farber-Szekrenyi, served as an unpaid board member.
Farber did not vote on either grant because she does not sit on the district board, but she did participate in a discussion about one of the grants. Less than a month after the district approved the second grant, her husband became a paid consultant for the nonprofit, earning $12,800 a month. In April 2011, Farber-Szekrenyi became its CEO, earning $208,000 a year. Under state law, public officials cannot participate in a decision in which they have a financial interest.
The commission determined that because Farber's husband was a volunteer when the grants were approved, there was no conflict of interest, according to Gary Winuk, chief of the commission’s enforcement division: “He was volunteering there, and not an employee at the time the decision was made, so there is no conflict if there is no pay.”
Farber declined to comment on the agency's decision. A district spokeswoman would not reveal how much the district has spent in legal fees to represent Wallace and Farber in the commission's inquiries.