'I'm so shocked.' New records reveal depth of probe into California Office of Democrat AIDS fraud

[Leroy N. Soetoro]

https://www.sacbee.com/news/politics-government/the-state-
worker/article255549481.html#storylink=related_inline

As investigators began to realize there were financial irregularities
inside the California Office of AIDS in 2018, they confronted worker
Schenelle Flores Nov. 7 of that year and told her she was no longer in
charge of the office’s HIV Prevention Branch’s fiscal operations.

Flores response: She called in sick the next day and every day after that
until her resignation on Nov. 20, 2018, citing “medical and personal
reasons.”

“I am left now unable to continue working in my position as the Health
Program Manager in the Office of AIDS at the California Department of
Health,” Flores wrote in a 5:45 p.m. email to her boss. “Unfortunately I
now need to face facts and pay more attention to my health and I am unable
to do this while I am still working.”

Gil Chavez, a CDPH deputy director and state epidemiologist, weighed in
directly: “Please process the necessary paperwork today,” Chavez wrote in
an email. “Let me know when this has been completed.”

Within weeks, auditors had begun to unravel what prosecutors now say was a
$2.7 million fraud using a Southern California contractor for the Office
of AIDS to bankroll Flores’ trips to Disneyland, concerts and sporting
events by billing the state for the cost.

“I’m so shocked,” Marisa Ramos, acting chief of the Office of AIDS, wrote
in a Dec. 12, 2018, email after being briefed on what auditors were
discovering.

The revelations are contained in a batch of emails and internal CDPH
documents released Thursday to The Sacramento Bee in response to public
records requests and a lawsuit against the agency seeking the release of
those and other records.

The documents, the second batch CDPH has handed over in recent days,
describe state-hired auditors and investigators from the FBI and
California Highway Patrol beginning a probe that would lead to guilty
pleas to wire fraud by Flores and co-worker Christine Iwamoto in the
scandal.

Both have agreed to cooperate with federal prosecutors as they continue
their investigation into how the state agency used MLB Distributors, a
contractor with offices in Fresno and Coarsegold in Madera County, to pay
invoices submitted by two firms that state officials ended up suspecting
were phony companies that had not actually done any work for the office.

Investigators descended on MLB’s Fresno warehouse on Dec. 11, 2018, to
collect bank statements, invoices and text messages and spent four hours
speaking with MLB’s chief financial officer, Leon Pick, while the
company’s chief executive officer, Mark Bell, was present with an attorney
and an accountant, the newly released documents say.

“A number of times during the discussion Leon noted MLB was like the
Office of Aids bank account,” according to an email report on the visit by
Samantha Parish of the auditing firm, Deloitte.

The report describes MLB’s attorney as saying the company wanted “to
cooperate fully with the investigation,” and said Pick was rattled by the
situation.

“Leon was very emotional at the end of the discussion described himself as
‘shocked’ and ‘devastated,’ he noted concerns regarding next steps, impact
to MLB employees, the business and their reputations,” Parish wrote.

Pick has not responded to messages seeking comment, and Bell told The Bee
Wednesday that he was cooperating with the federal criminal probe into the
scandal and could not comment. MLB was dissolved as a company in 2019.

The documents describe how Pick provided Flores with his debit card number
and details after she asked for the information to streamline payments.

“This was at Schenelle’s request, Leon’s perspective was that the funds
were Office of Aids funds and as she was a Chief he thought it okay that
she directly utilize funds for OA purposes,” Parish wrote, adding that the
“activities” began in December 2017 when Flores asked for help organizing
an off-site meeting and “then escalated.”

“March 2018 is when Schenelle was provided with debit card information and
started to utilize funds in the MLB Chase account directly,” Parish wrote.
“Leon’s main communications with Schenelle were via email and text.”

“Leon did raise concerns with their accountant about the nature of
payments being transacted, and was advised to take direction from Office
of Aids (Schenelle Flores) as to how to code and record the transactions
and maintain supporting information MLB has available ( emails, bank
statements, Chase Bank alerts...,” Parish wrote. “The perspective being
that funds were Office of Aids and were being utilized directly by Office
of Aids personnel, further, MLB’s contract was to perform services at the
direction of Office of Aids and not to judge the use of funds.”

The “use of funds” included what investigators wrote were more than
$200,000 in expenses at Disneyland.

“Leon noted that Schenelle would contact him on weekends when she was
trying to make purchases with the debit card which were blocked due to
‘fraud alert’ controls by Chase Bank and ask Leon to contact the bank and
approve/release the hold,” Parish wrote. “He noted a recent example when
Schenelle called him to help with the release of a $43k payment to Disney
Land Resorts which she said was for an Office of Aids meeting for 17
people.

“Leon and Mark thought most of the expenses related to corporate boxes and
hotels, while high in cost and number, were for Office of Aids meetings.”

Court records say Iwamoto, who worked with Flores in the office, created a
phony company to eventually bill the office for $450,000 for public
relations work that never was performed.

The documents released Thursday say officials also grew suspicious about
billings of about $1 million from a second company that none of them had
ever heard of.

“Are any either of you familiar with Web Tech Solutions?” CDPH assistant
director Drew Johnson wrote in a Feb. 27, 2019, email to two other agency
officials. “It appears OA paid them many hundreds of thousands of dollars
last year.”

“Do we know what this is?” replied Ramos, the interim chief of the Office
of AIDS.

Another official tried Google, Bing and other online searches, but came up
empty.

On March 1, 2019, Johnson wrote to two CHP investigators, Timothy Shively
and Thomas Tietz, about the company.

“Just want to confirm re: Web Tech Solutions below - OA leadership has
confirmed that none of these services as described in the invoices ever
occurred,” he wrote. “It appears to be a sham or a front for some back end
payments that did not benefit the Office of AIDS.”

Three days later, Johnson wrote back to the CHP, informing them that,
after a review of Office of AIDS expenses found by Deloitte, “Web Tech
Solutions appears to be a fictitious company that Schenelle was
profiting.”

“The Web Tech Solution invoices alone total roughly $1 million (in
addition to everything else included on the ledger),” Johnson added.

Johnson sent out another email March 22, 2019, confirming that the CHP had
looked into Web Tech.

“I talked to Officer Shively yesterday specifically about Web Tech and
they are very aware of it,” he wrote. “They have developed some kind of
spreadsheet for theme related charges - Disneyland was over $200,000,
according to Officer Shively.”

Court records say Iwamoto created a phony company and used a fake email
account under the name of “Patricia Roberts” to bill the Office of AIDS
for work that was never done, and CDPH documents show the Roberts Gmail
account being used to bill the office using the name of PR Management
Consultants. That company’s address was a UPS mailbox store on Calvine
Road in Sacramento.

“According to Shively, they are unpacking all of this (now!) and trusting
no one,” Johnson wrote in a March 22, 2019, email.

The newly released documents also confirm earlier documents that indicate
part of the investigation stemmed from discovery of a Flores Disneyland
itinerary in an office “shred bin,” a locked box where shredded documents
are kept.

“Officers, I have a thumb drive with all of the downloaded invoices from
MLB if you would like to stop by and retrieve,” Johnson wrote to the CHP.
“I have spent a couple of hours scanning with some observations -1) At the
very bottom are the more damaging appearing invoices including Von’s which
looks like tens or hundreds of thousands of dollars in $100 gift cards.

“2) There are invoices which show hotel reservations at Whitney Peaks
hotel in Reno.

“3} There is the invoice from The Mix here in mid-town for $7,900 or so
serving 65 people with food and bar. There are others as well.

“What I did not find though were invoices that paid for Raiders tickets,
Kings tickets, Disneyland, cruises, etc. I asked Deloitte why I did not
see these invoices and they said they did not know, but some of the
information i.e. the S. F. Giants, was in the shred bin materials; which I
do remember the invoice signed by Mark Bell of MLB for the Tony Bennet
(sic) suite.”

The Tony Bennett suite in left field at Oracle Park offers 25 tickets and
four parking passes to Giants fans, and suite prices range from $3,000 to
$8,000 per game at the park, according to the Giants website.



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