California Public Utilities Commission fired director who exposed missing $200M

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Earlier this year, the governing board of considered one of California’s most critical regulatory businesses unleashed troubling accusations in opposition to its high worker.

Commissioners with the California Public Utilities Commission, or CPUC, accused Govt Director Alice Stebbins of violating speak personnel suggestions by hiring ragged colleagues with out ultimate qualifications. They said the agency chief misled the overall public by striking forward that as great as $200 million changed into missing from accounts intended to fund programs for the speak’s blind, deaf and unlucky. At a hearing in August, Commission President Marybel Batjer said that Stebbins had discredited the CPUC.

“You took a chain of actions over the course of quite loads of years that calls into question your integrity,” Batjer informed Stebbins, who joined the agency in 2018. Those actions, she said, “predicament off us to hope to protect cease into consideration whether you furthermore mght can continue to reduction as the chief of this agency.”

The five commissioners voted unanimously to cease Stebbins, who had worked as an auditor and funds analyst for slightly about a speak businesses for bigger than 30 years.

Nonetheless an investigation by the Bay Metropolis Recordsdata Foundation and ProPublica has stumbled on that Stebbins changed into moral concerning the missing money.

Ethical days sooner than Stebbins changed into fired, CPUC officers informed California’s Department of Finance that the agency changed into owed bigger than $200 million, in accordance to a memo obtained by the guidelines organizations. The finance agency launched an investigation into the uncollected funds.

The knowledge organizations’ investigation furthermore stumbled on flaws within the Impart Personnel Board document that Batjer out of date to cease Stebbins. Three ragged CPUC workers said in interviews that the document contained falsehoods. The document alleged that the auditor who discovered the missing money changed into unqualified. Nonetheless hiring materials obtained by the guidelines organizations level to that speak officers had distinct that the auditor changed into basically the most first-rate candidate, awarding him an “pleasing” ranking in every category.

Batjer, a ragged casino govt, changed into appointed by Gov. Gavin Newsom to manual the rate in July 2019, the identical month Stebbins briefed the commissioners on complications with the agency’s accounting practices. Early on, Batjer scrutinized Stebbins’ personnel choices, in accordance to previously unreported textual relate material messages obtained by the guidelines organizations. At this time after she changed into sworn in as president in August, Batjer texted a ragged colleague in Newsom’s cupboard.

Marybel Batjer speaking in 2019, as California Gov. Gavin Newsom looks on.
(Rich Pedroncelli/AP Characterize)

Batjer informed Julie Lee, who changed into serving as California’s acting secretary of Authorities Operations, or GovOps, that she changed into “very fervent”: She believed the auditor changed into no longer first-rate for the job and changed into upset that Stebbins had given him a elevate after striking him liable for additional workers. Batjer had previously served as head of GovOps, which oversees the Impart Personnel Board.

“I fetch this awful!” Batjer wrote to her frail colleague. “I’m terribly terrified. Thanks great for any advice/let you furthermore mght can bring together sooner than this will get great worse.”

“Let’s occasion and identify this out!” Lee answered. “We are in a position to let you fix, don’t stress.”

The commissioners appear to maintain violated speak transparency regulations after they later exchanged textual relate material messages amongst themselves about whether to fire Stebbins. California regulation prohibits the extensive majority of a public physique from discussing issues below its jurisdiction initiate air of an on a standard foundation assembly, seriously to fabricate a consensus, ultimate experts said.

“I will’t have faith her last,” Batjer wrote a fellow commissioner in a non-public textual relate material message.

Stebbins filed a wrongful termination swimsuit in opposition to the CPUC this month. In a chain of interviews, basically the most intensive since her termination, she described an agency mired in disorganization and ineptitude. An experienced administrator, she changed into recruited by the old president to orderly up a dysfunctional agency. She stumbled on some of her workers didn’t know general files concerning the utilities they were speculated to be regulating — in a single case, missing even fresh contact files for regulated water companies. Audits dating reduction to 2012 had stumbled on ineffective funds administration and a need for improved fiscal monitoring.

“You’ve got ultimate systemic considerations,” Stebbins said in an interview. “Basically the most efficient procedure you furthermore mght can originate those changes is to genuinely scramble it apart.”

Batjer didn’t answer to requests for an interview. The opposite commissioners didn’t return emails attempting for comment. The CPUC has no longer but answered to Stebbins’ lawsuit. Through a spokesperson, Lee denied that she precipitated or influenced the investigation into Stebbins. The Impart Personnel Board declined to comment on their investigation.

In step with detailed questions, rate spokeswoman Terrie Prosper said that Stebbins’ allegation of $200 million in missing fines and costs changed into the pinnacle outcomes of a misunderstanding of the rate’s accounting practices.

Prosper didn’t deal with the apparent initiate assembly violations, citing pending litigation. Nonetheless she said Stebbins’ manipulation of the hiring job warranted her dismissal. She acknowledged “some inaccuracies” within the speak personnel document however pushed aside them as “nonsubstantive particulars.”

“Her allegation that she changed into pushed aside for locating alleged funds irregularities flies within the face of the clear public action taken by the CPUC,” Prosper said.

A Cleanup Job

The CPUC changed into fashioned within the early 20th century to adjust railroads. Since then, quite loads of different industries were positioned below its oversight, together with giant electrical and gasoline monopolies, mobile telephone companies, water providers and transportation companies fancy Uber and Lyft, making it considered one of basically the most critical businesses in California.

Nonetheless in fresh years, the CPUC has confronted accusations that it has changed into too cushty with utilities. In 2010, a PG&E gasoline line exploded within the San Francisco suburb of San Bruno, killed eight and destroyed 30 homes. The CPUC president at the time, a ragged energy govt, resigned after it changed into printed he and his crew were serving to a PG&E govt lift the protect cease for an upcoming rate case.

Stebbins changed into hired as the agency’s govt director in February 2018 to bring original scrutiny to its funds and operations.

Stebbins changed into horrified by what she stumbled on at the CPUC. Fiscal mismanagement and disorganization made conserving utilities to blame impossible, she said. She ordered intensive audits of agency divisions, accounting practices and genuinely expert programs for providing providers to impoverished and disabled California residents.

She snappy fired the head of the Water Division, who oversaw 110 investor-owned utilities serving about 6.3 million residents. Stebbins said that the division wasn’t conserving general records fancy contact files for the utilities it regulates.

An audit stumbled on division crew members were in most cases no longer conducting required on-location visits and after they did, the inspections were transient and incomplete. When a utility changed into stumbled on out of compliance with regulations, the division every now and then ever issued citations, even when violations persevered. One utility had been accumulating charges from ratepayers for 19 years and failing to ship the money to the CPUC, Stebbins said.

“It changed into a nonfunctioning division, and it’s light for basically the most part nonfunctioning,” Stebbins said.

Thousands and hundreds Past Due

One audit Stebbins ordered stumbled on the CPUC changed into doing a unlucky job accumulating on money owed. It stumbled on $49.9 million in outstanding collections as of the pinnacle of 2019. That integrated bigger than $12 million in enforcement fines, bigger than $22 million in telecommunication fines and better than $14 million in reimbursable contracts. About $21.1 million had been due since sooner than 2017.

“On condition that nearly about $50 million is owed to the CPUC,” the audit said, “CPUC can also light investigate whether the program areas originate basically the most of appropriate series efforts in opposition to companies with delinquent payments and to what extent note up occurs.”

In a observation to the guidelines organizations, the CPUC argued that it changed into aggressively accumulating past due fines and costs however that those efforts were mired in court docket actions or appeals. In explicit, the agency said two defunct companies owed nearly about $19.8 million in fines from a 2010 investigation. The matter changed into taken to court docket and an appeals court docket upheld a judgment within the CPUC’s favor in July.

The audit furthermore hinted that there will be great extra owed that is no longer any longer accounted for within the official e book of file. For distinct surcharges and costs, the CPUC enables companies to self-document what they owe and does no longer monitor whether they’ve paid.

The CPUC headquarters in San Francisco.
(Andri Tambunan, particular to ProPublica)

In early 2019, Stebbins hired Bernard Azevedo, a ragged colleague, as director of administrative providers. Azevedo had been an accountant with the speak for 30 years, most no longer too prolonged within the past as a division chief for the Air Resources Board. Amongst other issues, Azevedo started attempting moderately into the self-reported charges.

What he stumbled on fearful him. A superior a part of the costs were light as surcharges on buyer bills, seriously mobile telephone bills, to fund very crucial assistance programs for unlucky and disabled of us. Nonetheless the CPUC changed into doing a unlucky job of tracking what the utilities owed, he said. Those liable for the assistance programs were monitoring the money, in wish to the accounting location of enterprise. So at the pinnacle of each and each fiscal year, accountants merely reset the quantity because of the zero, assuming the costs had been light.

Azevedo estimated that the utilities owed the CPUC bigger than $150 million beyond the $49 million identified within the audit.

“We don’t know what we’re accumulating,” Azevedo said in an interview. “We don’t know who’s paying; we don’t perceive how great they’re paying.”

“I maintain true concerns,” Azevedo said. “Right here’s a bunch of cash.”

Azevedo estimated that the Lifeline program, which offers mobile telephone carrier for low-profits Californians, will be short $61 million. The Deaf and Disabled Telecommunications Program, which offers devices to of us with disabilities, will be missing $6.3 million. The California Teleconnect Fund, which offers low-price carrier to varsities, libraries, neighborhood colleges, hospitals, effectively being clinics and other neighborhood organizations, had no longer got some $10 million owed by utilities.

Stebbins alleges that the agency light most efficient $21 million within the 2018-19 fiscal year. Its odd accounting practices made it no longer easy to give an rationalization for which utilities paid or if they paid the moral quantity.

“I’ve never seen it accomplished this procedure by any organization I’ve worked for in 34 years in auditing and accounting for the speak,” Stebbins said.

For the length of Stebbins’ termination hearing, Batjer said, “the CPUC didn’t maintain $200 million in uncollected charges” and pointed to the audit document, which stumbled on most efficient $49.9 million changed into uncollected.

Nonetheless a letter from the CPUC’s initiate air counsel Suzanne Solomon that changed into despatched to Stebbins’ attorneys about a days sooner than Batjer’s remarks contradicted Batjer. Solomon acknowledged an additional $141 million owed as of June 2019 however argued that the CPUC expected to rep those charges the following year.

In a observation, the CPUC alleged that Stebbins and her attorneys made “many unfounded allegations” that “reflected a misunderstanding of the speak’s accounting system and solutions.”

Stebbins and Azevedo relate that they’re confident that they had discovered a true disaster. Nonetheless their investigation changed into lower short after they were each and each fired. Stebbins said, “I deem there’s millions and millions of bucks extra accessible which maintain no longer been reported.”

A Unique Boss

In April 2020, two investigators with the Impart Personnel Board contacted Stebbins. They desired to take dangle of about quite loads of fresh hires. Stebbins didn’t deem great of it at the time.

Nonetheless a month later, an licensed legit from the speak Felony legit General’s Discipline of job emailed her a draft document from the Impart Personnel Board that alleged she violated civil carrier suggestions and hired ragged colleagues who weren’t as first-rate as other candidates. She changed into directed to put up a response inner every week.

Stebbins changed into bewildered. She said she stumbled on the document wildly unsuitable — she didn’t have faith she had violated any civil providers suggestions. She confronted quite loads of commissioners. “I had some moderately passionate discussions with commissioners. I genuinely would perhaps well no longer in any appreciate convince them that the document changed into unsuitable, none of them would hearken to me,” Stebbins said. “It changed into abnormal attributable to I had a factual relationship with the commissioners and impulsively I didn’t.”

Text messages negate the commissioners were already deeply engaged in dialogue about her termination. They complained about Stebbins’ behavior and consoled one one other emotionally. They looked taken aback by the vehemence of Stebbins’ arguments.

On July 8, Commissioner Clifford Rechtschaffen wrote to Batjer, “It is clearly apparent that it’s untenable for her to protect working right here and we needs to be working from that assumption.”

Batjer wrote reduction, “I will’t have faith her last.”

Rechtschaffen furthermore wrote, “It’s no longer tenable for her to protect,” to Commissioner Liane Randolph the identical day.

“Heart-broken Marybel is genuinely combating this,” Rechtschaffen wrote to Randolph, who changed into no longer too prolonged within the past nominated to streak California’s Air Resources Board.

A textual relate material message alternate between two of the CPUC commissioners about Stebbins’ termination.
(Obtained from court docket records)

Below California’s Bagley-Keene Act, it’s unlawful for a majority of commissioners to discuss an argument amongst themselves initiate air of a gathering. It is ultimate for two commissioners to discuss considerations between themselves, however if they relay it to a majority initiate air of a gathering, it becomes unlawful. In the case of the CPUC, a majority is three commissioners.

Public officers who violate the regulation can face misdemeanor criminal charges, on the opposite hand it’s every now and then ever enforced.

“It is possible you’ll well perhaps also’t contrivance something else initiate air of a public assembly that ends in a dialogue between a majority,” said Kelly Aviles, an licensed legit specializing in authorities transparency. “It is possible you’ll well perhaps also’t contrivance something else circuitously that you just furthermore mght can’t contrivance straight away.”

Some topics, such as personnel issues, would perhaps well even be withheld from public peep by discussing them in a non-public session, however the closed sessions can also light be performed the identical procedure as any other assembly. For a dialogue to be non-public, the members must cite regulation that lets within the topic to be talked about in a closed assembly. “Ethical attributable to you furthermore mght can discuss something in closed session, it doesn’t enable this form of free-for-all and likewise you furthermore mght can now discuss it initiate air of meetings,” Aviles said. “It is possible you’ll well perhaps also’t. You’re sure by the identical requirement.”

Because the weeks went on, the agreement between the commissioners to fire Stebbins grew stronger. On July 14, Randolph summed up the outcomes of the commissioners’ textual relate material coast: “We all agree” to fire Stebbins.

Aviles said that building a consensus initiate air of a public assembly is furthermore a violation. “You’re no longer even speculated to be discussing issues that are within the physique’s discipline matter jurisdiction initiate air of a public assembly. The indisputable truth that they’re coming to a consensus is ultimate the cherry on high,” she said.


Stebbins changed into positioned on administrative league leave on Aug. 4. A pair of days later, Batjer took the irregular step of sending the Impart Personnel Board document to all 1,400 CPUC workers.

Batjer out of date the document to clarify firing Stebbins at the overall public hearing.

“It is appalling and disgraceful to engineer the hiring of a marginally first-rate ragged colleague over extra first-rate candidates, spike the actual person’s pay and then originate unfounded statements attempting to clarify the compensation,” Batjer said for the length of Stebbins’ termination hearing, making an apparent reference to Azevedo.

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