Prospective county supervisor candidate Cindy Chavez participated in decisions in which she had a conflict of interest when she helped move hundreds of thousands of dollars out of a local health nonprofit, according to copies of board minutes obtained by San Jose Inside.
The minutes—which the non-profit Santa Clara Family Health Foundation (SCFHF) refused to release last week—highlight Chavez’s central role in engineering transactions that funded other Chavez-led organizations.
At a pivotal meeting last June, Chavez was re-appointed to SCFHF’s board, and her close ally California Assembly Speaker pro Tempore Nora Campos was named to a seat. Chavez then voted to approve a budget that included a line item in which one of her employers, Working Partnerships USA, had a financial interest—and to fund a political campaign that was largely run by her other employer, the South Bay Labor Council. Towards the end of the meeting, Chavez proposed and won approval for a motion to create a five-member executive committee, with her as one of its members.
With the June board resolutions in place, SCFHF was free to use funds for purposes other than paying the health care premiums of low income kids. In the past nine months, it has
• awarded $150,000 in funding to Chavez’s Working Partnerships USA (WPUSA) for “community outreach.”
• given $250,000 to a “Yes on A” sales tax campaign, which was run by Chavez and two other SCFHF directors. The committee subsequently passed $100,000 to South Bay Labor Council and Democratic Central Committee campaign organizations.
The Santa Clara County Health Foundation raises funds to buy health coverage for uninsured children in Santa Clara County. The insurance programs are managed by Santa Clara Family Health Plan, a similarly named but legally distinct public agency. The Health Plan is much larger than the foundation and, unlike SCFHF, holds public board meetings and posts its minutes to the web.
The two entities are often confused, as they were last Friday when San Jose councilmembers Pete Constant and Johnny Khamis issued a memo calling for an investigation into whether some of the more than $6 million the city had given to the health foundation was put to political use. Santa Clara Family Health Plan CEO Elizabeth Darrow confirmed that the city’s money was actually paid directly to the health plan, not to the foundation.
The foundation encourages the confusion between the two by taking credit for public contributions to the health plan. It lists the cities of Cupertino, Los Altos, Milpitas, Mountain View, San Jose and Sunnyvale as donors on its website and includes the contributions—even though they go directly to the health plan—in its annual budget numbers.
The foundation’s June 9, 2012 board meeting saw directors unanimously approve a $9.2 million budget. The actual numbers are much less. According to the organization’s most recent IRS Form 990, it had revenues of just $1.3 million in the previous year, and projected expenses in the current year are less than $1.5 million. SCFHF’s budget comes principally from foundation grants, public agencies and fundraising events. The Measure A campaign represented about one-sixth of its budget. WPUSA got another 10 percent, as did its politically ambitious CEO, former Saratoga Mayor Kathleen King, who is a close ally of Chavez’s and briefly ran for county supervisor last year.
“They were little mob bosses,” says one source who’s familiar with how the politically connected duo operated at the foundation and in their interactions with other agencies. “That’s the way they behaved. Everybody’s terrified of them.”
The minutes obtained by San Jose Inside reveal that Chavez attended the June 8, 2012 board of directors meeting that unanimously approved funding the tax campaign. The committee that ran the campaign was already in place from an unsuccessful 2010 parcel tax measure the South Bay Labor Council and SCFHF had brought before voters.
The Yes on A committee quickly turned funds over to the labor council’s PAC, which was handling a variety of initiatives, including the expansion of cardroom gambling, a clean water tax and the minimum wage increase. Chavez also served as co-chair of the Measure B safe water tax campaign, which similarly paid the South Bay Labor Council Issues PAC to campaign on its behalf.
When labor officials bought burritos at Guadalajara Market, pizza at Tony & Alba’s or sandwiches at Subway for campaign workers, the expenses were allocated among the various initiatives. A 329-page campaign filing for the commingled account shows that when then-SBLC political director Ben Field was reimbursed $14.27 for a meal tab, $3.89 of the expense was charged to the Measure D, $2.27 to Measure A, $2.60 to Measure E, and two dollars and change for or against each of state propositions 30 and 32.
The money that hopped from SCFHF to the Yes on A committee to SBLC’s PAC also reimbursed $10,597.89 in SBLC’s general salaries and overhead, according to filings. In this case, Chavez was at every stage of the transaction: the funder, the strategist, the intermediary, the employer, the individual recipient.
According to the National Council of Nonprofits, all nonprofit organization should have in place policies to “prohibit interested board members from voting on any matter that gives rise to a conflict between their personal interests and the nonprofit’s interests.”
An organization that is tax-exempt under Internal Revenue Service laws must follow strict guidelines to avoid transactions that personally benefit its officers or directors. Such prohibited transactions are known as “self dealing.”
When Cindy Chavez seconded the motion to approve Santa Clara Family Health Foundation’s budget last June, it included the allocation for Working Partnerships’ “outreach” services. The outreach is primarily funded by the public agency First 5 Santa Clara County, which is a unit of county government. It is chaired by Board of Supervisors Chair Ken Yeager and is funded by Proposition 10 tobacco excise taxes.
First 5, has surplus funds, insiders say, because its health programs primarily service the children of undocumented immigrants, and less children and pregnant women are crossing the border these days. WPUSA also is not certified to run health insurance enrollment programs.
Nonetheless, the First 5-funded Working Partnerships “Community Outreach” grant was increased from $120,000 to $150,000 in documents circulated at its Feb. 1 board meeting. It was about a month after Working Partnerships took over responsibility for paying the portion of Chavez’s salary previously covered by the South Bay Labor Council.