Political Issues Cloud State’s Conspiracy Probe of Chico Feminist Center

Times Staff Writer

The caller had a seemingly simple query for the people running the local office of the state Department of Employment Development.

Was it proper, she asked, for someone to volunteer up to 70 hours a week at a nonprofit agency while collecting unemployment benefits?

It was no idle hypothetical question. Authorities soon learned that the caller was a former employee of the Chico Feminist Women’s Health Center--a gynecological, birth control and abortion clinic administered by women who are not physicians--and the subjects of her query were clinic directors who had laid her off.

Not long after the call was received in the spring of 1983, state officials began a routine investigation into the clinic, an investigation that has since grown into one of the longest and costliest unemployment insurance probes in state history.


Enforcement or Vendetta?

Still at issue is whether the case is a simple matter of enforcing state law, as prosecutors say, or whether it is, as clinic directors contend, a vendetta against this and other abortion clinics--and against politically controversial nonprofit groups in general.

The defendants accuse state investigators of misconduct, such as conducting questionable searches, sharing confidential patient records with third parties and not filing charges until they had been sued for harassing the clinic.

There also is concern about a note in which a top state investigator warned his supervisors in the Deukmejian Administration about purportedly “devious” or “serious . . . political involvement” by some clinic workers, such as their support of former Gov. Edmund G. Brown Jr.


The defendants say their politics is no business of the state.

“We aren’t being prosecuted for what we did, but for who we are and what we believe in,” said Dianne (Dido) Hasper, one of six women accused of felony conspiracy.

Prosecutor Gerald E. Flanagan, chief deputy district attorney for Butte County, dismissed the idea that politics is behind the case.

“For years, they’ve been running at this thing as a political prosecution, but . . . it’s not there. It’s a smoke screen,” he said. “The underlying facts are fairly simple. It’s a clear case of fraud.”


If a jury eventually agrees--a preliminary hearing is under way to see if there is enough evidence for a full trial--this case may affect many other nonprofit agencies, particularly new and politically unpopular ones, that some management experts say use the same or similar practices.

Small-Town Values

The setting for this debate, Chico, is an interesting amalgam of small-town values and big-city thinkers. The town is a place Norman Rockwell would have liked, a city of 60,000 people living in quaint frame houses on tree-shaded streets around one of the nation’s biggest municipal parks.

But Chico also is the home of a 14,000-student university campus, Cal State Chico, which draws free-thinking students from Los Angeles and the Bay Area, and the town is the business hub of a booming agricultural area.


The health center has had its run-ins with conservative elements within the community, said Hasper and fellow administrator Shauna Heckert. Demonstrators sometimes picket the center, which opened in 1975, while local physicians were less than hospitable until a clinic suit forced an out-of-court truce in which physicians agreed to make referrals to and accept referrals from the center.

However, even some abortion opponents wonder why their financially strapped county would spend so much--$500,000 by some estimates, with the trial months away--on a criminal case that could have been handled civilly with the forced repayment of disputed benefits.

At issue is whether the center, during the 1981-83 recession, supplemented its payroll by having six employees conspire to fraudulently apply for $30,000 in unemployment benefits while still being paid.

The six employees--Jeannie Clayton, Thora DeLey, Vickie Keeran and Maureen Pierce, as well as Hasper and Heckert--concede that they took turns receiving unemployment benefits while volunteering at the clinic, which is legal.


“We don’t contest anything,” said Heckert, who runs a satellite clinic in Sacramento, one of three that the Chico center operates in Northern California. The others are in Santa Rosa and Redding. “We do not contest the fact that we were on unemployment. We do not contest the fact that we volunteered.

“The only thing we deny is that there was an intent to defraud. There wasn’t. There never has been.”

But the volunteers also received what were described as expense reimbursements, and the crux of the case is whether those payments were legitimate or a disguised form of salary.

Flanagan, acting on information provided by the state, insisted that the expenses for which the women were reimbursed actually were a fraudulent attempt to make up the difference between the women’s usual salary and the modest unemployment stipend.


“At the end of each pay period,” he said, “they (the volunteers) put in their pockets the exact amount they would have been paid. That is, to me, suspicious, to say the least.”

Flanagan said papers seized at the clinic, including what he described as a “secret volunteer reimbursement ledger,” show that a typical defendant would normally earn $204 a week and actually take home $180.07 after taxes and other deductions were subtracted.

When that person went off the official payroll, he said the books show that she would receive $104 a week in unemployment benefits and acknowledge getting another $25 in pay from the clinic--the maximum amount allowed before jobless benefits must by law be reduced.

‘Net Salary Owed’


Flanagan contends the alleged secret ledger shows another payment of $51.07 for the same week. The general ledger lists that sum as expense reimbursements--within a penny, split evenly between food and gasoline. However, a different page shown The Times, purportedly from the secret book, listed the payment as “net salary owed.” Indeed, the $51.07 would bring the defendant’s weekly income to $180.07--her normal take-home pay.

Such dealings, if proven in court to be an accurate account of a deliberate effort to deceive, not only would have resulted in essentially a state subsidy for the clinic but would have helped the clinic avoid thousands of dollars in taxes, prosecutors said.

Those allegedly incriminating ledgers, however, may never be seen by a jury.

Once investigators were tipped by the former health center employee, who apparently was not among those who received the disputed payments, a Department of Employment Development auditor sought to examine the clinic’s ledgers. To prevent clinic directors from becoming suspicious, he told them his review was simply a routine audit.


Chico Municipal Judge William A. Skillman later decided that audit was “quite simply a conventional search and seizure” that should have been done under authority of a search warrant. Skillman’s opinion was upset in Superior Court, but the issue has been taken up by the state Court of Appeal in Sacramento.

Flanagan conceded that if the appellate court finds a warrant was needed for the initial audit, most of the prosecution’s documentary evidence in the case may be inadmissible.

To compound the controversy of the warrantless audit, both sides agree that once clinic files were seized Feb. 21, 1984, confidential patient records were shared with third parties. However, they disagree who the others were.

Clinic operators have said in a civil lawsuit that records were distributed “throughout California” in an effort to “spawn additional investigations of . . . the health center and its principals.” One state investigator was accused in the suit of giving information to an unnamed “anti-abortion, pro-life group which had been interfering with the operations of the health center.”


Flanagan disputed that allegation.

‘Not Being Shown Willy-Nilly’

“While it’s true they (files containing confidential patient records) were being shown around state government--to handwriting experts and tax people--they were not being shown willy-nilly to the public,” he said.

Concern about the dissemination of health records led Municipal Judge Ann H. Rutherford to order the files sealed in November, 1985, nearly two years after they were seized. They were unsealed one year later after references to confidential medical records were hand-deleted.


Once the state took the records back, several months passed without charges being filed. Hasper and Heckert said clinic business dropped during this time, in part because new clients were afraid their records would be seized and made public by investigators.

In June, 1986, the center’s directors filed a civil lawsuit in U.S. District Court in Sacramento, contending that the women’s civil rights had been violated and their reputation and business injured because the state pursued and publicized its investigation with no hope of finding enough evidence to file charges.

Hasper and Heckert noted that formal criminal charges were made in the case Jan. 21, 1987, the day after the health center was assigned a hearing date for its federal lawsuit.

Flanagan said that is coincidental. He said he had to file at that time because the statute of limitations was about to expire on the felony conspiracy charge he sought; the statute had much earlier precluded filing the less-serious misdemeanor charges originally pursued in the case.


The case has dragged on for so long, he added, because of a temporary reduction in the district attorney’s staff and because of the court order that sealed the clinic’s financial records until confidential data was excised.

Nonsense, argue the defendants and their lawyers.

“They waited so long (to file charges), they aced out our ability to defend ourselves,” Hasper said. Defendants and bookkeepers have difficulty recalling why certain expenses were OKd five to seven years ago, she said, and two important witnesses have moved out of the state and cannot be questioned.

Other Agencies Affected


Whatever a judge and jury ultimately find, the Chico case already has other nonprofit human service agencies rethinking the use of volunteers who are also accepting unemployment benefits, said several other nonprofit managers.

“People (at other nonprofit groups) are scared to death to say they do it, but they’ve told us they do it all the time,” said Carol P. Downer of the Los Angeles-based Federation of Feminist Women’s Health Centers. “I have had lots of people call up and say, ‘My goodness, you’re having trouble for that?’ ”

Roma Guy of the Women’s Foundation in San Francisco declined to name anyone, fearing she may bring the group to the attention of authorities. But, she said, “lots of nonprofits are forced to lay people off and then turn around and ask them to volunteer.”

Handwritten notes by one state investigator show that he warned his bosses about similar activities he suspected at six other health centers in the state--clinics in Hollywood, Santa Monica and Oakland were named--as well as feminist agencies in Portland, Seattle, Atlanta and Tallahassee, Fla.


Managers at the California centers dismissed the unsubstantiated suspicions as political harassment by the conservative Deukmejian Administration.