Department Chief Takes Over Welfare Unit Facing Probe

Continuing allegations of wrongdoing by employees of the welfare fraud investigations unit have prompted the director of the county Department of Social Services to take direct control of the division, officials said Friday.

Director Richard Jacobsen was attending a conference in Texas on Friday, but Assistant Director Lana Willingham said his action was prompted by a concern about “barriers” within the unit that have undermined attempts to investigate allegations of employee corruption.

Investigator David Sossaman has charged that some investigations of corrupt employees were covered up by some officials and investigators.

He testified before the county grand jury and raised the allegations of corruption to the media. Other investigators have made the same charges in testimony before the grand jury but have not gone to the media with the allegations.

The grand jury is investigating allegations of corruption and wrongdoing by county welfare employees.

Willingham said Jacobsen decided to assume control of the investigations unit Thursday, after learning of several recent controversial memorandums written by Dick Reed, head of the welfare fraud investigations unit, and other division employees.

Reed’s memo was called “one of the stupidest things I’ve seen” by David Janssen, county assistant chief administrator who was interviewed by the San Diego Union-Tribune. A secretary said Janssen was in Sacramento Friday and unavailable for comment.

Willingham insisted that Jacobsen’s decision to take control of the unit was not a criticism of Reed. However, Reed was not so sure.

“I haven’t spoken to (Jacobsen) since the decision was made. It’s possible that he could be unhappy, and I expect him to tell me face to face if he feels that way when I meet with him next week,” Reed said.

On Monday, Reed distributed a memo that Sossaman and other employees interpreted as an order to stop talking about the division’s problems or quit. Critics of the memo said it was also a demand for loyalty to Jacobsen.

In the memo, Reed quoted a saying by author Elbert Hubbard:

“If you work for a man, in heaven’s name WORK for him. If he pays your wages which supply your bread and butter, work for him; speak well of him; stand by him and stand by the institution he represents. . . . If you must vilify, condemn and eternally disparage, resign your position.”

On Friday, Reed said the memo was an attempt “to pull people together” and undo the unrest within the department, whose employees have taken sides in Sossaman’s allegations of corruption.

“The message was really to think about what you’re saying. . . . I was trying to put away some of the unrest here. . . . The timing was bad, but the message good,” said Reed.

The most controversial of the memos was a handwritten report by Lee Loveall about her Jan. 13 appearance before the grand jury. It was not clear to whom her memo was addressed.

Loveall, a section chief in the fraud investigations unit, wrote that grand jurors apparently believe allegations of departmental cover-ups of employee fraud.

“They were very disturbed that a district manager (of a welfare office) could tell an investigator to stop an investigation on someone,” Loveall wrote.

She said she explained to the jurors that such action is rare.

Loveall said in the memo that the panel also asked her several times about allegations that Jacobsen “was not to be embarrassed by finding that one of his staff was dirty.”

“The last time they asked . . . this question they explained that they found it hard to believe that we weren’t under some type of restriction . . . “ said Loveall in memo.

She wrote that the panel asked her for information about at least 13 welfare employees whom she named in the memo and who were accused of corruption or wrongdoing.

Loveall’s memo also appeared to support allegations by Sossaman and other investigators that some case files of employees under investigation were hidden or kept from district attorney investigators and other authorities.

In the memo, Loveall said she was asked about a particular file that senior fraud investigator Eduardo Gonzalez allegedly kept from the grand jury. The panel asked for the file, which was an investigation of a female employee suspected of fraud but never convicted, she said in the memo.

Loveall implied in the memo that she would withhold the file from them.

“They specifically asked why her (female employee’s) case did not appear in Eddie’s write-up. I told them I ran across several cases which he had not addressed. They want her case included, but I’ll try to avoid that,” wrote Loveall.

On Friday, Willingham confirmed the details of Loveall’s memo. She said she found it “disappointing that the memo has been given to the media.”

She also defended Gonzalez and said his alleged failure to provide the employee’s file and others to the grand jury was nothing more than an oversight.

Gonzalez could not be reached for comment Friday evening. Calls made to Loveall’s office Friday were directed to Willingham.

Another controversial memo was a Feb. 14 report by fraud investigator Mark Miranda. Documents made available to The Times show that Loveall asked Miranda to write a report about a meeting that he and Sossaman attended with local Republican Party officials.

A handwritten note by Loveall directed Miranda to “do a brief memo describing all you know about the meeting. . . . “

Miranda’s two-page report directed to Reed and Loveall began, “Per your request.”

His report included a brief description of Sossaman’s remarks to the political group and listed the names of several people who met with Sossaman.

Reed acknowledged that Miranda’s memo gave the impression that Sossaman’s superiors had assigned somebody to spy on him. Reed said he had no knowledge of Loveall’s order to Miranda to write the report until the memo was delivered to him.

“In retrospect, that was not the proper thing to do,” Reed said.

Miranda, who is viewed by colleagues as one of the unit’s most capable investigators, is at the center of another controversy.

Sources told The Times that Miranda testified before the grand jury that a fellow investigator had instructed him to lie before the panel. The investigator, who could not be reached for comment Friday, worked on the largest welfare fraud case ever investigated in San Diego County.

The investigation produced allegations that a ring of 20 people, who were led by five former county welfare employees, embezzled as much as $1 million in a scheme of phony payments from 1986 to 1990.

Eleven of the defendants have pleaded guilty in the case to date.

Miranda refused to discuss his grand jury testimony, but sources said he was asked by the other investigator to lie if the panel asked him about corrupt employees who were never investigated or prosecuted.

Willingham said she was aware of the allegation that Miranda was instructed to lie, but declined to discuss it. Instead, she said employees are being told to tell the truth if called to testify before the grand jury.

“We are issuing a memo to staff and met personally with staff. We told staff that in no way should anyone lie to the grand jury. Full disclosure of information is our standard and what we expect of our employees,” Willingham said.

A former welfare employee who testified before the grand jury told The Times that the panel instructed her not to talk to the investigator who allegedly told Miranda to lie or to senior investigator Gonzalez if they tried to interview her again.

The woman, who requested anonymity, said the two investigators questioned her about employee corruption in late 1991. When summoned to appear before the panel, she testified that she had been questioned by the two men.

“One of the jurors got very upset by that and instructed me not to talk to them if they ever called me again,” said the former employee.