State Warns Five Workers’ Comp Judges on Conduct : Ethics: Yearlong inquiry found no evidence of criminal activity. But questions of impropriety were raised.

In a report that prompted calls for further investigation into the workers’ compensation courts, state officials announced Friday that they have warned five of the system’s judges about possible misconduct and vowed to tighten regulations to prevent future wrongdoing.

Wrapping up a yearlong inquiry, the state Division of Workers’ Compensation found no evidence of criminal activity. But the agency concluded that three Southern California judges appear to have unwittingly violated ethics rules related to a trip to Hawaii, while two others broke state civil law by improperly accepting speaking fees from groups that appear before the courts.

“I am pleased that the most serious allegations proved to be unfounded rumor and innuendo,” said Casey L. Young, administrative director of the Division of Workers’ Compensation, referring to charges of bribery and money laundering. “The most valuable lesson of this ordeal is the realization that the line between what is acceptable behavior and what is unacceptable is not always as clear as it should be.”

But a key state lawmaker immediately called Young’s promised tightening of regulation an inadequate response and said he will call for a criminal investigation if Young does not take the action himself. Young had said he does not plan to do so.

The lawmaker, Sen. Bill Leonard (R-Big Bear)--co-author of a workers’ compensation reform measure passed last year--argued that “strong accountability” is needed in the workers’ compensation courts. Referring to statements that two judges “appear to have violated” state law and that three others “may have breached” the state code of judicial conduct, he added, “It’s weasel language that the public doesn’t enjoy.”

Stanley R. Zax, chairman and chief executive of Woodland Hills-based Zenith Insurance, one of the state’s biggest workers’ compensation insurers, said, “I don’t think that Casey Young, who apparently found violations, can think that the matter is closed.

“We can’t have a system where people are perceived to have violated the law, and there are facts to support it, and then it’s excused,” Zax said. “That doesn’t equate to equal justice under the law to me.”

The investigation by the Department of Industrial Relations began last year after the agency received a number of complaints about workers’ compensation judges in Los Angeles and Orange counties. The allegations heightened concerns that wrongdoing and sloppy operating procedures in the courts might be another major source of trouble in California’s abuse-riddled workers’ compensation system.

By the time the inquiry was complete, Young said, the agency had reviewed numerous documents and interviewed dozens of witnesses related to 26 allegations of wrongdoing.

The charges included receiving bribes or improper compensation in the form of gifts, money and speaking fees from insurance company representatives, attorneys or doctors involved with cases pending before some of the judges.

Investigators also looked into the allegation that some members of the bench had outside business relationships with attorneys, lien collectors and physicians that created the potential for conflicts of interest.

The investigation extended all the way up to the top judge in the workers’ compensation system, Mark L. Kahn, who from his office in Van Nuys oversees the 27 district courts.

Kahn, who carries the title of assistant chief of the Division of Workers’ Compensation, was scrutinized for outside income he drew by giving speeches for a legal seminar firm he co-owns. Records show that in 1992, Kahn made a profit of $70,000 from the firm.

But Kahn’s lawyer, Fred J. Kumetz, said the judge was cleared of any wrongdoing and was not among the five singled out in the report.

“My client has been fully vindicated,” said Kumetz, who charged that insurance companies instigated the state investigation to intimidate judges they oppose.

Young declined to release the names of the five judges singled out in the report, calling the investigation a personnel matter that by law must remain confidential.

Another part of the inquiry centered on whether Ellen L. Flynn, the presiding judge of the Anaheim workers’ compensation court, and at least three other Orange County judges had improperly accepted a trip to Hawaii from a doctor whose cases regularly went before their courts. The judges went to Hawaii to appear at a workers’ compensation seminar.

Each of the three judges whom the investigation deemed to have acted improperly in connection with the trip received “counseling letters,” Young said, to clarify ethical rules and to warn them against creating the perception of improper activity.

According to a summary of the investigation, only one judge reimbursed the doctor for all expenses related to the trip. Three others reimbursed the physician only for air fare and accepted hotel accommodations from him. In addition, the spouses of the judges accepted free air fare and accommodations paid for by the doctor.

Investigators noted that the Fair Political Practices Commission had told the judges they were under no obligation to report the trip on their state-mandated financial disclosure statements. But the FPPC had also warned the judges that if any of them received transportation or other gifts worth more than $250, they might have a conflict of interest.

Young promised Friday that his agency will draft a more specific code of conduct for workers’ compensation judges with the help of the Josephson Institute of Ethics, a nationally known organization based in Marina del Rey. He said the standards should be established by the end of the year.