Whistle-Blower Awarded $416,000

The state investigator who notified the FBI that California’s Medi-Cal program for the poor was ravaged by fraud, sparking a federal probe, has been awarded more than $400,000 in a discrimination lawsuit against his former employer, the state controller’s office.

J. Alan Cates, who was recently appointed by Gov. Gray Davis to head the state’s Medi-Cal Fraud Prevention Bureau, alleged in Sacramento County Superior Court that he had been denied the chance to apply for a job as senior investigator in the office of Controller Kathleen Connell because he has a physical disability. Cates, 47, must wear leg braces and sometimes uses crutches to walk due to a polio-related disability.

Moreover, Cates alleged, he was punished for filing a complaint after learning that he would be prevented from seeking a promotion due to his disability. That punishment, the suit charged, was actually a reprimand for assisting the FBI and the U.S. attorney’s office in investigations of fraud in the Medi-Cal program and at the state Department of Education.

A jury agreed on both counts, awarding Cates $416,000 for discrimination, emotional distress and retaliation. Because the verdict also included his legal fees, the ultimate cost to California could be $750,000.

“I’m a strong person,” Cates said Tuesday in an interview. “It’s an awesome undertaking to sue the state of California. But I had to do this. I would have regretted it forever if I didn’t. . . . Hopefully, this will prevent this kind of thing from happening to someone else.”

State officials are vowing to appeal.

“We disagree with the jury’s verdict, and on behalf of the taxpayers of California, we are going to ask a judge to set the verdict aside,” said Connell spokesman Tom Marshall. He declined to comment further.

In 1998, Cates took state audit reports and other documents detailing potentially widespread abuses of Medi-Cal to federal authorities. He said he did so out of a belief that the state attorney general’s office, which was headed by Republican Dan Lungren at the time and already had the documents, had not taken sufficient action.

The reports by the office of Democrat Connell, more than 100 in all, suggested that pharmacies, medical equipment suppliers and laboratories were fraudulently billing Medi-Cal for millions on dollars and should be prosecuted.

“He was stepping on toes,” said Cates’ attorney, Christopher Wohl. “But all he did was give public records to the FBI and U.S. attorney’s office, trying to save the taxpayers money.”

Federal authorities quickly launched a massive crackdown, and Democratic Atty. Gen. Bill Lockyer joined the effort. To date, it has resulted in 104 charges and 61 convictions. Officials say the cost of the fraud may reach $1 billion.

Ironically, Cates, the man whose words of warning about Medi-Cal once went unheeded, now frequently appears alongside Davis at news conferences and other events to discuss the latest details of the probe.

Despite the obvious resentment it caused in some state quarters, Cates said his decision to take his findings on Medi-Cal to the feds would never have resulted in any reprimands if not for his disability complaint.

Although the position Cates had sought involved white-collar crimes, the office’s chief investigator, John Henry, told him he was not physically capable of doing the job.

That deeply upset Cates, who had not only graduated from a physical training course for investigators, but also had received a special inspirational award for his performance--one of only three people ever to do so among the 10,000 that had taken the course before him.

The academy’s director, Gary Schoessler, even wrote Cates’ bosses a letter, praising his efforts as “something out of the ordinary,” and emphasizing that he “competed on an equal level” despite his disability.

Cates considered it one of his finest accomplishments.

“I remember telling [Henry], we could go out in the back and I could show him how physical I was,” Cates joked. “He declined.”