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July 20, 2006

The Weekly Wrap

Scam attack
Beware the friendly man who writes his checks in advance

16 Questions for John Thompson

The Weekly Wrap


WHISTLEBLOWER WINS: A five-week trial ended Friday in Humboldt County Superior Court with the jury ruling in favor of former Mad River Community Hospital (MRCH) administrator Charlene Pellatz in her lawsuit against the Arcata hospital for retaliatory termination. Reached Monday at the county Department of Public Health, where she now serves as the local Emergency Response Coordinator, Pellatz was in good spirits following what she called a "long and difficult" proceeding. "I am very glad that the process was successful and that it is over," she said.

Pellatz was fired in November 2001, four months after she approached the hospital's board of directors with two complaints: One, that MRCH was not adhering to Stark laws — federal anti-referral/anti-kickback statutes that regulate doctors and the hospital — and two, that the hospital did not receive building and licensing permits required by state and local agencies. Beyond those basic facts, neither Pellatz nor her Eureka attorney, Alan Goldberg, would spell out the details of the misdeeds alleged against MRCH. "I don't want to harm the hospital," Pellatz said.

Pellatz, 58, was employed at the privately-owned institution for 21 years and worked as an assistant administrator under CEO Doug Shaw for more than eight years. Shaw took the stand during the trial, and according to Goldberg, the CEO admitted to firing Pellatz, in part, for bringing allegations to the board in 2001. "He had other reasons as well," Goldberg explained Friday. "He felt she wasn't performing as he wanted her to." The prosecution sought over $1 million in damages from the hospital, but was awarded only $229,532 for lost wages, benefits and emotional distress. "The jury felt these were the appropriate damages and I know they were very sincere; we talked to them afterward," Goldberg said.

When reached on Monday, Mad River Hospital Spokesperson Tom Ayotte did not know whether MRCH would appeal. He said his employer "wants to move on," though management disagrees with the jury's verdict. According to Ayotte, the MRCH board of directors conducted an investigation into Pellatz's claims in 2001 and found the allegations to be unsubstantiated. Once a formal judgment is finalized by Humboldt County Superior Court Judge John T. Feeney, the hospital has 60 days to file an appeal.

— Helen Sanderson


ST. JOE NO GO: Four months after due diligence talks began between the pauperized St. Joseph Hospital of Eureka and North Carolina-based Hospital Partners of America, which operates Shasta Regional Medical Center, the potential out-of-town buyer has backed out, the hospital announced last weekend. The decision to end discussions, the hospital reported, was met mutually.

HumCo's biggest medical facility is still get-able for some party willing to take over the Catholic nonprofit's $70 million debt and also finance $80 million-plus worth of seismic upgrades to the Harrison Avenue facility by 2013. St. Joe's additionally insists that the new owners "commit to the community." But beyond selling the hospital, two other options remain — keep it and pray for some major philanthropy or create a community-based hospital funded through taxes.

A task force comprised of the Community Health Alliance of Humboldt-Del Norte and Dr. Ann Lindsay, Humboldt County's Public Health Officer has spent recent months kibitzing with community stakeholders (including a forum of local journalists) to identify which of those three choices — sell, stay or switch — is the best fit for the North Coast. The Community Health Alliance's report will be given to St. Joe's by July 31 and will also be presented to the county board of supervisors at their July 25 meeting. Then, St. Joe's own task force will review the other task force's review and discuss their findings at a board of trustees' meeting in late August.

—Helen Sanderson


FICKLE FEMA? Lord knows, FEMA works in mysterious ways. That's the Federal Emergency Management Agency, ready to step in with much needed emergency dollars when your need arises, or preferably before: to rescue you from rising flood waters, to keep your hay field from death by seawater, or, one might assume, to stop your house from sliding into the ocean or a river or whatever.

Naturally, not every request for the FEMA goodness can be granted. The project has to be justified. Take the Sacramento Valley levees, which are getting attention these days in the scary wake of Hurricane Katrina in the South. FEMA money is going toward preventing those levees from failure — good for the sake of hundreds of thousands of lives in that low-bottomed valley, good for the fed's bruised reputation.

And take the Arcata and Jackson levees, 4.9 miles of more-than-a-century-old rock rip-rap berms that stretch alongside Route 255 from the Arcata Marsh to Mad River Slough. FEMA is about to announce this week that it's committing $4.23 million to fix up some problem spots in the berms caused by the 2005-2006 New Year's storm. The California Office of Emergency Services is committing $1.4 million more.

"I'm surprised," said Arcata resident Domingo Santos, president of State Reclamation District No. 768, which governs the levees. "I'm shocked. But we were looking for help to protect our lands from saltwater intrusion. We have saltwater right now in one area — 40 acres are ruined. It's killed all the grass."

Santos was also a little surprised the press knew about the money. ""How'd you hear about it?" he asked suspiciously. "We haven't publicized it yet." The district was planning to announce it at its Wednesday night meeting this week.

Well, U.S. Senator Dianne Feinstein announced the FEMA/OES money for the levees on July 10, noting emotionally in her news release, "At the onset of this year, the Arcata and Jackson levees in Humboldt County sustained severe storm damage that desperately required a speedy response. With FEMA's approval of a $5.6 million grant, California will be able to move forward with the repair process and return the levees to their original conditions."

Feinstein's people also beat FEMA to the punch. On the phone Tuesday, FEMA spokesperson Ana Marcelo echoed Santos' curiosity: "How did you hear about this? We did not announce this yet."

Santos said the levees protect the 1,500 acres in the district, which include former (historic) dairyland, current dairyland and beef ranches, as well as some state Fish and Game land (500 acres) and some City of Arcata land. "But more land outside of that is affected," Santos said. "There's value out there, and a lifestyle. And it helps the economy, although not as much as it used to. It's an asset to the community, and always has been."

He said the levees are private, and this is the biggest chunk of public assistance the district has ever received, aside from a 40-year loan and small grant given the district three years ago to fix a breach.

Another project that sought FEMA funding earlier this year was rejected. The McKinleyville Community Services District had applied for $1.3 million to fix the Mad River Bluff, along which a number of modest homes now perch precariously above the river near where it enters the ocean. Winter storms, and the river's altered course, accelerated the bluffs' erosion. Thomas Marking, MCSD general manager, said he's never heard formally from FEMA about the rejection. The homes on the bluff are private, and individual homeowners don't qualify for FEMA assistance, he said. The public water and sewer lines hooked up to five houses out there would amount to about an $80,000 potential loss, Marking said — so maybe FEMA figured that wasn't enough to warrant assistance.

Marcelo said indeed that only public facilities can get FEMA funds. "Even though those two levees are not flood-control, they're considered public facilities because they're used for reclamation," she said.

A more cynical assessment — proffered by a cynical bystander — is that the $5.6 million for levees looks good, "levees being the issue of the day." Good for Feinstein. Good for FEMA. And, on an entirely uncynical note, good for the farmers and ranchers.

Santos, for his part, was sad to hear about Mad River Bluff's rejection. "I'm sorry they didn't get any help," he said. "But I'm grateful we did. We don't have that kind of money."

— Heidi Walters


Scam attack
Beware the friendly man who writes his checks in advance


It goes something like this.

It's late on a Wednesday evening and dozens of Japhy's customers bustle around inside. A line swells from the front counter of the soup and noodle joint through the beaded entryway, as hungry patrons filter in from the Northtown Arcata sidewalk. A man in a baseball cap and sunglasses steps to the front of the line.

He looks normal enough: pale skin, mid-40s, medium height, white hair. He's confident and polite, seems trustworthy. He takes a look at the soup cauldrons in the display case to his left. He asks if he can see the vegetable vegan option. The young clerk obligingly lifts the requested lid and stirs the cauldron's contents. The soup is bursting with chunks of fresh vegetables and wholesome goodness.

"Ooo that looks tasty. I'll have three bowls of that and a couple bowls of your peanut curry," the man says with a friendly smile. "To go."

Another employee begins ladling up the man's order. His three bowls kill off the remainder of the vegetable soup, so she wipes away the option on the dry erase menu board. Hopeful vegans in line groan with disappointment.

"That'll be $20," the clerk tells the man.

"I'm sorry. All I have is this check. I already wrote it out," he replies, seeming to be genuinely distraught at the inconvenience he poses. He hands her a light green check written out for $100. It's from Security First National Bank in Boron, Calif.

"That's too much," the clerk says, suspiciously.

"Well I was hoping you could give me some change. You see, my family and I are on our way back home — we have a long drive south back to Boron. I need some cash for gas money." He has taken off his sunglasses now and is looking the clerk in the eyes, begging for her help. She looks past him and sees that the soup queue has grown out the door and onto the sidewalk. People are getting impatient. She takes the check.

"OK, is that your license number?" she asks, pointing to the string of numbers the man has scrawled across the top of the check.

"Yes, well, it's actually the license number of my fishing boat. You see, I lost my wallet a few days ago and that's the only I.D. I have."

"And you are Gertrude E. McKay?" she asks, referring to the feminine name on the check.

"That's my wife," the man replies, carefully. "She's in the car with the kids."

The clerk looks at the check and back into the man's eyes. He seems to understand the shakiness of his story. But she sympathizes, and sees this as an opportunity to help out someone in a jam. She rings the register, and counts out $80 in change.

"Thank you so much," the man says. "I'm gonna go tell my wife it'll be just a minute. I'll be right back."

But he never comes back. As most outside observers will surmise, Japhy's Soup & Noodle has fallen victim to a surprisingly common forgery scam.

Police say that check fraud and forgery have become a real problem in Humboldt County, especially over the last couple of months. According to the Arcata Police Department, a lot of cases involve checks that people print out on their home computers, sometimes with real business names, sometimes with fictitious names. Many cases involve actual stolen checks that people try to pass off as their own, a mild form of identity theft.

"I would say a week doesn't go by that we don't take multiple calls about forged checks," said APD Officer Dok Weiler, who is following the Japhy's case.

Charles Bruce, director of the National Check Fraud Center in Charleston, S.C., said that check fraud happens everywhere. "If a business accepts checks, there is most likely going to be fraud," he said. "I have not seen a business yet that has not received a bad check." He said that a deliberate verification process is the only way to defend against check fraud.

Local police echoed Bruce's warning, adding that fraudsters usually attack bigger businesses, especially grocery stores like Ray's and Safeway, which have hundreds of customers coming in and out all day long. Even though smaller businesses like Japhy's may not expect scams to take place in their store, the question remains: Why would a business accept a check without at least verifying the I.D. of the customer?

"No one has ever given me a good answer to that question," said Lt. Ryan Peterson. "You just need a little bit of a sharp eye. If someone is highly suspicious, red flags should be going up."

Officer Weiler said that once people succeed in scamming a business they are more likely to go back for more.

"Most people around here are not good at forgeries," he said. "But someone will find a pattern that works for them and try it again and again."

Japhy's, unfortunately, has learned this the hard way. This most recent scam, which took place on June 14, was the third time in about six years the pale-skinned man with the sunglasses has pulled some variation of the above stunt, said Josh Solomon, who owns the restaurant with his wife. After it happened the first time six years ago, Solomon said, he had to bite the bullet, assuming he'd never see the fraudster again. The second time (on September 23, 2002) was a far more egregious affair. The man posing as Gertrude McKay gave the clerk a $200 deposit slip from Bank of America, which she blindly accepted and cashed out, much to the bewilderment of Solomon.

"We tell all our new hires about it, but sometimes they forget," he said.

Though one of them forgot on June 14, the third time seemed to be the charm for Japhy's. Invigorated by his continued success, Mr. Gertrude McKay tried to hit Japhy's once again, only three days later, at their Oyster Festival booth. Wise to the scam this time, the Japhy's employee took the check and promptly called the police. But the man had disappeared into the crowd.

Japhy's Northtown neighbors, Folie Douce, did not fare so well at the Oyster Festival, however. Seemingly undeterred by his failed attempt at the Japhy's booth, the scamming journeyman ventured over to the Folie Douce booth with the same story and a check made out for $100. Green to the world of check fraud, an unsuspecting employee fell for the trick.

"I [didn't] think we're the kind of establishment he would try that at," said Marsha Lenz, owner of Folie Douce. "I'm definitely surprised, but not that surprised — there is fraud everywhere."

Police have been able to track down a good number of these check scammers. "We have had a very good success rate for our size department," Lt. Peterson said. He pointed to the recent apprehension of five alleged scammers responsible for passing a spate of forged checks from Fortuna to McKinleyville. But fighting check fraud places added stress on a police force already strapped for resources. Peterson said it's important for people to destroy any old checks and to be especially careful with credit card checks, which usually get mindlessly discarded with the rest of the junk mail.

But the onus still falls on the businesses that are accepting bad checks, Peterson said. "It's a preventable problem. Just make sure the person standing in front of you has an I.D. When in doubt, don't take it."





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