Auditor’s Findings Alleging Nepotism and Retaliation in Dept. of Insurance Audit Challenged

A critical report by the California State Auditor alleging nepotism, retaliation, and other untoward acts was scrubbed clean of any individual names or the identities of the affected state agency. But the target of those allegations is challenging the veracity of the report.

Former Department of Industrial Relations Director Christine Baker in exclusive interviews and written communications with Workers’ Comp Executive maintains that the Auditor’s report is inaccurate and leaves out critical details. She says it is the product of complaints from disgruntled employees looking to take her down in retribution for legitimate adverse personnel actions, departmental restructurings, and special interests interested in reversing or preventing further reforms to the California workers’ comp system.

The release of the California State Auditor’s report – which was not significantly updated – comes roughly a year after Baker abruptly retired and just before she becomes eligible to represent clients in front of DIR.  She spent nearly four decades in public service with no blemishes. Her retirement was accompanied by rumors that a potentially critical audit report was in the works. That audit report is now out.

Baker penned and provided exclusively to Workers’ Comp Executive a lengthy response to the Auditor’s report that addressed many, but not all of its findings. In defense of her record and her actions, Baker maintains that there are many “omissions” and “factual errors” in the auditor’s final report. Baker earlier sent an email to labor and management leaders with a few comments. There is a link to all the relevant materials at the end of this article.

The State Auditor’s report is based, it says, in large part on information gleaned from e-mail communications generated by Baker and many of her staff, plus her daughter and her brother. The California State Auditor (CSA) says it reviewed over one million e-mails and interviewed dozens of connected individuals during the course of its investigation.

But Baker has her own take. “Please note the report does not mention that I presented copious documentation with information directly relevant to and contradicting what the CSA alleges in the Report. I did so despite being at a disadvantage in a process that was distinctly adversarial from the moment I was interviewed, having to guess at what the CSA was trying to prove from the accusatory questions I was asked when interviewed by a staff member of the CSA,” says Baker in a letter to Workers’ Comp Executive. “None of the information I provided [to CSA] is mentioned in the report,” she adds.

State Auditor Elaine Howell says she decided to release the report now due in large part to the Labor and Workforce Development Agency’s “lack of demonstrable progress in implementing our recommendations.” But Labor Secretary Julie Su has only been on the job since being appointed by Governor Newsom in January. She was confirmed just a few weeks ago.

Howell also chastised former Labor and Workforce Development Agency Secretary David Lanier, although not by name, for “sharing with the Director information of the impending investigation, which is evidenced by an email between the Director and the agency secretary.”

Baker says she never received such information.

She maintains that as the result of the Auditor’s interview she postulated the accusations were coming from a specific individual outside the agency.

 E-Mail Review

The report also highlights what it calls a wide-ranging review of DIR’s e-mail records that the Auditor says was conducted at Baker’s command to uncover department employees cooperating with the investigation.

Baker says that on the written advice of DIR’s chief counsel, Chis Jagard, she had the attorney in charge of the DIR fraud unit review all e-mails from one specific outside individual who Baker believes was interfering with the conduct of DIR business.

“The very fact that the director instructed her employee … indicates to us that she may well have divulged confidential information about our investigation to that staff member,” – Auditor Elaine Howell

The Auditor says that information gleaned from its review nearly resulted in “one of three high-level employees” at DIR being placed on administrative leave effective Dec. 26, 2017, for aiding the Auditor’s investigation. The plan was never carried out after the Auditor warned the Director to refrain from any retaliatory action, but the report says the e-mail monitoring continued.

About the email the Auditor opined “the very fact that the director instructed her employee to analyze the perceived whistleblower’s emails and prepare the memo naming employees who had communicated with the suspected whistleblower indicates to us that she may well have divulged confidential information about our investigation to that staff member,” the auditor says.

But Baker replies with additional facts: “I had information that a person in a high position outside of the department was attempting to orchestrate action against me and the department. No state agency would tolerate an outsider trying to interfere with official state business,” says Baker. “To be absolutely certain any action was appropriate, I went to the Chief Counsel [Chris Jagard] and asked for his opinion. He confirmed in writing that it was [appropriate].”  Baker emphasizes that only emails to and from that one outside individual were reviewed, and only then by the attorney in charge of the DIR fraud unit.

Nepotism Alleged

Key findings of the report are that Baker abused state personnel policy in the hiring and promotion of her daughter and improperly intervened in the hiring and promotion of another Department executive. The report says Baker’s alleged repeated abuses of state civil service rules constitute “gross misconduct.”

The auditor’s report also found that daughter Julianna Baker was dishonest in reporting her time worked and duties performed. The Auditor suggested a claw-back of pay, and while Former Director Baker does not address this finding in her rebuttal, she insists in interviews this is inaccurate and that the daughter worked more than was required.

The unexpected release of the report prompted numerous articles both inside and out of the workers’ comp community, but heretofore, the coverage has been largely one-sided. Complicating Baker’s ability to respond to the report and our questions is the fact that Baker is a named defendant along with the State of California and Lanier in a wrongful termination case linked to the audit. She is careful not to jeopardize that defense, but Baker does have a lot to say about what is in and what was left out of the report by CSA.

Baker is not addressing every conclusion in the Auditor’s report, of which there are many, but says when viewed in context many of the claimed abuses were not violations of state law or policy.

A key example, she says, of this is the report’s inferred nepotism involving her brother, Jim Culbeaux, who was DIR’s chief information officer. Culbeaux spent 34 years at DIR and was already in the CIO position when Baker was elevated from executive director at the Commission on Health, Safety and Workers’ Compensation to DIR director.

Additionally, Baker points out that when she came on board as Director, she worked with the agency and made sure Culbeaux reported directly to the Labor and Workforce Development Agency to eliminate any potential conflict.

She says her brother’s relationship was included in the report merely to further the nepotism narrative.

Permissive Reinstatement

Much of the report focuses on the hiring of Baker’s daughter Julianna into the Department and her subsequent transfers and promotions.

Baker notes that her own supervisors were made aware of the hire at the time it occurred and says that at no point during Julianna’s tenure at the Department did any DIR attorney or human resources personnel raise any concerns with her about nepotism.

The report says that Baker’s actions as director prevented an open and fair competition for the position that Julianna ultimately filled.

Baker says the audit report fails to tell the “full story.” While mentioning Julianna was a former state employee, Baker points out the Auditor failed to include the fact Julianna had left the Employment Development Department in good standing and was therefore eligible for permissive reinstatement into the position she ultimately accepted.

Under civil service rules, Baker says, “Permissive reinstatement does not require an examination announcement or the taking of an examination. All that is necessary is to apply to fill an existing open position that is at the same level as the position earlier resigned from. “Julianna’s reinstatement is exactly what happened.” Baker continues, “She reinstated to a position at the department’s DLSE at a time when DLSE had a vacant Staff Services Analyst (SSA) position, which was at the same level as her former EDD position. HR required her to take tests that weren’t in fact required, according to Baker, and she scored at the top of the group.”

Baker confirms that she asked the hiring manager if Julianna could be hired, but says it went no further. She also denies any knowledge of DIR’s personnel department downgrading an associate government program analyst (AGPA) position to a staff services analyst (SSA) position that matched Julianna’s past employment level at EDD. Baker maintains that at the time DIR had vacancies at both AGPA and SSA levels, so there was no need to downgrade a position. She says here the Auditor’s report omitted key and relevant facts.

The Auditor’s report goes on to allege that Baker acted inappropriately in arranging for Julianna’s transfer to the Department’s information technology unit. It also alleges she intervened to craft a training and development assignment that was tailored for Julianna. The training assignment was later used to “facilitate her claim that this experience qualified her for a later promotion,” according to the auditor.

Alleged Interference

Baker also disputes a finding that she prevented a supervisor from initiating disciplinary proceedings against Julianna for “problematic attendance” as well as for “tardiness and failure to complete work in a timely manner.”

Baker maintains that the supervisor started to discipline Julianna for a single instance when she missed a half-day of work because she got lost traveling to an unfamiliar DIR office. The Auditor says the supervisor backed off of the disciplinary action when an HR staff member and another senior staff member advised against the action due to Julianna’s relationship with the Director.

In fact, Julianna was traveling to Sacramento to attend Baker’s afternoon confirmation hearing and intended to work in the Sacramento office during the morning. She got lost but called into the Sacramento supervisor and resolved missing the morning by obtaining permission to take a whole vacation day. That was apparently not communicated, Baker says, to whoever wanted to report a missed day and initiate discipline. A phone call resolved the issue when HR clarified the situation.

In a later instance, the Auditor contends Baker retaliated against a supervisor that clashed with the daughter. The former director strongly refutes the charge.

In the latter instance, the auditor says Juliana’s supervisor was transferred after the daughter disagreed with the direction the supervisor wanted to take an investigation that both were working. The auditor’s report states that upon learning of the dispute, Baker ordered the chief of HR to remove the manager from overseeing her daughter’s unit.

Baker says her daughter objected when the supervisor planned to take the investigation in a direction that would require extended stays in Southern California at a time when the Governor had a ban on unnecessary travel.

Baker claims not to remember intervening, “but if I did, I would not change anything.”

The report says the supervisor was notified of the transfer on a Saturday night and that on that Monday the manager was told to move out of her office by the end of the week. “In addition, we found no evidence that the department gave the unit manager notice or a right to appeal, and the unit manager told us that she was never served with a formal notice of disciplinary action,” the auditor says. The Auditor notes that the State Personnel Board has determined that transferring an employee to another role is a disciplinary act if its purpose is punishment.

“Whether I intervened or not, the action taken was NOT ‘punitive” or “disciplinary,” says Baker in the letter. “The supervisor was moved to a different unit, at the same supervisory level and salary. This was not a matter of discipline; it was a legitimate exercise of managerial authority to ensure implementation of policy coming from the Governor’s Office.” Therefore, there was no notice.

The full Auditor’s Report, Bakers complete response to Workers’ Comp Executive, and Baker’s email to labor and management leaders are in our resources section. Click here for the links:

DIR audit report

Baker Rebuttal

Baker Letter To Friends