Francis v. CalPERS

1 LAW OFFICE OF MICHAEL P. WHITE MICHAEL P. WHITE 2 Attomey at Law SBN: 114595 3 2420 K Street, Suite 120 Sacramento, CA 95816 4 Tele: (916)446-1802 Fax: (916)498-9396 5 Email: mv^hite2230(^aol.com 6 Attomey for Petitioner 7 8

RLED Superior Court Of Califomii
Sdcramento

04/19/2011

Caso Numbur

34-2011-80000841

SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SACRAMENTO CASENO.: PETITION FOR WRIT OF MANDAMUS AND/OR OTHER APPROPRIATE RELIEF CCP §§ 526a and 1085

9 DANIEL E. FRANCIS 10 11 vs. Petitioner

BOARD OF ADMINISTRATION FOR THE 12 CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM (CalPERS); ROBERT 13 FECKNER, PRESIDENT, BOARD OF ADMINISTRATION FOR THE CALIFORNIA 14 PUBLIC RETIREMENT SYSTEM m his official capacity; and, ANNE STAUSBOLL, CHIEF 15 EXECUTIVE OFFICER, CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM m her 16 official capacity. 17 18 19 Petitioner alleges as follows' 20 21 PARTIES Respondents
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1. Petitioner Daniel E. Francis is, and at all times mentioned herein, was a resident of El Dorado

22 County, State of California, a taxpayer in the State ofCalifomia, a retired State ofCalifomia, 23 Department of Forestry and Fire Protection employee, and a member ofthe Califomia Public Employees 24 Retirement System (CalPERS) Petitioner is interested in the appropriate expenditure of public funds; 25 the proper administration of CalPERS programs; and, the appropriate application of laws, particularly 26 those relating to who can properly be a member ofthe CalPERS and be thereby eligible for its retirement 27 and benefit programs. 28
Francis v CalPERS - Original Petition for Writ of Mandamus

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2. Respondent, Califomia State Employees' Retirement System (CalPERS), is the agency charged with goveming the State employee retirement system in compliance with Public Employees' Retirement Law. (Government Code section 20000 et seq., hereinafter, "PERL"). CalPERS is directed by a 13-member Board of Administration 3. Respondent Robert Feckner has been the CalPERS Board President at all times mentioned herein and is named in his official capacity as such. The board has a sole and exclusive fiduciary responsibility over CalPERS' assets held for the exclusive purpose of providing benefits to its members. (Cal. Const., art. XVI, section 17(a)) 4. Respondent Arme StausboU has been the CalPERS Chief Executive Officer at all times

10 mentioned herein and is named in her official capacity as such. Ms. StausboU is responsible for carrying 11 out directions set forth by the CalPERS Board and she supervises CalPERS' employees and various 12 programs, including CalPERS funding, membership eligibility and member benefits. 13 14 15 5. CalPERS is located at 400 Q Street, Sacramento, California. FACTS COMMON TO ALL CAUSES OF ACTION 6. On February 14, 2006, the Honorable Thelton Henderson appointed Robert Sillen, to serve as

16 Receiver at the pleasure ofthe Federal Court. The Receiver is an officer and agent ofthe Federal Court 17 (gxhibitili Plata v. Schwarzenegger, No COI-1351 TEH, Order Appointing Receiver, 2/14/2006, at

18 page 2:2-5 and page 6:2-3) 19 20 21 22 23 24 25 26 27 28
Francis v CalPERS - Original Petition for Wnt of Mandamus

7. The receivership is the assumption of authority away from the State of California by the Federal Court. As an officer and agent ofthe Federal Court, the Receiver is responsible for administering and reforming California's inmate medical care system to achieve constitutional compliance. The Receiver is imbued with the power and authonty to act in the name ofthe Federal Court, and the ultimate authonty and responsibility rests with the Court alone. {Plata v. Schwarzenegger, No. COl-1351 TEH, Findings of Fact and Conclusions of Law Re Appointment of Receiver, 10/03/05; See also Exhibit 1, at page 4-5-10, and at page 6:2) 8. Shortly after his appointment the Receiver established the California Pnson Healthcare Receivership Corporation (CPHRC), as a non-profit corporation to carry out the responsibilities ofthe

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Receiver which included establishing an office and hinng staff who along with the Receiver were compensated by CPHRC in an amount approved by the Federal Court. (Exhibit 1, at page 6:10-15) 9. The CPHRC issued salary checks to the Receiver and his appointed staff CPHRC also implemented a benefit program consisting of health care insurance and a contnbution-and-eamings 401k savings program. 10. Neither Receiver SiUen nor his appointed staff were enrolled as members of CalPERS. II Funding for the Receiver and CPHRC is denved from public funds paid by the State of

California. The State is the Defendant in the Plata litigation giving rise to the Receivership. (Exhibit 1, at page 6:8 through page 7:14) 12. On January 23, 2008, the Federal Court terminated the appomtment of Robert Sillen, and appointed J. Clark Kelso (Kelso) to serve as Receiver at the pleasure ofthe Federal Court effective

12 immediately. The Court ordered all powers, pnvileges and responsibilities ofthe Receiver as set forth in 13 its February 14, 2006, Order Appointing Receiver continued. The Court additionally reaffirmed the

14 Receivership is independent from the State ofCalifomia and that it is an "arm ofthe federal courts" 15 16 17 18 established to take over state operations { E ^ ^ ^ ^ , Plata v Schwarzenegger, No COI-1351 TEH, Order Appointing New Receiver, 1/23/2008, at page 5:1-16) 13. Pnor to his appointment as an officer ofthe Federal Court, Kelso served as the State's Chief Information Officer (CIO) with the Califomia Department of Technology Services where he was a

19 member of CalPERS accruing a pension based on the length of his State employment and salary rate in 20 21 22 23 24 25 26 27 28
Francis v CalPERS - Original Petition for Writ of Mandamus

that position. 14 Kelso wished to remain m CalPERS m spite of leaving CIO position and accepting employment as an officer of the Federal Court. Consequently, Kelso and WiUiam C Vickery, the Director ofjudicial Council of California, Administrative Offices ofthe Courts (AOC) caused the preparation of a contract between CPHRC and the AOC (the contract). (Exnibit^:, Agreement Between the Judicial Councii of California, Administrative Office ofthe Courts and the California Pnson Health Care Receivership Corporation, 3/25/2008) 15. The AOC is a State agency and Its employees are CalPERS members.

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16. The sole purpose served by the contract is for funding received by CPHRC from the State of Califomia for Kelso's compensation to pass through AOC consequently causing Kelso to enjoy CalPERS membership which is uniquely available as a matter of law only to Califomia's public employees. 17. More specifically, the contract purports to make Kelso an "employee" ofthe AOC but only

6 from the outset of Kelso begiiming work as an officer ofthe Federal Court; only as long as Kelso 7 8 9 10 remains as the Federal Court Receiver; and, subject to CPHRC reimbursing AOC for Kelso's salary and benefits which include AOC enrolling Kelso m CalPERS for benefit and retirement purposes plus an administrative processing fee of $150 monthly (Exhibit 3, at pages 2-4) 18. The contract purports to hire Kelso, classify him as a "Special Consultant" and then

11 irmnediately "loan" Kelso back to CPHCR to act as Receiver even though Kelso was appointed by the 12 13 14 Court as Receiver effective two months earher. (Exhibit 2, at page 5) 19. The contract further provides that CPHRC will indemnify and hold the AOC harmless against claims, losses, costs and expenses, including attomey fees, should third parties bring an action

15 related to Kelso without regard for the nature of his actions or whether they fall outside the scope of his 16 17 18 employment, thus for example illustrating that Kelso is not an actual "employee" ofthe AOC. (Exhibit 3, at page 4) 20. Thus, the CPHRC/AOC contract was devised and designed for the singular purpose of

19 benefiting Kelso using public funds in a manner and for a type and degree of benefits through CalPERS 20 21 22 23 24 25 26 27 28
Francis V CalPERS- Original Petition for Writ of Mandamus

not available to private non-profit corporation employees or officers ofthe Federal Courts 21. Kelso presently is enrolled m and receiving health insurance coverage only available as a matter of law to legitimate members of CalPERS. 22 CalPERS determines the amount of, and receives and disperses the employer's share of Kelso's health benefit premium to either a health maintenance organization or preferred provider organizations The employer's share of Kelso's health benefit premiums comes from public ftinds. 23. By obtaining membership in CalPERS, the duration of Kelso's appointment as an officer of the Federal Court contnbutes to Kelso's ehgibility for and receipt of a lifetime defined (guaranteed)

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retiree pension and health benefits through CalPERS at public expense. 24. CalPERS funds its state employee pension program with member contributions, investment eamings and regular payments from the State of California as an employer using public funds. During fiscal year 2008/09 the CalPERS board set the State employer rate at the equivalent of 16.574% of each first tier member's compensation. Effective in January 2011 the CalPERS board set the rate at the equivalent of 17.528% of each first tier member's compensation. 25. CalPERS has been privy to Kelso's salary for the duration of his "employmenf by the AOC. 26 The CPHRC/AOC contract provides that Receiver Kelso is to receive the annual salary of $224,000 (Exhibit 3, at page 2), but State Controller records published by the Sacramento Bee indicate

10 the State paid Receiver Kelso a salary of $327,052.16 m 2009. (Exhibit'4;, Sacramento Bee online article 11 re' state salaries paid in 2009, published at. http://www.Sacbee.com/statepay/?name=kelso&agency= 12 13 14 JUDICIAL+COUNCIL&salarylevel=). 27. By being enrolled in CalPERS by AOC, and being permitted to remain enrolled by CalPERS, Kelso is accumulating hundreds of thousands of dollars in defined (guaranteed) pension

15 payments due upon his retirement sharply spiked based on his federally set salary level as Receiver and 16 the time spent as an officer ofthe Federal Court. 17 28. By achieving a "highest year" salary as Receiver that significantly exceeds any prior salary

18 he received, Kelso's retirement payment from CalPERS will become one ofthe all-time highest paid 19 20 21 22 23 24 25 26 27 28
Francis v CalPERS - Original Petition for Writ of Mandamus

among those receiving a CalPERS pension. 29. Since at least June 2009, CalPERS has had express notice about Kelso's enrollment as a CalPERS member This occurred m the course of Receivership employees*^ seeking a determination of whether they too were qualified for CalPERS benefits. Like the Receiver, those employees are officers and agents ofthe Federal Court and they are charged with carrying out the Receiver's duties. (Exhibit 1, at page 6:2-15) 30. Having received no response to their June 2009 inquiry, on May 3, 2010, a letter was sent to Respondent Aime StausboU by Receivership employees further detailing the method by which Kelso obtained CalPERS enrollment, and again seeking an immediate determination ofthe eligibility of

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Receivership employees for CalPERS membership. 31. In approximately June 2010, CalPERS concluded Receivership employees are not eligible for CalPERS membership (BdiibiTO;, Letter from Emily Perez de Flores, CalPERS Member Reporting Section, 6/7/2010). 32. In reaching its decision to deny Receivership employees CalPERS membership, CalPERS asserted that it and the Courts look to the common law employment test to determine employee status for CalPERS retirement purposes (Exhibit 5, at page 2). Pursuant to this same authority, CalPERS has known or reasonably should have known that Kelso, as the Federal Receiver, is not now nor has ever been an "employee" ofthe State or the AOC. More particularly, as clearly stated in the Federal Court Order appointing the Federal Receiver, the Federal Court alone reserves specific powers, thereby expressly denying the exercise of those powers to the State of California or any other purported "employer" of Kelso. Neither the State of California nor the AOC give direction to Kelso; neither entity

13 directs the marmer or means of accomplishing the desired result; neither entity evaluates Kelso's 14 performance; neither entity can hire or fire Kelso; neither entity controls Kelso's salary, duties, hours of 15 work, his Federal Court remedial tasks, or the amount ofthe appropriations that Kelso demands from the 16 17 18 19 20 21 22 23 24 25 26 27 28
Francis v CalPERS - Original Petition for Writ of Mandamus

State ofCalifomia to fund CPHRC for his salary, benefits and the iimiate medical programs he directs. (Exhibits 1, 2 and 3) Additionally, as the Federal Receiver, Kelso's duties of loyalty, responsibility and trust are uniquely owed to the Federal Court as its officer and agent and not to either the State of Cahfomia or the AOC as one of their alleged "employees". 33. Notwithstanding its knowledge ofthese indisputable facts and the applicable laws which defeat Kelso's status as an "employee" ofthe State ofCalifomia and the AOC, CalPERS knowingly continues to permit Kelso's membership and accordingly determines the amount of public funds that must be, are presently and will continue to be remitted to CalPERS on an ongoing basis for his benefits. 34. Petitioner is beneficially interested in the issuance of a writ as he is a taxpayer in the State of California and a member of CalPERS and, as such, is entitled to have public funds and CalPERS administered consistent with the law and to not pay for benefits for individuals such as Kelso who are /////

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1 not entitled to thereto. 2 3 4 5 6 7 35. Petitioner does not have a plain, speedy or adequate remedy in the ordinary course of law other than the relief sought in this Petition FIRST CAUSE OF ACTION Writ of Mandate CCP §§ 526a and 1085 Violation of California Constitution Article XVI, Section 17 36. Petitioner incorporates and re-alleges by reference paragraphs I through 35 above. 37. CalPERS Board of Administration members must discharge their duties with the care, skill,

8 pmdence and diligence under the circumstances then prevailing that a pmdent person acting in a like 9 capacity and familiar with these matters would use m the conduct of an enterpnse of a like character and

10 with like aims. (Cal. Const., art. XVI, section 17(c).) 11 12 13 14 15 38. CalPERS Board of Administration members shall discharge their duties with respect to the [pension] system in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries (Cal. Const., art. XVI, section 17(b).) 39. The CalPERS Board of Administration, its President, Robert Feckner, and its agent, Chief Executive Officer Aime StausboU breached this duty by permitting Kelso to enroll and remain a member

16 of CalPERS particularly since having constructive and actual notice of his enrollment m CalPERS as an 17 "employee" ofthe AOC and the circumstances associated therewith notwithstanding his clear

18 non-entitlement to the same. 19 20 21 22 23 24 25 26 27 28
Francis V CalPERS- Original Petition for Writ of Mandamus

40. The Board of Administration, its President, Robert Feckner and its agent Chief Executive Officer, Anne StausboU breached this duty by determining the amount of, taking, investing and/or spending public funds in order to extend benefits to Kelso for which he is not entitled. 41 The Board of Administration, its President, Robert Feckner and its agent Aime StausboU have breached this duty by permitting Kelso to enjoy health benefits under provider contracts that uniquely extend coverage to only those appropnately enrolled as CalPERS members. 42. The above descnbed actions of Respondents are void, unconstitutional, beyond their power or junsdiction, and are a prejudicial abuse of discretion.

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SECOND CAUSE OF ACTION Writ of Mandate CCP §§ 526a and 1085 Violation of Government Code Section 20028 43. Petitioner incorporates and re-alleges by reference paragraphs 1 through 35 above. 44. Govemment Code section 20028 provides the definition of "employee" for purposes of obtaining a CalPERS membership. Under subdivision (a) an "employee" means "any person in the employ ofthe state . . . whose compensation, or at least that portion of his or her compensation is 7 8 9 10 11 12 provided by the state . . . is paid out of funds directly controlled by the state." Under subdivision (b) an "employee" means "any person m the employ of any contracting agency." 45. Respondents have a duty to comply with section 20028 by determining whether an individual is an "employee" for purposes of qualifying for a CalPERS membership and therefore CalPERS benefits 46 Pursuant to Govemment Code section 20028, Kelso is not eligible to be in CalPERS because

13 he does not qualify as an "employee" under either subdivisions (a) or (b). 14 15 16 47. Respondents have violated and threaten to continue to violate Section 20028 by having determined that Kelso is a state employee m as much as Respondents are presently permitting, and will continue to permit unless enjoined by this court, Kelso's receipt of health benefit coverage through the

17 use of public funds under CalPERS contracts with providers who uniquely extend coverage only to those 18 appropnately enrolled as CalPERS members. 19 20 21 22 23 24 48 Respondents have violated and will continue to violate Section 20028 unless enjoined by this court, by having determined that Kelso is a state employee for purposes of pension benefits in as much as Respondents knowingly set the rate for, accept, spend and/or invest contributions to Kelso's retirement from a State agency using public ftinds. 49. The above described actions of Respondents are void, unconstitutional, beyond their power or jurisdiction, and are a prejudicial abuse of discretion.

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Francis V CalPERS- Original Petition for Wnt of Mandamus

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THIRD CAUSE OF ACTION Writ of Mandate CCP §§ 526a and 1085 Illegal and/or Unauthorized Expenditure of Public Funds Violation of California Constitution Article XVI, Section 6 50. Petitioner incorporates and re-alleges by reference paragraphs 1-35 above. 51. Article XVI, section 6, ofthe California Constitution prohibits CalPERS from making

6 "gifts" using public ftinds. 7 52. The Public Employees Retirement Law (PERL) correspondingly sets forth a mandate

8 limiting who may enjoy CalPERS membership. (Govemment Code Section 20028) 9 53. PERL does not include Federal Court officers and agents, nor does it include employees of

10 private non-profit corporations. 11 54. Consequently, Respondents are presently violating and threaten to continue to violate Article

12 XVI, section 6 by making a gift of public funds in the form of CalPERS benefits to Kelso. 13 55. The above described actions of Respondents are void, unconstitutional, beyond their power

14 or junsdiction, and are a prejudicial abuse of discretion. 15 16 17 REMEDY WHEREFORE, Petitioner prays as follows. 1. That the Court issue a peremptory wnt of mandate and related injunctive relief disallowing

18 Kelso membership m CalPERS on the purported basis of him being eligible as a State AOC employee; 19 2. That the Court issue peremptory wnt of mandate and related declaratory relief declaring that

20 CalPERS IS without legal authonty to extend benefits to Kelso on the purported basis of him being 21 eligible as a State AOC employee; 22 23 3. For attomey's fees and costs; and 4 For such other and further relief as the Court deems just and proper. Respectfully submitted by, Law Office of Michael P. White

24 Dated- CA,//UJ^ / V < ^ ^ ^ ^ y 25 26 27 28

MICHAEL P. WHITE, Attomey for Petitioner, Daniel E. Francis

Francis v CalPERS - Original Petition for Writ of Mandamus

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1 2 3 4 5 6 7 8 9 I, the undersigned declare:

VERIFICATION

I am the Petitioner in this action. I have read the above Petition for Writ of Mandamus, and know Its contents. All facts alleged in the petition are tme of my own personal knowledge except for those facts stated on my information and belief, and as to those facts, I believe them to be true. I declare under penalty of peijury that the foregoing is tme and correct and that this declaration was executed on V\r>&A\ \2^ /-—-^ . 2011 at Sacramenjo, Cahfomia

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)ANIELE. FRANCIS, DANIE Petitioner

Francis V CalPERS- OriginalPetitionfor Writ of Mandamus

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EXHIBIT 1

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

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MARCIANO PLATA, et al.. Plaintiffs,
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NO. COl-1351 TEH CLASS ACTION ORDER APPOINTING RECEIVER

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ARNQLD SCHWARZENEGGER, et al.. Defendants.

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On October 3, 2005, this Court issued its written Findings of Fact and Conclusions of Law m support of its June 30, 2005 decision to establish a Receivership to take control ofthe delivery of medical services to California state prisoners confined by the California Department of Corrections and Rehabilitation C'CDCR") ' In its wntten mling, the Court explained that it was undertaking a national search to find a Receiver with the leadership abihty, expenence, and vision to take on the monumental and cntical task of bnngmg the

' As the October 3, 2005 ruling notes. Pelican Bay State Pnson is exempted from this action and instead falls under this Court's junsdiction m the separate case of Madrid v Woodford, C90-3094 TEH.

1 level of medical care provided to Califomia's 166,000 inmates up to federal constitutional 2 standards. Having undergone a thorough and successful search process, the Court HEREBY

3 APPOINTS Mr. Robert Sillen to serve as the Receiver in this case, at the pleasure ofthe 4 Court, effective Monday, April 17, 2006. A copy ofthe Receiver's curriculum vitae is

5 attached to this Order. 6 7 8 9 10 11
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In furtherance ofthe Receivership, the Court sets forth the Receiver's duties and powers as follows:

I. DUTIES OF THE RECEIVER A. Executive Management The Receiver shall provide leadership and executive management ofthe California

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13 operations and developing, implementing, and validating a new, sustainable system that 14 provides constitutionally adequate medical care to all class members as soon as practicable 15 To this end, the Receiver shall have the duty to control, oversee, supervise, and direct all 16 administrative, personnel, financial, accounting, contractual, legal, and other operational 17 functions ofthe medical delivery component ofthe CDCR. 18 19 20 21 22 23 24 25 26 27 28 B. Plan of Action The Receiver shall, within 180-210 calendar days ofthe effective date of appointment, develop a detailed Plan of Action designed to effectuate the restructuring and development of a constitutionally adequate medical health care delivery system This Plan shall include recommendations to the Court ofwhich provisions ofthe (1) June 13, 2002 Stipulation for Injunctive Relief, and (2) September 17, 2004 Stipulated Order re Quality of Patient Care and Staffing Order and Injunction (and/or policies or procedures required thereby), should be earned forward and which, if any, should be modified or discontinued due to changed circumstances. The Plan of Action shall also include a proposed time line for

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all actions and a set of metrics by which to evaluate the Receiver's progress and success. The Receiver shall update and/or modify this Plan as necessary throughout the Receivership. Pending development ofthe Plan of Action, the Receiver shall undertake immediate and/or short term measures designed to improve medical care and begin the process of restmctunng and development of a constitutionally adequate medical health care delivery system.

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C. Budgeting and Accounting The Receiver shall determine the annual CDCR medical health care budgets

10 consistent with his duties and implement an accounting system that meets professional 11 standards The Receiver shall develop a system for periodically reporting on the status ofthe
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CDCR's medical health care budget and shall establish relations with the Califomia Office of Inspector General to ensure the transparency and accountability of budget operations.

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D. Reporting The Receiver shall provide the Court with bimonthly progress reports. These reports shall address- (a) all tasks and metrics contamed m the Plan and subsequent reports, with degree of completion and date of anticipated completion for each task and metnc, (b) particular problems being faced by the Receiver, includmg any specific obstacles presented by institutions or individuals, (c) particular successes achieved by the Receiver, (d) an accounting of expenditures for the relevant penod, and (e) all other matters deemed appropriate for judicial review. The Receiver shall meet with the Court on a bimonthly basis shortly following the issuance of each report and shall remam m contact with the Court throughout the Receivership on an informal, as needed, basis.

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1 II. POWERS AND AUTHORITY OF THE RECEIVER 2 The Receiver shall have all powers necessary to fulfill the above duties under this

3 Order, including, but not limited to: 4 5 A. General Powers The Receiver shall exercise all powers vested by law in the Secretary ofthe CDCR as

6 they relate to the administration, control, management, operation, and financing ofthe 7 California prison medical health care system. The Secretary's exercise ofthe above powers 8 is suspended for the duration ofthe Receivership; it is expected, however, that the Secretary 9 shall work closely with the Receiver to facilitate the accomplishment of his duties under this 10 Order. 11 i
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B. Personnel The Receiver shall have-the power to hire, fire, suspend, supervise, promote, transfer, discipline, and take all other personnel actions regarding CDCR employees or contract employees who perform services related to the delivery of medical health care to class members The Receiver shall have the power to establish personnel policies and to'create, abolish, or transfer positions related to the delivery of medical health care to class members.

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18 The Receiver also shall be empowered to negotiate new contracts and to renegotiate existing 19 contracts, mcluding contracts with labor unions, in the event that such action is necessary for 20 21 22 23 C. Property The Receiver shall have the power to acquire, dispose of, modernize, repair, and lease the Receiver to fiilfill his duties under this Order.

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24 property, equipment, and other tangible goods as necessary to carry out his duties under this 25 26 27 28 Order, mcluding but not limited to mformation technology and tele-medicine technology

D. Govemme State Laws, Regulations, and Contracts The Receiver shall make all reasonable efforts to exercise his powers, as described in this Order, in a manner consistent with California state laws, regulations, and contracts, including labor contracts In the event, however, that the Receiver fmds that a state law, regulation, contract, or other state action or inaction is clearly preventing the Receiver from developing or implementing a constitutionally adequate medical health care system, or otherwise clearly preventing the Receiver from carrying out his duties as set forth in this Order, and that other altematives are inadequate, the Receiver shall request the Court to waive the state or contractual requirement that is causing the impediment. Upon receipt of 10 any such request, the Court shall determine the appropnate procedures for addressing such 11 request on a case-by-case basis.
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E. Access The Receiver shall have unlimited access to all records and files (paper or electronic) maintained by the CDCR, including but not limited to all institutional, personnel,, financial, and prisoner records, as deemed necessary by the Receiver to carry out his duties under this Order. The Receiver shall have unlimited access to all CDCR facilities, as deemed necessary by the Receiver, to carry out his duties under this Order Ordinanly, the Receiver shall attempt to provide reasonable notice when scheduling such visits, but this shall not preclude the Receiver from making unannounced visits to facilities or offices as the Receiver deems necessary to carry out his duties under this Order. The Receiver shall have unlimited access to pnsoners and to line and managenal staff, including the authority to conduct confidential interviews with staff and pnsoners

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Immunity and Indemnification

The Receiver and his staff shall have the status of officers and agents ofthis Court, and as such shall be vested with the same immunities as vest with this Court. Additionally, Defendants shall indemnify the Receiver and members of his staff to the same extent as Defendants are obhgated to indemnify the Secretary ofthe CDCR.

III. OFFICE OF THE RECEIVER A. The Receiver shall be paid a reasonable compensation for his services in an amount to be approved by this Court B. The Receiver shall establish an Office ofthe Receiver in a location to be

11 determined m consultation with the Court, with staffing necessary to fully carry out his duties
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as set forth m this Order. Upon approval from the Court, the Receiver shall set,reasonable compensation and terms of service for each member of his staff, (including employees and/or consultants) and shall be authorized to enter mto contracts with the employees or consultants ofthe Office.

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fl> £ 16 C. Because time is ofthe essence, and in order to begm operations immediately. 1 c -i rn 17 Defendants shall, withm 30 days ofthe date ofthis Order, establish an initial operating fund T3
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with the Court m the amount of $750,000. The Receiver shall submit monthly requests for
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19 payment from this fund to the Court. Further funds for the Office of the Receiver shall be 20 21 22 23 24 25 26 27 28

deposited to the Receiver's Office Fund Account set forth in paragraph F below D. Throughout the Receivership, the Receiver shall submit to the Court a monthly accounting of all receipts and expenditures ofthe Office ofthe Receiver and shall arrange for an independent financial audit ofthe Receiver's Office Fund Account on an annual basis. E. Within 45 calendar days from the date of effecfive appointment, the Receiver shall establish an interest-bearing account, with respect to which he shall be the signatory and fiduciary. This account shall be designated as the Receiver's Office Fund Account and shall be maintained solely for the reasonable and necessary expenses associated with the operation

1 ofthe Office ofthe Receiver, mcluding but not lim.ited to salaries, consulting fees, and the

2 costs of supplies, equipment, office space, fransportation,^ and the like. The Receiver shall 3 arrange with Defendants a system for regularly replenishing the Receiver's Office Fund 4 Account. 5
F. Within 75 calendar days ofthe date of effective appomtment, the Receiver shall

6 establish a budget for the Office ofthe Receiver's first year of operation. The Receiver shall 7 also establish a budget for the Office of Receiver for each subsequent year of operation, with 8 each such budget due 90 days in advance ofeach budget year 9
10 IV. COSTS 1 1 " g
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All costs incurred m the implementation ofthe policies, plans, and decisions ofthe

12 Receiver relating to the fulfillment of his duties under this Order shall be bome''by
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Defendants. Defendants shall also bear all costs of establishing and maintaining the Office

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16 V. LENGTH OF RECEIVERSHIP 17
The Receivership shall remain in place no longer than the conditions which justify it

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18 make necessary, and shall cease as soon as the Court is satisfied, and so finds m consultation 19 with the Receiver, that Defendants have the will, capacity, and leadership to maintain a 20 system of providing constimtionally adequate medical health care services to class members. 21 The Court expects that as the Receivership progresses, the Receiver will attempt to engage 22 Defendants in assuming responsibility over portions ofthe system that are within 23 24 25 26
'When engaged in travel, the Receiver and his staff shall use their best efforts to travel, the Receiver and his staff shall, when possible, utilize advanced-purchase economy

27 contain direct expenses m a cost-effective fashion. For example, when engaged m necessary 28 airfares and reasonably pnced accommodations.

1 Defendants' demonstrated ability to perform, so that the ultimate transfer of power back to 2 the State will be transitional. 3 Pnor to the cessafion ofthe Receivership, the Receiver shall develop a Plan for Post-

4 Receivership Govemance ofthe system, which shall include consideration of its stmcture, 5 fimding, and governmental responsibility for its long-term operation. The Receiver shall 6 present this plan to the Court for approval and adopfion as an order. 7 8 VI. COOPERATION 9 A. All Defendants, and all agents, or persons withm the employ, ofany Defendant m

10 this action (including contract employees), and all persons in concert and participation with 11 them, and all counsel in this action, shall fully cooperate with the Receiver in the discharge of his duties under this Order, and shall promptly respond to all inquiries and requests related to
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compliance with the Court's orders in this case. Any such person who interferes with the Receiver's access, as set forth in section ILE , or otherwise thwarts or delays the Receiver's performance of his duties under this Order, shall be subject to contempt proceedmgs before

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B. Counsel for Defendants shall ensure that the following state agencies are given -a I 17 « s 'S 18 prompt notice ofthe substance ofthis paragraph, the Department of Personnel P Administration, the Department of Finance, the Department of General Services, the State 19 Personnel Board, and any other state agencies that Defendants deem should be notified. 20 Defendants shall notify the Court in wrifing of their compliance with this paragraph withm 21 30 days ofthe date ofthis Order. 22 C . The Secretary ofthe CDCR shall ensure that all ofthe CDCR's employees and 23 agents (including contract employees) are given prompt notice ofthe substance ofthis 24 paragraph Defendants shall notify the Court in wntmg of their compliance with this 25 paragraph withm 30 days ofthe date ofthis Order 26 27 28

1 VII. ADVISORY BOARD , 2 The Court, in consultation with the Receiver, shall appoint an Advisory Board'of no

3 more than five members to assist and advise the Court and the Receiver with respect to 4 5 6 7 VIII MODIFICATION Given that this Receivership is unprecedented m scope and dimension, this Court achieving the goals of the Receivership

8 finds that flexibility will be an important element in ensunng its effectiveness. Accordingly, 9 this Order may be modified as necessary from time to time to assure the success ofthis 10 Receivership and the eventual retum ofthe operation ofthe CDCR's medical health care 11 delivery system to the State of California.
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IT IS SO ORDERED.

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16 Dated February 14,2006 17 18 19 20 21 22 23 24 25 26 27 28

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iLTON E. HENDERSON UNITED STATES DISTRICT JUDGE

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ROBERT SILLEN

EDUCATIONAL BACKGROUND 1965 1972 University of Denver, Denver, Colorado Bachelor of Arts Degree Graduate School, Yale University. Masters of Public Health Degree

CAREER EXPERIENCE 1993-Present Executive Director Santa Clara Valley Health & Hospital System San Jose, CA Executive Director, Hospital & Climes Santa Clara Valley Medical Center San Jose, CA Associate Director, Hospital & Clinics • University Hospital University ofCahfomia Medical Center San Diego, CA Assistant Director University Hospital University of California Medical Center San Diego, CA Assistant Administrator City Hospital Center at Elmhurst Elmhurst, NY Director of Community and Professional Relations United States Public Health Service New York, NY Director of Climes United States Public Health Service New York, NY

1979-1993

1976 -1979

1972 - 1976

1968 - 1970

1967 - 1968

1965 - 1967

DETAILS OF CAREER EXPERIENCE Executive Director. Santa Clara Valley Health & Hospital Svstem fSCVHHSt In June, 1993, the Board of Supervisors created a full service, integrated County health care system consisting ofthe Santa Clara Valley Medical Center, Department of Public Heahh, Department of Mental Health, Department of Custody Health Services and the Department of Alcohol & Dmg Services The Santa Clara Valley Health & Hospital System is responsible for a full continuum of preventive intervention and treatment services throughout the County, both directly under County auspices and through contracts with the private sector The system is compnsed of over 6,200 employees and has an annual operating budget of nearly S 1.4 billion. The Executive Director is responsible for all aspects ofthe system's operations, long range planning, pnvate/public partnerships, community relations, capital development and mformation systems The development of a cost effective, fully integrated system is essential for the successful conversion to a fiill-service managed care delivery system in a highly competitive environment In additon, the Executive Director was responsible for designing and implementing a County-wide Medi-Cal Managed Care program (Local Initiative) in June, 1996 as well as the Children's Health Initiative and Healthy Kids program m January, 2000. Executive Director. Santa Clara Valley Medical Center (SCVMC) Directed, administered, and coordinated all activities of the hospital and its affiliated clinics; responsibilities included planning and establishing major current and long range objectives, goals, and policies, maintaining good employee and medical staff relations, mamtaimng financial solvency ofthe institution; organizing the functions ofthe Medical Center and clinics through appropnate departmentalization and delegation of duties; exercising day-to-day responsibility for the mtemal operations ofthe hospital; and directly coordinating all extemal activities and relations affecting the hospital and clinics. The Santa Clara Valley Medical Center is a 500-bed regional medical center with an operating budget of over S800 million and 4,500 full-time equivalent employees Services range from community based pnmary care satellite clinics to tertiary regional services such as Regional Bum, Spinal Cord Injury, and Head Trauma; Neonatal Intensive Care; Poison Control Center, Trauma Center, Life Flight Helicopter; and Custody (Jail) Health Services Associate Director. University Hospital, University of California Medical Center. San Diego Admmistrative and budgetary responsibility for the following professional services- Anesthesia, Medicine, Neurology, Surgery Responsibility included approval and control of operating and capital budgets, program planning and implementation and identification and solution of operational problems. Relate directly to Chairpersons and Division Chief of above mdicated departments Responsible for operation of hospital planning office, including overall administrative responsibility for short- and long-range planning Responsibilities included formulation of planning methodology, acquisition of capital resources, and coordination of all hospital construction, renovation, and space allocation.

Responsible for the activities of the Assistant Director, Hospital and Clinics, for a vanety of professional services and non-professional departments including: Cardiac Cathetenzation Laboratory, Gastroenterology, Matenal Handling, Medicine, Neurology, Pathology, Pharmacy, Physical and Occupational Therapy, Radiology, Respiratory Therapy, Surgery Assistant Administrator. City Hospital at Elmhurst Assisted the Administrator ofthis 1,000-bed teaching hospital in the general administration of a variety of professional and non-professional services, including- Anesthesia, Hematology, Inhalation Therapy, Pathology, Radiology, Social Services, Medical Records, and Medical Library Directly responsible for administration of internship and residency trainmg programs, and administration of Medicare comphance program.

ACADEMIC APPOINTMENTS Assistant Clinical Professor, Department of Community Medicine, University of California, San Diego Clinical Lecturer, Department of Community Medicine, University of California, San Diego

PROFESSIONAL ASSOCIATIONS AND MEMBERSHIPS Children & Famihes First Commission of Santa Clara County, Commissioner 2000 - Present California Association of Public Hospitals & Health Systems, Board of Directors, Current Member, Current and Past Chairman- 2003, 1984, 1985, 1989 National Association of Public Hospitals & Health Systems, Current Member, Past Chairman- 1987 Emergency Housing Consortium, Board of Directors, Member- 1998-2001 American Cancer Society, Board of Directors, Member: 2000, 2001 California Association of Hospitals and Health Systems, Board of Tmstees California Association of Hospitals and Health Systems, Chairperson, CAHHS Committee on Finance, 1990 California Association of Hospitals and Health Systems, Marketplace Task Force, 1989; Blue Ribbon Committee, 1990 Amencan Hospital Association Amencan Hospital Association, Governing Council, Section for Metropolitan Hospitals Hospital Council of Northem California, Board of Directors California Hospital Association County Hospital Committee Hospital Conference of Santa Clara County President, 1986 Hospital Councii of Northem Califomia, Planning Committee Hospital Council of Northem Cahfomia, Finance Committee National Association of Counties, Health and Education Steenng Committee, Subcommittee, Health Care Cost Containment; Subcommittee, Long Term Care

ROBERT SILLEN

Major Accomplishments Planned, flnanced and implemented major capital expansion of Medical Center: $50 million patient care tower, including new and expanded Comprehensive Emergency Room; Adult Medical, Surgical and Coronary Care Intensive Care Umts, Regional Bum Center, post-partum maternity; clinical lab expansion, 40 bed telemetered Transitional Care Unit; Newborn Nursery, roof-top heliport. $12 million ambulatory care/physician office buildmg (Valley Health Center). This practice facility provides a highly competitive practice site enabling our faculty to expand our base of pnvately insured patients. 42,000 square foot facility includesdecentrahzed registration/waiting, patient care modules including exam rooms, consult rooms and offices, pharmacy; laboratory, radiology services; medical records. This facility is the locus of our prepaid health plan (Valley Health Plan) for County and other public employees $5 milhon physician/administrative complex that houses our faculty practice plan, physician offices and administrative support offices. Psychiatric Facility Expansion - As part of the same bond issue that financed the West Wing patient tower we have built a new 54 bed acute psychiatnc facility ($8 million) and purchased a free-standing, distinct part psychiatric SNF ($4 milhon) Creation of a Magnetic Resonance Imaging Center through a joint venture. A Campus Development Plan has been funded and initiated which will culminate m the completion of the followmg projects dunng the next three years: Additional Patient Care Tower; 1,500 car parking stmcture(s), Ambulatory Care Facility, Alzheimers Treatment and Day Care Center; Long Tenn Care facility, new power plant and laundry; Administrative support and physician office building. The Campus Development effort will cost over $500 million. $250 million Patient Care Tower (completed m 1999) $250 million Specialty Inpatient Center (to be completed in 2008). Four Community Based Pnmary Care Centers (S200 million)

Program Development: Designation as Level I Trauma Center Occupational and Industrial Medicine Program Developed a program for and consummated contracts with union health and welfare funds and corporate entides in Silicon Valley as well as governmental agencies and school distncts. Valley Health Plan (VHP) Designed and implemented a prepaid health plan for County employees This plan, hcensed by the State Department of Corporations, is intended to compete with pnvate HMO's, PPO's, IPA's and indemnity plans offered to over 13,000 County employees thus increasing our private insurance base and reducing County subsidy to the Medical Center. Since its inception, VHP has grown from 0 to 2,600 enrollees. Developed a Marketmg and PubUc Relations Division that successfully mamtained and enhanced our patient referral base, created commumty support and understanding and enhanced our image throughout the County and State Created a free-standing 501 (c)(3) fundraising foundation (SCVMC Foundation) The Foundation, the sole purpose ofwhich is to raise fiinds and create community support for SCVMC was created in 1988. Dunng its first year it raised over $1 milhon for the Medical Center The Foundation Board is compnsed of wealthy Silicon Valley corporate leaders and civic "movers and shakers." Major support has been garnered from wealthy individuals, other local foundations, corporations (IBM, Cypress Semiconductors, Applied Matenals, Hewlett-Packard, Syntex to name a few) This is a unique effort for a county medical center and we are now providing consultative services to other pubhc hospitals that want to emulate our success. Service Excellence Successfully designed and implemented a Medical Center-wide program which has significantly enhanced mtra-and-interdepartmental functioning and communications, increased employee morale, aided recmitment and retention, positively impacted operating efficiency, enhanced our patient and community relations and maintained and enhanced our patient base Financial Performance. Despite the adverse sponsorship'mix of SCVMC's patient population (60% Medi-Cal, 20% unsponsored, 5% pnvate insurance, 15% Medicare) our financial perfonnance has been exemplary The County General Fund subsidy has never exceeded 10% of our total operating budget during my 16 year tenure at SCVMC This is unique for a California county hospital, especially the third largest in the State Our financial and clinical successes are closely related and have created an environment of full community and political support vital to our overall success Operational Re-engineering Implemented a full-scale work re-engineenng project, the goal ofwhich was to reduce operating expenses by $60 million over three years. This program is unique within County govemment in California and has the full support ofthe Board of Supervisors and County unions

EXHIBfT 2

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1 2 3 4 5 6 7 8 9
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MARCIANO PLATA, et al., Plainfiffs, NO. COl-1351 TEH ORDER APPOINTDMG NEW RECEIVER IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

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ARNOLD SCHWARZENEGGER, etal, Defendants.

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On October 3, 2005, this Court issued detailed findings of fact and conclusions of law

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16 explaining the Court's June 30, 2005 oral ruling to establish a Receivership to take control of 17 the dehvery of medical services to all California state pnsoners confined by the California 18 Department of Corrections and Rehabilitation ("CDCR"). The Court concluded that "the 19 California prison medical care system is broken beyond repair," and that an "unconscionable 20 degree of suffering and death is sure to continue ifthe system is not dramatically 21 overhauled " Oct. 3, 2005 Fmdings of Fact & Conclusions of Law at 1-2. The Court 22 "impose[d] the drastic but necessary remedy of a Receivership m anticipation that a Receiver 23 [could] reverse the entrenched paralysis and dysfunction and bring the delivery of health care 24 in California prisons up to constitutional standards." Id at 2 The Court further explamed 25 that, "[o]nce the system is stabilized and a constitutionally adequate medical system is 26 established, the Court will remove the Receiver and return control to the State." Id 27
On February 14, 2006, the Court appointed Robert Sillen "to serve as the Receiver m

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28 this case, at the pleasure ofthe Court, effective Monday, April 17, 2006 " Feb 14, 2006

1 Order Appointing Receiver at 2. In that appomtm.ent order, the Court also set forth the 2 Receiver's duties and powers and provided for the establishment of an advisory board to 3 assist and advise the Court and Receiver. Id. at 2-9. 4 Much progress has been made smce the Receivership was established, and the

5 Receiver has successfully recruited and hired a team of conectional and clinical experts to 6 assist him with his remedial obligafions. As detailed m the Receiver's bimonthly and, 7 subsequently, quarterly reports to the Court, the Receiver and his staff, including the many 8 CDCR employees who report to the Receiver, have undertaken significant efforts to improve 9 the delivery of medical care to California inmates. For example, vacancy rates among 10 clinical staff m prisons have been dramatically reduced as a result of increased salanes and
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11 improved hiring processes Similarly, many clinically appropnate changes have been made,
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12 including the replacement of medical technical assistants with licensed vocational nurses, 13 and several necessary clinical constmction projects have been initiated. In its first two years, 14 the Receivership has also resolved the CDCR specialty care contracting crisis, which was 15 preventing inmates from receiving needed care from clinical specialists, and established a 16 successful prison improvement pilot project at San Quentin State Prison Nonetheless, it is

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17 beyond dispute that the system for delivering health care to Califomia's inmate population 18 remains below constitutional standards and continues to be m need of repair - not through 19 any fault ofthe Receiver or his staff, but, rather, primanly as a result ofthe extreme 20 21 dysfunction the Receiver inherited from the State, as well as the numerous problems and obstacles encountered by the Receiver that were not anticipated at the time the Receivership

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22 was established. 23 24 25 26 27 28 In addition to being charged with undertaking immediate and short-term measures "designed to improve medical care and begin the process of restructuring and development of a constitutionally adequate medical health care delivery system," the Receiver was also ordered to develop a detailed Plan of Action to complete the development and implementation ofsuch a system. Id. at 2-3. The Court onginally ordered the Receiver to file his Plan of Action within 180 to 210 days of his appointment, id at 2, but later granted 2

1 the Receiver's request for an extension of time On December 19, 2006, the Court granted 2 the Receiver unfil May 15, 2007, to file his initial Plan of Action with metrics "that are 3 realistic, fully informed, detailed, and effective," with a revised Plan of Action due by 4 November 15, 2007. Dec. 19, 2006 Order at 2, 5. In the same order, the Court granted the 5 Receiver's request to delay appointment of an advisory board until after the filing ofthe 6 7 initial Plan of Action. Id at 3-4 The Receiver tunely filed his initial Plan of Acfion on May 10, 2007 Followmg the

8 Court's independent review of that plan and considerafion of Plamfiffs' responses to the plan, 9 includmg arguments raised during an August 27, 2007 hearing, the Court foimd that the 10 initial Plan of Acfion failed to contain adequate metncs and fime lines. The Court ordered
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12 November 2007. Sept. 6, 2007 Order Re (1) Receiver's May 2007 Preliminary Plan of 13 Acfion, & Mot. for Order Modifymg Stip. Inj. & Orders Entered Herein, & (2) Pis.' Mot. for 14 Order Directmg Receiver to Comply with Apnl 4, 2003 Order etc. at 3-5. The Court also 15 observed at the August 27, 2007 hearing that it had not fumished the type of hands-on 16 leadership that, m retrospect, it wished it had, and the Court resolved to provide such 17 leadership as this case moved forward. 18 To that end, the Court appointed Starr Babcock as a Pro Bono Special Assistant to the

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19 Court to assist with special projects, including the creation of "an advisory working group to 20 21 22 23 24 25 26 27 28 assist the Court with evaluating the Receiver's [revised] Plan of Action . and determining how best to assemble the advisory board." Oct. 29, 2007 Order Appointing Pro Bono Special Assistant to the Court at 1. Following the Receiver's timely filing of his revised Plan of Action on November 15, 2007, the Court provided the advisory workmg group with a copy of the revised plan and convened the group for a one-day meefing on December 8, 2007 The Pro Bono Special Assistant to the Court had numerous individual conversations with advisory working group members both before and after the December 8 meeting The Receiver, as well as counsel for Plaintiffs and Defendants, made presentations to and answered questions from the advisory working group at that meetmg The group
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subsequently reached two main consensus opinions durmg closed-session discussions. First, the advisory group recommended that a professional planner be hired to assist the Receiver m revising the Plan of Action so that it both complied with the Court's orders and direcfions and could serve as a useful leadership document that would provide a common vision for all stakeholders. In addition, the working group was unanimous in its recommendation that an advisory board be fonned to assist in the planning process and, more broadly, to advise the Court on issues relating to the Receivership's operation and progress towards implementing a prison medical care system that meets constitutional standards The Court agrees with and 9 10
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adopts both ofthese recommendafions, as ordered below The Receivership has reached a cnfical juncture at which it must now move from a

11 pnmanly investigative and evaluative phase, during which the Receivership analyzed the
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12 current system to determme what reforms were necessary and worked to create.the 13 infrastructure required to effectuate such reforms, into an implementation phase,, during 14 which the Receivership must translate the conceptualized reforms mto reality Throughout 15 Its existence, the Receivership has developed and put into practice cnfical short-term 16 measures, and such measures must continue to be adopted to address issues requiring urgent 17 attention. However, the Receivership's focus can and must now shift towards long-term 18 reform that will achieve the implementation of a sustainable, constitutionally adequate 19 system of delivering medical care to Plaintiffs - and, not inconsequentially, a system that • 20 must ultimately be transitioned back to the State of California's confiol. Put another way, the

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21 Receivership's overarching goal should be workmg itself out of existence once delivery of 22 23 24 25 26 27 28 medical care to California's inmates has been brought up to constitutional standards After careful reflection and deliberation, the Court has concluded that such work would best be accomplished by appointing a new Receiver who brings a different set of strengths appropriate to guiding the Receivership through its second phase. While the current Receiver has successfully used his unique skills and bold, creative leadership style to investigate, confront, and break down many ofthe bamers that existed at the inception ofthe Receivership, the second phase ofthe Receivership demands a substantially different set of 4

administrative skills and style of collaborative leadership. The Receivership must continue 2 to maintain its independence as an arm ofthe federal courts established to take over state 3 operations, but it also must work more closely at this stage with all stakeholders, including 4 State officials, to ensure that the system developed and implemented by the Receivership can

5 be transferred back to the State m a reasonable time frame Such collaboration appears to be 6 more important now than ever, given the cunent budget crisis faced by the State of 7 California. 8 9 Accordingly, with good cause appearing, IT IS HEREBY ORDERED that: 1 The Court's appointment of Robert Sillen as the Receiver m this case is hereby

10 terminated, and all prior authority vested by the Court in Mr. Sillen is hereby revoked,
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2. J. Clark Kelso is appointed to serve as the Receiver m this case, at the pleasure of

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13 the Court, effective immediately. All powers, privileges, and responsibilities ofthe Receiver, 14 as set forth m the Court's Febmary 14, 2006 Order Appointing Receiver, shall continue m 15 full effect, except as modified by subsequent orders ofthis Court A short biography of 16 Mr Kelso is attached to this order. 17 3 The Pro Bono Special Assistant to the Court shall assist the Receiver m reworking

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18 the November 15, 2007 Plan of Action so that it is a more useful leadership document. The 19 Receiver and Pro Bono Special Assistant shall consider how best to choose and use the 20 21 22 23 24 services of a professional planner to assist m this process, the costs ofwhich shall be borne by Defendants as part ofthe Receivership's budget 4 The Court will shortly be appointing an advisory board to assist and advise the Court and the Receiver as this case moves forward. All costs associated with the appointment and service ofthe advisory board shall be home by Defendants as part ofthe

25 Receivership's budget. Although the Court is cognizant of not making the advisory board so 26 27 28 large as to be unhelpful and inefficient, the Court may expand the advisory board beyond the five individuals provided for by the February 14, 2006 Order Appointing Receiver to ensure that medical, correctional, and any other areas of necessary expertise are adequately 5

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1 represented. The Pro Bono Special Assistant to the Court shall confinue to assist the Court in 2 assembling and staffing the advisory board, m consultafion with the Receiver. Details of the 3 advisory board will be announced by subsequent order of the Court. 4 5 IT IS SO ORDERED. 6 7 Dated 8 9 10
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01/23/08

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THELTON E. HENDERSON, JUDGE UNITED STATES DISTRICT COURT

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J. Clark Kelso Biographical Information J. Clark Kelso is a Professor of Law and, for the last twelve years, has been the Director ofthe Capital Center for Govemment Law and Policy at the University ofthe Pacific McGeorge School of Law m Sacramento, California. He comes to the Cahfomia Prison Health Care Receivership with over fifteen years of expenence m a wide vanety of positions in all three branches of state govemment. Throughout this service, he has successfully improved state programs and operations while developing a well-known reputation for independence, mtegrity, and collaborative leadership. In the 1990s, Kelso worked with the California Judicial Councii and Admimstratave Office ofthe Courts on a number of task forces and commissions. This work, particularly his efforts in support of unification ofthe state's trial courts, led to his receipt ofthe 1998 Bernard E. Witkin Amicus Curiae Award, the highest honor given to an individual other than a member of the judiciary for outstanding contribufions to California's courts. In July 2000, Kelso was selected by then Attomey General Bill Lockyer and Governor Gray Davis as the interim replacement for outgoing Insurance Commissioner Chuck Quackenbush, who abruptly resigned amid allegations of corruption. Kelso's leadership quickly restored public trust to the Department of Insurance. In June 2002, Governor Davis appointed Kelso to serve as the State's Chief Information Officer and charged him with restoring the state's crumbling information technology program. After Governor Davis's recall, Governor Amold Schwarzenegger retamed Kelso m the State CIO position. Focusing on the disciplines of strategic plarmmg, collaborative execution, and workforce development, Kelso tumed the state's information technology ("IT") program around, in two years moving the state from 47th to 12th in Brown University's aimual e-govemment report. In his State CIO role, Kelso also supported the development of state policies encouraging health information technologies and data shanng to improve quality, transparency, and accountability m public and private health care delivery systems In recognition of his accomplishments, he received a "Top 25 Award for 2004 Doers, Dreamers and Drivers" from Govemment Technology and was named by Computerworld to their list of "Premier 100 IT Leaders for 2007 " A 1983 graduate ofthe Columbia University School of Law, Professor Kelso clerked for Judge Anthony M. Kennedy on the United States Court of Appeals for the Ninth Circuit. Kelso joined the faculty at Pacific McGeorge m 1986 after practicing law briefly m the New York offices of Kaye, Scholer, Fierman, Hays & Handler A registered Republican, Kelso is married to Kan Kelso, Ph.D , and they have two daughters.

EXHIBIT 3

Agreement Betiveen The Judicial Council of California, Administrative Office ofthe Courts and the California Prison Health Care Receivership Corporation Regarding the Provision of Services By J. Clark Kelso, Court-Appotnted Receiver This Agreement ("Agreement") is entered into effective March 7, 2008 ("Effective Date"), by and between the Judicial Council of Califomia, Administrative Office ofthe Courts ("AOC") and the California Prison Health Care Receivership Corporation ("Corporation"). RECITALS By order issued on Januai-y 23, 2008, in the lawsuit captioned Marciano Plata, et al. v. Arnold Schwarzenegger, et al. (CaseNo. COl-1351 TEH) ("Plata Case"), the Honorable Thelton E. Henderson, Senior United States District Judge ("Judge Henderson") appointed J. Clark Keiso ("Mr. Kelso") as the new Receiver in the Plata Case, to serve at the pleasure ofthe Court, effecdve immediately ("01-23-08 Ordei"). The 01-23-08 Order charged Mr. Kelso as Receiver to focus on long-term reform that will achieve implementation of a sustainable, constitutionally adequate system of delivering medical care to all California state prisoneis confined by the California Department of Corrections and Rehabilitation C'CDCR"), which system must ultimately be transitioned back to the State of California'scontrol. A copy ofthe 01-23-08 Order is attached as Exhibit A. Mr, Kelso previously worked with the AOC on a number of task forces and commissions, which included work on the unification ofthe state's trial courts. More recently. Mr. Kelso served in various positions outside of the judicial branch to improve the efficiency of state government. In 2000, he served as Acting Insurance Commissioner following the resignation of Chuck Quackenbush. In 2002, he served as the state's Chief Information Officer to improve the state's information technoJ.-.gy p,V,^,am. His appointment as Receiver is consistent with bis prior work to improve state governmental programs. By letter dated Febmary 1,2008, from Judge Henderson to William C, Vickrey, Administrative Director of tlie Courts, a position created by article VI, section 6 ofthe California Constitution, Judge Henderson noted that a critical part ofthe process of establishing a constitutionally adequate health care system for California's prisons that wili ultimately be transferred back to state control is to begin a new collaborative approach with the state executive and legislative branches of government. Judge Henderson further noted that Mr. Kelso had requested that he maintain his status as a state employee while serving as Receiver and that Judge Henderson considered Mr. Kelso's request to be consistent with that collaborative approach. For reasons expiessed in that letter, a copy ofwhich is attached as Exhibit B, Judge Henderson concluded that the most appropriate placement of the Receiver's employment position would be in the .state judicial branch as a neutral branch of sfate govemment. vvith the Receivers salary and benefits to be paid by state funds pursuant to the order issued on February 14, 2006 in the Plata Case ("02-14-06 Order"). Accordingly, Judge Henderson has asked the AOC to serve as the employing entity of Mr, Kelso to facilitate his service as Receiver for the benefit ofthe court, the

Receiver, and the overarching goal of developing a constitutionally adequate system of inmate medical care over which the State of California can eventually resume control. After conferring with representatives ofthe executive and legislative branches, the AOC has determined that it is in the best interests ofthe State of California for the AOC to accommodate Judge Hendeison's lequest that the AOC employ iMr. Kelso. In the spirit of comity and respect for the federal court, and with the expressed support of the California executive and legislative branches, the AOC will employ Mr. Kelso on the terms set forth below. By letter dated March 5,2008, from Judge Henderson to William C. Vickrey, Judge Henderson acknowledged that the terms ofthe AOC's employment of Mr. Kelso are set forth in ihis agreement. A copy ofthe letter is attached as Exhibit C. 1. SERVICES

1.1 Mr. Kelso will be employed by the AOC, effective from Mr. Kelso's date of sepaiation from the California Department of Technology Services ("DTS"). 1.2 The employment-related benefits and policies relating to Mr. Kelso's employment by the AOC are as described in the California Judicial Branch Personnel Policies and Procedures Manual ("Personnel Manual"). Nothing in the Personnel Manual or this Agreement is intended to create an employment contract or to change Mr, Kelso's employment at-will status as an employee ofthe AOC. 1.3 The AOC will loan Mr. Kelso to the Corporation to act as Receiver in accordance with the 01-23-08 Order and pursuant to the terms ofthis Agreement. Mr. Kelso's loan to the Corpoiatioii -vVill continue until this Agreement is terminated. 2. TERM

Unless terminated earlier in accordance with Section 4, this Agreement will continue in full force and effect for so long as Mr. Kelso is authorized to act and acts as Receiver in the Plata Case. 3. TERMS AND CONDITIONS

3.1 Mr. Kelso will be classified by the AOC as a Special Consultant and will perform his duties as Receiver as requited by applicable court orders, 3.2 Mr. Kelso will receive a salary from the AOC in the amount of $224,000 per year, payable at $ 18,667 per month. 3 3 If approved by Judge Henderson, Mr, Kelso may receive from the AOC a onetime salary diffeiential payment in an amount equal to the difference between (i) the

amount Mr, Kelso would have earned as an AOC employee at the above (ate for the period between January 23, 2008 and Mr. Kelso's first day as an employee ofthe AOC, and (ii) the amount of Mr. Kelso's salary from DTS during that period. The one-time salary differential payment, if any, will be considered as salary for (he purpose of calculating Mr. Kelso's retirement benefits. 3.4 Mr. Kelso may receive from the AOC supplemental performance based payments, in the amounts determined by Judge Henderson. Supplemental performance based payments will not be considered for the purpose of calculating Mr. Kelso's letiremeat benefits. 3.5 During the term ofthis Agreement, any salary differential payment, supplemental performance based payment, or salary adjustment must be lequested by the Corporation and approved by Judge Henderson in writing prior to implementation. The Corporation will send any request for salary differential payment, supplemental peiformance based payment, or salary adjustment, along with Judge Henderson's approval, to the Division Diiector in the AOC's Human Resources Division. 3.6 Mr. Kelso will earn, accrue, and use vacation and sick leave or annual leave in accordance with the policies and standards as stated in the Personnel Manual applicable to , non-executive employees. 3.7 Mr, Kelso will be eligible for all insurance coverage provided to AOC employees and subject to the same tenns and conditions as apply to other AOC employees. Mr. Kelso will be a member ofthe California Public Employee Retirement System ("CalPERS") for retirement purposes with benefits determined by the AOC's contract with CalPERS. 3.8 During the term of Ihis Agreement, the AOC wili invoice the Corporation monthly. The AOC will send all invoices to: California Prison Health Care Receivership Corp. 501 JStreet, Suite 100 Sacramento, California 95814 Attn; Accounts Payable 3.9 The Corporation wilt remit within thirty (30) days the full invoiced cost of Mr Kelso's compensation, including all benefits. 3.10 The Corporation agrees to leimburse the AOC for any and all costs associated vvith any workers' compensation and/or disability claim filed by Mr. Kelso for any period during which he is loaned to the Corporation or otherwise covered by this Agreement, The Corporation also agrees to reimburse the AOC for any and all costs associated with any unemployment insurance claim filed by Mr. Kelso. • tne %

3 ll To the extent any additional costs arise upon expiration ofthis Agreement (e.g.. costs relating to payment of unused vacation or personal leave benefits, whether transferred or accrued), the Corporation agrees to leimburse the AOC for such costs. 3.12 The Corporation wil! process and pay ail travel-related expenses incurred by Mr. Kelso, as Receiver, in accordance with the applicable Corporation policies. 3.13 The Corporation agrees to reimburse the AOC for any addhional costs reasonably incurred by the AOC in connection with its performance ofthis Agreement during the loan of Mr. Kelso to the Corporation. Without limiting the foregoing, the Corporation agrees to pay the AOC an administrative processing fee of $150 per month. 3.14 The AOC wiii maintain Mr. Kelso's personnel file and all relevant documentation pertaining to Mr. Kelso's AOC employment as a Special Consultant, including payment of salary and benefits under this Agreement. 3.15 It is the intent of both parties that neither party will be responsible for the negligent and/or intentional acts and/or omissions ofthe other, 3.16 The Board of Dhectors ofthe Corporation will acknowledge in writing its consent to this Agreement and will send a copy of the executed written consent to the • AOC. 3.17 To the fullest extent allowed by Section 5238 ofthe California Nonprofit Public Benefit Coiporation Law ("NPB Coiporation Law"), the Corporation will defend any claim in any fonn made by a third party against Mr. Kelso individually or in his capacity as Receiver, and will seek indemnification from the CDCR as set forth in the 0214-06 Order. The AOC will defend any claim in any form made by a third party against the AOC as the employer of Mr. Kelso, To the fullest extent allowed by the NPB Corporation Law, the Corporation will indemnify and hold the AOC harmless against any and all claims, losses, costs and expenses, including reasonable attomey fees, which the AOC may incur as a result of claims in any form by third parties that arise from or relate to (i) the AOC's employment of Mr, Kelso, (ii) Mr. Kelso's work at the Corporation, 6r (iii) Mr. Kelso's actions as Receiver. 3.18 The Corporation will maintain a Directors and Officeis insurance policy covering the actions of Mr. Kelso during the term ofthis Agreement. The minimum liability limit will be $1,000,000per claim. The Corporation will require its carrier to endorse the Corpoiation's policy to include the Judicial Council of California and the AOC and their or its members, officers, agents, and employees as addhional insureds vvith respect to liability arising out of Mr. Kelso's actions. 4, TERMINATION

4.! Either party may terminate this Agreement for any or no reason following thirty (30) days' written notice to the other party.

4.2 Either party may terminate this Agreement immediately and without notice if Mr. Kelso becomes unavailable, unable, or unwilling to provide services as Receiver, whether arising from illness, disability, death, resignation without notice, retirement, termination of employment, court order, or for any other reason. Ifthe Corporation, or the Receivership ordered by Judge Henderson in the Plata Case, ceases to exist for any reason, then this Agreement will be deemed immediately terminated, 4.3 Within thirty (30) days of termination ofthis Agreement, payment will be made by the Corporation for any amounts due under this Agreement in connection with services performed up to and including the date of termination. S. GENERAL PROVISIONS

5.1 Assignment/Subcontracting: The services to be performed by Mr. Kelso are unique to Mr. Kelso and will not be assigned or subcontracted to another party. 5.2 Compliance with" Law: In the perfoi-mance ofthe Agreement, the parties will comply vvith all applicable state, federal, and local laws. 5.3 Complete Agreement: This Agreement constitutes the entire agreement between the parties with respect to the stated subject matter and supersedes any and all previous Agreements or other provisions, either written or oral, which may exist between the parties. 5.4 Severability The provisions ofthis Agreement are separate and severable. If any provision ofthis Agreement is found by a court of competent jurisdiction or duly authorized arbitrator to be invalid, void, or unenforceable, then (i) the remaining provisions will nevertheless continue in fu'l force and effect vvithout being impaired or invalidated m any way; and (ii) such provision will be enforced to the maximum extent possible so as to effect the reasonable intent of the parties and will be reformed without further action by the parties to the extent necessary to make such provision valid and enforceable. 5 5 Amendment: Any amendment ofthis Agreement must be in writing and signed by the parties. 5.6 Waiver: Any waiver by either paity ofthe terms ofthis Agreement must be in writing and executed by the expiessly authorized representative ofthe waiving party and will not be construed as a waiver ofany succeeding breach ofthe same or other term of this Agreement. 5.7 Nodces: Any notices required or permitted by this Agreement must be in writing and (a) personally delivered; (b) mailed by depositing in the United States mail, first class postage prepaid; or (c) sent by reputable overnight deliveiy service; addressed as follows or to such other place as each party may designate by subsequent written notice to the other party;

(a)If tothe Corporation; Chief of Staff Caiifomia Prison Health Care Receivership 501 J Street, Suite 100 Sacramento, Catifornia 95814 (b)IftotheAOC: Administrative Director ofthe Courts Administrative Office ofthe Courts 455 Golden Gate Avenue San Francisco, CA 94102-3688 (with copies to the General Counsel and the Business Services Manager) 5 8 Authorization: Each party represents that the undersigned is duly authorized to enter into this Agreement on behalf of the entity each represents. 5.9 Further Assurances: Each party agrees to cooperate with the other, and to ' execute and deliver, or cause to be executed and delivered, all such other instruments and documents, and to take all such other actions as may be reasonably requested of it from time to time, in order to effectuate the provisions and purposes ofthis Agreement. 5.10 Counterparts: This Agreement may be executed in any number of counterparts, each ofwhich will be deemed to be an original, but all ofwhich, when taken together, will constitute one and the same instrument. 5.11 Survival. Sections 3.10, 3.11, 3.13, 3.17, 4.3, 5.3, 5,4, and 5.11 will sui-vive the expiration or termination ofthis Agi-eement. IN WITNESS WHEREOF, the parties have executed this Agieement as ofthe Effective Date.

JUDICIAL COUNCIL OF CALIFORNIA, ADMINISTRATjWE OFFICE OFTHE COURTS

CALIFORNIA PRISON HEALTH CARE RECEIVERSHIP CORP. By:

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EXHIBIT A ORDER APPOINTING NEW RECEIVER IN THE PLATA CASE

2 3 4 5 6 7 8 9 10 v. ARNOLD SCHWARZENEGGER, et al., Defendants. MARCIANO PLATA, et al., Plaintiffs, NO. CO 1-135 ITER ORDER APPOINTING NEW RECEIVER IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNTA

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On October 3,2005, this Court issued detailed findings of fact and conclusions of law

16 explaining the Court's June 30, 2005 oral mling to establish a Receivership to take control of
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17 the delivery of medical services to all California state pnsoners confined by the California 18 Department of Coirections and Rehabilitation ("CDCR"), The Court concluded that "the 19 California prison medical care system is broken beyond repair," and that an "unconscionable 20 degree of suffering and death is sure to continue ifthe system is not dramatically 21 overhauled." Oct. 3,2005 Findings of Fact & Conclusions of Law at 1-2. The Court 22 "impose[d] the drastic but necessary remedy of a Receivership in atificipation that a Receiver 23 [could] reverse the entrenched pai'alysis and dysfunction and bring the delivery of health care 24 in California prisons up to constitutional standards," Id. at 2. The Court further explained 25 that, "[o]nce the system is stabilized and a constitutionally adequate medical system is 26 established, the Court will remove the Receiver and retum control to the State." Id. 27 On Februai7 14, 2006, the Court.appointed Robert Sillen 'no serve as the Receiver in

28 this case, at the pleasure ofthe Court, effecfive Monday, April 17, 2006," Feb. 14, 2006

1 Order Appointing Receiver at 2. In that appointment order, the Court also set forth the 2 Receiver's dufies and powers and provided for the establishment of an advisory boai-d to 3 assist and advise the Couit and Receiver. Id. at 2-9, 4 Much progress has been made since the Receivership was established, and the

5 Receiver has successfully recmited and hired a team of con'ectional and clinical experts to 6 assist him with his remedial obligations. As detailed in the Receiver's bimonthly and, 7 subsequently, quaiteriy repoits to the Court, the Receiver and his staff, including the many 8 CDCR employees who report to the Receiver, have undertaken significant efforts to improve 9 the deliveiy of medical care to California inmates. For example, vacancy rates among 10 clinical staff in prisons have been dramatically reduced as a result of increased salaries and
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11 improved hiring processes. Similarly, many clinically appropriate changes have been made, 12 including the replacement of medical technical assistants with licensed vocational nurses, 13 and several necessaiy clinical construcfion projects have been initiated. In its flret two years,

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14 the Receivership has also resolved the CDCR specialty care contracfing crisis, which was

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15 preventing inmates from receiving needed care from clinical specialists, and established a 16 successful prison improvement pilot project at San Quentin State Prison. Nonetheless, it Is

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17 beyond dispute that the system for delivering health care to California's inmate population 18 remains below constitutional standards and continues to be in need of repair - not through 19 any fault of the Receiver or his staff, but, rather, primarily as a result ofthe extreme 20 dysfunction the Receiver inherited from the State, as well as the numerous problems and 21 obstacles encountered by the Receiver that were not anticipated at the time the Receivership 22 was established. 23 In addition to being charged with undertaking immediate and short-term measures

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24 "designed to improve medical care and begin the process of restructuring and development of 25 a constitutionally adequate medical health care delivery system," the Receiver was also 26 ordered to develop a detailed Plan of Action to complete the development and 27 implementation ofsuch a system. Id. at 2-3. The Court originally ordered the Receiver to 28 file his Plan of Action within 180 to 210 days of his appointment, id. at 2, but later granted
0

the Receiver's request for an extension of time On December 19, 2006, the Court granted 2 the Receiver until May 15, 2007, to file his initial Plan of Action with metrics "that are 3 realistic, fully informed, detailed, and effective," with a revised Plan of Action due by 4 November 15, 2007. Dec, 19,2006 Order at 2, 5. In the same order, the Court gi-anted the 5 Receiver's request to delay appointment of an advisory board until after the filing ofthe 6 initial Plan of Action, Id. at 3-4. 7 The Receiver timely filed his initial Plan of Action on May 10,2007. Following the

8 Court's independent review of that plan and consideration of Plaintiffs' responses to the plan, 9 including arguments raised during an August 27, 2007 hearing, the Court found that the 10 initial Plan of Action failed to contain adequate metrics and time lines. The Court ordered
3

11 that the Receiver include such benchmarks in his revised Plan of Action to be filed in 12 November 2007. Sept. 6,2007 Order Re (1) Receiver's May 2007 Preliminao'.Plan of 13 Action, & Mot. for Order Modifying Stip. Inj. & Orders Entered Herein, & (2)'Prs."Mot. for 14 Order Directing Receiver to Comply with April 4,2003 Order etc. at 3-5. The Court also

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15 observed at the August 27,2007 heai'ing that it had not fumished the type of hands-on 16 leadership tliat, in retrospect, it wished it had, and the Court resolved to provide such 17 leadership as this case moved forward. 18 To that end, the Court appointed Stan- Babcock as a Pro Bono Special Assistant to the

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19 Court to assist with special projects, including the creation of'"an advisory v/orking group to 20 assist the Court with evaluating the Receiver's [revised] Plan of Action . . . and determining 21 how best to assemble the advisory board." Oct. 29, 2007 Order Appointing Pro Bono 22 Special Assistant to the Court at 1, FoUov/ing the Receiver's timely filing of his revised Plan 23 of Action on November 15, 2007, the Court provided the advisoty working group with a 24 copy ofthe revised plan and convened the group for a one-day meeting on December 8, 25 2007. The Pro Bono Special Assistant to the Court had numerous individual conversations 26 with advisoiy v/orking group members both before and after the December 8 meeting. 27 The Receiver, as well as counsel for Plaintiffs and Defendants, made presentations to

28 and answered questions from the advisory working group at that meeting, The group 3

subsequently reached two main consensus opinions during closed-session discussions. First, 2 the advisory group recommended that a professional planner be hired to assist the Receiver 3 in revising the Plan of Action so that it both complied with the Court's orders and directions

4 and could serve as a useful leadership document that would provide a common vision for all 5 stakeholders. In addition, the working group was unanimous in its recommendation that an 6 advisoiy board be formed to assist in the planning process and, more broadly, to advise the 7 Court on issues relating to the Receivership's operation and progress towards implementing a 8 prison medical care system that meets constitutional standards. The Court agrees with and 9 adopts both ofthese recommendations, as ordered below. 10
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The Receivership has reached a critical juncture at which it must now move from a

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11 primarily investigative and evaluative phase, during which the Receivership analyzed the 12 cuiTent system to detemiine what reforms were necessaiy and worked to createjthe, 13 infrastructure required to effectuate such'reforms, into an Implementation phase; dui'ing 14 which the Receivership must translate the conceptualized reforms into reality. Throughout 15 its existence, the Receivership has developed and put into practice critical short-terra 16 measures, and such measures must continue to be adopted to address issues requiring urgent

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17 attention. However, the Receivership's focus can and must now shift towards long-term 18 reform that will achieve the implementation of a sustainable, constitutionally adequate 19 system of delivering medical care to Plaintiffs - and, not inconsequentially, a system that 20 must ultimately be transitioned back to the State of California's control. Put another way, the 21 Receivership's overarching goal should be working itself out of existence once deliveiy of 22 medical care to California's inmates has been brought up to constitutional standards, 23 After careful reflection and deliberation, the Court has concluded that such work

24 would best be accomplished by appointing a new Receiver who brings a different set of 25 strengths appropriate to guiding the Receivership through its second phase. While the 26 cun'ent Receiver has successfully used his unique skills and bold, creative leadership style to 27 investigate, confront, and break down many of the barriers that existed at the inception of the 28 Receivership, the second phase ofihe Receivership demands a substantially different set of 4

I administrative skills and style of collaborative leadership. The Receivership must continue 2 to maintain its independence as an arm ofthe federal courts established to take over state 3 operations, but it also must work more closely atthis stage with all stakeholders, including 4 State officials, to ensure that the system developed and implemented by the Receivership can 5 be transferred back to the State in a reasonable time frame. Such collaboration appears to be 6 more important now than ever, given the current budget crisis faced by the State of .7 Califomia. 8 9 Accordingly, with good cause appearing, IT IS HEREBY ORDERED that: 1. The Court's appointment of Robert Sillen as the Receiver in this case is hereby

10 terminated, and all prior authority vested by the Court in Mr. Sillen is hereby revoked, a o Q
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11 effective immediately. 12 2. J. Clark Kelso is appointed to serve as the Receiver in this case, at the pleasure of

13 the Court, effective immediately. All powers, privileges, and responsibilities ofthe Receiver, 14 as set forth in the Court's Febmaiy 14, 2006 Order Appointing Receiver, shall continue in 15 full effect, except as modified by subsequent orders of this Court. A short biography of 16 Mr. Kelso is attached to this order.

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3. The Pro Bono Special Assistant to the Court shall assist the Receiver in reworking

18 the November 15, 2007 Plan of Action so that it is a more useful leadership document. The 19 Receiver and Pro Bono Special Assistant shall consider how best to choose and use the 20 services of a professional planner to assist in this process, the costs ofwhich shall be borne 21 by Defendants as part ofthe Receivership's budget. 22 ' 4, The Court vvill shortiy be appointing an advisoiy board to assist and advise the 23 Court and the Receiver as this case moves forward. All costs associated with the 24 appointment and service ofthe advisoiy board shall be borne by Defendants as part ofthe 25 Receivership's budget. Although the Court is cognizant of not making the advisoiy board so 26 large as to be unhelpful and inefficient, the Court may expand the advisoiy board beyond the 27 five individuals provided for by the February 14,2006 Order Appointing Receiver to ensure 28 that medical, correctional, and any other areas of necessary expertise are adequately 5

1 represented. The Pro Bono Special Assistant to the Court shall continue to assist the Court in 2 assembling and staffing the advisory board, in consultation with the Receiver, Details ofthe 3 advisoiy board will be announced by subsequent order ofthe Court. 4 - 5 IT rs SO ORDERED. 6 7 Dated: 01/23/08 8 9 10
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THELTON E. HENDERSON, JUDGE UNITED STATES DISTRICT COURT

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J. Clark Kelso Biographical Information J. Clark Kelso is a Professor of Law and, for the last twelve years, has been the Director ofthe Capital Center for Govemment Law and Policy at the University ofthe Pacific McGeorge School of Law in Sacramento, Califomia. He comes to the California Prison Health Care Receivership with over fifteen yeai^s of experience in a wide variety of positions in all thi-ee branches of state govemment. Throughout this service, he has successfully improved state programs and operations while developing a well-known reputation for independence, integrity, and collaborative leadership. In the 1990s, Kelso worked with the California Judicial Council and Administrative Office ofthe Courts on a number of task forces and commissions. This work, particularly his efforts in support of unification ofthe state's trial courts, led to his receipt ofthe 1998 Bernard E. Witkin Amicus Curiae Award, the highest honor given to an individual oUier than a member of the judiciaiy for outstanding contributions to Califomia's courts. In July 2000, Kelso was selected by then Attorney General Bill Lockyer and Govemon Gray Davis as the interim replacement for outgoing Insurance Commissioner Chuck Quackenbush, who abruptly resigned amid allegations of corruption. Kelso's leadership quickly restored public trust to the Department of Insurance. In June 2002, Governor Davis appointed Kelso to serve as the State's Chief Infoimation Officer and charged him with restoring the state's crumbhng information technology program. After Governor Davis's recall, Governor Arnold Schwarzenegger retained Kelso in the State CIO position. Focusing on the disciplines of strategic planning, collaborative execution, and workforce development, Kelso turned theistate's infoimation technology ("IT") program around, in two years moving the state from 47th to 12th in Brown University's annual e-goverament report. In his State CIO role, Kelso also supported the development of state policies encouraging health information technologies and data sharing to improve quality, transparency, and accountability in public and private health care delivery systems. In recognition of his accomplishments, he received a "Top 25 Award for 2004 Doers, Dreamers and Drivers" from Government Technology and was named by Computerworld to their list of "Premier 100 IT Leaders for 2007." A 1983 graduate ofthe Columbia University School of Law, Professor Kelso clerked for Judge Anthony M, Kennedy on the United States Court of Appeals for the Ninth Circuit, Keiso joined the faculty at Pacific McGeorge in 1986 after practicing law briefly in the New York office's of Kaye, Scholer, Fierman, Hays Sc Handler, A registered Republican, Kelso is married to Kari Kelso, Ph.D,, and they have two daughters.

EXHIBIT B FEBRUARY 1, 2008 LETTER FROM THE HONORABLE THELTON E. HENDERSON, SENIOR UNITED STATES DISTRICT JUDGE TO WILIAM C. VICKREY, ADMINISTRATIVE DIRECfOR OF THE COURTS

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UNITED STATES D I S T R I C T COURT
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S A N F R A N C I S C O , CALIP-ORISttA 9 4 1 0 2

THELTONt E .

HENDERSON

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February 1, 2008

VIA FACSIMILE

Mr, William C. Vickrey Administrative Director of the Courts Judicial Council of California, Administrative Office of the Courts 455 Golden Gate Ave, San Francisco, CA 94102 Re: Dear BiU: Thank you for your participatioa in the December 8, 2007 meeting of the Plata v, Schwarzenegger advisory workiag groxip, I writ& now to ask an additioaal fevor relating to the employment status of the new Receiver in Ftata As you know, when I appointed Ciai'k Kelso as the Receiver, I emphasized the importance of establishing a constitutionally adequate health, care system for California's prisons that wiil ultiraately be transfeired back to state control. A critical part of that process is to begin a aew collaborative approach with the state legislative and exeputive branches. I believe tho Receiver's request to maintain his employment status within a sfate ageucy is consistent wilh that approach. However, in reviewing the Receiver's request, I aotii concerned about potential coafUotB with executive branch agencies that may anse during litigafion, Therefore, I think the most appropriate placement ofthe Receiver's employment position would be in the state judiciary, specifically in the Administxative Office ofthe Courts. Regardless ofthe placement of the Receiver's position, the Receiver's salary and benefits would, of course, be continued to be paid by state fimds under the Receiver's control. I fully understand if there is a legal barrier to your accommodatmg this request, but I believe that the placement of the Receiver's posUion within a neutral branch of state goveniment would be of great benefit to this Court, th© Receiver, and the overarching goal of developmg a Appointment of Receiver in P/a/ctv. .ycAM/ctrre^iegg-ffr ,^

Received

Feb-OI-08 04'06piii

From-

To-AOC EXEClfflVE OFFICE

Page OOZ

Mr. William C. Vickrey Re; Appouitmeut of Receiver m Plata v. Schwarzenegger

February 1, 2008 Page 2

constitutionally adequate system of inmate medical care over which the State of CalifoTnia can eventually resume control. Please do not hesitate to contact me at (415) 522-3630 xf there is anything further I can do to facilitate this process or ifyou have any additional questions.

Thelton E. Henderson

Received

Feb-Ot-08

04;06pn

From-

To-AOC EXECtniVE OFFICE

Page 003

EXHIBIT C MARCH 5, 2008 LETTER FROM THE HONORABLE THELTON E. HENDERSON, SENIOR UNITED STATES DISTRICT JUDGE TO WILIAM C. VICKREY, ADMINISTRATIVE DIRECTOR OF THE COURTS

UNITED S T A T E S DfsTRicT C O U R T
NORTHERN DISTRICT OF CAUIFORNIA 4 5 0 GOUDEN GATE AVENUE SAN T=^RANC(SCO, CALIFORNIA 9 4 1 0 2

THEUTON E . H E N D E R S O N
SENIOR UNITED STATES DISTRICT J U o G f i

March 5, 2008

Mr, William C. Vickrey Administrative Director of die Courts Judicial Council ofCalifomia, Admimstrative Office of theComts 455 Golden Gate Ave. San Francisco, CA 94102 Re. Employment of Clark Kelso

Dear BiU; On February 1,2008,1 wrote to you regarding the appointment of Clark Kelso as the new Receiver in Plata v, Schwarzenegger At that dme, I asked that you accommodate the Receiver's request to maintain his employment status within a state agency by hiring the Receiver as an employee ofthe Adraim'stTadve Office ofthe Courts (AOC), as the placement ofthe Receiver withm the jvidicial branch of state govemment appeared appropriate underthe circumstances, I am pleased thai the AOC is able to accommodate this request, I have received the agreement to be executed by the California Prison Health Care Receivership Corporation (CPR) and the AOC, which sets forth the terms and conditions ofthe Receiver's employment at the AOC and provides for the CPR to reimburse the AOC's expenses As I mentioned in my earlier letter, I beUeve the AOC's employment ofthe Receiver is of great benefit to this Courf, the Receiver, and the overarching goal of developing a constitutionally adequate system of inmate medical care over which the State of Califomia can eventually resume conti'oi. Sincerely,

m

Thelton E. Henderson

EXHIBIT 4

State Worker Salary Search - sacbee com

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Search for State Worker Salaries
Updated June 1, 2010 Now includes 2009 civil service, UC, and CSU salanes, past and pre.sent salanes sida-by-side To find a state employee, use the form below For quicker searches, use the first dnd/or last name You can also search by agency or salary level Results reflect most recent available data 2009 for civil service, CSU and legislative workeis, and for UC system workers Note The University of California now redacts the name of student employees, citing federal pnvacy law Sources University of California President's Office, California State Controller's Office, California Legislature Name (flrsi and/or last) Agency Salaries over-

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Notes
Results for civil service workers are the actual amounts paid to them during 2009. according to the State Controller's Office Results for legislative staffers show pay as of March 2009 pi ejected out for the remainder of the year Gross pay includes overtime, bonuses, housing allowances, sick leave payout, vacation payout and multiple other forms of cash compensation Some workers promoted toward the end of the year will see their old job titles listed here None of the data presented has been changed from what was released to the Bee by the State Controller's Office, the University of California President's Office and the California Legislature On names that show up in the database twice Some state workers performed two jobs during 2009 For instance a fulltime lieutenant working for the Department of Corrections may work several part-time shifts as a sergeant He would be listed twice here, and to see his total salary, you would add up both figures shown This phenomenon is especially common in the California State University system Outside the CSU system, well over 99 percent of workers only show up in this data once UC salanes only include those earning a total of more than $20,000 in 2009 Also, the UC system blanked out the names of several thousand student assistants in their latest data release, most of them earning a relatively small amount On compaiing past year salaries The Bee determined past pay by matching the first name, last name, middle initial and department of employees with the same cntena from past years To avoid errors. The Bee excluded woikers who show up in this data twice (see above note) Also, a state worker who wasn't hired until recently won't have any salaiy history State workers hired in the middle of a previous year may appear to have a laige jump in pay during the subsequent year - that's because this database logs the actual amount paid to each workei dunng the entire year Likewise, workers who left state service dunng the middle of 2009 may appear to have a dip in pay - or even a big jump if they cashed out lots of vacation time 3 4 0 % Fixed Refinance $160 000 Mortgage for $547/mo Free No Obligation www Lendgo com/Mortgage Microsoft CMS Upgrade Migrate from MCMS to MOSS 2007 Microsoft Gold Paitnei wwv/ mettiodfactory com lava script error • Scan PC registry to speed.up Windows XP instantly, Pcfixsoftware com Ads by Yahoo'

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Page 2 of 2

EXHIBIT 5

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Employer Services Division PO 80X942709 Sacramento, CA 94229-270& Telecommunications Device for the Deaf - (916) 795-3240

CalPERS

888 CalPERS (or 888-225-7377)

FAX (916) 795-3005

June?, 2010

Linda Buzzini

Dear Ms. Buzzinr This letter relates to your eligibility for membership in the California Public Employees' Retirement System (CalPERS) for sen/ices performed at the California Prison Healthcare Receivership Corporation (CPHRC) from June 1, 2006 to May 29, 2009 We apologize for the delay it has taken to finalize our detennination A determination such as the one in your case requires intensive review of ail facts and documentation,' presented. We appreciate your patience as we completed our review of your case CalPERS has reviewed and evaluated the information provided by both you and the CPHRC and has made the following determinations 1) You were not a common law employee of the State of California when you provided services for CPHRC from June 1, 2006 to May 29, 2009; 2) You were a common law employee of CPHRC dunng that time penod, 3) The CPHRC does not constitute "the state" or "a state employer" for purposes ofthe California Public Employees' Retirement Law (PERL) and has not contracted with CalPERS as a public agency; 4) Since your service with CPHRC was not performed for a CalPERS-covered employer, you are not eligible for CalPERS membership for that sen/ice and, 5) The sen/ice under CPHRC does not constitute state service under the PERL and cannot be included as CalPERS sen/ice credit and compensation As a result, your service under CPHRC cannot be used in the calculation of any CalPERS retirement benefit. The following information has been prepared for you to review in light ofthe determinations presented above I. CalPERS Has Determined You Were Not an "Employee" of the State of California for Purposes ofthe Public Employees' Retirement Law while Providing Services to CPHCR.

The CalPERS Board of Administration (Board) has specific authonty under Government Code section 20125 to "determine who are employees and is the sole judge of the conditions under which persons may be admitted to and continue to receive benefits under this system " Government Code section 20028(a) defines "employee" in pertinent part as' "Any person in the employ of the state, a county supenntendent of schools, or
California Public Employees' Retirement System www.calpers.ca.gov

m\

Linda Buzzini

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June7, 2010

the university whose compensation, or at least that portion of his her compensation that IS provided by the state,.. , is paid out of funds directly controlled by the state, . . . excluding all other political subdivisions, municipal, public and quasi-public corporations " In order to meet the definition of state employee under the PERL, there are two separate requirements that both must be met' (1) the individual must be in the "employ" ofthe state; and (2) the individual must be paid out of funds directly controlled by the state If either critena is not met, the individual is not an "employee" and therefore is not entitled to CalPERS membership ^ CalPERS, along with the courts, look to the common law employment test to determine employee status for CalPERS retirement purposes.^ In determining whether one who performs services for another is an employee the most important factor is the right to control the manner and means of accomplishing the desired result. If an employer has the authonty to exercise complete control, whether or not that nght is exercised with respect to all details, an employer-employee relationship exists Other factors to be taken into consideration when determining employee status for CalPERS retirement purposes are (a) whether or not the one performing services is engaged in a distinct occupation or business,' (b) the kind of occupation with reference to whether, in the locality, the work is usually done under the direction of the pnncipal .or by a specialist without supen/ision; (c) the skill required in the particular occupation, (d) whether the principal orthe workman supplies the instrumentalities, tools, and the place of work for the person doing the work, (e) the length of time for which the services are to be performed, (f) the method of payment, whether by the time or by the job, (g) whether or not the parties believe they are creating the relationship of employer-employee ^

' See Metropolitan Water District of Southern California v Superior Court (2004) 32 Cal 4 491, 502-504 (also referred to as the "CargiH" case) See also Adcock v Board of Administration (1979) 93 Cal App 3d 399 which determined that an inheritance tax referee was not a state employee for retirement purposes because his compensation was not paid out of funds directly controlled by the state, the state controller had limited control over the referee positions, individuals could accept other employment so long as it did not conflict with referee duties and the Legislature failed to designate the positions as state employees or PERS members, 25 Cal Ops Atty Gen 248 (1955) which determined that the State Emergency Relief Administration was a state agency and that persons employed there and paid by the State Controller's warrant from funds in the state treasury were state emptoyees for retirement purposes, 31 Cal Ops Atty Gen 194 (1958) which determined California National Guard civilian employees were not state employees for retirement purposes where they were paid from federal funds by the federal government but appointed by the Adjutant General, a state officer, and 68 Cal Ops Atty Gen 194 (1985) which determined that where an in-home supportive services program aid recipient hired and supervised a domestic services worker, the worker may be a state employee for the purposes of the PERL, if controlled by the state and paid by the state ^ Metropolitan Water District of Southern California v Supenor Court, supra, 32 Cal 4'" 491 See also CalPERS Precedential Decisions In the Matter of the Application for CalPERS Membership Credit by Lee Neidengard v Tn-Counties Association for the Developmentally Disabled, Precedential Decision Case No 05-01 (2005) and In the Matter of the Application to Contract with CalPERS by Gait Sen/ices Authonty. Precedential Decision Case No 08-01, (2008) ' The factors to consider are enunciated in Tieberg v Unemployment Ins Bd (1970) 2 Cal 3d 943, 949 and Empire Star Mines v California Employment Com. (1946) 28 Cal 2d 33, 43-44 See also CalPERS Precedential Decisions In the Matter of the Statement of Issues of Lee Neidengard, Respondent and TriCounties Regional Center, Respondent, Precedential Case No 05-01 (2005) and In the Matter of the

Linda Buzzini

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June?, 2010

CalPERS has determined for PERL purposes that you were not an employee of the state because you were not a common law employee ofthe state and were not paid out of funds directly controlled by the state when you provided services to CPHRC This determination is primarily based on the following' • The records presented do not demonstrate that the state or California Department of Corrections and Rehabilitation (CDCR) exercised control over the manner or means of how you accomplished your services for CPHRC. To the contrary, we have concluded that that CPHRC exercised control over the manner and means of how you accomplished your services for CPHCR. You were hired by and signed an Employment Agreement to work for the CPHRC as a "Staff Attorney." Nothing presented shows the state or CDCR extended an offer of employment to you or hired you. Further, nothing presented confirms you undenwent a competitive examination for a state civil service job (such as a staff counsel position) or applied for a Career Executive Assignment (CEA) or Exempt Position to provide services 1;or CPHRC or that you were recruited or hired through the state civil service, CEA or Exempt process. You were not provided the civil service protections afforded state civil service employees Information presented suggests you took an unpaid leave of absence from state employment so that you could go work for the receiver/CPHRC. In addition, in November 2007, you requested a leave from CPHRC, so that you could reinstate into state service from December 1 0 - 2 7 , 2007, then retire from state service effective December 28, 2007, and return back to pay status at CPHRC. ' Compensation issued for your services as a CPHRC staff attorney were not paid out of funds directly controlled by the state. You were paid out of a bank account established by CPHRC pursuant to federal court order and were not paid by warrants issued by the State Controller's Office No standard state payroll or personnel documents were presented such as the Absence and Additional Time Worked Report [634 form] to report time worked or the Notice of Personnel Action form to show you were appointed or hired into a state position Nothing presented confirms the state evaluated your sen/ices at CPHRC, approved or rejected merit salary adjustments or other changes in pay, or initiated disciplinary or other personnel action against you or on your behalf dunng the time you performed services for CPHRC You were not provided the same benefits usually afforded to full-time state employees (such as CalPERS health benefits, CalPERS retirement, state vision and dental programs, and the like ) You did not accrue any state vacation, sick leave or annual leave credit while you performed services for CPHRC No tax documents were provided, such as W-2 form, identifying your employer as the State of California for the period of time you provided services to CPHRC

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Application to Contract with CalPERS by Gait Services Authority, Respondent, and City of Gait, Respondent. Precedential Case No 08-01 (2008)

Linda Buzzini

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June 7,2010

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No documents were presented to evidence a belief by the state that you and the state had created the relationship of employer-employee for the services you provided to CPHRC CalPERS Has Determined You Were An Employee of CPHRC.

II.

CalPERS has determined that you were a common law employee of CPHRC when performing services from June 1, 2006 to May 29, 2009 This determination is pnmanly based on the following. CPHRC controlled the manner and means of how you accomplished your services for CPHRC Your signed Employment Agreement states "CPHRC reserves the right to change Employee's job title, duties, responsibilities, reporting level, compensation and benefits, as well as the CPHRC's personnel policies and procedures, at any time and for any reason or cause, upon notice to Employee '"* In practice, it appears you were initially supervised by the ongmal receiver or his chief of staff and later by the genera! counsel and/or the current receiver. • Your offer of employment appears to have come directly from CPHRC.^ Your Employment Agreement provides that the employment relationship is between you and CPHRC, characterizes your service as an "at will" employee of CPHRC, and does not state that you would be a state employee ^ • Compensation issued for services rendered for CPHRC, as a staff attorney, was not from funds directly controlled by the state Instead, records confirm compensation onginated from a bank account established by the receiver/ CPHRC pursuant to federal court order ^ Payroll records confirm that CPHRC issued your compensation on a twice-monthly basis e You were paid a bi-monthly salary initially of $6250 ($12,500 per month or $150,000 per year), which exceeds the high end ofthe pay range for a staff counsel or similar position with the State of California (i e the high end ofthe pay range for a Staff Counsel IV position is approximately $10,477 per month ) • You were provided benefits not usually available to state employees performing legal services, but that were available to some employees of CPHRC, such as an amount equal to 30% ofyour annual salary for cash-in-lieu of benefits (at least initially through approximately October 2007), a monthly car allowance, and the possibility for a performance bonus of up to 20% of your annual base salary Pursuant to your Employment Agreement, you also were entitled to receive a severance payment, under certain conditions, of up to 6 months salary at the salary in effect at the time employment terminated State employees are not paid •

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See paragraph 1 1 of the Employment Agreement between you and CPHRC

^ Letter dated 5/15/2006, signed by Mr Robert Sillen (the initial court appointed receiver, 2006-2008) ^ See opening paragraph and paragraph 1 1 ofthe Employment Agreement between you and CPHRC '' See Order Appointing Receiver, filed February 14, 2996, section III, paragraph E

Linda Buzzini

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June 7,2010

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severance pay Further, you had the option to receive employee benefits through plans intended only for CPHRC employees ® Time sheets completed were CPHRC issued and not the standard state issue timesheet forms Any salary adjustments were subject to CPHRC's review, discretion and approval Per your Employment Agreement, CPHRC retained the nght to direct and control the services rendered, including prohibiting you from engaging m other employment while subject to the terms of the Employment Agreement In your position as a staff attorney, you were required to report to the receiver (CPHRC), and your services were rendered at premises operated by CPHRC, or you were directed to perform the services at places directed by CPHRC Your Employment Agreement provided performance bonuses that were subject to the receiver's (CPHRC) discretion. CPHRC also agreed to reimburse you for business related travel expenses. Based upon our review of your Employment Agreement and other documents provided, the evidence presented appears to show that both you and CPHRC believed you were creating the relationship of employer-employee.

CalPERS considered additional information raised by you, such as the receiver's duties included carrying out the functions of the Secretary of CDCR. We note that the receiver's powers and authority are broader than those possessed by the Secretary' and the receiver answers to the federal court and not to the Governor or any other state official Additionally, we considered your contention that the state appropriated funds for CPHRC's operating costs While the federal court ordered the state to appropnate funds and to reimburse ail CPHRC costs through a fiduciary controlled CPHRC account, the expenditure of funds was controlled solely by CPHRC and only subject to the federal court's approval The state had no control over how much or where the receiver spent the funds necessary to meet his mission Therefore, while the state ultimately reimbursed the costs associated with your employment at CPHRC pursuant to court order, the state did not directly control the funds or account from which you were paid You also contend that other court-ordered duties/powers granted to the receiver/CPHRC included the hinng of CDCR staff in state civil service positions.^ The federal court's orders appear to suggest that the receiver/CPHRC would hire its own employees, independent consultants/contractors and would need to use CDCR employees in order

^ You were provided with CPHRC sick/vacation leave accruals (vacation initially accrued at 24 days per year per your Employment Agreement) We also understand that CPHRC offered a 401 (k) Retirement Plan with employer contributions during your tenure ^ However, these employees still maintained their State of California employment status and received benefits offered only to state employees and did not receive benefits offered to CPHRC employees such as cash-in-lieu of benefits, CPHRC performance bonuses, severance payments, CPHRC vacation credit and so forth

Linda Buzzini

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June 7, 2010

to accomplish his mission ^° A June 2009 Office of the Inspector General (OIG) report also confirmed that receivership and CDCR employees work together under the receiver's direction to manage and implement his action plan to reform the state's delivery of pnson medical care ^^ Notwithstanding these facts, as discussed above, we have determined that you were not a state or CDCR employee but were a CPHCR employee when working for CPHRC. You also raise concerns about the "7,000+" employees who are already "working for the receiver" and have been enrolled into CalPERS.^^ You note that some employees of CPHRC have been converted to civil service employees. Our review ofthe documentation provided revealed that as the receivership moved through the initial phase. It became clear CPHCR would need to collaborate with CDCR to hire some new state employees, and also migrate some existing CPHCR staff members to state employment with CDCR, once the receivership terminated and control reverted back to the State of California. CalPERS has received no information that places you in the same category as those newly hired state employees or existing CPHCR employees who were to be converted to state employees in order to stay on with CDCR or the state after the receivership ends We considered your representation that the current receiver is an active member of CalPERS. We understand that this arrangement is based upon a specific written agreement between the Administrative Office ofthe Courts (AOC) and CPHRC to loan Mr Kelso and his services to the CPHRC ^^ We have not been provided with any similar agreement for you or your services We appreciate the information you provided and will continue to analyze the current receiver's agreement in accordance with applicable law, and take any appropnate actions as a result ofthis review. In addition, we also considered the facts that you were issued a State of California employment ID (which specifically identified you as being an attorney for CPHRC) and an e-mail address similar to those given to state-employed CDCR employees Nonetheless, neither of these facts demonstrates that the state or CDCR controlled the manner or means of how you performed your services. Moreovei^, since each could
'" Forexample, the Order Appointing Receiver, filed February 14, 2006, provides under section 11, "Power and Authority of the Receiver" at paragraph B, that the Receiver has the power "to hire, fire, suspend, supervise, promote, transfer, discipline and take all other personnel actions regarding CDCR employees or contract employees who perform services related to the delivery of medical health care to class members " The order also provides in section III, "Office of the Receiver" at paragraph B "The Receiver shall establish an Office of the Receiver with staffing necessary to fully carry out his duties as set forth in this order Upon approval from the Court, the Receiver shall set reasonable compensation and terms of service for each member of his staff, (including employees and/or consultants) and shall be authorized to enter into contracts with the employees or consultants of the Office " " OIG report, June 2009, p 5 '^ See May 4, 2010 letter from you to CalPERS '" We note this agreement was not approved until early 2008, approximately 18 months after you started to work for CPHRC We were provided no such agreement for you See also Order Appointing New Receiver, filed January 23, 2008, at p 4

Linda Buzzini

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June 7,2010

have been done for the purposes of easing your access to CDCR facilities and to provide easier communication with CDCR personnel as needed to accomplish the receiver's mission, these facts are insufficient to support a determination that you were a state or CDCR employee. For the reasons descnbed above, we conclude that you performed services as a common law employee for CPHRC and not as a state or CDCR employee III. CalPERS Has Determined CPHRC Does Not Constitute "the State" or a "State Employer" for purposes of the PERL Government Code section 20030, defines "employer" as "the state, the university, a school employer, and any contracting agency employing an employee " CPHRC does not meet the definition of an employer under the PERL, since it is not the state, the university, a school employer, or a contracting agency. Rather, CPHRC is a nonprofit public benefit corporation established pursuant to federal court order Our determination is pnmanly based on the following: • CPHRC IS a non-profit public benefit corporation created to house the activities of the receiver appointed by the federal court^"* and was organized to conduct activities aimed at lessening the burdens of governmentby sen/ing as the office of the receivership established to take control ofthe delivery of medical services to California state pnsoners confined by the CDCR ^^ The federal court's order effectively took control over the function of delivering medical care to inmates from the state and transferred it to the receiver/CPHRC Therefore, as a result of federal court order, the state, including the Governor, Legislature, and CDCR lost all authonty to manage medical care operations ir\ the pnson system.^^ The receiver (CPHRC) is an agent of the federal court established as a result of the Plata litigation and is not an agent of any of the parties (i e the state) to that litigation.^'' According to federal court order, "the receiver (CPHRC) and his staff shall have the status of officers and agents of this Court "^^

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^^ The office of the receivership was established by U S District Court Judge Thelton Henderson as a " result of the 2001 class action lawsuit (Plata v Schwarzenegger) brought against the state over the quality of medical care in the State's 33-pnson system See the California Prison Healthcare Services website at http //www cprinc orq/about aspx '* Articles of Incorporation of California Pnson Healthcare Receivership Corporation, paragraph 2 '^ Order Appointing Receiver explains the receiver's duties/powers included, the required submission of bimonthly progress reports to the court, authority that could override California State law if necessary to complete court-ordered tasks, establishing an office in a location in consultation with the court, and monthly requests for disbursements for funds, onginating from the State of California's general fund, which required court approval '^ SEC V Amencan Capital Investments. 98 F 3d 11 33, 1143 (9th Cir 1996), SEC v American Principal Holding Inc {In re San Vicente Medical Partners Ltd) 982 F 2d 1402, 1409 (9th Cir), cert denied, 506 U S 873 (1992) '^ See Order Appointing Receiver, section II, paragraph F

Linda Buzzini

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June 7,2010

We were provided no statute that authorized the creation of CPHRC or designated it as a state agency, department or entity . • As an officer of the federal court, the receiver (CPHRC) is not considered a "state actor" for other legal purposes, such as 42 U S C. section 1983^^ and is entitled to remove actions to federal court, pursuant to 28 U.S C section 1442(a)(3).^° • At the time you began to perform services for CPHRC, we found no court order that required CPHRC's employees be hired as state employees. Nor did we find any reference in any of numerous court orders reviewed, that at the time you began to work for CPHRC, you personally were to be hired as a state employee, or that your position was to be filled with a state employee Instead, the court orders conveyed authority to the receiver to determine using his discretion whether to hire individuals as 1) employees of CPHRC, 2) consultants or contractors, or 3) to hire state civil service employees to be employed by CDCR • We understand that salanes of employees of CPHRC, like you, also had to be approved by the federal court. CPHRC also does not qualify as a public agency under section 20056 ofthe PERL since it is not a "city, county, district, other local authority or public body of or within the state " Nor does CPHRC clearly meet the definition of section 20057(e) of the PERL which defines public agency to also include nonprofit corporations "whose membership is confined to public agencies " Moreover, CPHRC is not a contracting agency because it has not contracted with CalPERS to provide retirement benefits to its employees as required by Government Code sections 20022 and 20460 Since we have determined that CPHRC is not the state or a state employer under the PERL and since CPHRC does not contract with CalPERS to provide retirement benefits to its employees as a contracting agency, you are not eligible for CalPERS membership through your employment with CPHRC. IV. Service Performed for a Non-CalPERS Employer Does Not Constitute State Service.

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The PERL, at section 20069(a) defines "state service" in pertinent part to mean "service rendered as an employee or officer (employed, appointed or elected) of the state, . . , the university, a school employer, or a contracting agency, for compensation, and only while he or she is receiving compensation from that employer therefore, " Based on the determinations outlined above, you did not render service as an employee of the state or as an employee of a contracting agency for compensation from that employer For that reason, your sen/ice performed at CPHRC does not meet the definition of "state service" under the PERL Section 20370 defines "member" in part as "an employee who has qualified for membership in this system and on whose behalf an employer has become obligated to
^^ Murray v Gillmore, 231 F Supp 2d 82, 90 (D D C 2002) aff'd in part rev'd in part, 406 F 3d 708 (D C Cir 2005) ^° Ey Valley Mines, Inc v Hartford Acc & Indemn Co, 644 F 2d 1310 (9th Cir 1981)

Linda Buzzini

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June 7,2010

pay contnbutions " In your case, in light ofthe determinations outlined above, we conclude that you have not qualified for membership for your CPHRC service and the state has not become obligated to pay contnbutions on your behalf We further note that no employer or employee contributions were made to CalPERS for your CPHRC service, so there are no contnbutions to be refunded V. Conclusion

Based on the determinations above, we regret to inform you that your service as an employee of CPHRC from June 1, 2006 to May 29, 2009 does not qualify you for membership in CalPERS dunng that time frame. Accordingly, you cannot accrue CalPERS service credit for that service, or utilize compensation earned at CPHRC as final compensation for the purposes of calculating any CalPERS retirement benefits You have the right to appeal the decision referred to in this letter if you desire to do so, by filing a written appeal with CalPERS, in Sacramento, within thirty days of the date of the mailing o f t h i s letter, in accordance with Government Code section 20134 and sections 555-555.4, Title 2, California Code of Regulations An appeal, if filed, should set forth the factual basis and legal authorities for such appeal A copy of the applicable statute and Code of Regulations sections are included for your reference If you file an appeal, the Legal Office will contact you and handle all requests for information Your appeal will be set for heanng with the Office of Administrative Heanngs (OAH) The assigned CalPERS attorney will contact you to coordinate a hearing date Depending on the current caseload ofthe OAH and the assigned attorney, the heanng date may be set several months after the case is opened The OAH will typically offer its earliest available heanng date that meets the schedule of both parties. If you choose not to be represented by an attorney, the assigned CalPERS lawyer will be in direct communication with you dunng the appeal process If you do hire an attorney, please let CalPERS know immediately so our attorney can work directly with him or her

Linda Buzzini

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June 7, 2010

Your appeal should be mailed to the following address. Lon McGartland, Division Chief Employer Services Division P O Box 942709 Sacramento, CA 94229-2709 If you have any questions or concerns regarding this matter, please contact me at (888) CalPERS (or 888-225-7377) Sincerely,^-

"Emily Perez de Flores, Manager Member Reporting Section Employer Services Division Enclosure cc Clark Kelso, California Pnson Care Receivership Corporation (CPHRC) Anne StausboU