DTSC Leaders Have Owned Major Stock in Companies the Department Oversees

Some deputy directors at the Department of Toxic Substances Control are heavily invested in hazardous waste producers

By Vicky Nguyen, Liz Wagner and Felipe Escamilla
|  Thursday, Jan 9, 2014  |  Updated 1:03 PM PDT
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Economic Interest Forms obtained by the Investigative Unit show two top DTSC staffers held stock for the past seven years in companies such as Chevron, General Electric and Abbott Laboratories—companies the department regulates. This story aired on March 5, 2013.

Economic Interest Forms obtained by the Investigative Unit show two top DTSC staffers held stock for the past seven years in companies such as Chevron, General Electric and Abbott Laboratories—companies the department regulates. This story aired on March 5, 2013.

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The Investigative Unit has learned that several top staffers in the Department of Toxic Substances Control have owned thousands of dollars worth of stock in companies the department is supposed to regulate, posing what department insiders, state lawmakers and consumer advocates call a troubling conflict of interest.

Documents

NBC Bay Area reviewed seven years of Form 700 Statements of Economic Interest reports for the top ten highest paid employees of the department. According to the reports, Chief Deputy Director Odette Madriago, a 25-year veteran of the department, for three years held between $100,001 and $1 million of shares in General Electric—a company that holds a hazardous waste permit with the DTSC.

The documents also showed Madriago held up to $100,000 in shares of Chevron from 2005 to 2007. She maintains up to $10,000 in shares in the most recent year of disclosure. Chevron is a company that’s also permitted by DTSC.

“One of our top managers has a vested interest in one of the companies we are supposed to oversee,” said one longtime high-level DTSC employee who wants to remain anonymous for fears of retaliation.

When a pipe burst at the Chevron refinery in Richmond in August, flames shot into the sky for hours and thousands of people flooded area hospitals with lung and eye irritation. In response to the public outcry, the DTSC posted a letter on its website stating that its employees are “public servants” who are supposed to “protect people’s health and their environment.” Many people are questioning just how well the department can protect people when its top deputy director is also invested in Chevron.

Madriago is also invested in Abbott Laboratories and BP Amoco—two more companies regulated by the DTSC.

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According to the Form 700 statements for Stewart Black, the deputy director of Site Mitigation and Brownfields Reuse is invested in three companies that the DTSC regulates—Royal Dutch Shell, Intel and Procter & Gamble.

The California Political Reform Act requires most state and local government officials and employees to publicly disclose their personal assets and income. The act also requires them to disqualify themselves from participating in decisions that may affect their personal economic interests. It is unclear whether Black or Madriago recused themselves of decisions involving the companies in which they are invested.

Neither manager responded to request for comment, but the department issued a statement:

The state’s conflict of interest laws are complex and specific.  The laws are not intended to deter state employees from having investments, but require that employees and appointees declare their holdings on what are called Form 700s.  Both of the managers you have asked about correctly filed their forms with the Fair Political Practices Commission, and have in the past taken steps to ensure they acted within the conflict of interest laws. 

“As added precaution, our legal office is conducting a review of their Form 700s, their past decisions and the potential for conflict due to their position in the department,” said Debbie Raphael, the Director of the Department of Toxic Substances Control. “We will have that review completed shortly.”

Liza Tucker, an advocate with Los Angeles-based Consumer Watchdog, recently authored Golden Wasteland, a report accusing the DTSC of allowing companies to operate on expired permits and stay in business even when they repeatedly violate California’s pollution laws. Tucker said she wonders if Madriago’s investments in Chevron “may be a reason this department has not been aggressive” in regulating refineries.

“We cannot trust these regulators to do a proper job," Tucker said. "Because if you are invested in a company, you have something at stake that’s financial, and you may not want to regulate.”

Golden Gate University Law School professor and ethicist Peter Keane said anytime regulators have a direct financial interest in the industry they oversee, they are engaging in a conflict of interest. He said he believes public officials with these conflicts should recuse themselves of regulating industry, or divest themselves of the investments.

“To just keep the investments and to continue to regulate—that’s improper, that’s unethical and that should not be happening,” Keane said. “No one has exposed this type of conflict of interest until you guys came along and did it.”

State Senate Majority Leader Ellen Corbett (D-East Bay) said she will review policies that dictate how state employees are allowed to make investments in companies that may pose conflicts of interest and may introduce legislation to ban regulators from investing in companies that they oversee.

“This is the first I heard that DTSC staffers are invested in this way,” said Corbett. “This raises questions that we should go back and look at that, definitely.”

At least two other state senators have joined Corbett in demanding an independent investigation into the DTSC after NBC Bay Area’s initial investigation into the department. The Investigative Unit exposed weaknesses in the DTSC’s permitting and enforcement programs.

After NBC Bay Area’s first investigation aired, insiders pointed to the close relationship between Raphael and industry lobbyist Peter Weiner, a lawyer who represents Boeing—another company that holds a permit with the DTSC. Raphael was meeting with Weiner when the Investigative Unit’s camera caught up with Raphael on a street in Sacramento after the department declined numerous interview requests to discuss questions about the department’s permitting and enforcement programs and answer claims that the department puts industry before the public.

“There may be too close of a relationship between the department, the bureaucrats and the alleged polluters,” Sen. Kevin de Leon (D-Los Angeles) said. “That’s not kosher in my book.”

Click here to watch the Investigative Unit's first report about the DTSC.

If you have a tip for the Investigative Unit, email theunit@nbcbayarea.com or call 888-996-TIPS.

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