Sonoma County supervisors vote to sever ties with DEMA after financial investigation, legal threats from CEO

The Sonoma County Board of Supervisors on Tuesday voted to begin severing ties with contractor DEMA Management and Consulting, rejecting a request by the Department of Health Services to extend the for-profit company’s expired contract until July 31.

Instead, the five elected officials ordered county staff to replace DEMA as manager of two key county housing sites — a managed tent site a block away from the supervisors’ office, and the converted hotel Mickey Zane Place. The decision comes after a financial investigation that raised questions about the company’s billing, first raised in a Press Democrat investigation, and after DEMA’s CEO threatened to sue the county over an alleged bias against her.

Supervisors did not specify an exact timeline Tuesday. County officials said they must confer with their labor unions to determine if current staff can take on the medical and service work DEMA provides at the two sites. Another option is to seek out a new vendor on an emergency basis while a formal competitive bidding process plays out.

In the meantime, it appeared DEMA would continue managing the two sites on a week-to-week contract.

Some of the supervisors expressed frustration with the health department’s request to maintain the company until July 31, telling Director Tina Rivera they had hoped by this point, following months of internal debate, the agency would have more immediate options for moving away from DEMA.

“I’ve asked for options multiple times over multiple months,” Supervisor Chris Coursey said.

Supervisor Susan Gorin echoed that, saying she was not comfortable extending a contract with DEMA for any considerable length of time and is “frustrated” the board did not have more to choose from.

The health department had provided supervisors two options.

One was to award DEMA a new, multiyear contract through 2027 to continue managing Sonoma County’s homeless housing sites. Competitive bidding for that contract began late last summer even as the county’s financial investigation into the company was underway. During that process, a review panel recommended DEMA win that new contract over HomeFirst, a Bay Area service provider that has worked with the city of Rohnert Park. The panel made that decision in December, though it only became public last week.

The financial investigation concluded in March with a report stating that DEMA did not have the supporting documentation necessary to back up as much as 40% of the billing investigators examined.

After that report, the health department asked supervisors to once again offer DEMA a short-term extension of its contract, this time until July 31, while the department opened a new competitive bidding process for a long-term housing site operator.

The supervisors Tuesday indicated they did not have an appetite for maintaining ties with DEMA, a provider that was born during the early days of the pandemic and went on to run as many as seven sites for the county. Their decision came despite public comment from the company’s CEO Michelle Patino and three DEMA employees, who asked supervisors to keep on with the company and touted the front-line team’s connections to their vulnerable clients.

In her comments before the board, Patino again accused the county of discriminating against her as an LGBTQ+ business owner, and accused The Press Democrat of publishing “unsubstantiated” information that kicked off the financial inquiry.

“We have shown merit and expertise and the ability to fulfill this county’s goals at every turn,” Patino said. She emphasized that the county’s investigation had not turned up any evidence of fraud. She has denied any wrongdoing in her billing and said the county ignored documentation she believed supported her invoices.

A Press Democrat report published in July 2023 outlined $26 million in no-bid emergency contracts the company had secured in a little more than two years, and raised questions about billing for the company’s position of director of nursing. A review of invoices for that position showed $800,000 in billing that doesn’t align with what nine health care workers formerly or currently employed at the company say they saw on the ground.

In the wake of the newspaper’s investigation, Sonoma County’s independently elected auditor opened a financial inquiry that resulted in a report officials made public March 26.

That report, written by Santa Rosa-based accounting firm Pisenti & Brinker, did not conclude whether DEMA had overbilled in its invoices. Instead, the accountants found they couldn’t properly assess DEMA’s billing because the company had not tracked the work of its salaried employees.

The Press Democrat raised “legitimate questions,” Supervisor Chris Coursey, a former Press Democrat journalist, said in response to Patino’s comments. “Fraud was not found by the audit, but the questions weren’t answered either because the documentation wasn’t available,” he said.

Instead of proving its billing was accurate, DEMA has fought the county throughout its review, he said.

“They’ve been noncooperative, they’ve been litigious, they’ve been accusatory, they’ve not been acting as a good partner here,” Coursey said. “That concerns me. It has caused months and months of internal turmoil within the (county government).”

The county’s decision to wind down DEMA’s operations comes amid a widening dispute between the company’s co-founders, Patino and her wife Mica Pangborn. Late in March, a judge granted Pangborn a temporary restraining order against Patino after Pangborn filed allegations of physical, emotional and financial abuse against her wife.

Last week, Patino requested her own restraining order against Pangborn and made her own allegations of abuse. A judge rejected that order for now after Pangborn responded and denied the allegations. A hearing is scheduled for later this month. In their dueling court filings, the two disagreed about whether Pangborn remained with the company. Patino argued it was imperative the two be able to communicate about the business. Pangborn, however, wrote there was no need because Patino had fired her, and filed a letter terminating her as of March 31 as evidence.

At an April 11 hearing on Pangborn’s temporary restraining order, the judge ordered the two to conduct any necessary business communication in writing.

DEMA maintains a government contract in Harris County, Texas, where the city of Houston is located. The company was brought there by the Harris County Department of Public Health, after that agency came under the helm of former Sonoma County health director Barbie Robinson.

In Sonoma County, Robinson brought DEMA on in the early days of the pandemic, as the health department scrambled to house vulnerable homeless people and people who did not have a safe space to quarantine if infected with COVID-19.

Beginning as operator of one site, Robinson awarded DEMA five more sites to run for the county, operating under emergency health orders that circumvented the competitive bidding process. Patino, a former emergency room nurse, got her start in disaster response by voluntarily operating health clinics for evacuees during Sonoma County’s deadly 2017 firestorms and again amid the 2019 Kincade Fire.

While the supervisors ordered county officials to start unwinding from the troubled contractor, they did not issue any directive for a deeper investigation into DEMA’s billing. The county auditor, Erick Roeser, said a further audit by his office might not turn up any more detailed conclusions, given the lack of records DEMA kept for its salaried employees.

The auditor’s office is preparing the county’s claim to FEMA for reimbursement, Roeser told The Press Democrat via text message Monday. That process will take two to three months but will include a review of new DEMA records, Roeser said. “This process will helps to inform any next steps,” he said.

Roeser’s office has been contacted by a FEMA investigator about the company, he said late last month.

Staff writer Colin Atagi contributed to this report.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. Follow him on X (Twitter) @AndrewGraham88