HMO’s Licensing Missing Key Item : Health care: Molina Medical Centers application was approved without a signed statement from a board member, Sen. Diane Watson, a state commissioner confirms.

The state Department of Corporations approved an HMO license for a Long Beach-based chain of clinics last spring without enforcing a requirement that the company submit signed disclosure statements from all its board members, officials disclosed Tuesday.

Missing from Molina Medical Centers’ application, said Commissioner Gary Mendoza, was a sworn statement from a key board member, state Sen. Diane Watson (D-Los Angeles), which the company had promised to file but never did.

Mendoza dismissed the department’s failure to follow up as a “ministerial oversight.” But he acknowledged that his discovery contradicted statements by a department attorney last week that the confidential document was in hand and that a license could not have been granted without it.

Mendoza said the omission raises yet another question about whether Molina was licensed without meeting a fundamental requirement that a majority of its board of directors be financially independent of the family-run company.

“We are going to ask some more questions about the representation they made to the department regarding the (financially) disinterested board they were setting up at our insistence,” Mendoza said.

Molina’s attorney declined comment Tuesday, but company officials have said previously that the proper filings were made with the state.

The Times disclosed this week that the department, without reviewing critical medical audits, had granted Molina an HMO license that later opened a door to a state contract potentially worth $400 million. The license was granted in March--the same month the company distributed $15,000 to 23 other lawmakers and named Watson to its board of directors.

Watson said in a recent interview that she provided guidance to company officials on “how to work the system” to win a license but she never agreed to serve on their board of directors. Her service on the board would have raised the “perception of a conflict” of interest, she said, because she chairs the Senate’s Health Services Committee, which oversees the state agency issuing Medi-Cal contracts.

Company officials said they would not have listed Watson as a board member without her approval. Mendoza said the company had submitted documents “represent(ing) to us under penalty of perjury that she had agreed to serve on the board.”

The new disclosure supports Watson’s contention that she had not signed any documents relating to her board duties. It also underscores questions raised by critics about the diligence that Department of Corporations officials have exercised in granting HMO licenses, which are a steppingstone to Medi-Cal contracts.

In a March 14 letter identifying Molina’s newly appointed board members, Mark Andrews, an attorney for the company, drew the agency’s attention to the fact that Watson’s disclosure document did not have her required signature.

“Due to a personal emergency, Sen. Watson will not be available until the coming week at which time (Molina) will obtain her signature and file” it with the department, he wrote.

But Mendoza said the document was not filed and his department never followed up to find out why it had not been.

Asked about the matter Tuesday, Andrews said: “If you’re asking me about client matters, I have nothing to answer. If you’re asking me about public records I think you should address that question to the Department of Corporations.”

Mendoza acknowledged that the makeup of the board had been an important issue in the department’s determination of whether Molina should get its HMO license. Department attorney Anita Ostroff had raised a concern that with all the company’s top officials being family members, financial considerations might at times override medical decisions.

Molina offered to resolve the problem by appointing a majority of its board members from outside the company. With that issue out of the way, the department granted the company its license.

Watson’s presence on the board becomes important, Mendoza said, because without it the company never fulfilled its promise to appoint a majority of outside board members.

But in its inquiry into the matter, Mendoza said the department will have to resolve several contradictions which, in his view, make some of the senator’s claims “unfathomable.”

Although Watson said she never agreed to serve on the board, records show she did not mention that in a letter she wrote resigning from the position. The letter of resignation was written in August, four months after the senator said she discovered to her chagrin that her name had been placed on the board.

In her interview, Watson said she relied on her staff to write the letter and never knew when it was actually sent.

Department officials said they did not get any letter of complaint from the senator, nor did anyone advise them when she resigned.

“Before we decide what actions we will take. . . . we just want to know the facts,” said Mendoza.