Businesses Put Off Bolting For Now, Pinning Hopes on Schwarzenegger
By SHERRI CRUZ
Raj Bhathal, chief executive of Tustin apparel maker Raj Manufacturing Inc., said he was all set to pack up his 400 workers and flee California. Now those plans are on hold, he said.
“We were actually going to leave right away,” Bhathal said. “Then we put a stop to it and said, ‘Let’s see what Arnold does.'”
Bhathal isn’t alone. Others are placing a lot of hope in Arnold Schwarzenegger, betting things only can get better under the governor-elect.
“He was a ray of hope,” said Lester Edelberg, president of Filter Concepts Inc. of Santa Ana. “In six months we’re going to have a pretty good idea of which way he’s going.”
Filter Concepts makes noise filters for power lines. The company employs 30 people in Santa Ana, down from a high of 60. Edelberg said he put possible relocation plans on hold for at least for six months to give Schwarzenegger a shot.
Bhathal, Edelberg and others cite workers’ compensation fraud as the biggest issue plaguing the state. Bhathal said he was ready to pay higher rates,but not 400% more. That makes it tough to compete when many of his rivals are going overseas to reduce their labor costs.
Raj makes swimsuits sold under the Guess?, Guess? Girls, Athena Pick Your Fit, Athena Collection and Rajman brands.
In the past few years, Raj has invested in computers to track production, inventory and sales in a bid to stay competitive making swimwear here.
Many of Raj’s workers are sewing machine operators with company-provided health insurance. But Bhathal said he’s noticed that when they go to the doctor for any kind of pain, they’re automatically classified as a workers’ comp case.
“I’ve never seen so much fraud going on in workers’ comp,” he said.
Once sworn in, Schwarzenegger has pledged to convene a special session of the Legislature to address workers’ comp, re-doing reform legislation signed by Gov. Gray Davis in September that didn’t address fraud.
Meanwhile, Department of Insurance Commissioner John Garamendi has stepped up action against workers’ comp abuse.
Last week, police raided offices of Orange-based temporary employment company CheckMate Staffing Inc. as part of a probe into suspected workers’ comp fraud. No charges have been filed against CheckMate or its executives (see related story, page 4).
Edelberg said he’s still suffering from the days when lawyers worked unemployment lines to find workers’ comp clients for cases of “post-termination stress.”
The state caught on and finally stopped it, he said. But claims,even if they’re fraudulent,are on record and keep rates high.
“It’s the mentality that’s the problem in California,” Edelberg said. “It’s not hospitable to small business.”
During Schwarzenegger’s campaign, he said keeping businesses here would be a top priority for his administration. Edelberg said he’s going to hold him to that.
Insurance brokers who sell workers’ comp policies said they are optimistic Schwar-zenegger can bring about meaningful reform (see related story, page 20).
“I’m very optimistic,” said Bruce MacKenzie, of MacKenzie and Associates in Orange. “I’m happy to have Arnold in office. I do think he can carve out a middle.”
Carving out a middle and bringing everybody together is what Jim Ignacio is counting on. Ignacio is president of Laguna Hills-based Doctors Ambulance Service, an ambulance operator.
“Schwarzenegger has the people skills,” Ignacio said. “Hopefully, he’ll have the ability to eliminate the party lines and have bipartisan cooperation.”
Ignacio said he is worried about workers’ comp. If rates don’t go down, he said he won’t be able to offer raises or expanded healthcare benefits.
There are others who are anticipating results from Schwarzenegger. The Sacramento-based California Manufacturers & Technology Association’s board broke an 85-year run of not endorsing candidates to back Schwarzenegger.
“We’re certainly optimistic,” said William Hodges, a spokesman for the trade group, which includes several Orange County manufacturers. “There’s no question about it.”
Schwarzenegger recently spoke to the association’s board, Hodges said. His message was, “Give me a chance to change things,” Hodges said.
The governor-elect didn’t talk of any formal strategy on how to get business back on track, but he said he was going to address workers’ comp and electricity costs.
“Fraud has not been addressed,” Hodges said. “That’s something we’re going to advocate.”
If Schwarzenegger only does one thing,fix workers’ comp,Bhathal said he’ll stay.
“We love it here. We’d like to stay,” he said. “From now until May we’re going to hang in there.”
