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VEDC

VEDC/28″/mike1st/mark2nd By CHRISTOPHER WOODARD Staff Reporter When news broke in May that Valley Economic Development Center Inc. Chairman David Honda had asked for the resignation of its president, John J. Rooney, the board decided to squelch word of the rift. Led by business leaders Walt Mosher and Marvin Selter, the board put word out to other members not to talk to the press, according to one board member familiar with the unsuccessful damage-control effort. “They figured if they could clamp down on the release of information for two months, the story would go away,” said the member, who asked not to be identified. The tactic backfired. While on the surface it appeared to be business as usual at the VEDC with the board publicly expressing confidence in Rooney behind the rosy facade a power struggle was raging. In the course of a few weeks, Honda, under fire from a pro-Rooney faction on the board (including Mosher and Selter), resigned. Seven other board members, angry about Honda being forced out, immediately resigned as well. Now Rooney, who is said to be weary of the controversy swirling around him, has tendered his resignation as well, with the agency’s vice president, Wilma Berglund, expected to take over as acting president, members of the group’s board confirmed. The brouhaha has left several board members muttering about the damage-control effort and arguing that a smarter tactic would have been to open the agency to public scrutiny. “The only thing that has happened is that everything has snowballed and gotten much worse,” said Ellen Fitzmaurice, a current board member and owner of an Internet services firm. The board, left with a public relations nightmare on its hands, met last Monday, Aug. 2, to discuss a course of action to save the non-profit and its business assistance centers. Selter, president of Precision Dynamics Corp. who is now acting chairman of the VEDC, declined to say what that course might be. He would only say that an announcement would be forthcoming in two to three weeks. Fitzmaurice came away from the Aug. 2 meeting with the sense that the board still isn’t interested in digging too deeply into the VEDC’s problems. She was surprised that plans for an outside audit appeared to have been dropped. An outside audit had been proposed by some staff and board members to address questions raised about consulting fees paid to staff members and the accuracy of VEDC financial reports “A lot of people seem interested in propping up the VEDC’s name without getting to the bottom of all this,” she said. “There have been a bunch of allegations flying around, but how do you know what happened unless an independent auditor comes in. It’s completely irresponsible to do anything else.” The internal chaos began when Honda asked for the resignation of Rooney. Honda, a general contractor whose VEDC position was unpaid, was critical of Rooney’s fiscal management and felt the agency was languishing under his leadership. Following that move, Rooney, a full-time VEDC staff member with a $133,000 annual salary, marshaled support on the board, leading directors on July 19 to ask for Honda’s resignation instead. The directors at that time justified their move by claiming that Honda had been meddling too closely in the agency’s day-to-day operations, according to several VEDC board members. On July 27, Honda resigned, as requested, which elicited outrage among several board members, seven of whom later quit. “I didn’t receive any notice (about the vote to oust Honda), and conveniently, the meeting was held in one of the members’ homes,” said Maury Rosas, a retired phone company official who resigned from the VEDC board on July 21. Honda did not return repeated phone calls, but Rosas said it was unfair to ask for his resignation without a debate by the full board. “(Honda) questioned some judgments and actions by members of the staff. That was taken as micro-management. But as CEO, he has the obligation to do that,” said Rosas. “There isn’t a person with more integrity in the Valley, and to attack him that way was really uncalled for.” Meanwhile, in a memo circulating among board members, two high-ranking VEDC staff members questioned the accuracy of statements made by Rooney in his June 12 “President’s Report” to the board. In it, Rooney paints a rosy picture of the VEDC, saying the group “had one of our best years ever financially.” But in the June 16 memo to Honda, Roberto Barragan and Wilma Berglund, two high-ranking VEDC executives, paint a bleaker picture. “To say that this is the best year when we had $240,000 of short-term and long-term debt is to be in denial,” the memo states. The memo goes on to say that the true measure of profitability is the organization’s operating account, which as of June 16 had a deficit of $29,438. The memo also questioned the agency’s ability to meet its payroll in July. Rooney said he stands by his June 12 report. He also disputed Barragan’s and Berglund’s figure for the operating account, saying the balance has improved. He was unable to immediately provide updated figures. Rooney further said that the agency met its payroll for July, but he conceded that the VEDC has had cash-flow problems in the past. He attributed that cash-flow crunch to the VEDC’s rapid growth and the slow reimbursement of government agencies that fund VEDC programs. “We’ve helped tens of thousands of businesses grow. We’ve helped make the Valley a hotbed of entrepreneurial enterprise. We have thousands of small businesses that depend on us,” Rooney said. “It’s a phenomenal program, and it needs to continue to succeed.” The VEDC operates several small-business development programs out of 10 offices throughout the region. Its largest source of funding is the U.S. Department of Commerce, which provides a $6 million revolving loan fund for quake-damaged businesses. It also receives grant money from the U.S. Department of Commerce to run the business assistance centers in Pacoima, Van Nuys, Reseda and Chatsworth. But with its Commerce Department grant about to expire in September, and the organization running out of quake-damaged businesses to loan money to, Rooney has been under pressure to expand the group’s horizons and bring in additional revenues. That’s a goal Rooney had failed to make progress on, according to Honda and other past and current board members. Ironically, it was Honda and Rooney who took an obscure business assistance organization with a budget of $2,300 in 1976 and built it into an enterprise with 40 paid staffers and an annual budget of $2.8 million, said Wayne Adelstein, a Valley newspaper publisher and member of the board. “This organization is what it is because of two people John Rooney and David Honda,” said Adelstein. “Maybe it’s natural after so many years to have differences of opinion.”

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