TELACU to Surrender License, Assets : East L.A. Investment Firm Was Target of Lengthy U.S. Probe
More than three years after the U.S. Small Business Administration moved to shut down the TELACU Investment Co. in East Los Angeles, company officials have agreed to surrender their license and more than $3.2 million in assets, U.S. Atty. Robert Bonner announced.
The company is a subsidiary of The East Los Angeles Community Union (TELACU) and was funded by the SBA to invest in “socially or economically disadvantaged business concerns.”
Former SBA Administrator Michael Cardenas said he moved to “pull the plug” on the investment company in December, 1981, declaring that audits dating back several years had disclosed self-dealing and sloppy management practices.
The U.S. attorney filed a civil complaint in 1982 to recover federal funds remaining in the company, but TELACU fought back, charging that the lawsuit was part of a conspiracy by the Reagan Administration to put the company out of business.
“This has been a really protracted case,” said Asst. U.S. Atty. Ron Silver on Friday. He said a settlement has been reached in which TELACU Investment Co. has admitted no wrongdoing in return for surrendering all of its assets and its license to do business. Silver said a receiver will be appointed to preside over the company and liquidate its assets. He said about $2 million will be returned to the Department of Transportation, which provided the money for business investment purposes.
The U.S. attorney’s civil complaint, based on a 1981 audit of the company, charged TELACU Investment Co. with self-dealing by providing financing to its own associate companies, making unauthorized salary and management payments, and charging a “loan fee” of $10,150 to an outside business. Ten specific violations of SBA regulations were cited.
In a series of 1982 articles about TELACU and its far-flung business empire, The Times disclosed that the TELACU Investment Co. lent SBA money to the art company of a TELACU board member, the international trading company of TELACU’s founder, the business of a former federal official who approved TELACU’s funding, and the cable television company of two politically prominent attorneys who represented TELACU and to a third attorney who served on a national board overseeing TELACU.
The TELACU employee who helped set up the investment company in the 1970s left TELACU in 1979 owing about $65,000 and driving off in a TELACU-owned Mercedes-Benz, which he had not returned three years later.
Asked if he recovered the Mercedes, Silver said: “No. We never tried.”
