United Way’s Ex-Chief Says He OKd Loans
A former Los Angeles-area United Way chairman said Friday that he approved virtually all of the controversial loans made to agency executives by the charity’s president, Francis X. McNamara Jr.
The statements by insurance executive Walter B. Gerken, coupled with earlier remarks by another former chairman, confirm that McNamara had not acted on his own in making almost $300,000 in loans to United Way executives.
Gerken spoke after McNamara began a paid leave of absence Friday that the charity’s board of directors approved as part of his proposal to have a citizens’ panel review his financial management practices.
Board Meets
“I know that I have done no wrong,” the charity’s president for the last 19 years told a news conference, after a closed-door board meeting attended by fewer than half of the 95 directors.
He characterized the loans as insignificant “personnel costs,” when compared to the $85.5 million in pledges this year.
Since the controversy began, McNamara has maintained that he had obtained approval from the United Way chairmen and key committee chairmen, including Gerken, the chairman of Pacific
Mutual Life Insurance; Wallace W. Booth, chairman of Ducommun Inc., and George Moody, president of Security Pacific National Bank. Until Friday, Gerken had declined to comment.
At Friday’s news conference, Gerken said that in 1982 he had signed letters authorizing McNamara to assume more than $200,000 in loans due First Interstate Bank, when two charity executives could not repay them.
Later, Gerken said Moody, who was United Way finance committee chairman, also signed confidential letters authorizing McNamara to assume the First Interstate Bank loans. Moody did not attend the press conference and has not responded to requests for comment.
Gerken told reporters that he also approved unsecured loans totaling $40,000 to two other executives.
“I had the opportunity to raise the question, ‘Did we have policies?’ and I did not,” Gerken said, adding that he also did not bring the loans before the board’s 20-member executive committee or the full board.
McNamara did not take the matter to the board either.
“In retrospect, it would have been appropriate to raise that question, and I think that deficiency in our procedures will be corrected,” Gerken added.
High Rates
In explaining most of the loans, Gerken said that in the early 1980s, extraordinarily high interest rates prompted many corporations to loan money to employees being relocated.
“I looked upon it as a personnel act in order to attract top managerial talent into this community and not as the United Way being in the loan business,” he said.
“The worst case you can make on this is a little bad judgment call about how, procedurally, we handled it, because it was done in the interest of the community to attract top management, which in a service industry is absolutely essential.”
On Wednesday, Booth said he had no recollection of approving any loans, “but today I have been shown two letters I signed approving” $32,000 in loans.
For more than an hour at Friday’s press conference, United Way chairman Roy A. Anderson, flanked by 14 civic leaders who serve on United Way’s board, explained the board’s strategy to “regain the public’s confidence in United Way.”
Vacate Office
Anderson, the retired chairman of Lockheed Corp., said he would take over immediately as the unpaid acting president. He said McNamara, who will temporarily vacate his office at United Way headquarters, will act as a consultant to him.
“We have made certain mistakes, I would guess, first of all in not having clear policies established, possibly some errors in judgment,” Anderson said. “We admit to those; we hope that this (independent review) process will make sure that we have all of those corrected and the proper policies adopted.”
Anderson, emphasizing that responsibility for the loans--most of which were unsecured, interest-free and have not been repaid--should be spread broadly, said:
“I would not point to any one individual. I would point to several groups.
“First of all, I would look at the board of directors as to why, perhaps, they were not more alert.
“Second, I would look to the staff for not really making the total board aware, except for just the few who were made aware and participated in the approvals.
“Third, I would look to the professional organizations that have reviewed our operations, and by that I mean accounting firms and legal firms and so forth, for not having called this to our attention. . . .
Proper Policies
“There was no--in my mind--absolutely no intent to hide any disclosure,” Anderson said. “I think it was just that we didn’t have the proper policies. I can tell you this for sure: There will be no more loans or no more such things made until proper policies are established.”
He said he hoped no future loans would be made to employees, adding that if any loans are made, the full board would have to approve them and that details would be disclosed in the charity’s annual report.
Anderson said the citizens’ panel will review “management policies, procedures, internal controls and recent practices relating to financial administration of the Los Angeles United Way.” However, he said the scope of the inquiry “will be up to” the chairman, who has not been selected, and that the board wants the committee to be “as independent as possible.”
The citizens’ committee will be asked to file its report within 60 days, Anderson said. This would be well in advance of the 1987 fund-raising campaign, which a document on file with the Los Angeles County Business License Commission indicates will have a $90-million goal.
Change Auditors
Anderson also said a national accounting firm other than United Way’s current auditors, Deloitte, Haskins & Sells, will be retained to examine the charity’s books.
James H. Hugar, the Deloitte Haskins & Sells partner who supervises auditing United Way’s books, said it was not within his firm’s scope of duties to advise the board that payments were not being made on three of the five loans nor to question the propriety of the loans. He said his firm fulfilled its obligation--to make sure proper promissory notes were signed.
Anderson also pledged cooperation with the independent investigator sought by the state attorney general’s office and with sheriff’s detectives working for the Los Angeles County Business License Commission, which has scheduled a hearing Wednesday on whether to renew the charity’s solicitation permit.
Anderson said he hoped that talks with the investigators would persuade them that their inquiries are not necessary.
United Way Inc., the largest of 2,200 local United Ways in the country, reported raising $85.5 million in pledges this year for 350 nonprofit human care agencies in Los Angeles County and western San Bernardino County.
