Chamber Backs Chief in Face of State Sanctions
The Chamber of Commerce’s executive council has unanimously recommended retention of Chairwoman Elaine Hutchison following disclosure that her real estate license has been revoked by the state for improper use of client trust funds.
The 8-0 executive council recommendation will be forwarded to the full 45-member board of directors for consideration next week, said Lee Sellers, chamber president.
“Elaine explained how it happened, and I don’t think even for a minute that it was considered an image problem for the chamber. . . . The feeling was that the problem was a technical error,” Sellers said after Monday’s executive session.
Hutchison, 47, the first woman to head the chamber, is scheduled to serve as chairwoman until July.
Restricted License
The state Department of Real Estate revoked Hutchison’s broker license and the corporate license for her company, Long Beach Property Management, in December. Revocation takes effect Feb. 17, but the company will continue operating with a restricted license and after a year may apply for an unrestricted one, Hutchison said.
The license of Paragon Equities Inc., a second Long Beach real estate company owned by Hutchison, is not affected by the state sanctions, she said.
The state revoked the licenses after investigators found that Long Beach Property Management had disbursed funds from a client trust account without the owners’ permission, according to state officials.
The account was short $40,278 in May, 1985, when investigators conducted an unscheduled audit, but the money was promptly repaid by Hutchison, they said.
The audit also found that in 1984 and 1985 Hutchison improperly mixed funds from the same trust account with those of a limited partnership in which her company was a partner.
Agreement Reached
Long Beach Property Management also operated for 18 months in 1983 and 1984 without a required corporate broker license, the state reported.
Hutchison last month stipulated to the accuracy of the state’s findings in an agreement that allows her to continue to operate her property management company.
She said Long Beach Property Management operated without a required license because until late 1984 she was unaware that the company, which had at least one corporate license, needed one for each of its subsidiary companies.
Hutchison said the trust-account problems occurred because of a bookkeeping error. The trust account of an apartment house she managed was inadvertently combined with the banking account of the limited partnership, she said.
“The trust account got placed in the wrong banking account,” she said. “It should not have happened, but it was accidental. And in reality, this is not serious. . . . There is no interruption of business.”
The state official who filed the complaint against her disagreed. “This is not a minor item,” said Randolph Brendia, Los Angeles district commissioner for the Department of Real Estate.
‘Sloppy Bookkeeping’
“Anytime you’re holding monies for me and all of a sudden the money is gone, . . . it’s either embezzlement or sloppy bookkeeping,” Brendia said. “But if you promptly put the money back, there are real questions about whether you meant to do anything wrong. So I guess this was sloppy bookkeeping.”
Hutchison’s sanction is neither the most nor the least severe of the penalties meted out by his department, Brendia said.
Minor offenses are punished by short suspensions that are often waived, secondary offenses like Hutchison’s call for revocation of license and issuance of a restricted license, and the most serious offenses result in license revocation without the interim license, he said.
Over a 12-month period ending in November, the department’s Los Angeles district--which includes Ventura, Santa Barbara and San Bernardino counties--suspended or revoked 144 licenses after “several hundred” audits, Brendia said. There were 25 suspensions, 59 revocations without interim licenses and 60 revocations that allowed application for restricted interim licenses, he said.
Most audits are conducted as part of a random program that focuses on real estate management companies that handle large amounts of money, Brendia said. He said he could not comment specifically on what prompted the audit of Hutchison’s companies.
Provisions of Hutchison’s one-year restricted license require her to file with the state quarterly reports on Long Beach Property Management’s trust accounts.
40 Hours of Classes
By the end of 1987, she must also have completed 40 hours of classes in real estate education programs, according to state documents.
Since the state audit, Hutchison has hired an outside accounting firm to strengthen bookkeeping procedures and to “make sure this never happens again,” she said.
Chamber officials, meanwhile, expressed support for Hutchison, who founded her companies 12 years ago and has been involved in real estate development, sales and management ever since.
Joseph Prevratil, president of Wrather Port Properties and chairman-elect of the chamber, said Hutchison has been an effective community leader “and it is my hope that this does not affect that. . . . It is my understanding that she has worked through these problems.”
Sellers said that after Hutchison spoke to the executive council this week, “there was almost a battle to see who was going to make the motion” of support.
