Ernst & Young Contest Results Hotly Contested
When Ernst & Young trumpeted, “We Went Looking for the Best Entrepreneurs in Los Angeles,” it didn’t have to look far.
Eight of the 11 winners of Ernst & Young’s annual contest to select the area’s hottest entrepreneurs are clients of either the accounting firm or the competition’s co-sponsor Merrill Lynch or both.
What’s more, several losing contestants complained that the competition--which was jointly sponsored by Ernst & Young, Merrill Lynch, Inc. magazine and the Daily News--is little more than a sales tool in disguise and discriminates against businesses owned by women.
The accusations are strongly denied by Ernst & Young. Ronald H. Silver, the firm’s director of entrepreneurial services in Los Angeles, said there was no favoritism toward clients and that Ernst & Young representatives didn’t turn their visits with nominees into sales calls. “The point of the awards is to meet the people and honor them,” he said.
The sex discrimination issue was raised publicly by Karen Caplan, president of Frieda’s Finest Produce Specialties, a Los Angeles exotic produce company. Caplan, a finalist who did not win, blasted Ernst & Young’s handling of the contest in a speech before scores of women business owners at a reception last week.
“There were no women winners,” Caplan said. “We were not surprised to learn that out of seven judges, six were men.” Out of a total of 24 finalists in six categories, she complained “only three of the finalists were women.”
Caplan said in a later interview that Ernst & Young failed to send a representative to meet with her, although personal visits to every finalist are a required part of the final judging process, according to Ernst & Young and Inc. magazine.
This year, Ernst & Young in Los Angeles sent out 6,000 letters and garnered about 85 nominees. Company founders can nominate themselves or be suggested by outsiders. Silver said Ernst & Young spent about $25,000 in cash and uncountable hours of staff time on the awards program, which concluded in a June 14 ceremony.
“The vast majority of those nominated this year were not nominated by Ernst & Young,” said Silver, adding that none of his firm’s clients were among last year’s winners and only three were winners the year before.
Silver acknowledged that Caplan was not paid a personal visit but said the judges had plenty of information about her firm on which to base their decision.
Last year, the contest included a category for businesses owned by women and another for firms owned by minority women, he said. The categories were dropped this year after women business owners asked to compete equally with men. He also said several women business owners were asked to serve as judges but declined.
Several nominees complained that their visits from Ernst & Young representatives turned into high-pressure sales pitches. Silver said he instructed his staff not to tout the firm’s services. However, he said that when plaques are delivered to the finalists after the awards ceremony, representatives do bring along brochures describing the firm’s capabilities.
According to the rules, every finalist is supposed to receive a so-called due diligence visit from an E&Y; representative who looks at tax returns and financial statements, and collects historical information on the founder and the company. Silver said his staff prepares a quick summary of each business, which, along with information collected during the personal visit, is turned over to an independent panel of judges.
This year’s judges included a magazine publisher, heads of the entrepreneurial programs at USC and UCLA, a partner at the law firm of Riordan & McKinzie, the chairman of Foothill Group and the business editor of the Daily News.
“The Daily News knows nothing improper, unprofessional or inappropriate about the competition or awards,” Daily News editor Robert Burdick said.
Ed McKinley, a judge who serves as a managing director of E. M. Warburg, Pincus & Co., a venture capital firm, said the information provided to the judges was adequate to make a decision.
“I can understand how people would be perplexed by the outcome,” said McKinley. “But I found Ernst & Young to be very even-handed and thorough.”
Dennis Britton, former deputy managing editor of the Los Angeles Times and current editor of the Chicago Sun-Times, served as a judge in last year’s competition. Britton said due diligence was done on every one of the finalists when he sat on the panel. He also said Ernst & Young approached The Times to sponsor this year’s competition, but the paper declined.
“They were not offering us exclusive sponsorship, and co-sponsoring it with Inc. magazine or someone else did not offer us enough control over the event,” Britton said.
Ernst & Merrill Young Lynch Winner Company/type of business client client Stanley Braun Pacific Rim Assurance Co. * (Encino, workers’ compensation) Leslie Crane Software Toolworks Inc. (Chatsworth, software publishing) William Guthy Guthy-Renker Inc. * (Irwindale, cassette production) Arnold Lorber Lorber Industries * of California (Gardena,) (textile manufacturing) George Pla Cordoba Corp. * (Los Angeles, (computer systems) George Rathmann Amgen Inc. * (Thousand Oaks, biotechnology) Frederick Ruiz Ruiz Foods Products Inc. * (Tulare, frozen foods) Bradley Scott Los Angeles Auto Salvage (Woodland Hills, auto salvage) John Smart II Smart Corp. (Torrance, medical records copying) Jeffrey Sudikoff IDB Communications Inc. * (Culver City, communications) Craig Winn Dynasty Classics Corp. * * (Carson, lighting products)