Lao Family Community Inc., a private, nonprofit agency under investigation by state authorities for alleged misuse of hundreds of thousands of dollars in funds earmarked for social service programs in the Laotian community, has filed for bankruptcy and closed it doors.
The Garden Grove-based organization, which had several branch offices in the Fresno area, listed nearly $400,000 in debt in its petition for Chapter 7 bankruptcy liquidation, filed Jan. 15. in federal bankruptcy court here.
Of the total listed, $268,293 is owed to the federal government for payroll taxes that have gone unpaid since 1986. An additional $117,000 is owed to the state Department of Social Services, apparently as repayment of funds received for programs the organization operated between 1985 and 1988.
A spokeswoman for the Social Services Department in Sacramento was unable late Tuesday to say why the agency would owe that money.
Private agencies such as Lao Family Community contract with the state and various county social service departments to provide training and counseling programs that otherwise would be provided by government agencies. The state typically would require repayment of funds that were not used for the proper purposes.
Donald Hobson, the Santa Ana attorney who prepared the bankruptcy filing, said the collapse of Lao Family Community stemmed from “alleged embezzlements by prior management and by the failure (of the agency) to pay payroll taxes.” The funds “apparently were diverted to other purposes,” he said.
“The real story here,” Hobson said, “is how many other programs like this are being ripped off across the country?”
In addition to debts specified in the bankruptcy petition, the filing shows that Lao Family Community also owes an unknown amount of payroll tax to the state and that as many as 35 former employees are owed an unspecified amount in vacation pay and reimbursement for payroll checks that bounced. The employees were not identified.
In October, the state attorney general’s office confirmed reports that it was investigating Lao Family Community as part of an ongoing probe into charges by Laotian refugees that they were forced to make contributions to a Laotian liberation group in order to receive social services from the private agency.