Ready to Take Care of Business : New Director Hopes to Salvage Scandal-Ridden Enterprise Program

As he walks through the cavernous, half-empty warehouse on Lynwood’s industrial west side, the new executive director of a city-funded program for fledgling businesses looks a little sheepish.

The air in the windowless building is hot and still, the phones and copy machines are quiet, and only a handful of casually dressed people mill about the place.

“There’s really not a whole lot going on right now,” says Bill Raphiel, a soft-spoken man who spent years developing small-business programs for the city of Los Angeles. “But in time, all that will change,” he adds with a confident grin.

Raphiel has been given the daunting task of salvaging the Lynwood Entrepreneur Development Academy, which has been plagued by scandal since it opened nearly four years ago with a $1.5-million interest-free loan from the city.

The academy, established to help train fledgling entrepreneurs, thereby developing local business, has been dogged by allegations of fiscal irresponsibility and claims that it has failed in its objectives. A 1993 audit found that thousands of dollars had been misspent at the institute and that bookkeeping procedures were shoddy.

In late February, one of the academy’s original participants, Richard L. Calhoun, was arrested and accused of spending hundreds of thousands of dollars in public money for personal use. Calhoun has pleaded not guilty to charges of grand theft and money laundering.

Calhoun headed the now-defunct Lynwood Manufacturing Co., which was to have been the centerpiece of the academy and help the program become self-supporting by making aerospace parts for government contractors.

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The company was given $694,800 in city funds to purchase equipment and refurbish an old warehouse next to the academy warehouse. But the business never opened and the equipment went unused. The machines have been gathering dust while the academy pays thousands of dollars in rent each month for space that it can’t use.

Raphiel said the machines are outdated, and he has asked the city to haul away the equipment so he can lease the space to another manufacturer.

“Things have happened here that are somewhat odd,” Raphiel says diplomatically in his office, which is filled with plaques, framed commendations and pictures of Raphiel with his former boss, Mayor Tom Bradley.

The institute was set up to offer business-training classes at no cost to hopeful entrepreneurs and to allow selected participants to establish businesses in the academy’s warehouse. The academy was to provide free space and clerical support to help the businesses get on their feet. The business owners would then leave the academy and operate in the community, hiring local residents and contributing to the city’s tax base.

“The concept is such a strong one, if driven the right way,” said Councilman Paul H. Richards II, who originally suggested the program in 1990.

Officials say a business-development program could also provide positive business role models in the city, which has a 13% unemployment rate.

“Most of the kids in this city didn’t grow up with the Wall Street Journal,” said Leighton Hall, chairman of the advisory board appointed by the city to oversee the academy. “This program can help them realize their dreams. That’s important.”

Despite the academy’s troubles, Hall and Richards say, they are happy with some elements of the program.

“As far as training goes, we have one of the most outstanding education programs,” Richards says. “Irrespective of whether or not (Lynwood Manufacturing) fell apart, everyone else has done a magnificent job.”

Richards points out that more than 120 potential entrepreneurs have taken business classes at the academy, and nearly 30 have established businesses in the warehouse. He acknowledged, however, that he doesn’t know how many participants remained in business after leaving the city program. Raphiel said the academy hasn’t kept track of participants, but he plans to set up a tracking system.

City officials began asserting more control over the academy in 1993 after critics raised concerns that the city had failed to take proper care in drawing up financial agreements with the academy or in setting up adequate safeguards to ensure the money would be spent properly.

Officials appointed the advisory board and ordered tighter fiscal controls.

An additional $300,000 in city funds has been earmarked for the academy for the fiscal year beginning July 1. Officials included the money in the proposed 1995-96 city budget, which the council is scheduled to vote on late next month.

Some critics still contend that the academy is a waste of city funds.

“There is nothing in place that I have seen that supports its continuing existence,” said Councilman Armando Rea. “This isn’t the kind of program a city should be paying for. We should pay for public works, public safety and parks.”

Raphiel said he understands that some residents may be angry and frustrated about the program. “But I can’t dwell on that,” he adds. “There is too much work to do.”

Raphiel says he is now requiring operators of fledgling business at the academy to pay a monthly fee--based on their sales--to help defray the academy’s monthly rent of $14,000 for the two warehouses.

He is limiting businesses to a two-year stay at the academy, a condition that had generally been ignored. A tree-trimming business, for example, has been operating out of the academy, rent-free, since the program opened, officials said.

He said he is also requiring new participants to provide viable business plans and to secure reliable funding sources, such as bank or government loans, for their ventures.

“Some people don’t have the first idea about what it takes to run a business,” Raphiel says. “We want them to have realistic expectations about owning their own company, and that includes telling them that their ideas might not work.”

Councilman Robert Henning--an academy critic--said he is willing to give Raphiel a chance to turn the program around. “I have a lot of confidence” in Raphiel, he said. “He could do a good, effective job, and could really make this program work.”

During his 12 years with the city of Los Angeles, Raphiel directed small-business and minority development programs. Before that, he worked for the U.S. Department of Commerce and the Office of Minority Business Enterprise, specializing in small-business development.

“I have been doing this for 30 years,” he says. “I have a lot of contacts, and I bring a lot to the table. I want to take the academy’s original objectives and build on those.”

Raphiel said he is applying for federal grants that would allow the academy to purchase computers for a telecommunications training center. He said he also hopes to start an international trade program to teach business people how to tap into the thriving commerce at the ports of Long Beach and Los Angeles.

The academy “can be an umbrella organization for all sorts of things,” he says. “You have to have the vision and realize the potential of this place.”