City Begins Audit of Valley Business Aid Group, Sources Say

In light of questions raised over the financial practices at the Valley Economic Development Center, the city of Los Angeles this week launched a comprehensive audit of the business assistance agency, sources said Thursday.

Dan Margolis, a spokesman for Mayor Richard Riordan, said an audit, separate from the Van Nuys-based agency’s regular annual review, will look at finances throughout the operation and should be complete within about 60 days.

“The mayor’s office encourages a review of the VEDC, and we will withhold judgment until the results are in,” Margolis said.

The city’s interest stems from its role in helping the agency secure a $950,000 grant from the federal government to help fund the business-outreach efforts of the agency.

Sources said the impetus for the city audit is not the grant but rather other financial issues that have been raised.

In recent months some board members have raised questions on fees paid to John Rooney, who officially stepped down last week as VEDC president, and an agency worker for helping to broker a deal in which a Japanese investor pumped $1.2 million in venture capital funds into a Canoga Park sign company.

Others at the agency questioned the appropriateness of a deal in which David Honda, the longtime board chairman who resigned last month, performed construction work for a VEDC loan recipient.

Rooney, who could not be reached for comment, has stressed the fees were approved by the board members and were part of his compensation agreement. Honda, who also could not be reached, has said previously that none of the board members had raised questions on his deal initially, and that he disclosed his plan to perform the work to the agency’s loan committee, which includes at least one board member.

Still, a source close to the situation cited those instances as examples of the type of practices the city is now looking into. He said at this point the problems do not appear to be major but the practices are questionable.

Marvin Selter, acting board chairman, described the audit as “purely routine,” and “nothing exceptional.”

Several board members expressed confidence the city-instigated audit, and a separate regularly schedule audit being done by the agency’s regular accountants, will turn up no major improprieties.

“Based on what I know to be true, I believe that there is going to be no wrongdoing found at all,” board member Wayne Adelstein said.

“This is not an uncommon response from a government agency when [these] kinds of questions are raised. I would think the city--as any funding source would when there has been this type of discussion in the media--would do the responsible thing and take a look at this.

“They have to make sure the public funds are being properly utilized,” he said.

Added another board member who was familiar with the city’s involvement, “I don’t think they’ll find anything out of order. What are they going to find if there’s nothing wrong to find?”

Margolis said the $950,000 program has been carefully scrutinized by the city.

But sources said there were enough other financial questions swirling about the agency that the city felt compelled to take a look.

“In light of the questions arising about potential irregularities in the VEDC’s operations, the city initiated a comprehensive audit,” one source said.

“The review will determine if there were any irregular practices at the organization.”

Adelstein and others said they were not worried the continuing turmoil might scare off funding sources. And so far it apparently has not.

Dorothy Overal, acting district director for the U.S. Small Business Administration, said none of the issues so far has caused her agency alarm.

“All this that has been going on at the VEDC, we have been following very carefully,” said Overal, whose agency works with the VEDC on a micro-loan program and a small business development center.

“We don’t feel that anything that we are connected with there in the VEDC warrants any investigation at this time,” she said.