Community Bank Chief Resigns Because of Health

C. Robert Kemp, who has headed the federally funded Los Angeles Community Development Bank through its beleaguered three years of existence, is stepping down for health reasons, bank officials announced Tuesday.

The bank’s board of directors named former RLA President Linda Griego to temporarily take the helm of the $430-million loan fund--the federal government’s largest response to the 1992 riots. The bank was created to channel capital to entrepreneurs rejected by conventional lenders in the city’s poorest neighborhoods and thereby create local jobs. It has fallen short of its job-creation mandate and is struggling to repair a troubled portfolio.

Griego, a former deputy to Mayor Tom Bradley and an entrepreneur, will bring to the table her experience with RLA, another agency created to mend the city’s scarred economy after the riots. She took the helm of the former Rebuild LA in 1994, after that organization was criticized as fractious and ineffectual.

“The issues are tough. I recently came on the board and we’ve got our work cut out for us,” she said. “The thinking was, ‘Who could step in and take over?’ I feel comfortable doing it.”

Griego is well-positioned to navigate questions and criticisms about the bank’s record from city officials, said bank board member Eugene Grigsby. Earlier this year, the City Council requested a report on the bank’s loan portfolio and slow pace creating local jobs. A council hearing on the report is expected in coming months.

“Linda is likely in a position to better understand the difficulties that the City Council may be expressing in relationship to the bank,” Grigsby said. “We all anticipate that this is going to be positive for the bank.”

The council also is expected to take up the issue of the bank’s largest loan, to a South Los Angeles dairy. The bank has loaned more than $22 million to the dairy and is considering a further infusion, according to sources and documents.

Kemp’s decision to step down came in a special board meeting called Tuesday and was not related to any of the bank’s difficulties, Grigsby said. Kemp had been expected to serve through the end of the year, but his health has deteriorated in recent months. He has also been attending to his wife, who is ill.

Grigsby declined to reveal the nature of Kemp’s health problems. Kemp has taken an oxygen tank to recent meetings. He did not return a call to his home Tuesday.

“It was known that he was ill. It was not anticipated that his illness would progress to the degree that it has,” Grigsby said. “The board was very concerned about his health and the need for him to take care of himself.”

Griego accepted her role as interim chief executive on the condition that she not be a candidate for the permanent position. A search committee made up of bank board members is expected to appoint a permanent replacement within three months.

“I’m not about going in there to change things,” she said. “We [just] want to make it attractive for the next person to come in.

“I think Bob has taken it to a certain level,” she added. “I think a permanent CEO will do the next level.”

Kemp has vigorously defended the bank’s record, saying that its mandate--to take a risk on entrepreneurs rejected by conventional lenders--is sure to result in troubled deals. The bank also labors under burdensome federal regulations.

A Times investigation earlier this year showed that nearly a third of the bank’s major borrowers had gone out of business or fallen into deep trouble with their loans. Earlier borrowers also complained of excessive delays in loan processing, and two have filed lawsuits alleging that bank officers inappropriately meddled in their businesses.

The bank has since taken a series of steps to overhaul its operations, grading its portfolio according to risk level and offering the first outside training to its loan officers, among other changes. Monday, it announced a $15-million loan to Chesterfield Square, a $53-million shopping center planned in South-Central Los Angeles.

Bank officials say they have loaned $132 million and created or retained 1,000 jobs, a quarter of those to empowerment zone residents, who the bank was crafted to help.

Mayor Richard Riordan’s office Tuesday issued a statement in support of the institution.

“The mayor remains supportive of the Community Development Bank, which has opened the door of opportunity to low- and moderate-income neighborhoods in Los Angeles,” the statement said.

The appointment of Griego was applauded as a new chapter in the bank’s history.

“I think Linda Griego gives them an opportunity to take a fresh look at what the bank might be about,” said Roberto Barragan, vice president of business lending for the Valley Economic Development Center, which has underwritten many of the bank’s smaller loans under a contract with the institution.

“You have to make a comparison to RLA. She came in, took a fresh look. She saw what could be done and needed to be done.”