Is Problem Developing at Business-Aid Agency?
OK, spin doctors, start your engines.
Something is going on at the Valley Economic Development Center, the respected Van Nuys-based nonprofit agency that offers loans and management-counseling services to small businesses in the San Fernando Valley. You can tell by all of the scrambling and muted conversations that have been taking place there over the last two weeks.
Two subsets of the agency’s 15-member board have met at least twice within the past few weeks to debate, among other things, the continued tenure of longtime President John Rooney and to mull questions about the compensation package for employees under his command.
Some on the board have called for an audit of center finances, even though a 1998 audit, obtained by The Times, gave the agency a clean fiscal bill of health. Others, concerned about the direction of the organization, suggest it might be time for Rooney to step down.
Some board members have called for a full board meeting to get all relevant facts on the table. That sounds like a good idea.
Meanwhile, in the midst of this Sturm und Drang, board members (who aren’t supposed to be talking to the media about this) offer conflicting versions of what it all means, even if they agree on the basic facts.
“There were some people that were [describing] things as trivial, saying this is how things are done in these kinds of agencies,” said one board member, detailing one of the recent meetings. Others, the board member said, described the issues as more serious.
“There were pieces of paper that could be interpreted in different ways. It was very frustrating to me.”
Is there something big here, or a lot of nothing? Only the spin doctors know for sure.
The official position of the agency, as expressed by board Vice Chairman Marvin Selter, is: “Right now, as far as I’m concerned, nothing is going on.”
Others disagree. And as the board searches for answers, one man’s career and an agency’s prestige may be hanging in the balance.
Rooney, who has been head of the VEDC for eight years, leads a team of finance and business experts who help small businesses in the Valley secure loans and obtain venture capital funds. (I wrote recently about one such program, the microloan program.)
The agency came to the fore following the 1994 Northridge earthquake and since then has helped thousands of businesses obtain approvals for $100 million in disaster-loan assistance.
In addition, it administers a $6.25 million revolving loan fund that began as a quake assistance program initiated by the U.S. Commerce Department but in the future will offer assistance to a variety of small firms.
VEDC staffers are paid a salary from the nonprofit. In addition, VEDC collects fees for management consulting services including crafting business plans, brokering venture capital deals, and arranging some types of loans. Staffers get a cut of the fee, which varies with the type of transaction, up to 55%. Rooney gets a smaller slice. The rest goes to the agency.
That’s standard practice at the agency and has been for years, according to several board members, including Selter, who is acting as the group’s official spokesman.
One such deal, completed earlier this year, caused some board members to question the compensation program. It involved a Japanese investor who pumped $1.2 million in venture capital into a Canoga Park firm, sources said.
In compensation for months of work, the VEDC staffer who helped complete the deal received 55% of a $57,000 fee paid by the local company. The deal, which netted 30% for the agency and 15% for Rooney, was approved by the board, Selter and other board sources said.
Some board members seemed unaware of the agency policy, and at least one questioned whether staff should be getting fees on top of their salaries. Others questioned the size of the fees.
Selter bristled at the notion that there was something wrong with the deal.
“This was a private deal. This is not government money,” Selter insisted. “Whoever we want to pay what, that’s not anyone else’s business.”
Beyond the question of compensation, some have questioned whether Rooney has done enough to move the agency beyond reliance on earthquake-related government funds.
“He was a government grants guy stuck in [a] situation that increasingly required private-sector entrepreneurship,” said one source close to the agency.
Rooney and his staff are under instructions not to talk to the media. However, in a previous interview, Rooney noted that most of the center’s earthquake work is now complete. Roughly 85% of the staffers spend their time furthering the center’s goal of providing financing (through loan programs), entrepreneurial training and management consulting services to small companies in the Valley. There’s a particular focus on firms owned by women and minorities.
In addition, the center has launched a welfare-to-work program to help link unemployed people with jobs. The center is credited with helping create, or save, thousands of jobs in the Valley, Rooney said earlier.
“We’ve been pretty much weaned from the earthquake,” said Rooney, noting that less than 10% of the center’s $3 million in annual income now comes from earthquake-related work. “The earthquake is way behind us.”
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Perhaps it will be clear sooner rather than later what’s going on here. In the meantime, I hope there’s someone at the agency with enough energy left over to focus on small business.
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Valley @ Work runs each Tuesday. Karen Robinson-Jacobs can be reached at Karen.Robinson@latimes.com.
