State Probing Chapman Merger Partner

The merger between a Pomona medical school and Chapman University in Orange has been put on hold because the state attorney general is investigating allegations that top medical school officials received improper loans.

Chapman President James L. Doti said through a spokeswoman Wednesday that he is optimistic about the merger with Western University of Health Sciences but is awaiting results of the inquiry by Atty. Gen. Bill Lockyer’s office.

Tom Dresslar, a spokesman for the attorney general, said the office started an audit of Western University’s finances in the middle of last year. He would not disclose details.

The merger, announced last year, would be an ambitious step for Chapman, adding an array of professional and graduate programs in the health sciences.

Officials at the two schools said they were not considering combining the two universities on a single campus.

Western came under scrutiny in March when its director of human resources was fired after making allegations to the Internal Revenue Service and to Lockyer’s office that the university’s president and other administrators had given themselves more than $400,000 in salary advances and zero-interest loans from 1981-90.

Sinclair Hugh, the fired human resources director, repeated the allegations in a lawsuit. Two other former Western officials made similar accusations to the attorney general.

Hugh’s attorney, Russell J. Thomas Jr., said the audit was being conducted by the attorney general’s charitable trust department, which oversees nonprofits such as Western.

It is a violation of state law for a nonprofit organization to provide loans to its trustees, officers or directors, Dresslar said.

Western’s president, Philip Pumerantz, could not be reached for comment.

Western is cooperating with the audit, said Mark L. Wallace, a university spokesman. “We’re confident that when we get to the end of the process, we’ll be fine with the attorney general’s office,” he said. The university has filed a lawsuit against Hugh, whom Wallace described as a “disgruntled former employee.” Wallace said Hugh made false accusations in an attempt to defame the university.

Wallace said Western had a practice of allowing top executives to take loans against the value of accumulated vacation time. That was stopped in 1999, he said.

Western hired an accounting firm to conduct an in-house audit and collect documents that Lockyer’s office has requested. The university would not disclose results of the audit. The university plans to make public the attorney general’s findings when the investigation is concluded, Wallace said.

Western University, with 1,545 students, is a 27-year-old graduate school that trains nurses, pharmacists, physical therapists, osteopathic physicians, physician assistants and health educators.

Last year, the university opened the College of Veterinary Medicine, the second such institution in the state and the first in Southern California.

Chapman is a 142-year-old private university with 4,700 students. It offers a wide range of undergraduate programs as well as graduate degrees in business and economics, law, film and television, physical therapy, communication arts and education.