Montalban Foundation out of business, for now

The Ricardo Montalban Foundation, which only a year ago unveiled a major Hollywood theater to promote Latino stage productions, is in such financial disarray that it has been suspended from doing business in the state, pending an audit to sort out five years of delinquent accounting.

The public was unaware of trouble behind the scenes when the Ricardo Montalban Theatre, purchased for $2.4 million, was unveiled in May 2004 with the hoopla of an Old Hollywood debut. But a month earlier, the state of California had suspended the foundation for failing to file annual financial reports since 1999, when it was legally established by Montalban, the Mexican actor best known for his role on the TV series “Fantasy Island,” and Jerry Velasco, his longtime associate, as principals.

Velasco, who has also served since 1995 as president of Nosotros, Montalban’s 35-year-old advocacy group for Latino actors, says he didn’t know about the government’s legal requirements. Aside from late reports, the foundation, which originally qualified for a federal tax exemption, failed to apply for a separate state exemption as required in California.

“Why didn’t anybody tells us about this?” says Velasco, an actor who owns a public relations firm. “We didn’t do anything wrong because we didn’t steal any money. It was just a dumb oversight. The government says ignorance is no excuse. We should have been careful, which now we are.”

News of the foundation’s financial troubles comes at a time when L.A.’s Latino theater scene is struggling to survive. Center Theatre Group recently eliminated its in-house labs for ethnic plays, leaving the city with no major, ongoing effort to cultivate ethnic theater. Meanwhile, a proposal for the Latino Theater Company to take over downtown’s Los Angeles Theatre Center from the city has stalled.

At the 1,200-seat Montalban Theatre on Vine Street, the management mess has started taking a toll. Despite an almost $300,000 face-lift for its debut last year, the theater now appears dirty and neglected. The walls are marred by graffiti and an ugly rust stain running down the front of the building. Vandals have defaced the elegantly etched glass of the entry doors and the marquee has been left bottomless, exposing its unsightly innards to passersby on the sidewalk below.

The theater’s shabby condition reflects its faded promise of stimulating more Latino theater productions in the city. Although the theater has been rented for a variety of outside uses, not a single new play has been staged by the Montalban Foundation, and there’s no indication when a season may even be feasible.

For years, the financial oversight escaped the attention of the foundation’s six-member board of directors, which includes an attorney, a former L.A. city official and a former manpower advisor in the Lyndon Johnson administration. Its treasurer, Richard Amador, says he doesn’t suspect any wrongdoing and blames the problem on the lax management typical of small nonprofits.

“I’ve looked at the checking accounts and the books and I’m not concerned,” says Amador, the ex-manpower official who is also founder and retired president of CHARO, the East L.A.-based nonprofit that promotes Latino economic development. “I have no reason to believe there has been misappropriation of funds. Money hasn’t been wasted and there’s a paper trail on the expenditures. But right now you have to go though a whole box to put it together.”

Velasco, who represents Montalban, said the ailing, 84-year-old actor was unavailable for comment.

The foundation is essentially run by Velasco, a part-time employee who does most of the group’s fundraising, assisted by one part-time office worker. The Mexican-born actor and producer says he has not been paid by the foundation for the past 18 months and receives neither fees nor commissions.

“I wish!” he said over lunch at the Raleigh Studios, where he has a small office for Velasco and Associates. “I don’t even get reimbursements for lunches.”

Velasco was so unaware of rules and regulations that the Montalban Theatre has been making some payments to the governmentit could have avoided. Despite its federal tax exemption, the foundation has paid $35,000 annually in local property taxes since it acquired and started remodeling the former Doolittle Theatre.

Velasco says he didn’t realize the problem until last year, when he casually discovered that a neighboring nonprofit was exempt from the local tax.

When he called the state to complain about the discrepancy, asking, “How come they don’t pay if we pay?” Velasco says he learned for the first time his foundation had been suspended.

As it turns out, the Montalban Foundation does not have tax exempt status in California, according to Patrick Hill, a spokesman for the Franchise Tax Board, which ordered the suspension. Many groups with federal tax exemptions don’t realize that the state requires a separate certification, he said.

It is unlawful for a suspended corporation to continue to operate, said Hill, and its contracts are considered invalid. As a practical matter, the suspension is intended more as a prompt to comply than as a punishment.

“We’re not going to go padlock doors,” said Hill. “But it certainly behooves them to address [the problems] immediately.”

Velasco is anxious to have the foundation’s affairs straightened out because it could qualify for a substantial refund on the property taxes. Amador says the financial reports and results of the certified audit they commissioned are expected within a month.

Even if the foundation puts its financial house in order, some see nothing but a hard road ahead.

“Anything that’s going to start up again, they’ll have to create a new energy,” says Diane Rodriguez, former head of the Taper’s Latino Initiative, who survived the Center Theatre Group shake-up to become director of new play production. “It’s too bad, because it had a real potential.”

Realizing that potential has become such a far-off dream that Rodriguez has passed on the opportunity to be the Montalban’s creative director for now.

Still, some board members remain optimistic. Assuming it surmounts the current crisis, the foundation plans to resume efforts to raise an additional $2.5 million for extensive interior renovations, and create a separate training academy.

“As a community, we’re in a lot better situation than we were 20 years ago when it comes to [available] Latino talent,” says board member Jess Araujo, a Santa Ana attorney and community leader. “It’s a lot easier to lure those people to you, once you’ve got a nice theater finished and ready to go.”

That strategy, however, has caused dissension. Board member Al Nodal says he has urged his colleagues to focus less on renovations and more on programming -- before it’s too late.

“We’ve already lost a lot of momentum,” says Nodal, who headed the L.A. Cultural Affairs Department from 1988 to 2001. “We opened up that theater and people expected to go back there, but there’s been nothing to go back to. We need to show some results.”