Vedc4/mike1st/mark2nd

By CHRISTOPHER WOODARD

Staff Reporter

David Honda, chairman and chief executive of the Valley Economic Development Center Inc., has been ousted, and seven more of the center’s board members have resigned, according to former and current board members.

That brings to 10 the number of board members who have recently resigned, leaving only seven directors at the economic development organization, which has funneled millions of dollars in government assistance to local businesses since the 1994 Northridge earthquake.

The board has scheduled a meeting for Monday, Aug. 2, to discuss “urgent matters,” according to a letter sent out last week to board members.

The internal chaos began in May when Honda asked for the resignation of VEDC President John J. Rooney. Honda, a general contractor whose VEDC position was unpaid, had maintained that the agency was languishing under Rooney’s leadership.

Following that move, Rooney, a full-time VEDC staff member, marshalled support on the board, leading directors on July 19 to ask for Honda’s resignation. The rationale given by the board at that time was that Honda had been meddling too closely in the agency’s day-to-day operations, according to several VEDC board members.

Last Tuesday, July 27, Honda resigned, as requested, which elicited outrage among several board members.

“I didn’t receive any notice (about the vote to oust Honda), and conveniently, the meeting was held in one of the members’ homes,” said Maury Rosas, a retired phone company official who resigned from the VEDC board on July 21.

Honda did not return repeated phone calls, but Rosas said it was unfair to ask for his resignation without a debate by the full board.

“(Honda) questioned some judgments and actions by members of the staff. That was taken as micro-management. But as CEO, he has the obligation to do that,” said Rosas. “There isn’t a person with more integrity in the Valley, and to attack him that way was really uncalled for.”

Meanwhile, in a memo circulating among board members, two high-ranking VEDC staff members questioned the accuracy of statements made by Rooney in his June 12 “President’s Report” to the board.

In it, Rooney paints a rosy picture of the VEDC, saying the group “had one of our best years ever financially.”

But in the June 16 memo to Honda, Roberto Barragan and Wilma Berglund, two high-ranking VEDC executives, paint a bleaker picture.

“To say that this is the best year when we had $240,000 of short-term and long-term debt is to be in denial,” the memo states.

It goes on to say that the true measure of profitability is the organization’s operating account, which as of June 16 had a deficit of $29,438. The memo goes on to raise concerns about the ability to meet payroll in July.

Rooney said he stands by the report. He also disputed Barragan’s and Berglund’s figure for the operating account, saying the balance has improved. He was unable to immediately provide updated figures.

Rooney said the group has met its payroll for July, but he conceded that the VEDC has had cash-flow problems in the past. He attributed that cash-flow crunch to the VEDC’s rapid growth and the slow reimbursement of government agencies that fund VEDC programs.

“We’ve helped tens of thousands of businesses grow. We’ve helped make the Valley a hotbed of entrepreneurial enterprise. We have thousands of small businesses that depend on us,” Rooney said. “It’s a phenomenal program, and it needs to continue to succeed.”

With a staff of about 40, the Van Nuys-based VEDC operates several small-business development programs out of 10 offices throughout the region.

Its largest source of funding is the U.S. Department of Commerce, which provides a $6 million revolving loan fund for quake-damaged businesses. It also receives grant money from the U.S. Department of Commerce to run the business assistance centers in Pacoima, Van Nuys, Reseda and Chatsworth.

Honda had been critical of a flex-time schedule that left the VEDC largely unstaffed on Fridays, and he had raised concerns about fees that Rooney and a consultant had been paid for brokering a business deal.

That deal generated $57,000 in fees for the VEDC, of which Rooney received 10 percent and an outside consultant received 55 percent, leaving the cash-strapped VEDC with about $20,000.

Rooney said such commissions are common in venture capital deals, and that his share is spelled out in his management contract, which was structured to provide incentives for him to bring in more business to the VEDC.

Marvin Selter, who has been named interim chairman, said he is working on improving the organization’s 60-day cash flow and insisted that the VEDC’s finances are good.

“I don’t see any problems,” he said. “As far as I’m concerned, it’s business as usual. The VEDC will come out smelling like a rose.”