As Congress weighs the possibility of an economic stimulus plan that could pump more than $800 billion into the U.S. economy, one firm is already looking at the fraud and abuses that could accompany it.
Forensic/Strategic Solutions PC, a forensic accounting business with several offices across the country, has opened an office in Eagle Rock, and the firm picked a well-known local figure to head it up: Don Mullinax.
With a long history of investigating fraud in places such as Capitol Hill, Mullinax is better known locally for his years as inspector general of the Los Angeles Unified School District, where he uncovered significant shortcomings in the oversight of the district’s Belmont Learning Center project.
Now, he will take his experience and help government agencies and private companies assess their vulnerabilities as they prepare to accept federal funds.
“We can help them proactively look at their fraud risk and their vulnerabilities and what controls they have in place,” Mullinax said.
Ralph Summerford, president of the firm, said he decided to open an office here after seeing the significant potential for fraud with so much money about to be distributed.
“When we saw all this money coming down with the government stimulus plan, it scared the heck out of everybody. It’s like an ATM for thieves,” he said. “We knew they didn’t have controls on that stuff and it was a great opportunity for some forensic work.”
The House of Representatives last week approved an $819 billion stimulus plan that would offer tax cuts and new spending on things such as infrastructure and education. The Senate, meanwhile, considered a similar plan that had ballooned in cost to nearly $900 billion.
Education, specifically, could get as much as $150 billion, which sounded alarm bells for Mullinax.
“(This) is unheard of in the education arena because typically, funding decisions are made at the local and state level, and here’s this money that’s going to be coming in from the federal government,” he said. “Without the proper controls in place it could be a significant issue for a lot of school districts.”
Mullinax knows all about that.
While the LAUSD inspector general, he released a report that chronicled a series of poor decisions made by the district in pursuing construction of one of the nation’s largest public schools, the Belmont Learning Center, which was found to sit on contaminated land just west of downtown.
The report led to the scuttling of the project. It was later revived in 2000, but construction was halted again when an earthquake fault was discovered on the property, leading to the demolition of several buildings.
The school, now called the Edward R. Roybal Learning Center, opened last year at an estimated cost of $300 million, though district critics contend the figure is closer to $500 million.
Busy Times
It was a happy new year for at least one local investment bank.
Greif & Co., headquartered in downtown Los Angeles, handled four acquisitions in late 2008 despite a significant slowdown in the mergers and acquisitions market.
The company negotiated the acquisition of Industrial Opportunity Partners by hardware company E.B. Bradley Co., the sale of an equity interest in Patron Spirits Co. to rum maker Bacardi, the sale of most of Lighting Control & Design’s assets to Acuity Brands and the sale of an equity interest in Dogswell to TSG Consumer Partners.
“Business has been phenomenal for us. We’re as busy as we’ve ever been,” said Lloyd Greif, president of his namesake company. “We’re getting more deals coming through the door.”
In December, just 46 M & A; deals were announced countywide, according to data supplied to the Business Journal.
Insurance Sale
Mercury General Corp., the L.A.-based automobile and home insurer, has completed the acquisition of Auto Insurance Specialists LLC from Aon Corp., the world’s largest insurance brokerage.
The deal, which closed last month, was for $120 million in cash. Aon may also receive another $34.7 million in the next two years if the insurance unit meets certain performance benchmarks.
Separately, Mercury General last week announced the resignation of Charles McClung from its board.
C-Suite News
Jack Sweeney, founder of First Regional Bancorp, has resigned from his role as chairman of the Century City-based institution. Marilyn Sweeney, Jack’s wife, has been appointed to the board, and current director Gary Hogan has assumed the role of chairman. Encino-based California United Bank has elected Anne Williams to its board. The Federal Reserve Bank of San Francisco has appointed Keith Smith, chief executive of Boyd Gaming Corp., to the board of its L.A. branch.
Staff reporter Richard Clough can be reached at [email protected] or at (323) 549-5225, ext. 251.
