Bungling Alleged in Minority Center Closure

A pilot program to aid minority-owned companies has ceased operations in Los Angeles amid allegations that the consulting company running it bungled the job.

During its first six months of operation, the Minority Enterprise Growth Assistance Center fell substantially short of its goal of providing financial and contracting opportunities to businesses owned by minorities, according to an audit conducted by the Commerce Department’s Office of Inspector General.

But the consulting company that operated the MEGA Center, Los Angeles-based Cordoba Corp., contends that the center’s performance improved considerably in the second half of the fiscal year ended June 30.

The Downtown Los Angeles center closed July 20, but only because the Minority Business Development Agency, the Commerce Department arm providing most of the center’s funding, dragged out negotiations on extensions of the first year of the contract, said Cordoba Chief Executive George Pla.

Meanwhile, the MBDA is itself in danger of going out of business. Bills pending in the House and Senate would either eliminate the 25-year-old minority business assistance program or reduce its budget by nearly a third.

“The MEGA Center in Los Angeles is by far our most expensive project,” costing $3.2 million in the last fiscal year, said Elio Muller, associate director of the MBDA. “We don’t know if we’re going to have money for a MEGA Center in Los Angeles or Chicago or anywhere.”

The MBDA opened two MEGA centers last year to provide contracting, financing and other services that are more sophisticated than those offered by its other 93 business assistance centers nationwide.

But according to the audit, the Los Angeles center fell far short of its goals. For example, the MEGA Center packaged only $234,577 in loans in the first six months of operation instead of the $3.2 million projected. The center helped clients obtain $387,000 in contracts during the period, well below its goal of $14.4 million. The center served 177 clients, not the 422 anticipated.

What’s more, the audit contended that Cordoba is in “weak financial condition” and therefore a risky operator for the center--a charge Pla called “absolutely absurd.”

Pla acknowledged that the center suffered start-up problems but said it had turned around, packaging $53 million in loans and helping secure $43 million in contracts for more than 4,400 companies during the full year.

“The audit is a snapshot of the first six months,” Pla said. “All they had to do was wait until the end of the year.”