2 Probes Ordered in Loans to United Way Executives

Two government agencies ordered formal investigations Wednesday into the Los Angeles-area United Way’s loans of more than $300,000 of donated money to five executives of the nonprofit organization.

Meanwhile, a former United Way chairman, Wallace W. Booth, repudiated claims by the charity’s president that Booth authorized using agency funds to pay off more than $200,000 in loans that two United Way Inc. executives owed to First Interstate Bank in 1981.

United Way President Francis X. McNamara Jr. maintained in three interviews in recent days that while he did not seek approval from his board of directors to pay off the debts to the bank, he acted on authority from Booth. McNamara declined to comment Wednesday on Booth’s denial.

Booth, who is chairman of Ducommun Inc., said he had no recollection of approving any loans “but today I have been shown two letters I signed approving” loans by United Way to two agency executives for $19,789 and $12,177.

“But I disclaim any knowledge of those bank notes” held by two United Way executives which totaled more than $200,000, Booth said. “I would never approve United Way buying those bank notes.” United Way, which reported receiving $85.5 million in pledges this year to help 350 nonprofit human care agencies in Los Angeles County and western San Bernardino County, is the largest single United Way in the nation.

The Los Angeles County Business License Commission, which since United Way was created 23 years ago has routinely approved the charity’s solicitation permit without a hearing, unanimously ordered the Sheriff’s Department licensing detail to investigate the loans.

“It sounds as though donated funds were diverted” to some of the executives, Commission President Dewayne B. Smith said. All five commissioners emphasized that they do not want to harm United Way’s fund-raising, but their duty is to make sure donated proceeds are used properly.

The commission “invited” McNamara to appear at a hearing it has scheduled for next Wednesday to determine whether the charity’s permit to solicit donations in unincorporated areas of Los Angeles County should be renewed on July 1. Smith indicated that while the commission could not compel McNamara’s appearance, it expects him to show up and answer questions.

In San Francisco, the chief of the California attorney general’s charitable trust division, Carol Kornblum, said a court order will be sought appointing a retired judge or lawyer with expertise in nonprofit law to investigate United Way’s finances.

Kornblum said Atty. Gen. John K. Van de Kamp is removing his office from the case because his wife, Andrea, is a United Way director and serves on the board’s executive committee. Under state law, the attorney general is the guardian of charitable trusts.

Seeking Wide Authority

Kornblum said the charitable trust staff is recommending that Van de Kamp ask that the court-appointed investigator be granted broad authority.

She said Van de Kamp’s staff is recommending that the investigator “be authorized to conduct a sweeping and thorough investigation, as far back as seems appropriate, and he be authorized to retain auditors and other consultants.” The costs would be billed to the attorney general’s office, Kornblum said.

Kornblum added that Van de Kamp, who is in Oregon at a conference, is expected to decide Friday how broadly the proposed court order will be worded and that whatever document he approves will be brought before a Los Angeles County Superior Court judge on Friday or Monday.

The county business license commissioners, in what one called a “sad and unprecedented situation,” emphasized that they support United Way and want it to raise even more money to meet the area’s changing social service needs.

“The trouble doesn’t seem to be with the board of directors, but with the president (McNamara), who operates daily on his own in such a way that all the facts are not known to the board,” Smith said.

Limiting the Damage

“Whatever has occurred may be attributable to the possessory interests some people develop” when they are in a job for many years, Commissioner Nathan Benson, a businessman, said.

Benson emphasized that the commission “does not want to destroy United Way . . . whatever remedies we have to apply should be applied to do the least damage to United Way. But it is mandatory that we have a hearing,” Benson said, adding that “the public is best served if United Way succeeds.”

Commissioner Thyra Boeckmann said making the loans was “bad judgment.” She asked that detectives from the sheriff’s business license detail determine “if there have been any laws broken” in making the loans.

“When money is given to any charitable organization it is not in the mind of the contributor that the contribution will be used to pay off a note on an executive’s house,” Commissioner Bethel Smith said. “If United Way wants to be a charitable organization it should be that, and if they want to be a business they should be that.”

Need to Investigate

Commissioner Stanley Rothman, an attorney, said: “I don’t know if those loans are improper or violate some charitable trust laws or IRS regulations and I don’t even know if they violate their permit (to solicit donations), but we have to conduct some kind of inquiry.”

The investigations were ordered in the wake of a meeting Tuesday at United Way’s mid-Wilshire headquarters that was attended by most of United Way’s 216-member staff. Both McNamara and Chairman Roy Anderson, the retired chairman of Lockheed, addressed the employees in the hourlong session.

Anderson, according to four people who attended the meeting, characterized the loans to United Way executives as business matters that were out of the routine only because the full board did not vote on them and interest was not charged in all cases.

Anderson, the four employees said, described news reports of the loans as overdrawn and indicated that reporters did not understand that making loans to employees being relocated is a common business practice.

“Basically he tried to convince us that it was no big deal,” said one United Way planner, who asked not to be identified.

Study of Documents

Emily Chappell, United Way vice president for public information, said that neither Anderson nor McNamara would have any comment until Anderson completes his inquiry into the loans. She said both men spent much of Wednesday examining financial documents.

But in a brief videotaped interview with KHJ-TV reporter Jim Murphy that was broadcast Wednesday, Anderson indicated that he has no plans to discipline McNamara for making the loans or to encourage the 61-year-old charity executive to retire.

McNamara, who received $195,000 in salary and fringe benefits last year plus a telephone-equipped Cadillac, has come under fire from some prominent United Way volunteers for using donations to pay for his membership in the exclusive California Club, which has no women or black members.

The latest complaint was made by Richard Sinsheimer, a Beverly Hills attorney, at a May 19 meeting of a council composed of leaders of United Way and the 17 health charities that are its fund-raising partners. Sinsheimer said he told the council that he believes it is improper to use donations from the general public to finance membership in a discriminatory club.

Using donations to support McNamara’s California Club membership is “a policy wholly at cross-purposes with the professed goals and objectives of the United Way,” Sinsheimer wrote in a letter to Anderson that he made available to The Times.

McNamara said Sunday that he believes all county residents, including women and minorities, “appreciate that I need to belong to that club to be able to meet with the executives of corporations” whose donations help finance United Way programs, especially newer ones serving women and minorities.

The United Way executives receiving loans were:

- Alice McHugh of Santa Monica, senior vice president for planning and resource development, who got a partly interest free $15,000 loan in 1982 for relocation even though she already lived in Southern California. McHugh, who made no payments until The Times and KCBS-TV made inquiries, still owes some interest.

- Gary Erickson of Oxnard, former executive vice president, who got two loans in 1982 totaling $25,000 at 10% because of extraordinary medical expenses. He made timely payments and paid his loan off last week.

- Michael J. Pfaff of Marin County, who got a $9,750 loan in 1982 and paid it off when he resigned after nine months as executive vice president to join the San Francisco-area United Way.

- Kenneth R. Wilcox of Valencia, senior vice president for fund-raising, who got loans totaling $110,955, including a $62,900 loan from First Interstate Bank that United Way assumed, for relocation costs. He has made no payments.

- Kaj Sorensen of Westlake Village, an associate regional vice president when he resigned last year, who got $165,328 in interest free loans, most of them originally made by First Interstate Bank, for relocation costs. Sorensen has made only token payments.

Gary Libman and Karen Laviola of the View staff contributed to this story.