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Thursday, Mar 28, 2024

Turnover at the Top for VEDC

Valley Economic Development Center is navigating a bout of executive instability, having lost three top officers – including the chief executive – in the last month. In addition, rounds of layoffs at the Sherman Oaks nonprofit have shrunk its payroll to about 40 employees, down from 95 about a year and a half ago. But despite the challenges, the organization plans to move forward with its mission. VEDC was founded in 1976 to provide capital for small businesses that are unable to secure loans from traditional lending services like banks. The organization started by providing loans to underserved communities, such as the Latino and African American small business market. In addition, the company provides educational seminars for small businesses including marketing workshops and business tax resources. VEDC Board of Advisors Chairman Nishen Radia said while the organization is going through some operational changes, the core business remains stable. “We are actively lending and are actively trying to serve our mission,” he said. However, Jonathan Goldhill, a management consultant at Goldhill Group in Westlake Village, said such drastic changes at the top are an indication of trouble. “Any company that has a changing of so many senior-level people is not a good sign,” said Goldhill. “There may be some problem that needs fixing.” Goldhill has a long history with VEDC, where he served as senior vice president for over 10 years. He left the organization in 1999. Goldhill said organizations usually shrink because of financial issues. “There’s no reason you would destabilize the company and restructure it unless you were in some financial pain,” he added. Management turnover Last month, VEDC parted ways with Quentin Strode, who was appointed as chief executive in March. Strode told the Business Journal “there was nothing bad” that happened between the board and himself. Radia echoed this sentiment. “We have lot of positive things to say (about Strode). But our organization is just at a different time right now,” he said. Radia did not elaborate on the situation that lead to the separation. Strode was one of three c-level executives that left VEDC in July. Robert Lopez, the chief operating officer, left for personal reasons. Although his official last day was in July, he said he has not been involved with operations for over two months, after taking a leave following the birth of his first child. Lopez currently resides in San Diego, and has started a business process automation solutions company. VEDC confirmed that Rudy Navarro, former chief credit officer, left in July as well. The organization said Navarro is still involved as a consultant. VEDC noted that Navarro was commuting from Bakersfield, which is one reason he decided to step back. Following the departures, VEDC appointed Ray Valdama to serve as an interim president. Valdama has been consulting for VEDC since October, when the company’s long-time chief executive Roberto Barragan resigned his position. Radia said the company does not plan to find a permanent replacement for Strode until the end of the fiscal year in March 2018. According to Faith Larson, who worked as an executive assistant at VEDC, the organization has experienced multiple rounds of layoffs in the last year. Pegi Matsuda, board member at VEDC, confirmed that there are about 30 to 50 employees currently working at VEDC. According to VEDC’s Form 990 filed in early 2016 with the Internal Revenue Service, the company had 95 employees in March 2015. Larson, who left VEDC in January, said layoffs started shortly after Barragan left in October. Barragan told the Business Journal the main reason for his departure stemmed from disagreements with the board on the future of the organization. Barragan had been chief executive for 17 years prior to his departure. During his tenure, Barragan built VEDC into a major nonprofit business development organization with numerous bank partnerships and offices in Illinois, New York, Florida and Nevada. “The board decided to go in a different direction and I didn’t want to,” Barragan said. In the summer of 2016, a lawsuit was filed against VEDC and Barragan by Crown Acquisitions Fund. The attorney for the plaintiff, Tod Beebe of Barton Klugman & Oetting in downtown Los Angeles, confirmed that in the last several months, the Crown fund reached a settlement with VEDC that resulted in a $300,000 payment from VEDC to the plaintiff. He said a settlement with Barragan is currently underway. According to Barragan and other sources close to the company, around Barragan’s time of departure, VEDC’s business strategy started shifting towards “FinTech,” or financial technology. The term may describe back-end software used by financial institutions or consumer-facing programs that help automate loan application and processing. In an interview with the Business Journal last November, then senior vice president and current Chief Development Officer Alex Guerrero discussed a new automated system at VEDC. He said it would allow the organization to directly access tax returns from the IRS with a borrower’s permission. Guerrero told the Business Journal the system would be launched in December 2016. VEDC confirmed that the system development started last year and the organization is currently utilizing most of its components. However, the organization added that it expects full utilization in the next month or two. “FinTech meant higher pricing, and a different strategy than what we used to do,” said Barragan. He confirmed other sources’ claims that the main reason Lopez was hired as chief operating executive was due to his past business focus on FinTech. However, the board chairman Radia offered a different explanation. “He (Lopez) happened to have that expertise, but he was brought in for a lot of other leadership functions,” said Radia. He added that FinTech never was and never will be the organization’s focus. “Clearly, we are interested in utilizing technology to make access easier, a lot of organizations use it,” said Radia. “But it’s not our intention to become a strictly FinTech company.” Lender relations One source close to VEDC told the Business Journal that in April, Chase Bank notified an employee of VEDC that the organization has been temporarily removed from Chase’s small business website that lists approved Community Development Financial Institution lending partners. The bank refers applicants who can’t qualify for a traditional loan to these organizations. The Business Journal confirmed that VEDC was not listed as a lending partner on Chase’s small business website. Board members Radia and Matsuda said the organization’s relationships with banks remain solid. On the other hand, sources close to the organization said the loan operation has experienced problems. For example, one vendor who services small merchants in the Valley region told the Business Journal that he does not refer his clients to VEDC anymore. Another source close to VEDC said that some banks have stopped working with the organization in part because banks were not notified of Barragan’s departure in a timely manner. The Business Journal reached out to JP Morgan Chase and UBS, which are listed as VEDC’s banking partners. The banks declined to comment. Clarence Williams, a former board member at VEDC, said he did not find out about Barragan’s departure until the end of the year – two months after the fact – from the executive board, without an explanation. But Williams noted that he was not as involved as a board member near the end of the year. Despite the changes, VEDC still has a long history in the Valley region with strong name recognition in the business community. The organization expects to weather the turnover phase and continue to fulfill its mission under new leadership. Radia stressed that the core mission has not changed and the organization will continue to serve its constituency. “Our long-term plan is to be the best-in-class in lending and technical assistance in underserved communities,” said Radia. “We are very clear on our mission to provide jobs for our community.”

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