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Consultants Took $1.8 Million by Fraud, School Says

October 12, 1986|JACK JONES | Times Staff Writer

A private West Los Angeles preparatory school has sued its former business manager as well as several other people and companies for more than $100 million, claiming that it was defrauded of nearly $1.8 million over a 10-year period.

The action filed in Los Angeles Superior Court alleged that Noel R. Hanson, who served on a consultant basis, charged the Brentwood School for "supposed" public relations, office and legal expenses as well as other nonexistent services "without the approval, knowledge or consent" of the school or its trustees.

The school contended that Hanson and two consultant firms with which he was associated "took funds from the school" totaling more than $1 million, of which nearly $500,000 was for his "supposed professional fees, well in excess" of the approximately $30,000 a year agreed upon.

Third Firm

The suit also alleges that more than $233,000 was paid out to a third firm, Pasadena Financial Consultants, for the use of computer equipment, automobiles and vans without lease agreements or knowledge of the board and that some of that equipment may not have existed.

The chairman of the school's board of directors, Edward J. Costello Jr., who last week sent a letter to parents and supporters of the nonprofit school to notify them of the problem, said Hanson and his father apparently own or owned Pasadena Financial Consultants.

Costello said he had served on the board for four years and was not told of Hanson's involvement with that firm "until after I inquired of him myself about it last May."

Costello said it had taken a long time to detect the alleged loss because it was gradual over 10 years and that Hanson "occupied a position of enormous trust. When I first came on the board, he was described to me as a person of integrity and confidence."

Another conflict of interest charged in the suit pertained to Carol's Interiors, which allegedly collected more than $212,000 on invoices that "contained no indications of how monies were actually spent."

Carol's Interiors was actually operated by Hanson's wife, Costello said, adding, "I am not clear on what they did."

The suit includes as defendants the auditing firm of Deloitte, Haskins & Sells as well as accountant Richard English, who served as auditors for the school during the time Hanson was business manager. They were accused of "negligence and carelessness" in failing to detect or stop the loss of a total of more than $1.7 million.

Unauthorized Bills

The trustees said they did not discover what was happening until last May when the finance committee came across unauthorized bills for nearly $200,000 to Hanson, Olsen & Co.

An independent auditing firm was called in to assess the situation, leading to the lawsuit for alleged accountant malpractice, fraud, negligent misrepresentation and conspiracy.

Costello told supporters of the school in his letter that despite the loss, "our finances are sound." He said Brentwood School "will continue to meet all its financial obligations."

The suit, filed Oct. 2, seeks $100 million in punitive damages as well as the $1.7 million allegedly lost and other general damages.

Attempts to reach Hanson for comment were unsuccessful.

Brentwood School, founded in 1972, has 480 coeducational students. It is located at 155 S. Layton Drive.

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