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Questions Cloud Loan Default in State Program : Finances: Cal-Mortgage lost nearly $5 million. Officials allege fraud, but key players deny wrongdoing.

May 01, 1994|IRENE WIELAWSKI | TIMES STAFF WRITER

When a new Beverly Hills company sought a loan guarantee from the state, its goal seemed laudable: to expand residential care services in poor neighborhoods of Los Angeles County.

The company, though, did not meet the state's financial requirements, and one of its facilities had a history of serious health and safety violations.

Still, the state's Cal-Mortgage program granted $17 million in loan guarantees to Community Adult Care Centers of America Inc. four years ago.

None of that money has benefited the poor, and nothing has been built.

The company defaulted on nearly $5 million in loans and, the state alleges in a lawsuit, misappropriated more than $1 million of that sum in a kickback scheme.

A separate state investigation into activities at CACCOA's two facilities led to the indictments of two of the company's business associates on Medi-Cal fraud, forgery and tax evasion charges.

Key players in the loan deal have denied wrongdoing and blamed each other for the project's collapse.

How did Cal-Mortgage, a respected financial aid program for nonprofit health care providers, get drawn into this tangle--the first losing transaction in its 25-year history?

A three-month Times examination found that the program was loosely run, leaving it vulnerable to manipulation by private business interests, despite obvious financial risks for the state.

Also coloring the deal were procedural irregularities, some of which have spawned allegations of political influence-peddling and attempted bribery, as well as a lawsuit and an investigation by the state attorney general's office.

"It was such a bad deal," said former Cal-Mortgage official Richard A. McManus.

The CACCOA troubles emerge as Cal-Mortgage is struggling to recover from a $167-million loan default by Triad Healthcare Inc. of Encino.

Cal-Mortgage has played a pivotal role in health facility construction in California, enabling health care companies to qualify for low-interest loans that they could not obtain without the backing of the state treasury. But the program has been temporarily shut down by the Triad default last summer.

A legislative inquiry into Triad is focusing on possible conflicts of interest as well as departures from customary procedures that helped the company obtain a Cal-Mortgage guarantee.

Similar procedural irregularities show up in the CACCOA transaction, records show.

Both deals were accelerated by Larry G. Meeks in his final months as director of Cal-Mortgage's parent agency, the Office of Statewide Health Planning and Development.

Meeks also approved them over the objections of staff analysts who considered them unsound investments, according to records and interviews.

Meeks--an appointee of former Gov. George Deukmejian who was replaced in the $97,428-a-year job in 1991--said in an interview that he gave special treatment to CACCOA because its chairman, Howard L. Winkler of Los Angeles, was a Deukmejian appointee in another arm of Meeks' agency.

"Knowing this person was close to the governor's office because he was an appointee and so forth, I was always very attentive . . . to make sure his complaints were responded to," Meeks said.

Winkler tried to bribe Meeks with about $2,000 and a prostitute while the loan guarantee application was under review, state investigators alleged in an affidavit filed in Los Angeles Superior Court last year. No criminal charges have resulted because the attorney general's office was unable to find corroborating evidence.

Winkler declined to comment, but through his attorney, he denied the bribery allegations.

The affidavit alleged that CACCOA obtained the loan guarantee because of those bribe offers and "the influence of CACCOA's board chairman, Howard Winkler, who was on the board of a governmental unit within that same (state) agency."

Meeks also told The Times about the alleged bribery attempts, one of which occurred during a visit to Winkler's Los Angeles office.

Meeks said the CACCOA chairman put an undetermined amount of folded bills in the breast pocket of his suit. "I was freaked out," Meeks said. "I took it out and flung it on his desk and said: 'Don't you ever do that again.' " He said Winkler apologized.

On another trip to Los Angeles, Meeks said, he was staying in a hotel when Winkler telephoned to say he was sending over a "high-class call girl" to keep him company. Meeks said he angrily told Winkler to "call her off."

The former state official said he reported the alleged bribery attempts to the agency's counsel and was not influenced by them.

The agency's counsel, John Rosskopf, said in an interview that Meeks never told him about the prostitute but did say that Winkler had offered him $2,000 cash.

Meeks said he approved the CACCOA application solely because he believed that the project would benefit the needy.

"I thought it was a good project," said Meeks, 50, who is now retired on a medical disability. "I was intrigued by the concept of it: adult day care. The people behind it, I personally did not care for them."

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