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Deep in Debt, Hermandad Struggles to Ensure Future

Immigrants: $2.1-million grant, opening of L.A. clinic are keys for Latino group under voting probe in O.C.

March 31, 1997|JANET WILSON | TIMES STAFF WRITER

LOS ANGELES — The lights are on at Hermandad Mexicana Nacional's sparkling new health clinic, but so far, the 20 examination rooms are empty. In fact, the prominent immigrant rights group is $4.2 million in debt on the project and is still negotiating a contract for doctors, nurses and medical services so it can open its doors.

The clinic, badly needed in its neighborhood of hard-working poor just south of downtown Los Angeles, illustrates the strengths and weaknesses of the 50-year-old nonprofit organization that is at the center of a voter fraud investigation.

While long on vision and compassion, the organization, known for efforts to help immigrants become citizens and learn English, often comes up short in tending to details like paying bills, salaries and taxes.

To Bert Corona, Hermandad's founder and executive director, the new clinic is key to its fiscal future and proof that it is "bigger than ever."

To others, the clinic is a highly risky venture by a nonprofit already awash in debt. Despite receiving $35 million in public grants in the last 10 years, Hermandad today has little cash on hand and is saddled with huge long-term mortgages and loans.

An Orange County district attorney's investigation of Hermandad's Santa Ana operation and how it registered voters is now in its fifth month. The California secretary of state announced two weeks ago that 721 people who were not citizens appear to have registered through Hermandad, and that 442 of them had voted illegally.

Long before the investigation began, however, the nonprofit was immersed in financial woes. Documents obtained by The Times and dozens of interviews show that:

* Hermandad is $8 million in debt, according to its last tax filing, due mostly to the cost of the Los Angeles health clinic. Corona said Hermandad is suffering cash flow and long-term debt problems because government agencies refuse to pay nonprofit organizations for services in advance, forcing them to wait too long for reimbursement. Experts agree that nonprofits have a hard time receiving public funds in a timely fashion. They also note that hundreds of other California nonprofits that operate under the same constraints are fiscally sound.

* Hermandad was evicted from its North Hollywood office in 1995, and a lawsuit by its former landlord against the group for $400,000 in back rent is still pending. Hermandad is counter-suing.

* Hermandad owes $165,000 in back employee taxes, according to its own bookkeeper. Former employees say that they waited months to be paid, and that students in Hermandad classes have had to bring their own supplies. Corona said the IRS will get its money a little at a time. He acknowledged that employees often were not paid on time and that there were scant supplies--a reality of the nonprofit world.

* Hermandad will not receive a $2.1-million federal grant for citizenship and English classes, which amounts to 80% of its 1996-97 budget. Corona said he intends to get the money, even if it means flying to Washington to meet with Department of Health and Human Services officials.

"There are major problems, no one can deny that," said Antonio Montano, Hermandad's bookkeeper for the North Hollywood and Los Angeles offices. Montano said the loss of the $2.1-million grant could be devastating. "I'm going to be very truthful with you. . . . You could say that money is life or death to us."

Hermandad officials say their ability to survive could affect thousands of immigrants.

In Los Angeles and Orange counties alone, 134,000 legal immigrants--mostly elderly and disabled--have been told they will lose Social Security benefits within months if they don't become citizens. Statewide, Hermandad was the second largest publicly funded provider of citizenship classes and testing in 1996, education officials said. But Gabriel Cortina, the deputy secretary of education who decided that Hermandad would not receive the $2.1-million grant, noted that more than 400 other organizations provide similar services.

At the request of The Times, Irvine certified public accountant Ed Benoe and San Francisco tax attorney Rosemary Fei, both of whom specialize in analyzing tax-exempt organizations, examined Hermandad's available tax forms.

The nonprofit operates under two corporate names--Hermandad Mexicana Nacional Legal Center and Hermandad Mexicana Nacional--and the boards of directors of the organizations are nearly identical. Hermandad Mexicana Nacional is largely a membership organization. According to its tax forms, it takes in and spends far less than the Legal Center, which conducts the bulk of grant writing and other fund-raising efforts.

Benoe said the Legal Center had gone from being a "very, very solid organization at the end of 1990," when it took in $10 million in federal grants, to a "highly leveraged" organization with $8 million in mortgages and a $450,000 operating deficit on June 30, 1995, the last year for which required tax forms were filed.

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