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Winners & Sinners

Entrepreneur of the Year Awards salute the best in business, but some recipients have experienced a reversal of fortune. The proliferation of such awards has some questioning their impact.

June 24, 1998|PATRICE APODACA | TIMES STAFF WRITER

The menu includes filet mignon and swordfish followed by chocolate mousse and white chocolate truffles. Black tie is optional. Tears and hugs are expected.

Tonight, the annual Orange County Entrepreneur of the Year Awards banquet will be held at the Hyatt Regency Irvine. The event, organized by the accounting firm Ernst & Young, is like an Academy Awards for businesspeople, complete with videotaped vignettes of the finalists and breathless presenters who say "And the winner is. . . ."

This kind of high drama, once unheard of in the roll-up-your-shirt-sleeves world of entrepreneurship, is now commonplace. Awards are handed out like candy by such outfits as Ernst & Young, the insurance firm Connecticut Mutual, the Small Business Administration, Inc. magazine and many others.

The sudden abundance of these awards is an indicator of--and impetus for--a sea change in the public's attitudes toward business, observers say. Successful entrepreneurs have become celebrities in their own right, renowned for their risk-taking and lauded for their breakthroughs.

Entrepreneur awards "are just proliferating like crazy," said Jon P. Goodman, executive director of EC2, a business incubator project at USC. "I could probably, if I actually thought about it, think of 20 that are national, plus 50 or 60 I know of in various cities."

Some have questioned how many entrepreneurs of the year there can be before these honors begin to lose their value.

What's more, some award winners have later crashed and burned. That has raised questions about how thoroughly the firms have been researched, and whether winning an award can turn into the kiss of death. Others say it simply reflects the riskiness of entrepreneurship.

Several past Orange County Entrepreneurs of the Year have had a reversal of fortune since winning the coveted honor.

Perhaps the biggest embarrassment for the Ernst & Young program was its 1988 award to Michael Parker of Parker Automotive in Irvine. In 1993, Parker pleaded guilty to hiding the company's troubled finances from bankers to get a loan. He is also serving 11 years in federal prison for another savings and loan fraud.

The company filed for bankruptcy, and its assets were sold. Ernst & Young was later cleared of wrongdoing in auditing Parker Automotive's books.

Other past award winners have encountered setbacks.

* Mossimo Giannulli, founder of his namesake apparel company, by 1993 had collected entrepreneur awards from Ernst & Young, Inc. magazine and Merrill Lynch. The once high-flying Mossimo Inc. has since been plagued with losses, its stock has plunged and Giannulli stepped down as chief executive in April.

* James M. Sweeney merged four home-infusion providers in 1994 to form Coram Healthcare Corp., and in 1995 he won the Master Entrepreneur of the Year Award. But the road got a bit rockier for Sweeney after that. He moved Coram from Newport Beach to Denver, laid off hundreds of workers and closed facilities in a broad restructuring. Last year he resigned, after the company settled a lawsuit arising from an ill-fated acquisition.

* New Life Treatment Centers' Stephen Arterburn won as the 1993 Socially Responsible Entrepreneur of the Year. The Laguna Beach company, an operator of Christian therapy centers, was later accused of negligence in two separate cases involving allegations of therapists having sex or an inappropriate relationship with clients. It was cleared in one case; the other settled out of court.

* Just this week, one of last year's award recipients, William C. Cacciatore, chief executive of Richey Electronics Inc. in Garden Grove, encountered a rough patch. The company's stock tumbled upon news that weakness in the electronics market would result in lower-than-expected earnings.

Ernst & Young is far from alone.

Last month, the SBA's Los Angeles District office was left with egg on its face when it withdrew 1998 Entrepreneur of the Year honors from a firm that recently filed for Chapter 11 bankruptcy protection.

Observers point to the awards bestowed on fallen ZZZ Best carpet-cleaning king Barry Minkow as a classic case of misguided plaudits. Minkow, once lauded as an entrepreneurial wunderkind, even received a commendation from then-mayor of Los Angeles Tom Bradley in 1985--before his conviction on fraud and money-laundering charges.

"Sometimes getting an award isn't such a great thing," mused Alan Carsrud, chairman of UCLA's Venture Development Program. "Visibility doesn't always serve you well."

But despite a few high-profile flops, most observers say the benefits well outweigh the risks. Giving awards, like entrepreneurship itself, is inherently risky, they say.

"Can you ever be unscathed? No, never," Goodman said. "The world changes, the environment changes, technology gets old, Japan stops buying, the plant in South America blows up, the company gets acquired. There's no crystal ball" that can predict success.

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