Sunday, March 3, 1996
Board Resigns At U.S. Fund For Czechs And Slovaks
By MATTHEW L. WALD (NYT)
WASHINGTON, March 2 — The entire board of a troubled investment fund set up to help the Czech and Slovak republics has resigned. Now President Clinton is to appoint an interim board to help determine if the fund should be shut or merged with another fund, a spokesman for the Agency for International Development said today.
The Czech and Slovak American Enterprise Fund, established by Congress in 1989, has invested about $26 million but it expects to write off about $10 million in bad investments.
The chairman, John R. Petty, was forced out in November, after he put his longtime assistant on the fund’s payroll, got her a raise of more than 50 percent and became romantically involved with her.
According to a report by the Inspector General at A.I.D., the assistant, who later resigned, admitted that she had fabricated documents in an effort to get the fund and a sister fund, the Hungarian American Enterprise Fund, to pay $1,500 for computer consulting work to a woman who was a third member of the household.
The replacement chairman and two allies removed a fourth board member (Joseph S. Fichera) in December because he objected to the way the fund was being run; a fifth board member resigned in protest. On Tuesday, though, the replacement chairman and the two allies resigned.
According to Jay Byrne, a spokesman for A.I.D., the resignations were voluntary. He said the likely options were to re-focus the fund on Slovakia, which has economic problems much worse than the Czech Republic, or to merge the program with the Hungarian fund, or to phase it out.
President Bush appointed the first board, which was authorized to select its own replacements. But Mr. Byrne said President Clinton would appoint a new board, which would present recommendations to a joint committee of the State Department, A.I.D. and the White House.
The chairman who resigned on Tuesday is Lawrence McQuade, a former executive of Prudential Mutual Fund Management Inc. Milan Ondrus, a retired vice president of the FMC Corporation, also resigned, as did Jerome Jacobsen, a financial consultant for Economic Studies Inc., and Ian Tauber. An A.I.D. spokesman said he had no biographical information on Mr. Tabuer.
Mr. Petty, the chairman who resigned last year, is a former chairman and chief executive of the Marine Midland Bank. Joseph Fichera, a former managing director of Bear Sterns & Company, was voted off the board last December, and another member, Robert Rubin, resigned in protest of that vote.
Board memberships are unpaid positions.
Robert C. Odle Jr., a lawyer who examined the fund at the request of its audit committee, said in a telephone interview today that the Czech and Slovak fund was unlike the others.
“We have 11 enterprise funds, and 10 of the 11 have a good, modern corporate structure,” he said. He said the others had hired strong professional executives to run the operations.
Mr. Odle, a lawyer at Weil Gotschal & Manges, a New York-based firm that helped write the bylaws of some of the funds, said outright elimination of the Czech and Slovak fund was probably not an option, because it had a portfolio to manage.
“The most important job for the U.S. Government is to get the board right,” he said. “If the Government gets the board right, then the board has a chance to create the right corporate structure.”
“If you get the right corporate structure, then you have checks and balances,” he said.
Copyright 1996 The New York Times Company