Staff, Vendors Left in Dark in Wake of Museum Closing.

When the California Museum of Latino History, Art and Culture quietly padlocked it doors in August, no one in the local art world was too shocked.

Not because the museum lacked an audience -- its "An American Leader -- Cesar E. Chavez" exhibit attracted 5,000 visitors at its opening last summer. Instead, the fledging institution's woes stemmed from the fact that it was more than $500,000 in debt and five months in arrears on employee salaries when it closed, according to one board member.

As the museum seeks to reorganize and possibly reopen, it must first clean up the damage caused by mismanagement of its finances.

"The Latino Museum still owes us $35,000, which is about 25 percent of our annual revenue. So far, they haven't paid us a penny," said Mark Garcia, bookkeeper for Olympic Security in Norwalk, which provided daily security guards and other protective services for the Latino Museum last year.

"I can't get a hold of anyone. I've called Senator Calderon dozens of times and he hasn't returned any of my calls. I even went by his house in Whittier a couple times and no one ever answers his door. We're a small company so something like this can bankrupt us," Garcia said.

Former state Sen. Charles Calderon, D-Montebello, an attorney, is chairman of the board of trustees for the Latino Museum.

Olympic Security recently put a mechanic's lien on the museum building at Main and First streets in downtown L.A. The building, valued at $1.7 million, was sold to the museum by Bank of America in 1999 for $1.

But the lien won't help Olympic Security unless the building is sold.

Steven Park, general manager of the Glendale Blueprint Co., confirmed that the Latino Museum also owes a substantial sum to his company, which printed most of the museum's flyers and invitations.

"We don't want to put an exact figure on how much they owe, but it's a considerable amount for us because we're not a huge business. We have been in contact with the museum and the last we heard is that they are working to get state funding to pay off their debts," Parker said.

Denise Lugo, former director of the museum, and Calderon did not return phone calls. But Ana Araujo, a member of the museum's board of trustees since 1997 and manager for community relations at KNBC-TV, said the museum is reorganizing and is in the process of paying off its debts.

"Since April we have learned that a lot of people haven't been paid and that calls were not being returned, so we have a lot of burned bridges to mend and we are in the process of doing that," Araujo said.

In addition to debts owed to local businesses, the Latino Museum owes more than $120,000 in back pay to former employees. Since August, 19 former employees have filed claims with the California Labor Commission.

"A lot of claims have come in over the last few months, so we're consolidating them so we can proceed in one case instead of pursuing each individual claim," said Dean Fryer, a commission spokesman.

Museum officials have met with the Labor Commission and have paid some of those claims, according to Araujo.

Funding problems

The Latino Museum received $800,000 from the state in 1999 and $1 million in 2000. Under state law, however, the museum is only authorized to use those funds for capital expenditures and educational projects, not for employee salaries, debt relief or other operating costs.

Seeking to amend those restrictions, Calderon approached former Assemblyman Martin Gallegos, D-Baldwin Hills, last April about sponsoring a bill that would have allowed the museum to use the state money for operating expenses.

Sponsored by Gallegos, AB 998 was fast-tracked through the Legislature and passed by the state Senate on Aug. 31. But Gov. Gray Davis vetoed it in September, explaining that it "would set an unacceptable precedent by allowing dollars specifically allocated for one purpose to later be used for other operations."

According to Araujo, the museum was counting on those funds to retire debt. Now, she and other board members are scrambling to raise major donations to save the debt-ridden institution.

"Denise apparently believed those funds were coming to us and was spending money before we received it, but my feeling is that you don't spend money unless you have it," Araujo said.

Lugo, a former college art professor, had no museum administration experience when she was named director in 1998. Her alleged lack of candor about the museum's dire financial problems has elicited charges of administrative incompetence -- and possible financial malfeasance -- from some former board members.

"I don't believe there was any true deception involved," Araujo said. 'This was Denise's first time in this kind of job. She worked closely with Sen. Calderon while the rest of us were left in the dark."

According to Araujo, Lugo has resigned from her position as director and is now working with the museum as a consultant.

Resignations

Since revelations of the museum's financial problems surfaced last spring, Lugo has not been the only one to resign.

Former board of trustees member Jess Sotomayor, a corporate attorney, resigned from the board last June after learning about the museum's problems. Sotomayor declined to discuss the museum's internal operations.

"My policy is to refer all calls to Charles Calderon, who was chairman of the board at the time I resigned," Sotomayor wrote in an e-mail.

Since Sotomayor's departure, at least three other board members have resigned. Araujo said the museum recently recruited two new members to fill those vacancies, but didn't know who those individuals were or exactly who remains on the board.

Still, Araujo is not trying to shift blame for the museum's predicament.

"If you have to put the blame on someone, it is at us, as the board, and Denise, as director," she said. "The bottom line is that we have to take responsibility for working toward a solution and resolution because, at this point, we don't know exactly what happened."