Days before the Lompoc City Council is scheduled to extend exclusive negotiations with the nonprofit hoping to develop the California Space Enterprise Center on city-owned land, new disclosures about the organization and its finances threaten to send the project off trajectory.
The public disclosure of the details of a federal court's default judgment awarded more than a year ago against Alan Tratner, president of Environmental Education Group (EEG), the proposed space center developer, is forcing the city to take a closer look at the nonprofit it has been negotiating with for 18 months.
Additionally, a review of EEG's tax filings reveal that the nonprofit had $113,590 in operating revenue for the 2010-11 fiscal year, ending with a negative balance of $1,266, adding to questions about EEG and its ability to develop a $220 million space center project.
In 2009-10, EEG had operating revenue of $69,106 with a year-end balance of $3,194, and it ended fiscal year 2008-09 with a negative balance of $1,326, according to the nonprofit's public IRS records.
Now, questions are being asked about why the city apparently failed to scrutinize the Santa Barbara-based nonprofit that it stands ready to give 96 acres of city-owned land near Hancock College's Lompoc Valley Center and Ken Adam Park. Negotiations with EEG and the city began in October 2011.
The $21,000 default judgment was awarded to plaintiff Mark Sanders, a Sherman Oaks inventor, on March 2, 2012, after Tratner failed to appear at numerous U.S. District Court hearings in Los Angeles. Sanders originally filed the civil suit in 2010 under the Racketeer Influenced and Corrupt Organization Act.
The lawsuit alleges that Tratner took ideas submitted by members of the nonprofit Inventors Workshop International (IWI) headed by Tratner and "engaged in a pattern to acquire by fraud, patents and inventions of the members … and appropriate all claims and rights for himself."
The 29-page lawsuit also alleges that "Tratner hid behind and continues to shield himself … behind nonprofit corporations and fronts that were either not constructed as represented, or were bogus at time of the assertions."
Public records show that IWI, the nonprofit named in the suit, was established in 1971 but has been defunct for several years. A related nonprofit, also headed by Tratner, called Inventors Workshop International Education Foundation (IWIEF), was suspended by the State of California for failure to file required legal documents.
Both entities claim to help inventors bring their ideas to market and "to commercialize there (sic) great ideas."
Sanders said he brought suit after years of trying, and failing, to get information from Tratner about work performed on his and other IWI members' behalf.
"He keeps everything a secret. He sells vagueness," Sanders said in a phone interview. "They (IWI) want money and they don't help the inventor. Very few people are making money except for him."
EEG's response
Lielle Arad, EEG spokeswoman with the title of global director of public affairs, said in an email that the Sanders lawsuit contained "many false claims and misrepresentations. Alan Tratner is currently, with legal counsel, taking legal action against Mr. Sanders and is working to have the judgment set aside."
Arad said that Sanders was suspended from IWI membership for "disrupting inventor chapter meetings, and had to be suspended from membership for breaching the Non-Disclosure Agreement (NDA)."
Tratner did not attend court hearings, she said, because he believed "the new civil case would … be dismissed because of many defects."
She also acknowledged that neither IWI nor IWIEF is currently registered as a nonprofit, but said attempts are underway to revive both. Arad noted that neither IWI nor IWIEF are a legal part of EEG, although Tratner serves as president of both.
EEG has contracted with a new accounting firm, she said, and has filed for an
extension on its tax forms for the fiscal year ending June 30, 2012.
Arad, one of three members of EEG's Board of Directors, the legal entity that would own the proposed California Space Enterprise Center (CSEC) if built, said the nonprofit submitted a contractual agreement to Santa Barbara developer Guy Gniadek to meet Lompoc's requirement that a qualified developer be on board by April 8.
What happens next?
On Tuesday, the council will consider revisions prepared by city staff to the existing Exclusive Negotiation Agreement (ENA) with EEG that is set to expire May 30, including a six-month extension through November.
EEG is also expected to submit revisions to the development phases for the project, a critical factor in the city's ability to mandate what must be built in exchange for giving away city land.
In February, the city set a June 1 deadline for EEG to demonstrate "proof of
$59 million in equity and grant funding for partial financing" of the first two phases of the space center project.
Arad said the organization has "compiled letters of intent and commitment from a variety of financing sources to fund the CSEC and its phases," and will meet the June 1 deadline.
But with the disclosure of the judgment against Tratner and the state of the nonprofit's tax returns, council members are now paying closer attention to the nonprofit itself.
"There's been some new developments with the people trying to put this together," Councilman Dirk Starbuck said of Tratner and EEG. "I think the council needs to discuss it."
Councilwoman Ashley Costa - who has twice voted against signing an agreement with EEG - is more candid with her ongoing concerns about the nonprofit and its capacity to develop the $220 million space complex.
"I think EEG has created a labyrinth of entities that is difficult for anyone to navigate," Costa said. "Until it is clear what the legal and financial issues are, I am not comfortable giving this organization a vote of confidence in what they are attempting to bring forward."
Mayor John Linn, who has served as a strong supporter of EEG since 2011, said he had no comment on the lawsuit and default judgment "until I find out what the true nature of the case is. It's surely worth reading and understanding," he said.
