Net Loss

How LatinoNet -- the poster child for Washington's attempt to empower the poor with technology -- wasted money and networked almost no one

Dr. Armando Valdez leans from a stuffed hotel armchair and sweeps at the air jaggedly with both hands, punctuates his speech with glottal stops, and occasionally repeats and re-repeats his sentences. He's dissembling, which seems to make it harder to form thoughts.

"I think it'll succeed. I think it'll go through another evolution, maybe transformed, maybe something different, but I think the core program area will still be access to the community; to the technology; and to try to use this technology in a way that empowers."

Valdez crafts these less than straightforward phrases not because he's a dishonest man, but because he's nobly defending his life's most precious work. He's attempting to breathe rhetorical life into LatinoNet, the million-dollar Internet project he launched in San Francisco and then helped drive into oblivion.

Just three years ago, Valdez was heralded in newspaper articles coast to coast as the intellectual author of LatinoNet, an America Online site that was to serve as a centerpiece of U.S. government efforts to bring the benefits of the Information Superhighway to everyman. Now, he's sitting in the lobby of the Fisherman's Wharf Marriott, struggling to put an optimistic spin on what has become a fiasco largely of his own making.

Valdez came up with the idea of a nonprofit computer network in 1992. He obtained a grant to study the idea of linking Hispanic nonprofit organizations around the country, and soon, plans for a small local network had ballooned into designs on a great national organization that would bring Latinos closer together.

To found LatinoNet, Valdez garnered more than $1 million in support from the federal government, corporations, and other sources; assembled a prestigious board of directors; and hired a five-person staff. In a video press conference fed to five cities by satellite, Valdez and Federal Communications Commission Chairman Reed Hundt proclaimed a dream: LatinoNet would help Hispanic Americans "become full and equal partners in the coming technological society," Valdez was quoted in USA Today as saying.

By recruiting hundreds of Hispanic-oriented nonprofit agencies to provide information for an America Online site, then drawing thousands of subscribers to that site, LatinoNet would link, invigorate, and empower the growing Hispanic underclass.

But that was then. Now, Valdez gesticulates nervously as he tries to talk around the fact that within two years of inception, LatinoNet had burned through its money, alienated its allies, and created nothing more technologically empowering than a couple of dead-link Web sites and a defunct nonprofit page on AOL. LatinoNet is now slated to be turned over, gratis, to the Mexican Heritage Corp. of San Jose, a nonprofit organization that promotes mariachi festivals and like cultural events. When pressed about his specific plans for LatinoNet, Corporation President Pete Carillo says he might use the LatinoNet brand name on a Web site that would sell Mexican Heritage Corp. coffee mugs, T-shirts, and posters.

"This would give people an opportunity to go into the Web site and purchase gifts," Carillo explains.

In news articles in the Chicago Tribune, USA Today, the Los Angeles Times, the Washington Post, and dozens of other newspapers, the December 1994 launch of LatinoNet was said to symbolize the enfranchisement of the technologically excluded, the exploitation of network technology's potential role as a great leveler.

But within just two years, LatinoNet seemed to symbolize something else entirely: the haphazard nature of the federal government's attempts to capitalize on what it calls the Information Superhighway. LatinoNet was born amid a blizzard of Internet hyperbole. Everyone from Vice President Al Gore to House Speaker Newt Gingrich was extolling the virtues of computers, and touting the role of information technology in empowering the nation's less privileged.

But the experience of LatinoNet, and the Commerce Department agency that funded it, seems to indicate that the walk behind the talk was halfhearted and stumbling.

According to a report produced by the U.S. Commerce Department's Office of Inspector General, LatinoNet spent a lot of money and empowered almost no one. Another, more recent report blasts the department for giving away money to numerous technology empowerment projects, then not bothering to check up on how the money was spent.

The report discussing LatinoNet, issued in August 1997, lambastes LatinoNet for squandering much of the $450,000 it received from the department's National Telecommunications and Information Administration (NTIA). To get its federal grant, LatinoNet pledged it would attract about $675,000 in private-sector matching funds. The inspector general's report says the group did not meet that goal.

Finances aside, LatinoNet never came close to reaching its formally stated goal of networking the Hispanic community nationwide. In its grant application, LatinoNet said it would attract, in its first year, 1,200 subscribers, 50 nonprofit information providers, and 20 sponsoring institutions.

By 1996, it had attracted 168 subscribers, 85 nonprofit agencies, and no institutions. LatinoNet said it would establish five branch offices around the country. It sent one employee to Los Angeles and briefly set up an office there. In Chicago, a sponsor had agreed to pony up $220,000 for LatinoNet to set up a branch office. The sponsor withdrew the money when LatinoNet failed to find a local Latino group that would join in the endeavor, the report says.

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