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Vol. 31, No. 9
MIXED MESSAGES As order levels gyrate, manufacturers must grapple with changing production logistics to meet customer needs
Small firms decry lending environment Businesses express anguish to Fed over inability to access credit; banks also in vise
By DAN SHINGLER dshingler@crain.com
T
he ride out of the recession is turning out to be a bumpy one for manufacturers as their orders increase not in a straight line, but in a series of fits and starts that make it harder to navigate the foggy road ahead. Most manufacturers made it through the downturn by becoming experts at austerity, which meant jettisoning employees for whom they had no work and not maintaining inventories for which they had no orders. Now, though, they must become experts at forecasting and logistics if they are to fill batches of new orders that are coming in unpredictable waves, representing revenue they need.
By ARIELLE KASS akass@crain.com
When she talks about banks and small business, Susan Schwartz Salontay doesn’t mince words. “We’re being killed,” she said. “We are being put out of business because banks are looking to collect what they lost.” Ms. Salontay, president and owner of Work Best Electric, a 23-year-old electrical contracting company in Cleveland, said she is “holding on, holding on, holding on,” but that the company is “losing our grip here.”
Across the region and the country, small businesses are facing reduced lines of credit, less access to capital and resistance to restructuring loans. In Ms. Salontay’s words, they’re “so, so screwed.” According to Ms. Salontay, her eight-employee company hasn’t had a working line of credit since JP Morgan Chase eliminated hers 12 months ago. She said there are weeks when she doesn’t know how she’s going to make payroll. She already has used insurance money from a lost wedding ring to help pay employees See CREDIT Page 17
Clean technology sector finds favor with local VC investors
See WHIPS Page 9
INSIDE: Clean technology and advanced energy comprise a larger part of venture capital investment. Page 16
By CHUCK SODER csoder@crain.com
When it comes to attracting venture capital, Northeast Ohio’s clean technology companies are cleaning up. The region’s so-called “cleantech” startups — companies developing technologies that can range from wind turbines and fuel cells to water purifiers and new types of insulation — are receiving much bigger pieces of the venture capital pie as of late, hauling in 20% of all venture investments made in the region during the past two years.
On a percentage basis, that figure is more than they’re used to receiving, according to figures from the 2009 Venture Capital Report, which is compiled by three local economic development organizations. By comparison, cleantech startups in 2005 snared just 3% of all venture investments in Northeast Ohio. The increase is heartening, according to Becca Braun, president See TECHNOLOGY Page 16
INSIDE SON WIL TEN IS R K
FirstMerit banks on growth
09
The Akron-based bank aims to expand its market share by bolstering its presence in the Midwest. Last week, FirstMerit added four branches in the Chicago area. Read Arielle Kass’ story on Page 3.
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LEGAL AFFAIRS More local law firms implement sustainable practices with environment, ethics in mind ■ Page 11 PLUS: OFFICE POOLS ■ LEGISLATION ■ ADVISER ■ & MORE
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CRAIN’S CLEVELAND BUSINESS
REGULAR FEATURES Best of the Blogs ..........19 Classified .....................18 Editorial .........................8 Going Places ..................7 Letters ...........................8 List: Northeast Ohio investment banks .......17 Reporters’ Notebook ....19 The Week .....................19 30 YEARS AND COUNTING We ask which institutions have best represented the region over the last 30 years. For the video, log on to www .CrainsCleveland.com.
COMING NEXT WEEK
WWW.CRAINSCLEVELAND.COM
MARCH 1-7, 2010
PUTTING A STOP TO THAT They just don’t make big strikes like they used to. There were just five major work stoppages — defined as strikes and lockouts involving 1,000 or more employees and lasting at least one shift — in 2009 that idled 13,000 workers for 124,000 lost work days, both record lows. In 2008, for instance, there were 15 such stoppages idling 72,000 workers for 1.95 million lost work days. In 1947, the first year the Bureau of Labor Statistics tracked such data, there were 424 stoppages involving more than 1.6 million workers. Major U.S. work stoppages, 2005-2009 and selected prior years
An American dream Immigrant entrepreneurs comprise an important part of the U.S. economy. We look at some of the challenges they face as well as their motivations in our Small Business section.
Year
Work stoppages
Workers involved
2009
5
13,000
2008
15
72,000
2007
21
189,000
2006
20
70,000
2005
22
100,000
1990
44
185,000
1970
381
2,468,000
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FirstMerit strategy evident in Chicago moves Akron company adds 28 Windy City branches, and more Midwest banks may be there for taking By ARIELLE KASS akass@crain.com
The Second City is on the rise for Akron’s FirstMerit Corp., which is casting a broad eye on expansion in the Midwest. FirstMerit last week continued its expansion in the Chicago area by adding the four branches of the
THE WEEK IN QUOTES
failed George Washington Savings Bank in a deal assisted by the Federal Deposit Insurance Corp. The bank also converted the systems of the 24 Chicago-area branches it purchased from First Bank of St. Louis in late 2009. FirstMerit president, chairman and CEO Paul G. Greig said the Chicago moves are just the start of a
wider Midwestern expansion strategy. “We’re looking to grow, we’re looking at acquisition opportunities,” he said. “Clearly, Chicago provides a great strategic opportunity for the company. … There are a number of very attractive cities throughout the Midwest.” Tony Davis, managing director of investment firm Stifel Nicolaus & Co. in Richmond, Va., agreed with Mr. Greig’s assessment of Chicago’s offerings. The population in that area is 1.5 times that of FirstMerit’s
FirstMerit Corp. chairman and CEO Paul Greig said Chicago “provides a great strategic opportunity” for the Akron company. FILE PHOTO/JANET CENTURY
See STRATEGY Page 18
INSIGHT
BioEnterprise, Team NEO to jointly recruit biomed firms
“We learn to manage by understanding customers, by looking at historical data, by understanding the various industries we serve.”
Groups hope contacts, expertise lead to success
— Jerry Zeitler, president of Die-Matic Corp in Cleveland. Page One
By SHANNON MORTLAND smortland@crain.com
“The next Google, the next Genentech, is going to come out of the cleantech space.” — Mark Heesen, president, National Venture Capital Association. Page One PHOTO PROVIDED
“Is there really anyone ... who wishes we could return to the ‘days of glory’ that preceded Gateway?” — From a letter to the editor. Page 8
“This allows firms and lawyers the opportunity to show they’re doing something. ... This is something where we need to show some leadership.” — Carter Strang, chairman of the green initiative committee at the Cleveland Metropolitan Bar Association and a partner at Tucker Ellis & West. Page 11
“Cities need to update zoning codes to make them relevant to today’s 21st-century business environment.” — Paul Oyaski, Cuyahoga County director of development. Page 14
Russell Township technical trade association ASM International in April will begin a $6 million renovation of its campus best known for a striking geodesic dome, but that’s not all that’s going on there: It soon will launch the first of its specialized web sites that house sector-specific information. Customers will purchase licenses to access the information, which ASM spent six years and $11 million compiling.
CONTENT IS KING ... ... even in manufacturing, where trade group ASM International aims to turn its $11 million research database into a profitable web content arm By DAN SHINGLER dshingler@crain.com
A
lot of people are trying to figure out how to make a living from Internet publishing, but a bunch of materials scientists think they just must be among the first to do it. In Russell Township in Geauga County, ASM International, a technical trade association focused on materials, has spent six years and about $11 million amassing a huge database on materials from steel to ceramics and preparing to sell the information via pricey subscriptions to its own specialized web sites. The See ASM Page 4
HOW THE WEB WILL WORK “He who has the best content wins,” says Stanley Theobald, managing director of ASM International, a Geauga County technical trade group whose focus is materials. Six years and $11 million of work have resulted in a database of sector-specific information available for sale through subscriptions to web sites ASM soon will roll out. ■ ASM on March 15 will unveil The Corrosion Solutions Center, its first site; in April, a second site, the Energy Materials Network, will be introduced. ■ Customers then will buy licenses to access the sites’ information — for $4,950. ■ ASM has pre-sold about 500 licenses to universities and corporations. ■ “The kind of work (ASM does) is essential for innovation, and the way we maintain our competitive edge in U.S. manufacturing is through innovation.” — Bill Gaskin, president, Precision Metalforming Association
With a decent number of biomedical device makers already in Northeast Ohio but plenty more to be had, business recruitment organizations BioEnterprise Corp. and Team NEO have begun working shoulder to shoulder to recruit those types of companies here. “When we get involved in these opportunities — recruiting the companies that we find — we actually have a pretty good win rate in convincing companies to move to Northeast Ohio,” said Baiju Shah, president of BioEnterprise. “We ought to take more of a proactive, targeted approach now that we know the region has strengths.” Those strengths lie in medical imaging, orthopedics and biomaterials, cardiovascular medicine and neurostimulation, which are the four areas in which BioEnterprise and Team NEO hope to attract biomedical companies, Mr. Shah said. Within these specialties, the region already has a sizable community of biomedical device makers, a significant talent pool and a vast amount of research, he said. BioEnterprise is bringing to the table its contacts with companies and venture capital firms across the country, heavy hitters in the local medical industry and its ability to tailor a message to a company’s needs, said Tom Waltermire, CEO of Team NEO. Team NEO will use its expertise in helping companies find real estate and employees, as well as its ability to connect firms with government sources for support in launching their businesses here, Mr. Waltermire said. BioEnterprise and Team NEO have created www.clevelandplus biomedical.com to provide information on the four specialty areas they are targeting and to explain why Northeast Ohio is a good location for biomedical device firms, said Carin Rockind, a Team NEO spokeswoman. Ms. Rockind said the two organizations have identified 80 industry See RECRUIT Page 4
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Recruit: Groups have track record continued from PAGE 3
conferences where they’ll set up meetings in advance with attending companies to pitch Northeast Ohio’s biomedical industry. Companies to be targeted include startups and small to midsize companies that need to expand. “Small companies are very mobile because there’s not much there yet,” Mr. Shah said. “With medium to large companies, their decision (of where to locate) centers around where they would like to establish a production facility or a sales and service facility for customers.” When companies outside the state acquire a Northeast Ohio company, BioEnterprise and Team NEO have a chance to convince them to maintain operations here or move jobs to Northeast Ohio, which is a sort of “super victory,” Mr. Shah said
Making inroads BioEnterprise and Team NEO are no strangers to recruitment. Since 2007, 14 biomedical device compa-
12 TICKETS TO THE 12 BIGGEST GAMES ON SALE NOW 216.420.HITS
– Tom Waltermire, CEO, Team NEO nies have been lured to Northeast Ohio, including Israeli biomedical device maker Ni Medical Ltd. of Israel, which last month announced it would open an office in Akron. Likewise, pharmaceutical and dietary supplement company AIM Pharmakon Inc. of New York announced in December it would build a research, development and manufacturing site in Cleveland. The research lab initially will employ 40 people at an average salary of $55,000 each. Ms. Rockind said thousands of biomedical companies and suppliers exist in the region, and BioEnterprise and Team NEO can provide a specialized list of existing Northeast Ohio companies that can help a new company meet its needs. Though Northeast Ohio has a good story to tell, it faces a lot of
competition from various regions across the country, Mr. Waltermire said. “Every community in the U.S. has its future in the biomedical area,” he said. “We have a better case and more assets here than the vast majority of communities, but other locations have more than we do.” Northeast Ohio, in some respects, is arriving late to the biotech ball, Mr. Shah noted. For example, North Carolina has been recruiting biomedical companies to its Research Triangle Park region for 20 years. Mr. Waltermire, however, said the growing biomedical industry will not be concentrated in one place, so there is room for competition. “This is a matter of getting a higherthan-average share of that business,” he said. “Not dominating it.” ■
ASM: Cost pales compared to mistakes continued from PAGE 3
first such site, The Corrosion Solutions Center, will launch March 15. A second site, The Energy Materials Network, will go up at the end of April. “Content is king, and he who has the best content wins,” said ASM managing director Stanley Theobald in explaining the organization’s strategy. That’s why so much time, money and research has been spent on
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“We have a better (biomedical) case and more assets here than the vast majority of communities.”
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researching and preparing for the new sites, Mr. Theobald said. Site users will be able to drill down through categorized information to find specific data that is needed by engineers, architects, designers and others. For example, if someone wants to know the corrosion properties of a certain steel alloy, they not only can find it on the site but can access test data showing exactly how that metal performed, and for how long, in various corrosive environments. All told, there are more than 13,000 records in the corrosion web site alone, according to ASM. Accessing all that information won’t come cheap, as a license to a single web site will cost $4,950. But the cost is far less than using the wrong material just once in the design of a machine, vehicle, building or just about anything else, Mr. Theobald said. “The cost of corrosion in the U.S. alone is about $400 billion a year,” he said. Others apparently agree, as Mr. Theobald said ASM has pre-sold about 500 licenses to universities and corporations that want to use the first two sites. While the delivery model might be new, making a living off the sale of technical data is old hat to ASM. The organization historically has derived the bulk of its revenues from the sale of books and technical publications, and it already offers 17,000 titles on its web site, asm international.org. Topics range from nanomaterials to heat treating and many are standard industrial texts. Publishing and selling such texts has been a good business for ASM, but looking forward, Mr. Theobald said, a new model will be required. “That stuff isn’t going to stop
going down” in sales, he said of ASM’s print products, “and these (Internet offerings) are more profitable.”
Changing with the times The 97-year-old nonprofit that began life as the Steel Treaters Club in Detroit has successfully evolved before. During World War I, when metalworking advanced to become a science, the organization became the Steel Treating Research Society. When aluminum and other metals became more important in the 1930s, it became the American Society for Metals. And when composites, ceramics and other materials came to the forefront, it became simply ASM International in 1986. Along the way, ASM has lost none of its relevance and may have become even important as materials have become more diverse and complex, said Bill Gaskin, president of the Precision Metalforming Association in Independence. “They’re the material scientists. These are the folks who understand the technology, the research and the chemistry behind materials,” Mr. Gaskin said. “They’re really important.” And ASM isn’t going anywhere soon. In April, it will begin a $6 million renovation of its historic site, which sits on 200 acres and includes a 10-story-tall geodesic dome designed by Buckminster Fuller. It might be too soon to say how smoothly ASM will transition into a web-based provider of materials data, but Mr. Gaskin said he hopes they succeed. “The kind of work they do is essential for innovation, and the way we maintain our competitive edge in U.S. manufacturing is through innovation,” he said. ■
Volume 31, Number 9 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of May and fifth week of May, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2010 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $1.50. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. (888)9099111. REPRINT INFORMATION: 800-290-5460 Ext. 136
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NIH stimulus boon for economy Institutions use grant money to bolster staff, expand capabilities
Achieve.
By SHANNON MORTLAND smortland@crain.com
MIKE FOLEY STATE REPRESENTATIVE CLASS OF ‘95
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The $10.4 billion stimulus windfall to the National Institutes of Health last year has translated into a pot of gold for Northeast Ohio research institutions. In the year since the NIH stimulus package was announced, local researchers have received 159 grants totaling nearly $42 million — and more is likely to follow. NIH has distributed only about 56% of the stimulus money it received and it must award the remaining $4 billion by Sept. 30, said Michael Edwards, associate vice president for research at Case Western Reserve University. “We’re very early into the expenditure portion,” Mr. Edwards said. “I suspect the week of Sept. 30 will be a very exciting week.” Not surprisingly, CWRU, the Cleveland Clinic and University Hospitals have been the big winners of NIH stimulus grants in Northeast Ohio. Combined, they have received 136 grants totaling nearly $39 million, according to the NIH. The remaining grants were awarded to institutions such as Cleveland and Kent state universities and the Northeastern Ohio Universities Colleges of Medicine and Pharmacy. The cash influx has enabled institutions to recruit researchers, add
jobs and become bigger competitors with other parts of the country in the race to secure further NIH research money. The added dollars also have helped some young researchers launch their research careers earlier. UH has used the $13.5 million it received for cancer research to recruit three new faculty members from out of state who, in turn, hired people to staff their labs, said Dr. Stanton Gerson, director of the UH Ireland Cancer Center and the Case Comprehensive Cancer Center. “They came in here and got a research package to start, buy equipment and hire graduate students,” he said. “The dollars are staying in the economy.” CWRU and UH together have created 189 jobs with the expenditure of $4.3 million of the grant money received so far, Mr. Edwards said. NEOUCOM, which received $1.5 million from five NIH stimulus grants, created 11 jobs, said Walter Horton, vice president for research at NEOUCOM. Though the stimulus package has been criticized for being a shortterm boost to the economy, Dr. Horton said it has long-term benefits as well. For example, the NIH stimulus grants permitted research institutions to buy state-of-the-art equipment, which puts them in a better position to recruit researchers and conduct more robust research projects in the future.
Dollar chase continues The NIH money has assisted local cancer investigators in gaining a stronger foothold in research areas
such as brain tumors, stem cells and melanoma, which eventually trickles down to better treatment and diagnoses, Dr. Gerson said. Landing future NIH research funds after the stimulus money runs out will be needed to help continue to support those people hired with stimulus money, Dr. Gerson said. The competition will be steep, but researchers are used to it, he said. The current NIH budget stands at $30.5 billion. In his Feb. 1 budget proposal, President Barack Obama recommended a $32 billion NIH budget for the coming fiscal year, which would be a 4.9% increase. NEOUCOM’s Dr. Horton said the research field expects the NIH ultimately to receive a 3% budget increase. In the meantime, local research institutions are waiting to hear whether current NIH stimulus grant proposals will be funded and they continue to submit new proposals. CWRU and UH have submitted 212 NIH stimulus grant requests so far this year, including three large grant proposals from the Case Comprehensive Cancer Center, which is a collaboration among CWRU, the Clinic and UH, Mr. Edwards said. NEOUCOM has about $14 million in grant requests still outstanding, Dr. Horton said. Though the bulk of the money has been appropriated, the competition has not slowed down for the remaining grants, Mr. Edwards said. “Case and its affiliates have been working on this very diligently,” he said. “We’re continuing to submit recovery act proposals.” ■
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Leader Building owner gets reprieve from foreclosure By STAN BULLARD sbullard@crain.com
In a new and rare public development during the real estate credit crunch, the lender that recently instituted a foreclosure action against the owner of the Leader Building in downtown Cleveland dropped the case in Cuyahoga County Court of Common Pleas. Abdi Mahamedi, president of Carlyle Development Co. of New York, said in an interview that its lender, Grand Pacific Finance Corp., had extended the $4.2 million mortgage on the 15-story Leader Building for two years. “We made the same offer we did before the filing with a little better guarantee,” Mr. Mahamedi said. He said his company pledged additional money, but would not disclose how much, to make improvements to the property and to pay brokerage commissions to woo tenants. Grand Pacific, a Los Angelesbased lender that made the loan through its Flushing, N.Y., office, did not return three calls last week. Court records show Grand Pacific filed a terse notice of voluntary dismissal Feb. 16. Alec Pacella, a vice president at real estate broker NAI Daus in Beachwood, said the agreement reflects the “extend and pretend” scenario that real estate experts say is occurring behind closed doors when property owners are behind
STAN BULLARD
on their mortgage payments or loans mature. Rather than foreclose or get the owner to turn over control of a property, the lender extends the loan to deal with the property later, hopefully in a better business climate. David Browning, managing director of the Cleveland office of CB Richard Ellis, said the resolution holds no general lesson for the real estate market because each lender appears to be following a different agenda with respect to maturing or distressed loans. Some are extending loans, some are selling distressed loans, and some are pressing foreclosure to get control of the property, Mr. Browning said. ■
ON THE WEB
Story from www.CrainsCleveland.com.
VA hospital nabs funds to expand A deal has been reached to finance the expansion of Cleveland’s Veterans Affairs hospital. The Louis Stokes Veterans Affairs Medical Center has had trouble securing financing in the difficult credit cycle. Fifth Third Securities Inc. said last Thursday, Feb. 25, it had served as the financial adviser and structuring agent for a $115 million bond deal to help renovate and expand the hospital. The Cleveland-Cuyahoga County Port Authority financed the development through the issuance of taxable, lease revenue bonds. A special tax increment financing district also was part of the deal, which Fifth Third said was two years in the making. “The goal of this project is to improve access, improve quality of care and reduce costs,” said Sean Nelson, chief of external affairs at the medical center. The financing will go toward consolidating the hospital’s Brecksville campus into the Wade Park campus, then renovating and expanding that campus. New construction will include a 2,000car parking garage, administration building and residential services for homeless veterans. — Arielle Kass
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partner.
GOING PLACES
MANUFACTURING
JOB CHANGES
INSURANCE
EDUCATION
MEDICAL MUTUAL OF OHIO: Ray Mueller to vice president, finance and corporate controller.
CASE WESTERN RESERVE UNIVERSITY, SCHOOL OF ENGINEERING: Daniel Ducoff to associate dean for external affairs and development; Sylvia Aarons to senior major gifts officer. NORTHEASTERN OHIO UNIVERSITIES COLLEGES OF MEDICINE AND PHARMACY: Jay Alan Gershen, D.D.S., to president. NOTRE DAME COLLEGE: Al DiFranco to director of donor relations.
ENGINEERING TECHNICAL ASSURANCE: Jeff Smallidge to senior associate.
Gershen
DiFranco
Smallidge
Reilly
Sasso
Mueller
Fuerst
Justus
Stallard
FINANCE FIRSTMERIT CORP.: Richard H. Buffett to vice president, business development officer.
FINANCIAL SERVICE ANCORA ADVISORS LLC: Jack Burke to senior vice president. DELOITTE: Fiona Chambers to managing partner, Cleveland tax practice. SKODA MINOTTI: Jonathan Stocker to senior staff accountant; Diane Thompson, Michael Gross, Kyle McClear and John DiGeronimo to staff accountants.
HEALTH CARE CLEVELAND CLINIC: Holly L. Reilly to system executive director, nursing operations and integration, The Stanley Shalom Zielony Institute for Nursing Excellence. CROSSROADS HOSPICE: Michelle Elwood to clinical director; Tere Reyes-Decrane and Edward Nugent to assistant clinical directors. QUEST DIAGNOSTICS: Charles Rippin to director of hospital sales, Cleveland, Pittsburgh and Buffalo. SUMMA WESTERN RESERVE HOSPITAL: Nealie Houk to administrative director, graduate medical education, and institutional educational officer, medical education department. VILLAGE AT MARYMOUNT: Pat Sasso to director of nursing.
RIDGWAY & ASSOCIATES: Susan Woodmansee to partner, vice president, administration; Kevin J. Waldron to partner, vice president, marketing and sales.
LEGAL MEYERS, ROMAN, FRIEDBERG & LEWIS: Robert A. Fuerst to partner. OGLETREE, DEAKINS, NASH, SMOAK & STEWART P.C.: Michelle Arendt to shareholder. VORYS, SATER, SEYMOUR AND PEASE LLP: M. Patricia Oliver to
APPLIED VISION CORP.: Jerry Shaffer to vice president, customer service; Brian Baird to director of product marketing; Paul Stephan to director of software engineering. THE FEDERAL METAL CO.: Peter Nagusky to president.
NONPROFIT THE NORTH AMERICAN MENOPAUSE SOCIETY: Elizabeth A. Georges to director of strategic initiatives. PARALYZED VETERANS OF AMERICA, BUCKEYE CHAPTER: Sharon Moster to executive director. PATHWAYS INC.: Jacqueline A. Justus to finance and human resources director.
REAL ESTATE CB RICHARD ELLIS: Lisa Anne Cotten to senior commercial real estate appraiser.
SERVICE THE RESERVES NETWORK: Nicholas Stallard to chief financial officer.
TECHNOLOGY CARDINALCOMMERCE CORP.: Sara Koch to marketing communications manager. XEROX CORP.: Brian Walsh to region vice president, Northern Ohio.
UTILITY FIRSTENERGY CORP.: James G. Garanich to vice president, tax.
7
BOARDS MAXIMUM ACCESSIBLE HOUSING OF OHIO: Thomas Meyer (Greater Cleveland Habitat for Humanity) to president; Michael V. Palcisco to vice president; Scott G. Strawn to treasurer; Jan Hollinger Jones to secretary; Ann G. Russell to pastpresident. OHIO OPHTHALMOLOGICAL SOCIETY: Dr. Bernard D. Perla (Ophthalmology Consultants Inc.) to president. SWEDISH-AMERICAN CHAMBER OF COMMERCE: Matias Bonnier to chairman; Bo Carlsson to vice chairman; Lars Eriksson to president; Lars Traner to secretary; Kenneth Palmman to treasurer.
Send information for Going Places to dhillyer@crain.com.
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PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Now or never
D
uring a recent meeting between Crain’s and officials from the Cleveland Foundation, the subject of the foundation’s role in promoting education reform came up. Foundation CEO Ronn Richard was asked his opinion of the dramatic transformation plan for the Cleveland Metropolitan School District that has been put forth by district CEO Eugene Sanders. “This is our last chance to resuscitate the district,” Mr. Richard said succinctly. The no-nonsense Mr. Richard isn’t the kind of guy to make statements loosely. So it wasn’t a surprise when he followed that comment by saying, “This school transformation is our No. 1 priority.” It should be the business community’s No. 1 priority as well. It’s not that the business community hasn’t been supportive in the past. But enthusiasm for rushing to the district’s aid has waned over time as past reform efforts that companies have supported with money and personnel have failed to reverse the decline of Cleveland’s schools. No one can guarantee that Dr. Sanders’ transformation plan will play out differently. However, we share Mr. Richard’s belief that if the Cleveland schools are to be pulled out of their agonizing tailspin, a plan very close to the dramatic makeover Dr. Sanders is advocating must be enacted ASAP. It’s great that a handful of innovative schools are meeting with success, among them the Cleveland School of the Arts and John Hay High School, with its School of Science and Medicine and School of Architecture and Design. But students and families lack the luxury of time to wait for what amounts to incremental improvement to make its way through the Cleveland schools. As Mr. Richard correctly stated during our meeting, “It’s not enough to save 1,000 kids in the district.” Joel Klein, chancellor of the New York public schools, likes to say the way to improve urban education isn’t to create a great school system, but a system of great schools. That’s where Dr. Sanders is going with his plan to close habitually underperforming schools and to focus the district’s precious resources on those schools that are successful or stand a fighting chance to make the grade. And for as much as it may pain the Cleveland Teachers Union, it’s important that charter schools in the city with a track record of success be incorporated in any initiative for transforming the district. We especially like the idea of co-locating city and charter schools in buildings that otherwise might be underused, with no strings attached to whom the charter schools can hire for teaching positions. This nontraditional approach already is succeeding in New York with charter schools that are under the Uncommon Schools banner. The cost of this transformation won’t be cheap, which is why Mr. Richard says the business community “must come up with the dollars and provide moral support” to make it happen. Businesses have risen up en masse before in support of the city schools. We hope they marshal their forces one more time.
FROM THE PUBLISHER
Youngstown economy begins revival
A
Cruze. That move will mean another fter a decades-long decline that 1,200 employees at the massive facility began with the demise of the outside Warren. large-scale steel industry, In large part, the decision by GM to Youngstown and its environs build the Cruze there is an outgrowth of are finally seeing real light at the end the enormous strides made by manageof the tunnel, or more appropriately ment and labor leaders to make the facility perhaps, tube. a model for both efficiency and quality. A big European steel company says it That is a far cry from the days will invest $650 million to expand when Lordstown was a model of its existing Youngstown plant BRIAN labor unrest. and hire another 350 workers. TUCKER And Youngstown’s business Paris-based Vallourec SA plans incubator has helped create one this mammoth expansion in of our region’s hottest software order to produce steel tubes companies, Turning Technoloneeded to extract natural gas gies, which employs hundreds at from shale deposits. its downtown headquarters. The company already employs How can anyone be anything 500 at its existing Youngstown but happy for the folks of the plant. This latest deal needed Mahoning Valley, who have some cooperation from the known little than the constant drumbeat of mayor of the adjoining municipality, since bad economic news since the shutdown of the expansion crossed a border. It took the steel mills and the loss of thousands some wrangling, but it happened. upon thousands of jobs? Then this week, a top General Motors **** official drove to Lordstown to help AND SPEAKING OF differences, how announce plans to add a third shift in about the shift in attitude at Kent State Uniadvance of the rollout of GM’s new versity (my alma mater) in the decades Honda Civic-Toyota Corolla fighter, the
since the tragic National Guard shootings of students there 40 years ago this May 4? The university and that historic date were in the news again last week when the area of the student protests and the shooting that ensued was added to the National Register of Historic Places. It means the university has embraced its unique place in American history. There was a time — decades ago — when university and community leaders tried to make those memories go away, and even took the word “State” out of much of its branding efforts. Then, gradually, other opinions prevailed, and the university instead began using the anniversary to focus attention on the rightful place of peaceful protest in our form of government. The university — in its centennial year — is hoping to attract donors interested in the installation of a proper visitors’ center near the site, and is planning an appropriate schedule of events for this year’s May 4 commemoration. Kudos to the four KSU professors (Laura Davis, Jerry Lewis, Mark Seeman and Carole Barbato) who led the charge on this National Register effort. ■
LETTERS
Mental illness is a fact of employees’ lives ■ As an organization dedicated to breaking the stigma of mental illness, we have nothing but praise for the fine job Crain’s did in its Feb. 22 section featuring stories on mental health. We are all called to get the facts out there — removing the Boogie Man from mental illness by open and honest discussion. Mental illness is a simple fact of life. Treatment works. People recover. Marilyn Mongeon Quill President and CEO Passion for Change Westlake
Gateway opened doors ■ Brian Tucker’s Feb. 15 commentary regarding the naysayers complaining
about the Gateway sports complex and its unfulfilled promises squarely hit the nail on the head. Is there really anyone in Northeast Ohio who wishes we could return to the “days of glory” that preceded Gateway? Before Gateway, we could only boast of the downtown Central Market, a refrigerated food warehouse and associated bars. Now, because of Gateway, we have a state-of-the-art, 43,500-seat ballpark, a 20,500-seat sports arena, two parking garages, the Hilton Garden Inn and numerous restaurants in the Prospect Avenue/East Fourth Street area. These attractions have opened up the Warehouse District and the restaurants in the West Sixth and West Ninth street area as well. Soon, a casino and medical mart will be added.
Cities are great if they have people living downtown or if they attract people to the downtown area. We can have some of both. Each new feature we add brings us closer to the goal. The old food terminal and other buildings never could have accomplished what Gateway has done for our center city and our suburbs. Thank you, Gateway. James M. Biggar Chairman and CEO Glencairn Corp.
30-somethings, eat this ■ This is more of a rant to the editor rather than a letter. I got a kick out of See LETTERS Page 9
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It’s a matter of figuring and refiguring when to order inventory, what and when to buy, how many people to have available to work and which machines have extra capacity, local manufacturers said. Many can’t see more than a few weeks, if not days, into the future in terms of order volumes. And too often, they say, neither can their customers. “We put together forecasts and we get forecasts from our customers, but by definition they are always wrong. It’s like a broken clock — it’s right twice a day,” said Hawk Corp. president Chris DiSantis, whose company makes friction materials for brakes, clutches and transmissions used in automobiles, heavy equipment and motorsports. Customers frequently tell their supplier to expect a certain sized order, then downsize the order before it’s produced, often at the last minute. They’re motivated to over-order because they know if they run out of inventory it will take time to replace it, but once they see that their own order flow is less than expected, they are just as motivated to cancel existing orders so they can avoid having cash tied up in extra inventory. Unfortunately, the most optimistic business often is left holding the inventory bag — and that breeds caution. “What we’re seeing now is just a general cautiousness in the market,” Mr. DiSantis said. “In 2008, when business was still booming, it was the opposite problem — customers would say they needed 20% more and then they needed 30%.”
A touch of gray Meanwhile, those in charge of purchasing and production are constantly scrambling to prioritize customer orders and inventory, often guessing what to buy in anticipation of what their customers might need next. “A lot of times, I feel like I’m working in Las Vegas — the way you have to guess with a crystal ball as to where things are going,” said Dave Morgan, purchasing manager for Master Products Co. in Cleveland. On the factory floor of Master Products, which produces specialized washers and other stamped metal products, production manager Mike Zupka is dealing with his own set of variables and predictions. “I didn’t have gray hair five years ago,” quipped Mr. Zupka, who said in 40 years at the company he has
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WHEELS ARE TURNING Manufacturers face a variety of challenges as customers’ order levels vary drastically amid economic uncertainty. ■ Shops have to figure out how much inventory to buy and when to place those orders. These days, it’s tough to anticipate future order volumes. ■ Employees in charge of production and purchasing are scrambling to prioritize orders and inventory. ■ Lead times are increasing. never seen an environment as challenging as today’s in terms of the planning and work required to make sure production runs are completed and goods are shipped on time. Mr. Zupka said he’s spending more time than ever talking with customers, suppliers and his company’s sales force to get the information he needs to make constant revisions and refinements to production schedules. “I live in an area of the computer called the scheduling white board,” Mr. Zupka said. He said production schedules that formerly were reviewed or changed once a week now often are revised daily. All the revisions don’t mean Master Products is disorganized. Far from it. If anything, the company is more organized, with more internal communications, than ever before, Messrs. Morgan and Zupka said. But some things are beyond a company’s control, such as whether its own suppliers can provide the raw materials, parts or finished goods expected of them. And that’s causing many manufacturers to spend more time talking with or visiting suppliers to make sure they can secure what they need to keep their workplaces humming. For companies such as Hawk Corp., it’s a matter of whether basic materials such as steel are available, Mr. DiSantis said. Sometimes they’re not, which means production must wait until they arrive on the plant floor.
Longing for predictability In an ironic twist, just when materials are needed more quickly, lead times are increasing. “Lead times are getting long — 14 weeks or longer is not unusual,” said
Charlie Kerr, owner of Kerr Lakeside, a Cleveland manufacturer of highquality socket screws. And that’s where the train wreck can happen — when customers demanding that last-minute orders be filled quickly smash into inventory lead times that just won’t budge. Avoiding the carnage is every company’s goal, as is maintaining good working relationships with both customers and suppliers. For many manufacturers, trying to achieve both is a combination of art and science. “We learn to manage by understanding customers, by looking at historical data, by understanding the various industries we serve,” said Jerry Zeitler, president of Die-Matic Corp, a precision metal stamper in Cleveland. It’s a pressurized process in a stillrecovering economy. “All customers want parts when it best fits their schedule and needs and don’t want to hold inventory at their plants,” Mr. Zeitler said. “They want the best of both worlds. They also claim they worry about their suppliers and want healthy suppliers, but they have done little to help the situation.” That’s because no one wants to be the company that takes on the risk of optimism, said Mike Noretto, a partner with the accounting and consulting firm Rea & Associates in Mentor and a consultant to area manufacturers. “They’re selling what they can produce, but they’re afraid to go to that next level of production because they don’t want to get stuck with it,” Mr. Noretto said. So, manufacturers must wait it out. They long for the day when order rates again will become predictable or, better yet, when they can toil away at standing backlogs as they did in better days. Those days might be coming, but they’ll arrive at different times for different companies and industries, predicts Ned Hill, an economist and dean of the Maxine Goodman Levin College of Urban Affairs at Cleveland State University. “The good news is going to start out distancing the bad news, but it’s going to be a mix,” Dr. Hill said. “The only predictability that matters to a business is on the order books, and that’s going to vary industry by industry. If you are in commercial construction, you’ve probably got awhile yet. If you’re in auto, hopefully it will be later this year.” ■
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LETTERS continued from PAGE 8
your recent video segment where you asked people their favorite local restaurant of the last 30 years. I am no expert on age — at my age (48) everyone looks young. However, my estimated calculation of the average age of the folks interviewed was 34.375 years old. Therefore, on average, they were 4 years old when the period started, and five of eight of them could not have been born 30 years ago. I did not consider them experts on the subject. A more appropriate question for this group would have been what was your favorite kids’ meal for the last 30 years — McDonald’s cheeseburger, Burger King chicken or Chuck E. Cheese Pizza. The most popular answer was Melt, of all places, and although they make a
nice grilled cheese sandwich, I don’t know anyone with an American Express Card who would say it is the best restaurant in Cleveland over the of the last 30 years. People — it’s a grilled cheese sandwich! I have lived in Cleveland for 48 out of 48 years and went to school or worked downtown since 1979 for 22 of the last 31. Therefore, I know a little more about it than your interviewees and have about average knowledge of people with my years and background. My personal favorites over the last 30 years were Alvie’s for breakfast, Theatrical for Lunch, Swingo’s for dinner, and Mowry’s for cocktails. Difficult to argue with this lineup. Let’s also not forget about some of the other downtown favorites such as Sammy’s, Jim’s Steakhouse,
Clevelander, New York Spaghetti House, Rusty Scupper, Boxwood, Leather Bottle, Otto Moser’s, and outliers such as Spanish Tavern, Guarino’s, The Oaks, Don’s, Carrie Cerino’s and Giovanni’s. (Melt is better than Giovanni’s? C’mon.) Not to mention, if you are going to focus on newer restaurants which opened, say, in the last 10 years, wouldn’t Lola have to be on the list? If Melt is considered by Clevelanders as the best restaurant over the last 30 years, we must be in the Greater Depression. Two slices of bread, cheese and a long line. I think I remember seeing pictures with this theme from the 1930s. Thomas J. Wrabel Director Barnes Wendling CPAs Inc.
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LEGAL AFFAIRS
INSIDE
13 ADVISER: BE MINDFUL OF FEDERAL BRIBERY GUIDELINES.
EASY BEING GREEN
Summons Crain’s Cleveland Business District Court Summons in a civil action
Northeast Ohio law firms v.
Case no. 0301072010
wasteful business practices You are hereby summoned to read the following story detailing how Northeast Ohio law firms are doing their part to minimize their impact on the environment. What are they doing? ■ Reducing paper consumption is No. 1 on most firms’ lists, as the legal industry consumes more paper than any other except publishing; ■ Making light fixtures energy-efficient; ■ Replacing in-office paper products with glass; and ■ At Thompson Hine, implementing a “freecycle board,” where employees give items to their co-workers instead of throwing them away.
Author: Arielle Kass, Crain’s legal affairs reporter akass@crain.com
Region’s law firms enhance efforts to reduce impact on environment
S
ome people do it for altruistic reasons. Others for economic ones. Still more because doing something for the environment looks good to clients. Irrespective of the rationale, though, attorneys say the result of law firms increasing their sustainability efforts is the same. And it’s all good. “Regardless of the motivation, the efforts have a beneficial impact,” said Doug McWilliams, a partner in the environmental, health and safety section at Squire, Sanders & Dempsey. “It’s easier to gain a consensus on a path forward if you’re not concerned about what the motivations are.” Mr. McWilliams said at his firm, reducing the amount of paper used or becoming more energy efficient is important to different people for different reasons. But the result at Squire Sanders and elsewhere is similar in that it means more firms and clients are paying attention to the environmental impact of the work they do and how they can reduce that impact. See GREEN Page 12
Consistent treatment easiest way to avoid pitfalls involved with office pools By JOEL HAMMOND jmhammond@crain.com
W
hen it comes to March Madness, it’s all about consistency. Sure, that goes for the 65 entrants in the NCAA’s men’s college basketball tournament, which kicks off March 18. But that also goes for employers attempting to find middle ground with the inevitable office pools that are contested in offices around the region and country: Regulate them? Ignore them? Or, in order to gain control, sponsor them?
“Clients ask me about this, and those are the three options,” said Eric Johnson, a partner at Walter and Haverfield and the head of the firm’s labor and employment law section. “Prohibiting these things can lead to other negative effects, especially these days. Employees will ask, ‘We can’t even have an office pool?’ “Many find the best way to handle it is to sponsor contests, so they get a handle on it and also aren’t killing camaraderie.” The key, said Mr. Johnson and Seth Briskin, the chair of the labor and employment group at Cleveland law firm Meyers, Roman,
Friedberg & Lewis, is consistency. No matter the intentions, companies still run the risk of inconsistently enforcing company rules involving usage of property and inefficient use of company time. When later it comes time to fire someone for something similar, that employee can point to a company permitting office pools on company time as an inconsistency. “This is a human resources issue: Having good policies and consistently applying those policies is the safest bet to avoid litigation,” Mr. Briskin said. Mr. Briskin, though, downplayed See POOLS Page 12
Here’s a good bet: When Kent State advanced to the Elite Eight in 2002, many office pool brackets were busted. PHOTO COURTESY KENT STATE UNIVERSITY ATHLETICS
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LEGAL AFFAIRS
Pools: Activity can connect staff Green: Clients interested in sustainability continued from PAGE 11
any extensive damage such a suit would cause, especially in at-will states — such as Ohio — where employers can terminate employees for any legal reason they see fit. He cited outrage over a December case where a Fidelity Investments office in Westlake, Texas, another at-will state, fired four employees over using company time to play fantasy football. “Comments online in that case said the company doesn’t have any right to terminate employees when managers were involved too, which is a dreamland,” Mr. Briskin said. “Companies in at-will states can terminate employees for any reason under the sun as long as it isn’t illegal. “Those employees can sue, but they probably would win more in the office pool.”
All about morale Fifty-seven percent of companies responding to a February survey by Alexandria, Va.-based Society of Human Resource Management said they organize a form of a college basketball tournament gambling pool, and 55% said morale was affected positively. Three Northeast Ohio companies cited morale as reason enough to organize some form of contest, or allow related activities, in conjunction with the popular men’s tournament or fantasy sports. ■ Cleveland architectural firm ka last year had its 64 employees each draw a name out of a hat, and whatever team came out, that employee had to amp up his or her spirit for that school. The most spirited got a “tiny bit of money,” said human resource and office manager Audrey Kekst. Employees took to e-mails to talk friendly trash about “Bruin” (UCLA) some coffee, to say something was “Very Courteous of U”
(Virginia Commonwealth) or simply to pass along team fight songs. Ms. Kekst said ka would do something similar this year, though plans have not been finalized. “(Last year) we had a little downsizing, and had people sitting across from others they didn’t know that well,” she said. “We thought, ‘Let’s do something fun.’ The spontaneity really took off and we had fun with it.” ■ Nick DeTomaso, the director of operations at Jakprints, a Cleveland printing shop, said the company does not condone fantasy or pool meetings, fantasy transactions or other gambling-related activity in the workplace, citing the technical illegality. Gambling on organized athletics is illegal, save for Atlantic City and Las Vegas. The firm does allow one employee telling another how badly, in a hypothetical situation, Jim’s Slims are going to beat the Springfield Isotopes in this weekend’s fantasy baseball championship. “The competitive nature tends to be a great team-building exercise and is great for employee morale,” Mr. DeTomaso said. ■ Willoughby-based tda architecture runs a free NCAA pool in which all employees may participate, and the winner receives a $25 gas card; additionally, the company this year will hold a chili cookoff on March 18 to kick off the festivities. “It’s just a way for the staff to connect and participate in something fun,” partner Chris Smith said. “By doing it like this, it’s engaging for everyone.” However, Walter & Haverfield’s Mr. Johnson did offer this advice: “The last thing you want to do is be a company managing a thing where money isn’t there, or there’s major money involved,” he said. “Fifty dollars is a lot different than $5, and that’s where trouble comes in.” ■
continued from PAGE 11
The Cleveland Metropolitan Bar Association started a program last year to certify firms that have taken steps to go green, and since then, it has had more than 40 law firms and law departments qualify for the process. While the CMBA does not double-check efforts, it does ask firms to state they are meeting certain criteria, including a commitment to reduce total office energy by 10% in the coming year. Carter Strang, the chair of the green initiative committee at the CMBA and a partner in the energy and environmental law practice at Tucker Ellis & West, said he saw the need to push a green initiative at his firm and more broadly after noticing a large disparity in what people were doing. “I began to check around to what firms had in place already,” he said. “Some were on the ball, but others were doing nothing.”
Walk the walk Mr. Strang said he used Tucker Ellis to test ideas for the larger CMBA program, which he hopes will continue to evolve and improve over the years. He wanted to avoid setting the bar too high at the start, he said, to ensure there would be significant buy-in. “This allows firms and lawyers the opportunity to show they’re doing something,” Mr. Strang said. “Lawyers make good leaders. This is something where we need to show some leadership.” Already, he said, Tucker Ellis attorneys are using 15% less paper per person. He said there are no figures on savings across the CMBA. Dave Nash, a partner at McMahon DeGulis LLP, said the environmental law firm was one of the first 10 firms in the country to pilot an American Bar Association sustainability program and it has been
certified by the CMBA. Recycling waste paper by printing on two sides saves more than $4,000 a year alone, Mr. Nash said. He said that when a firm makes the decision to be more sustainable, it’s about more than going green — it’s about doing the right thing. Especially at an environmental firm. “We’ve got to walk the walk, too, we can’t just talk the talk,” he said. “We have a responsibility to be responsible.” Mr. Nash emphasized, too, that the expectations on lawyers to go green shouldn’t differ at all from other white-collar workers, saying attorneys should not face either a higher or lower standard. He suggested that the high ethical standard a lawyer is expected to live up to should also extend to sustainability.
Little things, big difference At Hahn Loeser & Parks, Alan Kopit, partner in charge of the Cleveland office, said that firm’s green efforts really began in June 2008, when the firm moved its offices. Then, they replaced paper products with glass, used primarily recycled paper and made light fixtures energy sensitive. While Mr. Kopit said the firm likely would have done such things eventually, the move to a new space was a good opportunity to kick off a new program. And Mr. Kopit said the changes have made for a more pleasant corporate environment. “It just seems more civilized to drink a cup of coffee out of a glass mug instead of Styrofoam,” he said. And while Mr. Kopit said law firms don’t have the same environmental impact that a manufacturer might, they still do things that impact the environment. Alvidas Jasin, director of business development and chair of the Think Green Initiative at Thompson
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Crain’s to take nominations for Emerald Awards The Crain’s Cleveland Business Emerald Awards recognize Northeast Ohio companies that have implemented sustainable strategic priorities that significantly trim costs or increase cash flow with innovations and products that reduce its environmental footprint. Nominations for the 2010 program open May 3, with honorees recognized in a special section Sept. 6 and an event in mid-September. For coverage of the 2009 awards, go to www.Crains Cleveland.com/marketing/ emeraldawards.html.
Hine, said the legal industry is the largest consumer of paper outside of publishing. Mr. Jasin said one of the key changes his firm made was to reduce the amount of paper used, and reuse paper whenever possible. The firm also has a “freecycle” board where employees can give items to their co-workers instead of throwing them away, it encourages ride sharing and shares best practices across the country as other law departments seek ways to become greener.
Selling point Thompson Hine founded a climate change and sustainable business solutions practice group about two years ago, co-chair Andrew Kolesar said. Mr. Kolesar, who is also the leader of the firm’s environmental practice group, said more clients are starting to pay attention to sustainability. While clients ultimately make their decisions based on the lawyers that would represent them in a matter, he said there are clients who care about what firms are doing internally and they appreciate expertise in a particular area. While Mr. Kolesar said he expects more companies to begin focusing on sustainability, it has not yet translated into a question when companies request proposals from law firms about possible work. Mr. Jasin, though, said he has begun to see the question about a firm’s sustainable practice “more often.” “We know it’s top of mind with a lot of clients and we want to make sure we’re addressing that,” he said. Mr. McWilliams, at Squire Sanders, said European clients are more interested in knowing the law firm’s carbon footprint — and that of the work done for them — than American or other clients are. He said that question has led Squire Sanders to calculate that footprint then, naturally, to work to reduce it. “It’s important to different people for different reasons,” he said. “Some of us advocate for this on the basis of our responsibility as people and as stewards to reduce our impact. … It also reduces cost, so it’s an easy sell.” ■
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LEGAL AFFAIRS
In business overseas? Comply with federal bribery law
A
pparently not everything that happens in Vegas stays in Vegas. While in Las Vegas for the 2010 Shooting, Hunting and Outdoor Trade Show in January, 21 people were nabbed in a sting that the FBI set to catch violators of the Foreign Corrupt Practices Act, or FCPA. The FCPA is a federal law that prohibits bribery of foreign officials. All 21 people are alleged to have offered bribes to an FBI officer who posed as an official of an African country. The arrests sent shockwaves through the trade show’s attendees and are an indication that the federal government is increasing its enforcement of the FCPA. Currently, the Department of Justice has admitted to having 140 open FCPA investigations. Every business that sells overseas needs to make sure that they are not violating the FCPA. The FCPA has been around since 1974, and while it was an issue on many people’s checklists, most people were not very concerned about it. All that has been changing lately, as the FCPA now is one of the three areas in which the Department of Justice is focusing enforcement. They have recruited a new special team of prosecutors to handle FCPA cases, and the number of investigations they have conducted steadily has been increasing. These investigators have the resources of the federal government behind them. What’s more, attorneys at the Department of Justice can make names for themselves by handling high-profile cases, and the FCPA certainly gives them the opportunity to do that. In many countries, payment to a government official to keep or retain business not only is common, it is expected. However, the FCPA prohibits a U.S. business from giving anything of value to a foreign government or political official to gain an “improper advantage.” This puts U.S. businesses at a distinct disadvantage. This dilemma is magnified by the seriousness of the penalty for violating the FCPA. Violations of the act result in fines and even jail time: $100,000 to $5 million and up to five years for each violation. In 2009, the engineering and construction company Kellogg Brown & Root paid to the Department of Justice a $402 million fine to settle a case, disgorged to the Securities and Exchange Commission $177 million, and individuals now are facing criminal charges. Fines are not deductible, and individuals cannot be compensated to pay the fines. Not only is it illegal under the FCPA to make bribes, it also is illegal to attempt to do so. In addition, if you do not have adequate internal controls to prevent or detect violations, you already are violating the act. Also, you are responsible for foreign subsidiaries and agents who violate the act, so you cannot outsource bribes. Finally, if a company violates the FCPA, criminal culpability may go
all the way to the board of directors if proper steps have not been taken to ensure that the company complied with the FCPA. Directors and officers cannot plead ignorance, but must instead deal with the issue head-on. Most directors’ and officers’ insurance policies do not provide coverage for FCPA matters. The best defense to a violation of the FCPA is an effective corporate compliance program. Among other things, it must be tailored to the particular risks in your business, have strong support from the board of directors and be properly imple-
FREDLEFFLER
ADVISER mented. When a problem arises — such as a violation or the company is investigated — your employees must be
trained to contact senior management and the company’s attorneys immediately. Reporting and responses must be handled very carefully to minimize any damage. It is hard enough for businesses to make international sales, but the increased enforcement of the FCPA is going to make it even more difficult. There are not many ways around it, except for an effective compliance program. As such, companies selling overseas need to consider what they are doing to comply with the FCPA. Otherwise,
they could be painfully surprised — much like those people who didn’t make it home from Vegas last month. ■ Mr. Leffler, an Akron-based partner with Roetzel & Andress, focuses his practice on corporate and international transactions. He represents clients in structuring, negotiating and documenting strategic alliances, acquisitions and dispositions of businesses. In addition, he addresses matters necessary for the ongoing internal and external operations of business ventures.
MY BENESCH “They understand the legal side, the corporate side and my side.” Ray Dalton CEO PartsSource, Inc.
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Committed to Helping Our Clients Attain Their Goals
Communities adopt more business-friendly rules By KATHY AMES CARR kcarr@crain.com
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usinesses and communities often end up square dancing over the elements of a community’s tax structure or zoning code. But rather than continuing that do-si-do, many Northeast Ohio municipalities are instead leading companies into a more business-friendly environment by adjusting legislation to advance economic development. “Cities need to update zoning codes to make them relevant to today’s 21st-century business environment,” said Paul Oyaski, Cuyahoga County director of development. Lakewood, for example, passed legislation last April that awarded a $200,000 renovation loan to the owner of the 70,000-square-foot Bailey Building at Warren and Detroit roads as an incentive to lure new tenants. “We created an asset and used legislation to attract economic development,” said Nathan Kelly, director of planning and development for Lakewood. “We took an ugly, empty building and made it better looking. We have very highprofile tenants interested in the site.” The city also passed last May a sidewalk dining ordinance to allow restaurants to use city-owned sidewalks for restaurant seating. Since then, a half-dozen restaurants have opened, and one establishment reported a 15% increase in business. “The response has been really positive,” Mayor Ed FitzGerald said. “We used to have a lot of bureaucratic laws about restaurants.” Kevin E. O’Brien, director of the center for public management for the Maxine Goodman Levin College of Urban Affairs at Cleveland State, said he expects to see more municipalities explore or implement legislative changes to improve their business environment, but also said he predicts more movement on a broader scale. “The lack of economic growth has created an opportunity for states to award grants that stimulate economic development, so we may see more local jurisdictions collaborate” to receive these funds and attract new business, he said.
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In Wickliffe, the city council unanimously passed late last year an ordinance that establishes the Wickliffe Incentive Grant Program, which offers tax credits based on the size of the investment made by a company and whether it retains or adds jobs, the now former Mayor Thomas Ruffner said at the time the incentive package was passed. The city already has incentives for new businesses, but it did not have anything for businesses looking to expand and add more jobs. By doing so, Wickliffe emulated the incentives offered by nearby Eastlake and Mentor. “We wanted to remain competitive,” Mr. Ruffner said. Similarly, Westlake in 2009 passed a job creation grant ordinance to lure businesses to the area. Two firms — Lakewood-based Bonne Bell Co. and Westlake’s
Hyland Software — both took advantage of the move by expanding within the West Side city, said John Wheeler, director of the city’s law department. For all the economic benefits that legislation can spark, however, certain laws end up hindering business activity. Elyria, for example, is evaluating the current structure of its Design Review Committee, about which businesses and contractors are complaining because they say the committee’s design and building standards are too stringent. The city in November placed a moratorium on the design review process until a more streamlined system can be rolled out, law director Terry Shilling said. The moratorium was scheduled to be lifted Feb. 28. Not all municipalities, towns and villages have such review processes in place, and the goal of the committee, established in 2000 by Mayor Bill Grace, was to ensure uniformity among building construction and design. “One ice cream business complained because they wanted to upgrade their building, but had to use red brick, which is more expensive than some alternatives,” Mr. Shilling said.
Think big On a more collaborative level, communities also are joining forces to generate economic development by establishing joint economic development districts. A joint economic development district is created when a city or village joins with a township to create a development zone. JEDDs give communities the opportunity to generate more jobs and revenue. In Medina County, for example, commissioners are scheduled to review a proposed JEDD between Medina and Montville Township. The agreement calls for certain industrial/commercially zoned properties of Montville Township to be part of the JEDD; Medina and Montville would share in the revenue dollars created by the businesses located within the JEDD. As Northeast Ohio municipalities take steps to legislate their own business-friendly climates, regional collaboration also must be part of the larger agenda to maintain services in a cost-effective way and grow a property tax base that has been declining for 30 years, Cuyahoga County’s Mr. Oyaski said. “They need to find ways to collaborate and seduce new business investment for revenue,” he said. Indeed, a more broad-based proposed attempt at regional collaboration is under way. Under the proposed Regional Prosperity Initiative, a 16-county entity would share new growth revenue from cooperative land use planning. The idea is to eliminate inefficiencies in government operations that hinder the region’s capacity to attract and retain business. “We have to do it if the region is going to compete in the global marketplace,” said Hudson Mayor William Currin, who also is the initiative’s co-chairman. ■
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In data breaches, repairing reputation as important as legal obligation Responsibilities to customers, authorities could be minor depending on type of information leaked By ARIELLE KASS akass@crain.com
F
rom banks to hospitals to the department stores where you did Christmas shopping, your information is out
there. Sometimes it’s a Social Security number. Other times, your credit card information. Maybe your driver’s license number. And sometimes that information gets lost or stolen. That was the case at FirstMerit Bank branches in Elyria, Westlake and Streetsboro in October, when locked trash bins filled with unshredded documents were taken. It also happened to patients and donors at Akron Children’s Hospital in 2006, when their information was viewed during a network expansion. Countless other breaches have taken place across the nation and state. So what happens when information is breached? And what responsibility does the business or institution have to affected customers? The answer changes depending on the state you live in or what information has been compromised, said Columbus attorney Kevin D. Lyles, a partner at Jones Day who leads the firm’s privacy and data security practice. In Ohio, companies are required to disclose that information has been breached only if a customer’s first and last name or first initial and last name are attached to the compromised data. So if a Social Security number is leaked, the customer may never know — unless a name is attached to it, too. Mr. Lyles also said Ohio’s laws only refer to data that were compromised electronically, like the 2006 case when hackers broke into the database of Akron Children’s Hospital and stole donors’ bank account information and the personal and medical histories of hundreds of thousands of patients. While Mr. Lyles said he would
advise clients who lost paper copies of customer data — as FirstMerit did earlier this year — to come clean about the theft, they may be under no legal obligation to do so. A FirstMerit spokesman said customers were notified and security was modified, though the bank would not discuss how. “There’s no obligation there to notify,” Mr. Lyles said of non-electronic thefts. “There’s a criminal market to buy that stuff (personal data in electronic form). Paper, I can’t imagine anyone’s trafficking in that.” The electronic information to which Ohio’s laws apply doesn’t actually have to be stolen to qualify for notification under the state’s requirements — it just needs to be breached. Once that happens, Ohioans must be notified within 45 days, regardless of the state in which the breach occurred, Mr. Lyles said.
“So much of what’s at issue here is a company’s goodwill.” – Breck Weigel litigation partner, Baker Hostetler’s Cincinnati office encrypting data as it travels, but not while it is at rest. He said while it is hard to say whether there have been more or fewer instances of data being inappropriately accessed, it seems that such breaches now are getting more media attention. Mr. Lyles said that may be because as more states adopt reporting laws, information is required to be released to consumers more frequently. Matt Davis, a principal at Cleveland-based SecureState, an information security management consulting firm, said businesses likely are paying more attention as laws like the Health Insurance Portability and Accountability Act have been altered to have more stringent reporting requirements.
Since Feb. 17, third parties that have access to patient information have been required to be HIPAA compliant, which Mr. Davis said “changes the burden” of compliance, broadening it. Aside from HIPAA requirements, Mr. Davis said even if a company isn’t stuck with a fine for compromising customer data, it likely would be required to pay for replacement credit cards for consumers, or the cost of notification to those whose information was accessed. He estimated that it would cost a company between $200 and $300 per record that was breached to make the proper notifications and replacements. “Why wouldn’t you treat a credit card number as a $100 bill?” Mr. Davis said. “That’s what it’s worth on the black market.”
Staying on guard Colleges and universities are among the most frequent targets of hackers, Mr. Davis said, because while they have a good deal of information about both students
and employees, “the academic freedom concept, the openness is pervasive.” Stolen laptops also are a frequent occurrence. Baker Hostetler’s Mr. Weigel said that is one of the most difficult cases to deal with because it’s impossible to conduct a forensic exam on the computer to learn how it was breached, or even if it was at all. Both he and Mr. Lyles said rules in the state and nation are getting tougher every day. Companies are expected to do more to protect data, Mr. Lyles said, and classaction or other consumer lawsuits against companies that released data are more likely to succeed if customers can show that they had a “reasonable expectation” their data would be stored safely, and it was not. He cautioned, though, that the “fear and hassle” of dealing with compromised information often has not been enough to win lawsuits in the past. People need to show they actually were damaged by the information’s loss. ■
‘Preparation is the key’ Breck Weigel, a litigation partner at Baker Hostetler in Cincinnati, said companies that experience data breaches may have to worry about rebuilding consumer goodwill, more so than any fines that could be imposed by the Federal Trade Commission or, in some cases, an industry watchdog like the Payment Card Industry Security Standards Council. “They may have no legal obligation to provide notice, but so much of what’s at issue here is a company’s goodwill,” he said. “Preparation is the key.” Mr. Weigel said companies that have access to sensitive information already should have a process in place to respond to breaches before one happens and should ensure that data is properly encrypted. Kelly Todd, an Omaha, Neb.-based project leader for Open Security Foundation, an online database that tracks data breaches, said problems often come from companies
IN BRIEF ■ TAKING THEIR SHOW ON THE ROAD: The Ohio Supreme Court will convene in official session in Huron County on April 21 as part of the court’s semiannual Off-Site Court Program. The Off-Site Court Program, initiated by Chief Moyer Justice Moyer in 1987, has gained national recognition as a model program for education about the judiciary. The program is intended to enhance students’ understanding of the legal system by providing an opportunity to attend and observe the proceedings of the Supreme Court in person and to interact with justices, attorneys and court staff. Students from the area and their teachers will receive curriculum material to study before the session, including summaries of the specific
cases to be argued. Attorneys will team with educators at participating schools to explain Ohio’s judicial system and review case materials. The Huron County session will mark the 59th time the Supreme Court has heard oral arguments outside Columbus during the past 23 years. ■ NEW KIDS ON THE BLOCK: More than 400 prospective lawyers took the Ohio Bar Examination last week. Results from the exam will be announced on April 30, and individuals who passed the exam and meet all other requirements for admission will be sworn in on May 10 during a special session of the Ohio Supreme Court.
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David K. Hales Gus Kallergis Donald E. Lampert James M. Lawniczak Charles B. Lyon Scott C. Matasar
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*Calfee attorneys do not wear actual capes. They do however counsel clients and litigate on their clients’ behalf. The attorneys guide them through complex situations by remaining focused, disciplined, and always fully engaged. And that doesn’t mean they’re trying to be super-human, just human. The way an attorney should be. Super Lawyers and Rising Stars are registered trademarks of Thomson Reuters, Legal division.
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Technology: International demand expected to burgeon continued from PAGE 1
of JumpStart Ventures, which is the investment arm of venture development group JumpStart Inc. For one, Ms. Braun said, it shows private investors believe local cleantech companies can compete in what experts expect will be an enormous market. She said finding cheaper ways to create clean energy would be “like curing cancer.” Plus, companies developing clean technologies can capitalize on the expertise other Northeast Ohio companies have in manufacturing and advanced materials, Ms. Braun
said. “It’s exciting because it plays on a base in Ohio,” she said. The Venture Capital Report — compiled by JumpStart, technology advocacy group NorTech and BioEnterprise Corp., which assists health care companies in the region — showed venture investments in cleantech companies in the region totaled $20 million, or just over 20% of all venture investments, in 2009. The dollar figure is way down from 2008, when cleantech investments totaled nearly $51 million, but the percentage in 2009 was slightly
higher because venture investing as a whole slowed down due to the recession. Despite the slowdown, the 2009 dollar figure for cleantech companies still beat figures from 2005, 2006 and 2007.
Single digits no longer Northeast Ohio cleantech companies in 2005 received less than $8 million, or 3% of all the venture investments made that year. They’ve gained more attention, however, in ensuing years. Cleantech companies in 2006 snagged $19 million, or 12% of all venture investments, and they received more than $18 million — just under 6% of all venture investments — in 2007, a year in which Northeast Ohio startups raised a record $318 million in venture capital. Ms. Braun said more cleantech companies have been approaching JumpStart in recent times. She expects the sector’s dollar amount to grow as the region’s effort to increase venture capital investments in all industries continues. Richard Stuebi, who six months ago joined Early Stage Partners in Cleveland as the venture firm’s
CLEANTECH INVESTMENT Northeast Ohio cleantech startups, which are developing technologies that range from wind turbines and fuel cells to water purifiers and new types of insulation, are receiving a larger percentage of venture capital investments than they were four years ago. Investments, across 21 counties
Year
Dollars
%
2009
$20.08M
20.28%
2008
50.87
19.59
2007
18.30
5.77
2006
18.64
11.76
2005
7.76
3.00
SOURCE: JUMPSTART, NORTECH, BIOENTERPRISE CORP.
cleantech specialist, agrees. Twenty percent of all venture investments is about as much as the region can expect cleantech firms to pull in because investors will spare much of their money for deals in life sciences, advanced materials and manufacturing — the region’s traditional strengths, said Mr. Stuebi, who also is BP Fellow for Energy and Environmental Advancement with the Cleveland Foundation. Still, Mr. Stuebi has been impressed by the quality of cleantech companies he has reviewed since joining Early Stage Partners six months ago. He would love to see cleantech investments in the region increase, which likely will happen if venture
investing in Northeast Ohio keeps growing. “I think the size of the pie needs to increase,” he said.
Anticipating the next Google Nationwide, venture investing in cleantech grew to $4.1 billion in 2008, up 52% from $2.7 billion in 2007, according to figures from the National Venture Capital Association of Arlington, Va. Although 2009 figures haven’t been released, association president Mark Heesen said cleantech figures fell in proportion to overall venture investing, which dropped about 38% to about $17 billion in 2009 from $28 billion in 2008. Mr. Heesen said Ohio has reason to believe it can be competitive in cleantech, given the state’s expertise in manufacturing and advanced materials. “There’s a reason to look at Michigan and Ohio and Indiana, states that have a core competency already,” he said. Mr. Heesen said international demand for clean technology is going to be massive in the coming years, especially because of concern over global warming. Venture capitalists are paying attention: He noted that six of his association’s 26 board members paid a visit to the U.S. Department of Energy when the board gathered for a quarterly meeting in Washington, D.C. That never used to happen, he said. “The next Google, the next Genentech, is going to come out of the cleantech space,” Mr. Heesen said. ■
Doing our part to keep our Great Lake great. The Northeast Ohio Regional Sewer District is proud to protect public health and our environment.
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Credit: Fed solicits views from banks, businesses continued from PAGE 1
and is contemplating selling her home to use the equity as working capital. Ms. Salontay is one of the small business people Sandra Pianalto, president and CEO of the Federal Reserve Bank of Cleveland, is referring to when she says — as she did in a speech in Dayton last Thursday, Feb. 25 — that “the amount of passion each side is bringing to the table (in the lender-borrower relationship) is unprecedented in my experience.” The Fed has been conducting “an extensive outreach program to hear the views of small business owners, community bankers” and others, Ms. Pianalto said, according to a transcript of her speech. Ms. Salontay was one of the participants in that program, and she attended a Feb. 11 meeting in Cleveland with more than a dozen other small business owners. From the perspective of small businesses owners, Ms. Pianalto said, credit is extremely tight. She said owners also have complained that they’ve had difficulty obtaining or maintaining credit on acceptable terms.
It’s just business Randy Markey, chairman of
telecommunications equipment developer Phylogy in Santa Clara, Calif., and managing partner of Capital Acceleration Partners in Cleveland, said Phylogy had to negotiate with PNC Bank to keep it from reducing the company’s line of credit by one-third. It was “not a comfortable conversation,” Mr. Markey said, but one that was necessary to have, and far in advance of when the line was set to expire. If the reduction had happened, he said, Phylogy would not have been in a position to succeed as a company. Mr. Markey said, though, that he understood throughout the negotiations that PNC was not trying to make the change because of any animosity for Phylogy; it was just business. “If we’re being rational about it, they made sense,” he said of the changes PNC required before it would renew the line. “It’s not because the bank wants to make your life miserable. It’s because their world has been turned upside down, too.” Jim Huntsman, president and CEO of the International Soap Box Derby Inc. in Akron, said the 76year-old institution got into trouble with its bank, FirstMerit, when it
“Now, they want your wife to sign personal ... your dog to sign personal.”
other companies are not always as fortunate.
– Tony George, chairman, The George Group
Tony George, chairman of The George Group — a holding company that owns the Harry Buffalo restaurants and Westside Jaguar, Land Rover, Volvo and Mazda, among other properties — said he has laid off 350 employees over the past year, though about 1,000 people continue to work for him. Mr. George, who also attended the Fed’s Feb. 11 session with small business owners, said he’s able to survive because he’s a good business person, despite his company’s holdings in real estate, restaurants and car dealerships — “three businesses that are not really good to be in right now.” But he said as he’s negotiating a new line of credit, he’s found that banks don’t want to work with him. As an example, instead of asking business partners as a whole to guarantee 100% of a loan, they’re now requiring that each individual do so, Mr. George said. “Now, they want your wife to sign personal, your kid to sign personal, your dog to sign personal,” he said. “What they’re doing now is breaking the backs of small businesses. We’re
was forced into default for being unable to make more than interest payments toward the $580,000 it owed on a $700,000 credit line. Because of the derby’s history in the community and its impact of $1.5 million to $2 million on the local economy, the city of Akron guaranteed the note, but Mr. Huntsman said without that help, the derby could have closed its doors, or been poached by another city that could afford to help keep it going. Mr. Huntsman said while he wished the derby hadn’t found itself in the situation it did, he understood that the bank was doing its job. “We didn’t view them as the enemy or the bad guy,” Mr. Huntsman said. “Unfortunately, it’s happening to too many guys, too many different companies right now, and not just in the community, nationwide. I have friends going through the same thing. Everybody’s struggling right now.” He said while the derby was “very fortunate” to have a happy ending,
Assets on the line
17
the boots on the ground.” Indeed, Ms. Pianalto noted in her speech last week that small businesses make up nearly 99% of all firms, account for more than half of all private-sector employees and have generated 64% of net new jobs over the past 15 years. “Collectively, these statistics tell us that small business is in fact big business, and its impact is even greater because it remains one of the most innovative and flexible parts of the economy,” she said in the speech. Kenneth McElrath, another attendee at the Fed’s Feb. 11 meeting and president of telecommunications company MAC Installation & Consulting LLC in Bedford Heights, said business owners who realize how integral they are to the economy are frustrated that they’re unable to go to banks to get help growing their companies. Mr. McElrath said he is seeking more private sector work because it pays faster than public sector work and is pressuring clients to pay him sooner because “going to banks isn’t really the best answer.” Mr. McElrath said, too, that the tendency of small businesses to use real estate as collateral often means they’re in even more trouble with their lenders because of the declining value of the real estate that backs up their loans. “It’s hard to get an increase in your line of credit when your assets are going down,” he said. ■
NORTHEAST OHIO INVESTMENT BANKS LISTED ALPHABETICALLY
Company Address Phone/Web site
Year founded
# of local investment bankers
Brown Gibbons Lang & Co. 1111 Superior Ave., Suite 900, Cleveland 44114 (216) 241-2800/www.bglco.com
1989
Bruml Capital Corp. 1801 E. Ninth St., Suite 1620, Cleveland 44114 (216) 771-6660/www.brumlcapital.com
Headquarters
Specialties
Chief investment banker(s)
Top local executive Title
21
Cleveland
Merger advisory services, restructuring, capital raising
Michael E Gibbons senior managing director
Michael E. Gibbons senior managing director
1986
3
Cleveland
Merger advisory services, sell-side and buy-side transaction advisory services, raising private capital, valuation and fairness opinions
Candlewood Partners LLC 10 1/2 E. Washington St., Chagrin Falls 44022 (440) 247-2800/www.candlewoodpartners.com
2001
5
Cleveland
Restructurings, debt financings, mergers and acquisitions, distressed investments
Glenn C. Pollack managing director
Glenn C. Pollack managing director
EdgePoint Capital Advisors 3700 Park East Drive, Beachwood 44122 (216) 831-2430/www.edgepoint.com
2000
8
Beachwood
Manufacturing, distribution, technology, chemicals, transportation, metal forming, health care
Dan Weinmann, John Herubin, Russ Warren, senior vice presidents
Thomas Zucker president
Evarts Capital LLC 20600 Chagrin Boulevard, Suite 495, Cleveland 44122 (216) 991-1201/www.evartscapital.com
1975
4
Shaker Heights
Merger and acquisition advisory services, sell-side G. William Evarts and buy-side transaction advisory services, capital Todd Peter placement and financial restructurings managing partners
G. William Evarts Todd Peter managing partners
Harris Williams & Co. 1900 E. Ninth St., 20th floor, Cleveland 44114 (216) 689-2400/www.harriswilliams.com
1991
12
Richmond, Va.
Dave Hegeman, managing dir.; Sale advisory, M&A advisory, restructuring, capital Geoffrey Frankel, managing raising, fairness opinions dir., head of restructuring advisory services
Dave Hegeman managing director
Holmes Hollister & Co. 1111 Superior Ave., Suite 1400, Cleveland 44114 (216) 937-2320/NA
2000
4
Cleveland
General industrial, transportation, speciality materials, Internet, for-profit education
John B. Hollister III co-managing partner
KeyBanc Capital Markets 127 Public Square, Cleveland 44114 (216) 689-3000/www.key.com/html/LP-KBCM.html
NA
375
Cleveland
Consumer, energy, financial sponsors, industrial, real estate
Christopher M. Gorman president, KeyBanc Capital Markets
MelCap Partners LLC 5164 Normandy Park Drive, Suite 285, Medina 44256 (330) 721-1990/www.melcappartners.com
2000
4
Medina
Middle market investment banking firm, merger and acquisition advisory services, private placement of debt and equity capital, general advisory services
Merkel & Associates Inc. 29325 Chagrin Blvd., Suite 101, Pepper Pike 44122 (216) 831-1440/www.merkelandassociates.com
1986
3
Pepper Pike
Manufacturing, distribution, business services
Nicholas B. Merkel president
ParaCap Group LLC 6140 Parkland Blvd., Mayfield Heights 44124 (440) 995-5100/www.paracapgroup.com
2006
2
Cleveland
Insurance, financial institutions, waste management, industrial
Jeff Boyle Will Areklett managing partners
Raintree Capital Partners(1) 1350 Euclid Ave., Suite 800, Cleveland 44115 (216) 774-1100/www.raintree-capital.com
2004
7
Cleveland
M&A advisory services, capital placement and financial restructuring, turnaround management
James Lisy, Mikel Harding, Bill Frazier, managing directors
Stifel, Nicolaus & Co. 30100 Chagrin Blvd., Suite 101, Cleveland 44124 (216) 593-7306/www.stifel.com
1890
11
St. Louis
Merger advisory services, capital raising, public finance, fixed income, retail brokerage services
Charles R. Crowley, managing director; Alan G. Baucco, sr. vice president
Vetus Partners 1300 E. Ninth St., Suite 600, Cleveland 44114 (216) 333-1840/www.vetuspartners.com
2006
6
Cleveland
Distribution and logistics, engineered products, automation, controls and electrical products, specialty materials, corporate carve-outs and divestitures
Western Reserve Partners LLC 200 Public Square, Suite 3750, Cleveland 44114 (216) 589-0900/www.wesrespartners.com
2004
20
Cleveland
Corporate merger advisory services, corporate capital raising, restructuring and bankruptcy, real estate finance
Robert W. Bruml president
Albert D Melchiorre president
Jay K. Greyson managing director, principal
Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com.
(1) Formerly Cohen Capital Advisors Ltd.
Albert D. Melchiorre president
Jay K. Greyson managing director, principal Ralph M. Della Ratta managing director
RESEARCHED BY Deborah W. Hillyer
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Strategy: Bank may not be only player in future bids continued from PAGE 3
said there are several publicly traded banks in the Chicago area that are trading below $1 a share and that may be available in the near future. “It’s only a matter of time” before more banks in Chicago and throughout the Midwest fail, Mr. McEvoy said. “It’s more than just one.” Greg Hernandez, a spokesman for the FDIC, said there were four bidders for George Washington Savings Bank, and that they made a total of eight bids. There were 366 qualified bidders for the institution. Another Chicago-area bank that failed Dec. 4, Benchmark Bank, had just two bidders from a similar number of qualified bidders, he said, while others — like Community Bank of Lemont, which failed Oct. 30 — had 18 bidders making 41 bids. Competition for failed banks will rise, Mr. McEvoy said, as more banks stabilize and decide to take advantage of their relative stability for growth.
existing Ohio franchise, he said, and there are more than twice as many small and mid-market companies in Chicago that could provide lending opportunities for the bank. In addition, Chicago’s median income of $67,000 is more than $14,000 higher than that of the bank’s Ohio footprint. FirstMerit also has branches in western Pennsylvania. “It’s a much bigger and more affluent market. It’s fractured,” Mr. Davis said of Chicago. “There are a lot of opportunities to acquire troubled institutions.” Since January 2009, more than a dozen Chicago-area banks have failed, according to the FDIC. With more than 700 banks on the FDIC’s troubled bank list, failures in the Midwest are bound to be plentiful.
‘It’s only a matter of time’ Terry McEvoy, managing director and bank analyst at investment firm Oppenheimer & Co. in Portland, Me.,
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Tom Mitchell, a senior financial analyst at Miller Tabak & Co. in New York, also said he’d prefer to see FirstMerit making acquisitions that are easy for the bank to swallow. “They run the risk of having indigestion at some point over the next two to three years,” he said. “There’s always that risk if they make several acquisitions or a large acquisition.” Mr. Mitchell said he does not expect FirstMerit to run into that problem if the bank continues to focus on markets that it knows and
Bright Spots is a periodic feature in Crain’s Cleveland Business, highlighting positive business developments from across Northeast Ohio. To submit information, e-mail managing editor Scott Suttell at ssuttell@crain.com. ■ The Nord Center in Lorain, which provides behavioral health care services, has been recognized for its organizational performance with the 2009 Pioneer Award from the Ohio Partnership for Excellence, or OPE. The OPE is the state of Ohio’s performance excellence and quality program. OPE partners with organizations using the Baldrige Criteria for Performance Excellence to complete a comprehensive organizational assessment that helps organizations better understand and prioritize key strengths and improvement opportunities.
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avoids spreading itself too thin. Mr. McEvoy noted that prior to the Chicago additions, it had been 11 years since FirstMerit’s last acquisition. “As a basic plan, I would hope there would be enough opportunities in their own back yards, so to speak, that they would develop incremental growth through acquisitions without having to scatter themselves through too many areas,” Mr. Mitchell said. Mr. Greig said FirstMerit continues to look at organic expansion “opportunistically,” saying it is “far and away” the most accretive way to provide growth for shareholders. Mr. Davis said he is looking for FirstMerit to be “in the hunt” in Chicago throughout this year and next; Mr. McEvoy said he expects the bank to be smart as it makes its moves. “They can come in and say, ‘We are a very strong organization, how can we help you today?’” Mr. McEvoy said. “Their banking philosophy would work well in other Midwest markets.” ■
Mr. Davis of Stifel Nicolaus said he expects FirstMerit to fill out Ohio and Illinois in the near term, but he wouldn’t be surprised to see the bank enter Indiana or a similar market. However, he said he does not want to see the bank making a series of “rapid-fire” acquisitions. “All things in good time,” he said. “We want them to be able to absorb these things.”
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THEINSIDER
THEWEEK
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
FEBRUARY 22 - 28
Young people create game for young people
The big story: The Cleveland Clinic will spend $848 million on renovations and construction across the health system this year and is looking for ways to continue to expand its footprint locally, nationally and abroad. Clinic CEO Dr. Delos “Toby” Cosgrove announced those plans during his State of the Clinic address. The new construction projects come on the heels of the $1.2 billion spent in recent Cosgrove years on various building projects, such as the Clinic’s $506 million heart hospital, which opened in fall 2008. “By the end of the year, all of this campus’ clinical and outpatient facilities will be renewed,” Dr. Cosgrove said.
■ A new digital game soon will be available on iTunes, courtesy of students at Case Western Reserve University and the Cleveland Institute of Art. Students in a joint digital arts course of the two schools created ChromaWaves, a game designed for the Apple iPhone or iPod Touch. It’s expected to debut on iTunes the second week of March and will be downloadable for 99 cents, said Casey Burry, a spokeswoman for the Cleveland Institute of Art. In ChromaWaves, players shoot at enemy balls of color, some of which explode and create interesting patterns on the screen. The students created the game with guidance from Electronic Arts Inc. of Redwood City, Calif., which makes games for systems such as Nintendo Wii, Sony PlayStation and Xbox 360. Electronic Arts executives gave high ratings to ChromaWaves and even provided the students with contacts at Apple, Ms. Burry said. All proceeds from the game will be donated to Child’s Play, a nonprofit group in Seattle that provides games and gaming systems to children’s hospitals — Shannon Mortland
Change the tire CEO: Robert J. Keegan, the man who set Goodyear Tire & Rubber Co. on a stable track after becoming the company’s CEO seven years ago, will relinquish the chief executive officer’s post but will remain the tiremaker’s chairman. Akron-based Goodyear said a Keegan protégé, chief operating officer Richard J. Kramer, has been elected president and CEO effective April 13. Mr. Kramer, a 1982 graduate of Padua Franciscan High School in Parma, also was elected a member of the company’s board. It’s all about jobs: Most Ohio voters aren’t familiar with the phrase “Third Frontier.” And those campaigning to renew the state’s technologybased economic development program aren’t about to teach them. The campaign to renew the Third Frontier initiative is leaving the name of the acclaimed program out of much of the material it will use to convince voters to pass the $700 million bond issue, which will appear on the May ballot. Instead, the material will refer to the renewal as “Issue 1” and will use the tagline “United for Jobs and Ohio’s Future.” An Ohio Business Roundtable survey indicated only 16% of voters were familiar with the program.
The price is right: AmTrust Financial Corp. sold its property and casualty insurance subsidiary for more than originally expected. Novak Insurance Agency Inc. in Solon is the new owner of AmTrust Insurance Agency Inc. Vice president Ryan Novak said the company will bring on the subsidiary’s two employees and more than $2.5 million in premiums. The winning bid of $625,000 was more than Novak’s original $450,000 offer because of a competing bid of more than $500,000.
Fresh starts: Two startup companies each have raised about $1 million from investors in Taiwan and soon will be living and working together in Cleveland’s Midtown neighborhood. Business process software company Silico Corp. and electronic device maker Ardent Products Corp. plan to move into the former Hill Floral Products distribution building at 6401 Midtown Commerce Park Drive in September. Ardent bought the 23,500-square-foot building in December for $665,000 and is in the process of remodeling it.
Nasty weather? Bring it on
Rather than take offense at Forbes.com’s recent designation of Cleveland as the worst winter weather city in the country, clothing and sporting goods retailer Geiger’s has decided to embrace it by naming itself the “Official Supplier to America’s Worst Winter Weather City.” “We are proud and thrilled at the designation,” Geiger’s president Chas Geiger writes in a tongue-in-cheek news release. Mr. Geiger says he knows other cities “are clamoring for the crown,” especially after big snowstorms this season in places such as Baltimore, New York and Washington, D.C. “But one blizzard, no matter how big, does not a winter make,” Mr. Geiger goes on. “America’s Worst Winter Weather City is not awarded to a sprinter, but to those who live winter over the long haul.” And the Geiger family should know something about the long haul. It has been in business for nearly 80 years, and besides its landmark Lakewood store on Detroit Road, owns Geiger’s Ski & Sport Haus in Chagrin Falls. Thanks for the chuckle, Chas. — Mark Dodosh
Accentuating the positive
■ This is the winter version of making lemonade out of lemons.
■ Sparked by angry tweets, e-mails and calls about Forbes’ recent list dubbing Cleveland the most miserable city in America, Positively Cleveland is encouraging people to help counteract the label.
WHAT’S NEW
BEST OF THE BLOGS
COMPANY: Root Candles, Medina PRODUCT: Legacy by Root Hope Candle
Excerpts from blog entries on CrainsCleveland.com.
This is a candle for a cause. Root has introduced a new line of fragrance candles designed exclusively for the Susan G. Komen for the Cure breast cancer organization. The candles come in three scents: Port Cozumel, Golden Chrysanthemum and Fresh Lime Blossom. Retail price is $30. Root says 10% of the sales will support the Susan G. Komen program, with a minimum guaranteed donation of $25,000. The program runs through Dec. 31. For information, visit www.RootCandles.com. Send information about new products to managing editor Scott Suttell at ssuttell@crain.com.
Sustainable development can follow Cleveland’s lead ■ Some national publications look at Cleveland and see misery. The Nation looks here and sees an emerging “Cleveland model” for sustainable development. In a piece on the much-lauded Evergreen Cooperatives, the steadfastly liberal magazine said the project “has substantial backing, not only from progressives but from a number of important members of the local business community as well.” Co-ops in general “cut across ideological lines — especially at the local level, where practicality, not rhetoric, is what counts in distressed communities,” The Nation said. “There is also a great deal of national buzz among activists and community-development specialists about ‘the Cleveland model.’ Potential applications of the model are being considered in Atlanta, Baltimore, Pittsburgh, Detroit and a number of other cities around Ohio.”
Now through March 10, the region’s convention and visitors bureau is running a “Happy in CLE+” contest, in which people can go to www.whattheforbes.com and share their favorite things about the region through videos, photos or postings. They also can tweet their faves with the hashtag #HappyinCLE+. Three winners will be chosen at random on March 11. — Kathy Ames Carr
Case Law struts its stuff ■ Students at the Case Western Reserve University School of Law have won the right to compete in an international mock trial competition. The team of five students won the Midwest Super Regional Jessup Moot Court Competition in Chicago in February, and will compete in the international rounds this month. The team beat Michigan State, Valparaiso and Marquette in the preliminary rounds; John Marshall College of Law in Chicago in the quarterfinals; Thomas M. Cooley College of Law in Lansing, Mich., in the semifinals; and Loyola University School of Law in the finals to advance to the competition in Washington, D.C. In 2008, the school’s mock trial team won the Jessup World Championship. This is the third time in four years it has made it to the international competition. Michael Scharf, a law professor at the school and the team’s coach, said the win “brings a real positive image” to CWRU. “When we walk into that particular competition, we’re seen as the Harvard of law schools that compete,” he said. — Arielle Kass
What’s especially promising about the Cleveland model, The Nation said, is that “it could be applied in hard-hit industries and working-class communities around the nation. The model takes us beyond both traditional capitalism and traditional socialism. The key link is between national sectors of expanding public activity and procurement, on the one hand, and a new local economic entity, on the other, that ‘democratizes’ ownership.”
Beer makes everything better, including travel ■ Atlantic writer James Fallows occasionally uses his blog to report on exceptional beers he finds as he travels. He recently found Burning River Pale Ale from Great Lakes Brewing Co. It’s a beer “whose cheeky name I really admire, not to mention really admiring its hoppy taste,” Mr. Fallows wrote. He added: “I realize that Kids Today might not recognize the puckish elegance of calling a Cleveland beer ‘Burning River.’ Dennis Kucinich would be able to explain.”
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