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VOL. 33, NO. 37
CWRU med school plans take hold Grants mobilize vision of modernizing campus, building program By TIMOTHY MAGAW tmagaw@crain.com
Thanks to the history-making generosity of two local foundations, Case Western Reserve University is well on its way to entering the arms race among medical schools to provide their students and faculties with first-rate buildings.
The Cleveland Foundation and the Mt. Sinai Health Care Foundation each have committed $10 million to the effort — the largest grants in each of the foundations’ histories — to help finance a roughly 160,000-square-foot building on the site of the now-defunct Mt. Sinai Medical Center on East 105th Street in Cleveland. The university
hopes to break ground on the $50 million project in 2016. Case Western Reserve president Barbara Snyder called the School of Medicine’s faculty “the class of the field” but noted the 1950s-era facilities in which the school is housed “do not match the quality of the work and the people.” “We don’t have a physical pres-
ence in the community that matches that,” too, Ms. Snyder said. About half of Case Western Reserve’s peer institutions have planned for or built new facilities in the last five years, according to Dr. Pamela Davis, the medical school’s dean. While the school has had healthy enrollment in recent years, she conceded that some prospective students have tended to “draw back” once they saw the school’s current facilities. See CWRU Page 5
LAUREN RAFFERTY
Armed with data, test cases, Tribe looks to long term ‘Mid-term’ surveying continues as team conceptualizes ballpark’s future By JOEL HAMMOND jmhammond@crain.com
MARC GOLUB
From left, Cleveland State University freshmen Bryan Fox, Olivia Wulfhoop and Christian Cantu represent a class whose average high school GPA is 3.19, the best in the university’s history.
GPAs HAVE NEW VALUE State’s public universities shift recruitment focus from quantity to quality of student body, much like private college counterparts
By TIMOTHY MAGAW tmagaw@crain.com
N
ortheast Ohio’s public universities aren’t so much touting the number of freshmen flooding their campuses this fall as they are boasting about how much academic muscle those students can flex. The change in marketing emphasis is the result of a shift in recent years in recruitment strategies by public colleges as they seek to emulate their private school peers by attracting bright students who wield above-average ACT scores and high school grade point averages — and thus are more likely to leave college with a degree. “You’re going to improve in all fronts when you
For the last 2½ years, the Cleveland Indians have sent to season ticket holders, corporate sponsors and other stakeholders dozens of surveys about potential changes at 18-year-old Progressive Field. And, in light of those survey results, some changes already have been made, such as the conversion of a half-dozen luxury suites along the right-field line into the Indians’ Kids Clubhouse. Now comes the big stuff. Indians president Mark Shapiro said the team within the next 18 months will have a multiphase plan in place for long-term changes at Progressive Field. The plan will address ballpark capacity, which could decrease as seating areas are removed or consolidated; circulation, where the Indians will study how fans move about the ballpark; and the appropriate premium product mix, which would be the end result of all the surveys the team has done. It also will tackle the sticky subject of how to pay for the changes. See INDIANS Page 9
INSIDE Microloans meet demand Small business owners like Alison Musser (right) are taking advantage of microloan programs. Ms. Musser owns Babies Travel Too. PAGE 15 PLUS: Meet the interim CEO of BioEnterprise, Aram Nerpouni. PAGE 3
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HERE’S WHAT CAR THIEVES LIKE
COMING NEXT WEEK Can oil and gas fuel law firms? Many Northeast Ohio firms have added practices centered around Ohio’s booming oil and gas industry. In our periodic Legal Affairs section, we look at whether there’s enough shale-related work to go around for all these new players.
Be careful, owners of 2000 Dodge Caravans. For whatever reason, your car was the most stolen vehicle in Ohio during 2011, according to the new “Hot Wheels” report based on theft data submitted to law enforcement. The rest of the top five seem equally unlikely: the 1994 Chevrolet Pickup, the 1996 Honda Accord, the 1996 Oldsmobile Cutlass/Supreme/Ciera, and the 1999 Ford Pickup. The number of auto thefts statewide is declining, though they rose last year in Akron (to 804 from 752 in 2010) and Cleveland (to 4,089 from 3,510). Here are the statewide data:
REGULAR FEATURES Best of the Blogs ..........23 Big Issue ......................11 Classified .....................22 Editorial .......................10 Going Places ................19
List: Business insurance agencies ..................20 Personal View ..............10 Reporters’ Notebook ....23 What’s New ..................23
SEPTEMBER 24 - 30, 2012
Year
Ohio auto thefts
Change from prior year
2011
20,421
-3.3%
2010
21,118
-6.8%
2009
22,660
-21.1%
2008
28,738
-14.9%
2007
33,779
-9.7%
2006
37,425
N/A
SOURCE: NATIONAL INSURANCE CRIME BUREAU; WWW.NICB.ORG
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Lenders go after ‘underbanked’ to fill revenue gap
INSIGHT
Despite risks, banks create new accounts, loan products for nontraditional customers By MICHELLE PARK mpark@crain.com
JANET CENTURY
Aram Nerpouni, who on Sept. 1 became interim president at BioEnterprise Corp., has traveled all over the world and likes trying “to see the world through other people’s eyes.”
MIDDLE MAN Years of travel could help BioEnterprise’s new leader become the biomedical community’s head diplomat By CHUCK SODER csoder@crain.com
GET TO KNOW ARAM NERPOUNI
D
■ Aram Nerpouni on Sept. 1 became interim president of BioEnterprise Corp. ■ Mr. Nerpouni has spent about five years during two stints at BioEnterprise. In between, he helped launch the Austen BioInnovation Institute in Akron. ■ He has visited 35 countries and has a lot of experience working abroad: Mr. Nerpouni and his father started an exporting business, and he later joined cosmetics maker Bonne Bell, focusing on international business and marketing.
on’t go quizzing Aram Nerpouni on pop culture trivia from his youth. During the late 1970s, his family moved from Boston to Greece. Then to Germany. And then to Bahrain. So — other than “The Muppets” and “Rawhide” reruns — he didn’t catch a lot of American TV. Instead, he picked up a taste for a world beyond Boston and a desire to understand people who have different points of view. “I find it very interesting to try to see the world through other people’s eyes,” said Mr. Nerpouni, who has visited 35 countries. That trait could come in handy. Mr. Nerpouni, 42, on Sept. 1 became interim president of BioEnterprise Corp. He replaces longtime president Baiju Shah, who left the Cleveland nonprofit to help launch BioMotiv LLC, a development company in Shaker Heights. The ability to unite people who have different points of view is critical for someone in the president’s role at
BioEnterprise, which aims to help build Northeast Ohio’s biomedical industry. It was created partly as a way to spark collaboration among local hospital systems that compete with one another. Representatives from the Cleveland Clinic, University Hospitals and Summa Health System all sit on the BioEnterprise board. The organization also works with biomedical technology companies that focus on different sectors and are See DIPLOMAT Page 8
Driven in part by the uphill climb they face to grow revenues, more banks and credit unions have rolled out products similar to those of payday lenders to lure customers who don’t bank at all — a move they acknowledge carries risk but also the certainty of fee revenue. While a number of local institutions have offered products such as second-chance checking accounts for years, many have added in the last year or so small loan alternatives to payday loans and checkcashing services that compete more directly with nonbank lenders.
One sure motivator: In recent years, financial reform has shrunk — to the tune of tens of millions of dollars — banks’ noninterest revenues from such things as overdraft charges and debit card swipe fees. “Big banks have started to explore more and more opportunities for fee-generating businesses,” said Maclovio Piña, a senior equity analyst for Chicago-based Morningstar Inc. who follows KeyCorp, Fifth Third Bancorp and other regional banks. “It’s about growing their revenues, and this is definitely a way to do it.” The unbanked and underbanked, as they’re called, have increased in See BANKS Page 6
THE WEEK IN QUOTES “It behooves us as ... someone who uses state funds to use them wisely by enrolling students that we think have the most appropriate preparation to succeed.” — Todd Diacon, senior vice president for academic affairs and provost, Kent State University. Page One
“A large percentage of our business is based on the team (performance). But of that other small percentage, we have to be 100% perfect.” — Mark Shapiro, president, Cleveland Indians. Page One
“No matter how much banks open up their doors again … I think there’s always going to be a need for microlenders that structure themselves like we do.”
“Small businesses shouldn’t be asking how much (new processing technology) costs, but how it’s going to make them more money.”
— Eric C. Diamond, vice president, Cleveland office of the Economic and Community Development Institute. Page 15
— Merrell Sheehan, vice president of product development, Electronic Merchant Systems. Page 15
Clinic spinoff developing more interactive e-records software By CHUCK SODER csoder@crain.com
To Dr. Wael Barsoum, looking up patient records on software at the Cleveland Clinic feels a bit like using an old “green screen” computer. In two years, however, the process will feel more like using an iPad, he said. A Clinic spinoff called iVHR Inc. is developing software that could transform the way employees at the Clinic and other hospitals use electronic medical records. The software — which the Clinic plans to implement throughout its
main campus, starting in late 2013 — will take data from the Clinic’s Epic electronic medical record system and present it in a visual format that should be easier to use, said Dr. Barsoum, one of the four inventors of the technology. The software also will come loaded with features designed to help physicians and hospitals analyze all that data. Like those old green screen computers, today’s electronic medical record systems display almost everything in text, and they are not very intuitive, said Dr. Barsoum, who is vice chairman of the department of orthopedic surgery at the Clinic.
By contrast, the iVHR software is designed so that data is presented in a way so that medical staff quickly can understand it and find the information they need, Dr. Barsoum said. It will help guide them to that information, much like an iPad does, he said. “We wanted this to just make sense,” he said.
The buzz is building The Clinic plans to launch an early version of the software in the rheumatology department during the fourth quarter of this year. The department, which also plans to
have patients enter their medical histories using iPads, was chosen because its patients come and go often, said Gary Fingerhut, head of information technology commercialization at Cleveland Clinic Innovations, the hospital’s business development arm. A few hospital systems that are part of the Clinic-led Healthcare Innovation Alliance — which consists of hospitals and colleges that aim to help each other innovate and improve the quality of care they deliver — have shown interest in the software, too, said Mr. Fingerhut, who also is serving as iVHR’s acting CEO.
So have doctors, IT leaders and other technologists at several large health care providers contacted by iVHR, which stands for interactive visual health record, he said. “There is a lot of buzz around this,” Mr. Fingerhut said. “There is a lot of buzz because there’s a tremendous need.” The software isn’t just meant to make electronic medical records look pretty. First off, it can use patient data to create maps that show medical staff which patients are in which rooms. A video used to demonstrate what the final version See IVHR Page 22
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Market, sales growth prompt King Nut expansion in Solon By GINGER CHRIST gchrist@crain.com
Thanks in part to ascending sales to customers in the airline industry, King Nut Cos. is planning to expand again in Northeast Ohio. The Solon-based snack food maker is in negotiations to lease a new, 35,000-square-foot distribution center in Solon, according to Marty Kanan, president and CEO of King Nut. Mr. Kanan would like to move into the undisclosed location by October. The building would be the company’s fourth in Solon and fifth overall;
its only operation outside Solon is its downtown Cleveland Peterson Nut factory outlet store, which the company acquired in 2003. Distribution services currently housed in one of the company’s other sites will be relocated to the new site to make way for more manufacturing capacity. King Nut has invested $2.5 million in the company over the last two years and plans to invest another $1.5 million this year for new equipment and employees. Mr. Kanan said the company needs more space because of its growing sales. King Nut has increased its sales
an average of 10% per year for the last 20 years through product diversification and by entering new markets. “The growth has been pretty amazing for the size of our company,” Mr. Kanan said, though he would not disclose revenue figures. The company initially produced only its namesake product — nuts — but now makes pretzels, snack mixes, candy and dried fruit.
Up, up and away In the mid-1990s, King Nut moved into the airline sector and now annually produces 500 million small 12-gram bags of peanuts — its primary airline product. The company sells to the major U.S. airlines, including United, Delta, American and Southwest, as well as smaller and international carriers. United Airlines, which operates a hub at Cleveland Hopkins International Airport, in September 2008 stopped serving complimentary snacks to passengers and increased its buy-on-board offerings. That move opened a greater market for companies such as King Nut, which makes more money off sales of its larger buy-on-board bags of nuts than the 0.5-ounce bags used for complimentary snacks, Mr. Kanan said. “We’ve grown a lot in that some of the companies have started selling the nuts on board,” Mr. Kanan said. Airline sales represent 25% of King Nut’s business. Jeremy Selwyn, chief snacks officer for Taquitos.net, a snack review website, said while most airlines no longer offer hot food, more also are scrapping complimentary snacks as well. Airlines instead are selling snack boxes, which feature a variety of products, sometimes from a number of snack manufacturers, he said.
Hungry for snack makers
THIS IS ENGAGED LEARNING csuohio.edu
Stephen Kirk, CSU Alumnus Retired Chief Operating Officer, Lubrizol Stephen Kirk credits CSU for propelling him to the Lubrizol executive suite — where he launched an enduring corporate partnership for next-generation leaders.
As the 225-person company has increased its sales, King Nut also has been able to ramp up its work force by an average of 10% a year for the last 20 years, Mr. Kanan said. To continue King Nut’s growth, Mr. Kanan, who took helm of the company in 2003 from his father, Michael Kanan, is on the prowl for acquisition. While he is not limited to any specific geographic areas, Marty Kanan said he is looking for another nut company or snack company. Acquisitions, he said, are a way to gain market share in the company’s existing market segments. King Nut’s business is comprised of co-packaging, airlines, retail, food service, retail and private label. Among its customers are retailers Marc’s and Giant Eagle, fast food giant Wendy’s, and food distributors Sysco and U.S. Foods. It competes against other manufacturers such as Planters Nuts, Diamond of California and Emerald Nuts. ■
Volume 33, Number 37 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the third week of May and fourth 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 © 2012 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 800-290-5460 Ext. 136
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CWRU: Field anticipates shortage continued from PAGE 1
The construction onslaught has been fueled by a projected shortage of more than 90,000 primary care and specialty doctors by 2020, according to the most recent estimates by the Association of American Medical Colleges, the Washington, D.C.-based accrediting body for medical schools. In 2006, the association called on medical schools across the country to increase enrollment by 30% by 2016. However, Dr. Davis said Case Western Reserve has had difficulty growing the size of its incoming classes as much as the school would prefer, primarily because of its need for new facilities. Once the new facility is completed, Dr. Davis anticipates adding another 20 students per year, or growing the class sizes by about 10%. The medical school currently enrolls 814 students.
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tution, naming rights to the School of Medicine. The foundations and Case Western Reserve already have been in talks with other philanthropic groups, including the local hospitals, about contributing to the project. However, the two $10 million gifts should make the project “more real” to potential donors, according to Robert Eckardt, the Cleveland Foundation’s executive vice president. With Ms. Snyder at the helm, Case Western Reserve already has demonstrated its fundraising prowess in recent years and secured some of the largest gifts in the university’s history. The university last fall announced the public phase of a $1
billion fundraising campaign that as of Aug. 31 had netted $732.4 million. The Cleveland Foundation, meanwhile, is positioning the gift as the first of many “legacy grants” that will coincide with its centennial celebration in 2014. Officials say the grants will far exceed those the foundation typically awards. Cleveland Foundation CEO Ronn Richard, however, said the award to Case Western Reserve made particular sense to kickoff the foundation’s centennial celebration given the region’s growing role as a hub for bioscience and medical innovation. “We believe that the future of Case and the future of Cleveland are inextricably linked,” Mr. Richard said. ■
STUFF Greater Circle Living ups ante for employees Program relaunch incentivizes individuals to buy homes in area They’ve got more money this time around, and they hope to run out of it. The Greater Circle Living program is being relaunched this Thursday, Sept. 27, as part of University Circle Inc.’s 3rd Annual Showcase in the Circle and Home Tour. This time around, the participating employers — University Hospitals, Case Western Reserve University, The Cleveland Museum of Art, the Judson retirement community and the Cleveland Clinic — are offering to lend $20,000, up from $10,000, to employees who buy homes in neighbor-
hoods including Fairfax and Little Italy. If the homebuyers remain in the properties for five years, their loans are forgiven. Launched initially in 2008, Greater Circle Living is run by Fairfax Renaissance Development Corp. and University Circle Inc. It has provided funds for 38 home purchases, 48 instances of rental assistance and 15 exterior repairs. Also new for the relaunch, The Cleveland Foundation has increased its loans to $10,000 from $5,000, meaning qualified homebuyers can receive $30,000 in total to facilitate their purchases. Plus, employees no longer need to meet certain tenure requirements before being eligible for the loans. — Michelle Park
“We believe that the future of Case and the future of Cleveland are inextricably linked.” – Ronn Richard, CEO, Cleveland Foundation The medical school building boom has been particularly rampant on the local front. Northeast Ohio Medical University, or NEOMED, is in the midst of plotting a dramatic expansion of its aging campus in Rootstown to the tune of $130 million. Cleveland State University plans to build a $45 million building to support its burgeoning health care programs, including its expanded relationship with NEOMED. Also, the Cleveland Clinic and Ohio University this summer announced plans to invest a combined $49 million to open a medical school campus at the Clinic’s South Pointe Hospital in Warrensville Heights. The Association of American Medical Colleges had chided the Case Western Reserve in recent years for its aging medical school facility, which Dr. Davis joked “sort of looks like my high school.” The new space, the design for which is still being hashed out, roughly will double the amount of teaching room for the school, including new spaces configured for the school’s curriculum that emphasizes learning in small groups.
‘Catalytic support’ needed University and foundation officials say Case Western Reserve is at a fundraising disadvantage from some of its medical school peers — Johns Hopkins University School of Medicine in Baltimore and the Washington University School of Medicine in St. Louis, for instance — that have anchor medical centers from which to draw philanthropic support given by grateful patients. Although the gifts from both the Cleveland and Mt. Sinai Health Care foundations are indeed transformational, Case Western Reserve officials acknowledge they still have an uphill climb in order to secure the remaining $30 million to keep pace with the current timeline of breaking ground in four years. Dr. Davis said she hopes potential naming rights for the medical school building could attract a major donor, or perhaps an even larger gift — one that far exceeds the cost of the building — could land someone, or an insti-
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Banks: Clients bring benefits, risks Continued from PAGE 3
number, particularly during the recent recession. “There’s a lot of growth potential for the banks,” said James Thurston, spokesman for the Ohio Bankers League. “We’re not talking a few thousand people.” No, we’re not: According to a Federal Deposit Insurance Corp. survey released this month, more than one in four U.S. households are either unbanked or underbanked, slightly up from the findings of the FDIC’s 2009 inaugural National Survey of Unbanked and Underbanked Households. Households are considered “unbanked” if they report that no member has a checking or savings
account. “Underbanked” households have bank accounts but use nonbank services including payday loans, check-cashing services and pawn shops. The 2011 survey revealed that 821,000 more households have become unbanked since the first survey and roughly 10 million U.S. households, or 8.2%, do not have bank accounts, up from 7.6% in 2009. “The results … indicate that insured financial institutions have an important chance to grow their customer base by expanding opportunities that bring unbanked and underbanked individuals into mainstream banking,” FDIC acting chairman Martin J. Gruenberg said.
If their growing product sets are any indication, local banks and credit unions are aware of the opportunity. “There is an awakening in traditional financial institutions that they can no longer ignore this segment,” said Bruce Murphy, president of Community Development Banking at KeyBank, which has offered related products and services to the underserved since 2004. “I think two years ago, people were saying, ‘OK, guys, we have to pay attention to this,’” Mr. Murphy said. “Things are coming to market now.”
Captive audience The study indicated that the
SEPTEMBER 24 - 30, 2012
highest populations of unbanked and underbanked are in the South. In Ohio, the percentage of unbanked — 8.8% — was slightly higher than the national figure. The percentage of underbanked was slightly lower — 19.3% — compared to 20.1% nationwide. One advantage to banks of rolling out services for this population is diversifying their revenue stream, Morningstar’s Mr. Piña said. “If you’re a big bank, you already have in place a pretty robust backoffice operation, so you’re just casting your net much wider and essentially using almost the same resources,” he said. “That becomes more profitable despite the fact that it’s riskier.” Bank regulators, too, are driving the increased efforts by urging bankers to create programs that attract the unbanked into the regulated financial services system, said
KeyBank’s Mr. Murphy, a member of the FDIC’s Advisory Committee on Economic Inclusion. “Historically, institutions have always thought about going upstream,” seeking the higher-margin opportunities, Mr. Murphy said. “As banks are trying to find ways to drive revenue, they’re beginning to recognize (this) opportunity.” KeyBank introduced two products in August 2011: Key Basic Line of Credit, an emergency cash alternative to payday loans, and its checkless KeyBank Access Account, which gives customers an online account and a prepaid debit card. Fifth Third Bank has targeted the segment since 2004, but launched its newest product — a check-cashing product called Cash Access — in the fourth quarter of 2011. Northeast Ohio’s larger institutions aren’t the only ones throwing their products into the ring. Euclid-based Eaton Family Credit Union launched last October a socalled “second-chance” checking program, which it offers to people who have caused a loss to a financial institution. The institution charges $10 a month for the second-chance accounts. “It’s a way to start a relationship with somebody,” marketing manager Fred Siegel said. “It’s very nice to see somebody trying to help themselves.”
Risky business
Fairmount Minerals would like to extend a sincere thank you to all our valued Partners in Business/Partners in Community who participated in and supported the 2012 Bill Conway Founders Charity Golf Classic. Your generous support of this event is a tribute to Mr. Conway's legacy of community investment and will touch many lives through the fund recipient, United Way Services of Geauga County. This event was held on August 30, 2012 at the beautiful Sand Ridge Golf Club in Chardon, Ohio. We extend a special thank you to the following leading sponsors: PARTNER SPONSOR
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Niceties aside, there’s risk here. “With those who have made the missteps, there’s a history there and a concern,” said Christy Young, chief financial officer and senior vice president of GenFed Financial Credit Union in Akron, which has offered its “new start” MasterCard and “new start” checking accounts for more than a half decade. “With those who don’t have a (banking) history, it’s a gamble because they haven’t proven themselves yet.” But, Ms. Young noted, “Sometimes you form the most loyal of bonds with those in need of help.” Local institutions are confident in their risk mitigation. KeyBank, Mr. Murphy said, has cashed more than $200 million through its check-cashing KeyBank Plus program since 2004 and has lost less than 1%. It’s achieved that, in part, by leveraging technology to validate that clients are who they say they are. Plus, the bank cashes primarily only payroll and government checks, Mr. Murphy added. “We’re very pleased from a performance perspective,” he said. “We wouldn’t continue to invest in the space if we believed that, financially, it made no sense.” Eaton Family Credit Union mitigates the risk of its related accounts by charging a monthly fee, placing holds on nongovernment checks and requiring direct deposits into the accounts, Mr. Siegel said. Emmanuel T. Glover, senior vice president and director of community development banking for Fifth Third Bank, is not alone in predicting that interest in the underserved will continue to grow, and with it the products and services on the market. Mr. Murphy agrees. “I don’t think this will ever again be a market people ignore,” he said. “If more financial institutions choose to compete in this space, it will force financial institutions to get better,” he said. “It will cause us to invest, to be competitive, more innovative. We will start to compete (in this) just like every other segment, and that’s a good thing.” ■
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SEPTEMBER 24 - 30, 2012
Diplomat: New BioE leader takes broad view continued from PAGE 3
spread all across Northeast Ohio, with investors from all over the globe. Mr. Nerpouni has the diplomatic skills needed to work with so many different groups, said Brad Whitehead, president of the Fund for Our Economic Future, a collection of Northeast Ohio philanthropic groups that helps fund BioEnterprise’s work. “This is a person that can travel well in a diverse set of audiences,” Mr. Whitehead said.
A familiar face Although Mr. Nerpouni’s title technically is “interim” president, he could be around for a while.
In August, just after BioEnterprise announced he would fill the position, The Plain Dealer quoted BioEnterprise chairman Joe Scaminace as saying the nonprofit currently is not looking for a new leader. Through a representative at BioEnterprise, Mr. Scaminace — who also is CEO of OM Group Inc., a Cleveland-based specialty chemicals company — declined to say anything else about the title. BioEnterprise promoted from within. Mr. Nerpouni previously was its vice president of strategic development, a job that among other things involved heading up new initiatives. He also was vice president of business development at the group from 2005 through
2009, when he left to help launch the Austen BioInnovation Institute in Akron. The institute is comprised of five Akron-area institutions — Akron Children’s Hospital, Summa Health System, Akron General Health System, Northeast Ohio Medical University and the University of Akron — that are working together to commercialize products, especially those related to biomaterials. During his first stint at BioEnterprise, Mr. Nerpouni commuted from Chagrin Falls to the nonprofit’s Akron office, a role that helped bridge a perceived gap between the Cleveland and Akron bioscience communities, Mr. Whitehead said. Mr. Nerpouni also quickly realized how much the Future Fund
and the other philanthropies that finance BioEnterprise care about inclusion and equal access to opportunity, Mr. Whitehead said. For instance, he took a lead role in putting together the first Minority Biomedical Entrepreneurship Conference, which was held this past May in Cleveland. The conference was national in scope but addressed a problem that exists locally. “He could see the local challenge in its larger frame,” Mr. Whitehead said.
Global citizen One might say Mr. Nerpouni’s taste for all things international is in his blood. Born in Boston in 1970, his paternal grandfather was
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Armenian, and his paternal grandmother was Irish. Both were immigrants. His mom’s parents were Irish/Scottish and French-Canadian. He traveled so much as a child because of his father’s job. Jim Nerpouni worked for building products maker Tremco Inc. of Beachwood, selling their products in the northeastern United States. That job required the family to move to Greece, then Germany, then Bahrain over a five-year period. In the process, he even got to spend six weeks in Iran, because Tremco was providing products for the palace of the Shah. His family moved to Chagrin Falls when they returned to the United States in 1983. After graduating from University School, he moved to the West Coast to attend Stanford University. He earned his bachelor’s degree in biology in 1992 and promptly moved again, this time to New York City, where he worked as an analyst for a retained search firm. He returned home in 1996, just as his father was leaving Tremco. That opened the door for a new opportunity: The two men co-founded Innovative Resource Group, which helped materials and coatings companies export their goods. Jim Nerpouni focused on Asia and his son covered Latin America. “It was a true entrepreneurial experience,” Aram Nerpouni said. He left the company in 2002 to join one of its clients, cosmetics maker The Bonne Bell Co. in Westlake, where he focused on international business and marketing. Three years later, he was offered a position at BioEnterprise. At the time, a lot of excitement was building around innovation starting to come out of the institutions in University Circle, Mr. Nerpouni said. Joining BioEnterprise looked like a good way to become part of the movement, he said.
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Mr. Nerpouni wouldn’t say much about any future plans for BioEnterprise, noting how little time he has spent as interim president. The nonprofit has given him a good foundation to build on, he said, noting that the amount of investment dollars flowing into health care companies annually is now regularly in the $150 million range, up from about $30 million per year when BioEnterprise was started in 2002. A big challenge that still vexes local biomedical companies is a lack of talent, said Mr. Nerpouni, who estimated that those businesses have “a couple thousand” open positions. That’s why BioEnterprise this year started holding online job fairs every quarter, he said. “The growth (of local companies) is outpacing the supply of work force at all levels,” he said. Mr. Nerpouni said he’s a fan of efforts to recruit Israeli companies to Northeast Ohio and to help get visas for immigrants that want to invest in the United States. He’s also a big supporter of the under-construction Cleveland Medical Mart, saying it could be a “great opportunity” for Northeast Ohio to showcase how much progress it has made related to biomedical innovation. He still loves to travel, but don’t expect him to leave BioEnterprise for another country anytime soon. Once he started having kids — he and his wife, Tina, have two daughters, Olivia, 9, and Isabel, 6 — he decided to put down roots. “I was realizing I liked to be home more than I liked to be traveling at that point,” he said. ■
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SEPTEMBER 24 - 30, 2012
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
9
Indians: Teams facing financing hurdles continued from PAGE 1
A
tour of Jack Kahl’s Avon Lake home reveals two of his greatest business influences: one, a horse, the other, the late founder of a ubiquitous retailer. Mr. Kahl — the retired CEO of Manco Inc., a predecessor company to ShurTech Brands LLC that’s best known for its Duck brand duct tape — also showed Crain’s House Calls his slice of the Lake Erie shoreline
and a wine tasting room that looks straight out of a 17th-century French home. Wait until you hear where Mr. Kahl once lived, too. Take the tour now: www.crainscleveland .com/housecalls.
Mr. Shapiro told Crain’s the Indians to this point privately have paid for what he called “mid-term projects” such as the Kids Clubhouse conversion, though even those changes may not be included in the final longterm plan if they don’t work. It still is too early to speculate on financing sources, according to Mr. Shapiro, though he said the Indians “know that private financing will be a component of any long-term vision for the stadium.” Todd Greathouse, director of Gateway Economic Development Corp., has said his group, which was formed in 1990 to build and maintain Progressive Field and its Gateway neighbor, Quicken Loans Arena, expects requests for building updates to come next year from the Indians and the Cleveland Cavaliers, who play at The Q. Mr. Greathouse did not return a call seeking comment on how changes would be financed. Gateway is responsible only for major renovations at each structure, after a 2004 revision to its original leases with the teams.
Matters of money The Indians — and the Cavaliers and Cleveland Browns, for that matter — are in delicate situations at
a time when scrutiny of public money for private enterprise has intensified. In February, the Browns offered to loan the city $5.8 million to make immediate repairs at Cleveland Browns Stadium, a move that drew some public outcry; at that time, Cleveland City Council said it may need to extend a cigarette and alcohol tax set to expire in 2015 to cover repairs at the city-owned stadium. The Browns’ owner-in-waiting, Jimmy Haslam, said last week in a caucus with City Council that he’d bring in three top architectural firms as soon as his purchase of the team is official. Those firms will study the stadium and what improvements might be made to enhance the fans’ experience and potentially increase how often the venue can be used, aside from 10 football games per year. Mr. Haslam so far has been vague about what he’d like done at the stadium, but he said “we’re completely open-minded” about the space. That statement was in response to Councilman Mike Polensek urging Mr. Haslam to consider a retractable roof — a project that could cost more than $100 million — to encourage more jobs for Clevelanders.
A need for perfection For the Indians, the process of
exploring how to revamp Progressive Field has been deliberate and datadriven after the team in 2010 asked seven local architectural firms to tour the ballpark and make suggestions on how best to use the venue. Since then, the Indians have worn out their email survey clients with questionnaires and have conducted scores of on-site meetings with corporate and other premium customers and season ticket holders. Those efforts have gauged interest in a new format for the stadium’s club lounge, a new premium lounge adjacent to the press box behind home plate, unique new menu options and, most recently, a potential change to the infield lower box seats, the last rows in the sections straddling home plate. As the Indians struggle on the field, putting underutilized space to new use and the potential revenues that could result is paramount. “We understand that a large percentage of our business is based on the team” performance, Mr. Shapiro said. “But of that other small percentage, we have to be 100% perfect. The good thing is that we have complete control over that side of things, where things happen on the field that we don’t have control over.” ■
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
SEPTEMBER 24 - 30, 2012
PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
The catch
I
t made for great television: With concrete supports for the first of two Inner Belt bridges standing behind him as a backdrop, Gov. John Kasich announced at a news conference a plan to put back on track the timetable for construction of the second bridge. Local TV stations lapped it up. They obligingly reported that the state had figured out a way around a budget squeeze that would have delayed completion of the second bridge until at least 2019. Instead, the private contractors that would erect the bridge by 2016 would finance its construction, with the state paying them back with interest. Problem solved. Well, not quite. Gov. Kasich’s plan to rely on private interests to front the money for the bridge is just that — a plan. We give the governor credit for using the media to put the word out that the state wants to move ahead with the second bridge by employing an unusual method for pulling off its construction. However, plenty of pieces need to fall into place to make bridge No. 2 a reality four years from now. The plan relies on teams of engineering firms and construction companies coming together to convince financial backers such as banks, insurance companies and pension funds to provide them with the money to pay for the $332 million bridge project. Playing financier for the state might be a tough sell even in the best of times. With the economy still so-so, it’s unclear how eager monied interests will be to commit big dollars to such an endeavor. Even Gov. Kasich acknowledged that the plan isn’t a slam dunk. “It’s possible that at the last moment, the markets shut down and nobody is interested,” he said. “But … it looks to be a safe project, and we believe it will work.” We wish we were as convinced. The governor could do a lot more to assure that the second bridge will be built on time by committing to use money from a higher severance tax on oil and gas producers to finance road and bridge projects across Ohio. Gov. Kasich wants to put any increase in the state’s haul from the severance tax toward lower personal income tax rates. If those rates were burdensome and were causing people and businesses to flee Ohio, we’d be right by his side. But it was just last year that the state completed the multiyear phasing in of a 21% cumulative reduction in individual tax rates. Another tax cut isn’t essential; on the other hand, there is a desperate need for investment in Ohio’s roads and bridges. And it will take money the state doesn’t have now to make that investment happen. Gov. Kasich loves to talk about creating a businessfriendly environment in Ohio. Well, crumbling infrastructure does nothing to attract and keep employers that count on modern, efficient transportation systems to move goods and people along. The bucket of added tax revenue that the shale exploration boom could yield should be sunk back into the ground so that overdue projects such as replacement of the decrepit Inner Belt Bridge can get green lights to proceed.
FROM THE EDITOR
Your pinch hitter: MARK DODOSH
D
and considers it the newspaper field’s ear Reader: There’s a few equivalent of the Bible. things you need to know about The AP Stylebook, as it’s known in the me before I go any further with trade, is quite specific when it comes to this column. capitalizing letters in company names. First, I’m an old school kind of guy. To quote its unambiguous content: Second, I like consistency — i.e., I’m “Do not use all-capital-letter names anal. unless the letters are individually proThird, I’m not particularly stylish. nounced: BMW. Others should That background info should be uppercase and lowercase. be enough to help you under- MARK Ikea, not IKEA; USA Today, not stand why I’ve been wrestling DODOSH USA TODAY.” for weeks with a possible change However, my AP bible bumps in how Crain’s identifies certain up against a hard reality: Various companies in the stories that companies have incorporated appear in the print and digital themselves using their names versions of our publication. in all caps. CBIZ Inc., NACCO The change would involve Industries and STERIS Corp. identifying in all capital letters are among the local companies those companies that, in either that go by those all-caps names their incorporation papers or in their filings with the Securities and Extheir marketing materials, or both, use change Commission, even though the all capital letters in their names. letters aren’t pronounced individually. I know, I know. With all the real probPart of this all-capital-letters business lems going on in the world, my dilemma relates to branding; the style of name amounts to so much dust in the wind. helps these companies stand out from But, like I said, I’m old school and anal, their rivals, though that matters little to and both come into play for someone me, because I’m not a slave to style. who has lived by The Associated Press Still, these names are their legal idenStylebook since I was a pup journalist
tities, and that does matter. The question I ask myself is, “Where does it end?” The names of CBIZ, NACCO and STERIS aren’t too voluminous, though the latter two would give headline writers the occasional fit as they try to cram them into a tight space. But what if some of our other companies chose to go the all-caps route? I can see the headlines now: “SHERWIN-WILLIAMS awash in black ink.” “FOREST CITY ENTERPRISES buys half of downtown.” “APPLIED INDUSTRIAL TECHNOLOGIES CFO wins award.” It would be like posting billboards atop stories. And what if people started following suit and legally changing their names to all caps? We’ve already got local philanthropist vic gelb using his name in all lower-case letters. Imagine if some ambitious politician decided to do the opposite? Or some attention-grabbing journalist did the same? Like MARK DODOSH. Hey, wait. I kinda like that ... ■
PERSONAL VIEW
Cut in research money would be costly By CAROLINE WHITACRE
T
he future of the American university and of American innovation is in jeopardy. For years, our country has been at the forefront of ingenuity and invention. But faced with diminishing resources and ever-growing global competition, the United States seems poised to make one of the largest cuts in research funding — a decision that could have long-lasting and far-reaching implications for our collective future. At a time when other countries are increasingly investing in research universities and new technologies, leaders in Washington are considering major cuts. On paper, it is easy to look at governmentsponsored research and see opportunities
Ms. Whitacre is vice president for research at Ohio State University. for reduction. Not all research leads to new technology and many projects require further study and additional funding. To do so not only would be shortsighted, but it also would also be devastating to our future. Some of our country’s greatest advances in medicine and technology were developed on college campuses and in technology incubators. Radar, penicillin, magnetic resonance imaging (MRI) and jet propulsion all were developed in the labs of America’s universities and spawned new businesses and entirely new industries. Research is a part of most everything we do at Ohio State. Our faculty and staff
are spearheading groundbreaking exploration of the world, our students are engaging in truly entrepreneurial projects and our alumni are working at some of the most innovative companies in the world. We don’t think of research in terms of dollars, but in terms of its potential to create lasting change in people’s lives and in our communities. Right now, a team of Ohio State researchers is working on a Department of Energy-sponsored project to capture carbon dioxide from burning coal and convert it into additional electricity and liquid fuel. Another research team is using a grant from the U.S. Department of Agriculture to inhibit soil-borne plant diseases, which could help farmers cultivate stronger crops. And federal funding See VIEW Page 11
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SEPTEMBER 24 - 30, 2012
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
THE BIG ISSUE How do you feel about speed cameras in Cleveland? Do you think they keep our streets safe or are an unnecessary money grab?
TOM MILLER
BLAINE GOTTEHRER
CHRISTINE ANDONOVIC
TOM BASALLA
Westlake
Cleveland
Cleveland
North Royalton
I would lean toward the unnecessary money grab. They’re set up specifically to make money.
Having been caught a few times, I would say an unnecessary money grab. ‌ I was going with the speed of traffic. West 25th — that’s the one that always gets me.
I think they’re good for safety purposes. If they’re going through a red light or something, they can catch the guy running away or if they’re in an accident, they can get the guy’s license plate number.
I think they’re good for public safety. I do think they control the speed of traffic a little bit.
➤➤ Watch more of these responses by visiting the Multimedia section at www.CrainsCleveland.com.
View: Research often leads to growth continued from PAGE 10
has supported the work of Dr. Ali Rezai, who specializes in the use of deep-brain stimulation to reduce tremors in patients with movement disorders such as Parkinson’s disease. Dr. Rezai is now evaluating deepbrain stimulation as a treatment for a variety of conditions through clinical trials — another critical piece of the research pipeline. Clinical trials are made possible by early stage research projects. The scope of the project may appear simple, but the result truly can be life-changing. Across America, more than 63,000 clinical trials are taking place, covering everything from cancer to personality disorders to heart disease. Our Comprehensive Cancer Center provides groundbreaking clinical trials for nearly every form of cancer. Those trials have led to new treatment
options for cancer patients worldwide, and saved the lives of more than 12,000 patients at Ohio State alone. Cuts in research funding will have a direct impact on the number of patients we can treat and on the number of researchers working in the field. Funding for clinical trials will decrease, meaning fewer people will be able to take advantage of potentially life-saving cancer treatments. What’s more, the cuts will directly impact funding for our researchers. How many students and researchers will walk away from research as a career? What will happen to the innovation pipeline then? As we prepare to recover from one of the worst economic times in our history, it is clear that we cannot treat research funding as a line item.
‡ ‡ ‡ ‡ ‡ ‡
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WRITE TO US Send your letters to: Mark Dodosh, editor, Crain’s Cleveland Business, 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 e-mail: mdodosh@crain.com
L U X U R Y
Throughout history, discoveries made through research have been the launching point for economic growth, especially in times of great adversity. Our challenge, now, is to fully invest in innovation, in technology, and in research. Because even a seemingly insignificant cut in research funding creates a domino effect, reverberating far beyond the confines of a research laboratory and impacting the lives of millions of Americans. â–
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
SEPTEMBER 24 - 30, 2012
Exporters can minimize risk by controlling exchange process
D
espite economic challenges that persist in many countries around the world, Ohio continues to be actively engaged in the global economy. According to the latest information from the International Trade Administration, a part of the U.S. Department of Commerce, more than 12,000 Ohio companies are exporters. Ninety percent of these companies are small and mediumsize enterprises with fewer than 500 employees. In 2011, Ohio exported $46.4 billion of merchandise in a number
of categories, including transportation equipment, chemicals, machinery, and computers and electronic products. As exports continue to play an important role in the ongoing economic recovery, the current environment represents an important opportunity for Ohio exporters, particularly exporters dealing with countries whose currencies have been down against the U.S. dollar. Many U.S exporters assume that dealing in U.S. dollars reduces their foreign exchange risk. In fact, risk is an element of any cross-border transaction. For exporters who insist
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■ Competitive handicaps: U.S. exporters who rely on dealing in U.S. dollars are potentially losing sales and handicapping themselves in price negotiations before they even start. If competitors — other exporters or suppliers in the potential buyer’s own country — are willing and able to quote prices in the local currency, they will gain a competitive advantage because the unknown cost of currency conversion is not part of the deal. To reduce the potential impact of such risks, all exporters — no matter their size — must have a strategy in place before any such deal is considered. Ideally, exporters should take control of and “own” the deal by managing all aspects of foreign exchange themselves. This approach allows U.S. exporters to build the FX risk into their pricing to account for the potential of adverse exchange rate moves and the incremental costs of the exchange process itself. Taking control of the deal also can help exporters control a variety of costs imposed by intermediary players that drive up prices with fees; help ensure the timing and finality of payment; and maintain a competitive advantage versus the local competition.
U.S. businesses that export as well as import in the same country also can take advantage of an opportunity to self-manage their exposure to currency fluctuations. These companies can create foreign currency accounts that will help make the most of surplus currency funds without converting each transaction into U.S. dollars. For example, an Ohio company might fund a bank account in Canadian dollars, use it to fund payables with receivables, and retain the flexibility to repatriate the value back to U.S. dollars or hedge the difference. Any overseas business transaction includes potential risks and rewards. Successfully navigating the international marketplace can mean new or substantially expanded markets for those Ohio companies that are successfully managing the challenges and opportunities of foreign exchange. Learn more about doing business internationally at the Crain’s NEO World Trade Conference, presented by RBS Citizens, on Sept. 27 at Executive Caterers at Landerhaven. Register at www.CrainsCleveland.com /NEOworldtix. ■ Ken Marblestone is president of RBS Citizens and Charter One, Ohio.
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18 ADVISER: FINANCIAL MARKETS SMILE UPON A UNIFIED CONGRESS.
SMALL LOANS HIT BIG TIME Push to attract microlenders pays off, helps satisfy demand in region By MICHELLE PARK mpark@crain.com
I
JASON MILLER
Alison Musser, shown here with her daughter, Adeline, in May received a loan from Bad Girl Ventures for her company, Babies Travel Too.
n the two days after it opened this July, the Cleveland office of the Economic and Community Development Institute received more than 500 phone calls, 80 emails and 30 visitors. In two days. And though the initial goal in this region for the microlending organization was to lend $500,000 in the first year, vice president Eric C. Diamond said, “I’ll probably have $500,000 out the door by Christmas. We’ll do over a million in the first year.” It appears those who worked to lure more microlenders — organizations providing smaller loans to smaller business borrowers — were right: Northeast Ohio is hungry for it. Rachel Anzalone sure was. After being turned down twice in three years for bank financing and ultimately launching her business, Holistic Lakewood, with personal funds, Ms. Anzalone today is using a $20,000 ECDI loan to stock her shelves and add equipment. The ECDI is not the only new group helping to fill what some say was a gaping hole in the funding ecosystem, particularly after the only local microlender, WECO Fund Inc., collapsed recently. Bad Girl Ventures, a microlending organization founded in March 2010 in Cincinnati, expanded to Cleveland in June 2011. Both ECDI and Bad Girl Ventures were recruited to Cleveland by The Cleveland Foundation, which was driven by anecdotal stories of struggle and a 2011 study by Friedman Associates that showed there was an unmet need of $38 million for loans under $50,000 in Cuyahoga County, with See LOANS Page 16
Small businesses weigh fee or free when accepting credit cards Charging customers carries risk of alienating those used to convenience By KATHY AMES CARR clbfreelancer@crain.com
I
s cash still king? Many financial industry observers think so, but others say the proliferation of plastic and smart phone payment use will continue to rule its paper currency counterpart, despite new regulations that permit merchants to charge higher prices to customers who pay with credit cards. A pending multibillion-dollar settlement between about 7 million merchants and Visa and Mastercard
also allows merchants to offer discounts to customers paying with cash or debit cards, and they have the ability to negotiate rates directly with the credit card issuers. The agreement still requires the approval of a U.S. District Court judge. “It’s an interesting time for small businesses,” said Chris Nelson, partner in PricewaterhouseCoopers LLP’s banking and capital markets practice. “We will see some small businesses take advantage of the ability to differentiate their pricing.”
But the alternative pricing option — and other recent changes to usage fees and rules — doesn’t necessarily mean small businesses will be relieved of the costs associated with credit card processing, observers say. Mike Mitchell, co-owner of Rocky River-based Mitchell’s Homemade Ice Cream, chalks up his yearly increases in credit card processing fees to the cost of doing business. “There’s not a chance” he would differentiate the ice cream operation’s pricing strategy according to
how consumers pay. “We want people to feel comfortable with using any method of payment to buy our ice cream.” Kathy Vegh, CEO of Mayfield Heights-based Danny Vegh’s, said while her business is in the process of lowering its prices to remain competitive with online retailers, it does not have plans to charge more to customers who use credit cards. “I don’t think small businesses have enough clout to implement that kind of pricing strategy,” she said.
Big dilemma for the little guys Operators who do charge their customers a fee for credit card use
risk alienating a large consumer base, which will swipe its plastic elsewhere, so proprietors may just pass along costs to consumers in the form of product mark-ups. “It’s a dilemma for small merchants,” said Roy Brooks, Edward J. and Louise E. Mellen chair in finance at John Carroll University. “We’re set in our ways. If they charge higher rates than the big boxes to use credit cards, then that gives an advantage to the Walmarts,” which are in a better position to also offer discounts to cash-paying customers, he said. Small businesses would be putting themselves at a competitive See FEE Page 16
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Loans: Banks more often partnering with microlenders continued from PAGE 15
the greatest gap among minorityowned businesses. “I think that we as a community … have in the last few years done a very good job of focusing on entrepreneurs and industries that tend to be high-tech and high-growth companies,” said Shilpa Kedar, program director for economic development for The Cleveland Foundation. “In the interim, I think we did not give as much attention to the small businesses that are more the population-serving businesses.”
Filling the gaps Ms. Anzalone, who received her ECDI loan in June, has watched her retail sales nearly double in recent months. She is in the process of hiring her first employee. Also growing her business is Alison Musser, who received in May a $25,000 low-interest microloan through Bad Girl Ventures and has more than doubled the inventory for her home-based baby equipment rental company, Babies Travel Too. She, too, is in the process of hiring her first employee. “It’s been huge,” Ms. Musser said of the new capital. “We thought that we could kind of fund this ourselves and quickly realized that that was not going to be very feasible.” ECDI has approved 12 loans to date totaling $299,200. Its borrowers include a beauty salon, a home health care company, a soul food restaurant and a website called Divorce 2 Dating, Mr. Diamond said. Helping to drive the microloan demand is the housing market’s decline, which limited entrepre-
Aurora
neurs’ ability to borrow against their homes, said Candace Klein, founder and CEO of Bad Girl Ventures. Unemployment did, too, she said, because it hurt people’s credit scores, reducing their eligibility for traditional loans. Microlenders say another driver of their business is a disinterest of larger banks to do that type of lending because of greater risk, increased regulation and lower profit margins. But the bigger banks are lending more small loans. Data from the U.S. Small Business Administration reveal that the level of SBA-guaranteed loans of $50,000 or less for the 11 months ending Aug. 31 across the Cleveland district, which includes all 28 northern counties in Ohio, is roughly back up to fiscal year 2008 levels. And the smaller loans account for 48.7% of all SBA-guaranteed loans made during that period, too, said Gil Goldberg, director for the SBA’s Cleveland district. “I think that shows you that the banks … have really stepped up and are doing their best to meet the needs of smaller borrowers,” he said. “These small loans help these businesses grow and become larger and employ more people. They, I think, are extremely important to job creation and the economy.” Huntington National Bank leads the district in that kind of lending, Mr. Goldberg said. KeyBank has increased the number and dollars of loans of $50,000 and less both this year and last year, said Tim Gretkierewicz, business banking executive for KeyBank’s
$1,525,000
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Cleveland district. The bank declined to provide exact figures.
Partnering up Banks also are deploying capital through the microlending organizations themselves. KeyBank funds the $25,000 lowinterest loans awarded by Bad Girl Ventures in Cleveland and Columbus, and Huntington contributed $2 million to ECDI’s $4 million fund. “The nice thing about ECDI is they have a seven- or eight-year track record of making sure loans perform well and get repaid,” said Daniel Walsh, president of Huntington’s Greater Cleveland region. “It’s very hands-on.” He’s referring to the fact that these microlending organizations don’t just put cash into smaller borrowers’ hands — they provide technical assistance to mitigate the risk associated with such loans. A typical microlender has a 15% default rate, said Mr. Diamond of the ECDI, which just started its first six-week training course in Cleveland. “You can’t just give these small companies money and hope they pay you back,” Mr. Diamond said. “One way or the other, they come out knowing more than they did when they went in there.” Founded in Columbus in 2004, ECDI’s rate of default stands at 6.4%, Mr. Diamond noted. Bad Girl Ventures spends 10 weeks educating women entrepreneurs before funding them, Ms. Klein said, noting that so far, Bad Girl Ventures has a 0% rate of default on the 38 loans it’s facilitated.
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No matter their intangible valueadd, are organizations like Bad Girl Ventures rendered obsolete if home equity lines again become a viable source of business capital or if traditional banks ramp up microlending? Not the way Ms. Klein sees it. For one thing, banks like partnering with such groups, she said. Also, bankers, Mr. Diamond
noted, aren’t in the business of training borrowers. “No matter how much banks open up their doors again, you’re never going to have banks say, ‘Let me walk you through what it means to be self-employed,’” Mr. Diamond said. “I think there’s always going to be a need for microlenders that structure themselves like we do.” ■
Fee: Mobile transactions rise continued from PAGE 15
disadvantage, Dr. Brooks added, noting credit card issuers already favor big retailers with lower interchange fees since they generate larger transaction volumes. Retailers pay a fee — usually 1.5% to 3% of a transaction — each time they accept a credit card. According to The Wall Street Journal, labor costs and swipe fees are some of the biggest costs to running a small business. The newspaper reported in a July story that interchange fee costs for Mastercard and Visa premium credit cards rose 24% between 2005 and 2009. Credit and debit cards, however, are becoming the most common type of payment, according to the U.S. Small Business Administration.
Mobile matters Some small businesses also are following the larger retailers’ attempts to grab more market share by investing in technology that enables customers to transform their smart phones into digital wallets and repositories for gift cards. Cleveland-based Rising Star Coffee Roasters, for one, accepts payments through a device called Square that attaches to Android devices and iPhones. “About half our customers pay with cash and the other with credit,” said owner Kim Jenkins. Small businesses that use this digital payment system either pay 2.75% per swipe or a flat rate of $275 per month. Other companies offer similar rates, such as Intuit’s
GoPayment at a 2.7% fee per transaction. These fees are in addition to those paid to credit card companies. The early small business adopters likely will have to absorb some of the initial investment costs to compete with the chain retailers, said Stephen Hotchkiss, an assistant professor of international business at Notre Dame College. “It hurts the smaller merchants because they have smaller volume (of transactions), and there are higher upfront costs with this technology,” he said, noting that they will be in a better position to grab market share from their competitors. Mobile payment transactions worldwide are expected to surpass $171 billion in 2012, up nearly 62% from $105.9 billion in 2011, according to Gartner Inc. The research firm predicts an annual 42% growth to 2016, with 448 million users. “Small businesses shouldn’t be asking how much (new processing technology) costs but how it’s going to make them more money,” said Merrell Sheehan, vice president of product development at Independence-based Electronic Merchant Systems, a payment processing and merchant services firm. Despite the anticipated demand for mobile processing technology, small businesses don’t need to tap into the trend just yet, PwC’s Mr. Nelson said. “It’s not urgent now to adopt it, but by 2014, 2015, (small businesses) better have a strategy in place for accepting mobile credit card processing,” Mr. Nelson said. ■
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THEINTERVIEW JAMES THOMSON Chairman, finance department University of Akron This summer, the University of Akron welcomed a veteran of the Federal Reserve Bank of Cleveland, James Thomson, as its new chairman of the finance department. Prior to joining the Federal Reserve in 1986, Dr. Thomson — who has a master’s and Ph.D. in economics from Ohio State University and a bachelor’s degree in economics from Georgia Tech — worked as a financial economist at the U.S. General Accounting Office. As he settles into his new position, Dr. Thomson took some time to respond to questions from Crain’s. Q Your position at the University of Akron is your first full-time academic position. Why did you opt to make this move after more than 25 years with the Federal Reserve Bank of Cleveland? A Making the jump to academia has always been part of my longer-term career plans. The questions were always: “Is this the right time?” and “Is this the right opportunity?” It turns out that opportunity to assume a leadership role in the College of Business Administration at the University of Akron was the opportunity I was looking for. The University of Akron is a dynamic institution and the CBA is a very respected up-and-coming business school that afforded me the opportunity to work with a firstrate faculty and administration. So the only question I had to answer was, “Is this the right time?” Taking an assessment of my career at the Cleveland Fed I realized that I had accomplished a lot at the Fed and there is no shortage of interesting projects for me to work on there. The position at the University of Akron presented me with a different set of challenges professionally and growth opportunities both personally and professionally. Q From your perspective, what is the most important lesson to be learned from the 2008 financial collapse? A The lesson we should have learned is that you cannot allow financial institutions, or any company for that matter, to become so large and/or complex that you cannot allow them to fail because they are too economically or politically important. Unfortunately, the remedies in the Dodd-Frank Act of 2010 for systemically important firms, such as the orderly liquidation authority and living wills provisions, are untested. Moreover, there is nothing in Dodd-Frank that compels regulators to close economically failed financial firms. Q Are there challenges unique to the Northeast Ohio economy? A I am not sure that there are challenges that are unique to the NE Ohio economy, but we do share a number challenges with other parts of the Midwest and Northeast. We have an aging population and shrinking work force. The shift of jobs requiring semi-
skilled and skilled workers to more knowledge-based jobs will continue to be a challenge for our region, especially for our institutions of higher learning (that) need to prepare students for a knowledge centric workplace. Q Historically, do presidential elections affect financial markets? If so, is there any response that may be expected after November? A Reaction of financial markets, most notably equity markets, to national elections is not something that I follow closely. To the extent financial market participants view differences in how the major parties would govern, then certainly there will be some reaction.
Obviously, markets will favor the party whose policies they see as most beneficial to growth. If this is a close election, we should see some reaction of financial markets to who wins the White House and the houses of the Congress. However, if the election is not close, markets will have already built that information into stock prices, interest rates, the exchange rate, etc. In this case, there should not be much of a reaction by financial markets to the election results –— unless of course, there is a Truman/Dewey outcome. Q What are some of the greatest issues facing financial institutions? A Financial institutions today face
three material challenges to their profitability. First is the low interest rate environment that is likely to persist for the next couple of years. The low interest rates are squeezing lending margins, affecting the core profitability of banks. More troubling is the impact low interest rates are having on life insurance companies and pension funds that are having increasing difficulties matching their asset returns with the future claims on them. In both cases, there may be an incentive to chase yields — moving into riskier investments to boost expected rates of return. Second are costs associated with the new regulations they will face as
a result of the Dodd-Frank Act. There is the cost over the near term associated with the implementation of the new regulations and the ongoing cost of complying with them. Lastly is the continued overhang of bad assets on the financial sector balance sheet, in particular, bad mortgage loans and foreclosed homes. The incomplete cleanup of the housing finance sector will continue to be a drag on the financial sector and the real economy. ■ James Thomson is on leave from the Federal Reserve Bank of Cleveland. The views expressed are his and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.
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Economic matters, financial security at heart of election
M
itt Romney’s selection of Paul Ryan for his vice presidential running mate came as a surprise to many. This calculated choice by Mr. Romney strikes at the heart of the main issue for this election: the economy. While many will say that this was an attempt to appeal to the majority right, Mr. Romney understands that his chances of being elected the 45th U.S. president relies on American voters viewing him as the candidate who will help them secure future financial security, which is directly dependent on their ability to obtain meaningful employment at a fair wage. How does this impact financial markets and investment behaviors? History has taught us that regardless of which party is in control of the presidency, much of how the markets react has to do with who has control of the House and Senate. While this might seem counterintuitive, it’s important to remember that legislation originates in the House and is approved in the Senate. What the markets do not
like is a divided Congress. A divided Congress creates legislative gridlock and gridlock is usually defined by lack of action. In a booming economy, this is less meaningful. However, coming out of one of the worst recessions in history, gridlock means Congress is less likely to pass meaningful legislation to guide the economy out of recovery and into a sustained growth period. Therefore, we have seen a great deal of involvement from the Fed trying to stimulate the economy through various initiatives, as it has done with the recent stimulus plan to help grow in its a opinion staggering economy. Why is this particular vice presidential candidate selection so important at a time when all the focus seems to be on the presidential candidates? Barring a catastrophe, the House most likely will remain in the control of the Republican Party; however, with 33 seats up for re-election (21 held by Democrats, two by independents and 10 by Republicans), control of the
FRANKFANTOZZI
ADVISER Senate could change and be placed in the hands of the Republicans, creating a unification of a single party in control of this Congress. That is why Paul Ryan’s “road map to recovery� is important. If the Republicans gain control of Congress, this blueprint will be the foundation for potential change moving forward. Paul Ryan’s road map addresses several key areas: Medicare and Medicaid; tax reform; job training; Social Security; and health care. The focus of the road map is in several basic principles: ■Create sustainable government programs as a backstop for many Americans.
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■Simplification of the tax code to remove social and political biases and higher compliance. ■Reduce the role of government and improve freedom of choice as it relates to health care. How would the markets react to the passage of this plan? The fact that Congress is unified, regardless of political party, will be viewed as a positive. Given the gridlock in Washington, companies over the past 18 months have paid down debt or bought back their own stock instead of investing in other growth opportunities that could lead to increased company revenues, jobs and tax revenues. Given that most companies’ financial positions are the strongest in more than 30 years and are poised to invest their funds in growth opportunities once the political landscape has clarity, this pattern now would change. We would see a great influx of cash being invested by companies, impacting the financial markets at many levels, thus driving the entire equity market higher. ■Sustainable government programs: Given the debt problems in Europe and its impact on foreign markets, which has created downward pressure and volatility in our domestic markets, our current fiscal problems will continue to weigh heavily on our markets. Having a plan that can fundamentally address the future liabilities of our entitlement programs without compromising the benefits received will promote fiscal responsibility. This will be viewed positively by the markets by allowing freedom of choice in selecting health care coverage and would enable improved competition among medical providers. This should help that sector of the economy improve while consumers receive stronger programs. ■Simplification of the tax code: This simplification of the tax code also would eliminate double taxation on corporate monies. Moving away from a corporate income tax to a consumption tax would improve compliance and
eliminate the corporate loopholes that exist today. In addition, investors would not have to concern themselves with selecting investments based on tax attributes since there would not be any taxes on interest, dividends and capital gains. Selection of investments would be based solely on investment merits and could help eliminate many tax-created investments that have substantial risks and liquidity attributes. Investors could better select investments that are appropriate for their goals and would not have to worry about tax implications on their decisions. â– Reduced role of government: The proposed job training program addresses the fundamental gap in our marketplace: transitioning displaced Americans who want to work but do not have the skills that are in demand by employers today. This would help place unemployed and underemployed Americans in a better position and help drive down unemployment. With more people working, consumption goes up, which will help drive markets in a positive manner and help drive growth in sectors such as housing and personal consumption. If Mitt Romney and Paul Ryan are successful in gaining the presidency and, more importantly if Congress falls under Republican control, markets will react favorably. They will feel Congress now can act in a positive manner toward the economy and in dealing with fiscal issues; the long-term viability of entitlement programs; creating a tax environment that is simplified, fair and helps more Americans find work; and through jobs training and increased consumer demand from an improved economy. â– Frank Fantozzi is president and CEO of Planned Financial Services, Brecksville. Securities are offered through LPL Financial; member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individuals.
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JOB CHANGES FINANCE HUNTINGTON NATIONAL BANK: Douglas Koi to vice president, business banking. KEYBANK: Laurie Muller-Girard to national director, Business Capital. NORTH AKRON SAVINGS BANK: Lindsay L. Hailer to manager, Munroe Falls.
FINANCIAL SERVICE CARD, PALMER, SIBBISON & CO.: Katelyn Gongos and Peter Nathanson to managers. CIUNI & PANICHI INC.: Gunjana Pandey and Anthony Pinzone to staff accountants; Eric Bukovec to senior staff auditor. CROWE HORWATH LLP: Mike Varney to partner. HARTLAND & CO.: Thomas S. Allen to senior managing director, Private Client Group. SS&G: Gregory Wester to associate. SS&G HEALTHCARE: Kim Ockunzzi to senior consultant; Susan Howard to billing specialist.
HEALTH CARE PSYCHOLOGICAL & BEHAVIORAL CONSULTANTS: Thomas Swales to clinical neuropsychologist, Beachwood.
MELAMED RILEY: Jennifer Spike to community manager. OPTIEM: Mary Kay Rill to back end developer; John David Drake to paid search specialist. PROXIMITY MARKETING: Brian Alonzo to web solutions manager; Annie Scavuzzo to senior account manager; Phil Khamoua to assistant account manager; Adam Maust to web designer.
NONPROFIT ASM INTERNATIONAL: Thomas Passek to managing director; Stanley Theobald to senior director of business development. BIG BROTHERS BIG SISTERS OF NORTHEAST OHIO: Mark R. Ruth to director of resource development. FREE MEDICAL CLINIC OF GREATER CLEVELAND: Amanda Miller to director, Finance and Support Services. LAKE HEALTH FOUNDATION: Greg Sanders to executive director. NEIGHBORHOOD PROGRESS INC.: Beverly Davis to financial education manager; Danielle Thomas to financial education assistant.
REAL ESTATE
HOSPITALITY
ALLEGRO REALTY ADVISORS LTD.: Adam H. Gimbel to strategic advisory consulting.
INTERCONTINENTAL HOTEL CLEVELAND: Keith Cooper to banquet chef; Jim Smith to sales manager.
KOWIT & PASSOV REAL ESTATE: Marc N. Silberman to sales and leasing agent.
LEGAL
NAI DAUS: Suzanne Hamilton to vice president, finance.
TUCKER ELLIS LLP: Rose Abood to director, marketing and communications.
TRANSACTION REALTY: David A. Bell to sales associate.
SERVICE
MANUFACTURING EYE LIGHTING INTERNATIONAL: Kristen Mallardi to business development manger. RPM INTERNATIONAL INC.: Kent Silverberg to senior IT auditor; Sanja Drobnjak to staff internal auditor; Jason Pinizzotto to senior financial analyst; Paul Licatatiso to IT support specialist.
MARKETING
SHAHEEN MOVING & STORAGE: Sam A. Misseri to vice president, business development. S. ROSE CO.: Claudia Brandeburg to account manager.
STAFFING DIRECT RECRUITERS INC.: Kelly Collins to project coordinator, Plastics and Flexible Packaging Division. GLOBAL TECHNICAL RECRUITERS: Matt Husak to account manager;
ADCOM: Heather McIntire to
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KNOWLEDGE
PEOPLE
INTEGRITY TECHNICAL SERVICES INC.: Straton Kephart, David O’Neil and Chris Schirra to technical recruiters. NESCO RESOURCE: Melissa Lias to branch manager, Middleburg Heights.
Varney
Allen
Swales
AMERICA SCORES CLEVELAND: Camille Falor to secretary; Matthew Milcetich to treasurer. VOLUNTEERS OF AMERICA OF GREATER OHIO: Robert S. Gilmore to secretary. Abood
Spike
Passek
Theobald
Ruth
Gimbel
Hamilton
Collins
Lias
AWARDS
Send information for Going Places to dhillyer@crain.com.
Revenues at staffing firms to grow in ’13 By STAFFING INDUSTRY ANALYSTS
BOARDS
ARTHRITIS FOUNDATION, GREAT LAKES REGION, NORTHEASTERN OHIO: Bob and Sally Gries and Dan and Molly Walsh received the Community Leaders of the Year Award; Rolland Standish and Mary L. Kudasick received the Chair’s Award; Linda Hamann, David Laudel, Chris Lynch and Daniel and Kathryn Mullinger received Volunteer Leadership Awards; Glade T. Pauley received the Terry Manville Memorial Award for Public Policy and Advocacy.
19
U.S. staffing industry revenue is expected to reach a high of $134.4 billion in 2013, according to the new “Staffing industry forecast: September update” report by Staffing Industry Analysts. The revenue will beat the industry’s previous high of $132.3 billion in 2007. The total is based on industry revenue growth of 9 percent in 2012 and 6% in 2013. However, the projected growth represents reductions from an earlier projection in the April update of the forecast of 10% growth in 2012 and 7% in 2013. “Despite very weak growth in the U.S. economy in 2012, the U.S. staffing industry is having a solid year,” said Timothy Landhuis, research analyst with Staffing Industry Analysts. “We forecast 9% growth in the total industry in 2012,” Mr. Landhuis said. “We project that growth will decelerate to 6% in 2013 due to ... cuts in federal spending, potential tax increases ... and slow growth in Europe and Asia.” ■
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CRAIN’S CLEVELAND BUSINESS
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SEPTEMBER 24 - 30, 2012
BUSINESS INSURANCE AGENCIES RANKED BY LICENSED EMPLOYEES
Name Address Rank Phone/Website
Licensed Licensed employees employees property/ 7/1/2012 casualty
Full-time equivalent employees
Firm compensation From fees
From commissions
Number of underwriters represented
Major carriers
Year founded Top local executive
1
Dawson Cos. 1340 Depot St., Rocky River 44116 (440) 333-9000/www.dawsoncompanies.com
176
153
230
2%
98%
50
NA
1931
Kyp L. Ross president
2
Oswald Cos. 1360 E. Ninth St., Cleveland 44114 (216) 367-8787/www.oswaldcompanies.com
166
86
229
NA
NA
NA
NA
1893
Marc S. Byrnes chairman, CEO
3
The Fedeli Group 5005 Rockside Road, Fifth Floor, Independence 44131 (216) 328-8080/www.thefedeligroup.com
115
95
137
NA
NA
NA
NA
1988
Umberto Paul Fedeli president, CEO
4
Wells Fargo Insurance Services USA Inc. 1301 E. Ninth St., Suite 3800, Cleveland 44114 (216) 241-4344/wfis.wellsfargo.com
74
67
82
NA
NA
114
NA
1989
Margaret Ludwig managing director
5
Hylant Group Inc. 6000 Freedom Square Drive, Suite 400, Cleveland 44131 (216) 447-1050/www.hylant.com
60
48
68
40%
60%
91
Chartis, Travelers, ACE, Chubb, Zurich, CNA, Hartford, Westfield, Liberty
1935
John Chaney executive vice president
5
Britton Gallagher 1375 E. Ninth St., Cleveland 44114 (216) 658-7100 /www.brittongallagher.com
60
42
64
15%
85%
NA
All national and regional carriers
1942
Lee M. Stacey CEO
7
Marsh & McLennan Cos. 200 Public Square, Suite 1000, Cleveland 44114 (216) 937-1700/www.marsh.com
59
59
171
NA
NA
NA
NA
1871
William M. Paul managing director
8
Alpha Group Agency Inc. 4200 Rockside Road, Independence 44131 (216) 520-3300/www.thealphaga.com
57
25
84
5%
95%
40
Westfield,Cincinnati, Selective, Hartford, Motorists, Travelers
1988
Kevin Mackay Kevin O'Brien principals
9
Insurance Partners Agency Inc. 26865 Center Ridge Road, Westlake 44145 (440) 835-9600/www.inspartners.com
56
55
63
NA
NA
60
Travelers, Westfield, Auto Owners, State Auto, Chubb, Hartford
1961
George S. Dadas president
10
Seibert Keck Insurance 2950 W. Market St., Akron 44333 (330) 867-3140/www.seibertkeck.com
54
53
62
NA
NA
15
Westfield, Cincinnati, Chubb, Travelers, CNA, Hartford, TDC, MedPro, ProAssurance
1910
Richard B. Hite chairman, CEO
11
United Agencies Inc. 1422 Euclid Ave., Suite 900, Cleveland 44115 (216) 696-8044/www.unitedagencies.net
53
51
55
3%
97%
100
State Auto, Travelers, Chubb, Westfield, Med Pro, ProAssurance, Aetna
1972
James E. Cogan II, CEO John J. Boyle IV, CFO James J. McMahon, COO
12
Todd Associates Inc. 23825 Commerce Park, Suite A, Cleveland 44122 (440) 461-1101/www.toddassociates.com
51
42
53
4%
96%
60
Chubb, Cincinnati, Ohio Casualty,Travelers, Westfield
1939
Edward J. Hyland Jr., president; Randy Cumley, Tim Fitzpatrick, executive vice presidents
13
Althans Insurance Agency Inc. 543 E. Washington St., Chagrin Falls 44022 (440) 247-6422/www.althansinsurance.com
44
38
51
4%
96%
75
NA
1925
James C. Althans president
14
Brunswick Cos. 2857 Riviera Drive, Fairlawn 44333 (800) 686-8080 /www.brunswickcompanies.com
43
38
48
NA
NA
NA
NA
1972
Todd A. Stein, president Michelle Hirsch vice president
15
The Hoffman Group 2 Berea Commons, Suite 10, Berea 44017 (440) 826-0700/www.thehoffmangrp.com
40
32
44
5%
95%
40
Travelers, Chubb, CNA, Cincinnati, Westfield, Motorist Mutual, Grange
1919
Brian M. Russell president
16
Aon Risk Services Inc. 1660 W. Second St., Suite 650, Cleveland 44113 (216) 621-8100/www.aon.com
34
30
72
NA
NA
NA
NA
NA
17
Zito Insurance Agency Inc. 8339 Tyler Blvd., Mentor 44060 (440) 205-7400/www.zitoinsurance.com
29
23
34
NA
NA
NA
NA
1964
Christopher M. Zito president
17
Willis 200 Public Square, Suite 3760, Cleveland 44114 (216) 861-9100/www.willis.com
29
17
33
65%
35%
NA
Chartis, Chubb, Travelers, Zurich
1828
Casey Petersen CEO
19
DRY Insurance Agency Inc. 320 Center St., Unit A, Chardon 44024 (440) 286-3344/www.dryins.com
28
28
29
1%
99%
29
State Auto, Motorist Mutual, Western Reserve, Auto Owners
1968
Donald R. Yert president, CEO
20
Luce, Smith & Scott Inc. 6860 W. Snowville Road, Suite 110, Cleveland 44141 (440) 746-1700/www.lucesmithscott.com
23
23
24
NA
NA
NA
NA
1925
William M. Killea, chairman; Daniel Skaljac, president
21
Fitzgibbons Arnold & Co. Agency 25730 First St., Westlake 44145 (440) 892-3636/www.fitzarn.com
22
22
22
NA
NA
NA
NA
1991
Richard Arnold Clark Fitzgibbons partners
22
Amer Insurance 3700 Embassy Parkway, Suite 160, Akron 44333 (330) 665-9966/www.amerinsurance.com
20
19
24
NA
NA
NA
NA
1916
Hamilton S. Amer, CEO Charles M. Tennent president
23
Leverity Insurance Group Inc. 3737 Park East Drive, Suite 204, Beachwood 44122 (216) 861-2727/www.leverity.com
15
15
15
1%
99%
NA
NA
1983
Peter Bern, CEO Derek Hoch president
24
Insurance Systems Group Inc. 4500 Rockside Road, Suite 400, Cleveland 44131 (216) 236-7760/www.insurancesystemsgroup.com
14
13
16
NA
NA
NA
NA
1935
Michael G. Herzak president
25
The Church Agency Inc. 600 E. Cuyahoga Falls Ave., Akron 44310 (330) 733-1800/www.churchagency.com
13
12
13
10%
90%
7
Grange, Travelers, Acuity, Westfield, Auto Owners, Philadelphia
1950
John E. Mitchell president
25
Jones & Wenner Insurance Agency Inc. 3030 W. Market St., Fairlawn 44333 (330) 867-4434/www.jones-wenner.com
13
13
NA
0%
100%
7
Westfield, Auto Owners, Progressive, Acuity, Ohio Mutual
1975
Robert M. Jones, chairman Gordon L. Wenner president, CEO
27
Pinkerton Insurance Agency Inc. 6133 Rockside Road, Suite 402, Cleveland 44131 (216) 520-8800/www.pinkerton-ins.com
12
12
16
1%
99%
23
Cincinnati, Travelers, Chubb, Westfield, Hartford.
1941
Paul Bonardi president
28
The O'Neill Group 111 High St., Wadsworth 44281 (330) 334-1561/www.oneillinsurance.com
11
10
17
NA
NA
NA
Westfield Insurance Cos., State Auto Insurance, Cincinnati Insurance Co.
1924
Patrick O'Neill president, CEO
29
Selman & Co. 6110 Parkland Blvd., Cleveland 44124 (440) 646-9336/www.selmanco.com
10
2
75
25%
75%
12
Transamerica, Hartford, AIG, ING, New York Life
1980
David L. Selman president, CEO
30
Rutledge Group Inc. 13124 Shaker Square, Cleveland 44120 (216) 561-4444/www.rutledgegrp.com
6
5
6
93%
7%
NA
Hartford, Travelers, Progressive, Westfield, MetLife, Titan
1995
Darwin Rutledge president, CEO
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.
Jennifer M Bell resident managing director, CEO
RESEARCHED BY Deborah W. Hillyer
20120924-NEWS--21-NAT-CCI-CL_--
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CRAIN’S CLEVELAND BUSINESS
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21
Value: Officials recognize graduation rates not sole focus A revised pitch
continued from PAGE 1
up the quality,” said Rob Spademan, assistant vice president for marketing and admissions at Cleveland State University, which began phasing out its open enrollment policy in 2006. “It’s frustrating having students in your classroom who aren’t prepared for college, plus there’s that turmoil you put them through when they fail,” Mr. Spademan said. “It’s just not a good thing.” Cleveland State reported less than a 1% bump in its enrollment this fall, but its freshman class boasts an average 3.19 high school GPA — a slight increase over last year’s class and the best in university history. Kent State University’s enrollment at its main campus inched up 2.85%, and the average high school GPA of 3.27 for incoming freshmen also set a university record. Freshmen this year at the University of Akron carry an average 3.2 high school GPA; the school reported a 3.1% dip in overall enrollment, but saw enrollment spikes in programs that attract better-prepared students, such as engineering and polymer science. The importance to schools of their efforts to attract more college-ready students could be highlighted in the next state budget as Gov. John Kasich is high on the prospect of supporting universities financially using a formula rooted in how many students each school graduates, rather than one largely anchored in enrollment. Earlier this month, Gov. Kasich charged the state’s college and university presidents with hammering out a proposal by Thanksgiving for the new funding formula. “We’re in the business of enrolling students and then graduating them,” said Todd Diacon, Kent State’s senior vice president for academic affairs and provost. “It behooves us as a state agency and someone who uses state funds to use them wisely by enrolling students that we think have the most appropriate preparation to succeed.”
Cleveland State perhaps faced the stiffest challenge in improving the quality of its student body. In 2005, the year before the university implemented its first admission standards, the college’s average ACT score hovered at a mediocre 19. That figure compares with the current freshman score of 21.8, which inches just above the national average of 21.1. Cleveland State’s hefty investment in its physical plant — a $44 million new student center and a heap of new housing options, for starters — has been a large component of the university’s ability to attract better students. However, Mr. Spademan attributes much of the university’s success over the last three years to a special scholarship program launched for high-caliber freshmen. Cleveland State offers incoming freshmen with a 3.0 high school GPA, a minimum 23 ACT score and a commitment to the university by May a $3,000 scholarship for each of their four years at the school. It recently beefed up the yearly award to $4,500 for students with a 3.5 cumulative high school GPA and a minimum 26 ACT score. “If you spent some time on our campus, you would see a difference,” Mr. Spademan said. “It’s hard to substantiate some of it, but the way the students look, the way they dress, the way they carry themselves, their willingness to participate — all of that has markedly improved.” Kent State president Lester Lefton charged his staff about three years ago with recruiting better-qualified freshmen. Part of the university’s strategy has been to ramp up the personalized attention given to top-performing prospects with individual meetings and personalized tours. “Private schools have been doing this forever,” said T. David Garcia, Kent State’s associate vice president for enrollment management. “I think what you’re going to see the-
Pro Football Hall of Fame scores PR firm The Pro Football ON THE WEB Story from ambassador. Hall of Fame in CanThe 5,000www.CrainsCleveland.com ton has retained DKC square-foot interacPublic Relations, Marketing & Govtive multimedia exhibit features ernment Affairs of New York to hanmore than 200 mementoes including dle strategic communications for its the iconic Vince Lombardi Trophy. coming multicity, multiyear tour to Gridiron Glory will debut in Pittscommemorate its 50th anniversary. burgh at the Heinz History Center DKC said “Gridiron Glory: The beginning Oct. 6, followed by a Best of the Pro Football Hall of 2013 Super Bowl stint at the NaFame” will bring the Hall of Fame tional WWII Museum in New Orleans, experience to fans nationwide. Hall stops in St. Louis and Detroit, then of Fame running back Barry Sanders on to New York/New Jersey for the will serve as Gridiron Glory’s national 2014 Super Bowl.
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“The really hard work is taking students who are underprepared and making them graduate.” – Bruce Johnson, president, Inter-University Council matically are public universities taking that private school mentality and personalizing the outreach efforts to students and parents.” The University of Akron has retooled its recruitment strategy, attributing its recent enrollment dip to steering less-qualified students to area community colleges or to its own Wayne College, the university’s branch campus in Orrville. The university has a goal by 2020 to recruit a greater number of students who are part of the top 25% of their high school classes. “We like to say we’re being accountable to our students, to the state and to ourselves by recognizing that while all students will find a path to the University of Akron, in some cases we may not be their first step,” said Mike Sherman, the university’s senior vice president, provost and chief operating officer.
Fall through the cracks? The state’s higher education financing formula is incredibly complex, and the governor and other higher education officials have been quick to note it shouldn’t reward colleges solely based on higher graduation rates. After all, it’s easier to graduate highly prepared students rather than those who require extensive remediation in the early stages of college. Bruce Johnson, president of the Inter-University Council, an advocacy group representing the state’s 14 public universities, said it would be important not to hash out a formula that punishes those institutions that traditionally draw underprepared students. Youngstown State University, for one, still has an open enrollment policy. “The really hard work at the university level is not taking the best and brightest and graduating them with a good degree,” Mr. Johnson said. “The really hard work is taking students who are underprepared and making them graduate.” The public universities maintain that there are options available for students who may not be ready to
go straight from high school to the rigors of a four-year program at their main campuses, though Jerry Sue Thornton, president of Cuyahoga Community College, hasn’t seen an uptick in students who in the past would have started at a four-year institution. “We just haven’t experienced that transition in their selection,” said Dr. Thornton, who added that preparing students to transition to a traditional four-year program always has been a component of Tri-C’s mission. Dr. Diacon said Kent State has open admission at its regional campuses, so “we clearly aim to stick to our historic mission of access.” Dr. Sherman at the University of Akron noted that the school is “trying to make sure they (students) start at the place that’s best for them, and by virtue of that, everybody is having access.” Still, it isn’t an easy message to deliver. Cleveland State’s Mr. Spademan said he’s “personally made phone calls and so has the director of admissions, breaking hearts and telling parents we won’t let their kid in. “We just have to tell them they have other options,” he said. ■
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IVHR: Medical records get makeover Continued from PAGE 3
of the software might look like represented patients with serious conditions as red dots, while those in better condition were represented by yellow and green dots. By clicking one dot, the user can pull up all sorts of information about the patient — basic details such as name and age, information on past conditions, electrocardiograms and other charts. The software then can highlight areas on those charts that are abnormal or pinpoint correlations between different charts. The software goes further to help doctors diagnose problems: It can display patient information in a web-
like format, so doctors can see how one piece of data relates to another. For instance, if a patient with a cough suffers from kidney failure and blood loss anemia — which each would appear as a bubble on the web — then the software could connect those bubbles to another in the middle, suggesting that the patient is at risk of a heart attack. IVHR’s software also has features that can help hospitals improve the billing process and analyze patient data, Dr. Barsoum said. Though other products can do some of the same things iVHR can do, Dr. Barsoum said he knows of none that can do all of them.
“We’re looking at it across the board,� he said.
Getting into an algorithm IVHR was founded in February but is the result of development efforts that started more than six years ago, when the Clinic department of orthopedic surgery began developing an algorithm to predict before an operation whether a patient would need a rehabilitation bed and for how long. The four inventors — Dr. Barsoum, Dr. Will Morris, Dr. Doug Johnston and Mike Kattan, Ph.D — developed another algorithm for cardiac patients before tackling the usability
problem. Through its product development fund, the Clinic in 2010 provided two grants totaling $85,000 that the inventors used to develop an early prototype of the system. A 2011 grant from the Global Cardiovascular Innovation Center helped pay for more development, and the company in July received more money from the Clinic. Now iVHR should have enough money to finish the product and expand to more than 10 employees from eight today, Mr. Fingerhut said. He wouldn’t reveal the size of the Clinic’s recent award. An official from the Global Cardiovascular Innovation Center also declined to give a dollar figure for its grant. Large companies that make electronic medical record systems
eventually might create similar products, Mr. Fingerhut said. Right now, though, they’re focused on deploying the software they have, which hospitals and physicians groups are scooping up as they try to meet federal standards that could influence how much money they get from Medicare and Medicaid. Mr. Fingerhut, who lauded the Clinic for being an early adopter of electronic medical records, said other industries for years have used software that improves the usability of enterprise resource planning systems, which many businesses use to manage their daily operations. It is time for the health care field to take a similar step with electronic medical records, he said. “Now we can dramatically enhance the user experience,â€? he said. â–
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THEINSIDER
THEWEEK SEPTEMBER 17 - 23 The big story: JumpStart Inc. and 16 other nonprofits that help entrepreneurs in Northeast Ohio soon might put more effort into helping more mature startups. Following months of delay and debate, the Ohio Third Frontier Commission approved $12 million that the JumpStart-led group of nonprofits will use to fund entrepreneurial services in 2013 and 2014. The approval is a win for the group, especially considering that the commission — which oversees the technology-focused Third Frontier economic development initiative — lately has been scrutinizing the performance of its Entrepreneurial Signature Program, which finances nonprofits that assist entrepreneurs.
Cuts coming: FirstEnergy Corp. expects to lay off about 200 workers in early November, with a focus on Akron-based units. The electric company announced an organizational study “to determine how its work force should be aligned to best meet the challenges of the continued weak economy.” In addition, the company expects more job cuts through 2013 as the jobs of employees retiring or leaving the company won’t be filled.
Out on a limb: Parker Hannifin Corp. pledged $1.5 million to Cleveland State University to fund an endowed professorship for research aimed at advancing understanding of human motion. The producer of motion and control technologies said the research aims to improve advanced prosthetics and orthotics in their ability to replicate the movement of healthy human limbs. Dr. Antonie van den Bogert, a researcher in biomechanics, was named the Parker Hannifin Endowed Chair in Human Motion and Control. Public practice: Cuyahoga County Prosecutor Bill Mason will resign his post and will become a partner with Bricker & Eckler, a Columbus-based law firm with a large Cleveland office. Mr. Mason has held the county prosecutor job since Mason 1999. He will join the law firm’s public sector practice, working for cities, counties and school districts.
Precision moves: Nidec Corp. of Tokyo, a maker of small precision motors, agreed to buy two U.S. companies — one of which is Avtron Industrial Automation Inc., an automation systems provider based in Independence. The Japanese company is buying Avtron from private equity firm Morgenthaler. Nidec also agreed to buy Deerfield, Ill.-based Kinetek Group Inc. Avtron has 154 employees and posted sales of $33 million last year. Nidec said it will acquire 100% of the shares of Avtron in an all-cash transaction. Right at home: Howard Hanna Real Estate Service acquired Realty Consultants Limited, a company in Broadview Heights that focuses on residential and commercial real estate sales as well as new construction. Howard Hanna did not say what it paid for the company, which is headed by Bill Burns, who has owned and managed Realty Consultants for the last 18 years.
This and that:
American Greetings Corp. announced a content licensing agreement with online photo service Snapfish by HP that the Brooklyn-based company said will give consumers greater opportunity to send personalized greeting cards they create online. Beginning in October, American Greetings cards will be available on Snapfish.com, where consumers can add photos and personalized verse. … Aircraft parts producer TransDigm Group Inc. bought a fellow Cleveland company, Aero-Instruments Co., for $35 million in cash. Aero-Instruments, founded in 1925, employs about 60.
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Landmark Management has interest in landmarks ■ A nearly $100 million complex proposed for the long-vacant Ameritrust headquarters in downtown Cleveland provides a taste of the scope of proposals Cuyahoga County received Sept. 14 as it looks to consolidate offices and shed excess properties. Developers John Carney and Robert Rains, whose Landmark Management Co. operates 700 apartments in rehabilitated buildings in downtown Cleveland and Indianapolis, proposed putting 250 suites and a high-end hotel in the 27-story Ameritrust tower in a joint venture with a hotel developer, according to Mr. Rains. In a separate proposal to the county, Mr. Rains said he and Mr. Carney want to convert other buildings in the massive banking complex — most notably the 1010 Euclid Ave. building — into another 112 apartments and 300 indoor parking spaces. The Ameritrust tower project would cost about $87 million. The 1010 Euclid building and structures facing Huron would cost another $22 million. Mr. Rains joked that at his age he “does not want to undertake an $87 million project alone,” though he declined to disclose his age or identify the hotel partner that could be part of Ameritrust tower. Cuyahoga County and its consultant, CBRE Group Inc., provided names but no details on what bidders proposed.
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Among other developers who surfaced in the hunt, Forest City Enterprises Inc. and Geis Cos. declined comment. A spokeswoman for Miami-based Optima Management Co. said its principals were not available to comment. — Stan Bullard
So big it’s worth a month of celebration ■ Manufacturing Day will be celebrated nationwide on Friday, Oct. 5, but in Ohio it will be recognized throughout the entire month of October. “With the level of interest from various groups, we felt one day just wasn’t enough to pay tribute to the thousands of manufacturing companies, hundreds of thousands of workers in Ohio’s manufacturing industry and the billions of dollars in revenue and income generated by manufacturing in Ohio each year,” said Dan Berry, president and CEO of MAGNET, a manufacturing advocacy organization in Cleveland. More than 1 million vehicles are made annually in the state, which represents one-sixth of total U.S. output, according to MAGNET. And 17% of the total U.S. employment in aviation and aerospace is located in the state. Statewide, nearly 13% of Ohioans, or 600,000 people, are employed by manufacturing. During Manufacturing Month, various organizations will hold plant tours, career workshops and on Oct. 11 a live interactive
The company, which makes products that protect against serious impact-related injuries, bills the EXFIL as the first carbon fiber helmet made with its next-generation helmet liner technology. Using technology largely developed under an Army Natick Soldier RD&E Center program, the EXFIL “features a hybrid sling/polymer structure impact management system that offers improved multi-impact performance,” Team Wendy says. The liner “also allows for superior air flow and ventilation by creating standoff between the wearer’s head and the helmet shell.” Team Wendy says the liner is made of durable TPU and is “resistant to wear and environmental extremes.” The helmet is made of lightweight carbon fiber and is compatible with tactical communication headsets. Picatinny rails “provide a wide range of attachment and positioning options, and webbing slots offer cable management,” according to the company. It also comes equipped with Team Wendy’s newest retention system made with cam-lock sliders for easy adjustment and a Boa Closure System for optimized stability and fit. For every EXFIL sold through Dec. 31, Team Wendy is donating $10 to the Military Child Education Coalition, which serves military children affected by mobility, family separation and transition. For information, visit www.TeamWendy .com.
At The Plain Dealer, the writing is on the wall ■ The likelihood of layoffs and the switch from seven-day-a-week publication at The Plain Dealer became a little more real last week as outgoing publisher Terry Egger spoke to newsroom employees and circulated a memo to them that suggested changes were coming sooner rather than later. “At this time, we do not have a specific plan, timeline, or structure for Cleveland,” he wrote in his memo to employees. “But we will — in the near future.” One staffer who spoke with Crain’s said the sadness on Mr. Egger’s face as he discussed the situation was more indicative about the future than any words he spoke. On Sept. 5, the 55-year-old Mr. Egger announced he would retire as publisher of the daily newspaper at the end of this year. Since May, Advance Publications, the paper’s New York-based owner, has been announcing that it would cut back from sevenday publication at a handful of its newspapers, including the New Orleans Times-Picayune and the Syracuse (N.Y.) Post-Herald. Those newspapers would print only three days a week and would shift more reporting attention to their websites. — Jay Miller
BEST OF THE BLOGS Excerpts from recent blog entries on CrainsCleveland.com.
THE COMPANY: Team Wendy, Cleveland THE PRODUCT: EXFIL Tactical Bump Helmet
telecast for middle and high school students featuring three young manufacturing employees — a research chemist and two engineers. A primary goal of manufacturing month is to show students the career opportunities available in advanced manufacturing. — Ginger Christ
This sector of the economy is booming ■ Broadcasting & Cable reported that the Cleveland/Akron market is the top market for political ad spending so far this year, according to data compiled by Wells Fargo Securities. The numbers are astonishing. Through Sept. 2, politicians had spent nearly $37.3 million on TV ads in this market. No. 2 was Washington, D.C., at $35.5 million, followed by Tampa-St. Petersburg-Sarasota, Fla., at $31.2 million. Rounding out the top five were Las Vegas at $30.7 million and Orlando-Daytona Beach, Melbourne, Fla., at $24.8 million. Total local TV political ad spending year to date through Sept. 2 was $852.6 million. Add in network and national spots, and the total was $998.4 million.
Private equity firms do more deals — with each other ■ Private equity firms “are buying and selling companies more this year than in any of the last five,” The Wall Street Journal reported, due largely to one industry: their own. “Some $28 billion in U.S. deals between private-equity shops have been announced this year, more than double the amount for all of last year and on pace to be the most since 2007’s $51.1 billion,” The Journal said. Many of the deals “involve private equity firms selling boom-era buyouts” to other private equity firms. Two deals mentioned in the story involve Northeast Ohio companies: ■ Janitorial service provider GCA Services Group Inc. of Cleveland, which was sold to a fund managed by investment firm Blackstone.
■ Quality Synthetic Rubber Inc. in Twinsburg, a maker of materials used in hospitals and to seal electrical connections, which was sold by Blue Point Capital Partners to private-equity backed rubber maker Lexington Precision Corp. These deals, known as secondary buyouts, are growing as sellers “want to get out of deals made in the boom era and buyers are looking to put cash to work,” the paper said. Also, expectations of higher capital gains taxes “are fueling the desire to sell.” An adviser in the Quality Synthetic Rubber sale told The Journal that the buyer wanted the Twinsburg company’s footprint in China. Also, he said, the combined company will be more appealing someday to a strategic buyer than either company was on its own.
He believes the interns are our future ■ Cavaliers owner and Quicken Loans founder Dan Gilbert offered some advice to Detroit-area businesses that works just as well for companies in Cleveland. “The single most effective way to move the (economic) needle in Detroit? Hire more interns,” Mr. Gilbert told the West Michigan Policy Forum on Sept. 12, according to our sister newspaper, Crain’s Detroit Business. Mr. Gilbert told about 600 businesspeople that Quicken Loans had 8,700 applications from 157 colleges and universities for 600 full-time internships this summer. In 2013, if major Detroit employers coordinated recruiting, “you could have 25,000 interns downtown,” he said. “There’s nothing better you can do for the future,” Mr. Gilbert said. “Twentysomethings aren’t leaving Michigan to go to Schaumburg, Ill. They leave to go to downtown Chicago or Boston.”
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