Crain's Cleveland Business by Crain's Cleveland Business

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VOL. 32, NO. 43

Law firms, too, ready for action in fracking

Clinic aims to head off concussions

Guidance likely needed for shale stakeholders

Mouthguard, iPad app, blood test are latest research into cognitive injuries

By MICHELLE PARK mpark@crain.com

By CHUCK SODER csoder@crain.com

They don’t wear hard hats, but they are members of Team Shale. The exploration for natural gas and oil in the shale beds of eastern Ohio has created a surge in activity for steelmakers and those who supply them, but nonmanufacturing companies, particularly law firms, are mobilizing, too. Anticipating that an increasing number of clients will need legal guidance in navigating the energy boom unfolding in this region, Thompson Hine LLP in Cleveland recently put together a multidisciplinary task force of nearly 20 attorneys — or Team Shale — to focus on shale-related issues, primarily in Ohio. In another example, the energy practice at Vorys, Sater, Seymour and Pease LLP, which includes attorneys in the Columbus firm’s Akron office, has risen to 16 as five lawyers shifted their focus over the past year. And partner Jeremy Sharp of Walter & Haverfield LLP in Cleveland said the firm seriously is considering forming a group or practice to handle work related to fracking, the technique of drilling down and fracturing

One day, a 10-year-old boy could be pulled out of a football game because his mouthguard just told a computer that he’s taken a big hit to the head. Then he could use an iPad to test himself for signs of a concussion. If there’s still doubt, he could provide a blood sample that could be tested on the sidelines to see if he’s OK. See CLINIC Page 20

RUGGERO FATICA

The Clinic’s Adam Bartsch (left) and Ed Benzel stand with a robot that is being used to test a new mouthguard that would offer more information when an athlete suffers a head injury.

See FRACKING Page 21

Geauga prosecutor sues electronic mortgage registry Argues system transferred deeds illegally, shortchanging county coffers By JAY MILLER jmiller@crain.com

NEWSPAPER

74470 01032

The Geauga County prosecutor has started the ball rolling on a lawsuit targeting an area of confusion in the nationwide mortgage foreclosure crisis that, the lawsuit says, has damaged the integrity of county

land records across Ohio and has cost counties thousands — and perhaps millions — of dollars in lost fees. David Joyce filed a lawsuit Oct. 13 in Geauga County Common Pleas Court against MERSCORP, the nationwide electronic mortgage registry, and many of the banks and

mortgage lenders that operate in the county. The lawsuit seeks class action status. Mortgage lenders created MERSCORP — commonly referred to simply as MERS, for Mortgage Electronic Registration System — in the mid-1990s to speed the recording and transfer of home mortgages

that were sold, often several times, by lenders and mortgage packagers on their way to being part of mortgage-backed securities. In addition to keeping track of mortgage records, MERS was designated as mortgage holder of record, retaining that role even as mortgages were sold and resold. As the housing market collapsed, it began to initiate mortgage foreclosure actions.

INSIDE Parma hospital plays surgical catch-up Parma Community General has brought on a surgical robot — the da Vinci — which the hospital says will allow it to offer more minimally invasive surgical procedures and better compete with University Hospitals, the Cleveland Clinic and MetroHealth. Read more about the robot and how it works during surgery in Tim Magaw’s story on Page 6.

See GEAUGA Page 20

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CRAIN’S CLEVELAND BUSINESS

receive investments from Bizdom U sign contracts requiring them to reside in the city of Cleveland. A contract would apply even if outside investors buy a controlling stake in a company, said Ross Sanders, CEO of the organization, which also has an accelerator in Detroit.

REGULAR FEATURES Best of the Blogs ..23 Big Issue ..............11 Classified ..............22 Editorial ................10 From the Publisher ..10 Going Places ........14

OCTOBER 24 - 30, 2011

CITIZENS OF THE WORLD

CLARIFICATION Bizdom U, a nonprofit that runs “entrepreneurship accelerators” that hold months-long boot camps for startup companies, clarified information that appeared in an Oct. 17, Page 4 story about the organization’s new accelerator in Cleveland. Participating startups that

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Letter....................11 List: Career/vocational schools ................19 Personal View........10 The Week ..............23 What’s New............23

The foreign-born population in the United States surged 28.4% in the past decade to just under 40 million, and while the Akron area kept up at a hearty pace, the Cleveland area lagged, according to a new Brookings Institution report. The report, “Immigrants in 2010 Metropolitan America: A Decade of Change,” found that 21 metro areas each have gained at least 100,000 immigrants since 2000. Here’s how Ohio metro areas fared:

Metro

Foreign-born population 2010 2000

% change 2000-10

% foreign born 2010 2000

Akron

26,910

20,772

29.5%

3.8%

3.0%

Cincinnati

90,785

51,400

76.6

4.3

2.6

Cleveland

123,037

113,006

8.9

5.9

5.3

Columbus

132,360

71,953

84.0

7.2

4.5

Dayton

29,478

20,637

42.8

3.5

2.4

Toledo

23,435

18,393

27.4

3.6

2.8

U.S.

39.96M

31.12M

28.4

12.9

11.1

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CRAIN’S CLEVELAND BUSINESS

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INSIGHT

Tax loopholes undergo renewed scrutiny Officials examining ways to cut superfluous breaks, reclaim revenue By JAY MILLER jmiller@crain.com

Picking up an effort that was dropped from budget talks earlier this year, the General Assembly is taking a fresh look at closing tax breaks in Ohio’s sales and income tax laws. Three groups from across the

political spectrum have been advocating cutting 20 of the 128 tax loopholes highlighted by the Ohio Department of Taxation in its biannual report on tax breaks, which are known as “tax expenditures” in government lingo. The 20 tax breaks account in the aggregate for about $300 million a year in revenue that the state isn’t collecting.

In the state Senate, president Tom Niehaus has handed his Ways and Means Committee the job of studying the tax breaks and reporting recommendations on which ones to eliminate before the end of the year. In the House, a special Legislative Study Committee on Ohio’s Tax Structure held hearings this summer and fall that took testimony

THE WEEK IN QUOTES

on the tax breaks and on other ways to reform state tax laws. Rep. Peter Beck, R-Mason, a member of the House Ways and Means Committee, said the goal will be to bring fairness, simplicity and ease of compliance to the tax code. “The whole purpose is to look at the tax expenditures and see what’s working and what’s not working, and also to ask why do we have tax expenditures in place and are there

See TAX Page 21

Indians take fans’ pulse on options for premium club seats

“As that awareness (of concussions) has grown, I think the Cleveland Clinic’s awareness and the number of people doing this type of work has grown.”

Survey reveals potential for change in pricey section that offers customers lounge, free food

— Jay Alberts, a biomedical engineer at the Clinic’s Lerner Research Institute. Page One

By JOEL HAMMOND jmhammond@crain.com

The Cleveland Indians have yet to announce their ticket prices for next season, but at least one big change may be afoot in the team’s luxury club seating area. The Indians after the 2011 season distributed a survey to club ticket buyers that listed several options for the section, located in the second deck along Progressive Field’s firstbase line. Club ticket buyers traditionally are entitled to free gourmet food unavailable elsewhere in the park and soft drinks, as well as

“We’re setting sales records and working 20-hour days. Our market came back from what we lost in 2009. We were down 30% that year, but we were back in 2010 and now we should have a record year (in 2011).”

access to a 16,000-square-foot lounge with a full-service bar. For those privileges, customers paid between $80 to $100 a ticket, depending on a seat’s location. (The six new options listed in the survey can be found below.) One club ticket buyer said this most recent survey was far more detailed than anything he has received in his seven years as a premium customer. However, Indians spokesman Curtis Danburg said the survey merely was part of the Indians’ year-round research efforts and that no concrete plans for seating See CLUB Page 9

TAKE YOUR SEATS The Indians, a survey sent to club ticket buyers shows, are analyzing possible alterations to their luxury club seating area, along the first base line at Progressive Field. Currently, customers pay $80 to $100 for tickets that include an allyou-can-eat gourmet buffet and access to a climate-controlled lounge. Options under consideration:

— Steve Peplin, CEO, Talan Products. Page 9

FIVE SECTIONS CLOSEST TO HOME PLATE ■ an all-you-can-eat seat plus $5 loaded ticket value (used for food, beer or merchandise) for $40 ■ a seat with $10 in loaded value for $60 ■ a seat with no food privileges for $40

“I think at this point companies are really starting to realize the importance of retention of good people. … HR people are really starting to think outside the box.”

The club seating area at Progressive Field, seen here in the second deck behind first base, is being scrutinized by the team for potential pricing changes.

— Sara Radak, Embrace Pet Insurance’s marketing coordinator. Page 15

By MICHELLE PARK mpark@crain.com

Successful stock offering key to pending changes

“We tell clients to engage employees, educate them and then enroll them.”

Central Federal Corp. and its CFBank subsidiary won’t just have new money if the company’s planned recapitalization is a success. They’ll have new leadership, too. A new CEO, a new president and five new board members are slated to take the reins of CFBank in Fairlawn and its holding company if the company successfully completes a coming stock offering, Central Federal revealed in a recent filing to the

Securities and Exchange Commission. Those who are waiting in the wings to lead the enterprise are the five leaders of a group of standby purchasers that has committed to buy more than $5 million of Central Federal’s stock, but only if the company raises at least $17.5 million more in equity. The proposed new management team, the company wrote in its filing, has extensive experience in

— Neil Quinn, director of health management services at Oswald Cos. Page 16

some we can do away with,” Rep. Beck said. Rep. Beck said the goal in the House will be to be revenue neutral. “What we don’t want to do is raise taxes on anybody, residents or businesses,” he said. Rep. Beck said he expects that if loopholes were closed and more revenue raised, tax rates would be lowered across the board to offset the new revenue. The latest tax expenditure report

ZUMA PRESS

CLUB AREA’S THREE MIDDLE SECTIONS ■ a seat with an all-you-can-eat plan plus $5 in loaded value for $60 ■ a seat with no food privileges or loaded value for $60 ■ a ticket with $20 in loaded value for $40

Fresh capital would yield new headship at CFBank the banking business, both with large financial institutions and community banks, and has deep business connections in the Columbus market, where the company sees the most growth potential. Leadership changes are common in small bank recapitalizations, said Fred Cummings, president of Elizabeth Park Capital Management, a Beachwood bank stock hedge fund. “Typically, in order to raise capital,

you’ve got to get rid of the current management team,” he said. “Guys that are going to recapitalize the bank, they want to have management control.” The purpose of the recapitalization, the company said, is to return the company to sound financial footing and to satisfy regulators’ consent orders. Last Thursday, Oct. 20, Central Federal’s stockholders approved three measures allowing it to proceed with the planned recapitalization. The measures included increasing See BANK Page 20

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OCTOBER 24 - 30, 2011

Ferro boosts solar energy R&D in search of long-term payoff By DAN SHINGLER dshingler@crain.com

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Ferro Corp. is reaping the benefits of ramped-up research-and-development efforts in the form of new products for the solar energy industry. Now it hopes that industry can live up to its promise of providing a growth market for the maker of specialty chemicals and materials. “We’ve put some significant investment into this and hired more people,” said Jeff Edel, global business director for Ferro’s Electronic Materials unit. “We’ve doubled the size of our R&D effort over the last year.” Ferro doesn’t want its competitors to know exactly what it spends on its solar-related research. However, Mr. Edel said it already was a large area of research for the company based in Mayfield Heights, even before Ferro stepped up its efforts significantly over the past 12 months. In that timeframe, the solar-related R&D budget doubled, and staff dedicated to that research rose to 60 from 30. The company makes most of the products in California, but most of the core R&D work takes place in Independence, Mr. Edel said. Ferro makes special “metallization” pastes that can be printed onto the silicon components of a solar cell, allowing them to conduct electricity. Because the pastes often are silver-based — and because increased efficiency is the perpetual holy grail of the solar industry — the technology behind these pastes is critically important to solar manufacturers,

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Mr. Edel said. Paste that can be applied more thinly or engineered to use less silver can lower manufacturing costs, while pastes that are more effective can increase the efficiency of a solar cell, he said. “The industry is evolving rapidly,” Mr. Edel said. “The challenge is to take the cost out of production so (the price of solar energy) becomes equal to or lower than what you buy (electricity) for from the grid,” Mr. Edel said. The solar industry already is making great strides in terms of improving the efficiency of its equipment, according to Mr. Edel. Just five years ago, solar cells could convert in electricity only about 15% of the energy they got from the sun. Today, that figure is at 19% and rising, Mr. Edel said. As a result of its stepped-up R&D efforts, Ferro has introduced 25 new pastes this year. It needs to develop so many, Mr. Edel said, because there still are at least five types of solar cell designs competing to be the most efficient and least expensive — and each one uses up to three different pastes in its manufacturing process. Ferro is one of the top three companies in the world when it comes to providing the specialized paste, Mr. Edel said, and it intends to stay ahead of its competition.

In it for the long haul The investment might take a long time to pay off, however. At the moment, analysts are citing the solar industry as a drag on Ferro’s growth, rather than an engine. Ferro is doing a fine job, analysts say, but there’s a slump in the solar industry generally. Indeed, when KeyBanc Capital Markets in Cleveland downgraded

Ferro’s stock to a “hold” from a “buy” in its ratings released Oct. 5, solar was cited as a reason for the pullback in confidence. “Following persistent concerns of over-supply and over-capacity in solar markets, we are lowering our fiscal year 2011 and fiscal year 2012 estimates to $1.00 and $1.20 (per share), from previous estimates of $1.10 and $1.35, respectively,” wrote KeyBanc specialty chemicals analyst Michael Sison. Mr. Sison said he, as well as investors, are concerned about near-term weakness in the solar industry. Mr. Edel, though, said Ferro is eyeing the long-term potential of the business. Solar companies and their suppliers face substantial headwind in the United States. Chinese solar companies are proving they can make their products cheaper than many U.S. competitors, at least for now, Mr. Edel said. Also, the scandal over solar panel maker Solyndra has bruised the industry’s image in the United States following that company’s recent bankruptcy after it was backed by a half-billion dollars of government loan guarantees. But Ferro’s biggest market for its solar pastes is Asia, followed by Germany and then the United States, Mr. Edel said. The U.S. market for solar energy will grow further, he said — if solar energy can become cost competitive with other sources of electricity, Mr. Edel said. So Ferro is focusing on working closely with solar manufacturers, partnering with them to bring down costs and to increase the powergenerating efficiency of solar systems. “The real win is if these can become competitive with grid power, then your market becomes much larger,” Mr. Edel said. ■

Contractors trade group plans to build HQ in Independence By STAN BULLARD sbullard@crain.com

Builders Exchange, a trade group for construction contractors that’s based in Valley View, plans to build a headquarters of its own on a site it recently acquired on Acorn Drive in Independence. David Griffis, president of the Builders Exchange board, said the exchange has grown over the past 10 years and wants to build a new structure that will accommodate future expansion. Builders Exchange paid L&M Properties Co. of Independence $350,000 for the three-acre parcel, according to Cuyahoga County land records. Mr. Griffis said Builders Exchange plans to build a 20,000square-foot structure on the land

within three years to replace its current rented office of 11,000 square feet, according to CoStar, the online realty data provider. Mr. Griffis said Builders Exchange opted for an Independence site to provide convenient access for contractors throughout the region. Constructing its own headquarters also would allow the group to install additional electronic infrastructure for an online planning review and bidding service called Private Planroom that the industry group operates, said Gregg Mazurek, Builders Exchange executive director. The cyber service supplements the traditional public plan room contractors and suppliers visit to examine drawings by submitting bids for projects to general contractors and developers. ■

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Workers’ comp bureau’s latest discount program draws ire Manufacturers, lawyers say Grow Ohio’s new business incentive burdens employers By JAY MILLER jmiller@crain.com

Ohio will offer reduced rates on workers’ compensation as an incentive to attract new businesses to the state. But the discount on workers’ compensation, a program called Grow Ohio, isn’t setting well with at least one major employment group in the state, and, if two lawyers already fighting the Bureau of Workers’ Compensation step up their interest, the proposal could end up being tied up in litigation. Under the plan, new employers can receive a 25% discount on their workers’ comp premiums for as much as 30 months. The bureau also is giving new employers the option of immediately joining the state’s group rating program, instead of waiting as long as a year for the next enrollment period. This path could reduce premiums by as much as 51% for six to 18 months. “We want to make sure (new employers) have all the dollars possible in their pocket to make investments in Ohio,” said BWC administrator Stephen Buehrer in an audio statement announcing Grow Ohio, which was approved Sept. 30 by the BWC board of directors. He said his agency was responding to the urging of Gov. John Kasich, who asked all state agencies to do what they can to bring new business to Ohio. A consultant to the bureau estimated the discount could cost the bureau between $11 million and $34 million over two years in lost premiums, against total annual premium collections of $1.4 billion. Because premiums are used to pay claims over a period of many years, it’s unlikely the discount would cause a serious dent in the state-run insurance pool. But opposition has popped up. The Ohio Manufacturers Association has long been critical of BWC’s major discount program, the grouprating program. BWC receives no state funding and is instead funded entirely by premiums paid by businesses. As a result, a discount to one employer that is not based on a proven lower cost to provide on-thejob injury insurance coverage would be paid by the other premiumpaying businesses. The OMA has been critical of the group-rating program because it has contended that the discounts offered to members of groups weren’t justified by the savings in administrative costs and shifted premium costs to non-group members. Employers with spotless on-thejob injury records, who could join groups, had been able to get as much as a 95% rate discount compared to employers with even a single injury recorded, who can’t qualify for groups. The BWC has begun to lower that disparity between group and non-group rates but the OMA sees Grow Ohio as a step in the wrong direction. As a result, said Dennis Davis, managing director of workers’ compensation services at OMA, existing

employers will end up paying at least slightly larger premiums to subsidize these new employers. “The worst part is, you’ve got a company, a going concern, and you’ll be subsidizing a company that might be your competitor,” he said. Mr. Davis said he didn’t know what his organization could do about the new program since it’s already been approved by the BWC’s governing board.

See you in court But another challenger may not be so acquiescent. Cleveland attorneys Stuart Garson and James DeRoche already are pursuing a classaction lawsuit against the bureau

“In effect, (Grow Ohio is) having one segment of the employer community provide a subsidy for the benefit of another.” – Stuart Garson, founder and managing partner, Garson & Associates Co. over a similar rate shifting policy and the pair, in a telephone interview on Thursday, Oct. 13, said they believe Grow Ohio represents a similar inequity. “We believe this is an unlawful way of promoting economic development,” Mr. Garson said. “In effect, they are having one segment of the employer community provide a subsidy for the benefit of another.”

Messrs. Garson and DeRoche are pursuing their class-action lawsuit in Cuyahoga Common Pleas Court after an appellate court upheld the right of the attorneys to create the class. The suit is seeking millions of dollars in premium overcharges paid by members of the class. The attorneys argue that small employers that didn’t qualify for group rating

and the 95% discount ended up with higher rates that subsidized the group-rating discount. Messrs. Garson and DeRoche see this new-employer discount as similarly illegal. However, Bill Teets, a BWC spokesman, said the state Legislature has given the bureau the authority to develop alternate premium plans and offer discounts for various reasons. “We’re confident we have the authority to develop programs as it relates to our rating programs,” he said. “In this case we believe it is an important enough mission to help improve the economic climate in Ohio to create this program.” ■

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OCTOBER 24 - 30, 2011

Parma Hospital invests in surgical robot Landfill service firm’s By TIMOTHY MAGAW tmagaw@crain.com

Parma Community General — one of the few remaining independent hospitals in Northeast Ohio — recently invested millions of dollars in a surgical robot it hopes will attract patients and ultimately boost its bottom line. The hospital’s purchase of the latest model of the da Vinci surgical robot for an undisclosed amount puts the community hospital in the same league as several other local providers, such as University Hospitals, Cleveland Clinic, the MetroHealth System and Southwest General, in their quest to provide more minimally invasive procedures, particularly those for prostate removal. “It allows us to compete with some of the other facilities that have the equipment,” said Pam Falasco, Parma Community’s vice president and chief nursing officer. “They may need to catch up with us.” Ms. Falasco said that’s an exciting prospect given that Parma Community isn’t part of a larger health system. The acquisition of the robot will allow the organization to do “several hundred procedures” it hadn’t done previously each year.

Parma Community General Hospital has invested millions of dollars in a surgical robot, which is expected to boost its surgical prowess. PHOTO PROVIDED

The hospital admittedly was behind the curve when it came to robotic surgery, but the opportunity to make the investment arose when a nationally known expert in robotic surgery, Dr. Carson Wong, joined SouthWest Urology Inc. in Middleburg Heights, one of the hospital’s partner practices. Dr. Wong, who most recently served as medical director of the Center for Robotic Surgery at Oklahoma University Medical Center in Oklahoma City, will lead the development of the robotic surgery program at Parma. “The reality is that (robotic surgery) is a standard of care for prostate

cancer in 2011,” Dr. Wong said. When using the robot, surgeons aren’t required to touch patients’ bodies. Rather, they slide their thumbs and fingers into a console and control the robotic fingers that touch the patients. With the help of the equipment, the surgery is minimally invasive, considerably decreasing blood loss and shortening recovery times. Right now, the equipment at Parma Community largely is used for prostatectomies, hysterectomies, and bariatric and kidney surgeries. Dr. Wong will lead the charge of developing other uses for the technology, though he said it was too early to say what those might be. ■

THERE WERE THE LANDOWNERS, AND THE NEIGHBORS, AND THE ENVIRONMENTALISTS AND THE ZONING BOARD. THERE WERE THE HUNTERS, AND THE FARMERS, AND THE FEDERAL REGULATIONS AND THE LAND USE RESTRICTIONS. THERE WERE EXCAVATION AND RECLAMATION ISSUES. THERE WERE AESTHETIC ISSUES. AND THERE WERE THE BIRD LOVERS, AND THE BAT LOVERS AND THE NOISE HATERS. AND THEIR ATTORNEYS. SO HOW DID WE GET APPROVAL FOR THE FIRST LARGE-SCALE WIND FARM IN OHIO?

WE FIGURED IT OUT.

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acquisition binge extends capabilities Richfield concern eyes national market share By CHUCK SODER csoder@crain.com

generation systems, Mr. Shipps said. Such systems are popular on the West Coast because of regulatory requirements and an increased burden on traditional power plants, but Mr. Shipps said he expects their use to grow elsewhere. “Our feeling is, ultimately, that’s going to be a national market,” Mr. Shipps said.

Carl Apicella and his colleagues have spent the past 18 months putting the “American” in American Environmental Group Ltd. The Richfield company has made three acquisitions since the spring of 2010 — a big change for a 9-yearold company accustomed to growing More deals could follow internally, mainly by providing services to landfill owners in the American Environmental Group, Midwest. which employs 32 people in Richfield, Though American Environmental started focusing more on acquisiGroup already had a few offices outtions after hearing of an opportuside Ohio, the acnity to buy the inquisitions give the stallation services “We’re going to be company a broader division of Gunstrategic. We have our national reach, said dle/SLT EnvironMr. Apicella, the mental Inc., or eyes open.” company’s presiGSE, a Houston – Carl Apicella, president, Amerident. company that can Environmental Group Ltd. The deals also makes geosynexpand the types thetic materials. of services the company can offer That purchase gave the Richfield landfill owners while broadening company 120 employees and a presthe types of customers the company ence in a few new industries, such serves, Mr. Apicella said. as mining and utilities. A year later Before the acquisitions, Mr. Apiit bought geosynthetics installer cella said, much of American EnviMid-American Lining Co. of Union ronmental Group’s revenue came City, Tenn., which employed about from building systems to extract gas 30 people. from landfills for use in generators. Partly because of the acquisitions, Now the company has more American Environmental Group capacity to operate and maintain expects revenue to land in the range landfills with those systems on a of $75 million this year, up from contract basis and to install geosynroughly $50 million in 2009, according thetic materials, which can serve as to information from Messrs. Apicella liners and caps for landfills, among and Shipps. other uses. Mr. Apicella said he “wouldn’t be “It gives us the ability to basically averse” to doing a few more acquitake care of the whole system,” Mr. sitions over the next year or two. Apicella said. “We’re going to be strategic. We The company — which employs have our eyes open,” he said. about 500 people nationwide, up Waste management company from about 300 in early 2010 — Republic Services Inc. of Phoenix — announced this month that it had American Environmental Group’s bought Power Management Inc. of oldest and biggest client — started Goleta, Calif., for an undisclosed working with several of its owners price. The acquisition gives Ameriback when they led Organic Waste can Environmental Group offices in Technologies, a Northeast Ohio the Los Angeles and San Francisco company that was founded in the areas as well as 20 new employees mid-1980s and bought by a company who can help the company become that went bankrupt. familiar with California’s regulatory Though American Environmental system, said Mark Shipps, a senior Group has grown a lot in nine years, vice president at American Environit remains a flexible, entrepreneurial mental Group. organization, said Joe Benco, vice Buying Power Management — president of engineering and enviwhich has a strong focus on operating ronmental management for Republic. and maintaining landfill gas The company can take on big prosystems and other generators — jects that involve a lot of planning or strengthens American Environmental move quickly on smaller jobs, Mr. Group’s existing landfill services. It Benco said. also could give the company a “They work well on both sides of foothold to service more small power the equation,” he said. ■

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Lorain County JVS touts importance ahead of Election Day, levy Employers hungry for graduates of school’s manufacturing track

seriously the fact that this is not just going to be a job, it’s going to be a career,” Mr. Valentine said.

In a different class

By DAN SHINGLER dshingler@crain.com

When most people think about Oberlin and education, they think of the college that dominates the town’s image and culture. But when industrial leaders in the area think about education, they’re just as likely to think of Lorain County Joint Vocational School in Oberlin and its program that trains students to work in manufacturing. Why manufacturing? Because that’s where the jobs are, says Jerry Pavlik, supervisor for manufacturing programs at the JVS. “We do not have enough kids, or adults, in our manufacturing program to meet the needs of the job market,” Mr. Pavlik said. “The demand for manufacturing (workers) right now just exceeds the supply.” The school is huge — more than 10 acres under roof on state Route 58 — and serves the vast area that makes up Lorain County. And it has its sights set on getting even bigger. JVS officials hope a tax levy on the Nov. 8 ballot will triple the school’s tax revenues, to a little more than $10 million a year starting in 2012. The added money would allow the school to renovate some of its 40-year-old campus and to take in more students. The school is using its role as a resource to area businesses to help sell that levy. The JVS teaches courses in a number of jobs and fields, from cosmetology and food service to auto mechanics and construction. But employers are clamoring loudest for graduates of its manufacturing program, which teaches students skills such as CNC (computer numeric controlled) machining, welding and computer-aided design.

‘An awesome resource’ Manufacturers in and around Oberlin have learned that the local vocational high school is one of the best places to find new workers. “I bet, over the last 15 years, they’ve accounted for a third of our work force,” said Jim Tyree, owner of General Plug and Manufacturing in Grafton, a 200-person shop that makes pipe fittings, bushings, plugs and other forged and machined metal products. “They are an awesome resource.” Just about every student of the

“I just knew I wanted to do something different — and to know stuff that other kids didn’t,” said Tyler Johnson, a JVS senior from Grafton who, when he isn’t at the school, works in the tool room at Invacare in Elyria using the machining skills he learned at school.

PHOTO PROVIDED

Midview High School student Krisy Burd studies at the Lorain County Joint Vocational School. manufacturing program who isn’t going on to college — and that’s a fair number of them — has an employer waiting to hire them, often before they’ve finished high school, said JVS career services specialist Bill Elliott. That’s partly because many students spend half their day at the school and the other half at a local employer, where they continue learning on the job. “Those students are already making anywhere from $9 to $13 an hour,” Mr. Elliott said. They work at nearby places such as publicly traded Nordson Corp., a maker of automated dispensing equipment, and wheelchair maker Invacare Corp., in addition to a slew of smaller shops such as General Plug or Rochester Manufacturing Inc. in Wellington.

he said. The JVS students, though, work out fine. Mr. Valentine said he’s able to find at the JVS the “fussy” students he needs — the kind who take the time to check and recheck calculations and machine settings to get the tight tolerances he needs to produce precision parts for machines used by other area manufacturers. “We’re working to tolerances that are less than a 30th of a human hair. That requires a kid who really takes

At the school, the students are not under illusions that gaining the skills they’ll need to succeed in manufacturing are going to come quickly or will be acquired in just two years of high school. During a recent tour of the school, not one of more than two dozen students who spoke with a reporter said they thought the JVS was the last stop on their educational journeys. All said they were bound either for more formal training through another school or two-year college, had apprenticeships lined up with area manufacturers or were headed to four-year universities to pursue engineering degrees. They aren’t the vocational school students of decades ago, say both school administrators and the businesses who work with the students. While in the 1980s or ’90s vocational schools might have been a place for school systems to send students who weren’t “college material,” today they are as challenging an environment as a traditional school, but simply have a different focus.

Learning the gift of gab Aside from teaching students hard skills such as machining and welding, the JVS also tries to teach them how to talk to and work with people, Mr. Pavlik said. To that end, much like a progressive manufacturing plant, the school’s manufacturing wing has been designed so the engineering, design and fabrication areas are in adjoining rooms, enabling students to go from one to the other without going into the hallway. It’s all about teaching that every process is linked to another — and communication is as important a skill as any in them working together. “It’s not just about becoming a CNC operator. You have to be able to talk to the customer, read the blueprints and see the project through to completion,” Mr. Pavlik said. “Our industry partners have told us that’s what they need.” ■

Insights from a business owner

Works in progress Do they come out of school as masters of their craft? No, but local manufacturers say they’re far better prepared than the average inexperienced job applicant and are primed for further training to become master machinists, engineers, designers or welders. “They’re ready to go into the apprenticeship, let’s put it that way. They know how to read blueprints, they know the basics of manual machining and they know some CNC machining,” said Roger Valentine, owner of Rochester Manufacturing. Mr. Valentine says he’s been hiring students from the school for years. They come to him for additional training that he’s happy to provide, even though he figures it costs him about $125,000 to fully train even a JVS graduate to become a master machinist. “I can’t just take any bum off the streets and turn him into a machinist,”

“I’m six-foot-five and even I felt like the phone company l o o k e d d o w n o n m e . S w i t c h i n g t o C o x c h a n g e d t h a t .”

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OCTOBER 24 - 30, 2011

Local scaffolding specialist bankrupt, with sale imminent Troubles made worse when Vegas project stalled; possible buyer plans to ‘capitalize’ on turnaround By MICHELLE PARK mpark@crain.com

The Cleveland scaffolding company Waco Holdings Inc. is bankrupt and for sale. Unless higher and better bids emerge, the holding company and six Waco operating entities will be sold for approximately $8.2 million to North American Scaffolding Inc. Waco filed for Chapter 11 protection last month in order to sell. The opportunity to bid has been marketed to Waco’s creditors and

several hundred additional parties, both strategic and financial, said William Schonberg, a partner with Benesch, Friedlander, Coplan & Aronoff LLP and debtors’ counsel. The deadline for competitive bids is Nov. 9. If competitive bids are received, an auction will take place Nov. 10. Approval of the sale of the company is to be sought Nov. 14 in bankruptcy court. The stalking-horse bidder, North American Scaffolding, is a new company formed by Longroad Asset Management LLC, a Connecticut

private equity firm that has its sights on growing Waco. Waco designs, manufactures, puts up and dismantles scaffolding and related access products, shoring and other construction-related equipment for the construction industry. It employs roughly 320 employees in eight U.S. offices and grossed $36.7 million in worldwide sales in 2010.

Dealt a bad hand In its Chapter 11 filing on Sept. 9 in U.S. Bankruptcy Court, Northern District of Ohio, the Waco holding company indicated it owes more than $10 million and up to $50 million to 1,000 to 5,000 creditors. The book values of the assets of the Waco entities are being compiled,

Mr. Schonberg said. Waco’s sales and revenue began to decline in the second quarter of 2008, “primarily as a result of slowing economic conditions, a lack of available credit and general market conditions that ultimately resulted in fewer construction projects and less demand for Waco’s goods and services,” according to a statement filed in court by Lawrence Napolitan, the company’s chief financial officer, secretary and vice president of finance. The company also began experiencing difficulty in collecting money owed to it, the statement read. Then, in June 2009, it suffered a serious setback when work halted on a $2.9 billion hotel, condo and casino development on the Las

Vegas Strip. Ultimately, Waco wrote off about $2 million of receivables associated with the project. Shortly after the abandonment of the Las Vegas project, Waco defaulted on its obligations to its lender, Fifth Third Bank. Between 2009 and 2011, the company took steps to restructure its business, closing branches in Cincinnati and Norfolk, Va., and reducing its number of employees. Waco in April hired a turnaround firm and an investment banking firm, which worked for several months to solicit potential buyers, investors and refinancing lenders. While it did not find any lenders willing to refinance all of Waco’s senior debt, the investment banker did find several parties interested in acquiring Waco’s assets. By mid-2011, despite its restructuring, Waco faced further liquidity constraints caused by customers’ failure to pay and its deteriorating sales.

“We want to grow this business. We don’t want to slash and burn it.” – Paul Coughlin, managing partner, Longroad Asset Management LLC A month before Waco filed bankruptcy, North American Scaffolding bought all of Waco’s senior secured debt and letters of credit from Fifth Third Bank, which totaled approximately $13.7 million as of the petition date. Afterward, the two companies entered into negotiations for North American Scaffolding to serve as a stalking-horse bidder in a sale to be conducted under bankruptcy code. North American Scaffolding also is providing debtor-in-possession financing of more than $1 million to enable Waco’s entities to keep operating. It will use the debt it has assumed for Waco as currency in purchasing Waco if its bid is approved.

Building plans If North American Scaffolding becomes the owner of Waco, it will seek to add on to the company’s other commercial and industrial scaffolding businesses, said Paul Coughlin, Longroad’s managing partner. Paul Coughlin is not related to Martin Coughlin, Waco’s CEO. “We want to grow this business,” Paul Coughlin said. “We don’t want to slash and burn it. We have faith in Marty and this team. “It’s been around,” he added, noting the company’s founding in 1945. “It’s a well-respected name. Listen, commercial construction has obviously gotten pounded, and at some point this will end. Because this is the first one to restructure, it’ll be the first one to capitalize.” Mr. Coughlin, who led an industrial scaffolding business in which Longroad was invested previously, said he knows Waco is the first scaffolding company to restructure because he follows the industry and also restructuring activity. “I think (scaffolding) is a business that needs to exist, and the downturn obviously has created the opportunity,” Mr. Coughlin said. Would buying the company for $8.2 million be a steal? “I’ll tell you in five years,” Mr. Coughlin replied. From the perspective of Waco’s leadership and its investment banker, the purchase price that North American Scaffolding has offered is a fair reflection of the market value of the company, Mr. Schonberg said. ■

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CRAIN’S CLEVELAND BUSINESS

Talan Products has strong year outside of its comfort zone By DAN SHINGLER dshingler@crain.com

Why on earth is Steve Peplin still smiling? Doesn’t the CEO of Talan Products in Collinwood realize that the U.S. construction industry — medical mart and casino here in Cleveland aside — is at a virtual standstill? That sector, after all, traditionally has been the biggest customer for the brackets and other building-related products that Talan stamps from steel and which have historically made up the bulk of its offerings. He knows, he said, he’s just found ways to manage around the situation. “We’re setting sales records and working 20-hour days,” Mr. Peplin said. “Our market came back from what we lost in 2009. We were down

30% that year, but we were back in 2010 and now we should have a record year” in 2011. Mr. Peplin said he got some help from the building maintenance market, which rebounded strongly after building owners delayed Peplin maintenance during the leanest periods of 2009 and 2010. That created some pent-up demand, and possibly more extensive repairs than would have otherwise been needed, Mr. Peplin said. “You can put it off for a year, but you can’t stop doing maintenance,” he said. “The next year, you just have to do twice as much.”

A little self-improvement Mr. Peplin thinks most of the events

Club: Team continues to tinker with prime areas continued from PAGE 3

changes were in place. Mr. Danburg said the team still is in the process of formulating a master plan for the stadium, an endeavor now two years old. The Indians have a reputation in professional sports for being ahead of the curve in analytics and advanced metrics, on the field and off. Mr. Danburg said the business analytics have been kicked up a notch with the hiring of Alex King as the team’s director of brand management. Mr. King formerly was a brand manager at Procter & Gamble. “We’re always trying to get into the minds of our consumers,” Mr. Danburg said.

Digging deeper The research continues the team’s reimagining of its premium seating areas, begun in 2008 with the combination of four suites into the team’s Champions Suite, which holds up to 60 fans. The team also turned one suite between first base and home plate into a “Fan Cave,” complete with a billiards table and flat-screen televisions, and this year moved its “Tribe Social Deck” — originally constructed in the leftfield bleachers — into a suite and renamed it the “Indians Social Suite.” Progressive Field has the secondmost number of suites — about 120 — in Major League Baseball, behind only the Texas Rangers’ Ballpark at Arlington. Mr. Danburg said a new model test suite, unveiled in July, was the result of research just like that currently under way. That suite includes a 42-inch flat-screen TV, a bathroom TV, a memorabilia display and a more open-air feel. “That’s an example of the process we go through, from surveys to test case scenarios,” Mr. Danburg said. “We’re in a transition to being far more analytical than we’ve ever been.” In 2010, the team raised eyebrows by beginning to offer a complimentary suite rental — valued anywhere from $2,000 on the low end to $6,500 on the high — with season ticket packages. It expanded that offer this year by including two club tickets and free access to the highend Terrace Club restaurant with each full- or partial-season ticket

package purchased. The value of Terrace Club access alone is put in the range of $500 to $900. The Indians saw the inclusion of those luxury areas in season ticket packages as a way to boost its season ticket base, which has declined with the local economy and the team’s performance. Crain’s has reported the full-season equivalent ticket number — a combination of full and partial season-ticket packages — at 13,000 in 2007, 15,000 in 2008 after the team’s American League Championship Series appearance, 11,700 in 2009, 8,000 in 2010 and 7,500 in 2011. Mr. Danburg said the team, which surprisingly contended in the American League Central Division for much of 2011, has seen positive early signs in new season ticket deposits for 2012, but won’t have a better view of next season until the renewal process starts, which he noted would be soon.

The outside view Bill Dorsey, chairman of the Cincinnati-based Association for Luxury Suite Directors, said the options the Indians apparently are considering would place similar value on food as other teams’ oneprice options. For instance: If the Indians’ club seats are worth $40 without the all-you-can-eat food option — as some of the team’s survey options indicate — the implicit $40 to $60 value for food at the Indians’ current club pricing levels is well above the more common $30, Mr. Dorsey said. Jim Kahler, executive director of the Center for Sports Administration at Ohio University, applauded the Indians’ efforts to give its prime customers more for their money. Mr. Kahler’s program has partnered with Chicago-based Full House Marketing, an entertainment database marketing specialist, on research into premium seating customers. “When these stadiums were built, there was an appetite for more premium seating, but there’s an accordion effect,” said Mr. Kahler, who was a marketing executive with the Cleveland Cavaliers for 11 years. “Teams are trying to determine what’s most important to the people buying these tickets.” ■

that led to this year’s potentially record profits — the company does not disclose its specific income — took place under Talan’s own roof. The company re-examined the workings of its shop floor; it empowered its production employees to make more decisions and charged them with coming up with more efficient ways of working. Then Talan used that input to introduce more efficient practices and work flows, allowing it to stamp parts faster and with less waste and lower costs, he said. That probably helped the company keep costs down and pick up some market share in the process, he said. Talan also went after and got new customers — in completely different industries than what the company has traditionally served. For instance, it came up with a way to stamp parts for the heat exchangers used in photovoltaic solar panels, as well as parts for the racks that hold the panels. It also worked its way into the growing LED lighting industry, by making aluminum extrusions and stamped metal parts used by companies such as General Electric to

make lamp fixtures and assemblies. Those new businesses still are a small part of Talan’s overall sales, Mr. Peplin said, but they represent growing, profitable product lines that have replaced business Talan has lost in other sectors, he said. Mr. Peplin has had the Midas touch before though. In 1997, when Talan was doing about $7 million a year in sales, it began a formal strategic planning process. By 2004, its sales had more than tripled. The company has continually focused on improving everything from the number of bad parts it puts out to its sales per employee. In a very mature metal-stamping industry where many operators have been doing things the same way for decades, that’s helped Talan stand out, he said. Today, for instance, only 22 parts are returned out of every million that Talan produces — or about a six small buckets of parts for every 100 truckloads, Mr. Peplin said. That’s a small fraction of the number of returned parts the company got back in its early years, he said. The private company does not disclose its financial data — except to all of its 60 employees — but Mr. Peplin said sales per employee are

approaching $500,000 a year and still growing.

Some luck doesn’t hurt To observers, it’s no surprise that the company has done well. “They’re a great example of how Cleveland’s traditional manufacturing expertise can be applied to new industries and emerging opportunities, as well as how local companies can make efficiency gains,” said Greg Krizman, spokesman for Magnet, the Cleveland manufacturing advocacy and consulting group. Talan works with Magnet and other groups to find strategies and methods to improve its operations, Mr. Peplin said, and one of Talan’s owners, Peter Accorti, is a member of Magnet’s board of directors. “They show how a well-run company can be successful, even in a declining sector,” Mr. Krizman said. It’s also had some good luck, Mr. Peplin concedes. For example, one of the companies Talan went after for its solar business was the now famously bankrupt company Solyndra. “I was really bummed out when we didn’t get that work,” Mr. Peplin said. “But, in the end, it worked out OK.” ■

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OCTOBER 24 - 30, 2011

PUBLISHER/EDITORIAL DIRECTOR:

Brian D. Tucker (btucker@crain.com) EDITOR:

Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:

Scott Suttell (ssuttell@crain.com)

OPINION

GOP gaffes

he Republican Party in Ohio has disproved the old saying that absolute power corrupts absolutely. GOP leaders in Columbus instead have demonstrated that absolute power can make for reckless leadership. We had high hopes for the caliber of government that Ohio would get when voters last November narrowly gave the boot to Democratic Gov. Ted Strickland and turned over control of the governor’s mansion and the Legislature to the Republicans. We have been disappointed by what we have seen over the last 10 months in the party’s needless, unrestrained use of its majority power in dealing with issues of broad importance to the citizens of Ohio. The key case in point is Senate Bill 5, the measure that severely restricts the collective bargaining rights of unionized public employees. Republicans took a good and necessary concept — reining in the cost of government — and turned it into nuclear war with their excesses in this piece of legislation. School districts and governments at all levels are struggling under the burden of employee pension and health care benefits that can’t be sustained. There is no parallel universe (sorry, Star Trek fans), so no one can say how unions would have reacted had Republicans crafted a bill that dealt primarily with requiring government employees and teachers to cover set percentages of their health care and pension costs. However, narrowing the issue to one most people can understand — that public-sector workers generally enjoy richer benefits than most private-sector employees — could have rallied the support of the latter group of taxpayers in the event the less-expansive bill was put to the test of a referendum. Instead, Republican lawmakers went for the “everything but the kitchen sink” approach to SB5, the full contents of which ran last week in daily newspapers across Ohio because it’s subject to repeal Nov. 8 under the referendum known as Issue 2. By creating a monstrous bill that covers 58 broadsheet newspaper pages, Republicans left the measure open to opponents’ attack ads that focus on side issues such as whether police and fire department staffing levels should be subject to collective bargaining. We will know in two weeks whether the Republicans’ lack of restraint blew an opportunity for meaningful reform (polling results aren’t promising). However, the verdict already is in on another of their excesses — a congressional redistricting map they approved that skews 12 of the 16 new districts toward Republican control. Even the Republican-dominated Ohio Supreme Court couldn’t buy into this one. It issued a unanimous ruling Oct. 14 that opens the redistricting plan to a potential referendum challenge next year. Republican leaders have the chance to redeem themselves. They can redraw the redistricting map’s boundaries so that competitive congressional elections in which voters can select who represents them are the norm, not the exception. Such changes would help Republicans in Columbus show that the “public” comes first and foremost in performing their roles as public servants.

FROM THE PUBLISHER

It’s time to occupy another location

their permits expired. Period. o just when some folks were “There are pretty much two choices: beginning to give the various Go home or participate in civil disobediOccupy groups a little benefit of ence,” an Occupy Cleveland facilitator the doubt (see our editorial in the told The Plain Dealer. “I think it is pretty Oct. 17 issue), the demonstrators in obvious. We are not going home.” Cleveland decided to amp it up, thus By now the deadline has come and endangering the high ground they once gone, and I hope that the protestors tried to stake in the debate over America’s chose a more reasonable path future. rather than force a confrontaLast week, some organizers BRIAN tion with the city and its police. of the protest in Cleveland’s TUCKER To do anything else would not Public Square said they planned only waste any goodwill their to remain there past the middemonstrations might have night Friday deadline for their generated, but would have given permit. Bad move. their opponents ammunition The Downtown Cleveland for the “what do you expect Alliance has city permission to from a bunch of left-wing radibegin the arduous task of decocals” argument. rating Public Square for the As we said in our Oct. 17 coming holiday season. DCA, editorial, both the Tea Party and Occupy with the help of its sponsors, does a Wall Street have every right to air their remarkable job of making our city center concerns about the American future. a magical place that enchants young and Our country always has held sacred the old alike, drawing families from across right to free expression of ideas, irrespecthe region. The tents, tables and various tive of their annoying tone or content. remains of the Occupy Cleveland But for Occupy Cleveland to remain demonstrations were to be gone once

relevant, its leaders need to remain reasonable rather than radical. **** BREAKTHROUGH SCHOOLS, THE INNOVATIVE, successful group of Cleveland charter schools, recently received the best sort of validation of its work in transforming public education. The six-school group recently got the news that it will receive $3.4 million over the next two years from the U.S. Department of Education, the only such federal grant awarded in Ohio, and the secondlargest award in the entire country. Breakthrough Schools is an organization that successfully has improved learning for its students even though they receive no local funds, and considerably less state and federal dollars than public school districts. Their students have longer class days and school years. Their teachers are inspired, and those who aren’t, well, they’re weeded out quickly. It’s a great success story for Cleveland and is helping to change the way people think about urban education, something long overdue. ■

PERSONAL VIEW

Independent audit of JumpStart necessary By RONALD K. COPFER JR. and MIKE BURKONS

s venture development organization JumpStart Inc. effective? As two of the most outspoken critics of JumpStart, as has been noted in earlier coverage in this publication, we feel compelled to offer a balanced response to the report JumpStart just released on its economic impact on Northeast Ohio. As entrepreneurs and small business owners in our community, we feel it is in the community’s best interests to have a thorough dialogue about how effectively this highly publicized organization is doing its job. We would be remiss if we did not emphasize that the largest portion of the funding that JumpStart receives comes directly from the taxpayers

Mr. Copfer is the co-founder of Visual Evidence/E-Discovery LLC ; Mr. Burkons is the founder of Charitee Golf LLC. of the state of Ohio, through the Third Frontier initiative. We’re disappointed to see that JumpStart continues to defend its bad habits by deflecting blame on others, arguing that they are merely requirements of its funders. We feel the following three points need serious consideration by the taxpayers and entrepreneurs in our region before they can feel comfortable that the mission of this nonprofit is being fulfilled appropriately: First, it is hard to understand how a publicly funded group, after seven years and nearly $70 million in funding, can continue to resist and ignore calls for an independent audit. Take into account

that, in the last three years, JumpStart’s CEO has taken home $250,000-plus in bonuses based on said performance. One would think JumpStart’s board, let alone their major funder — the Ohio Department of Development — would actually demand such accountability. It’s the kind of accountability that can only come from an independent third party accurately assessing the performance of the impact of these investments. In order for an independent auditor to have the best chance of receiving honest feedback from funded companies, those companies need to be assured that their responses are confidential and will not be shared with the public or with JumpStart. After all, who would bite the hand that feeds them? JumpStart claims to have helped 407 See VIEW Page 12

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CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

THE BIG ISSUE Ford has developed a vehicle feature that reads text messages out loud. What new feature do you hope automakers add to vehicles next, and why?

MATT MILLER

MEAGAN ZELINA

BROOKE DEINES

KORY BOUGHTON

Cleveland

Lorain

Cleveland

I think just keeping fuel economy, driving that down more would be great. … It seems like that’s already a big priority for them, just keep going with it.

Something hands-free because people and their phones are really bad.

I think they should take away that feature. ... People have enough distractions ... and having text messages being read to them out loud is just one more accident waiting to happen.

How about sending voice to text? If you’re going to (read text messages out loud), you might as well have it the other way.

➤➤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.

BRIGHT SPOTS Bright Spots is a periodic feature in Crain’s highlighting positive business developments in Northeast Ohio. To submit information, email Scott Suttell at ssuttell@crain.com. ■ Climax Metal Products Co. in Mentor, a maker and distributor of shaft collars, rigid couplings, keyless locking devices, bearings, abrasives and pulleys, said it has entered into a North American marketing partnership with MAV S.p.A. of Bosentino, Italy. MAV makes locking assemblies, shrink discs and keyless rigid couplings. Climax Metal said the marketing partnership with MAV will make it a big supplier of keyless locking devices and related technology in North America. A keyless locking device is “a hublocking device that improves the connection of a drive component to a shaft,” according to Climax Metal. Common uses for keyless locking assemblies include connection of timing pulleys, sprockets, sheaves, conveyor pulleys, gears and cams. Terms of the partnership were not disclosed. Climax Metal has been in business since 1946. It caters to the power transmission and industrial MRO

(maintenance/repair/operations) markets. ■ The Cleveland Orchestra and musical instruments maker ConnSelmer Inc. have supplied instruments to 30 students for the inaugural year of El Sistema@Rainey, an after-school music program the Rainey Institute and Cleveland Orchestra violinist Isabel Trautwein launched this fall. The program began Sept. 7. On Oct. 13, the El Sistema@Rainey students received new Scherl & Roth violins to use in the program. The Cleveland Orchestra and ConnSelmer are the official providers of Scherl & Roth violins for El Sistema@Rainey. Conn-Selmer’s string facility in Cleveland performs complete shop adjustment and setups on all the instruments used in the program. In its first year, El Sistema@ Rainey will provide 10 hours of weekly group instruction and educational support to 30 children in Cleveland in grades 1 through 4, with plans to expand to more students in the following years. Young musicians also will have opportunities to perform onstage at Severance Hall and to participate in master classes with Cleveland Orchestra musicians. Ms. Trautwein, of Cleveland Heights, was granted a year-long

leave of absence from the orchestra during the 2010-11 season to pursue an Abreu Fellowship, named for the founder of the influential El Sistema program in Venezuela. She spent the 2010-11 season studying in Boston and Caracas, with the goal of building an El Sistema program in Cleveland. ■Cleveland law firm Baker Hostetler represented The E.W. Scripps Co. in the $212 million acquisition of all the shares outstanding shares of McGraw-Hill Broadcasting Co., a subsidiary of The McGraw-Hill Cos. The deal encompasses a total of nine television stations, four of which are ABC affiliates, and is expected to close in the first half of 2012. Steven H. Goldberg of Baker Hostetler represented E.W. Scripps.

LETTER

‘Radical’ moniker suits GOP better than Dems ■ Regarding Brian Tucker’s Oct. 3 commentary, “Frustration builds with D.C. crowd”: I find it hard to understand how his ideology has made Mr. Tucker so oblivious to the way the powers in Washington work. Republican leadership has made it very clear on many occasions that they are willing to make the American people pay any price to get President Obama out of office. Doesn’t Mr. Tucker know that? Radical elements in the Democratic Party? Name one and tell me what you mean by radical. The gerrymandered districts certainly make compromise harder, but

they don’t seem to bother Mr. Tucker. Ronald Reagan disagreed. “No congressional district should be safe because of the way it is drawn. It should be safe because the congressman represents the interests of the people in that district.” Maybe Mr. Tucker thinks calling his commentary a rant exempts him from distinguishing truth from ideology. Mr. Tucker frequently has something thoughtful to say. Too bad he didn’t use this opportunity to do it again. Karl Hess Shaker Heights

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ON THE WEB

Story from www.CrainsCleveland.com.

Ill. company buys specialist in combustion An Illinois company, Eclipse Inc., is expanding its business via an acquisition of Clevelandâ&#x20AC;&#x2122;s CEC Combustion Safety. Eclipse, based in Rockford, makes heating and drying systems and equipment, and it does work in the field of combustion safety, which is CEC Combustionâ&#x20AC;&#x2122;s main business. In essence, they make sure equipment such as heaters, boilers, ovens and other fuel-fired systems donâ&#x20AC;&#x2122;t explode. Eclipse hopes to use its global presence to increase international marketing of CEC Combustion, which Eclipse said has been â&#x20AC;&#x153;the industry leader in the field of combustion safety.â&#x20AC;? CEC Combustion founder and CEO John Puskar will continue to manage the company as a subsidiary business unit of Eclipse. â&#x20AC;&#x201D; Dan Shingler

WWW.CRAINSCLEVELAND.COM

OCTOBER 24 - 30, 2011

View: Groupâ&#x20AC;&#x2122;s investments are being misdirected continued from PAGE 10

companies since its inception. The organization has funded 57 companies and claims to have assisted, but chose not to fund, another 350. Obviously, an independent auditor would contact the 57 companies, but if the auditor was given the list of the other 350 companies, it might also take a random sampling of 50 of those companies (not to be chosen by JumpStart) and survey the leadership on the value they placed on JumpStartâ&#x20AC;&#x2122;s assistance and what jobs and impact it was responsible for creating. In the prior report, released in April 2010, JumpStart measured its economic impact in Northeast Ohio by claiming it was responsible for creating 300 direct jobs. Since the group spent $50 million, each job came at a cost of $166,000. However, we criticized three crucial points about those metrics: They included jobs located outside the region, took credit for 100% of the jobs at nearly all of their funded companies (even if JumpStartâ&#x20AC;&#x2122;s investment had little or nothing to do with creating those jobs) and, most importantly, JumpStart was the source of the numbers and refused to allow anyone to audit or check them independently. We assert, if the prior report mea-

sured actual jobs directly generated by their investment, the cost per job would climb to between $300,000 and $500,000. After these flaws had been publicly aired â&#x20AC;&#x201D; we think to its tremendous embarrassment â&#x20AC;&#x201D; JumpStart responded not by addressing the substance of the complaints, but instead by deciding to change the reportâ&#x20AC;&#x2122;s format so as to measure â&#x20AC;&#x153;impactâ&#x20AC;? rather than actual job numbers of the companies it assisted. Point two: John Dearborn, JumpStartâ&#x20AC;&#x2122;s president, has defended the use of funds and resources for marketing and PR, claiming it is extremely vital to the ecosystem to celebrate and educate others about their success. We note that the Youngstown Business Incubator gets a tremendous amount of PR outside of our region without having one marketing/ PR person on staff. We understand the models of the incubator and JumpStart are different, but the incubator should have a much higher non-investment budget than JumpStart. Not only does it mentor, assist and make connections for all its portfolio companies, but it also provides office space, furniture, phone systems and so on. Even with all that, Youngstown Business Incubator has a budget

When It Gets Down to Businessâ&#x20AC;Ś Solon Gets It! The City of Solon welcomes these new businesses: Bijou Medical Esthetique Chagrin Valley Soap & Salve Dinoâ&#x20AC;&#x2122;s of Solon OK Sales LLC

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under $1 million, as compared to JumpStartâ&#x20AC;&#x2122;s non-investment budget of $10 million. Youngstown Business Incubator has three full-time employees, as compared to more than 40 for JumpStart. Youngstown Business Incubatorâ&#x20AC;&#x2122;s CEO just got a huge raise, to $90,000 a year, while JumpStartâ&#x20AC;&#x2122;s Ray Leach takes home more than $400,000. However, if you measured the incubatorâ&#x20AC;&#x2122;s success in the same way JumpStart measures its success, the incubator has outperformed JumpStart on almost every level. Mr. Dearborn also claims that so much of what JumpStart does and so much of its resources are used to support groups in the JumpStart Entrepreneurial Network. We have heard from many of the people at these groups, and they really canâ&#x20AC;&#x2122;t say what being part of this network has done for them. They are hesitant to speak critically of JumpStart publicly, as it seems like JumpStart has tremendous influence over where economic development dollars go in Northeast Ohio Point three: The stage of companies JumpStart is mandated to invest in is very different from the stage it actually invests in. We believe it is very important not to criticize the potential or value of any company associated with JumpStart. However, we also believe it is very important to point out that, according to the state of Ohio, JumpStart should only be assisting and funding companies so young and immature that, in almost all cases, they would not be able to secure other types of financing. Why? Because if a company is at a stage where it has progressed enough to get other financing, in all likelihood, it would exist without JumpStartâ&#x20AC;&#x2122;s state taxpayer funding. When this is the case, JumpStartâ&#x20AC;&#x2122;s involvement in a company creates no new net jobs, as most of the jobs at these companies would exist without JumpStartâ&#x20AC;&#x2122;s help. Out of the 57 investments made by JumpStart, at least half the companies have taken on other funding, have been around for a couple years and already had employees. Just recently, JumpStart invested in a company that, according to the generally reliable Crainâ&#x20AC;&#x2122;s Cleveland Business, had taken on over $1.25

million in previous funding. In another egregious instance, JumpStart invested in a company that, at least at the time of the investment, had 17 of its 19 employees based in Columbus, rather than Northeast Ohio. Two months later, in an article detailing a state tax credit for $600,000 and a state grant for $100,000 to expand its office and hiring in Columbus, the CEO claimed it was basically cash-flow positive and may not take on any further investments. Why is JumpStart investing in a Columbus-based company? And how can it claim that a company with enough positive cash flow to cover a 19-person staff needs a $250,000 investment to stay alive? Our complaint arises from JumpStart deploying only about 25% of its budget on direct investments in companies, which of course limits the number of investments it can make. Every time it invests in a company that strays from its stated mandate, it leaves one fewer company it can fund that does fit the state mandate. The bottom line: There is no net gain in jobs created when you invest in companies that would still exist without your investment. We continue to criticize JumpStart â&#x20AC;&#x201D; and by extension, the state of Ohio via lax oversight â&#x20AC;&#x201D; for the misuse of voter-approved, state economic development tax dollars. In the current economic climate, those resources are even more vitally precious than ever. We believe, as do many entrepreneurs here, that as a community we could do a far more effective job at incentivizing and starting new business startups through some alternate model. Yet, our arguments and those of JumpStart cannot be compared unless and until we have a truly transparent and independent audit that faithfully and scrupulously accounts for every dollar the taxpayers are spending on this economic development organization. Until we have the facts of true job creation, no honest comparison can be made. The time to start being accountable and responsible for these public resources has long since passed. We request that all likeminded entrepreneurs and interested parties contact Gov. John Kasich and demand an independent audit of JumpStart. â&#x2013;

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OCTOBER 24 - 30, 2011

CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

Crain Communications enters busy online car-buying field ShopAutoWeek project brings 40 new hires By DANIEL DUGGAN Crain’s Detroit Business

Crain Communications Inc., the Detroit-based parent company of Crain’s Cleveland Business, has launched a car shopping website to compete in the crowded car- Crain buying advice marketplace. Shopautoweek.com offers advice to car shoppers, pairing specific information about individual cars with editorial content, including content from Crain’s sister publication Autoweek. That use of staff-generated, journalistic news content will set the site apart from competitors such as Autotrader.com and Cars.com, said KC Crain, vice president and group publisher for Crain Communications, who is overseeing the shop autoweek.com project. The idea is to cut through the clutter of information, he said. “We’re looking at this as a more friendly way to shop,” Mr. Crain said, “like talking to your neighbor over the fence about shopping for a car.” The shopautoweek.com venture represents an expansion for Crain Communications, with 40 employees hired to work on the project and another 12 to be hired. The company was awarded a $443,000 tax credit from the Michigan Economic Growth Authority in January, based on a business investment of $3.6 million and the creation of 50 jobs over the course of five years.

vertising and editorial content separate is something the company knows well. “That’s something we’ve been doing for 50 years,” he said. The site is integrated with Facebook and stores a person’s car-buying searches in a “notebook” feature available for people to keep information about the cars they’ve researched. Integrating geographic information about dealerships near the person searching for the car is an element to be installed in a future update. However, the information about each car does enable shoppers to have contact information sent to a dealer. Consumers won’t be buying and selling cars through shop autoweek .com as they can with Autotrader .com and Cars.com, the two largest companies in the space. Autotrader.com, majority-owned by Atlanta-based Cox Enterprises

GET DAILY NEWS ALERTS FROM CRAIN’S ! Register for free e-mail alerts and receive: ■ The Morning Roundup: A collection of the day’s business news from Ohio’s daily papers ■ Breaking news alerts: When major news happens, you’ll know

The overall sector of third-party websites offering consumer information about cars has become extremely important, with dealerships getting as much as two-thirds of all the new car buyer leads from such sites, said Jody Stidham, global practice director for Detroit-based Urban Science, which tracks Internet sales leads for auto manufacturers and provides consulting on how to convert those leads into sales. Between 15% and 30% of all car sales are generated by consumers shopping online and being routed to dealers, Ms. Stidham said. And buyers still don’t trust the manufacturers’ sites. “We’ve found that consumers

Nutrition is one of three focus areas for Cargill’s community involvement. Our Deicing Technology business recently donated $248,000 to the Cleveland Foodbank. The Cleveland Foodbank provided 29 million meals to its 6-county service area in its fiscal year ended Sept. 30, up from 25 million the year before. The need continues to grow. Every dollar donated to the Cleveland Foodbank provides enough nutritious food for four meals. Nearly 18 percent of its service area is food insecure. Almost half the people served by the Foodbank are children and the elderly. Based in North Olmsted with a mine at Cleveland, Cargill Deicing Technology offers products that help make winter driving safety a reality. Cargill Deicing Technology will partner with other businesses to help address these community needs. Contact Irv Williamson at irving_williamson@cargill.com or Kristin Warzocha at kwarzocha@ ClevelandFoodbank.org.

■ Daily headlines: A collection of Crain’s-produced news and blog items from the day ■ Small Business Report: A weekly guide to small business news

SIGN UP NOW AT: CrainsCleveland.com/register ■ Crain’s on Twitter: @CrainsCleveland ■ Crain’s on Facebook: Facebook.com/CrainsCleveland

Big sources of leads

favor the third-party sites, finding that they’re not biased and let people shop multiple vehicles at one time,” Ms. Stidham said. Mitch Golub, who founded Cars.com in 1997 and remains its president, said it’s difficult for companies to remain competitive in the consumer advice space. In 2001, he said, there were 36 websites at the National Automobile Dealers Association conference, and there were six the following year. “Today, a business like Cars.com spends hundreds of millions of dollars on our consumer website, on our consumer businesses, serving our dealers and promoting our website,” Mr. Golub said. “That’s the type of investment you have to make to be of importance to the advertising customers, the dealership and the manufacturer.” Developing mobile applications and forming relationships with specific car dealers are endeavors that take time and money. The company has more than 1,000 employees, 500 of them salespeople in local

Cargill Deicing Technology Is Proud to Support the Cleveland Foodbank

Separating church and state Backing the project financially are advertising commitments signed with the three domestic auto manufacturers and the major international automakers, Mr. Crain said. The automakers buy advertisements adjacent to staff-generated stories and data about individual cars. Advertisements also accompany stories about car shopping tips, automotive news and lifestyle stories such as ways to save fuel. The ability to keep the advertising elements of the site distinct from the editorial content is a key to the site, Mr. Crain said. As the third generation of leadership in the family-owned publishing company, Mr. Crain said keeping ad-

Inc., dominates the segment with 15.8 million unique monthly page views and $738 million in 2010 revenue. Behind it is Cars.com, owned by Chicago-based Classified Ventures LLC as a joint venture among five media companies; it had 2010 revenue of $400 million.

www.clevelandfoodbank.org l l df db k

markets and 250 of them developing new technology. Handling classified ads and working with the used car market does make up a majority of the company’s revenue, though new car reviews and advice is a growing part of the business. Mr. Golub said consumers are happy with the online car shopping options that exist today, and exceeding the bar will be difficult. “But if someone can do a better job, we’ll copy them,” he said. “We’ll be fast followers if there’s a better way to do it.” Allyson Estes, director of industry relations for Autotrader.com, said the company’s editorial content continues to be competitive with other sites and is a key to the operation, attracting consumer attention. “We’ve built a very robust editorial staff, and we’re sending them to the auto shows, test driving the cars and informing consumers,” she said. “And we make the delineation (between paid and editorial content) very clear.” ■

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CRAIN’S CLEVELAND BUSINESS

UPCOMING EVENTS Crain’s Cleveland Business’ fall Ideas at Dawn business breakfast series — underwritten by Kaiser Permanente — continues on Thursday, Nov. 3, at the Ritz-Carlton Cleveland. A panel of experts from RBS Citizens NA, Smithers-Oasis Co., Benesch and Magnet will discuss the transition to international markets. For more information and to register, visit www.CrainsCleveland .com/breakfast or call Jessica Snyder at 216-771-5388.

GOING PLACES JOB CHANGES

of counsel; Andrea Plassard to controller.

FINANCIAL SERVICE

ULMER & BERNE LLP: Evelyn K. Holmer to attorney.

CIUNI & PANICHI INC.: Brett Benjamin to audit staff; Lisa Pipkin to tax staff; Jennifer Herbison to tax senior. MCGLADREY: Jim Valderrama to partner. SKODA MINOTTI: Josh Skolmowski to network administrator. SS&G: Brian D. Jones to manager, assurance department; Linda Phillips, Evan Pestello, Jonathan McGarity and Seth Weinstein to associates; Marian Plummer to administrative assistant. SS&G HEALTHCARE SERVICES LLC: Carrie O’Neill to manager of clinical research, Ohio Clinical Research Partners; Lee Anne Graefnitz to billing specialist.

Crain’s also will host its annual Forty Under 40 awards reception on Monday, Nov. 21, at Executive Caterers at Landerhaven. This year marks the newspaper’s 20th annual Forty Under 40 section. For more information on past events, this year’s class and to register, visit www.CrainsCleveland .com/marketing/forty.html.

WWW.CRAINSCLEVELAND.COM

LEGAL CALFEE, HALTER & GRISWOLD LLP: Teresa Metcalf Beasley to senior counsel. DREYFUSS WILLIAMS & ASSOCIATES LPA: Claire R. Cahoon to associate. THACKER MARTINSEK LPA: Maureen P. Tracey to attorney,

MANUFACTURING BRENNAN INDUSTRIES: Jennifer Altier to human resources manager; Rob Ward to credit manager. PSC METALS INC.: Brian Carlone to vice president, Northern nonferrous trading; Frank Savena to director, export sales and copper. WLS COS.: Susan B. Nash to chief financial officer.

MARKETING BROWNFLYNN: Andrew Watterson to senior consultant. EVOLVE CREATIVE GROUP: Derrick Boyd to mid-level designer; Kiersten Bonifant to web designer. MELAMED RILEY: Stephanie Landes to creative director; Janis Swope to account executive. OPTIEM LLC: Jim Sweeney to managing editor; Patricia Ross to business manager of technology; Jessica Young to front end developer.

MEDIA CONTEMPO COMMUNICATIONS:

OCTOBER 24 - 30, 2011

Robert L. Reed to vice president, sales; David Anderson to advertising sales director.

REAL ESTATE CBRE INC.: Steve Hryszko to first vice president. FOREST CITY ENTERPRISES: Jane Lisy to senior vice president, marketing, Forest City Commercial Management; Paulette Caputo to vice president, retail marketing.

Valderrama Skolmowski Beasley

SERVICE INFOCISION MANAGEMENT CORP.: Tina Myles to senior director of human resources; Ryan Cherkala and Christy Ditmar to account executives.

Altier

Ward

Nash

Watterson

Boyd

Bonifant

Landes

Swope

Sweeney

Ross

Young

Hryszko

ROGERS GROUP INC.: Christopher Nash, William Perpetua and Christopher Williams to account managers; Alicia Redden to administrative assistant.

BOARDS ACHIEVEMENT CENTERS FOR CHILDREN: Stephen B. Perry (Linsalata Capital Partners) to chair; Mozelle Jackson to vice chairman; Marvin Thomas to treasurer; Robert J. Wells to secretary; David Dunstan to immediate past chairman. AMERICAN INSTITUTE OF ARCHITECTS, OHIO CHAPTER: Judson A. Kline (Herschman Architects) to president. AMERICAN SOCIETY OF INTERIOR DESIGNERS, OHIO NORTH CHAPTER: Rita Amonett (Jo-Ann Stores Inc.) to president; Cristina McCarthy to president-elect.

Move Your Business to the Top of Cleveland’s

Send information for Going Places to dhillyer@crain.com.

/JDF -JTU

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OCTOBER 24 - 30, 2011

INSIDE

18 FORECAST FOR HEALTH CARE REFORM IMPACT: CLOUDY

BUSINESS BENEFITS Health care cost hikes dependent on strategy Workers may need to assume more financial, personal responsibility

CREATIVE OFFERINGS AT NE OHIO FIRMS ■ Bring your pet or child to work (some organizations even have designated play areas and toys for these visitors) ■ Career breaks — opportunities to pursue leisure, personal or educational goals and come back to the company ■ Free meal services (breakfast, lunch, snacks, dinners, “take-home” meals, etc.) ■ Coverage of in-vitro fertilization as well as acupuncture and alternative therapy or discounts on complementary medicine ■ Discounts on beauty services (manicures, pedicures, hair care, hair cuts, etc.) ■ Emergency company loans ■ Financial assistance programs ■ Food delivery programs ■ Laundry/dry cleaning/shoe-shining services ■ On-site massages ■ On-site yoga, zumba, pilates, aerobics and reiki classes ■ Paid sabbaticals ■ Sick child care and backup child care SOURCE: ERC

By JAY MILLER jmiller@crain.com

LAU REN RAF FER TY

ILLU STR ATIO N

THINKING OUTSIDE THE BOX Some business benefit packages include unique offerings to improve work-life balance, cultivate employee-friendly culture By AMY ANN STOESSEL astoessel@crain.com

hot meal for the family. Check. Child care research. Check. Tailored skirt. Check. At Cleveland’s Calfee, Halter & Griswold LLP, a full day’s to-do list can be seamlessly tackled — all without leaving the office. “There’s lots of people in the world — and lawyers are among them — who don’t have enough hours in the day,” said Marcia J. Wexberg, chairwoman of the law firm’s estate and succession planning group. To tackle that issue, Calfee three years ago rolled out its Lifestyle Resources program, which allows

employees to take advantage of such amenities as prepared food and groceries delivered to the office, as well as shoe repair, shoe shine, dry cleaning and tailoring services. The program even can provide a child-care consultation or access to care for a sick youngster. “If there are challenges at home then it all translates into the workplace,” said Ms. Wexberg, who helped in the creation of the program. Calfee, which also has an extensive wellness program, is not alone in recognizing the benefits derived from giving employees a little something extra beyond the traditional benefit offerings. Jamie Cahoon, Beachwood branch manager for staffing firm

Robert Half International, said there’s a big push in the workplace for a better work-life balance. Some organizations are shifting HR departments into more of a strategic planning function and re-evaluating the whole employee experience, she said. In a survey last year of more than 4,000 U.S. executives conducted by Robert Half, respondents said they had plans to offer perks in the coming year ranging from subsidized training/education (33%); flexible work hours/ telecommuting (27%); mentoring programs (25%) to matching gift programs for charitable donations (15%); free or subsidized snacks or lunches (13%) and on-site benefits See BOX Page 18

he increase in the cost of employee health care benefits is expected to slow in 2012, but how much costs will swell likely will depend on companies’ willingness to shift costs to employees, use cost-containment strategies and implement wellness and preventive health programs. According to a study by Mercer LLC, a leading human resources consulting firm, cost increases could slow to as little as 5% for companies that raise deductibles or move employees into lower-cost health plans. Companies that stand pat on their health care benefits package, however, could see increases more than double that figure. More companies also are adopting preventive health and wellness programs as a way to lower costs in the future. Firms, of course, have their eye on 2014, when federal health care reform will have an impact on business health benefits, though no one yet knows what that impact will be in dollars and cents. The Mercer study found that employers were reporting, on average, a 7.1% increase in cost for the coming year. However, several local consultants said some increases could be higher, as much as 14%. “Typical trends of what we’re looking at in the fully insured market from the major medical carriers is for medical to increase about 12% and (pharmacy costs) 13%,” said Frank Spinelli, practice leader for middle market group benefits at the Oswald Cos., a Cleveland-based insurance brokerage. “Depending on which carrier you’re talking to, it could be 10% to 14%.” Rick Chelko, president of the Chelko Consulting Group LLC, a Westlake consulting firm that counsels larger companies on health benefits, said he’s seeing similar increases. “General market trends are more in the 9% range, and smaller businesses are seeing much higher rates than that,” he said. He added that some clients who are careful about designing their programs and keeping an eye on their vendors have been seeing increases in the 5% range for the last few years. See COST Page 16

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Cost: Employees shouldering larger share continued from PAGE 15

Katie Talarico, survey manager at ERC, said surveys by her Mayfield Village human resources organization are showing typical health benefit increases averaging about 10%. The cost of other benefits, such as long- and short-term disability and dental and vision care, are pretty stable, Mr. Spinelli said. “The exception is possibly dental looking to kind of bump up a little there, depending on what kind of plan you have,” he said.

Cutting costs With medical care cost increases outstripping business growth, most companies will be pushing to find more ways to contain costs. “People are continuing to manage

health plans aggressively as the cost continues to escalate at a faster rate than most organizations’ revenue levels,” Mr. Chelko said. He said firms are looking for insurance plans that look critically at the value of procedures. He cited, for example, plans that won’t cover the full cost of expensive back surgeries that haven’t proven to have better outcomes for patients than other, less expensive treatments. Similarly, he said, some plans won’t pay for expensive new drugs that haven’t proven to be any more effective, or even as effective, as less expensive medications. Also, with cost sharing, employees are paying a larger share of their health insurance costs. Ms. Talarico’s research indicates that employees’ shares of costs are rising from 20%

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to 25%. However, companies are giving employees ways to save money with optional levels of co-payments and deductibles. “Employees are taking ownership of how they spend their employee benefits,” she said. The ongoing Mercer study, which had surveyed 1,600 employers by early September, said that in addition to higher deductibles and other forms of cost-sharing slowing rate increases, the use of hospitals and other health services was down. That was likely because employees were less likely to seek nonemergency care because of less disposable income and because they were working longer hours.

All is well Lower utilization, though, may also be an indication that workplace fitness centers, walking trails and smoking cessation classes can lower health care costs, Ms. Talarico said. “There is a growing emphasis on preventive health and wellness programs,” she said. Those kinds of programs, however, require more of an employer than writing checks for health care. “These programs are definitely things that require active management,” Mr. Chelko said. But everyone is looking down the road as well. “With health care reform there are a lot of people keeping an eye on ‘how is this likely to play out,’ almost looking at it as ‘here’s what we ought to be doing in the interim,’” Mr. Chelko said. “And then after the election and regulations start coming out, they’ll see how this will play out relative to 2014.” ■

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Education becomes a larger focus in enrollment process Blend of technology, personal communication key By JOEL HAMMOND jmhammond@crain.com

the three plans the company offers. Then, it uses its own employees’ experiences with the program to mployers in the past make changes and updates, and it haven’t had to think much offers the product to its customers about their benefits enrollto implement in their shops. ment process save for a “It has reduced costs on our end month or so each year. The generbecause we have the resources ally cookie-cutter approach: Inform available to administer the softemployees of their options, and ware,” said Leonora Yurichak, the come Nov. 1 or Nov. 15, sign ’em up. company’s human resources manThings have changed. ager. “We conduct employee meetHR officials at area companies ings, but having that online presand insurance brokers say the time ence makes it less burdensome on they spend on preparing benefits the benefit team.” packages and enrolling their emThat’s not the only way compaployees has expanded. Workers are nies are incorporating technology. more educated on — and more Meryl Kaplan, the managing conconcerned about — what’s going sultant for health and group beneon in the economy and how their fits at Findley Davies’ Cleveland bank accounts will be affected. office, said plan comparison mod“Employees are asking about eling has become popular, among these things and demanding more other new wrinkles. Those models information and attention from provide Jane Doe a personalized employers,” said Neil Quinn, the look at out-of-pocket costs under director of each of a compahealth manageny’s plan op“Employees are asking about ment services at tions — using Cleveland-based these things and demanding that employee’s Oswald Cos. prior-year benemore information and “They want to be attention from employers.” fit usage. informed, and Jane can – Neil Quinn decide if she there are now addirector of health management anticipates the ditional things to services, Oswald Cos. same benefit be explained throughout the consumption in year. the coming year and adjust accord“We tell clients to engage emingly. ployees, educate them and then Personal attention enroll them,” Mr. Quinn said. While technology has become At Akron-based call center more prevalent in the process, operator InfoCision, that means a employers say personal communi“forced” enrollment this year: All cation remains vital. At Marcus employees, whether or not they Thomas, a Warrensville Heights change coverage, must go through advertising and public relations firm, the process. Vice president of that includes weekly staff meeting employee benefits Kim Murphy updates year-round for employees said it’s a way to re-educate the on pertinent benefit issues. company’s 4,500 or so employees. The company still enrolls its She said, for instance, employees roughly 100 employees on paper, who since being hired have gotten personalizing the process even married, divorced, had kids or more. Lori Hedrick, Marcus gone through other life-changing Thomas’ vice president of human events need a refresher course; the resources, said a web-based mechforced enrollment is the company’s anism is in the discussion stage. chosen mechanism. That puts the company in the And at a time when companies extreme minority: According to also must mind the bottom line — Towers Watson, a global consulting already affected by the staggering company with an office in Cleverise in health care costs — they say land, only 9% of respondents to its the added focus on benefits educaannual benefits survey said they tion isn’t costing them much. still use paper for enrollment. At InfoCision, Ms. Murphy said “Bigger employers might not be the biggest cost is employees’ time able to do it that way, but we like it away from the phone during benelike that,” Ms. Hedrick said. “Onefits conversations. And Mr. Quinn on-one communication is the best said while the process has become way to do it. Benefits are very permore complex and employers sonal, and this makes it a little spend more time and effort on more comfortable.” education, technology has elimiThe same goes at InfoCision, nated many costs associated with which as part of its forced process enrollment, such as paper costs. this year hired an enrollment comTo the web pany to meet individually with the Independence-based profescompany’s 4,500 employees at 10 sional services outfit CBiz has used different locations in three states. new benefits technology to its ad“We felt we needed to invest vantage in two ways: First, it incormore time in our employees,” Ms. porates an online portal for its 176 Murphy said. “We have great benelocal employees to enroll and find fits and amenities, but we’re not any information they might need on sure everyone is aware of it.” ■

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Fostering relationship with broker minimizes risk Open communication key to ensuring proper insurance coverage

ne of the most important relationships your company has is the one with its insurance broker. A broker that understands your company and its risk exposures can be invaluable. However, when an insurer denies coverage for losses that you expected your broker to have you insured against, things can get less friendly. A broker’s mistakes generally fall into one of two categories: It failed to recommend suitable insurance, or it failed to obtain the insurance that you specifically requested. Clarity is the key to avoiding these problems. Don’t assume a broker knows your coverage needs. Make sure you communicate clearly everything that your company does, and all potential risks. Be broad, honest and relay worst-case scenarios about your risk exposures. Make sure that both of you understand exactly what the broker has agreed to procure. Although you may have a generic broker agreement that describes your relationship with your broker, often it will not be specifically tailored to a given insurance policy placement. It is a good idea to get those details in writing. Afterward, request a copy of the policies and make sure that they contain everything you instructed the broker to get. When an insurer denies coverage for a loss that you thought your broker had protected you against, the first step is to think of your broker as your friend rather than your enemy. Your broker often can assist you in understanding the insurer’s position and help negotiate with the insurer. Your broker has negotiating leverage because insurers are hesitant to alienate brokers, the primary drivers of business to insurers. Consult a policyholder lawyer if the matter cannot be resolved quickly. Even when embroiled in coverage litigation against your insurers, think carefully before suing your broker. Insurers will try to drive a wedge between you and your broker, distracting you from your claims against the insurer. Also, once an insured sues its broker, the broker may have less incentive to support the policyholder’s claims for coverage. Sometimes, suing your broker is unavoidable. This happens when your policies do not contain a coverage promised by your broker, and when negotiations with the insurer are going nowhere. It is best to hire an insurance policyholder lawyer to handle such a claim. The clearer it is that your broker dropped the ball, the more it will rely on tough litigation tactics and procedural defenses. Here are four weapons employed by brokers: ■ A fist fight: Brokers know that it takes a lot of money and time to litigate. Companies often cannot afford to wait several years to get compensated for their losses. The more the broker can exploit these pressure points, the bigger the discount it gets when settling your

MICHAELBRITTAIN K. JAMESSULLIVAN

ADVISERS claim. If you show that you are fully committed to the litigation, brokers often will back down and settle for

fair value. ■ Duty to read: When a policyholder argues a policy should say something different than what it says, its broker normally points to the general duty a policyholder has to read and know its insurance policy. This defense should be unsuccessful because a broker typically undertakes the duty to read the policy for its insured. However, the more basic and obvious the error, the more likely the broker can make headway with this defense. ■ Statute of limitations: A broker’s mistakes often do not surface until years after the policy is issued, so the

broker will argue your claims are too late. The most logical point at which the statute should begin to run is when you are actually harmed by your broker’s mistake, such as when a judgment is entered in favor of your insurer. However, brokers often can make trouble with this defense, even if it is ultimately unsuccessful in court. ■ Settlement with insurer: Once you have decided to pursue a claim against your broker, put your broker on notice of any settlement negotiations with your insurer. Invite the broker to participate. Otherwise, if you settle with your

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insurer, your broker will argue that the settlement interfered with its rights to go after the insurer, or that the settlement effectively waived your rights against the broker. Enough cannot be said for clarity at the outset when having a broker place insurance. However, when a dispute arises between you and your broker, remember that your broker will be a helpful friend unless and until you make it your formidable, but not invincible, opponent. ■ Mr. Brittain is a litigation partner and chairman of Calfee, Halter & Griswold’s Insurance Recovery Group. Mr. Sullivan is a Calfee partner who focuses on counseling and litigating on behalf of insurance policyholders and banks.

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Firms grapple with health care reform uncertainty By TIMOTHY MAGAW tmagaw@crain.com

he uncertainty surrounding President Barack Obama’s controversial health care overhaul has many Northeast Ohio employers on the fence about making sweeping changes to their benefits offerings for 2012. The full weight of the law goes into effect by 2014, when millions will be added to the insurance rolls and employers will be penalized for inadequate or no coverage for their employees. Many employers, benefits consultants say, are weighing whether to drop their insurance offerings altogether and stomach a fine from the federal government. “This year as opposed to last year, I would argue that the movement has slowed down because of what I perceive as a wait-and-see attitude going into 2012,” said Christopher Herbruck, area senior vice president for Gallagher Benefit Services, formerly Herbruck Alder in Cleveland. “That happens with elections. Last

year, there was a lot of irrational movement in plan design.” But until — and if — health care reform takes root, employers will continue to tinker with ways to rein in health care costs, which have outpaced the growth in wages for the last several years. While the rate at which health care costs are expected to grow are less than in recent years, that hasn’t stopped many employers from increasing premiums and deductibles and steering employees toward consumer-driven health plans and wellness programs. Employers anticipate their group health care plan costs will increase on average by 5.4% in 2012, down from 6.9% in 2011, according to a survey released last month by Mercer LLC, a national benefits consulting firm. Still, that’s a lot to stomach, considering employers added thousands of new dependents to their insurance rolls when a provision kicked in last year that allowed employees to enroll dependents as old as 26 years old.

“Adding more people just adds more cost,” said Bob Klonk, president and chief sales officer of the insurance brokerage firm Oswald Cos. in Cleveland. “Employers aren’t thinking health care reform is going to be a cost-saving tool.”

The right tools If the feds won’t provide the tools for bringing down costs, employers will attempt to do it on their own. Sherwin-Williams Co., which covers more than 20,000 people through its benefits program, is pushing its consumer-driven health plans, which the Clevelandbased paint manufacturer introduced to employees a few years ago, according to Martha Lanning, the company’s director of health and welfare plans. Under the plans, preventive care and wellness exams are covered without a co-pay or deductible, but employees must bear an out-ofpocket maximum. Employees contribute money to a health savings account on a tax-free basis, which

allows them to plan for future medical expenses. Ms. Lanning said enrollment in the consumer-driven plans was about 5% in 2010 and 10% in 2011. She expects that number to grow to more than 25% in 2012. Meanwhile, Parker Hannifin Corp.’s Craig Mockler said the rising health care costs still are a concern for the producer of motion and control technologies, particularly after the company added 1,200 dependents to its insurance rolls in the face of health care reform. Though he wouldn’t provide specifics, Mr. Mockler said the company increased its employee contributions, deductibles and copays and also is looking to expand its already-robust wellness programs.

Uncharted waters ahead One of health care reform’s watershed provisions is the advent of health insurance exchanges, which states are expected to implement by 2014. The exchanges would serve as a marketplace of sorts for

Box: Small businesses should emphasize offerings continued from PAGE 15

such as child care, dry cleaning, fitness center and cafeteria (11%). “Employees are going to be looking for an overall package,” Ms. Cahoon

said. “Employers are going to have to jump on board.”

Smaller guys thinking big Katie Talarico, survey manager

Join the Health & Wellness Crusade Participate in the 5th Annual Northern Ohio Employer Wellness Survey and get a report of the latest trends in worksite wellness in Northern Ohio. Go to www.gallagherbenefits.com/cleveland to complete the 10-minute survey. Contact Alison Muth for more information at 216.377.2595 or alison_muth@ajg.com.

for ERC, a Mayfield Village-based human resources organization, said it’s not just the big dogs throwing their employees a few extra bones. Ms. Talarico’s organization presents the annual NorthCoast 99 workplace recognition program, which honors organizations with unique and innovative practices that attract talent. “You’d be surprised how many small employers try to use that competitive advantage,” she said. At Foundation Software in Brunswick, for example, giving a little extra to employees is just part of the culture. “It’s the intangible,” said Fred Ode, founder and CEO of Foundation Software, who runs the construction software business with his nephew Mike, its president. The Odes described their company as one where employees are expected to work hard, but management is

empathetic, casual, flexible and understanding. For example, if an employee needs to leave early for a doctor’s appointment, so be it. Even so, there are plenty of tangible benefits at Foundation Software, too: work-at-home options when necessary; free coffee and snacks; lunches during busy times; a monthly lunch or picnic; and flu shots. In addition, the company — which has 75 employees in Northeast Ohio and is a NorthCoast 99 honoree — puts an emphasis on wellness, offering workers the chance to take advantage of health club memberships and the Blue Sky Green Fields produce delivery service. “What we do here is natural, it’s not contrived,” Fred Ode said. “It’s a very natural part of who we are.” Lori K. Long, an associate professor at Baldwin-Wallace College, said small employers often fail to promote the fact they offer

consumers shopping for insurance. Though Ohio Gov. John Kasich’s administration has been lukewarm to health care reform as a whole, the governor has indicated the state is developing an insurance exchange. When implemented, it’s possible employees could drop coverage from their employers altogether and opt for other alternatives provided through the exchange. How that scenario could impact the design of company benefits programs is anyone’s guess. “It’s awfully difficult when the state exchanges get up and running to see what employers are going to do,” Parker’s Mr. Mockler said. Mr. Herbruck said what happens in 2014 will be dictated largely by the employers, though the results might vary by industry. Some employers, he said, will decide they don’t need to offer health benefits and stomach the penalties. “Some will say we don’t need a health plan to be competitive, and they’re just going to dump them,” he said. “Conversely, some will keep them. Right now today, employers aren’t mandated to cover anyone. That’s going to change.” ■

perks like flex time or a casual working environment. Dr. Long said small businesses should be certain to pull out and highlight such benefits; she also suggests a company take the time to find out in a structured and open-ended way what workers really want in terms of bonus benefits. “The idea of an employee-friendly organization is becoming more popular,” she said. “Organizations are figuring out happy employees are a good thing for the company.”

Priceless, really Jackie Symons and Marcie Price know the power of offering employees a little something extra — and they’ve built a business around the idea that it can be done at no cost to the employer. Their brainchild, Hinckley-based Best Benefits Club, Employee Perks Program, makes available to roughly 500 companies discounts to about 400 vendors, ranging from salons to amusement parks. “It’s just amazing how happy the employees are,” said Ms. Price of the reactions they get when they visit employers. “They’re really doing a nice thing for the employees.” The Best Benefits Program, started in 2002, now covers roughly 600,000 employees, including those at some of the region’s major employers, although any size organization can participate. Best Benefits earns its money from the vendors offering discounts. Similarly, Beachwood-based Embrace Pet Insurance’s Work Perks program is of no cost to an employer. In place since 2007, it allows an organization to offer discounted pet insurance as a benefit. There are about 175 to 200 nonveterinary organizations nationwide offering benefits through Work Perks, with about 200 employees from that group signed up for policies. “I think at this point companies are really starting to realize the importance of retention of good people,” said Sara Radak, Embrace’s marketing coordinator. “HR people are really starting to think outside the box.” ■

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Ford, UAW pact allows automaker to operate more efficiently By JAMIE LaREAU and DAVID PHILLIPS Automotive News

Ford Motor Co.’s new four-year contract with the UAW will have a minimal impact on the automaker’s structural costs and allow Ford to run its plants more efficiently to operate profitably in the United States, company officials told analysts last week. The contract will allow Ford to keep its annual labor cost increases under 1%, the company said.

“Overall, this agreement allows Ford to better respond to market demand,” said Mark Fields, Ford’s president of the Americas in a conference call. UAW-represented workers at Ford ratified the contract Wednesday, Oct. 19. Members voted 63% in favor of the agreement, the UAW said in a statement. Ford’s estimate of its labor cost increase confirms a previous estimate made by UAW President Bob King. General Motors, it its contract

agreement, has a comparable labor cost increase. Also, Ford said: ■ Base lump sum payments and other benefit changes in the labor deal would take a $270 million cut into net income in 2011, $60 million in 2012 and about $80 million each in 2013, 2014 and 2015. ■ The total impact on net income would be determined by profitsharing payouts, buyouts, and changes in workplace rules and practices. ■ The new contract allows Ford

“to increase manufacturing utilization and efficiency, increasing our ability to match quickly supply to demand.” ■ Having plants producing at their highest efficiency relative to their size, also called capacity utilization, “represents substantial profit opportunity.” Ford will be able to create “alternative work schedules” and additional production shifts for more flexible manufacturing. And it can structure work teams to more effi-

ciently build products and improve quality and safety, Mr. Fields said. “It will improve utilization of our facilities,” he said. Ford is adding 12,000 hourly jobs in its U.S. manufacturing facilities through the four-year contract. Of those, 5,750 are new jobs, making it the most generous of the new labor agreements negotiated with Detroit automakers. Mr. Fields said Ford believes the U.S. sales volume will support the staffing additions. ■

NORTHEAST OHIO CAREER AND VOCATIONAL SCHOOLS RANKED BY FALL 2011 FULL-TIME EQUIVALENT ENROLLMENT

Name of school Address Rank Phone/Web site

Full-time equivalent local enrollment Fall 2011

Fall 2010

% change

Student/faculty ratio Year founded Programs offered locally

Top local executive Title

Medina County Career Center 1101 W. Liberty St., Medina 44256 (330) 725-8461/www.mcjvs.org

2,222

1,977

12.4%

15:1

1974

Medical, safety services, IT, HVAC

Gary Horton school board president

Polaris Career Center 7285 Old Oak Blvd., Middleburg Heights 44130 (440) 891- 7600/www.polaris.edu

1,944

1,941

0.2%

25:1

1975

Aeronautics, criminal justice, electronics and alternative energy, medical professions

Robert Timmons superintendent

Lorain County JVS 15181 state Route 58, Oberlin 44074 (440) 774-1051/www.lcjvs.com

1,682

1,664

1.1%

20:1

1971

Building trades, business and marketing, service, culinary, manufacturing and preengineering

John Nolan superintendent

Medical Technology Education Center Inc. 3624 W. Market St., Suite 104, Fairlawn 44333 (330) 670-9333/www.mtecinc.com

1,200

0.0%

Online education

1996

NexGen speech recognition editing, medical transcription

Kimberly Buchanan director of education

Trumbull Career and Technical Center 528 Educational Highway, Warren 44483 (330) 847-0503 /www.tctchome.com

1,083

1,160

-6.6%

12:1

1976

Cosmetology, AFJROTC, health science, welding

Wayne McClain superintendent

Cuyahoga Valley Career Center 8001 Brecksville Road, Brecksville 44141 (440) 526-5200/www.cvccworks.com

972

969

0.3%

24:1

1972

Health and public safety, industrial trades, information technology, business and administrative services

Celena Roebuck, superintendent; Joseph Dannemiller, executive director

Wayne County Schools Career Center 518 W. Prospect St., Smithville 44677 (330) 669-7000/www.wcscc.org

825

0.0%

1969

LPN

Kip Crain superintendent

Auburn Career Center 8140 Auburn Road, Concord Twp. 44077 (440) 357-7542/www.auburncc.org

696

736

-5.4%

20:1

1965

Information technology, health science, industrial and engineering, construction

Margaret Lynch superintendent

Akron Institute of Herzing University 1600 South Arlington, Suite 100, Akron 44306 (330) 724-1600/www.herzing.edu/akron

615

750

-18.0%

15:1

1970

Nursing, medical assisting, business

David L. LaRue campus president

Ohio Carpenters' Joint Apprenticeship and Training Trust Fund 4100 Maple Drive, Richfield 44286 (800) 601-1800/www.carpenterstraining.com

560

625

-10.4%

13:1

Carpentry, millwrighting, floorlaying, millcabinetry, piledriving

Michael Papalia state training director

Portage Lakes Career Center 4401 Shriver Road, Uniontown 44685 (330) 896-8200/www.plcc.edu

525

465

12.9%

12:1

1977

Information technology, medical, cosmetology

James A. Brown superintendent

Stautzenberger College, Brecksville 8001 Katherine Blvd., Brecksville 44141 (440) 838-1999/www.learnwhatyoulove.com

375

355

5.6%

8:1

1926

Personal fitness, veterinary technology, court reporting, paralegal

Donna K. Palmer vice president, director

National College 3487 Belmont Ave., Youngstown 44505 (330) 759-0205/www.national-college.edu

360

564

-36.2%

12:1

2007

Business administration, information systems engineering, health information technology, medical assisting

Michael Boyle campus director

Cleveland Institute of Dental-Medical Assistants 2450 Prospect Ave., Cleveland 44115 (216) 241-2930/www.cidma.com

358

441

-18.8%

9:1

1967

Dental assistant, medical assistant, pharmacy technician, medical secretary

Beverly A. Davis, president; Linda DavisCarson, vice president

Mahoning County Career & Technical Center, Adult Career Education 7300 N. Palmyra Road, Canfield 44406 (330) 729-4100/www.mahoningctc.com

201

121

66.1%

9:1

1971

Medical assistant, phlebotomy, health information and medical office management, pharmacy technician, EMT basic, fire fighter I, II

Roan Craig superintendent

Miami-Jacobs Career College 6400 Rockside Road, Independence 44131 (216) 834-1400/www.miamijacobs.edu

200

150

33.3%

30:1

1970

Court reporting, paralegal, health information technology, security and investigation

Lynn Mizanin campus director

Ohio Center for Broadcasting 9885 Rockside Road, Suite 160, Valley View 44125 (216) 503-5900/www.beonair.com

200

0.0%

1986

Radio and TV broadcasting

Christopher O'Connell campus director

Associated Builders and Contractors Inc. 9255 Market Place West, Broadview Heights 44147 (440) 717-0389/www.nocabc.com

140

200

-30.0%

15:1

1951

Carpentry, electrical, HVAC, plumbing

Ryan Martin president, CEO

Cleveland Institute of Electronics 1776 E. 17th St., Cleveland 44114 (800) 243-6446/www.cie-wc.edu

105

28.0%

1934

Electronics engineering, computer J. Randall Drinko information technology, software engineer president, CEO

Central School of Practical Nursing 4600 Carnegie Ave., Cleveland 44103 (216) 391-8434/www.cspnohio.org

0.0%

50:1 classroom 9:1 clinical

1937

Practical nursing

Alberta Plocica executive director

National Institute of Massotherapy 3681 Manchester Road, Suite 304, Akron 44319 (330) 867-1996/www.nim.edu

1.5%

8:1

1991

Massage therapy diploma, associate of applied science in clinical massage therapy

Stephen Perkinson president, curriculum coordinator

Cleveland Industrial Training Center 1311 Brookpark Road, Cleveland 44109 (216) 459-9292/www.clevelandindustrialtraining.com

18.2%

5:1

1993

CNC programming, set-ups and operations

Tim Duffy director

Vocational Guidance Services 2239 E. 55th St., Cleveland 44103 (216) 431-7800/www.vgsjob.org

0.0%

6:1

1890

Computer training, custodial training and food service training

Robert E. Comben Jr. 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.

RESEARCHED BY Deborah W. Hillyer

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Geauga: Title confusion Clinic: Concussion awareness rises slows foreclosure process continued from PAGE 1

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Following their lead

Mr. Joyce said he has begun talking to other county prosecutors in Northeast Ohio, and he hopes the rest of the state’s 88 counties will join in the litigation. In addition, the state’s recorders — the elected officials who maintain land records — took up the issue last Wednesday, Oct. 19, at the monthly meeting of the Ohio Recorders Association. Karen Vincent, Muskingum County recorder and vice president of the association, said the Geauga County lawsuit was discussed briefly at the meeting but the group made no decision on whether counties should join the lawsuit. Lake County Recorder Frank Suponcic said in an email that he has discussed the issue with Lake County Prosecutor Charles Coulson, and that any decision to join the lawsuit will be made by the prosecutor. The lawsuit argues that electronic mortgage transfers violate state law and create gaps in the chain of title to property in Geauga County. The suit says Ohio law requires deed and mortgage transfers to be filed with county recorders’ offices. Mr. Joyce said MERS began showing up on Geauga County mortgage documents in the late 1990s and that the rerouting of title transfers has deprived the Geauga County recorder of at least $250,000 in lost recording fees over that time. In a statement posted on its website, MERS spokeswoman Janis Smith said the company has not seen the Geauga County lawsuit, but maintained, “The MERS business model and practices comply with the recording statutes and regulations of Ohio. “This position has been upheld in numerous cases in Ohio courts and countless cases across the country on the state and federal level,” the statement continued. “We are confident that MERS’ business practices will be upheld in court as complying with Ohio law.”

Mr. Joyce said he decided to pursue the lawsuit after learning of comparable efforts elsewhere. Similar lawsuits have been filed this year in two counties in Kentucky, one in Pennsylvania and in Dallas County in Texas, according to Bloomberg Businessweek. Harris County, Texas, attorneys also are seeking approval from county commissioners to file a similar lawsuit. Bloomberg reported that attorneys in Dallas County believe at least $11 million and as much as $100 million in recording fees were avoided, depending on the number of times properties were used as collateral and the transactions were not recorded with the county. As Mr. Joyce began to research the issue, he decided to bring in Bernstein Liebhard LLP, a New York City law firm with considerable class-action experience, to help bring the Geauga County case to court. “It used to be that homeowners could go to the county recorder’s office and be able to go back in title records and find any problems,” Mr. Joyce said. He said MERS and the lenders “managed to obliterate that in a short period of time, all in the name of trying to make more money or save a little money.” Traditionally, establishing a chain of title was important to verify legal ownership, which could be affected by death, divorce or fraud, and by changes in the boundaries of a property. The lack of clear chain of title created by the MERS registry has complicated and slowed mortgage foreclosures nationwide. Homeowners and state attorneys general have challenged foreclosure actions taken by MERS, arguing MERS lacked the ability to foreclose because it can’t establish a clear chain of title that proves it is the lawful mortgage ■ holder.

He might be fine, though, thanks to his helmet, which was designed for kids. Several teams of researchers at the Cleveland Clinic are working together to create the technologies that could make that scenario a reality. Among them are Edward Benzel and Adam Bartsch. Together with former Clinic neurosurgeon Vince Miele, they have developed a mouthguard that can track the movement of an athlete’s head after he or she takes a big hit. They, like other researches at the Clinic, have devoted more time to researching and developing technologies to prevent and diagnose concussions as public awareness about such injuries has increased. Though many of the projects began separately, some of the researchers behind them now are working together, or plan to, said Dr. Benzel, chair of neurosurgery at the Clinic. “Now we’re converging because we see a commonality and a common purpose,” he said. Dr. Benzel and Dr. Bartsch, who is director of the Clinic’s Spine Research Laboratory, are about to start testing the mouthguard on 10 hockey players at St. Ignatius High School in Cleveland. As the players compete, the mouthguard — which contains an accelerometer to measure the acceleration of the head and a gyroscope to measure how the neck rotates — will relay that data to a computer. Researchers will analyze that information to figure out what kinds of hits are correlated with concussions, and how large numbers of smaller hits can affect

the company’s authorized number of shares of common stock to 50 million from 12 million. However, the company, whose assets totaled $277.7 million as of June 30, must await SEC action before it can move forward with the recapitalization plan.

The new cast According to the Sept. 30 SEC filing, the new management would be: ■ Timothy T. O’Dell, who spent 22 years at Fifth Third Bank, including as president and CEO of Fifth Third’s Central Ohio operations. He is to replace Eloise L. Mackus as CEO. ■ Thad R. Perry, who served as a senior partner at consulting firm Accenture for more than 25 years and has expertise in a variety of industries, including financial services. He is to replace Therese A. Liutkus as president. ■ Robert E. Hoeweler, CEO of a group of companies owned by the Hoeweler family, who is to serve as chairman of the board.

There are to be five new appointments to the board, which would include 10 directors after the recapitalization. They include Mr. O’Dell, Mr. Perry and Mr. Hoeweler, as well as James Howard Frauenberg II, principal owner of Addison Holding LLC, and Donal Malenick, former CEO of Columbus Steel Castings and a board member of Max and Erma’s Restaurants of Columbus. Mr. O’Dell said he and the others are not in a position to comment because it’s a “quiet period.” Ms. Mackus, who became interim CEO in May 2010 and CEO in February 2011, is expected to remain general counsel and corporate secretary, roles she assumed in July 2003. She, too, declined comment. Ms. Liutkus, who became president in June 2010, is to retain her duties as chief financial officer and treasurer, which she assumed in November 2003.

Here’s the plan The SEC filing disclosed recent challenges the company has faced,

No ordinary app The Clinic also could create a product out of a piece of software for the iPad called the Cleveland Clinic Concussion Assessment System. The “C3” app, developed for the Clinic by DXY Solutions LLC of Cleveland, is designed to check athletes for symptoms of concussion. The athletes take tests measuring their reaction time, memory and other brain functions using the iPad’s touch screen, but they would connect the device — which contains an accelerometer and a gyroscope — to a belt to test their balance. The app already has been tested on 120 football and soccer players from John Carroll University, Brecksville High School and Solon High School, said Jay Alberts, a biomedical engineer at the Clinic’s Lerner Research Institute. Dr. Alberts is not working in a vacuum: He and Drs. Benzel and Bartsch have applied for a grant from the Clinic that would allow them to develop a system that would let the mouthguard send data to the C3 app.

Plus, Dr. Alberts and other Clinic researchers have applied for an external grant that would let them use the C3 app to study how changes in brain function correlate with the amount of S100B proteins in a patient’s bloodstream. The Clinic is in the process of developing the test for S100B proteins, which leak into the blood when the bloodbrain barrier is damaged.

Docs on a mission The number of concussion-related research projects at the Clinic has risen as interested in the condition has increased, Dr. Alberts said. “As that awareness has grown, I think the Cleveland Clinic’s awareness and the number of people doing this type of work has grown,” he said. Other projects are under way, too. For instance, the Clinic’s Lou Ruvo Center for Brain Health in Las Vegas is studying boxers to figure out whether brain scans and other tests can detect changes that correlate with a drop in brain function. And the Clinic a year ago announced that sporting goods manufacturer Rawlings had given the Clinic research equipment to test how well baseball and football equipment minimizes hard hits. Drs. Benzel and Bartsch also are leading another project: They’re using a $100,000 grant from NFL Charities to study how the neck influences concussions in children and teens. Their goal is to design a football helmet for young players. “This is becoming a mission of the Clinic and a mission or ours,” Dr. Benzel said. ■

Creditors now control Revol Wireless; new leaders in place Ownership of struggling wireless service provider Revol Wireless was transferred to its creditors Sept. 8, and earlier this week the Independence-based company announced the new members of its board and management team. Among those who have been

Bank: Prospective leaders eye market growth continued from PAGE 3

players over time. That information could be used to create software to alert coaches, trainers or others on the sidelines whenever an athlete takes a dangerous hit — even if it didn’t look that bad. Then they could take the player out of the game to be evaluated. The mouthguard prototypes are produced by Sportsguard Laboratories of Kent. The technology eventually could be licensed or sold, or it could be marketed through a Cleveland Clinic spinout, Dr. Benzel said.

namely significant increases in its problem assets and heightened competition for deposits and quality loans. It also outlined how it plans to operate going forward. “Management intends to change the deposit mix, increase product offerings, such as private banking, and achieve profitability by more effectively serving existing customers and proactively seeking new customers in our markets,” the filing said. Despite CFBank’s operations in Columbus and in Akron — two “attractive market areas” — the company has underperformed in terms of its retail banking penetration, according to the filing. The new team will focus on expanding full commercial customer relationships, primarily in the Columbus and Fairlawn markets and particularly with small to midsize businesses in those markets. Central Federal indicated in its filing that it anticipates the capital it raises will provide the company with additional flexibility in addressing and accelerating the reduction of its

ON THE WEB Story from www.CrainsCleveland.com. replaced are CEO Bill Jarvis — who lived in Hawaii, where he also led another wireless phone service provider — and chief operating officer Scott Bergs, Revol's top local official.

nonperforming assets. That’s the “beauty of the recap,” Mr. Cummings said, noting that if the company is better able to absorb nonperforming asset losses, it could turn its attention to growth. But, he noted, today’s environment makes it “exceedingly difficult for small banks to access capital.” If Central Federal raises the minimum equity investment it seeks, it expects to exceed all the company’s regulatory capital requirements, including the higher ones imposed last May in a consent order from the Office of Thrift Supervision. The recent SEC filing reveals the company failed to reach capital requirements it was mandated to achieve by Sept. 30. It statea management will seek to demonstrate compliance as soon as possible and to convince regulators to terminate cease-and-desist orders issued to the bank and the holding company.

Starting over Even raising the minimum amount of capital required by the standby purchasers would increase by more than six times the number of Central Federal common shares outstanding. As of last June 30, the company

The company's new CEO, Timothy Yager, would not go into the detail about the transition, which took place because Revol failed to refinance $150 million in debt that came due last April 30. The company, which did not file for bankruptcy, is now debtfree, Mr. Yager said.

had 4.12 million total shares outstanding and an estimated 518 stockholders. Its minimum stock offering would result in 26.6 million total shares outstanding, and its maximum stock offering would result in 34.1 million shares. “That is dramatic,” Mr. Cummings said, noting the company’s June 2011 market capitalization of $3.3 million is significantly less than the capital it’s raising. “In a situation like this, they’re just kind of starting over,” he said. Central Federal noted the sale of common shares gives existing stockholders the opportunity to limit ownership dilution by buying additional stock. Otherwise, current shareholders basically stand to be “wiped out,” Mr. Cummings said. Per the SEC filing, existing stockholders are to receive subscription rights entitling them to purchase up to 24.9 million shares of the company’s common stock for approximately $25 million. If all or any portion of the subscription rights are not exercised by current stockholders during the rights offering, the company may offer the remaining shares of common stock to the public at a price of $1 a share. ■

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shale rock to gain access to the trapped natural gas. “Frankly, I think anyone in Ohio would be wise to look to get a piece of the Midwest gold rush,” Mr. Sharp said, citing the significant increases in oil and gas leases filed in eastern Ohio counties and the companies and property owners who do need and will need representation. “All of those things represent opportunities for law firms like us,” Mr. Sharp said. Various providers of professional services stand to reap significant business as more energy development occurs in the state, according to Rhonda Reda, executive director of the Ohio Oil and Gas Energy Education Program, a nonprofit financed by the oil and gas industry. Ms. Reda said her organization strongly encourages landowners to have land leases reviewed by qualified attorneys. Liability issues and government regulation underscore the need for such legal representation, attorneys say. In addition, engineers and environmental consultants also are likely to benefit, along with accountants and financial planners. People will hire financial consultants, Ms. Reda said, for help in managing the money their land generates and for tax guidance. “A lot of people are seeing more money than they’ve seen before,” Ms. Reda said, noting that some landowners who agree to lease the rights to their land are receiving sign-on bonuses ranging from $500 to $4,000 an acre.

Drilling for more work Mike Hardy, a Thompson Hine partner and member of Team Shale, which was formed about a month ago, said he has seen a couple oil and gas developments affect Northeast Ohio in the nearly 40 years he’s practiced law. But he expects the Marcellus and Utica shale discoveries, with their huge reserves, to dwarf the others. Team Shale includes attorneys who practice energy, environmental, intellectual property and real estate law. It is tasked with tracking business and regulatory developments related to shale, Mr. Hardy said. “We do this for two reasons,” he said. “No. 1, we know it’s very

important for the region. No. 2, a lot of Northeast Ohio industries will be looking at this for the first time. We need to be ahead of the game. “I think we’re going to start seeing some return on our investment over the next several months,” he added. “The (shale gas) industry itself is growing exponentially.” The increase in demand for shale legal work is particularly beneficial for lawyers in Northeast Ohio, where the pool of other clients hasn’t been growing, said Jeff Huntsberger, a member of Cleveland-based McDonald Hopkins LLC, which is training young associates in oil and gas matters and is seeking introductions to companies involved in fracking. “This is something that I think will add to the economy and should make it easier for attorneys who are looking to expand their practices,” Mr. Huntsberger said. “It certainly has the potential to be a game-changing event for our clients and for the attorneys representing those clients.” Vorys attorneys are spending more time on oil and gas litigation matters as land leases increase in value, said Jonathan Airey, a partner in the firm’s Columbus office and coordinator of its energy practice. Historically, he said, such leases were not of enough value to merit such litigation. “The stakes are much higher,” he said. Mr. Airey anticipates Vorys’ attention to these matters to continue to increase as oil and gas companies begin developing the shale positions they have.

Busy all around Environmental consultant Fraser K. Hamilton Sr. isn’t focusing his Euclid firm, Earth Consulting Ltd., on shale gas work, but he is feeling a squeeze because others with whom he works are adopting that focus. For example, getting drilling contractors to a job site is taking three to four weeks where it used to take three or four days, said Mr. Hamilton, whose firm consults on soil and groundwater contamination. He expects the strained availability to continue. On a positive note, he suspects the uptick in other business he’s experiencing is the result of larger competitors “being sucked into the environmental monitoring side of the fracking business.” ■

estimates that the 128 tax breaks will cost the state about $15 billion over the two-year budget period that began last July 1. Statehouse leaders have not set any target for tax expenditure reductions. “We’re not going into this analysis with any predetermined orientation or goals other than to analyze, ‘Do these tax expenditures have a role … in job creation or job retention?’” Senate Ways and Means Committee chairman Tim Schaeffer, R-Lancaster, told the Hannah Report, a Columbus state government reporting service, last month. Many of the exemptions are political hot potatoes that are likely untouchable. They include the personal and dependent exemption from the individual income tax that is available to all taxpayers and the exemption from sales taxes of sales to churches. The tax department estimates the dependent exemption takes $1.15 billion in revenue from the 2012-2013 budget; the church exemption costs $802.5 million.

More in store? The three nonprofits pushing the

– Zach Schiller, research director, Policy Matters tax expenditure issue — the conservative Buckeye Institute, the laborbacked Policy Matters Ohio and the more centrist Greater Ohio Policy Center — believe other tax breaks are ripe for trimming. Among them are an exclusion from sales tax for flight simulators, costing $3.2 million over the two-year budget, and a sales tax cap of $800 on the purchase of fractional ownership in multimilliondollar aircraft, costing $2 million. The largest exemptions the three groups would like to see ended are a $36.5 million sales tax exemption for the purchase of catalogs used by retailers. The groups also would eliminate an $11.7 million exemption for magazines bought by subscription, even though the purchase of individual magazines is subject to the sales tax. “We’ve targeted $300 million in specific ones that should be the low-hanging fruit,” said Matt Mayer, president of the Columbus-based Buckeye Institute. “But what is more important is just putting rigor

into the system to make sure the (exemptions) on the books are justified and continue to make sense based upon conditions today, rather than when they were enacted.” For example, legislation passed in 1997 exempts from the sales tax items bought by motor racing teams. The tax department says the cost of that exemption is minimal, but the three groups consider it an unjustified carve-out for a narrow group. The groups also would like to see tax expenditures regularly reviewed. “I’m glad this is getting some attention,” said Zach Schiller, Policy Matters’ research director, based in the group’s Cleveland office. “I hope that it will result in more transparency, more review and maybe some mechanism to do this on a regular basis.” Mr. Schiller said, ideally, these exemptions would contain sunset provisions that would require them to be reviewed on a regular basis. Sen. Niehaus had proposed a tax expenditure study committee in an early version of the state budget approved at midyear, but pulled it as part of the last-minute compromises made to pass the budget by June 30. ■

CRAIN’S

Wednesday, December 7 7:00 - 8:00 a.m. • Breakfast and Networking ng 8:00 - 9:30 a.m. • Panel Discussion The Ritz-Carlton, Cleveland

Breakfast Series 2011

HIRING ROCK STAR TALENT BUILD YOUR 2012 DREAM TEAM Attracting top talent can be an organization’s toughest challenge. Do you have the right workforce in place to adapt and thrive in today’s high-pressure climate?

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AARON GROSSMAN, PRESIDENT • ALLIANCE STAFFING SOLUTIONS JOHNNI BECKEL, EXECUTIVE VP & CHIEF HR OFFICER • KEYBANK

Labor demand stuck in neutral By STAFFING INDUSTRY ANALYSTS

Labor market conditions changed little in September, with limited or “selective” demand for new workers, according to the new Federal Reserve Beige Book report released last week. Staffing firms in some sectors such as manufacturing, transportation and energy were hiring more broadly in the Cleveland, Richmond, Atlanta, Chicago and Kansas City Federal Reserve districts. Firms also noted that they were experiencing difficulties in finding appropriately skilled or qualified labor. Elevated uncertainty or lower expectations for companies’ future growth have restrained hiring in the Boston, Richmond, Atlanta and Chicago districts. New York reported

that deteriorating business conditions in the finance industry had led to a pull back in hiring, with layoffs anticipated in the months ahead. Richmond and Chicago also reported reduced seasonal hiring in retail trade given apprehension about the strength of holiday sales; however, firms in the New York district indicated that seasonal hiring was likely to increase. Aside from specialized skills or areas with skills shortages, wage pressures remained subdued in most districts. Atlanta and San Francisco cited wage gains for workers with information technology skills, Minneapolis reported wage increases in the energy industry, and Cleveland noted higher wages for truck drivers. ■

SCOTT DOAK, SENIOR DIRECTOR, STAFFING & RECRUITMENT • CLEVELAND CLINIC