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$1.50/NOVEMBER 1 - 7, 2010
Vol. 31, No. 43
Legislators push for tough tack on China
THE STORY BEHIND ‘I’LL MAKE THEM PAY’
Many manufacturers, though, fear trade war with country By DAN SHINGLER dshingler@crain.com
MARC GOLUB
Ubiquitous personal injury attorney Tim Misny made a big bet on pharmaceuticals; it paid off, and now he’s ‘living the dream’
By DAN SHINGLER dshingler@crain.com
T
im Misny has made them pay more often than usual lately, especially when it comes to pharmaceutical companies. “In the past three months, I’ve settled 675 mass-tort cases,” he said in an interview last week at his 55-acre “Misnyland” estate — his term — in Waite Hill. The plantiff’s attorney who has made a name and face for himself soliciting cases on television and online says he’s reaping the benefits of a big bet he made three years ago that has brought him cases from across the country and the current rush of business. “I’m living the dream,” Mr. Misny said of his recent success as he tooled around his estate from stream to vista in his Ford F-150 pickup. It See MISNY Page 8
When it comes to China, manufacturers in Northeast Ohio and nationwide agree that the still-rising Asian nation does not play fair when it comes to international trade. But they can’t agree on what, if anything, to do about INSIDE: A peek at local it. companies successfully The question is whether exporting to the Asian the United States should get giant. Page 9 tough with China for closing some of its markets to U.S. companies, subsidizing its domestic industries in ways that violate international agreements and keeping its currency at an artificially low value — all steps U.S. Sen. Sherrod Brown and other federal legislators contend are illegal and unfair trade actions. See TOUGH Page 9
INSIDE Talking TARP Several Northeast Ohio banks have not paid back funds they’ve received from the U.S. Treasury, but that might not such a bad thing. Read Michelle Park’s story on Page 3.
Downtown officials, business owners fret over potential pro lockouts As work stoppages loom in NFL and NBA, bars, hoteliers ponder impact on city center By JOEL HAMMOND jmhammond@cleveland.com
43
For a peek of what the Cleveland Browns mean to downtown, visit Dive Bar, in the city’s Warehouse District, when the Browns play on the road or not at all.
Of course, you won’t get very far: The popular hangout is closed 44 Sundays out of the year. Owner Daniel Deagan chooses to save the little overhead Dive Bar requires, rather than open to an empty room. “You’re talking about not opening versus being the best day of the
INSIDE: A primer on the factors causing labor trouble in the NFL and NBA. (Hint: It’s money.) Page 16 week,” Mr. Deagan said. “A Sunday with a Browns home game equals what a Saturday night used to be in the Warehouse District, in its heyday.” As officials and business owners downtown found in 1996, the first of three seasons without the Browns after Art Modell moved the team to Baltimore, life is less sweet without
the team and the atmosphere that game day brings. The prospect of more of those dour days is something many of those business owners now are confronting, only doubly: Both the NFL and NBA are in collective bargaining negotiations and in serious danger, experts agree, of owner lockouts in 2011, which would take away major revenue streams at a time when it’s not exactly smooth economic sailing.
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“We’re keeping tabs on (the labor issues), definitely,” said Tamera Brown, director of marketing at Positively Cleveland, the region’s convention and visitors bureau. “We like to talk about our diversity of offerings, the plethora of options, but one things sports do that, say, PlayhouseSquare doesn’t, is that nationally televised piece. That goes above and beyond the dollars, and we’d certainly miss it.” See LOCKOUTS Page 16
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
THE VOICE OF EXPERIENCE
COMING NEXT WEEK
Self-employment is an experienced-person’s game. New federal data for 2009 show that self-employment rates rise consistently with age. Among the unincorporated, 18.1% of people age 65 years and older are self-employed, while among the incorporated, 7.7% of those 65 years and older fit that category. Men also are more likely to be self-employed than women.
Making a new name A group of food store owners in Lake County is finding that there is strength in numbers. Their brand, RediGo, was formed in 2007, and the partnership is now growing with additional stores.
List: Most affluent communities ............23 Personal View ..............10 Reporters’ Notebook ....27 Tax Liens .....................18
EMBA
Incorporated self-employed rate
Unincorporated self-employed rate
Age 16-19
0.1%
1.6%
Age 20-24
0.4
2.1
Age 25-34
1.9
4.6
Age 35-44
4.1
6.8
Age 45-54
5.3
8.2
Age 55-64
6.2
10.0
Age 65+
7.7
18.1
Characteristic
REGULAR FEATURES Big Issue ......................11 Classified................24-25 Editorial .......................10 From the Publisher .......10 Going Places................17
NOVEMBER 1-7, 2010
SOURCE: U.S. BUREAU OF LABOR STATISTICS
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700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 Phone: (216) 522-1383 Fax: (216) 694-4264 www.crainscleveland.com Publisher/editorial director: Brian D. Tucker (btucker@crain.com) Editor: Mark Dodosh (mdodosh@crain.com) Managing editor: Scott Suttell (ssuttell@crain.com) Sections editor: Amy Ann Stoessel (astoessel@crain.com) Senior reporter: Stan Bullard (sbullard@crain.com) Real estate and construction Reporters: Jay Miller (jmiller@crain.com) Government Chuck Soder (csoder@crain.com) Technology Dan Shingler (dshingler@crain.com) Manufacturing Tim Magaw (tmagaw@crain.com) Health care & education Michelle Park (mpark@crain.com) Finance Research editor: Deborah W. Hillyer (dhillyer@crain.com) Cartoonist/illustrator: Rich Williams Marketing/Events manager: Christian Hendricks (chendricks@crain.com) Marketing/Events Coordinator: Jessica Snyder (jdsnyder@crain.com) Advertising sales director: Mike Malley (mmalley@crain.com) Account executives: Adam Mandell (amandell@crain.com) Dirk Kruger (dkruger@crain.com) Nicole Nolan (nnolan@crain.com) Dawn Donegan (ddonegan@crain.com) Business development manager & classified advertising: Genny Donley (gdonley@crain.com) Office coordinator: Toni Coleman (tcoleman@crain.com) Production manager: Craig L. Mackey (cmackey@crain.com) Production assistant/video editor: Steven Bennett (sbennett@crain.com) Graphic designer: Kristen Wilson (klwilson@crain.com) Billing: Susan Jaranowski, 313-446-6024 (sjaranowski@crain.com) Credit: Todd Masura, 313-446-6097 (tmasura@crain.com) Circulation manager: Erin Miller (emiller@crain.com) Customer service manager: Brenda Johnson-Brantley (bjohnson-brantley@ crain.com) 1-877-824-9373
Crain Communications Inc. Keith E. Crain: Chairman Rance Crain: President Merrilee Crain: Secretary Mary Kay Crain: Treasurer William A. Morrow: Executive vice president/operations Brian D. Tucker: Vice president Robert C. Adams: Group vice president technology, circulation, manufacturing Paul Dalpiaz: Chief Information Officer Dave Kamis: Vice president/production & manufacturing Kathy Henry: Corporate circulation/audience development director G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $1.50. Allow 4 weeks for change of address. Send all subscription correspondence to Circulation Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373 or FAX (313) 446-6777. Reprints: Call 1-800-290-5460 Ext. 136 Audit Bureau of Circulation
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CRAIN’S CLEVELAND BUSINESS
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INSIGHT
Many banks sit tight on TARP infusions FirstMerit only local institution to repay Treasury; many strategically refraining By MICHELLE PARK mpark@crain.com
The faucet’s off, but much of what was pumped here remains — which isn’t necessarily a bad thing. After infusing tens of billions of dollars into 707 banks, the U.S. Treasury’s Troubled Asset Relief Program, or TARP, has stopped investing. In two years, Uncle Sam bought nearly $205 billion of stock and debt securities in banks and
thrifts in 48 states to strengthen them through its Capital Purchase Program. Several of those institutions do business in Northeast Ohio; most have not repaid any of their TARP funds. There is no deadline for repayment, and no bank official interviewed for this story would cite a specific date by which their bank will repay the money. But most did identify conditions that would make
repayment ideal. Huntington Bancshares owes $1.4 billion and will return the money when it experiences a return to consistent profitable performance, sees sustained improvement in the economy and receives clarification of new bank capital requirements, a spokeswoman said. Likewise, executives of LNB Bancorp Inc., which accepted $25.2 million, are waiting to see what long-term capital requirements will be before the bank returns its infusion, said Daniel E. Klimas, president and CEO of Lorain National Bank. Before they repay, executives with Western Reserve Bancorp Inc.
in Medina, which received $4.7 million, want to see the stock market improve, the economy continue to recover, big bank stocks increase in value and Western Reserve Bank’s profitability rise. Only the last factor is under the bank’s control, said president and CEO Ed McKeon.
Being careful Delayed repayment doesn’t mean, “Uh oh, uh oh, we have a problem here,” said Kevin Jacques, the Boynton D. Murch chair in finance at Baldwin-Wallace College who worked as an economist for the Treasury Department for 14 years, most recently from 2001 to 2005.
INSIDE: A list of banks that received capital infusions from the U.S. Treasury. Page 13 “I read that as an institution being careful,” he said. “Ideally, would the Treasury like to have its money and its dividends back now? Absolutely,” Mr. Jacques said. “What the Treasury would like to say is, ‘We gave money to these institutions ... and now they’re in such good financial health that they paid us back.’ That’s a political story they could tell in an election year.” That said, the Treasury would rather that banks retain the investments for a See TARP Page 13
Aclara’s water, energy meter systems open spigot of opportunities Solon firm adds staff to prep for product rollout By CHUCK SODER csoder@crain.com
RUGGERO FATICA
Jim Mueller, general sales manager for Scott Progress Systems Inc., said he expects the Hartville-based company to benefit from an anticipated rise in nuclear power plants’ construction worldwide. The company provides pipes to existing power plants.
NUCLEAR EXPECTED TO GAIN STEAM Area manufacturers in position to benefit from projected surge in power plant construction, though financing barriers remain By CHUCK SODER csoder@crain.com
A few years of massive sales growth wasn’t enough for Aclara RF Systems Inc. in Solon. The former Hexagram Inc. is hiring as it prepares to roll out a product designed to help utilities monitor and control how they distribute water, natural gas and electricity. Aclara can only hope that its new Acendant Network is as popular as its traditional meter-reading equipment has been over the past few years. Annual sales of the equipment, which is designed and made in Solon, are in the $100 million to
See NUCLEAR Page 26
See ACLARA Page 25
THE WEEK IN QUOTES “Thanks to bigbusiness greed and our own government officials, China has destroyed our country’s way of life.” — James Drabik, president of Drabik Manufacturing, a Brook Park machine shop. Page One
S
cott Progress Systems Inc. is getting ready for the renaissance. A projected increase in nuclear power plant construction worldwide — often described as a “nuclear renaissance” — represents a big opportunity for Scott Progress and other Northeast Ohio manufacturers. The Hartville company generates less than 1% of its revenue by providing pipes to existing nuclear plants, said general sales manager Jim Mueller. But that work will help Scott Progress build the expertise and relationships it will need to win more jobs as construction starts on more nuke plants over the next several years, Mr. Mueller said. Companies have submitted applications to
$150 million range today — up from $30 million to $40 million in 2006, said chief operating officer Gary Moore. He declined to give exact figures. The company’s staff has grown to nearly 300 from about 175 at the start of 2008, when Aclara started winning bigger contracts, Mr. Moore said. During 2008 and 2009, the company sold its automated meterreading equipment to municipal utilities in New York City, Toronto and San Francisco as well as to Pacific Gas & Electric Co., which serves northern and central California, and Wisconsin Public Service, which serves parts of Wisconsin and
“We like to talk about our diversity of offerings, the plethora of options, but one thing sports do that, say, PlayhouseSquare doesn’t, is that nationally televised piece.” — Tamera Brown, director of marketing at Positively Cleveland. Page One
“I believe if credit unions do not grow, they will run a very real risk of being a dying breed.”
“Be an ostrich; stick your head in the sand. But remember where ostriches get shot.”
— Robb Poore, president and CEO of Integrity Federal Credit Union in Barberton. Page 19
— Norm Gutmacher, a partner in the real estate group at Benesch Friedlander Coplan & Aronoff law firm. Page 19
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Hospice plans Westlake facility Coupled with new rebranding effort, nonprofit hopes to increase prominence By TIMOTHY MAGAW tmagaw@crain.com
Hospice of the Western Reserve plans to start construction early next year of a $20 million, 32-bed facility in Westlake that the nonprofit’s CEO said is part of a pattern of growth as hospice care “is more prominently discovered and accepted.” The new facility, which would be located on a 30-acre site off Crocker Road, would augment the nonprofit organization’s 42-bed facility on East 185th Street along Lake Erie in Cleve-
land. It expects to open the Westlake property in mid-2012. “Some people know they can no longer manage their loved ones at home in their own bed,” said David Simpson, CEO of Hospice of the Western Reserve. “This becomes a very wonderful center of excellence with extreme high quality and a very special atmosphere.” The hospice’s network of 12 locations — 10 of which manage patients — serve Ashtabula, Cuyahoga, Geauga, Lake, Lorain and Summit counties. Teams at the hospice offices
serve patients in nursing facilities and at their homes. The hospice also recently opened a location in Fairlawn to better serve Summit County patients. Previously, the hospice served Summit County patients primarily from its Warrensville Heights office. “This way is making it more convenient for everyone involved,” Mr. Simpson said. Hospice of the Western Reserve also bought the former St. Joseph Christian Life Center property adjacent to its residential facility on East 185th Street in June 2009 for patients to use as a green space and for families to use as a place for reflection. To salvage some of the historic St. Joseph building, the hospice used a “deconstruction” process to reuse, resell and recycle old building materials, said hospice spokeswoman Paige Boyer. Construction crews are gutting asbestos from the building and its demolition could take place in the next few months. The walking path at the hospice center along the lake’s shoreline will be connected with the St. Joseph property. Meanwhile, the hospice has been working on a rebranding effort with the Liggett Stashower public relations firm, and so far has updated its logo, which Jane Van Bergen, the hospice’s director of public relations and communications, said would “differentiate ourselves a little bit.” Ms. Van Bergen noted that the new logo, which plays on blue colors and a sun that is neither rising nor setting, is bolder and easier to understand. At the moment, only a new logo has been unveiled, but Mr. Simpson said the hospice plans to launch a more ambitious marketing and advertising effort to make its presence better known in the community. David Moore, president and managing director at Liggett Stashower, said the goal of the branding effort was to set Hospice of the Western Reserve apart from its competitors in the region and spread the message that it was OK to talk about death. Mr. Moore said it was important the hospice “communicates strength” because people need to know they can trust the organization during a time that is often difficult to handle. ■
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Volume 31, Number 43 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of May and fifth week of May, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2010 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $1.50. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 800-290-5460 Ext. 136
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CRAIN’S CLEVELAND BUSINESS
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NOVEMBER 1-7, 2010
Urban condo prices cut in bid to revive buyer interest By STAN BULLARD sbullard@crain.com
Developers of the Stonebridge Condominiums in the Flats, Franklin Lofts in Cleveland’s Ohio City neighborhood and Pinnacle Condominiums downtown are slashing prices to pick up their pace of sales, while a just-ordered sheriff’s sale in the townhouse portion of the downtown Avenue District may add more discounts to the mix. Not all developers with condos in or near downtown are joining the price-cutting frenzy. However, heavily promoted price reductions at the two projects reflect a steep drop in sales in the urban condo market since federal tax credits for new and move-up homebuyers ended last spring. The price cuts are attentiongetters. K&D Group slashed $10,000 to $145,000 from its Stonebridge Plaza prices, reducing its priciest unit 27% to $384,900 from $529,900. The complex is at 1237 Washington Ave. in the Flats. Meantime, the developer of Franklin Lofts cut $30,000 to $65,000 from its units, reducing its priciest unit 21% to $250,000 from $315,000. The former YMCA is at 3200
Franklin Ave. Doug Price, CEO of K&D Group, said the price cuts reflect the reality of the market and not desperation. “We sold five units at Stonebridge Plaza while the tax credits were in effect. Then the market just died,” Mr. Price said. Several prospective buyers have surfaced since the price reductions, he said, and one sale is now pending, for an amount he would not disclose because the deal has not yet closed. “It’s just realizing this is the market,” Mr. Price said. “Our sales are in the $195,000 to $200,000 range, and that’s where we are putting prices.” He adds that he’d rather “finish a unit and sell it than have it.” Gus Georgalis, developer of the Pinnacle Condominiums downtown, 701 Lakeside Ave., and Sincere Building Lofts, 2077 E. Fourth St., said he just began promoting a “developer’s closeout” with 20% price cuts, taking public the discounts his brokers were offering at the negotiating table to serious buyers. “We’d like to unload everything,” Mr. Georgalis said of the last nine units in projects he began selling in 2006, just before the housing market crashed.
Whatever it takes A similar situation exists at Franklin Lofts, an 18-unit condo conversion of the former YMCA. James Sosan, Franklin Lofts developer, said he sold three units from last fall into the spring, but none since the tax credits ended. “It is a very, very competitive market out there,” Mr. Sosan said in explaining his price cuts. “You have to do what you have to do to get this thing going. If we’re able to sell two or three units that will help us.” Mr. Sosan said he has worked on Franklin Lofts three years, but estimates it should have taken him one to get the conversion of the landmark building finished and the units sold. Meanwhile, a new wild card is about to come into play in the heated competition to make condo owners out of current downtown-area renters and suburban empty nesters. Cuyahoga County Common Pleas Court Judge Jose Villanueva on Oct. 22 ordered a sheriff sale of the remaining units and lots in the townhouse portion of the Avenue District. Fifth Third Bank launched the foreclosure case May 7 after Panzica Construction Feb. 4 filed to foreclose on the Tower at the Avenue
STAN BULLARD PHOTOS
Condo prices at Franklin Lofts (above) and Stonebridge Plaza (below) have been lowered by developers. District for unpaid, disputed construction bills.
Ready for a shakeup The Avenue District was designed as a single project by Zaremba, a Cleveland-based residential builder. However, different limited liability corporations and different lenders financed the townhouse and tower portions of the project. A sheriff sale is not yet set, but may undercut the high level of pricing homebuilder Nathan Zaremba achieved in the townhouses with his vision of a sophisticated downtown neighborhood in the area of East 12th Street between Superior and Lakeside avenues. Sales of $300,000 to $400,000 were typical for the three-story townhouses. Fourteen of them are sold and six remain on the market. The sheriff sale also will include 12 lots ready for future townhouses north of Superior at East 12th. Richard Cohen, court-appointed receiver for the Avenue townhouses, said he has not reduced prices further since instituting a 10% price cut this summer. “We have prospects. We’re trying to make deals with them,” Mr. Cohen said. David Sharkey, vice president of Progressive Urban Real Estate, has agents who represent both Stonebridge and Franklin Lofts and said he pushed for price cuts at the projects. “It’s trying to shake things up and get things moving,” Mr. Sharkey said. “If price is the issue, let’s find out.”
Staying the course Not all downtown owners embrace the price-cutting strategy. Jesse Howells, chief financial officer at family-owned Howells & Howells, which converted to condominiums the Park Building on Cleveland’s Public Square, said it does not plan to join the party. “It’s been slow, but we’re not out of breath,” said Mr. Howells, who noted the developer has not sold a unit since the federal incentives ended
because activity has been “horrendous.” One factor that has hurt condo sales, Mr. Howells said, is the inability of move-up buyers to shed existing homes if they were interested in suites that cost $300,000 to $975,000. Fourteen buyers have signed on the dotted line at The Park Building, and there are 10 units to go. “We have a unique product,” Mr. Howells said. “We have a billion dollars of development set to go into downtown. Even if the market is slow, we know we will sell all the units because we only have to sell 10.” Even in this environment, downtown-area condos are logging progress in establishing a beachhead for upscale home ownership. Four of the 10 highest-priced sales of residences in the city through Sept. 30 were downtown, according to a Crain’s analysis of Cuyahoga County property records. The two most expensive Cleveland home sales this year, for $806,000 and $793,000, and three of the top 10 sales were at the Pinnacle Condominiums in the Warehouse District. However, Mr. Georgalis, Pinnacle’s developer, now is promoting a smaller, two-bedroom, two-bath Pinnacle condo with an asking price of $389,900 after a $40,000 cut. ■
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California megachurch’s bankruptcy hits home InfoCision, other local outfits are creditors By JAY MILLER jmiller@crain.com
The ripples from the Chapter 11 bankruptcy filing of the Crystal Cathedral Ministries in California are hitting Northeast Ohio. The megachurch on Oct. 18 filed for bankruptcy and listed $55 million in liabilities, most of it the mortgage on its Garden Grove, Calif., home. The filing principally blames a temporary decline in donations for the need for Bankruptcy Court protection from creditors. InfoCision Management Corp., the Akron-based telemarketing giant, is the third-largest unsecured creditor of the 10,000-member church. It’s owed $359,788, according to the nonprofit church’s bankruptcy filing in Santa Ana, Calif. National City Professional Services Finance is listed on a creditors’ list with a Cleveland office. Because it is not among the top 20 creditors, the amount owed was not disclosed on the church’s initial filing. Another creditor, National City Commercial Credit Corp., is identified in court documents as a secured creditor, one of four claiming a total of $12 million owed. Both creditors are business financing units acquired by Pittsburgh-based PNC Financial Services Group Inc. when it bought Cleveland-based National City Corp. in late 2008. PNCEF LLC, an equipment financing and leasing subsidiary of PNC Bank, is the largest unsecured church creditor, owed $1.9 million. PNC spokesman Fred Solomon declined to comment on the filing. In an e-mail, he said the company does not discuss customer relationships. InfoCision is one of the largest telemarketing firms in the country and it claims on its web site that it “raises more money over the phone for Christian organizations than any other teleservices provider.” Company officials did not return three phone messages left last week. Another Northeast Ohio firm, A.R. Schopp’s Sons Inc. of Alliance, was listed among the church’s creditors, but company president Robert Schopp said the church does not have an outstanding balance with the organ maker and repairer. Mr. Schopp said his firm has supplied pipes and service for the Crystal Cathedral’s organs. The principal debt owed by the
UPCOMING EVENTS Crain’s will hold Ideas at Dawn business breakfasts tomorrow, Nov. 2, and Nov. 20, at the RitzCarlton Cleveland downtown. The former will feature a panel discussion on distressed real estate, while the latter will address planning a strategic and profitable sale of your business. For more information and to register, call Crain’s marketing and events manager Christian Hendricks at (216) 771-5182 or visit CrainsCleveland.com.
church is a $36 million mortgage with Farmers & Merchants Bank of Long Beach, Calif. The centerpiece of the real estate, the Crystal Cathedral itself, is an all-glass structure designed by Cleveland native Phillip Johnson that opened in 1980. The church expects services and its TV show, “The Hour of Power,” seen on Barberton-based WDLI-TV, Channel 17, Saturday evenings at 9 p.m., to continue without interruption. ■
The Crystal Cathedral Ministries megachurch in Southern California has filed for bankruptcy. The church, which is the birthplace of the televangelist show “Hour of Power,” lists $55 million in liabilities. ZUMA PRESS/NEWSCOM
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Misny: Lawyer says customers drawn by ads; initial case analysis his secret weapon continued from PAGE 1
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definitely is a dream come true for a kid from a modest family in 1960s-era Euclid, he said. To be sure, Mr. Misny is not talking about 675 individual cases, nor about cases that went to trial. But he said he has settled cases for that many people since the beginning of August. Nearly all the cases were against pharmaceutical companies, with the plaintiffs claiming harm by prescription drugs. The deluge of business is all because of a hunch Mr. Misny said he developed in early 2007. That was when he started thinking the U.S. Supreme Court was not going to continue to allow pharmaceutical companies to shield themselves from liability lawsuits using the so-called “pre-emption defense.� The concept essentially allowed the companies to avoid product liability suits, including in some cases where they failed to warn patients of possible side effects, because the drugs were approved by the U.S. Food and Drug Administration. The pre-emption defense made it almost impossible to win a case against a drug company, Mr. Misny said. But he had a notion that the defense was going to be wiped out by the Supreme Court, in part because legislators at the time were stating publicly that Congress did not intend for the FDA to grant drug and medical device makers such a broad defense from lawsuits. He correctly predicted the outcome of a landmark case, known as Wyeth v. Levine, in which the high court in March 2009 ruled 6-3 that FDA approval did not shield companies from lawsuits. By that time, Mr. Misny’s money was on the table. He’d mortgaged his house and raised a few million dollars, all of which he spent on television advertising around the country, seeking clients whose cases would benefit from — or even be made possible by — just such a ruling. “I made a huge bet,� Mr. Misny said, noting that he advertised in big markets in about 16 states. He asked viewers if they had taken certain drugs and had certain conditions later — and promised to “make them pay� if plaintiffs brought him their claims against the drug makers.
Grudging respect Even some defense attorneys for the pharmaceutical companies concede Mr. Misny made a smart bet and that the Wyeth ruling was every bit as big and important as Mr. Misny envisioned and now claims. “I hate to give Tim any credit for anything, but he’s right,� said Cincinnati attorney Brian Goldwasser, with a long pause and a chuckle. The ruling affected makers of drugs and medical devices, both of which Mr. Goldwasser represents as a partner with the Clevelandbased Reminger law firm. The entire industry was surprised at the ruling, he said. “It used to be pretty much that, since drug companies have to do so much clinical testing before a drug is submitted (for FDA approval), that almost any claim based on a failure to warn was pre-empted,� Mr. Goldwasser said. With the ruling, plaintiffs’ attor-
neys began actively seeking clients with claims against drug companies. By then, though, Mr. Misny already had lined up about 1,000 clients who had contacted him as a result of his advertising. The goal, he said, was never to engage in long, drawn-out trials. It was to get the companies to pay as much and as quickly as possible, sometimes for clients who desperately needed the money for medical treatments or were dying from problems with the drugs they took, Mr. Misny said. In other words, the goal was to settle, which is how the cases generally have been resolved so far. The client receives 60% of the proceeds and Mr. Misny gets the rest — often splitting his share with the outside law firms to which he assigns most of the case work. But actual negotiations are done personally by him, Mr. Misny said. He negotiates for groups of clients that have taken a single drug, such as Avandia or Accutane, and about five such groups account for most of those 675 cases he’s recently settled, he said. Mr. Misny still handles car accident cases, worker injury cases and the other sorts of personal injury cases he’s been doing since 1981, but the pharmaceutical cases now make up the largest portion of his work.
He’s mad for Max Mr. Misny’s skill, he said, is in analyzing a case initially to see if it can win a settlement, then building up a case that will convince the defendant to pay. Mr. Misny won’t say how much he makes on the average case or how much he’s made to date. He wryly cites “confidentiality clauses� in his settlements. He’ll only say that he spent a few million dollars on advertising and that he made many times that back in his share of the settlements to date. He also has gained some national fame and notoriety; you can even find parodies of some of Mr. Misny’s commercials on Comedy Central’s web site and, of course, YouTube. Mr. Goldwasser, however, said he has not seen Mr. Misny advertise in Cincinnati. He said he’s only aware of him because he grew up here and saw Mr. Misny’s local advertisements. Mr. Misny said he already was wealthy, even before the spate of recent settlements, from 30 years of lawyering and 20 years of advertising, mostly in Northeast Ohio before he went national. His web site touts several victories in which he and his clients settled for awards in excess of $1 million, all before the current round of pharmaceutical cases. He isn’t shy about showcasing the wealth his career has brought and seems to relish showing guests around his estate, complete with deer, turkey, red fox and streams stocked with trout. The place was built during Cleveland’s industrial heyday of the early 20th century, was later owned by the wealthy Prescott family and then by well-known industrialist Harry Figgie. The main house — there’s also a guest house — is about 16,000 square feet, he said, and about one-fourth of it is the third floor, which consists entirely of themed playrooms for Mr. Misny’s
infant son, Maximilian. “Max,� as he’s known in Misnyland, even got to go to the Vatican for his baptism, thanks to a promise Mr. Misny and his wife, Stephanie, made to each other on a visit to Rome before he was born. Highlights of that event are available to the world in a video on Mr. Misny’s web site. But Mr. Misny is not particularly extravagant in his personal style. “I don’t think I’ve bought any new clothes in two or three years,� he joked.
A long way from Euclid He roams the estate in his pickup truck, often smoking cigars as his dogs, a Doberman and a pug, ride in the back. It’s his only vehicle, and it has all the smells and discarded wrappers of a teenager’s Saturday night out. “I called the dealership and said, ‘What’s a good vehicle for plowing snow.’ They said, ‘A Ford F-150,’ so I said ‘Send one over.’ They said, ‘What color?’ and I said, ‘Surprise me.’â€? Nor is he as hard-nosed as one might imagine. His volume jumps at time, echoing from within his 6foot-5 frame as if a courtroom persona has overtaken him while he runs off on passionate tangents about victims’ rights or the callousness of some drug companies. But then he’ll talk about something such as the trout in the streams on his property. Originally, he bought them because he liked a recipe that called for fresh trout. “Then, we started naming them,â€? he said. Ultimately, with the exception of a few meals stolen by local heron, the trout have not been eaten. Instead, there are pellet dispensers alongside the stream so they can be easily fed. With regards to business, though, Mr. Misny has always been aggressive. He grew up in a “one-bedroom bungalow in Euclid,â€? he said, sharing an attic room with his older brother, Tom. He scrubbed toilets and trash cans at a local golf course to raise money for his high school tuition at St. Joseph. When, as a child, his grandmother took him through the Terminal Tower in downtown Cleveland and told him he’d have a law office there some day, he didn’t doubt for a minute she was right, he said. The law office ended up in Kirtland, where Mr. Misny employs six paralegals to help him wade through the constant inflow of potential new cases and to manage existing ones. Going forward, Mr. Misny said he’ll likely grow the firm but will remain its only attorney. He’ll add more co-counsels with which to share cases, he said, but not partners. The presence of partners, he said, would make it difficult to make the bet he made on pharmaceutical lawsuits, since some partners might not have shared his sense of the direction of the law. As for being a pariah, Mr. Misny said he knows a lot of people don’t like personal injury attorneys. That’s fine with him. Ask him if he cares that people call him an ambulance chaser and he offers a pat answer. “Let’s not talk about my family,â€? he said with a laugh. â–
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Some local exports find way to China By DAN SHINGLER dshingler@crain.com
In spite of popular perception, U.S. trade with China is not entirely a one-way street, as some local companies do successfully export to the Asian giant. It’s just a road that could use a lot more China-bound traffic. Companies in Northeast Ohio that sell into China tend not to make end-user items such as the toys, appliances, electronics and other consumer goods that China sells into the United States. Instead, they largely sell the tools of production — the machines and accessories that Chinese producers use to make the stuff that they sell to the rest of the world. For instance, Cleveland-based Jergens Inc. makes vises, clamps and fixtures that hold pieces of material while they are cut, drilled and shaped by other machines. It started selling into China in 2004 and, by 2007, had set up an office there with six Chinese engineers as sales reps. Jergens does not disclose its sales, but CEO Jack Schron said China still is a small part of its
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overall business, at about 2% of total sales. Still, Mr. Schron said that’s enough to make the office there profitable, and sales to China are growing at a brisk pace. “It’s doubling about every year and a half,” Mr. Schron said of his Chinese sales. So far, the experience has been a good one, according to Mr. Schron. The market is receptive to his higherend products, his Chinese employees have been excellent and even the Chinese bureaucracy has not been terribly difficult to deal with, he said. Other small to midsize manufacturers report similar stories. Cleveland Vibrator Co. has been selling its industrial vibrators into China for about 20 years, with the activity picking up rapidly since about 2000, said president Glen Roberts. Its most popular products there are small, inch-size vibrators that are used to agitate small hoppers or to shake small conveyor belts that handle small parts and materials at Chinese processing and assembly plants. Like Jergens, Cleveland Vibrator relies on China for only about 2% of its business, and Mr. Roberts said the company does not actively
market there. Chinese companies generally find him, he said, either via the company’s web site or by using a phone number printed on its products. They pay up front and the orders are fairly reliable, he said. He markets more aggressively in places such as Australia, Taiwan and Israel, he said. Overall, though, China has been more curse than blessing for local manufacturing operations. While China does buy from some U.S. manufacturers, it competes with many more for business in the United States, where the trade deficit with China has ballooned from $10.4 billion in 1990 to $173.4 billion in the first eight months of 2010, the U.S. Census Bureau says. Mr. Roberts said Cleveland Vibrator formerly had many more customers in the United States, where it still does 85% of its business. However, many of those customers, such as U.S. foundries, have shut down as China has grown to take over the market for many consumer goods in the United States, Mr. Roberts said. “Overall? It’s been a big minus,” he said of China’s net effect on his business.
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Tough: Manufacturers lack unanimity on topic continued from PAGE 1
While the Obama administration largely has been trying to address the situation via pressure on China to float its currency, Ohio’s junior senator and others are pushing for tougher action. Though the nation seemed more accepting before the recession of the problem presented by competition from China, it has become a hot button since the U.S. unemployment rate has risen and become stuck near 10%. “A significant amount of job losses are caused by unfair trade, and government is just catching up,” Sen. Brown told Crain’s. “The public has known that China’s been gaming the system for years.” Two pieces of legislation are in Congress that could punish China. Although Democrats such as Sen. Brown largely are spearheading the efforts for their passage, they are garnering Republican support, too. In late September, 100 House Republicans joined the Democrats in passing the Currency Reform for Fair Trade Act, a resolution sponsored by U.S. Rep. Tim Ryan (D-Niles). Targeted at China, the bill would levy tariffs on the goods of any country found to be manipulating its currency by the U.S. Treasury. Sen. Brown supports similar legislation in the Senate. “What the House did was important, because it sends a message to China that if you don’t want us to play hardball, then start letting your currency float,” said Sen. Brown, who thinks the Senate could pass the measure this year. “I’m sure going to push (Senate majority leader) Harry Reid on it and I think there’s a reasonable chance we will,” the Democrat from Avon said. Meanwhile, Sen. Brown has introduced his own legislation, aimed at making it easier and more likely that the United States will take action against specific products that are subsidized by China, and thus are underpriced. Under the current system, U.S. businesses can make a claim that a specific product is dumped or unfairly subsidized, but the petitions often are not accepted or investigated, Sen. Brown said. His bill would require the government to investigate trade generally, identify the imported products that benefit the most from illegal subsidies, and assign tariffs to them accordingly.
Give ‘em hell Manufacturers don’t speak in one voice on the issue, but some small Northeast Ohio manufacturers think it’s time the United States did something to stop its entire economy from moving to China. “Thanks to big-business greed and our own government officials, China has destroyed our country’s way of life,” said James Drabik, president of Drabik Manufacturing, a Brook Park machine shop. Over the years, Mr. Drabik has seen machine shop after machine shop close, just on his street in Brook Park, he said. He blames not only China, but U.S. companies that he says have abandoned their home nation in order to make more profits over the short term by exploiting cheap Chinese labor. “Not only should China be penal-
“A significant amount of job losses are caused by unfair trade, and government is just catching up.” – Sherrod Brown, U.S. senator from Avon ized, corporations should be penalized even more,” Mr. Drabik said. “Yes, they should take action,” he said of Congress’s pending efforts. Others in manufacturing agree and say that if China can’t be convinced to play fairly on its own, the U.S. government should step in. “The ideal plan is to get countries to agree to a fair playing field. If this cannot be achieved, then tariffs and penalties should be used to correct unfair practices such as subsidizing material costs,” said Jeff Walters, owner of Master Products Co., a Cleveland metal stamper.
Mixed messages Yet nationwide, manufacturers are far from unanimous, said Frank Vargo, vice president of international affairs for the National Association of Manufacturers in Washington, D.C. The association does not even take a position on the pending legislation, because its members are nearly equally split over whether to take action, Mr. Vargo said. But that does not mean they don’t agree that China doesn’t play fairly, he said. “Do we agree that they’re manipulating their currency? Yes, we do, and we’ve pressed that issue for five years now,” Mr. Vargo said. However, there isn’t a consensus on whether tariffs or negotiations are the best way to address the issue, according to Mr. Vargo, who said many NAM members fear the consequences of a trade war with China. “We are neutral,” Mr. Vargo said. “Why are we neutral? For about two years, we had an internal struggle between companies that thought it (tariffs) would help — that you’ve got to stand up to China and we can’t take this anymore — and those who thought it would hurt.” A chief concern, Mr. Vargo said, was that the United States would be going against China alone, and possibly suffering the consequences alone. He said he takes heart in knowing that other nations, such as Germany, now are pressuring China on fair-trade issues as well. Others think the best way to combat the trade deficit with China is through negotiations and by encouraging Americans to buy more stuff that’s made in their own country. Among those in that camp is Randy Nemetz, director of global business development for the manufacturing advocacy group Magnet in Cleveland. “I’m not sure there’s anything we can do from a governmental penalty standpoint that would do anything beneficial,” Mr. Nemetz said. But Sen. Brown maintains talk isn’t enough. “It’s time to call the bluff,” Sen. Brown said. “We are China’s biggest customer. Somewhere approaching a third of their exports come to the U.S. They have more to lose in a trade war than we do. They’re not going to go there.” ■
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PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Bravo!
A
big round of applause is in order for the Milton and Tamar Maltz Family Foundation, which last week pledged $20 million to the Cleveland Orchestra to help the region’s leading cultural institution take some innovative steps to attract the next generation of fans. The orchestra scores points with us, too, for its vision in creating the Center for Future Audiences, an initiative aimed at eliminating economic, geographic and cultural barriers to attending the ensemble’s performances. Gary Hanson, the orchestra’s executive director, is thinking big. With a bravado that many companies and institutions in the region would do well to emulate, he said the center’s goal is nothing less than to produce “the youngest orchestra audiences in the country by the time of our centennial in 2018.” Like most fine arts organizations of its caliber, the orchestra has a loyal, but aging, audience. International acclaim brings credit to its musicians and great pride to Cleveland, but without a plan to attract younger people, the orchestra cannot thrive long term. (For an orchestra in real trouble, look no further than the Detroit Symphony, which is striking and has canceled performances into November.) In Cleveland, though, the Center for Future Audiences already has some inspired ideas: neighborhood concerts, bus service to Severance Hall from the suburbs, free admission for children under 18 and discounted rush tickets for adults ages 18 to 34. They should serve as sound complements to the orchestra’s popular, young-audience-oriented Fridays@7 concert series. These programs should strike a chord with classical music fans who appreciate the beauty of the music and of Severance Hall but are hardpressed to attend performances due to financial constraints. The average ticket price to hear the orchestra in Severance Hall today is more than $50 — an amount that might seem like a bargain compared with, say, the cost of a Browns or Cavaliers ticket, but a deterrent just the same for many people in tough economic times. Ross Binnie, the orchestra’s chief marketing officer, has been named director of the Center for Future Audiences, and he has a big job ahead of him. The Maltz foundation’s gift kicks off the orchestra’s campaign to raise a special endowment fund of $60 million. We urge the region’s philanthropic community to heed the words of Milton Maltz, president of the family foundation, who said, “It is now this generation’s turn to continue to uphold the tradition” of community support for the orchestra. “It’s the right thing to do,” he said. “It’s our responsibility.” This year got off to a rough start for the orchestra. Coming off a fiscal 2009 marked by an operating loss of $2 million on a budget of $43.7 million, the orchestra went into heavy cost-cutting mode and even endured a brief strike by musicians, who ultimately agreed to a two-year wage freeze. With the Center for Future Audiences initiative, the year ends on a high note.
FROM THE PUBLISHER
GM shows much-needed adaptability
A
the United Auto Workers was forced to recent web story in our sister accept a two-tier wage system, one that publication Automotive News pays entry-level workers about half of spoke volumes about the new what senior employees earn. world that is American carmaking, So when the Orion Township plant in and why the many thousands of Northeast Michigan was shuttered for the retooling, Ohio workers connected to this vital about 375 laid-off General Motors workers industry should be encouraged about were given a choice: transfer to the Lordthe future. stown, Ohio, plant or lose their The Oct. 19 story detailed SUB pay from the company. changes going on at a plant in BRIAN The Lordstown plant is suburban Detroit that had to TUCKER increasing production of the close for a retooling, and the Cruze, a compact car that GM processes necessary to build an execs believe will help recharge entirely new model at a given the still-limping company. And facility. In the past, under a that plant outside Warren is “supplementary unemployment running three shifts, something benefits” (SUB) clause in the unheard of a year or two ago. union contract, workers on long If the Michigan workers layoffs would be paid federal reject the transfer, they not only unemployment benefits and lose their supplemental benefits, but would receive a company stipend. they also risk never returning to the Taken together, the payments Michigan plant when it reopens. A union amounted to 70% of a worker’s regular source told Automotive News that GM is pay. It doesn’t take an economics degree offering $30,000 to each worker who to conclude how high that drove the accepts the transfer and stays at Lordcosts of bringing out new models. After stown at least three years. If the worker the latest Great Recession and the neartransfers and stays six months, he or she implosion of the American car companies,
will receive $4,800, the newspaper said. I’m sure this offer is causing a lot of tension in the households of those 375 Michigan workers, but this is the new reality in the American car manufacturing business. Everyone knew that the legacy car companies were getting killed by the imports that set up shop here in new plants built in part by state tax incentives and weaker work rules. It took a cataclysmic event in our economy to force the UAW to accept needed changes. It will cause short-term pain for some members, but in the end will ensure stronger companies that won’t be cutting more jobs for Americans. A stronger American car business — both for the American companies as well as the foreign companies that have invested heavily in manufacturing centers here — means more good news for Northeast Ohio. Manufacturing remains a vital part of our economy, and we have the skilled labor, and managers, as good as anywhere in the world. This time, let’s hope our nation’s economic recovery is led by those who build rather than those who spend. ■
PERSONAL VIEW
Tout city’s rock ‘n’ roll roots more visibly By LEON BIBB
I
grew up listening to rock ‘n’ roll music. I was a child of the Motown sound, and its smooth and heartfelt quality is still a part of me. When I am walking along any street, I can hear the music, but it is usually in my mind. I wonder why there aren’t stronger rock ‘n’ roll sounds emanating from the city, especially because Cleveland is the rock ‘n’ roll capital of America — really, of the world. Cleveland is blessed to have the Rock and Roll Hall of Fame and Museum. It does a wonderful job of promoting the music and the culture that surrounds the many, many decades of the various sounds under the rock umbrella. But why aren’t there stronger refer-
Mr. Bibb is a news anchor with WEWS-TV, Channel 5. ences to the rock ‘n’ roll capital at Cleveland Hopkins International Airport, Public Square, and the many shopping malls, amusement centers and other places where people gather? Rock ‘n’ roll music is an important piece on which Cleveland and all of Northeast Ohio can hang its hat. When you visit New Orleans, immediately stepping off the airplane at the city airport, you are hit with the theme of that community — New Orleans-style music and food. It permeates every aspect of that city. Visit Nashville and country-and-western music is in the air. Stores loudly proclaim Nashville as a music capital. Nashville hangs its 10-gallon hat on its music and
its musical history. There are even shopping malls where the theme is Grand Ole Opry, based on the historical theater located in Nashville. I was raised in Cleveland. Although I have lived briefly in other cities, Cleveland has been where I’ve hung my hat for the bulk of my life. I expect I will be buried here when that time comes. For years, I have struggled with why Cleveland has not pushed itself to a higher level. In the years immediately before 1900, one of every six millionaires in the world lived in Cleveland. The city was known for steel, heavy industry, transportation and innovation. We are still known for great things — among them, medicine, with Cleveland Clinic, University Hospitals and MetroHealth Medical Center leading See VIEW Page 11
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THE BIG ISSUE Are electronic gadgets such as iPads and smart phones essential business tools, or do you view them mostly as toys?
JIM LOEB
MICHELLE MARRONE
GREG EDWARDS
DAVID PEAK
Cleveland
South Euclid
Euclid
North Ridgeville
They’re very useful business tools. When I’m out of my office I still have access to my e-mail and people can still get in touch with me.
I like my BlackBerry for when I travel. But I don’t like it when people use them during a meeting. With iPads, they belong at home.
I think they’re pretty useful. If you’re out of the office, you can get Internet access to follow stocks and keep up on your e-mail no matter where you are.
I pretty much think they’re toys. I don’t own a cell phone. It’s like they say in the movies, “I’m an analog guy in a digital world.”
➤➤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.
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View: Turn up the volume across region continued from PAGE 10
the way. With the proposed medical mart, we are positioning ourselves even more as a medical center to the world. But there is another area on which we can build a reputation. It is with rock ‘n’ roll music. The Rock Hall of Fame has certainly helped put us on the map. However, if the city itself hit the right notes, that reputation could soar even higher. We Clevelanders often beat up on ourselves. Our sports teams are sometimes competitive, but the sports championships have eluded us over the years. We are still holding on to the World Series championships of 1948 and 1920. Thank goodness for the Cleveland Browns’ NFL championship (before the Super Bowl existed) in 1964. We have watched high-profile businesses leave Cleveland. We have watched our population move away from the city and watched all the new growth in Sunbelt cities. However, there is one thing over which no other place has ownership. That is the Rock and Roll Hall of Fame. That gemstone on the shore of Lake Erie is truly a diamond. Go there and you will be inspired and you will be proud of what was accomplished here. However, that music and the theme of the Rock Hall has to be
picked up by other businesses and promoted. I visited New Orleans in September. Sitting at the worldrenown Cafe du Monde restaurant within sight of the Mississippi River, there was New Orleans-style music all around. It was played live by a trio of men who serenaded the cafe customers. I ate beignets and kept a hot cup of cafe au lait in my hand, drinking and eating New Orleans while its music washed over me. Wherever I went, there were references to New Orleans music and how it was one of the birthplaces of blues and jazz. Well, blues and jazz are also part of the same genealogical tree as rock ‘n’ roll. They all emanate from the same place. They are American music styles that have been embraced by the world. What I want to hear at Cleveland Hopkins International Airport is rock ‘n’ roll music. I want people who fly into this city to know that this is the rock ‘n’ roll capital of the world. The music did not originate here, but Alan Freed was a Cleveland disc jockey who popularized the phrase “rock ‘n’ roll” on his old Moon Dog radio show of the early 1950s. Freed took an old rhythm-and-blues phrase (which used to reference having sex) and popularized the words on the radio. The first rock concert was held in Cleveland during
Black Box buys Westlake communications firm Logos Communibut now be able to ON THE WEB Story from cations Systems www.CrainsCleveland.com. assist them on a Inc., a provider of global level, too. communications hardware and “The synergies that are created services based in Westlake, now is by joining these two great companies part of a publicly traded company will enhance our current offerings based in Pittsburgh. to all of our customers,” said Mr. The buyer is Black Box Corp., Tjotjos, who will report to Black Box which did not say last week what it regional general manager Steve paid for privately held Logos. Black Anderson. Box put annual revenues for Logos Black Box is a technical services at about $13 million. company that designs and builds Christopher Tjotjos, former data and voice infrastructure systems. Logos president, said his team is Black Box said it serves more than “very excited to not only be able to 175,000 clients in 141 countries, continue to offer our customers the with 195 offices throughout the highest level care at the local level, world.
that time period. So c’mon, Cleveland. Let’s help the Rock and Roll Hall of Fame put the music in the streets, and at the airport, and other places where people gather. The airport is hallway there with photographs of great rock and roll artists, but that is not enough. There has to be signs flashing to let the world know who we are. We are the rock ‘n’ roll capital of the world. Now that we have it rockin’, let’s let it roll, baby. ■
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NOVEMBER 1-7, 2010
Energy storage stands out as NorTech assesses future Development group sees category as ‘holy grail’ By CHUCK SODER csoder@crain.com
If Dave Karpinski was forced to put all of NorTech’s advanced energy eggs into one basket, it would be
energy storage. Not that he must choose. The economic development group aims to do whatever it can to establish Northeast Ohio in a leadership role in 10 different categories of advanced
energy technology. NorTech in May announced it would focus mainly on helping the region create clusters of economic activity in four of those categories: energy storage, biomass and waste energy, transportation electrification and smart grid technology. Energy storage, though, is seen as
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the “holy grail” of renewable energy, said Mr. Karpinski, who is leading NorTech’s “Energy Enterprise” initiative. Patrick Kelly of FirstEnergy Corp. agreed. Mr. Kelly, director of the Akron-based electric utility’s economic development department, called such technologies crucial to the success of wind turbines and solar cells, which work only when the wind is blowing and the sun is shining. While Michigan may have a leg up on Ohio when it comes to storing electricity in vehicles, no region of the country has established itself as a clear leader when it comes to storing power for the grid, Mr. Karpinski said. “There doesn’t appear to be anyone who’s jumped out in front yet,” he said. NorTech in late September hired management consulting firm Newry Corp. of Westlake to draft four “road maps” describing Northeast Ohio’s assets in each of its four categories, the competition the region faces, the factors driving demand for the technologies and how the region could build industries based around them. The process, financed with a $300,000 federal grant, should help the region figure out which companies to recruit and which grants to apply for, all while providing the information needed to write the best possible “sales pitches” for both, Mr. Karpinski said. The road maps also will help NorTech connect between players in each sector, who could apply for grants or work on other projects together.
‘A really big pool’
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Some of Northeast Ohio’s strengths already are clear. In energy storage, the region can build off its chemical expertise, Mr. Karpinski said. He cited Case Western Reserve University’s electrochemical research programs and BASF Catalysts in Elyria, which last year received $24.6 million in federal stimulus money to build a plant to make cathode materials for batteries to be used in plug-in electric vehicles. He also noted that boiler control technology company R.W. Beckett Corp. of North Ridgeville late last year won a $1 million Ohio Third Frontier grant to develop a battery that could store electricity for residential use. Mr. Karpinski said the biomass and waste-to-energy category represents the second-biggest opportunity of the four selected. He expects facilities that convert biomass to electricity to be built nationwide because biomass will be more expensive to ship than oil, which contains more energy per unit of volume. Northeast Ohio companies could supply the technology and the parts, he said. The region also could be a major user of biomass electricity, given how many farms there are in Ohio, he added. The category also includes companies that create energy from algae — such as Phycal LLC, a company in Highland Heights that in July received a $24 million grant to build a plant to test its technology in Hawaii — and those that convert polymers to energy, such as Vadxx Energy of Cleveland and Polyflow Corp. of Akron. “It’s a really interesting intersection in Ohio, given our role in the polymer industry,” Mr. Karpinski said. The transportation electrification category not only includes electric and hybrid cars, for which several
STORAGE THE ‘IN’ THING NorTech sees Northeast Ohio as capable of becoming a leader in storing energy for the power grid, an area where no region in the United States has seized control. How can we do it? For starters, by capitalizing on the area’s chemical pioneers, including Case Western Reserve University’s electrochemical research programs, BASF Catalysts in Elyria and R.W. Beckett Corp. of North Ridgeville.
Northeast Ohio companies already make specialized materials and parts, but it also includes charging stations and other infrastructure. Michigan is ahead in the first category, and California is the clear leader when it comes to installing charging station. The market, however, is still young — and will be big. “A small play in a really big pool can have a big impact,” Mr. Karpinski said. Opportunity also exists in the smart grid sector, though it’s not yet clear what aspects of it — smart meters, controlling devices, software or another facet — Northeast Ohio should focus on, he said. CWRU is in the process of ramping up grid-related research and redesigning part of its engineering curriculum to focus on the area. Also, FirstEnergy is moving forward with plans to place about 4,000 smart meters in homes “somewhere east of Cleveland” as part of a broader, $115 million pilot project financed in part by federal stimulus money.
The road ahead NorTech expects eventually to create roadmaps for some of the other 10 energy technology categories. The next one likely would focus on energyefficient building materials and systems, Mr. Karpinski said, who noted that a group of organizations between Cleveland and Pittsburgh that earlier this year applied for a $130 million federal grant targeting that sector did not received it. Next, NorTech likely would focus on clean coal and carbon capture and sequestration technology. Some of the other four categories represent opportunity as well, but other organizations or regions in the state have established leadership in those areas, Mr. Karpinski said. For fuel cells, there’s the Ohio Fuel Cell Coalition. For wind, there is the Great Lakes Wind Network and the effort to put wind turbines in Lake Erie, which NorTech has helped lead. The Edison Welding Institute in Columbus is tackling nuclear, and Toledo is a leader in solar technology. Whatever the focus, FirstEnergy will play a key role by helping researchers and companies test new technologies and figure out how to implement them, Mr. Kelly said. The pending acquisition of Allegheny Energy will make FirstEnergy the country’s largest investorowned utility, which should extend the company’s reach. For instance, the acquisition may help the utility build a relationship with the National Renewable Energy Laboratory, which has two offices in Allegheny Energy’s service territory. “We’ll have them surrounded,” he said. ■
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longer time than repay sooner only to fail later, Mr. Jacques said. There is one local institution that has returned the money: FirstMerit Corp. of Akron, which returned $125 million in April 2009, only four months after it received the money. In addition, Pittsburgh-based PNC Financial Services Inc., which does significant business here, has repaid all $7.6 billion it received. Aside from repayment, all the banks operating locally that received capital infusions have paid timely dividends to the government and are not counted among the more than 120 banks nationwide that have missed such payments, according to the Treasury.
In the game Days after the Oct. 3 end to new TARP investments, the Treasury released a report declaring the program has worked. The report cited increased stability of the financial system, $30 billion in returns earned on TARP investments and the repayment of more than $204 billion of TARP funds. Of the money that has been repaid, $152.9 billion were Capital Purchase Program dollars, according to Oct. 21 numbers from the Treasury. Several banks — including KeyBank, which has yet to repay $2.5 billion, and CFBank in Fairlawn, which also needs to return its infusion of $7.2 million — agree that TARP has worked, namely because it
LOCAL TARP INVESTMENTS The U.S. Treasury purchased stock in a number of banks that operate in Northeast Ohio to bolster their capital. Below is a list of banks that received investments, listed in the order of largest to smallest dollar amount. Also listed are the dividends each bank has paid the government as of Oct. 11. ■PNC Financial Services Group Inc., Pittsburgh: Received $7.6 billion in December 2008 and repaid it in February 2010. Paid $421 million in dividends. The government auctioned PNC warrants — or financial instruments that represent the right to purchase a certain number of shares of common stock at a fixed price — for more than $324 million in April 2010 — another return for taxpayers. ■Fifth Third Bancorp, Cincinnati: Received $3.4 billion in December 2008. Paid $298.2 million in dividends. ■KeyCorp, Cleveland: Received $2.5 billion in November 2008. Paid $219 million in dividends. ■Huntington Bancshares, Columbus: Received $1.4 billion in November 2008. Paid $122.5 million in dividends. ■FirstMerit Corp., Akron: Received $125 million in January 2009 and repaid it four months later. Paid $1.8 million in dividends. The government auctioned FirstMerit warrants for more than $5 million in May 2009. ■LNB Bancorp Inc., Lorain: Received $25.2 million in December 2008. Paid $2.1 million in dividends. ■Central Federal Corp., Fairlawn: Received $7.2 million in December 2008. Paid $612,118 in dividends. ■Western Reserve Bancorp Inc., Medina: Received $4.7 million in May 2009. Paid $320,188 in dividends. SOURCE: U.S. DEPARTMENT OF THE TREASURY
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enabled them to continue lending. “Everybody that has this money is in the game,� said Mr. McKeon of Western Reserve Bank. “There are business customers that are with us today that we could not have helped to expand if we didn’t have this to help us.� Western Reserve won’t start considering repayment for another year-and-a-half, he said. But he noted, “We don’t have any intention of being around with this (money) in five years,� when the annual dividend rate most banks pay to the government on the TARP funds they borrowed will increase to 9%, from the current 5%. Bill Murschel, a spokesman for KeyBank, said the bank’s strength-
ened capital position enabled it to continue to invest in its businesses, a visible example of which are the 12 new branches in Northeast Ohio the bank added in recent years. Key is working to position itself to repay “as soon as possible and practical,� Mr. Murschel said. A recent Morgan Stanley report indicated Key is “well positioned� to repay the government in the second quarter of next year. The CFBank board periodically considers whether it makes sense to repay the Treasury and so far has elected to keep the money and put it to use, interim CEO Eloise L. Mackus said. She said the conditions necessary for repayment are discussed internally only.
Motivation to move on Most banks will seek to rid themselves of the Treasury investment before the dividend rate on TARP funds increases, predicts Charlie Crowley, managing director for Paragon Capital Group in Mayfield Heights. He believes most will be able to pay it off, and those that cannot or do not will look to be acquired so the acquiring bank will repay. “I think we will see more acquisitions,� Mr. Crowley said. “If a Key or Huntington wanted to go out and do a huge stock offering, they could. They could get it done. For some of the community banks, it’s not that easy, and when that five-year deadline is approaching, they may just decide it’s easier, it’s better for the shareholders to sell the company.� Motivation to repay the Treasury also stems from a desire to shed
13
the regulations a bank is subject to during the time it has government money, Mr. Crowley said. Plus, there’s a stigma attached to TARP, noted Mike Van Buskirk, president of the Ohio Bankers League. He said he believes most banks will repay in the next few months. Banks need regulatory approval to repay, and there are other factors to consider. For one, some bank executives will raise money to repay by selling stock and may feel hesitant to sell stock now because they believe it will trade higher in the near future, Mr. Crowley said. Repaying by selling stock can carry consequences to existing shareholders, said Mr. Klimas of Lorain National. LNB Bancorp executives are bearing in mind that doing so could be very dilutive to existing shareholders’ stakes, he said. â–
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CRAIN’S CLEVELAND BUSINESS
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NOVEMBER 1-7, 2010
GM models rise on reliability lists
WHY
Its biggest division, Chevrolet, rockets up ranking to 83%
IS MY
SEWER BILL
GOING UP ?
THE HIGH COST TO REDUCE
By DAVID PHILLIPS Automotive News
SEWAGE OVERFLOWS
Higher sewer rates are necessary to repair and maintain our existing sewer system. But the bulk of the cost can be attributed to reducing sewage overflows into the environment, to comply with the federal Clean Water Act.
LEARN MORE:
ATTEND A PUBLIC MEETING All meetings begin at 7:00 p.m.
Thu. 11/4
South Euclid Community Center 1370 Victory Drive, South Euclid
Mon. 11/8
Barlow Community Center 41 S. Oviatt Street, Hudson
Tues. 11/9
Mt. Sinai Baptist Church 7510 Woodland Avenue, Cleveland
Wed. 11/10
Maple Heights Library 5225 Library Lane, Maple Heights
Tues. 11/16
Gunning Park Recreation Center 16700 Puritas Avenue, Cleveland
Wed. 11/17
Parma Memorial Hall 6617 Ridge Road, Parma
For more information, visit neorsd.org/cso or contact Jean Chapman at 216.881.6600 or chapmanj@neorsd.org.
NORTHEAST OHIO REGIONAL SEWER DISTRICT
DETROIT — Honda Motor Co. and Toyota Motor Corp. dominate the list of most reliable 2011 models based on an annual survey by Consumer Reports magazine, with Ford Motor Co. tops among domestic automakers and General Motors Co. posting notable gains. Chrysler and many European automakers lag the overall industry as many of their models scored below average in reliability, the magazine said. The magazine found 83% of Chevrolet models, GM’s biggest division, now have average or better scores in predicted reliability. That is up from 50% last year. “General Motors and Ford have taken different paths to improving reliability,” David Champion, senior director of Consumer Reports Auto Test Center, told the Automotive Press Association. “Some of GM’s redesigned vehicles have scored well. The company has also dropped many of its belowaverage models. Ford has put its emphasis on fine-tuning existing platforms and limiting the number of new-model introductions.” GM, the magazine added, is “still a way from the top.” The Porsche Boxster was rated the most reliable model, while the Audi A6 3.0T and Jaguar XF were rated the least reliable models in the magazine’s 2010 Annual Auto Survey. Consumer Reports polls 5 million
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OL’ RELIABLE Consumer Reports each year polls its 5 million magazine and online subscribers to track vehicle reliability. Some findings from this year’s survey: ■ Eighty-three percent of Chevrolet models now have average or better scores in predicted reliability, up from 50% last year. ■ Porsche’s Boxster was rated the most reliable car in the survey, with Audi and Jaguar models rating as the least reliable. ■ Overall, 69% of GM models had average or better scores, while 90% of Ford models attained that level of reliability. (Ford on Wednesday reported third-quarter profit of $1.7 billion.) ■ None of Chrysler’s models scored above average, with the Ram 1500 pickup is the only Chrysler model recommended. ■ Toyota vehicles were ranked first in five segments, though the Prius scored average. SOURCE: CONSUMER REPORTS
magazine and online subscribers to track the reliability of vehicles up to 10 years old. The magazine receives replies from about 25% of subscribers, and this year’s survey covered 1.3 million vehicles from the 2001 through 2010 model years. The magazine uses the results to predict the reliability of 2011 models.
GM improves In the past, some GM models had been among the least reliable vehicles, but now they outrank some European competitors such as Audi, BMW and Mercedes-Benz. The magazine said GM has been helped by the recent introduction of all-new models such as the Chevrolet Camaro and Equinox, the frontwheel-drive Buick LaCrosse and the Cadillac SRX. Also, GM discontinued many models with subpar reliability when it shut down Saturn, Pontiac and Hummer. The magazine said older GM models such as the Chevrolet Avalanche, Corvette and Suburban have improved to average. A total of 69% of GM models had average or better reliability. Cadillac improved the most, rising seven places from last year’s ranking. Consumer Reports said 90% of Ford’s lineup, including Lincoln, has at least average reliability. The Ford brand now tops Mazda and Nissan and ranks just below Lexus. Mr. Champion said Ford’s results reflect steady annual improvement across all brands, as well as the performance of its large SUVs such as the Flex and the Fusion, now the most reliable midsize sedan tracked by the magazine. Mr. Champion said the Chrysler Group is saddled with dated vehicles, with 12 of the 20 models that the magazine was able to track scoring below average in reliability. None of Chrysler’s models scored above average. The Ram 1500 pickup is the only Chrysler model recommended by the magazine. Mr. Champion said Chrysler’s new ties with Fiat should help the automaker improve in future surveys. He added that if Chrysler applies the same attention used to develop the new Jeep Grand Cherokee to the rest
of its lineup, the automaker’s prospects should brighten. “The new Grand Cherokee is heads and shoulders above the old model,” Mr. Champion said, adding that “the mindset has changed at Chrysler” under Fiat.
Asian brands still lead Toyota models, including Scion and Lexus, remain among the most reliable and earned top scores in five segments: small cars (Yaris), midsize SUVs (FJ Cruiser), luxury SUVs (Lexus LX), minivans (the frontwheel drive Sienna), and full-size pickups (Tundra V6). The magazine said only the all-wheel-drive Lexus GS and the new Lexus IS 250 convertible ranked below average. The redesigned 2010 Toyota Prius hybrid, hurt by antilock brake problems on early vehicles, scored only average — a major drop from previous years. Honda and Acura topped five vehicle segments — upscale sedans (Acura TL), luxury cars (Acura RL), small SUVs (CR-V), upscale compact SUVs (Acura RDX) and compact pickups (Ridgeline). Consumer Reports said problems with rear brake pads pushed the 4cylinder Honda Accord and Acura TSX sedans down to average. At Hyundai and Kia, all six models new or redesigned for 2010 — the Hyundai Genesis coupe, Sonata and Tucson; and the Kia Forte, Sorento and Soul — had average or better reliability. Mr. Champion called it an impressive showing. In addition, only one model, the Kia Sedona minivan, rated below average. Nissan continued to fare well in the study, though it slipped one notch in the rankings. The Nissan Altima and Maxima sedans and the Murano and Pathfinder SUVs all rated average or better in predicted reliability. The Titan pickup had shown improvement “in the last year or two,” the magazine said, but both 2WD and 4WD versions have once again dropped to below average reliability, the magazine found. The small Nissan Cube had a below average score in its first appearance in Consumer Reports survey. All Infiniti models were all average or better.
Europeans slip Among major European automakers, reliability seems to have stalled after several years of improvements, the magazine said. All Porsche and Volvo models are rated average or better, but Audi, BMW and Mercedes-Benz are among the worst automakers overall in terms of reliability. BMW had five of 11 models scoring below average. While the BMW M3 topped the sporty car segment, the magazine said 1-Series, 3-Series and 5-Series models with the 3.0-liter turbocharged engine had high problem rates related to the fuel system, among other issues. Six of Mercedes-Benz’s 13 models ranked below average, and the GLK SUV was far below average. However, the redesigned E350 sedan was above average, a promising start. The new E-Class coupe, a wholly different car from the E-Class sedan, languished in the bottom ranks. ■ David Phillips is online deputy managing editor at Automotive News, a sister publication of Crain’s Cleveland Business.
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E!CLEVELAND Every Thursday, Crain’s sends to more than 20,000 readers an arts and leisure e-mail called e!Cleveland. The e-mail highlights at least 10 events that are worth your time outside work. We’re fortunate in Northeast Ohio to have a vibrant arts community, and each edition of the e-mail features a mix of local music, theater, dance, film and other activities. To sign up for this and all our e-mails, visit www.CrainsCleveland .com and click the “Register for Crain’s alerts” icon at the top left of the home page. Like just about everything else on the Internet, it’s free. If you have events you’d like us to consider for inclusion in future editions of the e-mail, send information to managing editor Scott Suttell at ssuttell@crain.com. Here’s a taste of what makes it into e!Cleveland each week:
Sing out Event: By Grace Gospel Choir Venue: United Methodist Church of Berea, 170 Seminary St. When: Today, Nov. 1, at 8 p.m. Why you might be interested: If you want to hear gospel music, Swedish-style. By Grace Gospel Choir, a group of 18 singers from Stockholm, has been singing contemporary black gospel music together since the beginning of 1995. The choir has released four albums and performs regularly in Centrumkyrkan Evangelical Church, north of Stockholm. Director Daniel Stenbaek “has been playing gospel music since the age of 10 and has been the frequent guest at some of the leading gospel festivals in Europe,” according to BaldwinWallace College, which is sponsoring this free show as part of its World Music Series. Mr. Stenbaek performs with acclaimed Swedish and international gospel artists throughout Europe. The performance also will feature B-W’s Voices of Praise Gospel Choir. On the web: www.bw.edu/news/ calendars
State of the art Event: Philippe de Montebello on “The Prospects for a World Art History” Venue: Harkness Chapel, 11200 Bellflower Road, Cleveland When: Wednesday, Nov. 3, at 6 p.m. Why you might be interested: If you’re serious about art. Three art scholars — Mr. de Montebello, the Fiske Kimbell Professor in the History and Culture of Museums at New York University’s Institute of Fine Arts; David Carrier, Champney Family Professor at Case Western Reserve University and the Cleveland Institute of Art; and Noelle Giuffrida, assistant professor of art history at Case — tackle the lofty theme of whether a world art history is possible, and if so, what it would look like. The discussion is part of a yearlong program hosted by the Baker-Nord Center called “Globalism and Its Origins.” Mr. de Montebello was director of New York City’s Metropolitan Museum of Art for 31 years, retiring in 2008. On the web: www.case.edu/ humanities
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When: Wednesday, Nov. 3, at 8 p.m. Why you might be interested: If you want to catch a performance by an acclaimed indie pop-folk band that has become a favorite of television producers. The Weepies — Deb Talan and Steve Tannen — have had their work used on shows including “Grey’s Anatomy,” “One Tree Hill,” “Gossip Girl” Coughlin and “How I Met Your Mother.” Their song “Can’t Go Back Now” also was used in President Barack Obama’s 2008 presidential campaign. This tour supports their fourth album, “Be My Thrill,” which was released in August. Tickets are
$18 in advance and $20 on the day of the show. On the web: www.Beachland Ballroom.com
Write on Event: Book signing by Dan Coughlin Venue: Joseph-Beth Booksellers, Legacy Village, Lyndhurst When: Thursday, Nov. 4, at 7 p.m. Why you might be interested: If you like to hear and share old stories. Mr. Coughlin, a veteran sports reporter in town and a member of the Press Club of Cleveland’s Journalism Hall of Fame, will sign copies of his new book “Crazy, With the Papers to Prove It.” In the book, published by Gray & Co., Mr. Coughlin tells tales of
the unusual events and characters he covered while working as a newspaper and television reporter for 45 years. On the web: www.GrayCo .com
Friends in high places PHOTO PROVIDED Event: Lecture by John Allen Jr. of the National John Allen with Pope Benedict XVI Catholic Reporter Venue: Regina Hall Auditorium, “Vatican Interfaith Relations with Notre Dame College, South Euclid Islam and Judaism.” The lecture is When: Thursday, Nov. 4, at 7 p.m. sponsored by Medical Mutual of Why you might be interested: If Ohio and open to the public on a you’re fascinated by the majesty of the first-come, first-served basis. A VIP Vatican. Mr. Allen, who also serves as dessert reception with Mr. Allen will senior Vatican analyst for CNN and follow the program for those who has written six books about the Vatican purchase advance tickets ($50 each). and Catholic affairs, is coming to Notre On the web: www.NotreDame Dame College to deliver a talk titled College.edu
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Don’t cry for them Event: Performance by The Weepies Venue: Beachland Ballroom, Cleveland
15
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Lockouts: Business owners keep leagues’ labor trouble on radar continued from PAGE 1
Positively Cleveland estimates each Cavs regular season game had a $2 million impact on downtown; that figure includes spending at Quicken Loans Arena and any hotel rooms booked, though it does not take into account spending at Gateway District restaurants and bars, Ms. Brown said. The convention bureau last estimated in 2007 that a Browns home game results in $7.9 million in direct spending, following the same formula as above.
The labor 411 The collective bargaining trouble stems from — what else? — money. NFL owners in 2006 approved a deal in which players receive 59% of all league revenues. Now, owners are regretting it and asking for a chunk back. Players are resisting, voting to decertify their union (in order to strengthen a potential antitrust lawsuit) and hunkering down for a lockout. NBA owners — whose lockout of players in 1998 reduced the league’s 82-game schedule that season by 32 games — want massive concessions, including an approximate 40% reduction in player salaries. The owners claim they’re losing $400
“In planning for 2011, we have to be aware of all factors, and (lockouts) are included. If this happens, we have to look at how we’re going to recoup that additional business.” – Alex Cavazos, director of room operations, Cleveland Marriott Downtown at Key Center million a year; the NBA players’ union is balking. Losing the Browns, especially, could hurt hoteliers, all of whom benefit from out-of-towners following their team. A few, such as the Cleveland Marriott Downtown at Key Center, also benefit from opponents staying at their hotels. Marriott director of room operations Alex Cavazos estimates an NFL team — players, coaches, trainers and support staff members — requires about 120 rooms, plus space for team meals and meetings. The Marriott hasn’t hosted NBA teams, but they likely would require about a third of that number. “We definitely keep an eye on it as we look at long-term business forecasts,” Mr. Cavazos said. “In planning for 2011, we have to be aware of all factors, and these are included. If this happens, we have to look at how we’re going to recoup that additional business from one year to the next.” The Marriott also has been the hotel of choice of massive TV crews
from CBS, TNT and ESPN, in town to produce Browns or Cavs telecasts, though business from the latter will shrink massively this season without a certain No. 23. The Cavs’ only nationally televised games at home, after they hosted the league-maximum 34 last season, are Dec. 2 against the former No. 23 (now No. 6) and the Miami Heat, and March 6 against New Orleans. “That’s 20 to 30 rooms a night, and trust me, they spend all over downtown, not just here,” Mr. Cavazos said. “It also impacts the whole town. Parking garages, vendors. You can’t put dollar signs to it.”
Back to the bar Christine Connell is optimistic, based on early returns during the Cavaliers’ pre-season, that LeBron James’ absence won’t hurt business too badly at Flannery’s, the venerable Irish pub on Prospect Avenue in the East Fourth Street neighborhood near Quicken Loans Arena. She said the restaurant sees a 40% increase in business for Cavs home games,
and seats still have been full early this season. If that traffic keeps up, it would make a lockout only hurt more. “I hope everyone else is monitoring these things,” said Ms. Connell, the restaurant’s general manager. “It’s not our lifeblood, but it’s a beautiful perk. We don’t live or die by these facilities, but we certainly like to try to take advantage. “If (a lockout) is going to happen, you could argue it’s a good thing it might happen the year after LeBron leaves,” Ms. Connell said. Restaurants and bars outside the city’s center also count on Browns and Cavs games to draw crowds, and
nowhere is that more evident than in the dense western edge of Lakewood, dotted with watering holes. Mike Potraffke, general manager of Harry Buffalo in Lakewood, said not only are the Browns a major driver of business — as were the Cavs over the past five or so seasons — but the bar also draws fans of other teams to watch games unavailable on local TV but offered on DirecTV, for which Mr. Potraffke pays $1,000 per season. “The Cavs and Browns are what is keeping a lot of places afloat,” he said. “Some will be badly hurt without LeBron, let alone without a team. Sports are part of our business, and any (bar owner) who doesn’t think that is kidding themselves. We’re hoping, crossing our fingers we don’t have to deal with (lockouts).” ■
NFL ‘more stable’ than NBA By JOEL HAMMOND jmhammond@crain.com
Collective bargaining agreements (CBAs) between the NFL and NBA and the respective players’ unions of those sports expire after the current seasons, and officials on both sides in each sport are preparing for work stoppages. That possibility could deal a major blow to hotels and restaurants in downtown Cleveland and across the area, as those games often are big money-makers for those businesses. The latest updates in each sport’s drama:
NFL The owners opted out of the current CBA in 2008, leaving the league to operate without a salary cap this season. If a new agreement isn’t reached by March 1, Chryst there will be no games next fall. League officials say the players’ 59% take of revenues — agreed to by owners in the last CBA, in 2006 — is unsustainable in an era where new stadiums are must-haves, and the owners are proposing an 18-game schedule. The players, meanwhile, are rebuffing that schedule change, saying it would cause more injuries than the already-significant number that occur. In addition, players on many teams are voting to decertify the NFL Players Association, a step they think — based on past cases — would give them a better chance in an antitrust lawsuit against the league. The players also have urged the owners to open their books to illustrate what they’ve been claiming — namely, that they’re losing massive amounts of money. Only the Green Bay Packers’ financials are made public, as that team is publicly owned; the owners are resisting strongly that movement. “The NFL has most stable environment,” said Rick Chryst, of counsel at Walter & Haverfield and member of the firm’s newly formed sports law practice. “The popularity of the sport is the most
powerful dynamic. They’ll get to a deal; they might have a lockout in March, but in terms of missing actual games, I doubt it.”
NBA League officials claimed that teams lost a combined $400 million in 2009-2010, and are forecasting similar losses for this season, again citing players’ lopsided take: 57%. This, too, was agreed to by owners in the last round of CBA negotiations, in 2005. The NBA last had a work stoppage in 1998-99, when the season was shortened to 50 games. The league wants shorter contracts, less guaranteed money and a “hard cap,” meaning teams no longer would be able to go above the salary cap to sign players, as is allowed now in certain instances. Commissioner David Stern’s latest salvo came two weeks ago, when he said he wanted a reduction of $750 million to $800 million in player costs, the latter figure being 38% of the $2.1 billion players received last season. Billy Hunter, the NBA Players Association’s boss, predictably called that proposal a “non-starter.” “The players and the union would prefer to work towards attaining a fair deal that addresses concerns raised by both sides and improves the game,” Mr. Hunter told The New York Times. “But, if the owners maintain their position it will inevitably result in a lockout and the cancellation of part or all of the 2011-2012 season. The players and union will prepare accordingly.” Mr. Chryst, also the former commissioner of the Clevelandbased Mid-American Conference, said the labor-management issues in the NBA’s case go deeper than in the NFL. “Who knows how you handicap it, but I think it’s going to be a bigger structural change and that’s going to be tough,” Mr. Chryst said. He said Mr. Stern “doesn’t do anything by accident. There’s some positioning there; staking out that ground publicly is noteworthy.”
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Kelly Wilson and Greg Zitkiewicz to of counsel.
GOING PLACES imaging specialist.
JOB CHANGES DISTRIBUTION
SUMMA PHYSICIANS INC.: Dr. Rachel L. Waldman to rheumatologist.
SUMMIT STEEL CORP.: Joe Baudo to chief operating officer.
INSURANCE
EDUCATION
KAISER PERMANENTE: Joe LaGuardia to vice president, marketing, sales and business development, Ohio region.
KENT STATE UNIVERSITY: Michael O. Bice to professor of health informatics, School of Library and Information Science.
ENGINEERING CIVIL & ENVIRONMENTAL CONSULTANTS INC.: Justin Roeder to staff engineer.
FINANCE MORGAN BANK: Nathaniel Marshall to market executive.
Bice
Marshall
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
TUCKER ELLIS & WEST LLP: Daniel K. Wright II to member. WALTER & HAVERFIELD LLP: Jeremy J. Sharp to partner.
MANUFACTURING OSBORN/JACKSONLEA: Bob Pinchot to field applications manager.
K. Fort to vice president, outreach and communications; Pamela D’Amore to director of accounting; Kirsten G. Conley to director, marketing and guest programs.
EXPERIENT INC.: Andy Smith to senior vice president, Experient Sales Network.
MARKETING
TECHNOLOGY
ZITO INSURANCE AGENCY INC.: Thomas Stapel to financial services director.
9THREADS: Lee Zapis to president.
MATRIX INTEGRATED SOLUTIONS: Ken Knight to senior consultant.
NONPROFIT
LEGAL HURTUK & DAROFF LLP: Jeremy S. Sosin to partner. KURT & VERMILYA LAW INC.: Laura Perme, Cecilia Cooper,
STAN HYWET HALL & GARDENS: Sean Joyce to vice president, finance and operations; Gailmarie
Kearsey to secretary; Mike Campana to membership chair; Scott Kessler to programs chair; Leigh Greenfelder to communications chair; Federico de Gregorio to education chair; Tim Klinger to chairman.
SERVICE
MEDICAL MUTUAL: Belinda Tyma to accounting manager, benefit services.
VOCATIONAL GUIDANCE SERVICES: Betty Goodman to chief financial officer and treasurer; Emily Erbs to supervisor of information services.
17
BOARDS AMERICAN ADVERTISING FEDERATION AKRON CHAPTER: Jen Snider (WhiteSpace Creative) to president; Cecilia Sveda to vice president, ADDY chair; Michael Houseman to treasurer; Dan
AWARDS CENTRAL ASSOCIATION OF COLLEGE AND UNIVERSITY BUSINESS OFFICERS: Mike Mayher (Lakeland Community College) received the 2010 Best Practices Award. OHIO UNIVERSITY COLLEGE OF OSTEOPATHIC MEDICINE: Dr. Mary Carneval (South Pointe Hospital) received the Arnold P. Gold Foundation Excellence in Humanism and Teaching Award.
Send information for Going Places to dhillyer@crain.com.
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FINANCIAL SERVICE CORRIGAN KRAUSE: Eric L. Dorenkott to tax manager; Dena K. Mahon to bookkeeper. LIBMAN GOLDSTINE KOPPERMAN & WOLF: Katie A. Allender and Geoffrey S. Jacobson to managers. MERRILL LYNCH: Scott E. O’Malley to client adviser, Hudson. RETIREMENT SOLUTIONS: Robert Armagno to associate financial consultant. SS&G: Michelle McCue to senior associate; Jennifer Anne Seeling and Emily Richards to associates. SS&G HEALTHCARE SERVICES LLC: Daniel Clark to senior consultant; Denise McCartney and Jeanette Danczak to medical billing specialists. THOMAS MCDONALD PARTNERS LLC: Bill Hegarty to chief investment officer.
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Amount: $150,038
TAX LIENS The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federal government. The lien is a public notice to creditors that the government has a claim against a company’s property. Liens reported here are $5,000 and higher. Dates listed are the dates the documents were filed in the Recorder’s Office.
Grand Leasing Inc. P.O. Box 24041, Mayfield Heights ID: 34-1330246 Date filed: Sept. 14, 2010 Type: Corporate income Amount: $321,722
IEC Technologies Corp. 19111 Detroit Road, Suite 300, Rocky River ID: 31-1606584 Date filed: Sept. 14, 2010 Type: Employer’s withholding, unemployment Amount: $145,050
NOVEMBER 1-7, 2010
Dornbirer Pump Co. 5182 Richmond Road, Cleveland ID: 34-1005814 Date filed: Sept. 28, 2010 Type: Employer’s withholding, unemployment Amount: $99,455
LIENS FILED
Greater Heights Academy 1970 S. Taylor Road, Cleveland Heights ID: 20-0816330 Date filed: Sept. 2, 2010 Type: Employer’s withholding Amount: $225,180
Forum Architectural Services LLC 1138 W. Ninth St., Cleveland ID: 26-3647659 Date filed: Sept. 23, 2010 Type: Employer’s withholding Amount: $136,584
Philbert Jones M.D. Inc. Plastic & Reconstructive Surgery 9345 Ravenna Road, Unit D, Twinsburg ID: 34-1443685 Date filed: Sept. 23, 2010 Type: Employer’s withholding, unemployment Amount: $97,252
TVK Floors LLC 5124 Wallings Road, North Royalton ID: 20-2839050 Date filed: Sept. 23, 2010 Type: Employer’s withholding Amount: $1,327,555
North Coast Home Mortgage Inc. Shaker Heights ID: 34-1861276 Date filed: Sept. 2, 2010 Type: Employer’s withholding, unemployment
Cooperative Resource Services Ltd. 6070 Parkland Blvd., Mayfield Heights ID: 34-1789188 Date filed: Sept. 23, 2010 Type: Civil penalty assessment Amount: $136,394
Rubystone Cos. 7609 Euclid Ave., Cleveland ID: 31-1489513 Date filed: Sept. 14, 2010 Type: Employer’s withholding, unemployment
Amount: $92,340 Loving and Giving Daycare Inc. 3150 Mayfield Road, Cleveland ID: 34-1832602 Date filed: Sept. 23, 2010 Type: Employer’s withholding, unemployment Amount: $91,822 Best Heating & Cooling Inc. 16207 Cypress Ave., Strongsville ID: 34-1780498 Date filed: Sept. 28, 2010 Type: Employer’s withholding Amount: $78,261 Sheehan-Moser Inc. Absolute Remodeling 17383 Howe Road, Strongsville ID: 34-1781988 Date filed: Sept. 28, 2010 Type: Employer’s withholding Amount: $76,031 Pramuky Inc. Edgewater Inn 18451 S. Salem Row, Strongsville ID: 34-1852948 Date filed: Sept. 28, 2010 Type: Employer’s withholding, unemployment Amount: $68,604 TVK Floors LLC 5124 Wallings Road, North Royalton ID: 20-2839050 Date filed: Sept. 23, 2010 Type: Employer’s withholding, unemployment Amount: $61,304
China just called and you sold them your company for three yuan and a hot dog. (oops)
Pinkney-Perry Insurance Agency Inc. 2143 Stokes Blvd., Cleveland ID: 34-0968041 Date filed: Sept. 8, 2010 Type: Employer’s withholding Amount: $48,924
LIENS RELEASED Konstanzer Masonry Inc. 514 Dover Road, Bay Village ID: 34-0967162 Date filed: April 20, 2010 Date released: Aug. 17, 2010 Type: Employer’s withholding Amount: $25,400 Medical Specialties Inc. 2330 Denison Ave., Cleveland ID: 34-1027401 Date filed: Oct. 20, 2000 Date released: Aug. 12, 2010 Type: Employer’s withholding, unemployment Amount: $28,718
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On-Time Delivery Services Inc. 25100 Euclid Ave., Suite 209, Euclid ID: 34-1830262 Date filed: Jan. 31, 2001 Date released: Aug. 12, 2010 Type: Employer’s withholding Amount: $26,985 Technology Services Group of Ohio P.O. Box 470456, Broadview Heights ID: 77-0598034 Date filed: April 7, 2010 Date released: Aug. 3, 2010 Type: Employer’s withholding Amount: $7,101 Visionking Inc. P.O. Box 360354, Cleveland ID: 34-1681972 Date filed: Jan. 10, 2007 Date released: Aug. 2, 2010 Type: Employer’s withholding, unemployment Amount: $30,668 West Side Institute of Technology Inc. 908 Walford Ave., Cleveland ID: 34-0974268 Date filed: April 16, 2001 Date released: Aug. 12, 2010 Type: Employer’s withholding, unemployment Amount: $386,614
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INSIDE
19
FINANCE
22 NORTHEAST OHIO BANKS BOLSTERING THEIR STAFFS.
CREDIT UNIONS SEND A MESSAGE Financial institutions turn up the marketing volume to promote products, services By MICHELLE PARK mpark@crain.com
I
t’s audible on radio and visible on billboards, newspaper pages and social networking sites such as Facebook. Certain dollar trails prove it, too. Though consumer borrowing is down and money is tight, many local credit unions are spending more time and money to spread the word that customers can bank with — and bank on — them. Marketing budgets are up — even double what they were a year ago, some credit union executives report. Institutions are spreading the word in new ways, and at least one — PEF Federal Credit Union in Highland Heights — hired this year the first marketing professional it’s ever employed in its 53-year history, as far as CEO Russ Fisher is aware. The drive to get the word out seems to be a local and nationwide trend. Anecdotal evidence suggests credit union marketing has grown nationwide in the last two to three years, said Mark Wolff, senior vice president of communications for the Credit Union National Association, which represents 90% of federally and statechartered credit unions. See CREDIT Page 20
Corporate leases may draw more scrutiny Proposed accounting rule changes could affect balance sheets By STAN BULLARD sbullard@crain.com
J
ust what corporate users of real estate, property owners and realty service firms need: another shift in the way companies, primarily public ones, book lease transactions that may roil an already ailing industry. This time the challenge comes not from the economy or lenders, but rather from the Financial Accounting Standards Board, a nonprofit group that sets accounting standards. FASB is considering new standards for financial statements that would move the cost of operating leases — and even options to extend leases — onto public company balance sheets from a disclosure in the footnotes. The new rules currently are in a public comment period. If the board adopts them next year — which it is largely expected to do — they would become effective two years later, or in 2013. However, decisions companies make now may have an immediate impact when the rules go into effect in 2013, because there will be no provision to exempt older leases by grandfathering them in. Local experts are divided on the results of the change, but at a minimum it will mean leasing as a means for handling real estate and equipment will be viewed differently. Some feel the impact will be more dramatic given that the larger a company is, and the more property it leases, the more liability it will add to its balance sheet. Many experts, such as Bob Nosal, managing director of Grubb & Ellis Co.’s Cleveland office, and David Browning, managing director of CB Richard Ellis’ Cleveland office, wonder if the shift will mean some companies will be more inclined to own properties than lease, as they have in the recent past. Norm Gutmacher, a partner in the real estate group at Benesch Friedlander Coplan & Aronoff law firm, said he views the rules as likely to go into effect and believes companies should start factoring them into their decisions now. “Be an ostrich; stick your head in the sand. But remember where ostriches get shot,” Mr. Gutmacher See RULES Page 21
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Credit: Institutions also target younger customers continued from PAGE 19
A key reason for the growth is a change in the customer bases many credit unions serve, Mr. Wolff said. A decade ago, only 10% of the nation’s credit unions drew their membership from particular geographic areas; instead, most drew customers from specific employers. For example, PSE Credit Union Inc. in Parma derives its name from initially serving Parma school employees exclusively. Today, about 25% of the approximately 7,800 credit unions nationwide have community, or geographically based, charters, Mr. Wolff said. As their membership bases changed — no longer defined by where people work but instead by where they live — marketing more broadly made more sense.
Tapping bank displeasure When Cardinal Community Credit Union’s charter changed in 2006, expanding its membership area to four counties — Lake, Geauga, Cuyahoga and Ashtabula — instead of Lake only, there was a need to get the word out in a broader way, said Joseph Modarelli, vice president of marketing. The Mentor credit union has doubled its marketing budget during Mr. Modarelli’s seven years there, with most of the growth occurring in recent years, he said. The institution is marketing itself in ways it never used to, including on the radio and in newspapers. “I told the bosses if I have to wear a cardinal costume, I’ll quit,” Mr. Modarelli quipped. The economic slump also has intensified the need for credit unions and other financial institutions to market themselves, Mr. Modarelli said. “I think competition has been much, much stiffer,” he said. “There’s a smaller pool of borrowers out there, and you have to work harder to get people to come to your place.” Although it’s not the first reason they cite, most credit union executives acknowledge their increased marketing is geared, in part, to taking advantage of greater distrust of banks. Since January 2008, 292 banks have failed, according to the Federal Deposit Insurance Corp. During the same period, 68 credit unions have failed, said Cherie Umbel, spokeswoman for the National Credit Union Administration. That figure includes involuntary liquidations and governmentbacked mergers, she noted. The woes of banks spell opportunity, according to Mr. Modarelli. “It’s a good time to let people know you’re out there when they’re not happy with where they’re at,” he said. Robb Poore, president and CEO of Integrity Federal Credit Union in Barberton, agreed. Integrity already has spent 2½ times more on marketing this year than it did all of last year. The $30,000 outlay is the largest amount it’s ever spent on marketing in a single year, and Mr. Poore aims to boost that figure by at least 50% next year. “Historically, we have waited for members to come in, tell us what they wanted and then leave,” he said. That approach is changing, he and others agree.
Youth movement Ohio Credit Union League spokesman Patrick Harris said he can’t say whether most of the state’s 392 credit unions have increased marketing. He’s heard some are, and he’s heard others remark that marketing is the first expense to go when budgets constrict. Nonprofit credit unions typically
have less money than profit-driven banks to allocate to such efforts, Mr. Harris noted. “We don’t have those million-dollar, hundred-thousand-dollar marketing budgets,” he said. Anne Legg, who chairs the marketing and business development council of the Credit Union National Association, noted some of the reported marketing growth may be the result of broadcast media lowering ad prices. Some prices have come down so much that credit unions may be able to buy advertising they couldn’t before, she said. With its marketing budget down 15% to 20% in the past five years, Taleris Credit Union Inc. has reduced its number of promotions but began building in 2010 a presence on Facebook and Twitter, said Rick Zimmerman, director of sales, marketing and business development for the credit union in Cleveland. The Taleris Facebook page pictures an elephant holding a sign that asks, “Who needs banks?” and offers tips for eliminating debt and reasons to join credit unions. It’s a social networking effort aimed at attracting younger customers, an age group Mr. Wolff said many credit unions are courting. The average credit union client, he noted, is 47. Even those credit unions that aren’t spending more money are spending time to get the word out locally, for example, at chamber of commerce events, said Mr. Harris of the Ohio Credit Union League.
A matter of life and death Though regulatory burdens have increased credit unions’ operating costs, cutting back on marketing to reduce expenses — or taking a “duck and cover” approach — is dangerous, Mr. Poore said. “I think in any business, you have to make the decision to invest in your business if you want to grow,” Mr. Poore said. “I believe if credit unions do not grow, they will run a very real risk of being a dying breed. “We made a decision to grow and be stronger,” he said of Integrity Federal. The results of increased marketing nonetheless can be hard to assess, particularly during economic times such as these, credit union executives said. At Cardinal Community Credit Union, there’s been “modest growth overall,” and Mr. Modarelli is quick to note the institution has retained “quite a bit of business,” too. Mr. Poore said he believes increased marketing has driven growth at Integrity, which has seen its total assets rise 30% during the past year to roughly $30 million. While other credit unions’ loan volumes have declined amid a sluggish economy, Integrity’s lending has risen significantly, exceeding in the first six months of 2010 all of the lending it did in 2009, he said. Integrity recorded an immediate increase in lending following its first direct mail piece in February, which advertised car loan interest rates as low as 3.99% for 72 months, Mr. Poore said. Many with local credit unions predict marketing efforts and budgets will continue to grow as the economy improves. Tabitha Baszynski, marketing director for PSE Credit Union Inc., where the marketing and advertising budget has doubled this year from last, said the efforts must continue. “When you start advertising, you really have to keep your momentum up,” she said. “You’re almost not going to get anywhere if you don’t keep going with it. Really, the question is, how can you afford not to do it?” ■
CRAIN’S CFO OF THE YEAR AWARDS
JASON MILLER PHOTOS
About 600 people on Oct. 26 attended the Crain’s CFO of the Year Awards at LaCentre Conference and Banquet Facility in Westlake.
C
rain’s Cleveland Business last Tuesday, Oct. 26, honored Northeast Ohio’s top fiscal officers with its CFO of the Year Awards. More than 40 nominations were submitted for consideration as part of this year’s program, and for the first time Crain’s presented a Lifetime Achievement Award. This year’s recipient is James Abel, who most recently was the CFO at Lamson & Sessions. The public company winners were: Laurie Brlas, Cliffs Natural Resources Inc. (large); Robert G. O’Brien, Forest City Enterprises Inc. (medium); and Mark R. Widmar,
GrafTech International Ltd. (small). The private company winners were: Gregory Robinson, Safeguard Properties LLC (large); Andrew Tanner, The NRP Group (medium); and Frank Mercuri, Vocon (small). The winners in the nonprofit category were: Michael A. Szubski of University Hospitals (large); Dr. Craig Foltin, Cuyahoga Community College (medium); and Brian S. Kenyon, The Rock and Roll Hall of Fame and Museum Inc. (small). The sold-out event was Crain’s largest to date. It was held at LaCentre Conference and Banquet Facility in Westlake.
ABOVE: Crain’s publisher and editorial director Brian Tucker (left) and Bill Paul of title sponsor Marsh, congratulate Laurie Brlas of Cliffs Natural Resources Inc., who won in the large public company category. RIGHT: The CFO of the Year winners’ awards.
The 10 winners gather on stage after receiving their awards.
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Rules: Companies may shy away from leasing continued from PAGE 19
said. “I think it will have a dramatic effect on planning, on property decisions and on balance sheets — and that is what it is intended to do.”
Paradigm shift The rule would require compliance from companies that follow generally accepted accounting principles, which includes most public companies, public company wannabes and some smaller companies that need to follow it to adhere with lender requirements. That means companies would have to book the entire cost of a lease as a liability at the time the lease is signed, Mr. Gutmacher said, as well as options. Lease costs rapidly reach the millions of dollars for a significant amount of space or locations for large companies with multiple leased locations. The change removes one of the benefits of leasing compared to ownership, Mr. Gutmacher said, because leases would have to be factored in as liabilities up front, just as purchasing a property is today. “This will change the paradigm,” Mr. Gutmacher said. “It’s a change in the way people have been doing it for longer than I have been practicing law, since the 1970s.” However, others are less Cassandralike. John Funk, director of real estate services at the Maloney + Novotny accounting firm of Cleveland, calls the measure “a gamechanger as far as financial presentation goes. But do the accounting rules become the tail wagging the dog? “I think not, particularly for middle-market companies. They will still choose what basis they use for financial reporting. Sophisticated investors (in public companies) already know how to calculate this from the footnotes. I do not think it will change the way my clients handle their real estate and decide whether to buy or lease. It’s just a different financial reporting mechanism.” However, some ideas for how the new rules will affect corporate real estate and the industry that serves it are afoot. For one, companies may try to shorten lease terms in order to reduce the size of the liability they must disclose. However, Mr. Gutmacher said, companies that want a developer to build and lease a building to them will confront the requirement that lenders want long-term leases, in some cases 20 years, to secure construction loans. “Some buildings may not be built, at least initially,” Mr. Gutmacher said. “There will be a period of chaos followed by realignment.”
companies that lease multiple locations in order to free capital for operations. However, he said, the own-versus-lease analysis will be different for each company. “I’ve had companies that lease for flexibility, which you do not get with ownership,” Mr. Cantor said. He said he also has seen firms sell properties because they did not need the space and did not want to take the risk of holding empty space. Another thing that companies will need to watch is whether incorporating leases into their books as liabilities will put them out of com-
pliance with bank-loan covenants, Mr. Gutmacher said. Lenders may not be overly concerned about a technical violation, he said, but it would give banks more negotiating power over borrowers. The new FASB rules also will mean a lot for companies that lease equipment, for leases less than a year will have to be included as liabilities rather than expenses. Construction companies are heavy users of leased equipment because they may not need it all the time, or only for a specific project. Aaron Cook of Meaden &
Niche killer? The biggest impact on the real estate business may be hampering a niche, as making leasing less attractive will reduce the allure of companies selling buildings and
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Ripple effects However, Michael Cantor, a principal of Allegro Realty Advisors of Cleveland, which describes itself as a real estate consultant for corporations, said a shorter lease means tenants would have to pay for more of the expenses for outfitting their space over a shorter term, making for higher leases. He believes the tax and market implications will balance one another out. Mr. Cantor said the most profound impact will be felt by
Moore, an accounting and business consulting firm in Cleveland, said the short-term provision may get jerked from the final rule, but if it is not, it will hit the weak construction business hard. He said even small contractors would feel its bite, if only because of more paperwork.
leasing them back to raise cash. “That’s the segment I believe will be impacted the most,” Mr. Cantor said. In northern Ohio, sale-leaseback deals typically are arising for out-of-town based retailers, restaurateurs and warehouse operators who sell off properties here. Given that most companies are preoccupied with surviving the downturn and making a profit and most real estate operators are focused on keeping properties occupied and loans current, many experts agree the timing for the new FASB rule could not be worse. “Whether it deserves it or not, the last thing real estate needs is another potential shift in how it does business,” Mr. Gutmacher said. ■
* Results may vary depending on your business situation.
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22 CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
NOVEMBER 1-7, 2010
FINANCE
Northeast Ohio banks on a hiring spree Scandals highlight By MICHELLE PARK mpark@crain.com
A
mid years of decreasing bank employment across the country, banks in Northeast Ohio are hiring — some by triple-digit numbers. ■ Columbus-headquartered Huntington Bank is creating more than 300 full-time jobs in this area and 500 statewide as it opens branches in Giant Eagle stores, said Daniel P. Walsh Jr., president of the Greater Cleveland region. Nine of the full-service branches are slated to open in the Cleveland area in the first quarter of 2011; 45 of a total of 103 are planned here. The new jobs augment nearly 200 that Huntington has added in Northeast Ohio since the end of 2009, Mr. Walsh said. ■ Chase Bank plans to hire up to 175 full-time employees for its Cleveland mortgage operations center. It hosted a job fair in early October and will host another Nov. 9. If the maximum number is hired, it would result in 40% growth in the bank’s local work force of some 440, according to a spokeswoman. ■ KeyBank, too, is growing its ranks: After adding 12 branches in Northeast Ohio and roughly 70 new employees in recent years, the bank plans to open five more branches and hire 30 more in 2011, said Lisa Oliver, president of KeyBank’s Greater Cleveland District. ■ Charter One has hired “aggressively” in the past six months, spokeswoman Carrie Carpenter said. The bank has hired 80 in its Ohio mortgage department with plans to add up to 90 more.
Many banks, including PNC, also are looking to fill dozens, even hundreds, of existing positions in and around Cleveland. “We have 250 banks and thrifts in this state; certainly, they’re not all growing like Huntington is,” said Jeff Quayle, senior vice president and general counsel for the Ohio Bankers League, which represents the majority of those banks and thrifts. “(But) let’s think about the overall story. We’ve come through one of the most challenging periods in American economics in quite some period of time, and here you … have triple-digit growth.”
Seizing opportunity Nationwide, the number of fulltime equivalent employees reported by banks increased slightly — 0.32% — between March 31 and June 30 this year, according to the most recent Federal Deposit Insurance Corp. data available. However, June-to-June comparisons reveal that the number of employees has dropped consistently since 2006. Most recently, from June 30, 2009, to June 30, 2010, bank employment declined 2.8%. In Ohio, bank employment has fluctuated more. Between June 2009 and June 2010, it was down 3.56%, but between June 2008 and June 2009, it increased 9%. Overall, it has increased more than 2.12% since 2007. While bank consolidations, online banking and the recession have contributed to fairly flat employment numbers nationwide, Doug Johnson, vice president of risk management policy for the American Bankers Association,
noted: “There are these institutions — because they see opportunities — (that) are increasing employment while others are freezing.” Huntington Bank’s hiring is rooted in a desire to expand its market share in Cleveland, which was ranked fifth by the most recent FDIC Summary of Deposits data, Mr. Walsh said. In addition, with more locations, the bank can have a stake in what he called a coming “Cleveland renaissance.” Chase executives are convinced the mortgage business will continue to build for a number of reasons, among them historically low refinancing rates and an increase in people using banks instead of mortgage brokers, spokeswoman Mary Kay Bean said. KeyBank began planning its “big burst of activity here in Cleveland” in 2006 — before the recession, Ms. Oliver explained. “One of the main factors here for Key is (Cleveland) is a headquarters city for us. This is not an optional market,” she said.
Growth spurts Banking executives cite the industries in Northeast Ohio — among them, biotechnology, manufacturing and health care — as reasons they’re attracted to creating jobs and growing here. And considering the growth in employment occurring now — in spite of the economy — Mr. Quayle of the Ohio Bankers League expects growth to continue. “You’ll see some segments of banking growing, and you’ll see other segments of banking that will not,” he said. ■
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investor-adviser ties
W
ith the glut of recent Ponzi schemes involving the bilking of trusting investors out of millions of dollars, it seems that we as a society are continually plagued by investment scandals. Trust is a critical component of the adviser-investor relationship, which can take a long time to develop yet just an instant to destroy. However, thanks to the likes of Bernard Madoff and even Cleveland’s own Joanne and Alan Schneider, investors have become more savvy in protecting themselves against nefarious investment practices. Moreover, lawmakers also have responded with proposed legislation to foster a safer investment environment. The most significant legislation in this regard is the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law on July 21 by President Barack Obama. The Dodd-Frank Act is more than 2,300 pages long and touches almost every aspect of the U.S. financial services industry. Specific to preventing investment fraud, the Dodd-Frank Act creates the Consumer Financial Protection Bureau, which is empowered with broad authority to regulate retail financial products and services, and it includes numerous provisions designed to encourage whistle-blowing on conduct that violates securities laws. Under these provisions, the SEC will be required to pay a monetary reward between 10% and 30% of the amount recouped to anyone who provides original information to the SEC, when that information leads to a monetary sanction exceeding $1 million. Courts also have been intimately involved with addressing who should be liable for the investment frauds of the recent past. One of the most recent decisions out of the Southern District of New York suggests that responsibility for Ponzi schemes cannot be linked back to investment advisers who merely introduced the investor to those running the Ponzi scheme. In fact, the ruling states: “There is nothing inherently fraudulent about referring customers to an investment advisor for fees ... absent awareness or notice that Madoff’s investment advisory business was a sham. In other words, one who conducts normal business activities while ignorant that those activities are furthering a fraud is not liable for securities fraud.” So, how can investors best protect their assets before getting entwined in a relationship with the wrong investment professional? First, they need to develop a level of familiarity with their adviser. An investor should find out where their adviser’s office is located, how long they have been in business and then meet with the adviser and his or her staff in person. They also should do their homework by examining all available background information. There are many public record databases that provide multiple sources of information in this regard, including
ANDREWDORMAN
ADVISER public court dockets, the Better Business Bureau and the Financial Industry Regulatory Authority web site. Next, investors should carefully consider whether they want to relinquish custody of their assets. In this regard, investment professionals can either act as investment advisers or registered representatives. An investment adviser typically maintains custody of a client’s assets and has discretion to trade assets pursuant to a limited power of attorney. Alternatively, a registered representative typically does not maintain custody of his or her client’s assets and simply makes recommendations for clients to consider. Prior to initiating a relationship with their investment professional, investors should understand who has custody of their portfolio. It also is prudent for investors to insist upon receiving trade confirmations, as well as any monthly account statements. Every trade that is made in an investor’s account generates a confirmation document. Investors should not agree to let these notices only go to their investment professional. Full disclosure is a two-way street, as financial advisers bear a legal obligation to act in their investor’s best interests at all times. Investors need to be up front about their financial assets and liabilities and investment objectives and risk tolerance, just as advisers need to be truthful about their capabilities and matters that they are qualified to handle. All of these disclosures should, of course, be confirmed in writing. Key events and conversations also should be documented with clients through confirmation letters. In this regard, if a client declines to follow an adviser’s recommendation, this should be confirmed in writing. Meetings also should be scheduled with clients on at least an annual basis to ensure the client and the investment professional are on the same page, and that there have been no changes to a client’s risk tolerance or investment objectives. A successful investor-adviser relationship is built on open lines of communication and trust. The investor needs to perform due diligence at the onset to select the right adviser for their unique style and preference. The investment professional, on the other hand, must use all of their talent and skills to work on behalf of their clients’ best interests. When a rift arises in the relationship, it is best to consult with qualified legal counsel. ■ Mr. Dorman is an attorney in the Cleveland office of Reminger.
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NORTHEAST OHIO'S MOST AFFLUENT COMMUNITIES RANKED BY MEDIAN HOUSEHOLD INCOME(1)
Population
Projected population growth 2010-2015
4 year %
Post-Grad %
Owner %
Renter %
Average travel time to work (minutes)
276
700
(3.9)
36.5
33.9
85.1
14.9
23.9
Cuyahoga
$562,500
281
899
(4.1)
39.7
38.5
97.9
2.1
26.0
Cuyahoga
$150,049
$491,797
842
2,243
(6.2)
30.2
39.1
92.6
7.4
27.8
Cuyahoga
Pepper Pike www.pepperpike.org
$147,377
$393,551
2,095
5,624
(4.9)
33.9
39.9
95.4
4.6
22.6
Cuyahoga
5
Kirtland Hills Village www.lakecountyohio.gov/ kirtlandhills
$128,125
$478,000
317
819
8.9
28.1
22.0
90.2
9.8
23.3
Lake
6
Moreland Hills www.morelandhills.com
$126,894
$401,333
1,192
2,981
(6.4)
35.9
32.5
94.9
5.1
23.0
Cuyahoga
7
Hudson www.hudson.oh.us
$112,017
$268,581
7,681
23,263
1.0
41.7
28.6
89.3
10.7
27.4
Summit
8
Waite Hill N/A
$110,156
$475,758
234
548
7.1
31.2
29.4
85.9
14.1
22.2
Lake
9
Orange www.orangevillage.com
$104,401
$296,608
1,185
3,194
(2.4)
32.9
28.7
95.5
4.5
24.0
Cuyahoga
10
South Russell www.southrussell.com
$96,926
$287,893
1,348
3,927
(2.2)
37.9
29.1
97.1
2.9
26.7
Geauga
11
Solon www.solonohio.org
$96,327
$258,131
7,643
21,995
(1.0)
29.7
24.1
87.2
12.8
24.7
Cuyahoga
12
Boston Heights www.bostonheights.org/village/ vbhcontact.html
$95,149
$301,389
433
1,271
1.7
30.6
13.9
84.8
15.2
24.6
Summit
13
Valley View www.valleyview.net
$93,200
$190,000
718
1,956
(6.4)
15.9
9.5
91.8
8.2
21.5
Cuyahoga
14
Highland Heights www.highlandhts.com
$92,605
$251,305
2,978
8,581
1.1
24.5
22.2
97.2
2.8
20.1
Cuyahoga
15
Brecksville www.brecksville.oh.us
$90,157
$248,081
4,841
12,672
(3.6)
26.3
24.8
88.3
11.7
25.3
Cuyahoga
16
Bainbridge CDP N/A
$89,926
$236,199
1,220
3,210
(2.9)
39.4
23.9
90.7
9.3
24.9
Geauga
17
Richfield www.richfieldvillageohio.org
$85,740
$237,013
1,228
3,332
4.0
24.6
13.8
90.0
10.0
26.0
Summit
18
Bratenahl www.bratenahl.org
$85,693
$216,518
672
1,232
(5.4)
28.7
37.6
84.2
15.8
19.7
Cuyahoga
19
Peninsula www.explorepeninsula.com
$85,593
$233,333
291
684
4.2
25.3
20.1
80.8
19.2
24.1
Summit
20
Bay Village www.cityofbayvillage.com
$84,021
$191,091
5,645
14,217
(7.2)
37.0
20.0
92.1
7.9
24.2
Cuyahoga
21
Aurora www.auroraoh.com
$83,894
$224,060
5,836
14,987
3.4
30.7
13.9
78.5
21.5
27.9
Portage
22
Macedonia http://macedonia.oh.us
$82,744
$185,925
3,798
10,401
3.6
26.3
9.4
95.0
5.0
24.9
Summit
23
Avon www.cityofavon.com
$81,398
$202,527
6,506
17,788
11.6
24.7
11.1
87.4
12.6
26.3
Lorain
24
Sugar Bush Knolls N/A
$81,250
$182,692
64
171
8.8
18.3
17.5
87.5
12.5
23.4
Portage
25
Strongsville www.strongsville.org
$80,960
$191,785
15,816
41,856
(3.4)
25.5
14.8
82.3
17.7
27.5
Cuyahoga
26
Westfield Center www.villageofwestfieldcenter.com
$80,492
$186,020
424
1,092
1.7
35.7
15.7
91.0
9.0
25.0
Medina
27
Silver Lake www.villageofsilverlake.com
$80,417
$183,445
1,281
3,071
(0.1)
33.4
21.9
95.5
4.5
24.1
Summit
28
Kirtland www.kirtlandohio.com
$78,062
$215,057
2,821
7,502
4.6
23.1
12.1
86.7
13.3
24.1
Lake
29
Mayfield Village www.mayfieldvillage.com
$77,844
$232,713
1,262
3,049
(6.9)
28.9
20.0
81.9
18.1
24.0
Cuyahoga
30
Westlake www.cityofwestlake.org
$76,863
$206,404
12,399
30,064
(3.8)
29.2
20.0
74.9
25.1
25.3
Cuyahoga
31
Avon Lake www.avonlake.org
$75,483
$186,953
9,296
24,711
10.0
27.9
17.8
84.9
15.1
27.6
Lorain
32
Twinsburg www.mytwinsburg.com
$74,872
$189,779
6,947
17,559
0.7
29.0
14.8
76.0
24.0
27.2
Summit
33
Chagrin Falls www.chagrin-falls.org
$74,770
$262,883
1,689
3,670
5.6
39.1
25.6
72.2
27.8
25.6
Cuyahoga
34
Chesterland CDP www.chesterlandchamber.com
$74,662
$194,371
983
2,604
(0.8)
21.6
12.7
90.4
9.6
26.6
Geauga
35
University Heights www.universityheights.com
$73,395
$150,395
4,479
12,390
(6.7)
28.8
29.2
74.8
25.2
22.3
Cuyahoga
36
Walton Hills www.waltonhillsohio.gov
$72,337
$187,901
859
2,235
(4.9)
16.0
6.0
96.7
3.3
25.3
Cuyahoga
37
Shaker Heights www.shakeronline.com
$72,243
$192,526
10,936
26,007
(6.8)
26.4
37.9
64.4
35.6
23.9
Cuyahoga
38
Fairlawn www.cityoffairlawn.com
$71,628
$177,358
2,902
6,955
(3.1)
31.5
21.6
63.5
36.5
23.5
Summit
39
Independence www.independenceohio.org
$71,460
$216,367
2,553
6,682
(4.4)
19.5
12.5
94.3
5.7
22.5
Cuyahoga
40
Beachwood www.beachwoodohio.com
$71,448
$265,045
4,593
10,976
(5.7)
25.5
28.5
63.9
36.1
21.5
Cuyahoga
Median household income
Median owneroccupied housing value
Number of households
1
Hunting Valley www.huntingvalley.net
$250,625
$977,778
2
Bentleyville www.villageofbentleyville.org
$198,837
3
Gates Mills www.gatesmillsvillage.com
4
Community Rank Web site
Education
Housing units
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. Business lists and The Book of Lists are available to purchase at www.crainscleveland.com. (1) Information for this list of communities in Cuyahoga, Geauga, Lake, Lorain, Mahoning, Medina, Portage, Stark and Summit counties is based on 2010 estimates from Nielsen Claritas, www.claritas.com.
County
RESEARCHED BY Deborah W. Hillyer
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10/29/2010
11:53 AM
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CRAIN’S CLEVELAND BUSINESS
Contact: Phone: Fax: E-mail:
WWW.CRAINSCLEVELAND.COM
NOVEMBER 1-7, 2010
REAL ESTATE
Genny Donley (216) 771-5172 (216) 694-4264 gdonley@crain.com
Copy Deadline: Wednesdays @ 2:00 p.m. All Ads Pre-Paid: Check or Credit Card
AUCTIONS
Rosen & Company, INC.
REAL ESTATE AUCTION Includes Restaurant Furniture, Fixtures & Equipment Formerly TGI Friday’s
Bringing Buyers and Sellers Together Since 1917
*** ABSOLUTE AUCTION ***
Restaurant Use Only Wednesday, November 10th, 1 pm – on site 2040 Midway Boulevard, Elyria, OH (Midway Mall) 6,770 sq. ft. Commercial Building/FF&E 10% Buyers Premium See Website for Details
21 PROPERTIES (Selling to the highest bidder!!!!!)
FRIDAY, NOVEMBER 5, 2010
HarborWalk, Lorain, OH
Midwest Properties Auctioneers, LLC - Robert Nieto – Auctioneer / CB Richard Ellis, Inc., Broker
www.midwestprops.com
Developer Liquidation Of Excess Inventory
11 Building Lots Bidding Starts @ 10 a.m. PLUS
10 Single Family Homes Bidding Starts @ 12 p.m.
Promote your Luxury Properties to high-end prospects AND receive reduced rates on your advertising.
SEE WEB SITE FOR TERMS, CONDITIONS AND OPEN HOUSES Stanley H. Rosen, Broker, Auctioneer Ross “Buddy” Barton III, Lead Auctioneer, Agent Sheila Rosen – Schiff, Agent, App. Auctioneer
2550812-01
SELLING REAL ESTATE? 1-877-BID-ROSEN
ATTENTION REALTORS:
CALL IMMEDIATELY! 1-877-243-7673
www.BIDROSEN.com
30405 SOLON ROAD, SUITE 6, CLEVELAND, OHIO 44139
REAL ESTATE SERVICES Davis Realty Management Consulting & Management Services. Over 20 years Management Experience. P.O. Box 22489 Beachwood, Ohio 44122
216-702-4488 davisrealtymgt@gmail.com
Call Genny Donley at (216) 771-5172
330-225-2822
LEGAL NOTICE NOTICE TO VENDORS Notice is hereby given that sealed proposals will be received in the Board of County Commissioners Office of Procurement & Diversity, Room 100, County Administration Building Annex, 112 Hamilton Court, Cleveland, Ohio 44114 until 11:00 A.M. local time on December 01, 2010 for lease of office space for a Juvenile Court Westside Regional Probation Office for the period July 01, 2011 to June 30, 2016. Note: The Office of Procurement and Diversity is moving and may be relocated by the time the proposals are due. Please be sure to call ahead 216.443.7200 for their new address. Required geographic locations: The space must be in an area bounded approximately by: North: I-90 South: West Avenue / Chatfield
East: West Blvd. West: Western border of Cleveland
The official closing time shall be determined by the wall clock located in the Office of Procurement & Diversity. (SAME ADDRESS) Late proposals will be returned unopened. There will be a Pre-proposal Conference on November 16, 2010 at 10:00 A.M. local time at The Department of Central Services, 2nd floor conference room, 1642 Lakeside Avenue, Cleveland, Ohio 44114. IT IS STRONGLY RECOMMENDED THAT INTERESTED VENDORS ATTEND. Specifications and proposal blanks may be obtained at the Board of County Commissioners Office of Procurement & Diversity. (SAME ADDRESS) Questions may be addressed to Mr. John Myers, Real Estate Manager at 216.698.2517. Payment will only be made upon approval of the Board of County Commissioners and payments will be warrants issued by the County Auditor upon notification from the Commissioners. The Board of County Commissioners reserves the right to accept or reject any proposals or any part or all parts of any proposal submitted, and waive all technicalities.
OFFICE SPACE
Each proposal must state in full the name and address of each person, firm or corporation interested in the proposal submitted. BY ORDER OF THE BOARD OF COUNTY COMMISSIONERS OF CUYAHOGA COUNTY JIMMY DIMORA
INDEPENDENCE CORPORATE CENTER
TIMOTHY F. HAGAN
PETER LAWSON JONES
LENORA M. LOCKETT, DIRECTOR Office of Procurement & Diversity
7100 E. Pleasant Valley Rd. Award Winning Building • Class A Office Space • Up to 15K Contiguous SqFt Available
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216-674-0525
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20101101-NEWS--25-NAT-CCI-CL_--
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25
Aclara: Municipalities sign on Doctors earn much less than specialists continued from PAGE 3
Michigan’s Upper Peninsula. The company was able to win bigger jobs as its reputation grew, but Mr. Moore also said the purchase of Hexagram in 2006 by the larger Esco Technologies Inc. of St. Louis gave the company credibility and the finances to handle the necessary expansion. “When we were privately held, we were limited by our line of credit,” Mr. Moore said. Esco paid $67.5 million for Hexagram, which became part of Esco’s Utility Solutions Group, a segment that includes a few other businesses that use the Aclara brand. The agreement stated the price could rise by another $6.3 million if the Solon firm met its sales targets over a five-year period, which it’s on track to do, Mr. Moore said.
A form of remote control Aclara’s traditional “Star Network” consists of boxes attached to water or gas meters that relay usage information to nearby data collection equipment, which then sends the information to the utility. The devices allow utilities to get readings twice a day without paying people to read meters. That technology lays the foundation for the company’s new Acendant Network, which gathers information from meters and other monitoring devices to let a utility know, say, if pressure in a water system is becoming too high or a circuit breaker has blown on its electric grid. The network also gives a utility the ability to control certain equipment from afar, such as capacitor banks that even out fluctuations in the electric grid and “smart appliances” such as air conditioners that electric companies can shut down if usage gets too high on a hot day. Aclara is testing the Acendant Network with a few customers and plans to start selling it in the second quarter of 2011, Mr. Moore said.
“When we were privately held, we were limited by our line of credit.” – Gary Moore, chief operating officer, Aclara RF Systems Inc. To prepare for the product’s release, the company has hired 25 people in Solon so far this year and has budgeted to increase its staff by 15% next year, he said. The company is in a growing industry, said Carolyn Peterson, director of communications and public affairs for the Association of Metropolitan Water Agencies in Washington, D.C.
By REBECCA VESELY Modern Healthcare
Physician specialists make as much as 52% more than primary-care doctors — a wage difference that can add up to millions of dollars over a career, according to a new study in the Archives of Internal Medicine. The national study, conducted by researchers at the University of California at Davis, compared wages of more than 6,300 physicians practicing in 41 specialties in 60 communities in 2004 and 2005. The researchers compared hourly wages,
factoring in the number of hours each day the physicians worked minus vacation time. They found that primary-care doctors, including pediatricians, geriatricians and internal medicine doctors, made about $60 an hour. In comparison, surgeons, including orthopedic, neurological and obstetrics/gynecological specialists, made $92 an hour. Emergency-medicine doctors, dermatologists, psychiatrists and other specialists made $88 an hour, according to the study. In addition, women made $9 less per hour across practice areas. ■
IN BRIEF Maximum contribution to 401(k) plans to hold steady in 2011
Fans in Ann Arbor Many larger water utilities have installed some sort of automated meter-reading equipment or are considering it, Ms. Peterson said. Their aim is to get as much information about their distribution systems as they can. “It’s definitely the direction of the future,” she said. The city of Ann Arbor, Mich., knows the value of such information. In addition to helping the city nearly eliminate manual meter readings, the Star Network helped it gather data needed to make heavy water users pay their fair share, said Wendy Welser, customer service manager in the Ann Arbor Utilities Department. Now, heavy users are encouraged to save water, and “the lady down the street” doesn’t need to help pay for the enormous volume of water used during home football games at the University of Michigan’s “Big House.” Ms. Welser also lauded Aclara’s service, noting that company officials are meeting with the utility in January to discuss how to improve their system. “They have been very customer-focused,” she said. ■
IRS cites low inflation as reason for keeping monetary allocations to fund at $16,500 For the second year in a row due to the low inflation rate, the maximum allowed contribution to 401(k) and other defined contribution plans, and the maximum benefit that can be funded through defined benefit plans, will hold even, the Internal Revenue Service said Thursday. As a result, the largest annual contribution an employee can make in 2011 through salary reduction to a 401(k) plan will remain at $16,500, while the largest “catch-up” contribution that employees 50 and older can make to 401(k) and certain other defined contribution plans will stay at $5,500. In addition, the maximum contribution to defined contribution plans, which includes employer contributions, will remain at $49,000 per participant next year. The largest annual benefit that can be funded through a defined benefit plan will remain at $195,000, while the amount of employee compensation that can be considered in calculating pension benefits and contributions to defined contribution plans will remain at $245,000 next year. The definition of a highly compensated
employee for 401(k) plan nondiscrimination testing purposes in 2011 will be the same as in 2010, which is an employee who earns at least $110,000 a year, according to the IRS. — Business Insurance RETIREMENT ON DISTANT HORIZON: Sixty-one percent of affluent individuals surveyed this fall by Bank of America Merrill Lynch expect to retire later than expected, up from 29% in January. Despite that, 78% believe their financial picture is better than a year ago, according to the survey of 1,000 affluent Americans — those with investible assets in excess of $250,000 — conducted Sept. 13 through Oct. 7. One in five affluent Americans tapped into their long-term savings and investments over the last year in order to meet their immediate financial needs, according to a news release detailing the survey’s findings. Of those 20%, 35% dipped into savings to cover regular monthly expenses, 27% paid down debt and 19% compensated for a loss of family income. — Pensions & Investments
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Nuclear: Federal loan guarantees a concern continued from PAGE 3
build more than 30 nuclear plants in the United States. One near Waynesboro, Ga., is under construction, which is a big deal to an industry that hasn’t had a new plant approved since before the Three Mile Island reactor meltdown in Pennsylvania in 1979. Financial hurdles have slowed the industry’s progress, but Mr. Mueller said the opportunity should be big enough for plenty of manufacturers who currently don’t serve the industry to start. They should begin pursuing nuclear certifications soon, though, because they can take years to secure, according to Mr. Mueller.
“I feel sorry for anybody that hasn’t planned out a strategy heretofore,” he said. Ohio, however, already has a disproportionate number of certified nuclear suppliers relative to other states, said Nate Ames, director of the Nuclear Fabrication Consortium, part of the Edison Welding Institute in Columbus. “The Ohio-Pennsylvania area, we’re kind of the mecca for Class 1 components,” Mr. Ames said, referring to parts that meet the industry’s highest quality standard. Mr. Ames formed the consortium — which conducts research meant to improve nuclear fabrication technologies and processes — in
2008, after learning about the growing number of nuclear plants scheduled to be built. More plants will enter the construction phase if nothing major goes wrong with the project in Georgia, Mr. Ames said. “If we get one that goes really well, that’ll likely be the catalyst,” he said.
Powering up The Euclid plant of Babcock & Wilcox Nuclear Operations Group over the past year has seen a spike in new business opportunities, said Kevin Stambaugh, manager of product development at the plant. The renewed focus on nuclear power also could help the Euclid
plant as it puts the finishing touches on development of a new, smaller nuclear reactor. Though the 125megawatt “mPower” units would generate less power than a traditional nuclear plant, they can be built in a factory, shipped on a rail car and bundled together. The mPower reactors also give utilities a way to add more nuclear power without raising the billions of dollars needed to build an entire nuclear plant, said Todd Schneider, spokesman for FirstEnergy Corp. The Akron utility is considering deploying mPower reactors, he said. GrafTech International Ltd. foresees “very big” opportunities in the industry as well, said Lionel Batty,
director of corporate research and development for the Parma-based producer of graphite and carbonbased products. GrafTech aims to supply graphite for coming “Generation IV” reactors, giving the company a chance to re-enter an industry that years ago stopped using the heat-resistant material, which lines blast furnaces in steelmaking. Generation IV reactors, which likely won’t be built until the 2020s, each would use tens of millions of dollars of graphite because they operate under extremely high temperatures, Mr. Batty said. Four to eight U.S. reactors should move into the construction phase over the next few years, said Adrian Heymer, executive director of strategic programs for the Nuclear Energy Institute in Washington, D.C. The industry will need more suppliers to handle much more, Mr. Heymer said. During the second half of the decade, Pennsylvania and Ohio will be “well positioned” to take advantage of demand for specialized parts and systems, Mr. Heymer said. “That’s where there’s a good niche for the U.S. market,” he said.
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Still, Mr. Heymer doesn’t refer to the expected pickup in activity as a “nuclear renaissance.” He prefers “measured expansion.” Financing, in particular, remains a “big hurdle,” he said. It has yet to be seen whether a federal loan guarantee program that began in 2007 will spur construction, particularly in states such as Ohio, where unregulated electricity generation rates make plants harder to finance even with guarantees. Mr. Heymer noted how Constellation Energy in early October pulled out of a joint venture working to build a nuclear plant in Maryland, another unregulated state, after the federal government said it would charge an $880 million fee for a $7.5 billion loan guarantee. The plant still may be built by Constellation’s former partner, Électricité de France. Arlene Corkhill, director of communications for Curtiss-Wright Corp.’s nuclear group, shares those concerns about federal loan guarantees. The Parsippany, N.J., company owns seven businesses serving the nuclear industry, including Nova Machine Products Corp., a company in Middleburg Heights that makes fasteners and machined products for nuclear plants. New construction should help business grow for Curtiss-Wright’s nuclear group, but it may not expand as fast as anticipated, Ms. Corkhill said. “The nuclear renaissance in the United States may not be as big as we were all thinking,” she said. Other hurdles are smaller, Mr. Heymer said. The industry’s safety record — no one has ever died from a U.S. nuclear accident — speaks for itself, he said. Plus, a presidential commission next year is scheduled to release recommendations on what to do with used fuel. The toxic material today is stored at nuclear plants themselves. Regional technology advocacy group NorTech sees big opportunities in nuclear as well, given the number of certified suppliers in Northeast Ohio, said vice president Dave Karpinski. Still, it will take time before many manufacturers can reap the benefits, given how long it takes to build plants, said Mr. Karpinski, who is leading NorTech’s efforts to create jobs related to advanced energy. “It’s just so far out. It’s going to take a while,” he said. ■
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The acquisition beat to go on at Hyland Software
The big story:
■ Hyland Software Inc. has acquired five companies since July 2008. Six if you go back two more years. More are on the way, according to Andy Kuyper, director of mergers and acquisitions for the Westlake company. After all, the Hyland Software aims to become the world’s biggest independent provider of document management software. Right now it’s No. 2, behind Open Text Corp. of Waterloo, Canada. That company had revenues of $786 million in the fiscal year that ended June 30, 2009, compared with the $133 million Hyland Software brought in during calendar 2009. Open Text employs about 3,400 people, while Hyland employs just Gilbert over 1,000. “You should expect more acquisitions from Hyland,” Mr. Kuyper said. The document management software maker in September bought both Hershey Systems of Santa Fe Springs, Calif., and Computer Systems Co. of Strongsville, which had filed for bankruptcy. The company’s previous acquisitions have gone fairly smoothly, Mr. Kuyper said, partly because the company works to make sure acquired firms buy into Hyland Software’s vision as soon as possible and because there is steady communication between the Westlake firm and its new, remote offices. To facilitate communication, the company
Dan Gilbert, the majority owner of the Cleveland Cavaliers, the founder/ chairman of Quicken Loans Inc. and the developer of the coming downtown casino, has made a new commitment in Cleveland. Mr. Gilbert announced that Bizdom U, a nonprofit “boot camp” that trains entrepreneurs to launch and grow successful businesses, is coming to downtown Cleveland in 2011. Mr. Gilbert founded Bizdom U in 2007 in his hometown of Detroit. The Cleveland chapter will give 20 participants up to six months of training in business. At the end of the training program, entrepreneurs present a detailed business plan to Bizdom U. If the plan is approved, the participant can receive startup money of up to $100,000 from the nonprofit Bizdom Fund.
Strike up the band: With an eye on drawing a new generation of patrons, the Cleveland Orchestra announced the creation of the Center for Future Audiences, made possible by a $20 million gift from Cleveland’s Tamar and Milton Maltz Family Foundation. Gary Hanson, the orchestra’s executive director, said the center will be fully funded and operational by 2018. By then, it will have “eliminated the major barriers to accessing the orchestra’s live concert experience in Northeast Ohio.” See related editorial, Page 10 Surprise!: Officials of the MetroHealth System already are pondering steps to take in light of plans by Cuyahoga County officials to reduce by almost 10% the county’s subsidy next year to the hospital provider. The county’s proposed 2011 budget recommends a $36.1 million subsidy for MetroHealth, which would be down from the current $40 million the system receives. The county cited declining property tax revenue as the reason for the cut. In budgeting for 2011, MetroHealth trustees said they were bracing for about a $2 million cut in the subsidy and were somewhat surprised by the $4 million reduction proposed by the county.
Network news: Venture development group JumpStart Inc. formalized several longstanding collaborations with the creation of the JumpStart Entrepreneurial Network, which replaces the organization’s TechLift entrepreneurial support program. The members of the network — which includes several business incubators and a few organizations that finance high-tech startup companies — have agreed to match up any entrepreneur looking for assistance with the member organization that can best provide it.
Power up: German chemical giant BASF broke ground on a plant in Elyria valued at more than $50 million to produce advanced cathode materials for lithium-ion batteries that will power the hybrid and full-electric vehicles of the near future. The new plant is built with the help of a $24.6 million grant from the U.S. Department of Energy under the American Recovery and Reinvestment Act. To keep up with local business news as it happens, visit www.CrainsCleveland.com.
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typically has officials from headquarters visit acquired companies regularly for four to eight months, he said. On average, Hyland Software has cut about 10% of the employees at acquired companies to eliminate operational redundancies, said Kaitlin Maurer, public relations specialist for Hyland Software. Most employees from Computer Systems Co. have relocated from Strongsville to Westlake. Otherwise, the company tends to leave employee where they are, Mr. Kuyper said. “It is not our intent to uproot people from their family lives and livelihoods,” he said. Hyland Software made known its intention to acquire other companies after private equity firm Thoma Bravo paid $265 million for a 58% stake in the company in July 2007. — Chuck Soder
Dan Gilbert decides to display his humor ■ Dan Gilbert says the Cleveland Cavaliers are confident in future success, but he still is using the past to earn some laughs. Mr. Gilbert held court last Thursday at Sammy’s Metropolitan in the Huntington Building as he accepted the Ruth Ratner Miller Award for his contributions to the community. Between promoting downtown, his new Bizdom U entrepreneurship initiative and his casino project, Mr. Gilbert got off a few one-liners about a former Cavalier, much
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COMPANY: Geared for Imagination, Fairlawn PRODUCT: Topozoo creature playsets
Excerpts from blog entries on CrainsCleveland.com.
The toy company just rolled out its first toy designed and made in Ohio. Geared for Imagination previously has brought to this country several European toys, including the Deglingos stuffed animals from France. For the last year, though, it has worked to bring to market three Topozoo playsets — Safari, Dinosaurs and Monsters — that are equal parts puzzle, room décor and craft project. Each set contains three animals, and each animal is made of five wooden parts, the company says. Kids can assemble these parts in their own imaginative ways, creating more than 1,200 unique animal hybrids. Topozoo will be featured in several catalogs and national press outlets this holiday season. Each playset retails for $29.99. Topozoo also is sold in gift and toy shops. For information, visit www.topozoo.com.
Clinic looks online to keep patients in line with goals ■ A Cleveland Clinic patient provided the lead anecdote for a Wall Street Journal story that looked at the merits of various online services for people to track their health. The newspaper said Brecksville resident Michael Adamik, 66, was recording his weight and blood pressure recently when he discovered a gain of nine pounds from the day before. Sudden weight gain for someone who has congestive heart failure, as Mr. Adamik does, could indicate the condition is worsening, The Journal noted. As a result, the Clinic asked him to sign up for Microsoft HealthVault, an online personal health record. The retired engineer now “enters his daily numbers directly into the online tool, which the Clinic monitors in real time,” The Journal reported. “If Mr. Adamik is in any danger, the clinic contacts him immediately.”
Aerospace supplier TransDigm lands in exclusive company ■ High-flying aerospace supplier Trans-
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to the delight of the 300 in attendance. Regarding his letter after “The Decision”: “You should have seen the first version.” Regarding the luncheon’s program: “I have one beef; I expected the program to be in Comic Sans,” the font Mr. Gilbert used in his letter on Cavs.com. — Joel Hammond
As it approaches 30, St. John plans a makeover ■ St. John Medical Center in Westlake is in the midst of deploying a five-year, $100 million strategic plan, which the Catholic hospital’s president, Cliff Coker, says will “enrich the hospital and stabilize it into the future and throw the benefit back into the community.” St. John Medical Center — formerly known as St. John West Shore — is jointly owned by University Hospitals and Sisters of Charity Health System, an arrangement finalized in a deal earlier this year. Both organizations are splitting the cost of the plan, and Mr. Coker said the hospital likely also will kick in $5 million to $10 million of its own capital. “It’s not a lot of money when you look at the total needs, but it’s a great starting point for us,” Mr. Coker said. The plan will update the 29-year-old medical center, an effort that will include adding four operating rooms and upgrading the 10 it currently has. It also will allow for the renovation of all patient rooms, the main lobby and other areas of the hospital. The plan also calls for the purchase of surgical and imaging equipment and the opening of a radiology suite. — Timothy Magaw
Digm Group of Cleveland earned a spot on a Forbes.com list of the 100 “best publicly traded firms with sales under $1 billion.” The company was No. 21 on the list, with sales of just more than $800 million, sales growth of 22% and earnings per share growth of 61%, Forbes.com said. It was the only Northeast Ohio company on the list.
Key, Huntington bank on reservoir of good will ■ CNNMoney.com reported that small business owners “are less than pleased with their relationships with their banks, especially big banks,” according to a new study, though a couple local banks fared quite well. Consumer satisfaction research firm J.D. Power and Associates’ U.S. Small Business Banking Satisfaction Study found that satisfaction now is at 711 on a 1,000-point scale, down from 718 in 2009. CNNMoney.com said the banks that fared worst in J.D. Power’s rankings are the nation’s three biggest: Chase, Bank of America and Citibank. Smaller regional banks swept the top spots: Atlanta-based SunTrust Bank tops the list, followed by Columbus-based Huntington National Bank and Cleveland-based KeyBank.
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