Crain's Detroit Business, Nov. 24, 2014 by Crain's Detroit Business

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www.crainsdetroit.com Vol. 30, No. 47

NOVEMBER 24 – 30, 2014

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Page 3 WSU doc group shake-up reveals philosophical split

Immigration dissection

Kevin Adell buys Farmington radio station for $3 million Salary survey points to return of retention bonus

Experts: Parts of Obama plan good for business; may fall short for tech workers BY BILL SHEA DUSTIN WALSH

AND

CRAIN’S DETROIT BUSINESS

Chase Bank program opens door for Detroiters, Page 11

This Just In Shinola to open watch dial factory in Detroit Shinola/Detroit LLC is opening a new watch dial factory in Detroit, allowing it to bring more manufacturing back to the city. Currently the luxury goods company, which is known for watches, bicycles and leather goods, purchases its dials from Taiwan-based BAT Ltd. Now it has hired the firm to train a team of 14 to manufacture watch dials. The factory will encompass 2,000 square feet inside the company’s flagship retail store in Midtown. To accommodate the growth, Shinola plans to expand the shop in 2015. The factory will open in two phases, with the first starting this month. Staff will learn to print the watch face for the Runwell model, the company’s best-selling model. In January they’ll learn metalstamping and dial painting. “Our long-term goal is to create Shinola watches that are predominantly American made,” said Heath Carr, CEO of Dallas-based Bedrock Manufacturing, which owns Shinola. “This development also gives Shinola the opportunity to be part of workforce development in the local community.” Earlier this year, Shinola opened a 12,000-square-foot leather-goods factory to produce small leather goods and straps for its watches. Shinola employs 320 people. — Amy Haimerl

President Obama’s temporary deportation relief plan for about 5 million undocumented immigrants includes elements that have some local business executives and immigration experts hailing the coming changes as an economic positive for metro Detroit. “Taking executive action does not just bring certain undocumented immigrants into the mainstream, it also allows entrepre-

neurs to more easily establish businesses in the U.S.,” said University of Detroit Mercy School of Law Professor David Koelsch, who also is director of the law Koelsch school’s Immigration Law Clinic and the Asylum Law Clinic. “It allows foreign STEM graduates to put down roots here, and it

Compuware HQ sale: How, why deal went down

he Compuware building is getting new owners as Dan Gilbert and Meridian Health finalize a deal to buy the office tower for $142 million and invest $24 million in upgrades. The deal gives Meridian room to grow, Gilbert space to call his own and the building off Compuware’s books. Read the back story | PAGE 26

See Immigration, Page 24

IMMIGRATION ISSUES HIT HOME Michigan’s plan: Obama move unlikely to affect Snyder’s strategy, Page 24 Detroit’s open door: As Washington debates, immigrants bolster the Motor City, Page 25

Officials: Bankruptcy fees unlikely to fall Duggan fears possibility of more increases

MANUEL MARTINEZ

Finance

expedites the process for skilled workers to gain status in the U.S.” In a speech to the nation Thursday night, President Obama said he would issue an executive order that allows qualified undocumented immigrants a renewable three-year legal status. The plan allows them to apply for work permits as long as they meet government-set criteria, have no criminal record, provide personal data, and pay a nearly $500 fee. The president also said other labor-related immigration issues would be tackled, such as modernizing the green card system and extending certain employment programs for international students in high-tech fields.

BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

About 80 percent of the $146 million in professional services fees that a Detroit bankruptcy court mediator will review next week are already paid, and officials said odds are long that mediation will reduce the balance very much. Detroit Mayor Mike Duggan has voiced concern that legal and other professional fees since the city filed for bankruptcy have climbed by millions in recent months and could climb tens of millions more. But other officials and attorneys said that is unlikely, since most major disputes are resolved. The tally did climb another $18 million earlier this month with a new, but expected, charge from investment banking consultant Miller Buckfire & Co. for a restructuring

FEE ENTERPRISE Meet the man who will help decide how much lawyers, auditors and the like will be paid, PAGE 22 Also: Consultants’ expense reports test official scrutiny, PAGE 23 fee negotiated into an amended contract the firm signed with the city in June. Miller Buckfire, which aided Detroit on financial restructuring matters, including lining up exit financing from Barclays plc and bonds to refinance some previous See Bankruptcy, Page 22

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CRAIN’S DETROIT BUSINESS

MICHIGAN BRIEFS Growers up a tree, thanks to Christmasy snow that came early That it began to look a lot like Christmas this past week was a source of considerable consternation to a group who you’d think would be happy that this is the season when people write “’tis” instead of “it is.” We’re speaking about Michigan’s Christmas tree growers, who are struggling to harvest and ship their final orders. Ken Wahmhoff of Wahmhoff Farms Nursery in Southwest Michigan’s Van Buren County told MLive.com that employees were working in more than a foot of snow, hampering their ability to get outside and harvest. Some tree growers farther inland, in Cadillac and Lake City, weren’t as affected by the weather, said Marsha Gray, director of the Michigan Christmas Tree Association. Michigan harvests about 3 million trees each year, ranking third in the nation for Christmas tree production.

Audit: Lottery winners who want anonymity sell tickets to stores Some stores that sell lottery tickets are hitting the jackpot by buying winning tickets at a discount from players who owe back taxes or other debts and don’t want the state to learn their identity, The Associated Press reported.

Kellogg offers $127M for Egypt confectionery maker Kellogg Co., the Battle Creek-based producer of breakfast cereals and snack foods, offered $127 million to buy Egyptian confectionery maker Bisco Misr, topping a $119 million bid by the Abraaj Group, Bloomberg News reported. Kellogg offered the equivalent of $11.05 a share, according to a statement from the Egyptian Financial Supervisory Authority. Egypt is seeing a pickup in merger and acquisition activity amid increasing political stability. Egyptian companies in the fast-moving An audit found 37 store owners who turned in winning tickets worth nearly $3.6 million in 2012 and 2013. One retailer collected 107 prizes worth $346,312 last year. Six store owners didn’t report $509,211 in lottery winnings on their 2012 tax forms. No stores were named in the report. Officials of the Michigan Office of the Auditor General said 13 retailers were disciplined.

MICH-CELLANEOUS 䡲 Come 2016, Dallas will have its own version of the ArtPrize international art competition, which was born in Grand Rapids in 2009. A newly founded nonprofit reached a three-year charter agreement with ArtPrize officials in Grand Rapids. 䡲 The Michigan Chamber of Commerce last week elected new officers

consumer goods industry trade on “very rich valuations” and have achieved significant growth “irrespective of the political or economic situation of the country,” said Wael Ziada, head of research at Cairobased investment bank EFG-Hermes Holding SAE. Bisco, which has turned down two other offers, owns three factories, where it produces the biscuit Luxe and a variety of cakes and wafers. Similar to Abraaj’s offer, Kellogg’s is subject to the acquisition of a minimum 51 percent of Bisco’s shares.

for 2015. Among them: Denice LeVasseur, president of the Southfield-based law firm LeVasseur & LeVasseur PC, elected chairman of the board. Mark Davidoff, managing partner at Deloitte LLP in Detroit, was re-elected board treasurer. 䡲 Tom Mee, COO of McLarenGreater Lansing hospital since 2013, is the new president and CEO, the Lansing State Journal reported. He replaces Rick Wright, who officials said resigned “to pursue other opportunities” after nearly three years in the job. Officials for the hospital, owned by Flint-based McLaren Health Care Corp., did not elaborate. Mee started his career as an emergency nurse at William Beaumont Hospital in Royal Oak. 䡲 Lansing-based Sparrow Health System plans to build a new cancer center on the site of a former elementary school, the Lansing State

Journal reported. The project would include a five-story office building and four-story parking ramp with ground-floor retail space. Sparrow spokeswoman Sacha Crowley said the project is expected to cost tens of millions of dollars and could start next year. 䡲 New figures show that the Flint Community Schools’ deficit has grown to $21.9 million, The Flint Journal reported. In June, the district learned its deficit had nearly doubled to $20.4 million. 䡲 Sturgis Bancorp, the parent company of Sturgis Bank & Trust Co. near Michigan’s southern border,

䡲 A photo caption on Page 37 of the Nov. 17 issue should have said the

SET Enterprises plant pictured is in New Boston. An information box on the same page should have said the title for Sid Taylor is chairman.

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said it agreed to purchase West Michigan Savings Bank, the Grand Rapids Business Journal reported. The combined company would have 12 branches and about $353 million in assets, $255 million in loans and $271 million in deposits. 䡲 The UFP Western Division of Grand Rapids-based Universal Forest Products Inc. acquired “certain assets” of Bigs Packaging and Lumber, a Texas-based maker of industrial wood and packaging products, the Grand Rapids Business Journal reported. Bigs generated sales of about $50 million in the past year. 䡲 The East Lansing-based Michigan State University Federal Credit Union plans to double the size of its headquarters with a new $46 million building, the Lansing State Journal reported. The credit union has more than 600 employees and predicts that will grow to 724 by 2017 and more than 1,000 by 2024.

Muskegon gon n

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CRAIN’S DETROIT BUSINESS

November 24, 2014

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WSU looks for Rx for doc group Consultant hired to evalute relationship

An effort to evaluate the relationship between WSU and its physician group comes amid the firing of Robert Frank (right) by Valeri Paris. President Wilson says they’re unrelated.

BY JAY GREENE CRAIN’S DETROIT BUSINESS

The sudden involuntary departure of Wayne State University Physician Group’s CEO last week reveals philosophical differences in how independent the group and the university should be from each other. On Nov. 17, four days before stepping down as dean of the Wayne State Medical School, Valerie Parisi

Adell to buy Radio Disney station, expand Word’s reach BY BILL SHEA CRAIN’S DETROIT BUSINESS

As he prepares to exit the terrestrial television industry, local broadcaster Kevin Adell is expanding the reach of his satellite religious network by adding another local radio station. Adell is paying The Walt Disney Co.’s Burbank, Calif.-based Disney Radio a reported $3 million for its WFDF AM 910, which is licensed by the Federal Communications Commission to Farmington Hills. The 50,000watt station, Adell which airs preteen-oriented Disney music and programming, has offices in Southfield and a group of relatively new transmitters in Monroe County. The station’s wide reach will allow Adell’s Southfield-based The Word Network to simulcast its religious content, or to air radio-specific content, throughout much of Southeast and central Michigan. Adell’s office said he cannot comment because the WFDF transaction has not yet closed. Broadcast industry observer Matt Friedman of Farmington Hillsbased communications agency Tanner Friedman said Adell is the winner in the sale because WFDF was “highly undervalued” and its owner didn’t subscribe to a ratings service, instead selling on the Disney brand value alone instead of ratings. See Adell, Page 26

fired Robert Frank for unspecified reasons. Both Frank and Parisi declined to comment for this story. But Crain’s has learned the university has hired ECG Management Consultants to evaluate best practices and suggest more effective ways the 2,000-physician UPG can interact with the university as a

more closely affiliated faculty practice plan. WSU President M. Roy Wilson said the firing had nothing to do with the study, but “I think there is a general perception that UPG is not as tied into the university and medical school as would be appropriate. There is frustration in

some quarters. We have an opportunity to look at all these things” with the ECG study. Wilson said Parisi did not characterize Frank’s departure as a firing, “just a parting of the ways” and that he did not know about it in advance. UPG is an independent 501(c)(3), but the medical school dean serves as the chairman of its board and hires and fires the practice group’s CEO, who also serves as a vice dean in the medical school.

Sources told Crain’s that Frank See WSU, Page 21

ASE study: As economy improves, so do bonuses, other perks BY AMY HAIMERL

ichigan’s economy has been growing steadily for the past five years and is expected to keep up the pace in the coming years. And with that growth comes a new — but enviable — challenge for employers: retaining top talent. “As the economy continues to improve, the job market is also heating up, making it potentially more difficult to retain top employees who may have previously stayed due to fewer competitive opportunities,” said Mary Corrado, president and CEO of the American Society of Employers. To combat the problem, many Michigan companies are doling out annual bonuses to executives as well as hourly workers, according to a recent survey of more than 200 of the state’s employers by Southfield-based Corrado ASE. The number of firms offering bonuses to executives is fairly flat, but there is growth in the number of companies using bonuses to keep salaried employees. “These strategies are gaining greater popularity across all levels of the company,” said Jason Rowe, manager of survey services for ASE. It’s not just large companies offering bonuses, either. Bingham Farms-based Wolf-Chandler Agency LLC re-

cently implemented a weekly bonus structure for its seven-member team. “They are very happy,” said Matthew Wolf, who opened the agency with his partner, Steve Iuppenlatz, last year. “We had been talking about it for a few weeks. It’s fun. They have a carrot every week to shoot for. “It’s important to retain talent and motivate them. I’m a member of the Entrepreneurs Organization, and they always promote that, so we wanted to implement it.” The second most common strategy among compaSee Survey, Page 25

SURVEY FINDINGS

TO PHO CK ISTO

Small biz has more health insurance choices, Page 6

‘Feathers were ruffled’

Firms tell talent: You stay, we’ll pay CRAIN’S DETROIT BUSINESS

Inside

Overall, the survey found: 䡲 73 percent of employers offered bonuses to their executives in 2014, a perk worth about 25 percent of their salaries on average. 䡲 69 percent of employers offered bonuses to salaried workers who don’t qualify for overtime at an average value of 8.8 percent. 䡲 48 percent of employers rewarded hourly employees with annual bonuses worth 4.4 percent.

Company index These companies have significant mention in this week’s Crain’s Detroit Business: A2B Bikeshare . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 AdAdapted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Adell Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . 26 Axis Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Bedrock Real Estate Services . . . . . . . . . . . . . . . . 26 Blue Cross Blue Shield of Michigan . . . . . . . . . . . . . 6 Cambridge Consulting Group . . . . . . . . . . . . . . . . . 6 Capital Impact Partners . . . . . . . . . . . . . . . . . . . . 12 Chaldean American Chamber of Commerce . . . . . . 25 Compuware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Denovo Sciences . . . . . . . . . . . . . . . . . . . . . . . . . 15 Detroit Land Bank . . . . . . . . . . . . . . . . . . . . . . . . 11 Detroit Regional Chamber . . . . . . . . . . . . . . . . . . . 24 Diebold Insurance Agency . . . . . . . . . . . . . . . . . . . . 7 Donnelly Penman & Partners . . . . . . . . . . . . . . . . 14 Farbman Group . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Fragomen, Del Rey, Bernsen & Loewy . . . . . . . . . . 24 Gas Station TV . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Global Detroit . . . . . . . . . . . . . . . . . . . . . . . . . 24, 25 Health Alliance Plan . . . . . . . . . . . . . . . . . . . . . . . . 6 HealthPlus of Michigan . . . . . . . . . . . . . . . . . . . . . 7 Invest Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Invest Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . 15 J.P. Morgan Chase . . . . . . . . . . . . . . . . . . . . . . . . 11 K9 Kindergarten . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Level One Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . 5 Lotus Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Meridian Health . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Michigan Economic Development . . . . . . . . . . . . . . 4 Michigan Sports Hall of Fame . . . . . . . . . . . . . . . . 23 Miller Buckfire . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Oakland Community College . . . . . . . . . . . . . . . . . . 4 Office for New Americans . . . . . . . . . . . . . . . . 24, 25 PNC Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Priority Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Rapid Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Retail Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Rockbridge Growth Equity . . . . . . . . . . . . . . . . . . . 13 Spickler Wealth Management Group . . . . . . . . . . . 11 STEC USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Summit Commercial . . . . . . . . . . . . . . . . . . . . . . . 26 Talmer Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Tanner Friedman . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Tetra Discovery Partners . . . . . . . . . . . . . . . . . . . . 15 University of Detroit Mercy . . . . . . . . . . . . . . . . . . . 1 Vanguard Community Development . . . . . . . . . . . . 12 WADL TV-38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 WFDF AM 910 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Wayne State University . . . . . . . . . . . . . . . . . . . . . . 3 Wayne State University Physician Group . . . . . . . . . 3 Wolf-Chandler Agency . . . . . . . . . . . . . . . . . . . . . . . 3 Word Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Department index BANKRUPTCIES . . . . . . . . . . . . . . . . . . 4 BUSINESS DIARY . . . . . . . . . . . . . . . . 19 CALENDAR . . . . . . . . . . . . . . . . . . . . 20 CLASSIFIED ADS . . . . . . . . . . . . . . . . 21 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8 CRAIN’S LIST . . . . . . . . . . . . . . . . . . 17 OPINION . . . . . . . . . . . . . . . . . . . . . . . 8 OTHER VOICES . . . . . . . . . . . . . . . . . . 9 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 18 RUMBLINGS . . . . . . . . . . . . . . . . . . . 27 WEEK ON THE WEB . . . . . . . . . . . . . . 27

THIS WEEK @ WWW.CRAINSDETROIT.COM

The lights fantastic An illuminating guide to watt’s happening across Southeast Michigan this holiday season, crainsdetroit.com/holidaylights DAVID HALL/CDB

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CRAIN’S DETROIT BUSINESS

Chinese auto OCC to wreck office building, supplier to make way for future growth invest $15.1M, hire 176 BY KIRK PINHO

CRAIN’S DETROIT BUSINESS

BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS

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Chinese automotive supplier Shanghai SIIC Transportation Electric Co. Ltd. is establishing North American operations in Madison Heights for its electronics components. STEC USA Inc. — a subsidiary of China’s largest automaker, Shanghai Automotive Industry Corp. — will spend $15.1 million to open a new headquarters and manufacturing operation in an existing building at 31831 Sherman Ave. The project stems from STEC’s winning several contracts with General Motors Co., requiring it to have a presence in North America, according to a state memo on the project. The project is expected to create 176 jobs and is supported by the Michigan Economic Development Corp. through a $700,000 Michigan Business Development Program grant, to be disbursed based on performance. “STEC USA’s decision to establish its North American headquarters in Michigan tells global companies that Michigan holds great opportunities for growing their business,” MEDC Finney President and CEO Michael Finney said in a release. “Michigan leads the country in new manufacturing jobs creation, and the new jobs resulting from this investment will keep us moving in the right direction.” Madison Heights is also supporting the project with brownfield grants. The city was chosen over a site in Missouri, the MEDC memo said. The facility will manage STEC USA’s operations as well as manufacture automotive window regulators, electric horns and other electronics. It’s also expected to house research and development functions as well as warehousing. Dustin Walsh: (313) 446-6042, dwalsh@crain.com. Twitter: @dustinpwalsh

BANKRUPTCIES The following business filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Detroit Nov. 14-20. Under Chapter 11, a company files for reorganization. RnD Engineering LLC, 12433 Globe St., Livonia. Assets: $100,001 to $500,000. Liabilities: $1,000,001 to $10 million.

— Kirk Pinho

Oakland Community College expects a 296,000-square-foot building in Southfield that it purchased earlier this year for $2.5 million out of bank foreclosure to be demolished next month. Janet Roberts, executive director of marketing and communications for OCC, said $1.6 million is budgeted to tear down the 17-story North Park Plaza building directly west of the OCC Southfield campus, south of Nine Mile Road and east of Northwestern Highway. The building is expected to be imploded. Cleanup and other work on the site, such planting grass seed, is expected to be completed by May, Roberts said. Sitting on 11.5 acres and built in 1972, the building was bought because OCC “didn’t want to be landlocked” if an expansion of the quickly growing Southfield campus, where about 4,000 students are enrolled this semester, is needed, Roberts said.

“The age of the building makes it obsolete. To go back and retrofit it and bring it up to code, from a physical and economic perspective, makes no sense,” she said. “It’s not worth the time and effort and money to either renovate it or in any other way bring it up to today’s standards.” Last year, OCC also bought 5 acres near the building from the city of Southfield and the Southfield Downtown Development Authority for $2.2 million, also in case the college needs to expand the campus. The land was the site of a Ramada Inn before demolition began in August 2013. The 18-story, 253,000square-foot hotel, later renamed the Southfield Inn, had been closed since 2007. Lapeer-based North American Dismantling Corp. has been awarded the demolition contract. North Park Place was purchased from Evanston, Ill.-based First Bank & Trust. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB.

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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

November 24, 2014

Level One to buy Lotus Bancorp for $16.8M after settlement of civil rights suit BY TOM HENDERSON CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

The sale of Novi-based Lotus Bancorp Inc. to Farmington Hills-based Level One Bancorp Inc., announced last week, marks the consolidation of two local banks â&#x20AC;&#x201D; and an exit strategy for shareholders of Lotus, which had been embroiled in a civil rights lawsuit. The deal was unanimously approved by the boards of directors at each bank but is contingent on the approvals of Lotus shareholders and of state and federal regulators. Thatâ&#x20AC;&#x2122;s expected to happen in the first quarter of next year. Level One will pay about $16.8 million or $12 a share and 1.3 times book value, which represents a profit of $2 a share for Lotusâ&#x20AC;&#x2122; original investors. The bank was launched in 2007 after raising nearly $14 million. The planned sale follows the settlement of a lawsuit against Lotus that was filed in March 2013. The

suit claimed racist behavior by top bank executives violated the stateâ&#x20AC;&#x2122;s Elliott-Larsen Civil Rights Act of 1976 and led to troubles a customer had over a commercial loan. The lawsuit was settled before a trial scheduled for October in Oakland County could begin. Terms were not disclosed. Of the acquisition, Level One President and CEO Patrick Fehring said: â&#x20AC;&#x153;This is exciting. ... Lotus built a tradition with the Indian community, and weâ&#x20AC;&#x2122;re going to continue to honor that.â&#x20AC;? Said Lotus President and CEO Neal Searle: â&#x20AC;&#x153;This is an excellent combiFehring nation. Itâ&#x20AC;&#x2122;s good for our customers, our employees and the community.â&#x20AC;? After the deal closes, Level One, which also began operations in

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2007, will have assets of almost $800 million and nine branches. Lotus has two branches and assets of about $105 million. Level One completed two other acquisiSearle tions in the past five years: Michigan Heritage Bank in 2009 and Paramount Bank in 2010. Both were in Farmington Hills. Both banks have the highest rating of five stars from Fort Lauderdale, Fla.-based BauerFinancial Inc., which rates the health of banks and credit unions. But it wasnâ&#x20AC;&#x2122;t its five-star rating that generated the recent headlines and news stories about Lotus. It was the lawsuit and a series of emails by Lotus executives that came to light. The lawsuit was filed on behalf of Jasit Takhar and Anil Gupta. Through their Jackson-based firm, Four Pointe Investments LLC, the pair got a mortgage of nearly $1.5 million from Lotus in 2008 to buy a Travelodge motel in Jackson. Later, they had trouble making payments. The lawsuit claims the two had trouble working out terms with the bank in part because of racist behavior, a charge that was particularly noteworthy because the bank was founded to serve the needs of the Asian-Indian business community. Most of those who invested in the bank were of Indian descent, and most of its board members are Indian, as are Takhar and Gupta. At the heart of the lawsuit were numerous emails, the most inflammatory involving Lotus CFO Richard Bauer. In one of the memos, written May 24, 2010, Bauer referred to members of the board of the bank as â&#x20AC;&#x153;chimps.â&#x20AC;? Thursday morning, a major Lotus shareholder who asked not to be identified said he was sure shareholders would OK the sale. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s 1.3 times book value, which isnâ&#x20AC;&#x2122;t much,â&#x20AC;? the shareholder said. â&#x20AC;&#x153;Normally, I would refuse. If the lawsuit had been settled before the emails became public, there would have been no need to sell the bank. Now, Iâ&#x20AC;&#x2122;m just happy to make a little money. Iâ&#x20AC;&#x2122;m really glad my money will be liquid again.â&#x20AC;? Lotus common stock holders will receive $12 a share. The shareholder said the word among shareholders is that Takhar and Gupta shared $350,000 in the settlement and got their current mortgage with Lotus reduced by $100,000. When asked whether those figures were accurate, Elizabeth Thomson of Bloomfield Hills law firm Hertz Schram PC, lead plaintiffsâ&#x20AC;&#x2122; attorney, declined comment. When Searle was asked whether the figures were accurate, he said: â&#x20AC;&#x153;I absolutely decline comment. The suit was amicably settled.â&#x20AC;? Searle said no discussions have occurred with Fehring about whether Lotus management would continue after the sale closes. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

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CRAIN’S DETROIT BUSINESS

More health insurance products available to small business in ’15 BY JAY GREENE CRAIN’S DETROIT BUSINESS

EXECUTIVE CALENDAR Regional event dates, locations and contacts, all in one place.

crainsdetroit.com/executivecalendar

Small businesses with fewer than 50 employees have more health insurance product choices for the 2015 plan year during this year’s renewal season than they did last year, but the amount of plans is fewer than in past years. The price increases are variable. The average is under 10 percent for renewables, but the range is from no increase to about 25 percent. For newer Obamacare-compliant plans, the increase could be 20 percent to 60 percent over the predecessor plans. The current options are still reduced since the Patient Protection and Affordable Care Act was approved in 2010, several metro Detroit insurance executives said. For Southeast Michigan, the majority of small companies are renewing their existing health benefit policies for 2015 at single-digit

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felt the need to continue “ Most employers with employer-sponsored coverage due mainly to the competitive landscape (recruiting and retention).

”

Cameron Kennedy, Cambridge Consulting Group

rate increases, say insurance executives at Health Alliance Plan and Priority Health. But some are paying significantly higher rates, depending on the makeup of their workforce, insurance executives and agents told Crain’s. Last year, President Barack Obama deferred to state insurance commissioners whether to allow health insurers to extend plans that wer not Obamacare-compliant through 2015. Under Obamacare, health plans must include a minimum of 10 essential health benefits and comply with other affordability requirements. Michigan’s health insurers were allowed to extend plans, and many of them have allowed small businesses to continue their plans with price increases that reflect historical trends. However, Blue Cross Blue Shield of Michigan decided not to extend nonObamacare-compliant health plan choices for 2015, forcing many clients to decide whether to purchase a more expensive ACA-compliant plan with the Blues or go elsewhere. Blue Cross officials said they don’t have an average premium rate that small businesses would pay because of the large number of plan options. Detroit-based Blue Cross is offering 53 different smallgroup plans with eight of those offered on the Small Business Options Plan exchange.

Increasing cost-sharing Health insurance agents tell Crain’s they are quoting ACA-compliant plans for various insurers to small businesses that are 20 percent to 60 percent higher than their previous plans.

TIPS ON OPEN ENROLLMENT, PRODUCTS FOR 2015 䡲 Meet with your health insurance

agent. Know if you are considered a large or small employer with 50 qualified full-time equivalents. 䡲 ACA has brought about many changes in terms of compliance. Small groups, in particular, need to ensure they are compliant with new regulations and requirements. 䡲 Explore new medical plan options for coverage. They include defined contribution with private exchanges, self-funding, shared or level funding, and narrow network plans that offer lower cost but limited provider choices. 䡲 Promote wellness and healthier lifestyles in the workforce. Health insurance is expensive because of chronic diseases, many of which are either preventable or manageable with preventive care and regular treatments. 䡲 Pay close attention to debate in Congress over changes to the Affordable Care Act. There may be changes that impact small companies, including modifying the definition of full-time employers from the current 30 hours to something higher. Source: Interviews with Health Alliance Plan and Blue Cross Blue Shield of Michigan

Cameron Kennedy, president of Troy-based Cambridge Consulting Group, said Cambridge’s small-business clients are paying increases for Obamacare-compliant policies that range from a 10 percent cut in premiums to more than a 90 percent rate increase. He agreed most fall in the 20 percent to 60 percent rate increase range. “There were many factors that See Next Page

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Is your workplace the healthiest in Michigan? Find out by nominating your company for Healthiest Employers of Southeast Michigan, an awards program that will be included in a June 2015 Crain’s report. The Healthiest Employers award, sponsored by Health Alliance Plan, looks at the best practices that employers across the state use to create a healthy workplace. Judging will be handled by Indianapolis-based Healthiest Employers LLC. The group has conducted similar competitions in most of the major U.S. cities. The contest is free to enter. Winners will have their wellness efforts recognized as part of a print supplement to run next year. They also will be featured in a video series as well as honored at an event in April, with a time and location still to come. To enter, go to crainsdetroit.com/nominate. The deadline for entering is Jan. 26.

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new business and customer solutions, said 90 percent of HAP’s small-business customers have already chosen to renew either for the Dec. 1 or Jan. 1 renewal dates. For those small businesses still shopping, Selinsky said many have experienced “sticker shock” at the prices of the Obamacare-compliant plans. “We all knew the new health care plans are more expensive,” he said. “This is the busiest I have seen it in the last 12 years. They are looking at all kinds of different solutions.”

drove the increase, and each employer may have been impacted differently,” Kennedy said. “Rating factor changes, mandated benefits, taxes and fees, and plan design mapping all played a role in the increases.” To hold down premium increases, Kennedy said, many small employers changed their plan design to increase deductibles and copays and increased cost-sharing with employees. “One strategy we did not see was dumping coverage and sending employees to the individual market,” Kennedy said. “Most employers felt the need to continue with employersponsored coverage due mainly to the competitive landscape (recruiting and retention), as well as the preferred tax treatment of employer-sponsored plans versus the individual market.” Kevin Elliott, president of Diebold Insurance Agency in West Branch, said the company will pay 32 percent to 37 percent higher premiums next year for a Blue Cross Obamacare-compliant plan. Monthly premiums for 34 qualified employees totaled $10,063 in 2014 compared with $13,295 in premiums for a high-deductible ($1,750) plan with a health savings account or a $1,000 deductible preferred provider plan for $13,772, Elliott said. Under Obamacare rules called “member-level rating,” small businesses are charged different premium amounts based on the age of their employees. For example, Elliott said, a 30year-old employee at Diebold is paying $357 per month compared with a 58-year-old who is paying $701 per month. “Companies will find a way to reduce costs by getting rid of older people,” Elliott said. “I have already seen this. … There are huge issues (of age discrimination) coming down the road.” Diebold also operates affiliated companies of Tawas Bay Agency LLC and Hartz Insurance LLC in Detroit.

This is the “ busiest I have seen it in the last 12 years.

”

Steve Selinsky, Health Alliance Plan

businesses and a new catastrophic plan. “The catastrophic plan is the leanest you can legally sell anymore,” Cole said. HAP’s Steve Selinsky, director of

Avoiding ‘sticker shock’ Some small employers are looking at private exchanges or self-insured or partially self-insured

Page 7 plans, which offers reinsurance, or stop-loss, above a specified dollar amount, Selinsky said. HAP and Priority Health use the Royal-Oak-based iSelect Custom Benefit Store private exchange. “Those employers having to go to another plan or a different carrier are seeing rates most times in the higher double digits,” Selinsky said. “If you choose a high-deductible plan, there is not as big a sticker shock.” Kennedy said some of his smallbusiness clients also will be looking more closely at private exchanges. They like predetermined employer costs, increased employee plan flexibility and lower administrative costs, he said. Next year, for larger businesses with 100 or more full-time employ-

ees, the Affordable Care Act will impose financial penalties on companies that do not offer at least 70 percent of their workforce health insurance. The fine is $2,000 for every employee, minus the first 80 employees. In 2016, companies with 50 to 99 full-time employees must offer coverage or face the fines, and the required minimum for coverage will rise to 95 percent of a company workforce. Small businesses with fewer than 50 employees are exempt from coverage requirements under the law, which defines a fulltime employee as someone working at least 30 hours a week. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

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Choosing to renew John Dunn, Blue Cross vice president for middle and small group business, said as of Sept. 30, more than 60 percent of Blue Cross smallbusiness customers had already decided to stay with the state’s largest insurer and migrate to an Obamacare-compliant plan. Companies with Dec. 1 plan start date have to decide in the next few days, and those with a Jan. 1 plan start have until mid-December to decide on a plan. “We are seeing some move to self-insured offering, and some are still considering it,” said Kirk Roy, Blue Cross vice president for health reform. “We also are offering a defined contribution on our private exchange, Glidepath.” HealthPlus of Michigan also decided to phase out its noncompliant ACA small-business policies, said Bryan Cole, HealthPlus director of product development. Most small employers renewed with HealthPlus, said Bridget Hollingsworth, HealthPlus manager of enrolled accounts. “Maybe a third have to decide what to do for 2015,” she said. Hollingsworth said the Flintbased insurer is offering seven PPOs and seven HMOs for small

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OPINION

Some bankruptcy fees are ‘bunkum’ D

etroit’s bankruptcy may soon be over, and a debt is owed U.S. Bankruptcy Judge Steven Rhodes and dozens of players for pulling the city through in a remarkable 18 months. But the rear-mirror view also includes some incredible examples of outrageous hubris in the billing practices of some attorneys and consultants whose firms are in line for millions of dollars from the beleaguered city’s battered treasury. We suspect there are some who may be giving thanks this week for the billable quarter-hour. Our nominee for the “Billable Hours Bunkum” award goes to law firm Dentons for charging $450, as reported by WXYZ Channel 7, to walk from a downtown law office to the U.S. District Courthouse (and don’t forget the minutes spent in security line!). All in all, though, given the scope of the city’s debt, the final tab may seem reasonable. We can sympathize with hiring car services for DetroitCleveland runs; but we wonder: Hmmm, was the lawyer in the car ALSO doing work for other clients? Fee examiner Robert Fishman negotiated some line items downward, but others — like the fee for time spent walking four blocks to court — remained. Kind of makes us want to ask the boss about paying us for time in the car on the way to work.

No call for lame-duck action For at least nine days in December, Michigan lawmakers will meet for what’s otherwise known as their “lame-duck” session before newly elected members take office in January. The best thing they can do is pass a comprehensive plan to increase funding for roads and transit. Just last week, a regional planning agency reported that nearly 2,000 miles of roads in Southeast Michigan should be torn up and rebuilt — up more than 500 miles than the year before. The worst thing they can do is use those days to try to enact controversial changes in things like the allocation of Michigan’s Electoral College votes in presidential elections. Many may be surprised to learn that it’s up to states how they allocate their specific electoral votes. Michigan is one of 47 states that have a winner-takes-all rule. Some Republicans would like to change that. The Metropolitan Affairs Coalition — a coalition of business, labor and government leaders in Southeast Michigan — went on record last Friday opposing any change in the lameduck session. Such a change, the MAC board said, requires significant study. We agree.

TALK ON THE WEB From www.crainsdetroit.com Re: Future Red Wings arena Is this project going to do for Detroit what Comerica Park and Ford Field could not? What positive impact on Detroit’s neighborhoods will this project have? Construction people are being temporarily put to work. The skilled jobs in the Ilitch organization are coming over from Joe Louis Arena. The growth in permanent jobs is only going to involve minimum-wage jobs, such as concession workers. The development around the arena is not guaranteed. These types of projects have been failures in other cities. Remember how great the Silverdome turned out for Pontiac? Carolyn Mazurkiewicz This project cannot afford any more delays. It’s time to rebuild Detroit and build its future by putting people to work and attracting new businesses, workers and entertainment to our state. Detroit cannot afford to wait.

Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity. Derek Dimitriov

Re: Bus rapid transit study draws concerns over stops, loop How many people on the BRT design team have actually relied on public transit for their livelihood? Day after day, season after season, year after year? There are enough mistakes in this plan to believe they haven’t gotten the experience on the team. Or they don’t take pride in their work. cuGMaUvdtP

Re: Blue Cross CEO Loepp: Obamacare should be tweaked, not repealed People complain about the Affordable Care Act, but the fact is it is here, so work with the president

to make changes. Repeal and replace with what? Dent There was always an easier and more efficient method of getting health care to those who needed it. It is called vouchering, and it basically was never even brought up as an alternative. It would have left alone those who were satisfied with what they had, and gave a legitimate, governmentally-run option to those that were not. Freedom Trinity It was ludicrous to waste billions and throw the majority of Americans into programs they neither wanted nor needed, just to insure 14 million people who were previously uninsured. Especially since there was already a federal program in place (Medicaid) — but people still try to spin this and force it into a positive. Pjk

KEITH CRAIN: Last one to leave? The lights are already out It’s bad enough that nothing is ever done about my pet peeve. Like clockwork, when there is a moderate to severe storm, thousands of people in Michigan lose electricity for an extended period of time. Mind you, they never lose telephone service, even if they still have a land line, and their natural gas is supplied. (Although without electricity, the gas isn’t much help in keeping the furnace running.) Now, Public Sector Consultants, an outfit in Lansing, has done a study that seems to conclude that our power generating system is be-

coming obsolete faster than we’re replacing it. So, if you follow the logic, if we keep going as we have, we’re not going to have enough capacity. I can’t help but think that our legislators and regulators are making it unnecessarily hard for power companies and others to create new ways to generate energy. You can forget about any suggestion that a new coal-fired plant

might be a good idea. If you want to create complete apoplexy, then just bring up the idea of adding nuclear power plants. Then, there are the many people who think we should dot our landscape with lots of windmills to generate power. I would love to hear how that experiment is going across the river in Ontario. In Europe, France is now generating over three-quarters of its pow-

er from nuclear, while Germany has implemented plenty of green energy. But the heavy reliance on solar power there is an economic model that just doesn’t work. They will have plenty of power — but they will all be broke. It’s a real dilemma for the U.S., and here in Michigan. We haven’t had thoughtful energy policy from our federal government for decades, since the very first oil crisis back in the seventies. But changes are coming. The EPA proposed in June that power plant carbon emissions be cut 30

percent by 2030. The proposal put natural gas front and center as the candidate for a base-load fuel. We have lots of natural gas, and its price has never been lower in recent times — so maybe we can think about switching to natural gas as an energy source. But natural gas is only part of a workable solution. Perhaps we need our state government to create a new bureaucracy in Lansing to come up with an energy policy for our state. Otherwise, we won’t freeze but we’ll sit here with the lights out.

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OTHER VOICES: Public transportation can be key to revival year. Witness the current As construction of the M-1 Rail Line has begun in debate in Lansing regardearnest, it is worth examing the amount required to ining the history of public “fix” Michigan’s roads. transportation in the Chakrabarti argues metro Detroit area. It may against the economic inbe a surprise to many that centives that favor highthroughout the late 19th end single-family homecentury and the first half ownership over other types of higher-density of the 20th century, Detroit living environments. had a well-developed pubTheo Pappas If developers of sublic transportation system. Between 1860 and 1910, with the urbs were allowed to build subestablishment of the Detroit City divisions only if they also built Railway Co. and the growth of its the utilities and roads to support first passenger rail system, Detroit such development, then a freewas invested in a trolley/streetcar market consequence would have system that grew and expanded been much less suburban develalong with its tremendous popula- opment and a much greater intion growth at the dawn of the American Industrial Age. At first there were horse-drawn trolleys, but soon they were replaced with electric ones. Detroit expanded its rail system with the growth of the Grand Trunk Western Railroad routes and lines, furthering the development of the interurban electric railway that linked downtown Detroit with its surrounding communities. Through the early 1950s, Detroit upgraded and expanded its bus system, rail system and highways in an effort to maintain and feed its tremendous economic growth in the postwar environment. It all came to a stop in 1956. The Metro Detroit Streetcar Service ceased after 93 years — yet this was not a spontaneous event. In 1933, the voters of Detroit approved a subway plan, but the “state advisory board” refused to recommend construction to the federal government. In 1934, the Department of Street Railways, with more than 1,600 streetcars and 19 routes at its height, began a campaign to replace its streetcars with buses. What followed was suburban sprawl, transit strikes, noisy and foul buses, and the commitment of vast public funds and resources to highways, freeways, parking structures and roads. Since the 1950s, numerous studies, task forces, and committees put forward dozens of plans for mass transit in Southeastern Michigan, but none gained political or economic support. The die was cast for a low-density, auto-dependent culture. Ironically, the freeways and highways that were built to ostensibly facilitate transit into the city did the opposite. As we look toward the future of mass transportation in metropolitan Detroit, we need to address the key myth of mass/public transportation highlighted by Vishaan Chakrabarti in his book A Country of Cities — A Manifesto for an Urban America. In regard to the notion that mass transportation is not economically self-sufficient and requires massive governmental subsidization and continued public investment, Chakrabarti writes: “Proponents of passenger rail are continually pressed to prove profitability, while few ask whether airlines or auto companies would be profitable without massive government subsidies and bailouts.” The truth is that government subsidizes the construction and maintenance of highways, roads, bridges, and other infrastructure needed to support the automobile to the tune of billions of dollars every

vestment in the city, supporting higher densities and less overall cost per capita of public dollars. Not all public transportation has to take the form of elevated rails, subways and trains. For example, Cleveland’s HealthLine is a recently developed bus rapid transit system that connects downtown with its medical/hospital districts and universities. It employs new technologies and buses to support a clean, efficient and safe transportation system. The result is that along each stop of the 4-mile journey, new retail and housing developments have taken root. In fact, public transportation often stimulates real estate develop-

ment in much the same way as suburban developments have done, but with much less public investment and cost per capita. The Portland Metropolitan Area Express line, which serves over 120,000 passengers a day, was funded by the reallocation of money originally intended for freeways. Public transportation can result in more sustainable cities, more efficient forms of transportation, less traffic congestion and parking problems, and most importantly, the greater availability and access to transportation by people who need reliable transportation to maintain their employment. What seemed the right thing to

do more than 100 years ago should echo forward to our current leadership to provide them with the will and desire to find a balance of new and modern strategies for public transportation and the rebirth of not just the city of Detroit, but all of Southeast Michigan. Let us strengthen our support for the Regional Transportation Authority and work together for brighter, better communities. The automotive capital of the world can lead the way forward once again. Theo Pappas is an associate and senior planner at Stantec Architecture Group in Berkley. He is a board member of AIA Detroit and AIA Michigan.

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Counting on Talent A CFO’s guide to the new human capital By James Ritchie

s firms throughout the U.S. undertake growth initiatives such as introducing new products, entering new markets, and acquiring other companies, they’re looking to their CFOs for much more than financial leadership. They’re depending on them Matthew Elliott to oversee a wide range of new areas Michigan Market and play a key role in setting corporate President Bank of America direction and identity. Merrill Lynch “The CFO has evolved from this accounting function — the most senior accountant in a company — to being this strategic leader who, by the way, is also involved in finance,” says Matthew Elliott, Bank of America Merrill Lynch market president for Michigan. One task in particular associated with an aggressive growth enterprise is acquiring and retaining talent. Companies need top people in every department in order to sustain high growth rates. And the key strategic role that CFOs play in such firms means that helping to find and keep the best employees is part of their job, too. Hiring is a top concern for a growing number of companies as the economy picks up and corporate confidence grows, according to the Bank of America Merrill Lynch CFO Outlook Survey. CFOs might not become directly involved in hiring decisions except for finance and accounting positions. But their influence on the company’s human resources (HR) strategy means they are key players in talent acquisition and retention efforts. “The CFO gets involved more strategically with the culture you are creating,” Elliott says. “The culture that the CFO and CEO shape trumps everything.” These efforts help ensure that the organization has the human capital, not just the financial resources, to get where it wants to be. Compensation and benefit packages, including healthcare, are important variables.

companies, and the Affordable Care Act has brought additional worries. A crucial part of the solution in many cases is an expansion of wellness and disease management programs, which boost employees’ health and productivity while lowering companies’ long-term healthcare costs. About seven in 10 middle-market companies now offer a wellness plan, according to the Bank of America Merrill Lynch Benefits Solutions Survey.

“Healthcare is now a financial metric,” Elliott says. “Human capital is on the radar. In the past, these issues did not make it to the CFO.” Companies are looking for help to deliver compelling employee plans with options from financial literacy programs and advice to 401Ks to health savings accounts. In the war for talent, how well they fare depends in no small part on the decisions of their CFOs. For ideas on how to boost your hiring and talent retention efforts in Detroit, contact matthew.b.elliott@baml.com

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A BALANCED APPROACH Many CFOs are insisting that their firms incorporate big data into their hiring, placement, compensation and other HR decisions. A Bersin by Deloitte study of 436 North American firms found that advanced talent analytics helped in several areas: leadership pipelines, talent cost reductions, efficiency gains, and talent mobility. There was a market impact, too. Companies with mature talent analytics capacity beat the Standard & Poor’s 500 stock index by an average of 30 percent over three years, according to High-Impact Talent Analytics: Building a World-Class HR Measurement and Analytics Function. A challenge in rapidly growing companies is designing packages to meet the needs of both experienced employees and those just starting out. Achieving the right balance of offerings helps organizations take advantage of what each generation brings to the workplace. Most of the detail work on these matters falls to the HR department. Still, it’s ultimately up to the CFO to make sure the packages are competitive in the market while remaining affordable for the company.

THE HEALTH METRIC Our CFO Outlook Survey also reports that healthcare coverage has long been a top issue for middle-market

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REPORTER’S NOTEBOOK SMALL-BUSINESS LENDER GROWS

Tom Henderson covers banking, finance, technology and biotechnology. Call (313) 4460337 or write thenderson @crain.com.

Retail Capital uses private equity investment to expand, boost analytics to speed up lending, Page 13

Tom Henderson

Diligence yields successful niche Melissa Spickler can manage your money and, in a pinch, probably watch your back, too. She is managing director of Spickler Wealth Management Group in the Bloomfield Hills office of Merrill Lynch and has carved out two niches to go with her group’s traditional wealth management services: serving the investment needs of the LGBT community and helping manage health care costs for the elderly. Spickler, who Spickler was named one of Barron’s top 100 financial advisers from 2012 to 2014, majored in criminal law at Michigan State University and from 1977 to 1979 worked undercover for the state attorney general’s office, looking for fraudulent billing practices at Lansing-area car dealerships. One night, a guy who worked at one of the dealerships where she unearthed fraud saw her in a bar, suspected she was the whistleblower and followed her home. “He broke into my house and threw me against the wall,” she said. Trained in martial arts, “I broke the guy’s arm and nose. The police came and took him away. I decided law enforcement wasn’t for me.” Spickler sold life insurance, then new cars. In 1980, a customer, impressed by her sales skills, suggested she apply to Merrill Lynch’s training program. Spickler got an interview with Russell Mann, who ran the Bloomfield Hills office. “It didn’t go well, and I knew he wasn’t going to hire me,” she recounted. “I went out to the lobby and sat there for four hours. Finally, he came out.” “ ‘What are you doing here?’ he said. “ ‘I’m not leaving until you hire me.’ He hired me and I started on Monday,” she said. Spickler spent three months training in New York City, then was assigned two male mentors upon her return. “They told me I had to open 100 new accounts in a month,” she said. “I opened 110 accounts my first month. That’s when they told me I’d set a Merrill Lynch record,” she said. Spickler’s mentors had thrown out an impossible number to see how she handled stress. Today, she has a team of 10. Twenty years ago, Spickler added her first lesbian-gay-bisexualtransgender clients, a same-sex couple. “I didn’t judge them.” The couple sent her a referral, and by word-of-mouth, Spickler had a niche. About 10 years ago, Stacey Cassis, a member of the LGBT community, joined Spickler’s group. Nancy Katz of Plymouth served with Cassis on the board of Affirmations, an LGBT community center in Ferndale, and became a client. “Melissa is great. She’s done a wonderful job for us,” said Katz.

DAVID HALL

Carl Hollier (left) had to scramble for financing for a home in the Boston-Edison section of Detroit. When Drextel Amy of Liberty Bank and Trust heard about Hollier’s interest rate — 18 percent — he exclaimed, “We’ll get this redone,” and tapped into a J.P. Morgan Chase program.

Bank – and trust BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

t is fitting that Liberty Bank and Trust, as part of the $100 million program to help revitalize Detroit that J.P. Morgan Chase & Co. announced in May, has begun closing loans for some of the winning bidders for houses auctioned off by the Detroit Land Bank. It is fitting, too, that one of the first loans the bank closed, on Oct. 31, was for Carl Hollier, who got in a highly publicized bidding war for a house in the historic Boston-Edison district, which drew so many online viewers last May that the land bank’s website crashed. On July 10, Chase announced the program with Liberty to finance the purchase and repairs of homes bought at auction. Liberty set aside $15 million for loans, with the Chase Foundation contributing a grant of $5 million to offset loan losses Liberty might incur, $300,000 for a down-payment assistance fund to help eligible Detroiters get up to $10,000 each, and $200,000 in operating costs. Liberty Bank and Trust, based in New Orleans, entered the Detroit mar-

Chase program opens doors for Detroiters with loans for rehabbed homes ket in November 2009 when it bought the assets of the long-struggling Home Federal Savings Bank after it was ordered closed by federal and state regulators. Home Federal Savings Bank had a reputation far beyond its size. Always a small bank, it was founded in 1947, a few weeks after Jackie Robinson broke the color line in baseball, to break the mortgage color line in Detroit. Until Home Federal Savings was founded, African-Americans here were shut out by the city’s banks from getting mortgages. The loan was particularly appropriate for Hollier. As an 11- and 12-year-old nearly three decades ago, Hollier had a Detroit News paper route in Boston-Edison that

took him past the Chicago Street house he bid on. His aunt and uncle now live across the street, and his brother, Adam Hollier, a vice president of the Hantz Woodlands urban farming project on the east side, lives around the block. “The house had been sitting there empty. I’d been making calls for years trying to figure out who owned it and if it was for sale,” said Hollier. So when Hollier, who retired with a disability from the Detroit Fire Department and now is a professional DJ who tours regularly with the rapper Xzibit, found out the house was up for auction — it was built in 1914 with a third-floor ballroom, five bedrooms, four fireplaces and a separate butler’s stairway — he was determined to get it. Hollier’s winning bid was $135,000. “My fiancee was watching the auction online in Arizona,” he said. “She was calling me. ‘Are you out of your mind? I know you love that house, but ….’ ” There was another “but.” But the land bank’s website crashed just before his bid became official, requiring a second auction a few days later. This time, his chief rival gave up early, and Hollier got the house for $97,000. See Chase, Page 12

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Finance

Chase: Opening doors to build homes â&#x2013; From Page 11

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That was when things really got interesting. Hollier says he had been approved by an out-of-state bank for a mortgage, but on July 31, the day the loan was supposed to close, the bank backed out because it didnâ&#x20AC;&#x2122;t like a clause in the auction contract: that his house would revert back to the Land Bank if it wasnâ&#x20AC;&#x2122;t brought up to code in nine months. Hollier applied for the Liberty Bank program, but there wasnâ&#x20AC;&#x2122;t enough time to close on a loan to beat the 90-day deadline he had as an auction winner to pay the Land Bank. So Hollier took a loan at 18 percent interest from a nonbank lender for the $80,000 he needed to pay the Land Bank in full. Thatâ&#x20AC;&#x2122;s when Drextel Amy, regional president for Liberty Bank, re-entered the picture. â&#x20AC;&#x153;I heard heâ&#x20AC;&#x2122;d closed and called him up,â&#x20AC;? Amy said. â&#x20AC;&#x153;I told him, â&#x20AC;&#x2DC;Listen, youâ&#x20AC;&#x2122;re at 18 percent. Weâ&#x20AC;&#x2122;re not going to let that happen. Weâ&#x20AC;&#x2122;ll get this redone.â&#x20AC;&#x2122; But it wasnâ&#x20AC;&#x2122;t easy. Itâ&#x20AC;&#x2122;s a long process, 10 times longer than a conventional loan.â&#x20AC;? Under terms of the Chase program, Liberty provides loans of up to 96.5 percent of rehabbed value at market rates to customers with credit scores as low as 600. An outside appraiser and a bank appraiser put a value on a house as is, then the bank and the customer each get estimates for the repairs needed to get the house up to code, and more appraisals are then made of what the finished house will be worth. If all the numbers work, the loan can close. The numbers worked for Hollier, and he got a loan of $150,000 at 5.5 percent, $80,000 to refinance the house, the rest for rehab costs. â&#x20AC;&#x153;People were getting great deals on houses, but there was no ability to get financing,â&#x20AC;? said Amy. Now there is.â&#x20AC;?

More rehab help

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On Nov. 3, New York City-based Chase announced a five-year program called Detroit Service Corps to send teams of employees to Detroit to help nonprofits. The first four three-person teams finished their three-week stints last week at Eastern Market, Focus: Hope, Michigan Community Resources and Vanguard Community Development Corp. More teams will arrive each year for brief labor-intensive stays. The team at Vanguard was to develop a business model to buy, rehab and sell homes in Detroitâ&#x20AC;&#x2122;s North End, an area bounded by Woodward Avenue to the west, I-75 to the east, I-94 to the south and Woodland Street to the north. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s been a wonderful experience,â&#x20AC;? said Khalilah Gaston, executive director at Vanguard, a few days before the embedded Chase employees left for home. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m sure all the other nonprofits say they had the best team, but I did.â&#x20AC;? She proudly showed off a detailed spreadsheet her Chase volunteers had come up with that would provide the backbone of the program. The spreadsheet included cashflow analyses for buying homes using both credit and grants, and

operational and program support. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;ve never gone through a process with a funder that went this quickly and this smoothly,â&#x20AC;? said Invest Detroit President Dave Blaskiewicz. He said that two projects are nearing final approval, which he expects to be a formality, one for an iconic Detroit building he said he canâ&#x20AC;&#x2122;t name yet, the other for a growing metal processor to buy COURTESY OF J.P. MORGAN CHASE & CO. more equipment. Chase employees Paula Oliveira, Jennifer Prichard and Blaskiewicz said Benjamin Wang provided the Detroit nonprofit three other projects Vanguard Community Development Corp. a business are well along the apmodel to buy, rehab and sell homes. proval process, and there is a full pipeline line items for such things as rehab of projects seeking financing. cost, holding cost, broker fees, taxIan Wiesner, the senior loan offies, buyer income, estimated cer at Capital Impact Partners, said lenders loan to value and so forth. he expects a first close from the Gaston said her organization fund to be in early December, on a has done new single-family and se- renovation for a 36-unit apartment nior housing developments, but near Midtown, with a pipeline of this is the first time it has done reprojects worth about $25 million. hab projects, and the Chase inâ&#x20AC;&#x153;We focus on multifamily rentals. volvement is crucial. We want to increase density along â&#x20AC;&#x153;This is going to help us shore key corridors in the city,â&#x20AC;? he said. up the market and then to ignite â&#x20AC;&#x153;Chase has been a great partner. the market,â&#x20AC;? she said. They really listened to us when they Her Chase crew was made up, asked us what the market needed.â&#x20AC;? ironically, of three members of Chaseâ&#x20AC;&#x2122;s private banking group, which manages money for the affluent. Jennifer Prichard was here from With the announcement on Sept. Columbus, Ohio, with Benjamin 16 that Chase will fund $1 million of Wang in from Hong Kong, and Paula a $2.7 million innovation fund run Oliveira in from Sao Paulo, Brazil. by Macomb Community College to supThey temporarily doubled Vanport business start-ups throughout guardâ&#x20AC;&#x2122;s workforce, and all three Southeast Michigan, the bank has said they got as much or more out of deployed more than $21 million of the program than they contributed. the $100 million it committed to in Chase has described the employMay, according to Steve Oâ&#x20AC;&#x2122;Halloran, ees who came here as among the Chaseâ&#x20AC;&#x2122;s head of public relations, bankâ&#x20AC;&#x2122;s rising stars. corporate responsibility. â&#x20AC;&#x153;This is a great opportunity for The Macomb fund will provide Chase to develop leadership, to $25,000 grants to help metro Detroit take its best and brightest and entrepreneurs get ideas ready for bring them together to collaborate. market and will make loans of up to Itâ&#x20AC;&#x2122;s a great training ground,â&#x20AC;? said $100,000 to help more advanced earWang, a Chase vice president. ly-stage companies get to the point

$21 million and counting

Closing in a hurry â&#x20AC;&#x153;We got these loan funds closed in less than 90 days. In record time. It never happens that fast,â&#x20AC;? said Aaron Seybert, Chaseâ&#x20AC;&#x2122;s Ann Arborbased vice president of community development banking and new markets tax credits. He was speaking about a pair of $20 million loan funds for two nonprofit community development lenders, Invest Detroit and Capital Impact Partners â&#x20AC;&#x201D; the Chase Invest Detroit Fund and CIPâ&#x20AC;&#x2122;s Detroit Neighborhoods Fund, which will be supplemented with $10 million of CIPâ&#x20AC;&#x2122;s funds. The Invest Detroit Fund will provide flexible-term financing for commercial and industrial business, while the CIP fund will predominantly finance multifamily residential properties, mixed-use real estate and grocery stores. In addition to those funds from Chase Bank, the Chase Foundation gave the two organizations a total of $7.5 million in grants for

they can attract equity funding. In addition to the $7.5 million in program support for Invest Detroit and CIP and the $5.5 million for Liberty Bank and Trust, Chase spent $2.8 million for a mapping project to fight blight, $2.1 million on workforce readiness programs with several area nonprofits, $1.2 million for the M-1 Rail line along Woodward, and $1 million on small-business initiatives with Eastern Market, Bizdom and TechTown. Add in the $40 million for Invest Detroit and CIP, which has been put into but not yet spent, and Chase is nearly two-thirds of the way to its total commitment. When asked about the progress Chase has made, Detroit Mayor Mike Duggan said: â&#x20AC;&#x153;Chase has been a great partner. Theyâ&#x20AC;&#x2122;ve had me to New York twice to meet with senior management. Every two or three weeks, someone from Chase is in my office. Thereâ&#x20AC;&#x2122;s no doubt theyâ&#x20AC;&#x2122;re completely engaged.â&#x20AC;? Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

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CRAIN’S DETROIT BUSINESS

November 24, 2014

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Finance

Retail Capital uses investment to expand, boost analytics BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

Retail Capital LLC is wasting no time putting to use a large private equity investment announced in August. The company, which provides growth capital to small businesses, is expanding its headquarters in Troy, has opened a New York office and is beefing up its risk analytics department so that it will soon be able to provide funding the same day a small business fills out an application. In August, Flexpoint Ford LLC, a Chicago-based private equity firm with more than $1 billion under management, invested in Retail Capital, which is ranked 35th in the U.S. and No. 1 in Michigan on the 2014 Inc. list of the 5,000 fastest growing companies in the U.S. Terms of investment weren’t announced, but Flexpoint generally invests between $30 million and $150 million in its portfolio companies. Retail Capital, which was founded in December 2010 and operated until earlier this year as a joint venture with Troy-based Crestmark Bank, had 2013 revenue of $7 million and three-year growth in revenue of nearly 7,000 percent. Founder Ryan Rosett, who has the title of chief revenue officer, says the company plans on growing revenue more than 100 percent this year. As part of the deal, Flexpoint brought in Glenn Goldman, a technology and financial services veteran, to be CEO of the firm. Technically, Retail Capital doesn’t provide loans to small businesses, it buys a share of future sales and Goldman is paid back with a percentage of future cash flow, including credit card payments made by its customers’ customers. According to Rosett, the company provided $28 million in capital last year, expects to provide more than $60 million this year and is targeting more than $110 million next year. Previously, Goldman had been CEO of Capital Access Network, a nonbank lender to small businesses based in New York City. After leaving Capital Access, he spent a year at Flexpoint as entrepreneur in residence, sourcing potential deals, which led to the investment in Retail Capital. Prior to funding Retail Capital, Rosett was a principal in Diversified Property Group LLC, a real estate developer based in West Bloomfield Township. Retail Capital employs five in New York and 62 in Troy, up from 53 when the Flexpoint deal was announced. It is enlarging its space on Kirts Boulevard from 10,000 square feet to 13,000, mostly to house its expanded risk analytics team. Rosett says the company plans to be at 150 employees locally in three to five years. Goldman said the key for Retail Capital to quickly approve capital for small-business owners — who

GLENN TRIEST

Founder Ryan Rosett says Retail Capital provided $28 million in capital last year, expects to provide more than $60 million this year and aims for more than $110 million next year.

typically don’t have much collateral or lack detailed financial statements — is the company’s proprietary analytics, which draw correlations between such things as what margins different kinds of businesses typically have, how revenue has been growing and where the business is located. “It’s a way for us to use big data to move faster than banks can move,” said Goldman.

LENDING

He said risk analytics can help Retail Capital determine which potential customers, even those with bad credit scores, are actually good risks, something banks can’t attempt to do for regulatory reasons. Goldman said factors that contribute to a bad FICO score are often irrelevant to whether a customer has a thriving business. He said many small-business owners put a lot of their expenses on their credit cards, which can lower their scores, and they may have hurt their scores by making inquires for equity loans or lines of credit from banks and getting turned down. But, Goldman said, that doesn’t mean they don’t have healthy businesses that will be able to use growth capital successfully. Dave Wilkins, the president of K9 Kindergarten LLC, a pet store, animal hospital and animal day care in Shelby Township, is an example. Wilkins needed capital in June to add inventory, an on-site bakery and a tag machine but had been turned down for a bank loan because of a mediocre credit score. He said the business was grossing $50,000 a month and was growing and profitable. He said he got first got $46,000 from Retail Capital, then another $13,000, and plans to have the money paid back by February. “Retail Credit gave us the chance we needed. They stuck

T R E A S U RY

M A N AG E M E N T

their neck out for us,” he said.

Words of support “More than anything else, we really liked Ryan and the management team. We are very picky about whom we partner with and who’s in our portfolio,” said Steven Begleiter, a managing director at Flexpoint, which focuses on health care and financial services. “They’re only a few years old. In any industry, there’s a right way and a wrong way to do things, and they did everything the right way.” “I like their model. It’s a fastgrowing business,” said Crestmark Chairman and CEO W. David Tull, who described Crestmark’s role with Retail Capital as “acting as an incubator. We created a joint venture with them, CM Retail LLC, so they could fund their transactions, grow their business and do what they did, which is become independent.” Tull said the decision to end the joint venture and for Retail Capital to take on equity funding from Flexpoint Ford was amicable. “There were a range of options when we started,” he said. “We might have bought them, we might have continued in business with them. It’s totally, absolutely amicable that they decided to go the way they did. We’re excited for them.” In September 2013, Detroit-based Rockbridge Growth Equity LLC, one of

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Dan Gilbert’s companies, bought Bethesda, Md.-based Rapid Financial Services LLC. Doing business as Rapid Advance, it, like Retail Capital, is a specialty finance company focusing on growth-capital loans to small businesses, generally ranging between $20,000 and $500,000. “It’s a great space to be in, it really is. There’s a lot of private equity interest in that space, so I’m glad we got ahead of it,” said Kevin Prokop, a managing partner at Rockbridge. Prokop said small businesses have more difficulty getting traditional bank financing now, in part for caution borne out of the recent recession, but more so because of federal regulatory changes that required banks to tighten lending standards. “Traditional lenders are finding it very hard to be active in this space because of regulatory reform, so it’s opened up a real opportunity for businesses like Rapid Advance and Retail Capital,” he said. “Small businesses are the backbone of the economy, and it’s important for them to be able to get growth capital.” Prokop said he has been watching Retail Capital’s growth. “They run a very good business. They’re good operators,” he said. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

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November 24, 2014

CRAIN’S DETROIT BUSINESS

Finance

Top team, solid plan put Talmer on fast track to growth BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

In April 2010, First Michigan Bancorp Inc. — a 3-year-old, one-branch bank holding company in Troy with just $75 million in assets and 30 employees — announced at the bottom of the recession that noted New York City financier Wilbur Ross had invested almost $50 million in a capital-raising effort of $200 million to grow the bank. It seemed counterintuitive to some that anyone would invest in a place that had been in a one-state recession for years before the national economy also tanked, but Ross and bank President David Provost thought that Provost opportunities would arise for a bank with little or no distressed assets on its balance sheet to buy troubled banks at a big discount to book value. There were, indeed, opportunities, and they paid off for the holding company, which was renamed Talmer Bancorp Inc. — dropping the “Michigan” as it expanded into Wisconsin and Illinois.

In February, Talmer went public on the Nasdaq exchange under the symbol “TLMR” in a $202 million initial public offering. The same day First Michigan finished its fundraising in 2010, the bank was the winning bidder for the $1.1 billion in assets of Citizens First Bank of Port Huron, which was shut down by state and federal regulators. Talmer was off and running. Since the second quarter of 2009, Talmer has been the fastest-growing bank in the U.S., according to data compiled by SNL Financial, a Charlottesville, Va.-based company that provides data and analysis for the banking, financial services and insurance industries. In five years, Talmer grew its assets by nearly 8,000 percent to a total of just over $5.6 billion as of June 30. State Bank Financial Corp. of Atlanta was the second-fastest-growing bank, increasing its assets more than 7,300 percent to almost $2.6 billion. Customers Bancorp Inc. of Wyomissing, Pa., was a distant third, growing just over 2,000 percent to $5.6 billion. No other state bank was in the top 20, which grew assets by an average of about 1,200 percent. “The plan was to grow. There were other banks and organiza-

tions that had even bigger plans then, but we were able to execute,” said Provost, who is president and CEO of the holding company and chairman and CEO of Talmer Bank. “We got a good team cobbled together from a lot of banks in Michigan and exceeded what everyone else was able to do. The opportunities in 2010 were in the failed-bank space. What we are able to do when that space dried up was shift strategies away from the FDIC-assisted deals to other strategies.” Said John Donnelly, managing director of the Grosse Pointe-based investment banking firm Donnelly Penman & Partners: “David’s strongest suit is he truly has surrounded himself with the absolute best people money can buy and delegates lots of authority to them. “Dave and his team’s accomplishments in this short period of time would put him in the Hall of Fame league with the likes of First of America, Old Kent and Standard Federal, which all started as small Michigan community banks and through dozens of acquisitions grew to be multibilliondollar organizations. “Of course, they became PNC, Fifth Third and Bank of America, respectively. But the footprint goes back to these predecessor organi-

zations and the outstanding CEOs that led them.” Talmer followed its acquisition of Citizens First Bank with the acquisitions of other banks closed by regulators — Wisconsin-based First Banking Center, Madison Heights-based Peoples State Bank and Mt. Clemens-based Community Central Bank. And then Talmer turned to buying assets out of bankruptcy. In November 2012, it bought First Place Bank of Warren, Ohio, in a bankruptcy sale, adding $2.6 billion in assets. In October 2013, Talmer bought the remaining assets of long-troubled Capitol Bancorp Ltd. of Lansing in another bankruptcy proceeding, a sale that included Ann Arborbased Michigan Commerce Bank. Finally came a healthy acquisition. In August, Talmer announced it had agreed to acquire First of Huron Corp. of Bad Axe, its $228 million in assets and its wholly owned subsidiary, Signature Bank. The deal is expected to close in February. When asked whether anything was in the works, Provost said, “The banking industry is consolidating at a record pace, and we hope to be part of that.” Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

Women biz owners’ optimism is in check Women who own businesses are confident about their own sales and profits over the next six months while being more cautious about the economy as a whole, according to a national survey by Pittsburgh Financial Services Group Inc., the holding company of Pittsburgh-based PNC Bank. The PNC Women Business Owners survey of 154 businesses with annual revenue of between $100,000 and $250 million found that only 9 percent of respondents think sales will decrease in coming months, with 44 percent expecting sales to increase and 47 percent expecting them to remain about the same. Fifty-four percent say they are optimistic about the national economy, while 43 percent say they are pessimistic. As a result of that cautious take, only 9 percent of women business owners say they plan to hire workers over the next six months, and 5 percent plan to reduce staff. Among those who don’t plan to hire, 29 percent say they are most focused on improving their company’s online presence, and 23 percent say they plan to concentrate on improving their customers’ experience. — Tom Henderson

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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

November 24, 2014

Page 15

Finance

State banks on stellar rebound BY TOM HENDERSON CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

The health of Michigan banks today stands in stark contrast to how they were faring at the beginning of January 2011, according to quarterly data compiled by BauerFinancial Inc., a Fort Lauderdale, Fla.based ratings service. Back then, for the third straight quarter, there were eight banks in Southeast Michigan that got the lowest rating of zero stars, and there were 12 in the state. Today, thereâ&#x20AC;&#x2122;s not a single zerostar bank in the region or state. Of the 117 banks headquartered in the state, none received less than two stars on the five-star scale. There are only two banks in the fivecounty region with ratings as low as two stars â&#x20AC;&#x201D; Oxford Bank and First National Bank of Howell â&#x20AC;&#x201D; and only six statewide. In 2011, only two area banks had five-star ratings â&#x20AC;&#x201D; Auto Club Trust of Dearborn and First Michigan Bank of Troy, since renamed Talmer Bank and Trust â&#x20AC;&#x201D; and there were 28 such banks in the state, many of them based in the Upper Peninsula, far from the frenzied lending markets that led to the collapse of the economy. Today, there are 39 top-rated banks, including 11 in the area â&#x20AC;&#x201D; Ann Arbor State Bank; Dearborn Federal Savings Bank; First Indepen-

LENDING a helping hand from one entrepeneur to another.

HOW THE BANK STARS ALIGN How other area banks currently rank: äĄ˛ Four stars: Bank of Ann Arbor; Bank of Birmingham; Bank of Michigan, Farmington Hills; Crestmark Bank, Troy; Hantz Bank, Southfield äĄ˛ Three and a half stars: Flagstar Bank, Troy äĄ˛ Three stars: Auto Club Trust, Dearborn Here are the ratings for banks doing business in Michigan but are headquartered elsewhere: äĄ˛ Five stars: Comerica Bank, Texas; Fifth Third Bank, Ohio; FirstMerit Bank, Ohio; Huntington Bank, Ohio; KeyBank, Ohio; PrivateBank and Trust, Illinois äĄ˛ Four stars: Bank of America, North Carolina; J.P. Morgan Chase Bank, New York; Charter One Bank, Rhode Island; Northern Trust, Illinois; Old National Bank, Indiana; Wells Fargo Bank, South Dakota äĄ˛ Three and a half stars: PNC Bank, Pennsylvania; TCF Bank, Minnesota äĄ˛ Three stars: Urban Partnership Bank, Illinois dence Bank of Detroit; First State Bank of St. Clair Shores; Huron Valley State Bank in Milford; Level One Bank in Farmington Hills; Lotus Bank in Novi; Main Street Bank in Bingham Farms; Sterling Bank & Trust in Southfield; Talmer Bank and Trust; and University Bank in Ann Arbor. The lack of zero-star banks is in part due to many of those banks being closed down during the recession by state and federal regulators. Of the eight listed in January 2011, Paramount Bank, Farmington Hills; Community Central Bank, Mt. Clemens; Fidelity Bank, Dearborn; and Peoples State Bank, Madison Heights, were shuttered.

Of the others who got zero stars, Clarkston State Bank rebounded to become a four-star bank, Oxford Bank and First National Bank of Howell are back to two stars, and the assets of Ann Arbor-based Michigan Commerce Bank were sold to Talmer. BauerFinancial says it evaluates capital-to-debt ratios, profit and loss trends, delinquent loans and charge-offs, historical data, liquidity, community reinvestment ratings and market versus book value. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

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November 24, 2014

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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

CRAIN'S LIST: MICHIGAN BANKS Ranked by 2014 deposits inside market

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20141124-NEWS--0018-NAT-CCI-CD_--

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10:36 AM

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Page 18

CRAIN’S DETROIT BUSINESS

PEOPLE

QUICK & EASY PRECAST PARKING.

ARCHITECTURE Mark Farlow to director of design, Hamilton Anderson Associates Inc.,

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McLaren Health Care has named Bill Hardimon as president and CEO of McLaren Medical Group, Flint. Hardimon has more than 20 years of health care administration experience. Most recently he served as CEO for Mid-Michigan Physicians in Lansing. He also has been CEO of Michigan CardioVascular Institute in Saginaw and the Cardiology Institute of Michigan in Flint, as well as holding administrative roles with Detroit Medical Center, Detroit Community Health Connection, Greater Detroit Physical Therapy and Rehabilitation, and Great Lakes Rehabilitation Hospital. Hardimon, 49, replaces Mark O’Halla, who remains with Hardimon McLaren Health Care as executive vice president and COO. Hardimon has an MBA from Wayne State University and a bachelor’s degree in human physiology from Oakland University.

troit, from vice president. Bob Caza to communications manager, North

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to executive director, Oakland Counfrom manager, provider relations and education, HealthPlus of Michigan, Flint. Michelle Merrill to assistant conducGrennell tor, Detroit Symphony Orchestra, Detroit, from guest conductor, Jacksonville Symphony, Jacksonville, Fla., and assistant conductor, Northeastern Pennsylvania Philharmonic, WilkesBarre, Pa. Rita Patel to director, Michigan WellMerrill ness Council, Troy, from wellbeing strategist/independent consultant, Rochester.

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SERVICES David Braun to executive vice president, Jobplex Inc., Birmingham, from

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20141124-NEWS--0019-NAT-CCI-CD_--

November 24, 2014

11/21/2014

10:37 AM

Page 1

Page 19 Ferdinand Samson, VP, Equipment Finance of Level One Bank and client Robert Brisley, President of Polymer Process Development

BUSINESS DIARY ACQUISITIONS C/D/H, a technology consulting firm with offices in Detroit and Grand Rapids, has acquired Blue Sphere Solutions Inc., a software development firm with offices in Grand Rapids and Chicago. Website: cdh.com. DTE Energy Co., Detroit, announced it is purchasing the Renaissance Power Plant, Carson City, from LS Power Co., New York City. DTE expects to complete the deal in the first quarter of 2015. Website: dteenergy.com.

CONTRACTS Near Perfect Media, Farmington Hills, a public relations and marketing firm, has added as clients The Sussman Agency, Southfield; Sellers Auto Group, Clarkston; and Institute for Health Care Innovation, Washington, D.C. Website: nearperfectmedia.com. Qualitech, Bingham Farms, a technology integrator and software reseller, was selected by Dembs Development Inc., Farmington Hills, a commercial real estate firm, to facilitate the relocation of all technology equipment, including server, workstations and telephone systems as well as providing a new Intel Terminal server. Website: qualitech.net. TSCADVertising, Saline, a marketing and advertising firm, has been awarded a media buying and promotional advertising contract by Washtenaw Community College, Ann Arbor. TSCADVertising will be responsible for development of a media plan to support brand awareness and promotional messaging. Website: wccnet.edu.

Ferdinand “Ferd” Samson, VP, Equipment Finance of Level One Bank and client Rob Brisley, President of Polymer Process Development

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EXPANSIONS Botsford Hospital, Farmington Hills, opened the Botsford Mohs Surgery Center in the Botsford Cancer Center, 27900 Grand River Ave., Suite 230, Farmington Hills. Telephone: (248) 473-4828. Website: botsford.org. Denso International America Inc., Southfield, part of Denso Corp., Kariya, Aichi prefecture, Japan, has invested approximately $1.6 million to expand the Denso Logistics Michigan warehouse in Belleville. The investment added 40,902 square feet and 10 new jobs. Also, Denso is opening in April a new, 165,000-square-foot shipping warehouse in Nashville, Tenn., investing about $6.7 million and creating about 20 new jobs. Website: globaldenso.com. Michigan First Credit Union, Lathrup Village, has opened a new concept financial store, 21650 Gratiot Ave., Eastpointe. Telephone: (800) 664-3828. Website: michiganfirst.com.

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NEW PRODUCTS Altair Engineering Inc., Troy, a provider of computer-aided engineering and computing software and services, announced the launch of HyperWorks Unlimited- Virtual for Amazon Web services. HWUL-V integrates unlimited use of the HyperWorks computer-aided engineering suite with PBS Professional, a high-performance computing workload manager, and applicationaware portals. This enables organizations to manage the entire simulation lifecycle on the cloud. HWUL-V will be offered in all Amazon Web services regions globally, including the U.S., Europe, Brazil, Japan, Singapore and Australia. Website: altair.com. Munro & Associates Inc., Troy, a consulting engineering firm, has developed the Design Profit 6 Sigma Defect Rate Converter App to allow engineers to easily and quickly calculate statistical process metrics for quality improvement, productivity, reliability and forecasting. The new app for Android users is available for purchase at Google Play. Website: leandesign.com.

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20141124-NEWS--0020-NAT-CCI-CD_--

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November 24, 2014

CRAIN’S DETROIT BUSINESS

CALENDAR UPCOMING EVENTS Detroit Women’s Leadership Breakfast. 7:30-11 a.m. Dec. 2. City Year. Women leaders discuss education reform; chaired by Sandra Pierce, chairwoman and CEO of FirstMerit Michigan. Detroit Athletic Club, Detroit. $75. Contact: Jenna Moritz; email: jmoritz@cityyear.org; website: cityyear.org/Detroit/wlb. Michigan’s Got Talent Series. 11:30 a.m.-1 p.m. Dec. 2. Automation Alley. Lunch ’n’ learn event features Chad Sibley, business systems project manager, Merrill Technologies Group; Danielle Bates, human resources manager, Research Into Internet Systems; and Robert Cohen, executive director, Jewish Community Relations Council, discussing hiring and keeping talent. Automation Alley, Troy.

$20 members, $30 at the door; nonmembers $40, or $50 at the door. Preregistration closes end-of-day Nov. 26. Contact: (800) 427-5100; email: info@automationalley.com; website: automationalley.com. The D Show 2014. 6-10 p.m. Dec. 3. Adcraft Club. Detroit’s creative, media, entertainment and production communities celebrate top talent. Masonic Temple, Detroit. $130 regular, $65 student members. Register at adcraft.org. Website: thedshow.org.

Professional Development Seminar: Networking 2.0. 8-10:30 a.m. Dec. 5. Marketing & Sales Executives of Detroit. Gerry Weinberg, CEO of Gerry

Weinberg & Associates/Sandler Training, shares how to maximize networking efforts. Management Education Center, Troy. $35 MSED members, $50

nonmembers. Contact: (248) 643-6590; website: msedetroit.org. 25th Annual Fiesta Hispana Gala. 6 p.m.-midnight Dec. 5. Michigan Hispanic Chamber of Commerce. Event celebrates Hispanic leaders in business, community, educational and government leaders. MGM Grand Detroit. $200 individual tickets. Contact: Barb Lange, blange@mhcc.org; website: mhcc.org.

21st Century Workspace, Workplace, Workforce: Microsoft, Steelcase, Right Management. 11:30 a.m.-1:30 p.m. Dec. 8. Inforum. Speakers include John Fikany, Microsoft vice president, who will discuss living in a mobile and cloud-centric world; Laura Feinauer, project leader for brand communications at Steelcase, who will talk about the importance of place for employee

well-being

and

engagement;

and

Michael Haid, executive vice president, talent management and global strategic workforce consultant, Right Management, who’ll discuss how to align talent and business strategies. Detroit Marriott Renaissance Center. $40 members, $60 non-guests, $25 students. Contact: (877) 633-3500. Register at inforum michigan.org.

State of the Region/Annual Meeting. 5 p.m. Dec. 10. Detroit Regional Chamber. The chamber discusses an analysis of business and economy trends. Westin Book Cadillac Detroit. $25 members, $595 future members. Contact: Janelle Arbuckle, (313) 596-0340; email: jarbuckle@detroitchamber.com; website: detroitchamber.com/events. Holiday in the D. 6-10 p.m. Dec. 10. Adcraft Club of Detroit. Holiday net-

working and a benefit for Bottomless Toy Chest. MotorCity Casino Sound Board, Detroit. $80. Contact: (313) 8727850; email: adcraft@adcraft.org; website: adcraft.org. Detroit Economic Club Presents. 11:30 a.m.-1:30 p.m. Dec. 11. With Anthony Earley Jr., chairman, CEO and president , PG&E Corp. Westin Book Cadillac Detroit. $45 DEC members, $55 guests of members, $75 others. Contact: (313) 963-8547; email: info@econ club.org; website: econclub.org. Silver & Gold Awards. 10:30 a.m.-noon Dec. 12. Auburn Hills Chamber of Commerce. Awards recognize womenowned, engineering and small companies, plus volunteers and chamber supporters. Great Oaks Golf & Country Club, Rochester Hills. $35 members, $40 nonmembers; add $5 after Dec. 1. Contact Rebecca Wiles: (248) 853-7862; email: rwiles@ auburnhillschamber.com; website: auburnhillschamber.com.

Detroit Economic Club Presents. 11:30 a.m.-1:30 p.m. Dec. 16. With Lily Eskelsen Garcia, president, National Education Association. MotorCity

Keep your business heading in the right direction.

Treasury Management from FirstMerit Bank When John talked to FirstMerit Bank’s Treasury Management team, his goal was to increase his company’s working capital. Together, they came up with a plan to help John effectively manage receivables, control payments, and improve his company’s overall cash ﬂow. Now John has all the tools he needs to keep his business moving in the right direction — forward.

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Casino Hotel, Detroit. $45 DEC members, $55 guests of members, $75 others. Contact: (313) 963-8547; email: info@econclub.org; website: econ club.org. Detroit Economic Club Presents. 11:30 a.m.-1:30 p.m. Jan. 8. With Michael Finney, president and CEO of the

Michigan Economic Development Corp., and Rodrick Miller, president and CEO of the Detroit Economic Growth Corp. MotorCity Casino Hotel, Detroit. $45 DEC members, $55 guests of members, $75 others. Contact: (313) 963-8547; email: info@econclub.org; website: econclub.org. 2015 AutoGlow. 4:30 p.m-1 a.m. Jan. 16. Ford Motor Co. Fundraiser benefits the Children’s Center; the theme is “The Future Starts Here.” Ford Field, Detroit. $275 through Dec. 15, or $325 beginning Dec. 16. Contact: (313) 2627123; email: autoglow@thechildrens center.com; website: thechildrenscen ter.com/autoglow. Breakfast of Champions. 7:30-9 a.m. Jan. 21. Leadership Oakland. Kent Snyder, financial adviser, Kent Financial Group, discusses “The Economics of Happiness.” MSU Management Education Center, Troy. $25 members, $36 nonmembers. Contact: (248) 952-6880; email: info@leadershipoakland.com; website: leadershipoakland.com. Detroit Economic Club Presents. 11:30 a.m.-1:30 p.m. Jan. 28. With Mike Petters, president and CEO, Huntington Ingalls Industries. Westin Book Cadillac Detroit. $45 DEC members, $55 guests of members, $75 others. Contact: (313) 963-8547; email: info@econclub.org; website: econclub.org. Breakfast of Champions. 7:30-9 a.m. Feb. 18. Leadership Oakland. Jennifer Korman, community relations, Mercedes-Benz Financial Services, moderates a panel of young professionals who talk about what it means to be a leader. MSU Management Education Center, Troy. $25 members, $36 nonmembers. Contact: (248) 952-6880; email: info@leadershipoakland.com; website: leadershipoakland.com.

CALENDAR GUIDELINES If you want to ensure listing online and be considered for print publication in Crain’s Detroit Business, please use the online calendar listings section of www.crainsdetroit.com. Here’s how to submit your events: From the Crain’s home page, click “Detroit Events” in the red bar near the top of the page. Then, click “Submit Your Entries” from the drop-down menu that will appear and you’ll be taken to our online submission form. Fill out the form as instructed, and then click the “Submit event” button at the bottom of the page. That’s all there is to it. More Calendar items can be found at www.crainsdetroit.com.

20141124-NEWS--0021-NAT-CCI-CD_--

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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

November 24, 2014

Page 21

WSU: Leaders looking to other medical school practice models â&#x2013; From Page 3

had run afoul of university officials and some tenured faculty at the medical school over management style, efforts to improve UPGâ&#x20AC;&#x2122;s financial performance through compensation changes and to change its governance bylaws to make the faculty practice plan more independent. In a 2011 interview, Frank told Crainâ&#x20AC;&#x2122;s that one of his goals was to make UPG as competitive and as well-respected in Southeast Michigan as the Henry Ford Medical Group and the University of Michigan Faculty Practice Plan. Frank joined WSU three years ago from Ochsner Medical Center in New Orleans, where he had been director of cardiovascular surgery. Wilson, who became WSU president in August 2013, said he was concerned that UPG had lost some key faculty members over the past couple of years and had some difficulty in recruiting replacement physicians. One medical school faculty member told Crainâ&#x20AC;&#x2122;s that Frank simply tried to hold physicians accountable for performance. The source said some â&#x20AC;&#x153;feathers were ruffledâ&#x20AC;? by Frankâ&#x20AC;&#x2122;s efforts to increase productivity. Difficulty in recruiting physicians has more to do with Wayne Stateâ&#x20AC;&#x2122;s lower comparative pay scale and Detroitâ&#x20AC;&#x2122;s inner-city reputation, but annual turnover of 10 percent is similar to other practice plans, sources said. â&#x20AC;&#x153;Some good people have left,â&#x20AC;? said Wilson, adding: â&#x20AC;&#x153;UPG is a separate organization and I have not delved into it. I have seen some really good practice plans

Ken Lee, UPGâ&#x20AC;&#x2122;s executive director, said ECG was hired earlier this year, but wasnâ&#x20AC;&#x2122;t given sufficient information until May to begin its assessment. â&#x20AC;&#x153;There are several types of practice plans in the U.S.,â&#x20AC;? Lee said. â&#x20AC;&#x153;Some are totally within the university; we are separate. Are there better ways to get best practices and efficiencies?â&#x20AC;? Lee said the review isnâ&#x20AC;&#x2122;t aimed at UPG itself. â&#x20AC;&#x153;We all want to make (UPG) more profitable,â&#x20AC;? he said. â&#x20AC;&#x153;We have looked at compensation plans and bylaws already, and (Wilson) made some suggestions to (Parisi).â&#x20AC;? But Lee said Wilson hasnâ&#x20AC;&#x2122;t seen

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and how they support the medical school.â&#x20AC;? He cited the University of Colorado Denver as having a good medical practice model. Wilson was chancellor of UC Denver and chairman of the board of the University of Colorado Hospital. â&#x20AC;&#x153;This one (UPG) is very similar to the University of Colorado in structure,â&#x20AC;? Wilson said. â&#x20AC;&#x153;The difference is the Colorado practice plan is more profitable and supports the academic mission more.â&#x20AC;? Wilson said ECG will look very closely at other faculty practice plans to compare with UPG and Wayne State. â&#x20AC;&#x153;We want to look at the relationship other practice plans have with their universities and see if (UPG) is in line with best practices,â&#x20AC;? he said.

proposed bylaw changes that probably wonâ&#x20AC;&#x2122;t be voted on by the full UPG board until January or February. Wilson confirmed that ECG will recommend additional bylaw changes, but he wouldnâ&#x20AC;&#x2122;t specify what they might be. He said he suggested one bylaw change to Parisi that would make clear the dean is solely responsible for hiring or firing the UPG CEO instead of the practiceâ&#x20AC;&#x2122;s seven-member executive committee. â&#x20AC;&#x153;Wilson wants to protect the deanâ&#x20AC;&#x2122;s input to make sure the dean is very active in the practice plan,â&#x20AC;? one source said. â&#x20AC;&#x153;Some practice plans do not have the dean in a very powerful position in the plan. Roy does not want that to happen here.â&#x20AC;?

Determining input

Sources told Crainâ&#x20AC;&#x2122;s that Frank over the past year had been urging the UPG board to make several additional changes to UPGâ&#x20AC;&#x2122;s bylaws. â&#x20AC;&#x153;The changes were going to be in the opposite direction of what Roy wanted, and they were close to being approved before (Frank) was terminated,â&#x20AC;? said a source knowledgeable about the UPG board. One major change that sources said is still in the works is to add several additional community members to the 28-member UPG board, increasing the number from about six to possibly 10 members and reducing the number of physician department heads. Among other reasons, the change was said to be needed to comport with IRS regula-

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CRAIN’S DETROIT BUSINESS

Bankruptcy fee examiner: Role he couldn’t pass by

BANKRUPTCY FEES AND PAYMENTS Jones Day

䡲 Total expenses and fees: $51.8 million 䡲 Paid to date: $46.1 million Miller Buckfire & Co. LLC

䡲 Total expenses and fees: $24.5 million 䡲 Paid to date: $5,7 million Ernst & Young LLP

䡲 Total expenses and fees: $15.6 million 䡲 Paid to date: $13.7 million Dentons

䡲 Total expenses and fees: $15.4 million 䡲 Paid to date: $14.1 million Conway MacKenzie Inc.

䡲 Total expenses and fees: $14.6 million 䡲 Paid to date: $14.1 million Miller, Canfield, Paddock and Stone PLC

䡲 Total expenses and fees: $4.3 million 䡲 Paid to date: $4.1 million

Kurtzman Carson Consultants LLC

䡲 Total expenses and fees: $3.6 million 䡲 Paid to date: $2 million Segal Consulting

䡲 Total expenses and fees: $3.5 million 䡲 Paid to date: $3.1 million Pepper Hamilton LLP

䡲 Total expenses and fees: $2.7 million 䡲 Paid to date: $2.5 million Lazard Freres & Co. LLC

䡲 Total expenses and fees: $2.4 million 䡲 Paid to date: $2.1 million Milliman Inc.

䡲 Total expenses and fees: $1.5 million 䡲 Paid to date: $1.47 million Phoenix Management Services

䡲 Paid to date: $1.1 million Brooks Wilkins Sharkey & Turco PLLC

䡲 Total expenses and fees: $959,042 䡲 Paid to date: $888,467 Shaw Fishman Glantz & Towbin LLC

䡲 Gross expenses and fees: $815,408 䡲 Paid to date: $693,711 Barris, Sott, Denn & Driker PLLC

䡲 Gross expenses and fees: $778,318 䡲 Paid to date: $690,288

Debevoise & Plimpton LLP

䡲 Total expenses and fees: $417,744 䡲 Paid to date: $357,552

BY CLAIRE BUSHEY CRAIN NEWS SERVICE

An army of lawyers, auditors and consultants has swarmed Detroit for 16 months, generating paperwork and arguments and billing more than $140 million in negotiating the largest municipal bankruptcy in U.S. history. Now they want to get paid. The man playing a key role in determining just how much many of them will receive is Robert Fishman, partner at Shaw Fishman Glantz & Towbin in River North, Chicago. Fishman is the case’s fee examiner, assigned to pore over those professionals’ invoices and weigh the reasonableness of the charges. Though U.S. Bankruptcy Judge Steven Rhodes ultimately will decide whether the fees are appropriate, the fee examiner’s opinion carries considerable weight. It is possibly the first time the role, a function generally found in Chapter 11 bankruptcies, has been used in a municipal case. Detroit filed for bankruptcy in July 2013, the culmination of decades of depopulation, financial mismanagement and plummeting tax revenue that left it owing $18.5 billion to creditors. More than 50 professional services firms are involved in some aspect of the city’s restructuring. Most of them have their bills examined by the city or the emergency manager’s office. Fishman reviews the fees of the 17 firms directly involved in the court case. The fees are a contentious subject, as evidenced by the angry emails Fishman has received from Detroit citizens. On Nov. 7, Rhodes approved a plan for the city to exit bankruptcy, but a city attorney has requested extra time to review the fees of outside counsel, prompting Rhodes to set a two-day mediation session in December. “It’s the only thing left in the whole bankruptcy,” Fishman says. “Now everybody wants to fight about the fees.” Fishman, 60, says he didn’t seek the high-profile assignment. He had been following the Detroit bankruptcy out of intellectual interest, when one day he picked up the phone and it was Rhodes, offering him the job. He was appointed to the case last summer to review lawyers’ and consultants’ invoices, question their fees when necessary and then file quarterly reports with the court disclosing

MANUEL MARTINEZ

Robert Fishman says he didn’t seek the assignment of evaluating Detroit’s bankruptcy fees, but that U.S. Bankruptcy Judge Steven Rhodes called to offer him the job.

those fees. He examines what services a firm provides, how long it takes to complete them and the rates being billed. For example, in August he questioned one firm’s $67,000 bill for monitoring and responding to news coverage. Fishman says he fell into bankruptcy practice “by accident” after a stint at the Illinois attorney general’s office. The mix of dealmaking, litigation and client variety proved a good match for his temperament. After 13 years in private practice, he left 155-lawyer Ross & Hardies, which later merged with McGuireWoods. He joined a small real estate firm and established a bankruptcy practice there. He wanted more control over his work, he says. That independent streak is apparent in his full beard, a rarity among cleanshaven lawyers. Even though he doesn’t work for a large law firm, Fishman has built a national profile based on his work with the Alexandria, Va.based American Bankruptcy Institute, where he was president from 1997 to 1998, and his involvement in the United Airlines, Kmart and Peregrine Financial Group bankruptcies. A native of Danville, Ill., Fish-

man has lived in Deerfield since 1982 and has no ties to Detroit. That likely helped him get the job, says J. Ford Elsaesser, a past president of the bankruptcy institute and managing partner at a firm in Sandpoint, Idaho. “There would be more independence because he’s not wedded to a law firm or group of lawyers in Detroit, so he can probably speak more freely,” Elsaesser says. “And if he was in a big firm people might be of the view, ‘All these big firms stick together, they’re never going to criticize each other’s fees.’ ” The job is a delicate one since it basically involves conducting a forensic audit to determine exactly what the client is paying for, said Bruce Meckler, a legal fee expert and partner at Meckler Bulger Tilson Marick & Pearson in Chicago. “You’re doing something that is not necessarily going to be popular,” he says. Yet Fishman has the credibility needed to call a partner and say, “I have a problem with your bill,” said Deborah Williamson, also a former president of the bankruptcy institute and managing director of a firm in San Antonio. At the same time, few of his objections became part of the public record because he seeks to address issues

before it’s necessary to file his report, she said. Outside of work, Fishman likes skiing, golf, football and basketball. Richard Mason, a partner at McGuireWoods, said they used to play pickup basketball games in the mid-1980s against off-season Chicago Bears players. Fishman also has a collection of roughly 20,000 stamps, a hobby fueled by a love of history and geography. He has been married for 35 years and has two living sons in their 20s. His oldest son died in 2006 from epilepsy complications. The fee examiner role is the most prominent he has held in a big case, Fishman says, “the kind of opportunity I just felt I couldn’t say no to,” although not because of the money. He earns $618 per hour, a discount off his usual rate of $695. He says he’s not sure how much more work the case will generate for the firm, but as of July, Shaw Fishman had billed more than $490,000. Rather, Fishman sees the assignment as an important credential for business development. He speculates that more municipalities may file for bankruptcy. If that happens, he says, “I’ll be in a very good position to be considered for that.” From Crain’s Chicago Business

Dykema Gossett PLLC

䡲 Paid to date: $344,514 Foley & Lardner LLP

䡲 Total expenses and

fees:

$259,994 䡲 Paid to date: $244,206 Kapila & Co. 䡲 Gross expenses and fees: $226,145 䡲 Paid to date: $191,847

Squire Patton Boggs

䡲 Paid to date: $188,364 Kilpatrick & Associates PC

䡲 Total expenses and fees: $113,985 䡲 Paid to date: $13,985

Ottenwess, Taweel & Schenk PLC

䡲 Paid to date: $58,921

Bankruptcy: Fee review raises questions, concerns ■ From Page 1

debt, has received just over $6 million on $24.4 billion billed to date. That puts its total fees second only to the $51.8 million that Jones Day has billed as lead counsel in the case, according to records from the office of Detroit Emergency Manager Kevyn Orr. Miller Buckfire is unusual in having a mostly unpaid balance. The remaining more than 25 law firms, restructuring advisers, mediators and other professional services firms have about $13 million

Experts familiar with the Detroit case say professional services firms rarely if ever have to return fees already paid to them. unpaid before mediation with Chief U.S. District Judge Gerald Rosen. Kenneth Buckfire, president and managing partner of New York City-based Miller Buckfire, de-

clined to comment last week about his fees, citing the mediation. Alexis Wiley, chief of staff for Duggan, also said the mayor’s office would not discuss the Miller Buckfire fee or any other specific charges before

the mediation Dec. 3-4. “The mayor has expressed his deep concern over the significant increase (in recent months) in the amount of fees that have been charged to the city. He wants to be sure the city is being charged a fair rate,” director of communications John Roach said in a statement. “Every dollar spent on a consultant is one that can’t be used for a city service.” See Next Page

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CRAIN’S DETROIT BUSINESS

November 24, 2014

Consultants’ reports reveal surprising Ch. 9 expenses BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

A law firm representing Detroit’s retirees billed more than $125,000 over six months to monitor and respond to various media reports. A single attorney from the city’s lead law firm charged between $375 to $450 per trip in early spring to travel by car service between Detroit and Cleveland, due to early morning or late-running meetings. WXYZ-Channel 7 also reported last week that another attorney billed $450 for the time to walk from a downtown law office to the U.S. District Court building on Lafayette Boulevard and wait in line to pass through a security checkpoint and gain admittance. The attorney, Claude Montgomery, represents the official committee of retirees at the Dentons law firm. He later cut the charge in half, according to WXYZ. Some expenses from professional services firms are easier to understand than others in Detroit’s $18 billion bankruptcy court case, and fee examiner Robert Fishman of Chicago-based Shaw Fishman Glantz & Tobin LLC has occasionally taken firms to task over line items that helped build toward a $146 million tally of professional fees. For example, Dentons reported expenses of between $14,000 and $28,000 per month between January and June for the unspecified media monitoring, according to fee examiner reports, but began agreeing to a 40 percent markdown of those fees in April, after Fishman decided they were excessive. The firm has reduced about $25,200 from that expense through June, the most recent fee examiner report available. “Although certain media activities may fall within the scope of providing legal services, such as

From Previous Page

Experts familiar with the Detroit case told Crain’s that professional services firms rarely if ever have to return fees already paid to them in the course of bankruptcy, but U.S. Bankruptcy Judge Steven Rhodes has the authority to order that if any firm’s fees prove unreasonable or excessive. About $115 million in fees have been paid to various firms since Detroit filed for bankruptcy in July 2013, including $111.7 million to firms that are subject to a quarterly review by fee examiner Shaw Fishman Glantz & Towbin LLC. The last such review, submitted Nov. 5, covers the quarter ending June 30. Fee examiner Robert Fishman has been reviewing those fees in quarterly reports since a court order last fall put more than 15 firms’ fees under review and subject to a 15 percent holdback. Those holdback funds are released for payment after the exam-

reviewing and advising on press reports prepared by a client, other tasks do not, such as drafting the entire press report and reviewing newspaper articles on the bankruptcy case,” Fishman said in at least three separate reports on media expenses of Dentons. “The fee examiner thus does not believe that the fees charged for the (firm’s) media activities are reasonable.” David Heiman, an attorney for the city and partner at Jones Day, also billed for several car service trips between Detroit and his office in Cleveland in March and April of this year, referencing early or late-running meetings he was attending, according to itemized Jones Day billing reports. Here are some more examples of the costs driving up bankruptcy costs: Jones Day billed approximately $168,000 for nine of its attorneys and other professionals to attend the eight-day eligibility hearing before U.S. Bankruptcy Judge Steven Rhodes in October. The firm agreed to write down about $14,740 in expenses for a senior partner and associates who attended. The firm apparently took more than 213 hours to prepare a single legal brief for the court, but after questioning by the fee exam-

iner the firm contends the issue was complex and actually took additional hours that weren’t billed. A Jones Day attorney, Mary L. Hale, billed $4,252 on April 4 to drive from Columbus, Ohio, to Detroit to collect documents and interview the “custodian” and then drive back. Another employee, J.E. Callaway, apparently charged $1,787.50 to make the same road trip for document collection on the same day. Miller Canfield Paddock and Stone PLC agreed after a fee examiner review of its own expenses in the eligibility hearing that it would “not … charge the city for more than two lawyers appearing in court as local counsel in a nonactive role” and to reduce another attorney’s charges by 50 percent. The firm marked down its fees and expenses for that period about $14,500 after that review. Miller Canfield partner Amanda Van Dusen of the firm’s public law group charged $485 to leave two voicemail messages by phone regarding matters in the Detroit Water and Sewer Department in October 2013. Miller Buckfire was questioned about “a duplicate airfare charge and excessive charges for use of a car service rather than a commercial cab service,” but also explained those expenses during a phone call in August. The company also billed about $1,055 for a dinner for seven people, including two of its own employees, at the Townsend Hotel in Birmingham in October 2013. Milliman Inc., an actuary retained by the city, has been asked several times by the examiner to consider providing a discounted billing rate, but “continues to decline” to do so. Ernst & Young was questioned at least once about having several of its professionals attending the same meetings or conference calls

iner review unless any balances are disputed, so the unpaid balances today are either bills so recent they haven’t received even a partial payment yet, or holdbacks for the months since June that Fishman isn’t finished reviewing. Orr spokesman Bill Nowling said any adjustment to professional fees in mediation would likely come in those two areas, rather than by refunding past payments the companies have already receivved. “Those are probably the two factors of what you can go back to and try to adjust down,” he said. “These are all professionals, who follow procedures not just for this case but in all bankruptcies. “The holdback is under an assumption that, if a discrepancy comes up, it isn’t going to fall in the order of 80 percent, it’s going to be modest. This mechanism was created so you don’t get $4 million of legitimate bills held up over a (single) $50,000 questionable one.” After Miller Buckfire’s $18.7 mil-

lion, the largest unpaid balance as of mid-November was $5.7 million still owed on Jones Day’s $51.8 million in legal bills to date. Then came $1.9 million to Ernst & Young LLP, followed by $1.6 million owed to Kurtzman Carson Consultants and $1.3 million out of $15.3 million in legal bills for Dentons, the law firm representing the committee of retired city employees. Lazard Ltd., the investment banking consultant to the retiree committee, also had an unpaid balance of about $230,000 of $2.4 million, but it was not immediately clear if the firm has submitted its own final restructuring fee as Miller Buckfire has done. Judi Mackey, director of global communications for Lazard, said she had no comment on the fees. Dave Petrou, global public communications manager for Jones Day, did not return phone calls seeking comment about the fee mediation. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom

A single attorney from the city’s lead law firm charged between $375 and $450 per trip to travel by car service between Detroit and Cleveland.

Page 23

Mich. Sports Hall of Fame hires ad agency to help boost revenue BY BILL SHEA CRAIN’S DETROIT BUSINESS

The nonprofit Michigan Sports Hall of Fame said last week it has hired Troy-based advertising agency AFA Krause “to create brand development programs and new revenue streams.” Financial details of the relationship were not disclosed. A message seeking additional details and an accounting of the hall’s current finances was left with the organization’s outside media relations handler, Ken Droz. A statement said the agency was “now active in expanding the hall’s efforts to recruit sponsorships and will also manage ad sales for the hall’s multiple platforms, including events, ticket sales and website. In addition, the firm will assist the hall’s efforts to find a permanent home. The hall’s last major capital campaign, begun in early 2005 with a goal of $5 million to $7 million, fell apart almost immediate-

ly because the preferred location, downtown’s First National Building, was sold and the new owners weren’t interested. The Michigan attorney general’s office began investigating the hall of fame in 2009 after it was tipped off that the nonprofit failed to renew its state license or file its required federal financial disclosure paperwork. Then-Attorney General Mike Cox halted a planned sale of the hall’s inductee plaques. He sent a letter to the hall in 2010 that ordered financial reporting requirements New revenue streams have included online auctions of packages (trips, games and meals with hall inductees) and sports collectibles. That began in 2011. The hall has 270 2-by-2-foot, 47pound inductee plaques that were displayed in Cobo Center until that facility’s $299 million renovation. The plaques have been put in storage and offered to the city’s four pro sports teams for display.

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CRAIN’S DETROIT BUSINESS

Obama move unlikely to impact Snyder plan for state The Obama administration’s outline is unlikely to have much effect on Gov. Rick Snyder’s immigration plan. Snyder created the Office for New Americans in February to boost the educated immigrant population in Michigan. The office, which serves as a clearinghouse for when issues related to immigration arise, continues to coordinate with state departments and the various ways they touch immigration policy in the state. Snyder hired Bing Goei, former

CEO of Grand Rapids-based Eastern Floral, as director of the office. Goei emigrated to the U.S. with his family in 1960 from Indonesia through the Netherlands. Goei In March, he hired Karen Phillippi as the office’s deputy director. “There’s been a considerable amount of information gathering

across the various state agencies,” said Dave Murray, deputy press secretary for Snyder. “Bing has tremendous ideas and has been meeting with and working with people around the state as they build the foundation for what his office can and will do.” Snyder also petitioned the federal government to create a statewide EB-5 regional center, which it did in just 77 days. A foreign investor can enter the program in one of two ways: be paired with an investment opportunity in the state or open a new

business in Michigan. In both cases, the investor and the investment opportunity are vetted by the federal immigration services division. Investors are checked to make sure the money used to invest is theirs and was not given to them or obtained illegally. The company that the investor wants to bring to Michigan and/or the Michigan companies that are seeking investors are also vetted to ensure they meet underwriting standards. The investment must be at least $500,000 if it is in a distressed area

where the employment level is at or above 150 percent of the national unemployment rate. There are 433 such areas in the state. If the investment is not in one of these, the investment has to be at least $1 million. Snyder’s office also continues to lobby federal officials for 50,000 EB-2 work visas over five years for those with advanced degrees, solely for the city of Detroit. Discussions continue with federal officials, but an agreement hasn’t been reached, Murray said. — Dustin Walsh

Immigration: Experts disagree on local impact of Obama plan ■ From Page 1

Undocumented immigrants being able to live more openly in metro Detroit and elsewhere are a net benefit, Koelsch said. “Each person, whether high- or less-skilled, who benefits from this action is a consumer. People who know their futures and feel secure are more willing to buy houses, cars, and everything else they need for a long-term future in our community. That spending and investment has a significant positive ripple effect throughout our local and regional economy,” Koelsch said. Alexandra LaCombe, partner and head of the Troy office for immigration law firm Fragomen, Del Rey, Bernsen & Loewy PLLC, said Obama’s new guidelines on immigration are a positive for employers. “This isn’t necessarily a pathway for illegal immigrants to become legal in the U.S., but a path for them to work here legally,” LaCombe said. “This will no doubt help employers looking to fill positions.” However, Michigan has so few illegal immigrants, LaCombe said, that while the LaCombe ruling is beneficial it will have a marginal effect on the workforce. Michigan in 2012 had 120,000 undocumented immigrants, according to the latest data available from the Pew Research Center’s Hispanic Trends Report published on Nov. 18. That’s up from 25,000 in 1990, or a 380 percent increase. Undocumented immigrants account for about 1.6 percent of Michigan’s labor force, according to Pew’s data. Most undocumented immigrants in Michigan came from Mexico (56 percent), followed by India (14 percent) and China (6 percent). Sandy Baruah, president and CEO of the Detroit Regional Chamber, said he missed the president’s speech but has been catching up on subsequent reports and analyses. In what he’s read so far, he doesn’t see much that aligns with the chamber’s immigration concerns. “We’re really focused on the economic impact issues, the positive impact of immigration on high-

tech industries,” he said. The chamber wants to see an influx of immigrants who invest in the station, “bring needed talent and skills to the Michigan workplace” and “fill unfilled jobs with Michigan companies,” Baruah said. Still, there likely will be a positive impact at the lower end of the economic spectrum as more undocumented immigrants legally enter the workforce, he said. “The agriculture industry, Baruah the service industry, such as hotels and retails, should be impacted in a positive way. Those are not unimportant at all,” he said. Baruah questioned the president’s timing of his order, calling it “a little odd” and termed the plan as largely aimed at “immediate humanitarian issues that are important to (Obama).”

Visa concerns LaCombe echoed Baruah’s concern about the lack of details about high-tech immigration. She said she was disappointed the president didn’t include expansion of the H-1B non-immigrant visa program in his plan, something she said hurts the economy. “It is hindering our nation’s economic growth that there are not enough available work visas for immigrants who seek to fill the vacant

positions of highly skilled roles in the U.S.,” she said. “Too many highly educated job positions are vacant because there are not enough qualified workers within our borders and immigrant students who study here find difficulty in receiving permission to stay and work.” The H-1B is targeted at highly skilled workers — usually scientists, engineers, or computer programmers — that the U.S. deems in short supply, and it allows them to stay up to six years. H-1B visa holders also can apply for a permanent alien resident status, known as the green card. This year, the number of H-1B visas was capped at 65,000, with another 20,000 for applicants with advanced degrees. “The current H-1B quota is an artificial number that has nothing to do with the economy, the market or the needs of U.S. employers, and that needs to change,” she said. “Our government must recognize that the number of highly skilled, highly qualified workers admitted into our country each year must be adjusted by market demands. While the H1-B visa program in the U.S. remains unexpanded, other countries welcome highly skilled workers with open arms.” In January, Gov. Rick Snyder said he would ask Washington to provide the city of Detroit with 50,000 EB-2 visas over five years — and so far has gotten no response. The EB-2 immigrant visa is for professionals with advanced degrees and individuals with exceptional ability in the sciences, arts, or business, according to the U.S.

“I see this as beneficial for the individuals involved but having little effect on the local business/ entrepreneurship climate.” | Kurt Metzger

Citizenship and Immigration Services. An EB-2 usually requires a job offer and a labor certification issued by the Department of Labor to ensure that the foreign work doesn’t displace a qualified U.S. worker, the agency said.

Other issues The president’s speech also touched on other aspects of immigration policy, and his pledge to expand a high tech job training program for immigrants has piqued the interest of Steve Tobocman, director of Global Detroit, a nonTobocman profit-funded study of the immigration effects on metro Detroit’s economy. The president said the “Optional Practical Training” initiative popular with the tech sector will be expanded and extended, but specifics won’t be known until worked out by the Department of Homeland Security. The OPT program allows certain types of international students from U.S. colleges to work at American companies for a year after graduation. In 2008, President Bush extended the limit to 29 months for graduates in science, technology, engineering and mathematics (STEM) fields. Further expansion will help Global Detroit’s local efforts. “It’s in line with what we’re trying to do on the ground,” Tobocman said. Global Detroit in 2011 was one of the co-creators of the “Michigan Global Talent Retention Initiative” that aims to connect Michigan’s 28,000 international students with unmet talent needs of Michigan companies. It links such students from 32 Michigan colleges with more than 60 employers. Most of the students are in the STEM fields. There was a Michigan GTRI conference in Detroit on Friday attended by more than 350 international students, Tobocman said.

A blunt voice Longtime demographer Kurt Metzger was blunt in his assessment of the president’s plan and what it BLOOMBERG

means locally. “Our fortunes are not going to change because Obama has created a three-year window for certain segments of the ‘illegal’ immigrant pool,” said Metzger, the retired founder of Data Driven Detroit who spent nearly 40 years compiling information and statistical analysis locally. “In fact, while significant, the Michigan and local numbers affected are relatively small compared to other areas in the country.” Instead, the Metzger president’s plan is an opportunity to bring more attention to the immigrant community already in metro Detroit and the assets that they bring, said Metzger, now mayor of Pleasant Ridge. “I see this as beneficial for the individuals involved but having little effect on the local business/entrepreneurship climate,” he said. “Of course, there will be a number of folks who will now feel more comfortable ‘going public.’ Within this group, there will undoubtedly be some entrepreneurs who can come forward.” Metzger endorses Global Detroit’s various initiatives and suggests a regional welcoming initiative of local governments and ethnic chambers to develop attractions plans. “Highly educated immigrants will continue to migrate to communities with strong schools, safety and other city services,” he said. Additionally, the city of Detroit has to overcome “the negative vibe that the city has given to immigrant groups for years,” Metzger said, adding that Detroit must do more to develop its Office of Immigrant Affairs. He also recommends the city and Detroit Public Schools have more interaction with Detroit’s Latino community, improving the relationship between foreignowned businesses and local residents, and capitalizing on Wayne State University ranking third among Michigan colleges for international students. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19

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Immigrants bolster Detroit as D.C. debates BY CHRIS CHRISTOFF BLOOMBERG NEWS

An influx of 16,000 immigrant Latinos big enough to prompt the opening of 17 taquerias in five years has spared southwest Detroit from the city’s downward spiral. In and around Hamtramck, a 2square-mile enclave surrounded by the city, almost 10,000 immigrants from Bangladesh and Yemen bolster the economy of a town once known for its Polish heritage. A few miles away, Chaldeans who once thronged north Detroit want to revive their presence there with housing for refugees fleeing the Islamic State in their homeland of Iraq. “I’m not sure many other people would take the chance that I took,” said Bangladesh native Khurshed Ahmed, 32, a naturalized citizen who five years ago opened a restaurant to tap the local market of Muslims craving halal pizza. While debate rages in Washington, D.C., over what to do with an estimated 11 million unauthorized immigrants, Detroit and Michigan Gov. Rick Snyder want to attract foreign-born settlers to move past a record bankruptcy and repopulate an emptied landscape. Foreign-born professionals, business owners and refugees have helped sustain Detroit throughout the loss of twothirds of its population since 1950. President Barack Obama on Thursday announced an order that would shield as many as 5 million people from deportation.

Attractive effect Snyder, a 56-year-old Republican, has asked Obama to issue 50,000 visas over five years to highly skilled and entrepreneurial immigrants who agree to live in Detroit. The city this year created a task force to assist the foreign-born. “People are already moving to the city,” Detroit City Council member Raquel Castaneda-Lopez said. “It’s a question of how you streamline the process and make it easier.” The 18th-largest U.S. city ranks 135th in the number of foreign-born residents, said Steve Tobocman, director of Global Detroit, a nonprofit agency that promotes legal immigration as an economic catalyst. Still, in 2007 they accounted for 11 percent of the economic output in a four-county area that includes Detroit while making up 9 percent

BLOOMBERG

Small businesses line Bagley Avenue in Mexicantown. An influx of 16,000 immigrant Latinos and a commercial corridor where 17 taquerias opened in five years have spared Southwest Detroit from the city’s downward spiral.

of the population, according to the most recent data from New York’s Fiscal Policy Institute, a research organization. Detroit has about 35,000 foreignborn residents out of an estimated 688,000, according to Global Detroit. In the metropolitan region, two-thirds own their homes and about half have become citizens. Those who live in the city find housing bargains. The median sales price of Detroit homes in October was about $18,000, according to Realcomp, a Farmington Hills real-estate listing service. That compares with $145,000 for the four-county metropolitan area. Southwest Detroit is the most notable example of vitality, with its contingent of immigrants and about 30,000 U.S.-born Latinos and healthy business district. As the city struggled to replace broken streetlights, a neighborhood business group mustered $6.4 million in grants to replace them and spruce up its main street, Vernor Highway. Around the Hamtramck border, dozens of businesses, many immigrant-owned, contrast with blighted and abandoned buildings that scar neighborhoods nearby. Foreign-born residents tend to be younger, more educated and more likely to start businesses than Michigan’s general population, Tobocman said. “When immigrants feel welcome, they’re very good at reaching out to others and multiplying their numbers,” he said. Numbers are what Detroit needs. Its population has fallen from 1.8 million in 1950, according to the U.S. Census Bureau. That’s

left swaths of the city abandoned, blight-ridden and poor. By 2012, the property-tax base, adjusted for inflation, had fallen to 21 percent of its 1950s value, according to a report by Tobocman. “Solid economic evidence suggests that immigrants disproportionately contribute to economic growth, employment and wage gains — including for local African-American populations,” according to a 2010 Global Detroit report. Groups that help Chaldean refugees want to buoy Detroit’s north side, where members of the Christian sect first settled in the 1960s. The Chaldean American Chamber of Commerce has plans for a Detroit “village” that includes housing for those fleeing militants in Iraq and Syria.

Encouraging immigration Detroit leaders are receptive and the project is seeking investors and state and city approval, said Martin Manna, chamber president. Manna said 90 percent of the city’s Chaldeans have moved out since 2003, though members still own most convenience and liquor stores. About 30,000 Chaldean refugees have fled to Michigan since 2007, Manna said. He said Detroit’s cheap land makes it advantageous for redevelopment. Crime and substandard schools don’t. “Imagine if we could repopulate the city,” Manna said. “But the challenges are enormous for security and schools.” Snyder’s focus has been to lure

and keep highly skilled professionals and university students, and persuade some to move to Detroit. To that end, Snyder this year created the Michigan Office for New Americans. “There are opportunities if we can get specifically designated visas for people willing to invest in Detroit and work in Detroit,” director Bing Goei said. Snyder’s request for 50,000 Detroit visas is innovative, although the illegal-immigration fight overshadows it, said Margie McHugh of the Migration Policy Institute in Washington. Obama is at odds with Republican lawmakers who say his executive order will amount to amnesty for law-breakers. “That has sucked all the oxygen out of conversations about modernizing our immigration system,” said McHugh, director of immigration integration. McHugh said a better strategy is to target visas for specific jobs. In Canada and Australia, local governments compete for visas to meet economic needs, McHugh said. “It’s hard to envision circumstances that highly skilled people who could go anywhere else in the U.S. would go to Detroit,” she said. Those aren’t the only people who can help, said Mexico native and Detroiter Sergio Martinez, a 26-year-old restaurant manager whose parents brought him to the U.S. when he was 5. “High-skill immigrants get the breaks,” he said. “You’re ignoring the immigrants you already have in your city, the ones who are spending money every day, going to work, building families here.” An estimated 22,000 unauthorized immigrants live in Wayne County, which includes Detroit, according to a new report by the Migration Policy Institute. Martinez was in the U.S. illegally until 2012, when he was granted two-year status under Obama’s Deferred Action for Childhood. Martinez plans to own the home he rents for $700 a month in a tattered neighborhood near Detroit’s Latino hub. The house needs a new roof, floors, kitchen and neighbors. Where others see blight, Martinez sees opportunity. “A lot of people in my community see it as half-full,” said Martinez, who wants to own a restaurant and become a lawyer. “They don’t just leave the city where they grew up.”

Survey: Employers giving raises, bonuses again ■ From Page 3

nies seeking to retain talent was profit-sharing, followed by teambased incentives. What hasn’t changed, however, is the budget for salary increases. Most employers expect a 3 percent increase in salaries in 2014 and plan for the same baseline in 2015. It takes more than money to hire and motivate the right employees, however. It also takes a culture of opportunity and fun, said David Leider, CEO of Royal Oak-based Gas Station TV, which has been on a hiring spree.

“Nondirect financial elements seem to be very important to employees,” Leider said, who has 76 employees. “That ties around opportunity. You have to be competitive from a financial perspective — things like salaries and bonuses — but we also give people the feeling that there will be continued opportunity. They don’t want to be a cog in the system.” GSTV, which provides digital entertainment video at gas pumps, offers a bonus structure to all of its salaried employees and considers

it part of the total compensation package. So when the company pitches employees, it tells them the total number, including bonus, as what they can earn. “That may seem nuanced,” Leider said, “but people get really excited. They understand that there is a part they have to work for and a part that is guaranteed.” That’s a significant change from the throes of the recession when companies were implementing wage freezes, not finding ways to increase compensation.

In fact, ASE found that wage freezes have finally thawed: Just 6 percent of those surveyed expect to use that tactic to control costs in 2015 compared with 67.8 percent in 2009. “I see a lot of growth,” said Wolf. “I’m growing, my clients are growing. They are adding employees, buying buildings. It’s a tight market for talent.” The ASE salary survey is available free to members and for $525 to others by emailing surveys@aseonline.org.

www.crainsdetroit.com EDITOR-IN-CHIEF Keith E. Crain GROUP PUBLISHER Mary Kramer, (313) 446-0399 or mkramer@crain.com ASSOCIATE PUBLISHER Marla Wise, (313) 4466032 or mwise@crain.com EXECUTIVE EDITOR Cindy Goodaker, (313) 4460460 or cgoodaker@crain.com MANAGING EDITOR Jennette Smith, (313) 4461622 or jhsmith@crain.com DIRECTOR, DIGITAL STRATEGY Nancy Hanus, (313) 446-1621 or nhanus@crain.com MANAGING EDITOR/CUSTOM AND SPECIAL PROJECTS Daniel Duggan, (313) 446-0414 or dduggan@crain.com SENIOR EDITOR/DESIGN Bob Allen, (313) 4460344 or ballen@crain.com SENIOR EDITOR Gary Piatek, (313) 446-0357 or gpiatek@crain.com WEB EDITOR Kristin Bull, (313) 446-1608 or kbull@crain.com RESEARCH AND DATA EDITOR Sonya Hill, (313) 446-0402 or shill@crain.com WEB PRODUCER Norman Witte III, (313) 4466059, nwitte@crain.com EDITORIAL SUPPORT (313) 446-0419; YahNica Crawford, (313) 446-0329 NEWSROOM (313) 446-0329, FAX (313) 4461687 TIP LINE (313) 446-6766

REPORTERS Jay Greene, senior reporter: Covers health care, insurance, energy utilities and the environment. (313) 446-0325 or jgreene@crain.com Amy Haimerl, entrepreneurship editor: Covers entrepreneurship and city of Detroit. (313) 4460416 or ahaimerl@crain.com Chad Halcom: Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson: Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho: Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor: Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Dustin Walsh: Covers the business of law, auto suppliers, manufacturing and steel. (313) 4466042 or dwalsh@crain.com Sherri Welch, senior reporter: Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com

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CRAIN’S DETROIT BUSINESS

Compuware deal: Gilbert gets a home, Meridian room to grow BY KIRK PINHO CRAIN’S DETROIT BUSINESS

You have to go back before 2000 to find a sale of a single downtown office building more expensive than the one announced last week by a trio of Detroit heavyweights: Dan Gilbert, the Cotton family and Compuware Corp. Gilbert’s Bedrock Real Estate Services LLC and the Cottons’ Meridian Health will split the expected $142 million cost to purchase the 1.1 million-squarefoot Compuware Corp. headquarters downtown and an attached parking deck with about 2,600 Gilbert spaces. Sean Cotton, Meridian chief administrative officer, said the deal is a 50-50 partnership. CoStar Group Inc., a Washington, D.C.-based real estate information service, has no record of any one central business district office building selling for more than $140 million — although there have been downtown Detroit buildings included in larger, more expensive national portfolio sales, and build-out costs. For example, General Motors Co. purchased the 5.5 millionsquare-foot Renaissance Center in 1996 for $76 million but spent $500 million renovating its buildings. For Gilbert, the founder and chairman of Quicken Loans Inc. and Rock Ventures LLC, the Compuware building gives him a home he can call his own after leasing space there since 2010. For Meridian, the Detroit-based managed care company, the deal gives it enough space for its planned expansion over the next five years — and a key equity stake that will generate revenue from operations of one of downtown’s newest and most prominent office buildings. “We wanted equity in the building where we plan to have our headquarters because when you ‘own,’ you’re there for the long term — 30, 40, 50 years,” Cotton said in a statement to Crain’s. “We want to be a

part of Detroit, the city’s renewal, and its history.” Bunia Parker, principal of Detroit-based real estate firm Summit Commercial LLC, said Meridian having an Cotton ownership stake in the building is better than the company’s original plan to build a new headquarters downtown, a plan that was scrapped this year. “They are getting a Class A building for a second-generation price,” Parker said. Robin Schwartz, public relations director for Bedrock, said Bedrock’s Parker discussions with Meridian, which will move about 400 employees into the building starting in the spring, took place over several months. Gilbert said deals with other partners are also in the works. “We are in discussions with several other non-affiliated partners for various forms of acquisition and development with both in-state and out-of-state groups whom we strongly welcome,” he said in a statement emailed Thursday to Crain’s. “We believe that significant interest and investment from others is a clear sign of progress in the redevelopment of downtown Detroit.” Selling the headquarters has long been part of Compuware’s “corporate transformation plan,” CEO Bob Paul said in a statement last week. For years, the company has been criticized by some of its institutional investors for having built an expensive modern office tower for about $350 million and continuing to own it. The building was among the factors cited during a takeover bid launched in 2012 by Elliott Management Corp., a New York Citybased activist hedge fund that accused Compuware management of

Meridian Health and Quicken Loans are set to become the largest tenants in the Compuware Corp. headquarters, pending the building’s sale.

DAVID HALL

wasting resources. Meridian will take about 330,000 square feet, making it the building’s largest tenant, just ahead of Quicken, which will use about 300,000 square feet after it occupies an additional 60,000 square feet. Compuware, which has about 500,000 square feet now, will lease about 130,000 square feet. Andy Farbman, CEO of Southfield-based Farbman Group, called the purchase “one of those rare opportunities where both sides win.” “You’ve got one company (Compuware) that gets rid of excess space and another (Meridian) that goes into the excess space,” he said. “And you certainly couldn’t replicate that product for the price they are buying it for.” Last year, Meridian announced it would build a 320,000-square-foot headquarters downtown developed by Livonia-based Schostak Bros. & Co. Plans for the $111 million, 16-story building — on a 1.96 acre parcel bounded by Monroe, Bates and Farmer streets and Woodward Avenue and Cadillac

Square — were scrapped earlier this year due to changing economic factors and the cost of new construction. Steve Morris, principal of Farmington Hills-based Axis Advisors LLC, said both new Compuware building owners will receive significant cash flow from things like tenant leases and revenue from parking deck ownership. Meridian plans to move into the building from two downtown locations — One Kennedy Square and the Gilbert-owned 1001 Woodward building — by the end of 2015 and expand into more space by 2019, when the company is expected to double its employee roster to 2,000. Meridian manages Medicaid and Medicare plans in Michigan, Illinois and Iowa with more than 540,000 covered lives that is growing annually at a double-digit clip. The company also owns a pharmacy benefit management company. Cotton said the company will invest $24 million on things like renovations and furniture in its buildout of the six floors it will occupy.

Compuware, which in September announced an agreement to sell the company to Chicago-based private-equity firm Thoma Bravo LLC for $2.5 billion, will take a significantly smaller footprint. It was not known how many of Compuware’s more than 800 Detroit employees will remain in the building. The company employs 2,975 worldwide. If the deal closes as expected by the end of the year, it would be the largest single-building sale in the region this year and the secondlargest in terms of price, behind only the $177.5 million sale of the Southfield Town Center to New York City-based 601W Cos. in May. Covisint Corp., a company Compuware spun off last September in a $64 million IPO, and Plante Moran LLC are also tenants in the building, which was constructed between 2000 and 2003 for about $350 million. Covisint is expected to move out of the building; its lease expires March 31. Plante Moran recently opened an office in the Compuware building as well. Gilbert owns more than 60 properties — buildings and parking decks — totaling more than 9 million square feet. He has spent more than $1.5 billion purchasing and renovating them, according to a Quicken Loans tally. His largest office buildings are the First National Building (823,000 square feet); Chase Tower (525,000 square feet); the former Detroit Media Partnership building (404,000 square feet); One Woodward (360,000 square feet, soon to be renamed Fifth Third Bank at One Woodward); and the Chrysler House (351,000 square feet). U.S. Securities and Exchange Commission filings last week said an entity called 1000 Webward LLC is expected to purchase the building and parking deck. It’s not yet clear what new name the building will take, but it is expected to be renamed after the sale closes. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB Jay Greene and Tom Henderson contributed to this report.

Adell: Broadcaster to buy Radio Disney station, spread Word ■ From Page 3

“The Word Network appears to have made a terrific business deal. They should be able to recoup their $3 million and start generating profits relatively quickly,” Friedman said via email. “This gives them a multiplatform revenue strategy in their home market. Theoretically, they will have no programming costs as they already stream their programming online. This gives them another outlet for that stream, on which they can sell radio advertising.” Disney paid to technically reorient the station’s signal from Flintfocused to aimed at the metro Detroit market, something that required the purchase of two other stations to take off the air so the signal space was cleared for WFDF.

Adell Broadcasting Co.’s broker, Elkridge, Md.-based Patrick Communications, announced the $3 million WFDF sale on its website on Nov. 18. Radio Disney, which used Williamsburg, Va.-based media brokerage firm Schutz & Co., said in August that it intended to sell 22 AM and one FM station as part of its effort to move to a digital content business. WFDF went on the air in 1922 under the call letters WEAA, and changed to its current letters in 1925. The station’s format over the years has been adult contemporary, Top 40, news-talk, and adult standards. Then-owner Cumulus Broadcasting Inc. sold the station to ABC Radio

Inc. in 2002 for $3 million, and it switched to the children-oriented Radio Disney format, according to the radio industry tracker Michguide.com. This is Adell’s first foray into radio, and comes at a time when he’s exiting the ground-based television industry. Adell told Crain’s in October that he plans to sell his television channel, Clinton Township-based WADL TV-38, in the FCC’s 2015 auction of the UHF over-the-air broadcast spectrum. Mobile wireless providers need more airwave bandwidth to satisfy customer demand, and the 600-MHz spectrum used by stations such as WADL is coveted because it penetrates obstacles such as walls and base-

ments. Based on estimates provided by the FCC, which Adell shared with Crain’s, he expects to get $170 million for WADL’s portion of the local UHF airwaves. The station, which he and his now-deceased father launched in 1989, would go off the air three months after the auction sale is finalized. Adell’s parents applied for a television license in 1978, and it was awarded 10 years later, he said. He said his father, Franklin Adell, borrowed $3 million to build the station, and it went on the air in May 1989. Franklin Adell, who established himself with a family-owned automotive supplier of doorjambs decades before, hired Kevin after

his graduation from Arizona State University in 1988 to help him establish WADL. It initially broadcast infomercials and home-shopping programming before adding religious content, along with children’s shows, music videos and classic movies. It airs a mixture of older and newer syndicated shows, many aimed at an urban African-American audience. The Word Network is a separate company from WADL. While WADL broadcasts in eight Southeast Michigan counties, The Word Network reaches a potential 3 billion people around the world. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19

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CRAIN’S DETROIT BUSINESS

November 24, 2014

RUMBLINGS Obamacare adviser pact under fire Michigan Republican legislator has called for the state Department of Community Health to investigate a $481,050 contract awarded to Lansing Charter Townshipbased Health Management Associates because of the work Massachusetts Institute of Technology economist Jonathan Gruber — who also consulted on the Affordable Care Act — did on it. Over the past several weeks, Republicans nationwide have criticized Gruber for remarks he made several years ago, and recently made public, that the Affordable Care Act passed Congress in 2010 because of “lack of transparency” and the “stupidity of the American voter.” The U.S. Senate approved the Affordable Care Act in a 60-40 vote, and the House approved it 219-212. No Republicans voted for the bill. President Barack Obama signed the law in March 2010. According to Kelly Niebel, a spokesman for Health Management, Gruber was hired by the consulting company in 2012 along with Milliman to provide advice on the effect of the Michigan health insurance exchange. The exchange, which ultimately was set up by the federal government, offers customers an online method to purchase health insurance and receive a federal subsidy based on income. Of the $481,050 fee, Gruber’s firm was paid $275,000 for a report completed in February 2013. “He has a micro-simulation model that takes a look at health insurance policies and the effect they have on the distribution on health care spending, and public and private health care sector costs,” Niebel said. Niebel said Health Management has not been contacted by Community Health

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or state Rep. Tom McMillin, who asked the department for more information on Gruber’s involvement. Some Republicans are calling on Gruber to return some or all of the more than $6 million in estimated fees he and his associates have collected from federal and state governments. Gruber had no comment Friday.

Passport back for holidays Just after Black Friday’s mall and power shopping center sprees, Small Business Saturday is up this week — and it has a Detroit twist. To promote the day, American Express, the creator of Small Business Saturday, recently posted a video featuring a host of Detroit smallbusiness owners, from Rachel Lutz at The Peacock Room to Don Studvent, owner and chef at 1917 American Bistro. The video also announces the return of the Detroit Small Business Passport, a new holiday tradition. Created last year by Ryan Hooper (one of Crain’s 20 in their 20s winners this year) and Pure Detroit, the passport offers shoppers a discount of 10 percent to 25 percent at a host of shops in the city. At each location, shoppers get a stamp in their passport. Last year, 18 local retailers were involved; this year, 23 signed on. Said Janet Jones, owner of Source Booksellers, who is participating in the passport program again this year: “The passport lets us tell other people about other businesses. We get customers that we wouldn’t necessarily have because they are using their passports.” Free passports are available at Pure Detroit’s locations in the Renaissance Center, Guardian Building and Fisher Building starting Friday afternoon.

COURTESY OF FRANKLIN PUBLICITY

Brothers Jason (left) and Brian Maynard show off their restored vintage bus, now the traveling Cuban Missile Lounge.

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WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF NOV. 15-21

Cigar lounge goes mobile Have cigar lounge — will travel. Two entrepreneurial brothers have turned a 1974 Airstream Land Yacht RV into a mobile cigar lounge. Brian and Jason Maynard — both business owners in their own right — co-founded Brighton-based Unbolted Entertainment Inc. and invested $50,000 to buy the Airstream and renovate it into the Cuban Missile Lounge. The mobile lounge includes wall-to-wall Brazilian cherry wood flooring, hardwood wall panels, seating for 12-15 people, big-screen televisions, a mini-refrigerator and stocked humidor with a rotating selection of cigars at a price range of $8 to $25. Rental costs range from $500 for four hours to $800 for eight hours. The brothers are marketing the lounge for bachelor and bachelorette parties, weddings, tailgate parties, charity fundraisers, festivals and private corporate events. They hope to acquire five to 10 additional Airstreams to base them in Michigan hotspots and franchise the Cuban Missile Lounge concept.

12 lauded by Black Chamber The Michigan Black Chamber of Commerce hosted its second annual Sankofa Black Business Awards Gala last week. The awards honor 12 entrepreneurs, executives, and business and academic leaders. The Sankofa honorees were: John Barfield Sr., founder, Bartech Group LLC (lifetime achievement award); Daniel Loepp, president and CEO, Blue Cross Blue Shield of Michigan (corporation of the year); Forrest Carter, professor and director, Michigan State University Entrepreneurship Institute (5 Pillars of Commerce award); Greg Jackson, president and CEO, Prestige Automotive Group LLC (black business of the year); Karl Gregory, retiring professor emeritus and economist, Oakland University (scholar of the year); Horace Rodgers, retired attorney, entrepreneur and economic development professional (unsung leader); John Dingell, member, U.S. House of Representatives (citizen of the year); Mike Rogers, member, U.S. House of Representatives (citizen of the year); Louis Green, president and CEO, Michigan Minority Supplier Development Council (advocate of the year); Sid Taylor, founder and chairman, SET Enterprises LLC (black supplier of the year); Suzanne Shank, president and CEO, Siebert, Brandford Shank & Co. (woman of the year); and Tatiana Grant, president and CEO, Infused PR (next generation award).

Happy’s Pizza HONORING CRAIN’S 40 UNDER 40 founder convicted of tax crimes appy Asker, the founder of Farmington Hills-based Happy’s Pizza, was convicted of conspiracy and tax crimes in a scheme to conceal millions of dollars in income from the pizza chain. The government said a portion of the unreported income was shared among franchise owners. Asker said the indictment involved “only a handful” of the company’s 100 franchise locations. He added he was “surprised and disappointed” by the verdict and will “consider options for an appeal.”

ON THE MOVE 䡲 Rob Casalou was named

president and CEO of Ann Arbor-based St. Joseph Mercy Health System, a six-hospital group that is part of Livonia-based Trinity Health. He replaces Garry Faja, who will retire Dec. 31 after 32 years with the system. 䡲 Common Ground President and CEO Tony Rothschild plans to retire next September, capping a 25-year career at the Bloomfield Hills-based crisis and mental health services agency. 䡲 Richard Ludwig left as senior vice president in the Southfield office of Colliers International Inc. and joined Farmington Hills-based Fortis Commercial LLC as senior director of investment sales. 䡲 Nigel Francis, former state of Michigan car czar, was named vice president of corporate planning for Detroit-based American Axle & Manufacturing Inc. 䡲 Outgoing Wayne County Executive Robert Ficano appointed two county representatives to the Wayne County Airport Authority. Nabih Ayad is a partner at Canton Township-based Nabih H. Ayad & Associates PC; Michael Garavaglia is founder of Farmington Hills-based public relations firm Capital Relations LLC.

COMPANY NEWS 䡲 Ann Arbor-based St.

Joseph Mercy Health System signed an agreement to sell 164-bed St. Joseph Mercy Port Huron Hospital to Prime Healthcare Services, which agreed to invest $20 million into the hospital over three years. 䡲 Saying “we are deeply sorry,” an executive for Takata Corp., the Tokyo company that produced faulty airbags linked to the deaths of motorists, apologized at a U.S. Senate hearing as two lawmakers told of a sixth fatality they say is related, Auto-

AARON ECKELS

Jane Harper (center), director of information technology risk management and internal audit for Henry Ford Health System and Health Alliance Plan, poses with her family as one of the honorees Nov. 19 at the Crain’s 40 under 40 awards event at MGM Grand Detroit. The annual event includes 40 honorees and past classes selected for their accomplishments.

motive News reported. 䡲 The U.S. health system based in Livonia created by the 2013 merger of Catholic Health East and Trinity Health announced it will be named Trinity Health. It has been known since the merger as CHE Trinity Health. 䡲 Blue Cross Blue Shield of Michigan signed agreements with Brighton-based LifeSecure Insurance Co. and Lincoln, Neb.-based Assurity Life Insurance Co. to offer an expanded portfolio of individual supplemental insurance products in 2015. 䡲 Beaumont Health opened its first medical office in Detroit — at the Renaissance Center. Riverfront Family Medicine will initially be staffed by a family medicine doctor who will serve primary care needs of adults and children, but Beaumont officials said the clinic will be expanded. 䡲 Detroit-based Henry Ford Health System unveiled a new patient gown that aims to put the wraps on a big source of patients’ grumbles — a lack of rear coverage. Dearborn-based Carhartt Inc. will manufacture them, The Associated Press reported. 䡲 American Laser Skincare of Farmington Hills closed 100 clinics. Crain’s was told employees were notified of the closure when company CEO John Harlow told them the firm was closing because a key investor decided to pull out. 䡲 The Ann Arbor-based Michigan Venture Capital Association will honor Mike Finney, MEDC president and CEO, with a lifetime achievement award as well as three local companies — Ann Arbor-based ForeSee Results Inc., Plymouth Township-based ProNAi Therapeutics, and Detroit Labs — for recent achievements.

OTHER NEWS 䡲 In their annual fore-

cast, University of Michigan economists project the U.S. economy to grow by its highest rate in 10 years.

䡲 Southeast Michigan’s total health benefit costs for active employees are projected to increase only 2.9 percent in 2015 as employers continue to change benefit plans, according to Mercer’s 2014 National Survey of Employer-Sponsored Health Plans. 䡲 University of Michigan political science and public policy professor Robert Axelrod received the National Medal of Science award from the White House. 䡲 The Detroit Symphony Orchestra is collaborating on “Symphony in D,” a symphony celebrating the sounds of Detroit. It will premiere at Orchestra Hall next November. 䡲 With car insurance rates for city residents considered among the highest in the nation, the Detroit City Council approved a contract for a firm to study whether it’s feasible for Detroit to create its own auto insurance company. 䡲 A U.S. judge refused to put a stay on a court challenge to Michigan’s emergency manager law, but dismissed most of the case save for a claim that it is disproportionately applied to governing African-Americans. 䡲 Wayne County Community College District officials say they are talking with the developers of the former state fairgrounds in Detroit about creating a campus presence there. 䡲 The not-yet-built Detroit Red Wings arena was named to host the secondand third-round games for the 2018 NCAA Men’s Basketball Tournament. 䡲 The Federal Emergency Management Agency added 20 more days to the application period for metro Detroit flood and storm damage aid. The new registration deadline is Dec. 14.

OBITUARIES 䡲 Arnold Michael Ford, former CEO and president of T&M Asphalt Paving in Milford, died Nov. 14. He was 70.

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