Crain's Detroit Business, Oct. 7, 2019 by Crain's Detroit Business

Antonio Luck’s next act: Launching $100M global venture fund Page 7

OCTOBER 7 - 13, 2019 | crainsdetroit.com STATE BUDGET

Whitmer’s office enlists lobbyists to pressure GOP A few hours after Gov. Gretchen Whitmer ripped the L e g i s l a t u r e ’s “pork barrel” spending for “ l o b b y ist-pitched proCHAD grams” during a LIVENGOOD press conference Tuesday, her senior staff met with Lansing’s lobby corps to enlist their help in fixing the budget the Democratic governor had just dissected. About 20 private lobbyists representing special interest groups that got their line-item appropriations axed by Whitmer in an unprecedented veto spree were summoned to the governor’s office for a midafternoon huddle with senior gubernatorial aides, according to four lobbyists in attendance. According to those in the room, the governor’s aides read from prepared talking points and encouraged them to lobby Republicans who control the Legislature to introduce a supplemental budget bill that could be used to restore the 147 line items totaling $947 million that Whitmer wiped out day before. The lobbyists, who spoke on condition of anonymity, described the strategy as unusual and said the governor’s aides made no commitment to getting funding restored for their clients. “The governor’s office thinks somehow we’ve got the magic dust to put Republicans at the table and talk about roads,” said one veteran lobbyist who attended the meeting. This was the general company line several special-interest groups reported getting from the governor’s office last week after Whitmer threw down a gauntlet with the GOP-controlled Legislature: If you can convince Republicans to restart budget negotiations, then there’s a chance you can get your piece of the pie back. SEE PRESSURE, PAGE 25

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LIV opened as a medical marijuana provisioning center in Ferndale at 2625 Hilton Road. It is among two that have opened in the city so far. KAT HILTON

As application start date looms, cities say yes, no or maybe later to recreational marijuana By Annalise Frank afrank@crain.com

At least half of Michigan’s communities have opted to ban recreational cannabis facilities so far, as Nov. 1 looms — the date the state will start taking business applications. Just over 50 percent of Michigan’s 1,773 cities, townships and other municipalities have notified the state as of Sept. 27 that they have

passed ordinances or other rules opting out of the licensed facilities portion of the Michigan Regulation and Taxation of Marihuana Act. Michigan voted in November to legalize recreational use for adults, but cities get to decide whether they want businesses to set up shop. While cities must opt in to set up rules for and allow medical marijuana businesses — 126 have done

so, as of Sept. 27 — it’s not the same with recreational. They will automatically become legal ground for businesses unless they act and notify the state otherwise. “This really has been one of those issues that’s all over the map and the reactions in communities are vastly different,” said Christopher Johnson, general counsel for the Michigan Municipal League, which

creates programs and advocates for municipalities. Many communities consider the opt-outs temporary for now, and are waiting for more clarity surrounding the law or to see how cities leading the charge fare. They may re-evaluate and opt in later, while others just don’t want weed sold within their borders. SEE MARIJUANA, PAGE 29

HEALTH CARE

McLaren’s 10-year cancer quest comes to an end By Jay Greene jgreene@crain.com

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McLaren Healthcare Corp.’s decade-long quest to offer its patients cutting-edge proton beam therapy for cancer has finally arrived as its Proton Therapy Center since December has treated 38 patients who have trekked to the center in Flint for more than 1,400 visits. After completing construction of its proton center in 2015, McLaren ran into a variety of delays, including the bankruptcy of its partner, Texas-based ProTom International Inc., that helped push the three-room

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center’s total costs up 25 percent to more than $65 million. Proton beam therapy, which delivers a narrow beam of radiation to destroy cancerous cells, is an emerging radiation treatment that is steadily gaining acceptance among physicians, patients and health insurers. Research is showing that proton beam radiation is effective in some prostate and pediatric cancers because it causes less damage to surrounding tissues while directing high doses of radiation at tumors. SEE PROTON, PAGE 28

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MICHIGAN BRIEFS

INSIDE

From staff and wire reports. Find the full stories at crainsdetroit.com

Michigan vape ban takes effect, challenges continue Gov. Gretchen Whitmer’s ban on flavored e-cigarettes started last Wednesday after a pair of judges said they were not ready to decide whether to stop it. Michigan Court of Claims Judge Cynthia Stephens heard arguments Tuesday about an injunction sought by Houghton tobacco vape retailer 906 Vapor LLC and its owner Marc Slis. The attorney general’s office said the hearing will continue Oct. 8. The lawsuit claims Whitmer’s office lacked the legal authority to enact the emergency rule, which bans the retail sale and possession with intent to sell by a retailer of flavored-vape products for 180 days. A separate but related lawsuit is pending in federal court in western Michigan. Mister E-Liquid, a Grand Rapids company that makes liquids used in e-cigarettes, filed suit arguing the ban violates the U.S. Constitution’s commerce clause. Gov. Gretchen Whitmer announced the ban on flavored e-cigarettes Sept. 4 to combat growing health concerns, including deaths and hospitalizations around the country linked to vaping. Federal

health officials say most of those incidents revolve around black-market marijuana vape products. “For too long, companies have gotten our kids hooked on nicotine by marketing candy-flavored vaping products as safe,” Whitmer said in a statement last month. “That ends today.” Under the rules, selling a flavored vape product, excluding tobacco flavor, could result in a misdemeanor charge, punishable by a $200 fine and up to six months in jail. While the ban is only effective for 180 days, it can be extended another six months under the emergency rules. “Today is the day that a lot of (vape business owners) are packing trucks to move their product out of the state,” said Andrea Bitely, spokeswoman for the Defend MI Rights Coalition, a group of around 12 actors against the ban in Michigan, including affected businesses and associations. “There are approximately 700 vape stores in the state ... Each of them is, right now, figuring out what is next for them.” Joost Vapor, a vaping liquid manufacturer and retailer with corporate offices in Wyoming, Mich., packed up two 26-foot trucks to transport between $2 million and $3 million of its products out of Michigan before the ban took effect, Michael Ames, chief administrative and compliance officer, said in an email.

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nation of indoor waterparks and hotel rooms proved popular with consumers, spurring competition and attracting interest from private equity. Centerbridge bought Great Wolf in 2015 from Apollo Global Management Inc. GREAT WOLF LODGE

Great Wolf Lodge’s resorts include water parks with a variety of amenties.

“We have a partner in the Chicago area that is willing to hold our product for resale out of the state so we may comply with the emergency rules,” Ames said. “Rather than risk the criminal penalties, we have found this is the only viable option for us within the timeline granted.”

Traverse City’s Great Wolf Lodge has new owner

Blackstone Group Inc. agreed to buy a 65 percent controlling interest in waterpark operator Great Wolf Resorts Inc. from Centerbridge Partners and the two companies will form a $2.9 billion joint venture to own the company.

Great Wolf’s 18 family-oriented resorts in the U.S. and Canada include Great Wolf Lodge water resorts in Traverse City and Sandusky, Ohio. The properties include full-service hotels, indoor waterparks and recreational activities such as bowling alleys and ropes courses. It’s the second major resort in Michigan to come under private equity ownership in the past month. Mackinac Island’s Grand Hotel was acquired by KSL Capital Partners from its longtime owners, the Musser family. Great Wolf opened its first property in Wisconsin in 1997 and spent its early years expanding in cold-weather states across the Midwest. The combi-

Grand Ventures raises $28 million

Grand Ventures LLC has finished raising capital for its $28 million flagship fund intended to help startups based in Michigan and the Midwest. The Grand Rapids-based venture capital firm announced Tuesday that it made the final close on its Fund I LP, which has invested about $5 million in six companies so far and aims to provide capital to 15-20 over the life of the fund, according to a news release. “We continue to differentiate our firm by focusing the majority of our deal-sourcing efforts on the greater Midwest with portfolio companies in Ann Arbor, Chicago, Cincinnati and Indianapolis,” Tim Streit, Grand Ventures co-founder and managing partner, said in the release.

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REAL ESTATE

FINANCE

Executive denies crimes in response to lawsuit; more investors sue By Kirk Pinho kpinho@crain.com

er banks and larger banks. “It’s not these big ones gobbling up little ones, it’s these small and midsize banks coming together to be able to handle and be compliant with all these federal regulations that have come down since Dodd-Frank,” said Patricia Herndon, executive vice president, government relations, at the Lansing-based Michigan Bankers Association. New York City-based JPMorgan Chase is the largest bank in the state and region by total deposits. As of June, it had 26 percent of the Detroit-Warren-Dearborn designated market area with $36.55 billion in deposits. Five years ago, it had 29.3 percent of the market with $30.8 billion in deposits.

A Troy real estate executive says there were “no crimes committed” in his business dealings and that he doesn’t owe two former business partners money, but Viktor Gjonaj’s response to a civil lawsuit against him in Oakland County claiming he’s involved in a “multi-million dollar Ponzi-type scheme” does not deny he fled the country. It’s the latest development in a case that has the suburban real estate and legal community wondering what happened to Gjonaj, the 42-year-old longtime real estate broker and founder of the now defunct Troy-based firm Imperium Group LLC, which collapsed in the middle of August Gjonaj after he stopped showing up to work. Filed Sept. 26, his response comes as lawsuits mount against him in Oakland County Circuit Court alleging he took $700,000 from two new plaintiffs earlier this year. In the response to an Aug. 26 lawsuit filed by investors Kris Krstovski and Jerome Masakowski, Sterling Heights-based attorney Cecil St. Pierre, partner at Boyer, Dawson & St. Pierre PLLC and president of the Warren City Council, writes that Gjonaj has fully paid his debts allegedly owed to the two men, who say they invested with Gjonaj on real estate deals in recent years. Other portions of the response say Gjonaj “lacks knowledge or information sufficient to form a belief” on the veracity of some of the allegations in the August complaint, including: J Whether there was a Ponzi scheme.

SEE BANKS, PAGE 26

SEE GJONAJ, PAGE 27

GETTY IMAGES/ISTOCKPHOTO

Fueled by M&A, smaller banks take bigger slices of the pie By Kurt Nagl knagl@crain.com

The banking landscape of metro Detroit and the state is shifting as small and midsize firms combine amid an absence of new competition. JPMorgan Chase & Co. and Comerica Inc. still command the most market share, but they have become less dominant in recent years, according to annual data from the Federal Deposit Insurance Corp. Meanwhile, mergers and acquisitions are enabling other institutions such as TCF Bank and Level One Bancorp. to take a larger slice of the pie. With just one new bank opening in the state since the Great Recession, community banks are looking to combine for growth. The result is few-

“It’s not these big ones gobbling up little ones, it’s these small and midsize banks coming together to be able to handle and be compliant with all these federal regulations that have come down since DoddFrank.” Patricia Herndon

INSURANCE

No-fault insurance changes begin to spark litigation By Chad Livengood clivengood@crain.com

As the sweeping changes Gov. Gretchen Whitmer and the Legislature made this summer to Michigan’s no-fault auto insurance start to sink in, litigation from medical providers, insurers and injured motorists is starting to heat up. Two catastrophically injured motorists and their guardians along with one of the state’s leading brain injury rehabilitation centers filed the first major lawsuit last Wednesday asking an Ingham County judge to declare the new law’s medical care limitations and price-control mechanisms unconstitutional. On the day before, State Farm Mu-

tual Auto Insurance Co. was at the Michigan Supreme Court battling a lawsuit brought by Flint medical clinic of neurosurgeon Jawad A. Shah over a disputed medical bill for treatment of an injured motorist. State Farm’s lawsuit revolves around a case law dispute the Legislature and Whitmer cleared up by giving medical providers the right to directly sue no-fault auto insurance carriers over medical services rendered. A Michigan Supreme Court ruling in 2017 in a case involving State Farm and Covenant Medical Center in Saginaw made it harder for medical providers to sue insurers for nonpayment for services rendered.

For about two years, hospitals, pain-management doctors and rehabilitation centers were required to get each injured driver to assign their right to sue insurers to the medical provider. Crain’s reported in March that the Covenant decision caused a major shift in medical provider lawsuits against insurance companies from Wayne County to Oakland County, where judges have been more receptive to hearing the lawsuits. In 2018, State Farm was sued 440 times in Oakland County by injured motorists and medical providers — more lawsuits than were filed against all insurers in Oakland County in 2011, court records show. SEE NO-FAULT, PAGE 26

LARRY PEPLIN FOR CRAIN’S

Gov. Gretchen Whitmer and the Michigan Legislature made sweeping changes to the state’s no-fault auto insurance law.

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The vacancy rate in Detroit’s prime office buildings dropped this year, according to a new report from the Royal Oak office of JLL.

It’s harder to find space in prime downtown office buildings, report says The 21 most in-demand office buildings in and around downtown Detroit are more than 92 percent leased. That’s accordKIRK ing to the annual PINHO Detroit Skyline report from the Royal Oak office of Chicago-based brokerage firm JLL, which has been compiling this data for a few years. At 7.7 percent vacant, those buildings have filled up a little bit since last year, when their combined square footage of nearly 10.8 million square feet of the city’s primo office space was 8.8 percent empty. The vacancy rate was 7.5 percent in 2017. Rents have also continued to be driven upward, now at $24.99 per square foot, up a whopping $1.52 per foot from last year, when they were $23.47. Even that was nearly a $1 jump from 2017, when they were $22.55 per square foot. In all, rent in those buildings has increased 10.82 percent in the last two years, which has pushed some nonprofits and smaller operations out of the downtown core to the north in areas like New Center. “Downtown Detroit’s skyline remains very tight in 2019,” said Harrison West, a research analyst for JLL. “With an evident shortage of quality direct available space in the skyline, everyone is keeping an eye on the Hudson’s and Monroe Blocks projects to see how much office space will ultimately be included and when it will deliver. As of now, the only true large blocks of available space are in the Renaissance Center, where more than 60 percent of the skyline vacant is situated.” West said part of the rent increase was due to rents in the RenCen rising from $23.50 per square foot to $25.50. “Everything is pretty full,” West said. “The large blocks available are in the RenCen. If those spaces aren’t taken up in the next year, this probably isn’t going to change a lot” by the time the next Skyline report is released. Here are the deets on those 21 buildings: JJ211 West Fort St., 446,000 square feet. Occupancy: 77.2 percent JJ150 West Jefferson Ave., 500,000 square feet. Occupancy: 100 percent

JJOne Woodward Ave., 360,000 square feet. Occupancy: 100 percent JJAlly Detroit Center, 1 million square feet. Occupancy: 96.6 percent JJThe Guardian building: 643,000 square feet. Occupancy: 97.9 percent JJChase Tower, 505,000 square feet. Occupancy: 100 percent JJFirst National Building, 850,000 square feet. Occupancy: 96 percent JJChrysler House, 416,000 square feet. Occupancy: 97.3 percent JJOne Kennedy Square, 247,000 square feet. Occupancy: 100 percent JJ1001 Woodward Ave., 305,000 square feet. Occupancy: 99 percent JJOne Campus Martius, 1.08 million square feet. Occupancy: 100 percent (Note: This does not include the under-construction addition of 310,000 square feet) JJRenaissance Center, Tower 100, 588,000 square feet. Occupancy: 85 percent JJRenaissance Center, Tower 200, 593,000 square feet. Occupancy: 48.4 percent J Renaissance Center, Tower 300, 585,000 square feet. Occupancy: 100 percent J Renaissance Center, Tower 400, 576,000 square feet. Occupancy: 92.7 percent J Renaissance Center, Tower 500, 307,000 square feet. Occupancy: 100 percent J Renaissance Center, Tower 600, 307,000 square feet. Occupancy: 69.9 percent J Ford Field office space, 331,000 square feet. Occupancy: 100 percent J 1900 Saint Antoine, 99,000 square feet. Occupancy: 100 percent J Brewery Park, 371,000 square feet.

“With an evident shortage of quality direct available space in the skyline, everyone is keeping an eye on the Hudson’s and Monroe Blocks projects to see how much office space will ultimately be included and when it will deliver.” Harrison West

Occupancy: 80.8 percent JJThe Fisher Building, 635,000 square feet. Occupancy: 92 percent

WeWork’s Cass space moving forward The Wall Street Journal reported on Sept. 27 that WeWork had thought about suspending new leasing as it ramped up to the IPO that didn’t happen, but the co-working space giant is still moving forward with its lease at 6001 Cass Ave. in Detroit’s TechTown neighborhood. “While we will continue to sign new lease agreements with our landlord partners, we expect the pace to slow over the next several quarters as we focus on strategic expansion and profitability,” the company said in a statement. I sent questions about how much is being spent on its new 91,000 square feet in the building owned by Detroit-based The Platform LLC and when the space will open. They were not answered. A Platform spokesperson said in a statement that WeWork “will bring a great deal of energy to TechTown and the greater New Center area,” adding that construction on the space is “already in full swing.” The Tech Town space more than doubles WeWork’s presence in Detroit, after it took about 85,000 square feet in a pair of Dan Gilbert-owned buildings downtown.

Royal Oak project kicks off A new townhouse development in Royal Oak is slated to bring 10 units to the market starting at $550,000. The Oaks Residences, expected to cost more than $5 million, broke ground last month with construction set to be finished next summer. The Wirt-Rivette Group is the developer of the project at 700 E. Parent St. and Royal Oak-based Alexander Real Estate is marketing the units for sale. The general contractor is Royal Oak-based Hudson Building Co. and the architecture firms working on the project are Comprehensive Design Group Inc. and FX Architecture LLC, both based out of Royal Oak. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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Shank to be CEO of largest minority-owned investment bank following merger By Kirk Pinho kpinho@crain.com

Affordable plans for every business?

A pair of major municipal and corporate bond firms are merging next month to create what’s being called the biggest minority-owned investment bank in the nation, headed up by Suzanne Shank from Detroit. A press release says Siebert Cisneros Shank & Co. LLC and The Williams Capital Group LP are merging to create Siebert Williams Shank & Co. LLC, which will have its headquarters offices in New York City and Oakland, Calif. It will be headed up by Shank, who will be president and CEO, and Christopher Williams, who Shank will be chairman of the board. Henry Cisneros, a former U.S. Housing and Urban Development secretary, will remain a principal of the firm and be vice chairman; the parent/holding company of the new firm is Shank Williams Cisneros LLC, a spokesman said. “By bringing together two first-class firms, we will accelerate our collective success and greatly enhance our ability to serve our clients using a strong capital base that is now significantly larger,” Shank said in the press release. “We are creating the No. 1 ranked MWBE (Minority and Women Owned Business Enterprise) investment banking firm in the country that will continue to compete with the best firms on Wall Street. Williams was the only firm with the capa-

bilities, talent and integrity in the corporate underwriting space that we felt expanded our franchise and matched our work ethic and high standards of performance, and now, we have created a truly historic firm.” Bond Buyer reported in January that Siebert Cisneros Shank was one of the top 25 municipal bond underwriters in 2018 with $5.64 billion based on Thomson Reuters data. A spokesman said the new firm has more than 50 percent more capital than Siebert Cisneros Shank had before the merger. The release says the new company will have more than 15 offices and over 750 institutional investors. In the last five years, Siebert Cisneros Shank has been involved in almost 2,000 municipal financings, the press release says. It was lead manager on over 200 of those totaling almost $30 billion. Williams Capital has worked on debt and equity financing for more than 65 of the Fortune 100 and has worked on over 900 corporate debt and equity offerings, according to the release. Shank is active in Detroit business and philanthropic circles, serving on the CMS Energy (NYSE: CMS) and Consumers Energy Inc. boards. She was named one of Crain’s 100 Most Influential Women. At that time, Crain’s reported that she was involved in more than $1.2 trillion in municipal bond transactions and $800 million in corporate bond and equity transactions. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Michigan Supreme Court hears arguments in Honigman’s tax fight By Chad Livengood clivengood@crain.com

LANSING — The law firm Honigman LLP was in Michigan’s highest court last week fighting a $1.1 million tax bill from the city of Detroit in a lawsuit that could have taxing implications for other Detroit businesses with clients in the suburbs and beyond. The Michigan Supreme Court heard oral arguments in Detroit’s appeal of a Court of Appeals ruling that certain revenue the Honigman firm earned was not subject to the city’s corporate income tax because they came from legal work done for clients outside of the city. For the tax years between 2010 and 2014, the Honigman law firm has claimed 11 percent of its gross revenues Niehoff were generated within the city, while about half of the firm’s 352 attorneys work out of the First National Building in downtown Detroit. The law firm has other offices in Ann Arbor, Bloomfield Hills, Grand Rapids, Kalamazoo and Grand Rapids. The dispute hinges on whether Honigman’s legal services and work product is rendered complete when it’s delivered to clients outside of Detroit or if it’s complete when the work is performed inside the city limits. Charles Raimi, deputy corporation counsel for Mayor Mike Duggan’s administration, argued Wednesday that an “eminently fair and reasonable” estimate is that 50 percent of the firm’s revenue is generated from the Detroit headquarters. “The phrase ‘services rendered’ in the city is synonymous with the phrase ‘services performed,’” Raimi said. Leonard Niehoff, head of Honigman’s appellate advocacy practice group, argued the law firm’s profits from legal work delivered to clients

outside of the city shouldn’t be subject to the 2 percent corporate income tax. Honigman defines a client’s location by where it sends the legal bills, Niehoff said. Niehoff said state law is ambiguous as to whether the corporate income tax applies to legal work created for clients outside of the city. “If the statute is indeed ambiguous, then we win,” Niehoff said. “Because in the case of tax statutes, all ambiguities are construed in favor of the taxpayer.” Justice Stephen Markman pushed back, noting “every statute coming before us is ambiguous by that criteria.” “We always have conflicts and disagreements — that’s kind of the stuff we do here at the court,” said Markman. The income of corporations based in Detroit is taxed based on three equally weighted factors of real and personal property, payroll for employees based in the city and revenue derived from goods and services rendered within the city limits. The Supreme Court’s justices lobbed multiple scenarios, probing what type of business activity the firm would consider taxable. “If we ... were a partnership that sold widgets and we shipped them outside of the city of Detroit, that wouldn’t be a revenue factor (subject to taxation) either,” Niehoff said. Justice David Viviano said a manufacturer in Detroit “with a couple of partners” who don’t spend much time at the manufacturing plant would be taxed differently than the law firm. “It seems to me you guys have a lot of partners, so a lot of the work being done in the city is not captured under any of these factors,” he said. Niehoff argued that’s justified. Just 7 percent of Honigman’s clients are based in Detroit, he said. Wednesday’s hearing took place on the first day of the court’s new term. The justices did not indicate if or when they will rule on the appeal. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

Antonio Luck’s next act: Launching $100M global venture fund By Kurt Nagl knagl@crain.com

Antonio Luck is departing Endeavor Detroit to take his venture capital skills global. Luck is helping launch a $100 million fund with four other former leaders of Endeavor Global, a nonprofit organization that operates business mentorship programs in 30 countries. His last day as managing director of Endeavor Detroit is Oct. 31, though he will help advise as the job transitions to successor Diana Callaghan. Luck will carry the same title to the new fund, MatterScale Ventures, formed this summer. The fund plans to focus on disrupting highly regulated industries such as finance, health care and Luck manufacturing by investing in tech companies positioned to scale up. Luck will oversee the Midwest from his base in Detroit. The other managing directors are in San Francisco, Mexico City, Istanbul and Bogota, Colombia. “We have the connectivity in the ecosystem that comes from Endeavor and our previous lives,” Luck said. “We thought that continuing to do what we’re doing and adding a layer of capital on top was the next step.” Luck said the new venture is in its early stages, and he did not want to put a time stamp on the fundraising goal. Incorporated in Delaware, the fund is being marketed to high-net-worth investors from around the world and will be administered primarily from the West Coast. It has raised $2 million so far from more than a dozen venture partners, including Joe Hessling, CEO of Troy-based 365 Retail Markets, and Jason Wenk, CEO of Grand Rapids-based FormulaFoli-

os who participated in the Endeavor Detroit program. Luck said he has several other soft commitments from investors elsewhere in the fund’s footprint. He said $100 million in capital would provide seed investment for 40 companies — two companies in each geography per year — as well as follow-on support. He said he is looking to invest in companies in Southeast Michigan but declined to give names before conducting due diligence. There’s nothing obvious linking Detroit, San Francisco and the capital cities of Mexico and Colombia, but Luck believes entrepreneurs run in a tight circle even across borders. “We’ve been seeing the pipeline. We know the entrepreneurs, we know the investors,” he said. “It seemed obvious to give (the fund) a shot.” Luck, included in Crain’s “20 in their 20s” in 2008, has been Endeavor Detroit’s managing director since its inception in 2015. Under his watch, it has helped 17 member companies generate $140 million in revenue and raise $83.5 million, according to the organization. Prior to Endeavor, Luck served as director of business acceleration, entrepreneurship, innovation and venture capital at the Michigan Economic Development Corp. Callaghan, who started with Endeavor Detroit last Wednesday with 15 years of experience in business consulting, said she intends to take the baton and run. “I’m looking to scale some of our services to reach more entrepreneurs, and I’m excited about going on a little bit of a learning journey,” she said. “I’m really going to be building off of what Antonio and his team have already created.”

Count on it.

Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

United Way sets $40M goal for annual campaign By Sherri Welch swelch@crain.com

United Way for Southeastern Michigan has scaled back the amount it’s looking to raise through its annual campaign to $40 million, from a $46 million goal set for last year’s campaign. At the same time, the Detroit-based nonprofit has increased its target for the number of hours the community volunteers to 40,000 from 25,000 during the 2019-20 drive. Its volunteer and investment strategy for Wayne, Oakland and Macomb counties will be focused on supporting households struggling to meet their basic needs, United Way said. Hudson Joe Hinrichs, Ford Motor Co.’s president, automotive, is chairing the campaign for the second consecutive year, fulfilling a two-year commitment. “Every day, children and families in more than 680,000 households across southeast Michigan have trouble finding money for the basics — food, housing, health care, child care and transportation,” he said in a news release. A March report released by the Michigan Association of United Ways found that 43 percent or 1.66 million households statewide could not afford basic needs in 2017. That baseline number “gives us more of a catalyst and forces us to think very differently about how we help meet these basic needs,” United

Way President and CEO Darienne Hudson said Thursday, following the annual campaign launch. “We want to see this number decreasing substantially over the next three to five years.” United Way will look for ways to bring more agencies together to help families meet their basic needs, Hudson said. The extra effort put behind basic needs will come in addition to continued support of two other community impact areas on which United Way is focused: financial stability/economic prosperity and education, said Vickie Winn, director of public relations. United Way kicked off its “Forty-forty in Twenty-twenty” drive Thursday morning at the Ford Resource and Engagement Center in Southwest Detroit, a community resource center launched by Ford Motor Company Fund and 18 nonprofits in 2013 to help break the cycle of poverty for families living in the area. The lower financial target announced for this year came amid news that United Way surpassed its annual campaign goals last year, raising $47.4 million and coordinating 36,000 volunteer hours. “During our previous campaign, we set aggressive financial goals, anticipating the new charitable giving laws and other factors impacting the nonprofit sector across the country,” Hudson said. “This year, our goals are more conservative, while making sure the needs of people in our communities and their families are met.” Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

OPINION EDITORIAL

Higher education is forgotten player in budget battle L

ost in the fury of last week’s state budget battle was a big part of the state budget that will have ramifications for decades. The loudest debate focused on roads and K-12 spending. It seemed the forgotten side in the discussion was higher education. Michigan saw a state funding increase of only an anemic 0.5 percent for higher ed. That means the state’s public colleges won’t even be keeping pace with inflation in a state that already ranks near the bottom — 44th in the nation — in public funding for universities. Michigan’s promotional efforts tied to careers have emphasized the value of skilled trades of late, and there’s no question the state needs those workers. But for long-term payoff, bachelor’s degrees and beyond are where it’s at. Just ask Amazon, which didn’t give metro Detroit a second look for its HQ2, because we didn’t have the talent. What does Amazon see in Detroit? A ripe site for its warehouses — a fourth is now planned at the Pontiac Silverdome site. Those fulfillment centers bring jobs, for certain, but jobs that pay a fraction of those at any corporate headquarters or technical center. And the job growth of the future isn’t in warehouse jobs, even if we’re buying all our groceries from the online retail behemoth. Between now and 2026, jobs that require a fouryear degree are projected to increase 11 percent, but those that require only a high school diploma a comparatively weak 4.9 percent. An investment in college educations pays off for state coffers in the long run, too. Research published by the Lumina Foundation shows that increasing bachelor’s degrees saves states money on things like incarceration and human services, and brings in more tax money because college graduates make more money. Over the lifespan of college graduates, their increased value to states in terms of tax money saved and generated totals $355,000 in time-adjusted dollars. Public university tuition even at today’s rates starts to seem like a bargain, from the state’s point of view. “Bottom line: State funding of public higher education is a smart, fiscally conservative investment,” said Dan Hurley, CEO of the Michigan Association of State Universities. He’s got it right. The slim increase means that higher-education funding won’t

MICHAEL LEE malee@crain.com

keep pace with inflation, continuing decades of disinvestment that has put more and more weight on families to make up the difference as tuition goes sky-high. As an example, my tuition in 1990 when I started college was just under $100 per per credit hour — around $1,500 for a full class schedule. My son’s tuition has been more than quadruple that rate. And I can tell you from experience that the cost of college — and an astonishing fear of taking on crushing debt to pay for it — is keeping kids and their families from even trying. And that’s even though the “out-thedoor” price after financial aid is typically much lower for most families than the full-freight sticker price. Parents see that sticker price and despair. And, Hurley says, studies show they overestimate the actual cost of college by some 40 percent. That overestimation keeps real people from getting the education that will benefit them. Younger people themselves are starting to wonder if the value of a college education is still there. I’ve had to talk to my own son, a junior in college, about how it’s still worth it — literally going over the research — because he has freaked out over the amount of money it’s costing. I’m still not sure he believes me. One of the reasons for long-term public disinvestment from higher education is the belief that parents and students will pay the difference. But I think we’re hitting a wall where that is no longer true. Michigan’s employers and future economy depend on knocking down those fears and bringing down that sticker price. A state investment in higher ed pays off down the road. And we should be talking more about it. Michael Lee is the managing editor of Crain’s Detroit Business.

MORE ON WJR Listen to Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning at 6:15 a.m. Mondays on WJR 760 AM’s Paul W. Smith Show.

COMMENTARY

New expungement package will help thousands find work W

e talk to businesses every day and they tell us the same thing: there are simply not enough qualified, skilled workers to meet the demands of the marketplace. When thinking about workforce development policies to address this crisis, we must consider expungement reform legislation. Unfortunately, the current laws, and lack of awareness of the expungement process, are keeping hundreds of thousands of Michigan residents unemployed. State lawmakers recently introduced a six-bill legislative package addressed at expunging an individual’s criminal record. These bills have the opportunity to open up the expungement process to many Michigan residents who struggle to find a job because of their past criminal records as well as open up eligibility for a number of low-level offenses such as traffic offenses that are ineligible under the current expungement law. Research shows that expanding expungement means massive economic benefits. Annually, the underemployment of formerly incarcerated people costs the nation between $78 billion and $87 billion in gross domestic product. Within two years of receiving an expungement, a person’s likelihood of being employed increases significantly and their personal income increases by 25 per-

OTHER VOICES

Sandy Baruah and Rick Baker

cent. With a stable career, returning citizens are able to support themselves and their families while being productive members of society. Additionally, clearance of public criminal records reduces recidivism rates and fights crime, making communities safer. Employing someone who is formerly incarcerated is the best available recidivism-reduction tool. If a person stays out of trouble for five years or more, they are no more likely to commit another crime than any member of the general public. Past convictions do not predict future criminal conduct and should not be the basis for employment decisions. Michigan businesses are primed and ready to support individuals who want to take advantage of the benefits of expungement and address the labor shortage. In fact, many employers already overlook criminal records to fill their talent shortages, giving workers a chance to prove them-

selves for their past mistakes — Bank of America has partnered with the Detroit Justice Center to provide a place to get records clear, among many other services for formerly incarcerated Detroiters; Cascade Engineering helps give returning citizens a second chance for successful re-entry and provides opportunities to former inmates they may not otherwise receive; and DTE Energy partnered with the Michigan Department of Corrections last month to train inmates for careers after prison. What they have found is that an individual with a record typically performs no differently than other employees who do not have records. Employers report that these employees are actually often more productive, sticklers for attendance and timeliness, and have lower turnover rates. The expungement legislative package will help residents of all age groups and across multiple demographics to take that first step to a new beginning. Finding employment should be an easy process for people who are not a threat to public safety. The time is now to modernize this legislation and change the lives of so many Michiganders. Sandy Baruah is the president and CEO of the Detroit Regional Chamber and Rick Baker the president and CEO of the Grand Rapids Chamber.

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

Michigan is ready to retool Manufacturing Day

ince its introduction in 2012, the national observance of Manufacturing Day has quickly grown to nearly 3,000 events last year, with over 275,000 people taking part in tours and demonstrations at manufacturing companies and educational institutions across the country. The crowd is only expected to grow in 2019, and several states have gone so far as to designate October as National Manufacturing Month, adding multiple events in the weeks following the traditional first-Friday “kick-off” tours. With that momentum at our backs, our company’s experience over the last few years tells us that we’re ready to take this to the next stage — to grow beyond a fall celebration, and to work together to develop a sustained campaign that maintains our connections with students throughout the year, beyond graduation and into the early days of their professional lives. The need addressed by programs like MFG Day is clear — Michigan’s prosperity is inextricably tied to the success of its manufacturing base, and the rate of predicted growth is cause for urgent concern. According to a study produced by Deloitte and The Manufacturing Institute in 2018, over 4.6 million manufacturing jobs will open up over the next 10 years, through a combination of attrition, baby-boomer retirements and natural industry growth, but only 2.2 million jobs are expected to be filled by 2026. What can smaller companies and regional organizations do on a smaller scale that can actively move us in the right direction? Do we want to be up at Mackinac next May redefining the problem, or can we work together to make substantial progress toward a sustainable solution? At Deshler Group, we’ve truly enjoyed the opportunity to host hundreds of middle and high school students at our manufacturing facilities in Michigan and Ohio through MFG Day events since 2017. We’ve grown and adapted our immersive and interactive MFG Day programs, from working directly with local high schools on our own to having active collaborations with the Livonia Chamber of Commerce, the Oakland County Executive’s office, and a three-county vocational center in Ohio. However, as is expected in an industry that requires constant innovation to remain competitive, the need for an updated strategy has become apparent. When Deshler Group approached partners this year, we heard similar responses from almost everyone we talked to across two states and three counties: Why are you doing this in October? High school seniors are months away from graduation, they can’t just apply for a job now. Can you get this moved to spring to maximize the chances of hiring some of these seniors? Our hope is that what began as project to raise visibility to change perceptions can be retooled and upgraded to take on a more active and sustained campaign, a step-up made possible by the success of MFG Day’s early adopters. Building on the current program’s foundation, we believe that creating ongoing relationships with students means engaging not only with their

OTHER VOICES Robert Gruschow

schools on a consistent basis, but also, crucially, with their parents. Expanding the current MFG Day program with an ongoing series of engagement events, mentorship opportunities and parent nights on the

shop floor can foster the kind of perception shift that will make a real impact on our economic future, at both the community and regional levels. It is also our hope that decision-makers with the ability to influence education policy at all levels will take part in at least one MFG Day event this year, and ask themselves: Are we doing the best we can to prepare our students for this rapidly growing professional environment? What would it take to match our curriculum to the needs of this diverse field of careers? How can we build relationships with industry leaders to create opportunities that will increase our access to the best

outcomes for our students? MFG Day has earned our confidence as a constructive use of our company’s time and resources, and we think the time is right for our peers and our regional business institutions to make a shared, coordinated investment in its evolution, which will enhance this program’s return on investment for companies that truly prioritize the attraction and retention of great talent and keep it right here in Michigan. Robert Gruschow is the president of Deshler Group, a global Tier-1 automotive supplier based in Livonia.

ACCELERATING TOWARD A CLEANER FUTURE

Building on the current program’s foundation, we believe that creating ongoing relationships with students means engaging not only with their schools on a consistent basis, but also, crucially, with their parents.

We’re accelerating our carbon emission

reduction goal, cutting emissions in half by 2030, and by 80% a decade earlier than planned. And we’re doing it while providing affordable and reliable energy. Together, we can speed Michigan toward its cleaner energy future.

Learn how you can get involved at journeyto80.com

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

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Health care organizations prepare, but many are unready for increasing threat of cyberattacks By Jay Greene | jgreene@crain.com

ansomware and other cyberattacks are expected to increase in the coming years as criminals become more adept at breaking through protected information systems to extract wealth or to simply create chaos. Dozens of ransomware, phishing or malware attacks have already affected Michigan companies, governmental bodies or organizations this year, most of which haven’t been reported in the press, experts tell Crain’s. Nationally, about 70 percent of ransomware attacks last year targeted small businesses, with an average ransom demand of $116,000, according to a recent report from Beazley Breach Response Services. Worldwide, the WannaCry ransomware attack in 2017, believed to originate from North Korea, affected more than 300,000 people in more than 150 countries and caused widespread problems with the United Kingdom’s National Health Service. U.S. companies were not targeted by WannaCry, although experts predict it is only a matter of time before something similar happens here. In Michigan, high-profile cases include Brookside ENT and Hearing Center, a small physician practice in Battle Creek that was hacked in a ransomware attack. The practice’s computers were locked down, patient data and appointments frozen. The two doctor partners refused to pay and announced they would close their office. SEE ATTACKS, PAGE 12

Hacking by the numbers Hacking sources, targets  69 percent of attacks are perpetrated by outsiders  39 percent of all attacks are perpetrated by organized criminal groups  23 percent of bad actors are identified as nation-state or state affiliated  43 percent of breaches involved small businesses victims

52 percent of breaches involved hacking 

 33 percent included social attacks

28 percent involved malware 

Source: Verizon Data Breach Report, 2019

Financial impact of hacking  Average total cost per organization was $7.9 million in 2018, a 7.6 percent increase from $7.35 million in 2017

Average cost per record of hack in U.S. was $233 in 2018, up from $225 in 2017. 

 Heavily regulated industries such as health

Source: Ponemon Study, 2018

care, pharmaceutical, financial, energy, and transportation, communications and education have a higher per capita data breach cost. Health care average cost per compromised record was $408, up from $380 in 2017. 

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

Hospitals face complex web of risks By Jay Greene jgreene@crain.com

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Certain factors decrease the cost of data breaches: JJCreating an incident

response team can reduce data breach costs by $14 per record. JJUse of encryption can save $13.10 per record. JJEmployee training can save

$9.30 per record.

JJInsurance protection can save $4.80 per record.

Nonprofit hospitals face greater fiscal and credit risks from cyberattacks than any other sector due to the increasingly interconnected nature of hospital operations and information technology, according to a recent report from Moody’s Investor Services. At Henry Ford Health System, Christine Wheaton, chief privacy and security officer, said the five-hospital system has taken steps in recent years to protect patient data, educate its workforce and prevent and contain potential intrusions from ransomware attacks. “The whole purpose why my department exists is to protect patient information privacy and provide security,” said Wheaton, who has been with the health system since January and oversees a growing department of 50 security professionals. “The health care industry, everything in this space, is transforming to improve patient safety” and ensure “We take the privacy is protected. Since 2010, Henry potential of Ford has reported four an attack possible data breaches. very seriously. We Like others in health care, Henry Ford is reregularly quired by federal privatalk with cy laws to report leadership breaches and notify paand develop tients their personal insecurity formation may be used postures and inappropriately. controls. We Wheaton said Henry are doing all Ford has learned and we can. ... improved from each inHumans are cident, all of which have the weakest been caused by human link.” error. One of the first the DeChristine Wheaton changes troit-based system made was to encrypt all its employee laptops and limit the use of flash drives, which are also encrypted in case they are stolen or lost. “We take the potential of an attack very seriously,” Wheaton said. “We regularly talk with leadership and develop security postures and controls. We are doing all we can. ... Humans are the weakest link.” Like other companies, Henry Ford has created a robust vendor risk-management program to ensure companies that it does business with also take cybersecurity seriously. “We won’t go with suppliers that won’t go through the process,” she said. Another big change has been to move Henry Ford’s information privacy and security office from the information technology department and into the general counsel’s office, Wheaton said. “We are completely partnering with IT, but now I report to the general counsel. The change creates independence, which is a good thing and goes back to a risk-based approach to security,” Wheaton said. Henry Ford’s board of trustees, who have elevated the risks of ransomware, malware and hacking to a top board and management priority, are more closely overseeing medical privacy and cybersecurity. “The board is concerned. We are not unlike any other (large health care company). We have bad actors coming at us all the time. ... We see the data, the attempts. We see people responding. It’s a fight,” Wheaton said. SEE RISKS, PAGE 14

Defending against ransomware attacks Experts advise the following steps for businesses seeking to fend off cybersecurity incidents: J

A GOOD HEART CAN CHANGE EVERYTHING.

J Patch and update operating system, software, and firmware on all digital devices.

Max and Debra Ernst are two people with kind and generous hearts. That’s why they gave to create the new Max and Debra Ernst Heart Center, now open at Beaumont Hospital, Royal Oak.

Make sure employees are aware of ransomware and how they can protect company data.

J Ensure anti-virus and anti-malware software are set to automatically update and conduct regular scans. J Manage the use of privileged accounts. Limit administrative access to systems to those with definite needs and enhance training.

Configure access permissions to files, directories and networks appropriately. If users only need read-specific information, don’t give them write-access. J

J Disable macro scripts from office files transmitted over e-mail. J Implement software restriction policies to prevent programs from executing from common ransomware locations.

This new state-of-the-art cardiovascular outpatient center offers exceptional, comprehensive care for patients close to home – with a special focus on advanced heart failure. It’s part of Max and Debra’s unwavering commitment to heart health, starting in 2009 with the launch of the Ernst Family Cardiovascular Center and their support of the life-saving Student Heart Check program. In total, they’ve given more than $8 million to help communities lead healthier, longer lives with Beaumont cardiovascular care.

Thank you Max and Debi for your kind hearts and the lives you’ll help save.

J Back up data regularly to offsite or cloud locations. J Secure backups and make sure they are not connected to the computers and networks they are backing up

Sources: Interviews, Verizon Data Breach Report, Ponemon Study

beaumont.org/ernst-heart

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SPECIAL REPORT: HEALTH CARE

ATTACKS FROM PAGE 10

Health care is a particularly rich target for cybercriminals, because patient records are filled with information that can be used to steal identities, and many health care practices are small businesses that can’t afford to spend massively on defenses. Two other reported cases earlier this year were the Lansing Board of Water & Light and Genesee County government, both of which were targets of ransomware and experienced weeks of internal disruption of computer systems and problems with customer service, costing hundreds of thousands of dollars. Ransomware, a virus that locks down computers and usually comes with a demand that victims pay a ransom to get systems running again, is a serious business problem that many companies are unprepared to handle, said David Derigiotis, corporate vice president and national professional liability practice leader with Burns & Wilcox, a Farmington Hills-based wholesale insurance broker and underwriting manager. “We are seeing an increase in claims, absolutely,” Derigiotis said. “There has been an increase in attacks in Michigan with business-interruption losses. Companies are not able to process orders, not access patient records and (there is a) potential for physical harm to patients and (companies could face privacy) violations and fines. Every minute that goes by is a dollar lost.” Based on FBI and Insurance Infor-

mation Institute data, Michigan was ranked No. 1 in cybercrime complaints with 201.89 per 100,000 population. Next was Florida at 176.37 and Delaware with 175.61 per 100,000. In 2018, Michigan ranked eighth in the nation in victim losses in internet crimes, including ransomware, at $80.9 million, and 15th in the number of victims at 7,533 in 2018, according to the FBI Cybercrime Report. FBI trends show Michigan has been has steadily rising in the rankings. The FBI also said there were 1,493 reported ransomware crimes with $3.6 million in losses last year, a figure the FBI said was low because most crimes go unreported and business losses were not calculated. Derigiotis said recent cyberattacks in Baltimore and Atlanta resulted in millions of dollars in costs to get systems back up and running. “In Baltimore, the ransom was $76,000. The city didn’t pay. The fallout was in the millions of dollars,” he said. “Not paying could mean the difference in staying in business or not staying in business.” However, the FBI doesn’t recommend making payments in response to a ransomware attack. For one, paying doesn’t guarantee an organization will get its data back. Second, paying ransoms only encourages cybercriminals. Earlier this year, an infamous ransomware gang announced they were retiring because they had already earned $2 billion from attacks. “We have proved that by doing evil deeds, retribution does not come,” they said in a statement. Instead of paying, the FBI recom-

EXPERTS FROM ACROSS THE GLOBE BEST PRACTICES EMERGING TRENDS THOUGHT LEADERS

TCF CENTER DETROIT MICHIGAN OCTOBER 28, 2019

HOSTED BY THE STATE OF MICHIGAN

The Summit will feature: • Internationally recognized speakers • Experts from across the country • Presentations addressing cybersecurity issues impacting the world • Breakout sessions on emerging trends, technology and best practices For more information or to register visit www.michigan.gov/cybersummit

#MiCyberSummit

mends organizations focus on prevention, educating employees and creating a continuity plan in case of a ransomware attack. Experts tell Crain’s, however, each company must make decisions to pay or not to pay based on their own situation. Derigiotis said cybercrime trends show that Michigan is a top state for consumer identity theft complaints, and Social Security numbers are prized possessions. And the health care industry is a trove of sensitive data: names, dates of birth, medical record or account numbers, treatment and clinical information. When attacked, Derigiotis said many unprepared companies end up shelling out three or four times the amount of money on correcting the problem than they would have spent to prevent the incursion in the first place. Companies spend thousands of dollars to hire consultants to investigate, analyze databases closely to see what was extracted, and ensure malware isn’t still present that could allow future invasions, he said. “Most companies that have patient or customer information stolen will pay for one year of credit protection services,” Derigiotis said. “That isn’t nearly enough. It hangs over your life. Offering 12-month credit monitoring is a Band-Aid. Credit monitoring just lets you know your house is on fire. It doesn’t notify you if there is medical fraud.” Derigiotis said personal information like Social Security numbers ends up on the “dark web” for years and goes for a much higher price than credit card numbers that can be canceled. “Medical and insurance information can turn into fraudulent billings. Criminals can order prescription drugs or use it to buy durable medical equipment and sell that for a profit,” Derigiotis said. “I’ve seen cases where hospitals absorb a doctor client base of someone who is retiring and the paper documents are discarded on the street or placed on a flash drive and stolen,” he said. “Most of the problems start with human error.” Trevor Turner, sales and marketing director with Advantage Technologies, a cybersecurity firm in New Baltimore, said many small businesses don’t have the resources to invest to keep information systems secure. He said companies should spend money on simple things like employee education in the use of emails. “Companies don’t have the basics and are really vulnerable. They should have guidelines in place for employees, but they don’t,” Turner said. “... They don’t think they will be hacked until it happens.” Chris Abbott, Adv-Tech’s director of client services, said computer systems should have strong anti-virus software that could prevent ransomware and other cyberthreats from compromising systems. They also should have backup systems in case of attack, he said. “A lot of companies are backing up hard drives to an external hard drive. That doesn’t do any good because it can infect that as well,” Abbott said. Nowadays, “everything is going to the cloud with offsite backups. It is costly, but a good protection.” Adv-Tech works with a variety of small businesses, including health care, energy, lawyers, landscaping, hotels, restaurants and financial companies, to advise them how to minimize risks. Each company has its own challenges, he said.

Data breaches, records exposed by sector Health care is one of the most frequently targeted industries for hackers: 2019 (Jan.-Aug.)

2018

Industry

Breaches

Records Exposed

Breaches

Records Exposed

Health care

363

36 million*

363

9.9 million

446

4.6 million

571

415.2 million***

100.4 million** 135

1.7 million

Education

2.2 million

1.4 million

Government

3.6 million

18.2 million

Total

1,030

146.9 million

1,244

446.5 million

Business Financial

* American Medical Collection Agency, a medical billing collections company, was hacked and 20 million people had personal information accessed, including 12 million people who received services from Quest Diagnostics. ** Capital One data breach of credit card information in July that affected 100 million people in the U.S. *** Marriott International had breach in November that affected 383 million people worldwide. Passport details, date of birth and credit card information was exposed. Source: Identity Theft Resource Center

Derigiotis

Fandrich

For example, a small physician office with five doctors and 10 employees recently was the victim of ransomware. “They came to us for help after the fact and haven’t been hit since,” said Turner, who said the practice wants to remain anonymous. Turner said 80 percent of attacks are caused by an employee clicking on something he or shouldn’t have. “Training is so important. We work with employees and management on education,” he said. Experts say phishing campaigns — where malicious e-mails are sent to employees of targeted companies — often succeed. For example, statistics show that there is a 90 percent chance at least one person will open an e-mail with malware for every 10 e-mails sent out. Moreover, 23 percent of recipients will read the email and 11 percent will open the trouble-making attachment, according to the Verizon Data Breach Report. Abbott said ransomware software

developers are getting more sophisticated in their attacks. “The next-generation security software is all (artificial intelligence)-based. AI learns and analyzes behavior of what is running on the computer and knows if software opens up and looks for open documents,” Abbott said. In some recent ransomware attacks, cybercriminals are seeding legitimate websites with malicious code and gaining entry because companies haven’t updated security software. Legal exposure from hacking, lost or stolen personal data can take various forms, said Mike Hindelang, co-leader of data security and privacy litigation practice with Honigman LLP in Detroit. They include fines for violating federal or state privacy laws, costs to provide data-monitoring services to customers and lawsuits from affected individuals or business partners, Hindelang said. “Health care is highly regulated. You have HIPAA (Health Insurance Portability and Accountability Act of 1996), and potentially each of the 50 states have notification requirements if the wrong type of information is disclosed,” he said. While health care cyberattacks appear to be on the upswing, Hindelang said the numbers may be skewed because health care companies are re-

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quired to report when they have been hacked. Ransomware legal exposure has its own costs that usually include expenses to get computer systems unlocked, databases inspected to ensure malware has been removed and then lost business revenue, Hindelang said. “There certainly have been disputes between companies” over hacking incidents and data loss, he said. “If I had to spend a significant amount of money buying identity theft products and spend time resolving problems, there could be compensation for that.”

Blue Cross In 2015, Anthem Blue Cross Blue Shield in Indianapolis was the target of a cyberattack that exposed personal information of 80 million members, one of the most extensive attacks in the health care industry. At the time, Blue Cross Blue Shield of Michigan officials said they were treating the Anthem attack as if it were an attack on itself. While they are entirely separate companies with distinct information systems, the Michigan Blues and Anthem share data on certain members. Bill Fandrich, chief information officer of Blue Cross Blue Shield of Michigan the past two years who worked at Blue Cross in Massachusetts at the time of the Anthem hack, said an investigation showed no Michigan Blues’ member information was compromised. Still, “(the Anthem attack) made us realize we needed a more coordinated effort across all Blues plans,” said Fandrich, who added that Massachusetts Blues “scanned our environment” for potential malware that could have been transferred through the Anthem attack. Last October, Anthem agreed to pay a record $16 million settlement with the Department of Health and Human Services’ Office for Civil Rights for alleged privacy and security rules violations under HIPAA. As a result of the Anthem hack, Michigan Blues and other Blues plans adopted guidelines created by the Health Information Trust Alliance, a health care data security collaborative based in Texas. “HiTrust has a unique approach

with standards, controls and measures that allows us to ensure that the controls we have in place are effective,” Fandrich said. “We have to demonstrate (security), report, monitor and remediate issues” that happen during attempted or successful hacks. Fandrich said the Michigan Blues have been implementing HiTrust over the past 18 months and expect to apply for certification later this year. “I am proud of our company. These things are taken seriously. There is not a board meeting where (hacking) is not a topic,” Fandrich said. In December 2018, the Michigan Blues faced another cybersecurity issue when the laptop of an employee of a vendor company, COBX Co., was stolen. Blue Cross notified about 15,000 Medicare Advantage members of a potential breach. “We are very transparent and err on the side of caution,” Fandrich said. Despite having laptop computers encrypted and password-protected, Fandrich said the employee did not follow password protocols and there was uncertainty on whether the laptop could be accessed. “The password could have been compromised had (the hackers) intended to take action,” he said. “We shut down and did a detailed analysis. No one tried to access our network and no one got into our environment.” Over the past several years, all Blue Cross employee laptops have been encrypted and flash drives are not allowed to be used, Fandrich said. In addition, third-party vendors must use Blue Cross equipment. Fandrich also said Blue Cross is encouraging vendors to go through formal security reviews with HiTrust.

Vendor vector One recent trend cybersecurity professionals are seeing is that smaller companies are being targeted with the goal of accessing larger companies with which they have business relationships. “We are seeing a trend — smaller entities are being compromised as collateral damage in an effort to get to larger more data-rich organizations,” Derigiotis said. For example, when Target Corp. was hacked in 2013, cyber criminals got into the corporate retailer through a much smaller vendor that provided services to Target. Hackers stole data on more than 40 million credit and debit card customers. Target ended up settling lawsuits for $18.5 million, but said it spent more than $200 million to fix the data breach. “Smaller vendors don’t have the same budget to defend against attacks. Once breached, they hold the keys to a larger and much richer environment,” Derigiotis said. “Hackers work their way through systems, and companies need to evaluate the partners they are working with much closer. This is a huge soft spot for organizations.” Over the last three to five years, Blue Cross plans and most large companies have improved cybersecurity, Fandrich said. “It is highly automated and artificial intelligence is being used,” he said. “We have people 24-7 monitoring. Five to eight years ago, we didn’t do it.” Other actions Michigan Blues have taken is to make sure security software patches are installed regularly. “We keep track of those updates and measure how much time it takes to do it,” he said. The biggest dangers for Blue Cross

and other health insurers are phishing and ransomware, Fandrich said. “We have daily mock tests throughout the company. You can make something look legitimate,” he said. For example, a fake email from CEO Dan Loepp will purport to inform employees that Blue Cross has changed policies on compensation. The phony email will ask workers to open the email for more information. “We teach people not to open suspicious emails. They are taught no (financial or compensation) information like that would be sent in an email,” he said. “If they open it, they get reported. It happens a couple times, they go through training.” There are three types of phishing attacks. One is “blanket” attacks where thousands of users within a network receive malicious emails. A “spear-phishing” attack targets individuals. The third type is a “whaling” attack where a malicious email targets C-suite or other high-value individuals. “Whales” are C-suite executives such as a chief medical officer who will have greater access to medical records or a CFO who can authorize payments. If a phishing attack can compromise two whales, the attacker could strike gold. For example, a hacker could make it appear that the CEO sent an e-mail to a CFO requesting a confidential transfer of funds and access financial accounts. Even in general phishing attacks, Derigiotis said small companies get locked down because a majority or all users are connected in one system, where malware can spread. Blue Cross has an emergency system to prevent or slow malware from spreading. “If you do get hit by one (phishing e-mail), we block them or stop them from spreading,” Fandrich said. “We have lots of segmentation in our system. The worst case is one person’s PC is locked down. We have buttons on every computer. We can literally shut off, disconnect the computer from the network and alert security professionals.” Derigiotis said such mitigation can also help reduce insurance premiums. As an underwriter, Burns & Wilcox does an analysis of risk and exposures to come up with premiums, but also to advise clients on how to protect themselves. “We want to make sure (the company is taking) preventive measures and planning for an attack as well,” Derigiotis said. “The goal is to avoid intrusion, but when it happens we want to know what the response will be.” Once a company has been hacked, Derigiotis said the first response should be to contain the intrusion. “Make sure the intruder is out of the system, make sure what data has been accessed, who you need to notify,” he said. “Next is to evaluate how well the response was to the incident. Do an audit, what improvements need to be made.” But Derigiotis said Burns & Wilcox will not advise a client locked down in a ransomware attack to pay or not to pay. For the criminals involved, the risks are very low and the potential rewards are high. “It is easy to carry out. They can get paid $1,000 or $10,000 and don’t need a high skill level to do it,” Derigiotis said. “They go on the dark web, pay to launch a ransomware attack and wait to get paid or not.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

SPECIAL REPORT: HEALTH CARE

Hospitals would take $171M-plus hit in vetoes of spending By Jay Greene

Need to know

jgreene@crain.com

Michigan Gov. Gretchen Whitmer vetoed $233.9 million in spending from the state Department of Health and Human Services that included $79.3 million in general funds, nixing 48 line items of Republican-chosen spending priorities. More than half of Whitmer’s cuts, some $171 million, were targeted at hospitals, a decision that was criticized by the Michigan Health and Hospitals Association. “For too long, hospitals in Michigan have operated with inadequate Medicaid reimbursement rates, which have continually moved further away from providing the full cost of care,” said CEO Brian Peters in a statement. “The elimination of funding for hospitals further exacerbates the financial burden on Michigan hospitals, primarily those that are small or rural, and threatens access to care in our most vulnerable communities,” Peters said. “The MHA will continue to work with elected officials to secure critical financial support to hospitals that provide access to timely, lifesaving services.” The health care cuts were part of 147 line-item vetoes totaling nearly $1 billion that Whitmer carved out of a nearly $60 billion spending plan for the fiscal year that began Tuesday. In a conference call with reporters Tuesday afternoon, Robert Gordon,

Gov. Whitmer vetoed $233.9 million from state Department of Health and Human Services J

J Controversial Section 298 to consolidate physical and mental health under Medicaid HMOs was vetoed J MDHHS director: Republicans cut essential services in health care, clean water, services for families in crisis

director of the MDHHS, said state officials are supportive of rural hospitals and want to ensure good access to health care services. “For all the provider cuts in the budget, there will be an opportunity for an orderly process to prioritize where the needs are the greatest,” Gordon said. “How we do it in a limited budget (is the question).” Whitmer also asked the State Administrative Board to approve interdepartmental transfers of $22.5 million in MDHHS funding. Transfers included adding money to administrative hearing officers ($180,000), workers’ compensation ($847,000), state community service commission ($975,000), behavioral health program administration ($593,000), office of recipient rights ($197,000), Medicaid mental health services ($2 million), healthy homes program ($1.5 million), Healthy Michigan plan administration ($6.1 million), child enforcement support

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Gordon

Sheehan

services ($555,000), child welfare psychiatric evaluations ($593,000), juvenile justice ($988,000), public assistance and family independence ($946,000). In a briefing Monday on the budget, Gordon said Whitmer needed to fix the state budget because Republicans cut essential services in health care, clean water and services for families in crisis. “It was a lobbyist wish list,” Gordon said. “I say this with sadness because I have real respect with the appropriation committees of the House and Senate.”

Section 298 funding cut While hospitals appeared to get the short end of the stick, behavioral health agencies and providers cheered as Whitmer cut $3.1 million in funding for Section 298, a pilot program intended to integrate behavioral and physical health with Medicaid health plans managing the two-year test. “We are absolutely thrilled for the people we serve, their family members, and allies, that the governor heard their views on Section 298 and responded appropriately,” Annette Downey, CEO of the Oakland Community Health Network, said in a statement. “Decisions made about public mental health services should always be guided and directed by those whom we are serving, making this conversation very simple; the people have said no to privatization and therefore the push for Section 298 needs to end.” Gordon said the Section 298 boilerplate language was too rigid in allowing statewide integration to begin after certain outcome criteria were met at the end of the pilot projects. On the future of Section 298, Gordon said the department will have more to say on how best to integrate physical and behavioral health. “It was always conceived as a pilot program, where the state tests out financial integration with the health plans” and mental health agencies, Gordon said. “The state could see how it works and decide how to go forward. ... The boilerplate puts the

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In a December 2017 cyberattack, Wheaton said an employee opened an e-mail and clicked on a link without realizing the e-mail was part of a phishing attack. “The user clicked on something (he or she) shouldn’t have. We have key security controls. ... The security system contained it” and kept the malware from infecting the wider network. The Moody’s report says hospitals’ electronic medical record systems

pilots on autopilot toward statewide implementation.” Gordon said it is more than state officials envisioned. “The two greatest needs in behavioral health are shortages on front lines; we need to find ways to get (care to) people who need it,” he said. “There is misappropriated money. It was disappointing not to get the supplemental” funds to financially support at least three of 10 structurally bankrupt mental health organizations. Gordon said Whitmer’s budget proposal requested $50 million to support several community mental health organizations that have been financially struggling. He said restoring that money is a priority in future negotiations with the state Legislature. Dominick Pallone, executive director of the Michigan Association of Health Plans, said the association remains committed to work with the state and legislators to develop an integrated system that improves outcomes, reduces waste and expands care for people. “We look forward to working with the department and the Legislature to address the nearly $90 million in cost to the state associated with overspending by select (prepaid inpatient health plans) as fiscal year 2019 comes to a close,” Pallone said. Robert Sheehan, CEO of the Community Mental Health Association of Michigan, said Whitmer’s veto of Section 298 funding gives an opportunity for the state to overhaul the mental health financing system to develop a holistic health care approach to align mental, physical and social outcomes under Medicaid. “We still believe that the public mental health system and innovative and forward-looking private sector partners can design a groundbreaking behavioral health initiative that could fundamentally redefine the way local providers coordinate physical and mental health care and achieve sound health outcomes for our state’s most vulnerable and resilient citizens,” Sheehan said.

Unfunded mandates, health tax One of the biggest oversights in the budget, Gordon said, was failing to include $50 million in state general funding to pay for the federal health insurance tax. The $50 million generates a total of $180 million when federal matching shares are factored in. “Without that money, we cannot pay actuarially sound rates, and the state is on the hook,” said Gordon, adding that the money needs to be are tempting targets because of the intimate information they contain on patients. However, connected medical devices also pose potentially patient safety risks. For example, connected medical devices such as insulin pumps, defibrillators, pacemakers and cardiac monitors are points where hackers can gain entrance into computer systems, the classic “backdoor” infiltration. But Wheaton said an even more serious patient safety threat is if a device is hacked and instructed to turn off or to change how it functions. Or if

found in the budget. A source who asked to remain anonymous told Crain’s that the state Legislature has reserved the $50 million in its balance sheet to insert during budget negotiations. “What I found shocking about the budget is the Legislature put in work requirements for Healthy Michigan (Medicaid) but doesn’t support it with $10 million for outreach” to help people understand how to comply with the rules, said Gordon, adding that the department was not provided with needed $2.5 million for staffing to initiate the changes. Gordon said the executive branch has done everything the state Legislature requested to ensure a smooth transition to mandate healthy people work 80 hours per week. If they don’t, they lose coverage. At least 40 of the boilerplate items the governor vetoed were unfunded mandates, Gordon said. Here are some of the line-item vetoes and the amounts: J MiDocs Graduate Medical Education Consortium: $17.5 million J Hospital payments, rural obstetrician pool: $8 million J Hospital payments, rural and sole community hospital pool: $16.6 million J Hospital outpatient 7 percent rate increase: $95.2 million J Critical access hospital rate increase: $34.3 million J Neonatologist rate increase: $5.2 million J Private duty nursing rate increase: $3.9 million J Pediatric psychiatric rate increase: $10.7 million J Pediatric traumatic brain injury project: $1.5 million J Private agency rate increase for Family Preservation Programs: $2.1 million J Oral health assessment grant: $2 million J Child care funds indirect costs: $4.2 million J Autism navigator: $1 million J Child and adolescent training centers: $1 million J University of Detroit Mercy dental clinics: $1 million J Nursing facility current asset value: $4.9 million J Michigan dental registry: $700,000 J Oral health assessment grant: $2 million J Pharmacy dispensing fee increase managed care: $7.6 million J New Beaumont Health psychiatric training residency program: $8.4 million Jay Greene: (313) 446-0325 Twitter: @jaybgreene the hacking changes the patient’s electronic medical record in a way that causes a doctor or nurse to misdiagnose or prescribe the wrong medication, she said. “Medical devices are getting smarter, but there are vulnerabilities” from hacking, she said. “This is why I talk about our priority of patient safety. (When a device is hacked) there can be denial of service or the device can’t communicate because it is flooded with information.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

Mitten Crate moves out of Eastern Market space

At right, Mitten Crate decided to move out of Beau Bien Fine Foods on Riopelle Street after its six-month sublease ended. At far right, Cory Wright is a co-founder of Mitten Crate.

Company also ends subscription box service

MITTEN CRATE

By Anisa Jibrell ajibrell@crain.com

SOMETIMES, DATA IS THE BEST MEDICINE. An emergency room is designed to treat immediate, often lifethreatening conditions. Among all this chaos, Dr. Phillip Levy, assistant vice president of Translational Science and Clinical Research Innovation at Wayne State University, saw a hidden opportunity: A patient’s data offers clues into not only their health, but into the overall health of the community. Project PHOENIX is born. As a resident, Dr. Levy was taught that an emergency room doctor had to see beyond the emergencies. The patients represented how the health care system was performing for the people of the city. He learned that in most cases, there was a larger, longerterm issue that was the root cause, and he was driven to imagine a world where population health care was an effective way to improve overall health. PHOENIX — which stands for Population Health Outcomes and Information Exchange — is a shared database that identifies diseases affecting a particular area, the precise risk factors that cause them, the opportunities to address them and the ability to track the health outcomes after interventions have been put in place. When a patient is a symptom. The health care world has many ways to treat patients, but Dr. Levy wanted to treat the long-term issues that were causing large parts of the population of Detroit to be sick. He wondered why he saw so many relatively young patients with consequences of uncontrolled hypertension. Using de-identified data from multiple sources, he

WARRIOR STRONG

was first able to identify census tracts where blood pressure control appeared to be the worst. Remarkably, he was able to see that each neighborhood had a unique constellation of underlying contributors to this problem. Suddenly, it was clear: By identifying the patterns hidden in data, he would be able to drive innovative solutions from beyond the field of medicine to make a huge difference in the health of the people that live in our community. Thinking beyond medical intervention. Data is more than a patient’s vitals on a chart. It’s a diagnostic tool that helps the health care community improve people’s lives for years to come. Car registration data may uncover an area where transportation is old and unreliable, making getting to a doctor practically impossible. Foreclosure data may indicate that a patient is at risk of being homeless, and stress comes with that. “Patient data” in the near future is going to be completely reimagined to represent every person’s individual risk factors. And the effect of every intervention can be tracked and measured to see how effective it was. It’s health that should be rising. Not the cost of it. PHOENIX shows how data can save lives and take costs out of the health care system. Instead of decades of treatment for high blood pressure, lower-cost, proactive care could help us avoid having to treat it altogether. And that’s Warrior Strong.

After a six-month stint in the brickand-mortar world, gift box business Mitten Crate has left its space in Eastern Market, focusing instead on its online gift orders and corporate gifting service. The business, which sells gift boxes featuring Michigan-made products, was subleasing a space from Beau Bien Fine Foods LLC at 2478 Riopelle St. Between maintaining a full-scale retail presence, online orders and running around to different vendors, Mitten Crate’s team was “stretched thin,” owner Cory Wright told Crain’s. However, the company will continue to host pop-ups and participate in holiday markets, he said. Mitten Crate’s last day on Riopelle was Saturday. On Monday, the company moved its products to its central fulfillment center in Harrison Township. The company paid $2,000 per month to sublease 1,200-1,300 square feet of space, which included the storefront, a warehousing portion and flex space, according to Wright. Mitten Crate is also bidding adieu to its subscription box business, a shift triggered by sales that began to slip within the last one to two years, according to Wright. Most customers used the subscription service as a vehicle for gift-giving, but the business was receiving an influx of requests to tweak the content of the boxes that it wasn’t able to accommodate, he said. The owners found that customers would much rather purchase a gift and have an ability to personalize it, as opposed to receiving a subscription box and not having control over its contents, Wright explained. The last round of subscription boxes will be shipped in December, Wright said. Online orders account for around half of Mitten Crate’s business, while corporate gifting, which includes themes such as employee appreciation and client retention, makes up the other half, Wright said. Established in 2013, Mitten Crate works with around 100 Michigan-based vendors throughout the year. Last year, the company generated $268,000 in revenue; this year Wright said he expects sales to surpass $400,000. Mitten Crate sells boxes packed with products made by companies including Lush Gourmet out of Portage, Dexter-based Mindo Chocolate Makers, Plymouth-based dessert shop The Blu Kitchen and more. For the time being, Noelle Lothamer, owner of Beau Bien, said the space vacated by Mitten Crate will be used as a tasting room on Saturdays, starting later this month. The hours are to be determined. Lothamer is putting out feelers for other businesses that might be a good fit for the space.

TO LEARN MORE ABOUT PHOENIX, VISIT MED.WAYNE.EDU/DATA-MAPPING

Anisa Jibrell: (313) 446-0495 Twitter: @anisajibrell

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

Co-owner of Sindbad’s Detroit riverfront restaurant dies Need to know

By Annalise Frank afrank@crain.com

Brian Blancke, a night owl popular with customers of the longtime family-owned Sindbad’s Restaurant and Marina on the Detroit riverfront, died Sept. 28. He was 61. The St. Clair Shores resident had been dealing with cancer, according to his sister and Sindbad’s co-owner, Denise Blancke. The east-side restaurant, a favorite watering hole and food stop for boaters, has been a family affair since the Blanckes’ father, Prudent “Buster” Blancke, opened it in 1949 with brother-in-law Hillaire “Van” VanHollebeke. Buster Blancke died in 1984 and VanHollebeke retired the year after. The rest of the Blancke family took up ownership and management after that, according to Denise Blancke: their mother, Noella Blancke; and siblings Denise, Brian, Marc and Linda Salvadero. “All us siblings, we’re very, very different, and yet we worked together for all these years,” Denise said. “Brian was more of the night owl. Brian normally took the night shifts. And he enjoyed all the nighttime customers who would come by boat or by car. “The one thing that has not

Awdish

JJBrian Blancke helped run iconic

nautical-themed restaurant

JJBlancke's father co-founded Sindbad’s in 1949 JJNight owl, avid golfer was popular with customers

Brian Blancke died Sept. 28 at age 61.

changed about our customers is that they are so diverse. You could sit down at the bar on a Saturday evening and you will see every walk of life ... and Brian would get along with anybody that came in here. Brian liked people.” The avid golfer born in 1958 and

raised in Grosse Pointe was a hard worker who also liked to have a good time, his sister said. Customers often asked for members of the Blancke family, knowing someone was usually around and enjoying the communal atmosphere — but “I have to say, there was a lot of love for Brian” specifically, she said. The nautically minded restaurant offers docking stations for those who come by boat. It has expanded over the years, but its interior design and decorations harken to the old days, as does its traditional menu, though some salads and healthier options have been added.

Blancke is survived by his son, Matthew Blancke; mother, Noella Blancke; and siblings Linda Salvadero, Denise Blancke and Marc Blancke. He was preceded in death by his father, Prudent “Buster” Blancke. A memorial service is planned at 11 a.m. Tuesday at St. Ambrose Catholic Church in Grosse Pointe Park, according to an obituary from Kaul Funeral Home in St. Clair Shores. Memorial donations may be made to the Capuchin Mission Association, 1820 Mt. Elliott St., Detroit, 48207. Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

Nonprofit group launches statewide census campaign By Sherri Welch swelch@crain.com

The Michigan Nonprofit Association has launched an eight-week, statewide media campaign to get historically undercounted populations thinking about the 2020 census and the importance of getting a full count of residents. The multimedia campaign will run in rural and urban communities that are home to the state’s undercounted populations. It will include ads on social media, Gas Station TV, the Michigan Video Gustafson Network shown in 131 full-service Secretary of State offices, radio and television through ads run on Comcast, Spectrum, Direct TV, Dish and WOW in select Michigan communities. The $480,000 campaign, which runs through Nov. 22, will also include billboard advertisements in Detroit, Dearborn and Pontiac. The campaign is meant to introduce the U.S. census, to make people aware it’s coming, and to understand the importance and how it impacts their communities and families, said Joan Gustafson, external affairs officer for the Michigan Nonprofit Association. “With so many competing messages and people leading busy lives, we thought it was important to start to in-

troduce this to people (sooner),” she said. Detroit-based Mort Crim Communications Inc. developed materials for the media campaign. They are available in multiple languages, including Spanish and Arabic. The MNA-led fall census campaign will be followed by a 22-week campaign set to launch in January. The second campaign will focus on communities with large ethnic and minority populations and large populations of families with young children, as well as rural communities that have traditionally been undercounted in previous censuses. In addition to the traditional media outreach included in the fall cam-

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An example of one of the bulletin boards running in the new census campaign.

paign, next year’s campaign will include advertisements in 140 non-traditional, ethnic and minority media outlets throughout the state coordinated through New Michigan Media, and advertisements at events in those communities, Gustafson said. The ad campaign will direct people to visitMIVoiceCounts.org to learn the importance and benefits of completing the census. The microsite offers an opportunity to see census questions ahead of time to help ease fears and misunderstandings. An additional page provides more information, key dates and the ability to contact local nonprofits for more information about the 2020 census. The campaigns are part of a $10 mil-

lion effort led by MNA to increase census participation in the state. Census counts are critical because they provide demographic data that directly influences federal funding to states for the next decade, the number of congressional seats in each state and where businesses choose to locate. The outreach is equally important with a decreased number of U.S. Census Bureau sites in the state this year, and other challenges, including fears among Michigan’s immigrant populations, sparked by White House policy and a question on citizenship posed to respondents, as Crain’s reported in May. In late June, the U.S. Supreme Court blocked the Trump administration

from including the citizenship question on the census form. But NBC News reported in late July that the question was still being asked as the U.S. Census Bureau was testing the 2020 census online and on some of the printed forms sent to about 240,000 American households randomly chosen for a test. Michigan’s local government leaders said they lacked confidence in accurate census counts this past spring, according to the spring 2019 Michigan Public Policy Survey released Tuesday. The University of Michigan Center for Local, State and Urban Policy surveyed local government leaders from 1,364 Michigan counties, cities, townships and villages about their views on the 2020 Census. Just 15 percent of local officials said they were confident the census would provide an accurate population count for their jurisdiction. Another 64 percent said they were somewhat confident, while 12 percent were not very confident and 2 percent not confident at all. Only 5 percent of the local leaders were confident the statewide count would be accurate. As of spring 2019, 41 percent of the local leaders surveyed indicated their jurisdictions haven’t yet started planning any actions to encourage residents to fill out their census forms, and 24 percent said they were unsure whether their jurisdictions were planning actions, according to the survey. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

Haven, TTI team up to offer transitional housing to domestic violence survivors By Sherri Welch swelch@crain.com

Pontiac domestic violence shelter Haven Inc. and Training and Treatment Innovations Inc. are teaming up to launch a new transitional housing program with wraparound support services for Oakland County survivors. A three-year, $400,000 grant from the U.S. Office on Violence Against Women will fund the Transitional Housing for Survivors program, which will serve up to 24 individuals or families staying in Haven’s emergency residential shelter for up to 24 months. The program will fill a critical service gap, Haven President and CEO Aimee Nimeh said. “Survivors ... are typically fleeing an abusive situation,” she said. Some can go live with family or friends, but others don’t have options, Nimeh said. And it typically takes some time to line up those women and children with subsidized housing arrangements. Haven’s expertise in domestic and sexual abuse crisis response and counseling, combined with TTI’s expertise in housing assistance and other services the two agencies offer will help put women and families at Haven’s emergency shelter on a stable path, TTI Executive Director Jacque Wilson said. The new transitional housing will give those women and families a safe place to go with two-thirds of the rent subsidized while they work to obtain independent living

Need to know

Emergency shelter brings domestic violence, sexual abuse expertise to joint program J

J Training and Treatment Innovations brings decades of housing assistance experience, other support services J $400,000 federal grant will fund joint program to put up to 24 women, families into secure transitional housing

Nimeh

Wilson

“By assisting our clients in securing housing, they will be on a path to economic stability, safety and independence.” Aimee Nimeh

skills, improve their credit and find permanent housing. Haven will provide case management and other supportive services, while TTI — which provides housing assistance programs for the homeless and veterans and

brings existing relationships with landlords in Oakland County — manages the new Transitional Housing for Survivors program. It also provided mental health, substance use disorder and other services. “By assisting our clients in securing housing, they will be on a path to economic stability, safety and independence,” Nimeh said. In operation for 44 years, Haven provides a 24-hour crisis line, emergency shelter for about 450 women and children each year and forensic exams for survivors of domestic and sexual abuse. Additionally, it provides services to help those who have experienced such abuse get back on their feet, including counseling, job readiness and placement, money management and food resources. With the federal grant, Haven and TTI will hire a community resource advocate and a housing specialist who will use a joint case management framework to integrate the services provided by each nonprofit. Staff will work with clients on their housing needs while coordinating supportive services from Haven and TTI. “Our partnership with Haven expands housing resources and other vital behavioral health services intended to strengthen a survivor’s sense of well-being, safety and empowerment,” Wilson said. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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Wayne County spent $26 million during the Robert Ficano administration putting infrastructure to the Pinnacle Race Course site to get the track open.

Wayne County approves Pinnacle Race Course site sale for $40 million project By Kirk Pinho kpinho@crain.com

The Wayne County Commission unanimously signed off last week on the sale of a failed former horse racing track in Huron Township to a Texas-based developer that plans a $40 million project. The nearly $4.9 million purchase for about 650 acres that includes the former Pinnacle Race Course is not yet final and Hillwood Enterprises LP, which is Ross Perot Jr.’s real estate company, is still doing due diligence as it explores a redevelopment. Closing is expected by Dec. 1 with construction on new light industrial and warehouse space beginning in the spring. It would be the latest repurposing of property in Michigan’s horse racing industry, which in recent years has seen redevelopment plans emerge and begin to materialize for the former Hazel Park Raceway and Northville Downs properties. The former race track on Vining Road between Sibley and Pennsylvania roads is sandwiched between a pair of county-owned properties to the east and west, making the total 650-acre development area. The county has exercised its right of first refusal to purchase the property. The state and township have already declined to purchase it. Crain’s reported in July that Hillwood and Detroit-based Sterling Group are working together on the development. The two companies have worked together before on the Shelby Township distribution center for Amazon.com Inc. on the site of a former Visteon Corp. auto parts plant. Khalil Rahal, assistant county executive, said Thursday morning that it’s not yet known how much of the 650 acres is developable. “We have a decent idea, but there are significant amounts of conservation easements, wetlands and rightof-way issues,” he said. “We know there is a significant market for light industrial and warehouse in the area with two freeways, the airport, and vacancy rates are tight right now.” Post It Stables Inc., the previous

From dedication to innovation in the practice of law... Celebrating 50 years and looking forward to 50 more! Pinnacle Race Course in Huron Township closed in November 2010.

Pinnacle owner, had until March 31 to redeem the property from property tax foreclosure on approximately $4.9 million in back-due taxes but failed to do so. Rahal said a broker opinion of value showed that all 650 acres are worth between $2 million and $4 million. A Hillwood spokeswoman, Elizabeth Carpenter, declined comment Thursday morning before the 14-0 commission vote. “Pinnacle has been a difficult chapter for Wayne County and Huron Township, and there is a lot of work yet to do, but I’m excited about the prospect of selling Pinnacle to people who are going to finally put it to productive use in a way that makes sense for this location,” Wayne County Executive Warren Evans said in a press release. “It’s a large tract of land near a renowned international airport, and there’s a lot of potential for development that will help expand our tax base and create jobs.” Rahal said in a July interview that a January request for qualifications for the property was active for 49 days and sent to more than 900 companies in an effort to solicit offers. Just two responses were received: one from Hillwood and another from Detroit-based New Era Community

Group Inc. Rahal said two months ago New Era was “never able to provide proof of sufficient financing in order to make the county comfortable to exercise the right of first refusal in the time we need.” The county wanted to avoid the property going to a tax-foreclosure auction. The race track was open 2008-10, and it had been listed for sale for $8 million three years ago. The county spent $26 million during the Robert Ficano administration putting infrastructure to the site to get the track open, Rahal said during an interview earlier this year. At the time of the 2016 property listing, demolition on the site was taking place as a result of the county threatening a nuisance abatement lawsuit. The property featured a 1-mile horse-racing track, a 12,000-squarefoot pavilion with restaurant and bar equipment, 15 horse stables and significant paved parking space, according to the listing from Southfield-based Signature Associates Inc., which had marketed the property. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

CRAIN'S LIST: HEAL HEALTH TH INSURER INSURERS/MANA S/MANAGED GED C CARE ARE PLANS Ranked by 2018 Michigan revenue Company Address Phone; website

Top Local Executive(s)

Blue Cross Blue Shield of Michigan/Blue Care Network

Daniel Loepp president and CEO

Priority Health

Michigan revenue ($000,000) 2018/ 2017

SE Mich. Mich. revenue enrolled Mich. ($000,000) members percent 2018/ 2018/ change 2017 2017

SE Mich. enrolled members 2018/ 2017

$29,300.0

8.9%

$29,300.0 $26,900.0

4,713,493 4,623,292

Rick Morrone SVP, employer solutions

3,840.8

5.3

543.3 523.7

Health Alliance Plan of Michigan

Michael Genord, M.D. interim president and CEO

2,016.3

-15.6

NA 1,832.5

Delta Dental of Michigan

Goran Jurkovic president and CEO

1,988.7

0.3

Meridian Health Plan of Michigan Inc.

Sean Kendall president and COO

1,934.3

Molina Healthcare of Michigan Inc.

Christine Surdock president

1,789.7

McLaren Health Plan Inc.

Nancy Jenkins president & CEO

UnitedHealthcare

1 2 3

6 7

8 9 10 11

1,120,636

3,427,815

165,042

NA 800,153

HMO/PSO, Medigap, PHIC, Medicare Advantage, Medicare PDP, Medicaid, Self-funded

HMO, POS, PPO, EPO, EPA, ASO, TPA

940.6 939.6

5,672,521 5,637,122

2,610,020 2,605,679

4,584,248

-12.1

1,988.4 2,201.8

519,373 517,338

519,373

Medicaid, Medicare, Marketplace

-8.2

NA NA

383,277 398,239

Medicaid, Medicare

836.1

-13.8

NA 0.0

262,446 255,157

Small Group; Rewards: Platinum, Gold, Silver; Standard: Platinum, Gold, Silver, Bronze; HSA: Bronze ; HRA: Gold - Large Group; POS; HMO; HSA; HDHP ASO

Dustin Hinton CEO, UnitedHealthcare Michigan and Wisconsin

447.0

4.4

447.0 428.0

UnitedHealthcareChoice, UnitedHealthcareChoice Plus, UnitedHealthcare Options PPO, HRA, HSA, Dental PPO, Dental INO, Dental Select Managed Care, Dental Indemnity, vision, Medicare, Medicaid

Aetna Better Health

Randy Hyun CEO

293.6

2 2

-16.0

NA NA

45,032 50,421

2 2

NA 50,421

Aetna Better Health of Michigan and Aetna Better Health Premier Plan

Upper Peninsula Health Plan LLC

Melissa Holmquist CEO

254.4

2 2

-13.1

NA NA

48,878 48,579

2 2

NA 48,579

Medicaid, Medicare

Physician Health Plan

Dennis J. Reese president

199.6

2 2

9.4

NA NA

NA 34,779

Randy Narowitz CEO

198.8

32.6

198.8 150.0

42,382 34,348

39,788

2,383

211

HMO, POS, HDHP

5.8

NA NA

3,440,179 3,672,713

Vision insurance

14.8

NA NA

212,600

Medicare, Medicaid, HMO

Medicaid, HMO

Medicare, Medicaid, commercial

600 E. Lafayette Blvd., Detroit 48226 (313) 225-9000; www.bcbsm.com

27777 Franklin Road, Suite 1300, Southfield 48034 (800) 942-0954; www.priorityhealth.com 2850 W. Grand Blvd., Detroit 48202 (313) 872-8100; hap.org

4100 Okemos Road, Okemos 48864 (800) 524-0149; www.deltadentalmi.com 1 Campus Martius, Suite 700, Detroit 48226 (888) 437-0606; www.mhplan.com 100 W. Big Beaver Road, Suite 600, Troy 48084 248-925-1700; www.molinahealthcare.com G-3245 Beecher Road, Flint 48532 (888) 327-0671; www.McLarenHealthPlan.org

26957 Northwestern Hwy., Suite 400, Southfield 48034 (800) 842-3585; uhc.com

1333 Gratiot, Suite 400, Detroit 48207 (313) 465-1519; www.aetnabetterhealth.com/ Michigan 853 West Washington St., Marquette 49855 (906) 225-7500; uphp.com 1400 E. Michigan Ave., Lansing 48912 (517) 364-8400; www.phpmichigan.com

$26,900.0

3,646.6

2,389.7

1,983.1

2,201.8

1,949.3

2 2

969.6

428.0

349.5

292.8

182.4

2 2

NA 398,239

Total Health Care USA Inc.

Vision Service Plan VSP

M. Scott Mitchell market director

147.0

Humana Inc.

Ryan Zikeli Market VP, employer group sales Kathie Mancini president, East Central Medicare region

88.7 77.3

Michigan Complete Health Inc. (formerly Fidelis SecureCare of Michigan Inc.) 6

Amy Williams CEO

63.7

2 2

17.4

NA NA

2,417 2,478

2 2

NA 2,478

Trusted Health Plan Michigan Inc. (formerly Harbor Health Plan Inc.)

Andrew Leonard Miller CEO

26.9

2 2

-39.7

NA NA

8,327 9,337

2 2

NA 9,337

Lori Johnston president

22.9

2 2

5.3

NA NA

2,012 1,986

2 2

15 16 17

3011 W. Grand Blvd., Suite 1600, Detroit 48202 (313) 871-2000; www.thcmi.com 2000 Town Center, Suite 1700, Southfield 48075 (248) 350-2082; www.vsp.com 26600 Telegraph Road, Suite 220, Southfield 48033 (800) 486-2620 ; www.humana.com

800 Tower Drive, Suite 200, Troy 48098 (877) 373-8085; mmp.michigancompletehealth.com/ mmp.html 7

3663 Woodward Ave., Detroit 48201 (313) 578-2234; www.trustedhpmi.com

Paramount Care of Michigan

106 Park Place, Dundee 48131 (734) 529-7800; www.paramounthealthcare.com

150.0

139.0

54.3

44.5

21.7

Mich. Mich. Mich. enrolled enrolled enrolled members in members members Mich. HMO/ in PPO in POS Other DHMO, plan plan plan members Types of health plans

PPO, HMO, HSA-eligible products, Medigap, Medicare Advantage, Medicare Part D, commercial prescription drug plans, dental and vision benefits, Medicaid HMO

1,088,273 Delta Dental Premier, Delta Dental PPO

Want the full Excel version of this list â&#x20AC;&#x201D; and every Crain's list? Become a Data Member: CrainsDetroit.com/data

This list of leading Michigan insurers/managed care plans encompasses medical, dental, optical and other health care organizations. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the companies or the Michigan Office of Financial and Insurance Regulation. Companies with headquarters elsewhere are listed with the address and top executive of their main Detroit-area office. NA = not available. Health care plan types include: Exclusive Provider Organization (EPO) - Members must use the EPO provider network exclusively and medical services received outside of the EPO network are not covered except for emergencies. Exclusive Provider Arrangement (EPA) - Similar to an HMO. Members must choose a physician who authorizes referrals and arranges hospital admissions. Point of Service Plan (POS) - Members designate a primary care physician but can go outside the network for services. Administrative Services Only (ASO) - Offered by insurers to self-insured employers. 1 Does not include members who are part of Michigan-based groups but reside outside of Michigan. 2 From Department of Insurance and Financial Services. 3 Succeeded Dennis Smith in July. 4 Priority Health to absorb Total Health Care HMO in a merger. The deal is expected to be finalized later this year. 5 Company estimate. 6 Effective April 1, 2017, Fidelis became Michigan Complete Health Inc. 7 Harbor Health Plan Inc. was acquired by Trusted Health Plan (Washington, D.C.) in February 2017. LIST RESEARCHED BY SONYA D. HILL

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

SPOTLIGHT

DEALS & DETAILS CONTRACTS

EXPANSIONS

NAME CHANGE

 Circle Power, Royal Oak, a renewable energy developer, has a partnership with an affiliate of Hunt Companies Inc., El Paso, Texas, companies in the real estate and infrastructure market, to finance and develop two 20MW renewable energy projects in Michigan’s Upper Peninsula. The wind projects will be comprised of four turbines each on two separate sites. Websites: circlepowerco.com, huntcompanies.com

 Avalon, Buffalo, N.Y., provider of eDiscovery, digital forensics, cybersecurity, managed services and litigation support services, opened two new offices in Michigan at 24445 Northwestern Highway, Suite 208, Southfield, phone: (248) 9559200, and 678 Front Avenue NW, Suite 135, Grand Rapids, phone: (616) 251-1212. Website: avalonlegal.com

 dPOP, Detroit, a commercial interior design company, has rebranded as Pophouse as it looks to diversify business and build from its base of Bedrock projects. The firm has added GM, DTE and Delta as clients and also signed its first product design deal with Acoufelt LLC, Clawson, an acoustical consultant. Websites: dpopculture. com, acoufelt.com

Advertising Section

PEOPLE ON THE MOVE To place your listing, visit www.crainsdetroit.com/people-onthe-move or for more information, please call Debora Stein at (917) 226-5470 or email dstein@crain.com. ACCOUNTING

NONPROFIT

Echelbarger Himebaugh Tamm & Co., PC

The Children’s Foundation

David G. Echelbarger, CPA, CFF, CGMA has been elected chair of the board of directors for the Michigan Association of Certified Public Accountants. Echelbarger is a shareholder and the managing partner at Echelbarger Himebaugh Tamm & Co., PC of Grand Rapids, where he is responsible for the vision and direction of the firm. With more than 19,000 members, the MICPA is the leading statewide professional organization dedicated to promoting and enhancing the value of the CPA profession.

FINANCIAL SERVICES

Stout Mark Abbott has joined Stout as a Director in the Investment Banking Group. He brings extensive experience providing M&A advisory to private equity firms, private businesses and public companies in the diversified industrials, distribution, and automotive sectors, among others. Before joining Stout, Abbott was with JSJ Corporation where he led the strategy and investment team and earlier, he was with Piper Jaffray & Co. He will work out of Stout locations in Detroit and Grand Rapids.

The Children’s Foundation announced that Brian Calka of DTE Energy and Donnell White of TCF Bank have joined the nonprofit organization as members of the Board of Trustees. The Foundation is the state’s largest funder dedicated solely to advancing the health and wellness of Calka children in Michigan. To date, the Foundation has granted over $54 million to more than 70 partners across the state. Calka, the director of renewable energy solutions at DTE Energy, with responsibility of MIGreenPower, brings finance, corporate strategy and operational knowledge to the evolving board. White, the senior vice White president, chief diversity officer and director of strategic partnerships at TCF Bank, brings vast leadership expertise and diverse strategies.

NEW HIRE? PROMOTION? BOARD APPOINTMENT?

MERGERS & ACQUISITIONS  Lineage Logistics LLC, Novi, a temperature-controlled warehous-

Contact: Debora Stein at dstein@crain.com

Submit Deals & Details items to cdbdepartments@crain.com

CALENDAR THURSDAY, OCT. 10 Great Lakes Digital Transformation Summit. 8 a.m.-5 p.m. WIT. The speakers will include representatives from Greenpath Financial, Secure-24 and Stant and keynote speaker Joe Chung of Amazon Web Services. Also a panel of tri-county CIOs comprised of Phil Bertolini from Oakland County, Jako Van Blerk from Macomb County and Carlos Perez from Wayne County will discuss the topic of “Digital Innovation: Connecting Citizens to the County.” Troy Marriott. $129. Contact: Erin Adair-Guy, email: eguy@witinc. com; phone: (800) 257-1490.

FRIDAY, OCT. 11 2019 Entrepreneur & Small Business Conference: Power Up Your Business. 8:30 a.m.-3 p.m. Oct. 11. The National Entrepreneurs Association. The program will focus on ways to leverage relationships, finances and marketing to accelerate growth through tech. The event will include: keynote speakers, breakout sessions, Google training, entrepreneur awards exhibitors, breakfast and lunch. Speakers include: Tommey Walker, owner and creator of Detroit Vs. Everybody and Paul Glantz, founder and chairman of Emagine Entertainment. Mike Ilitch School of Business. $125. Contact: ZaLonya Allen, email: supportstaff@nationalentrepreneurs.org; phone: (248) 491-3146.

UPCOMING EVENTS Lunch & Learn: Stay on the Path to Success with Staff Succession Planning. 11:30 a.m.-1 p.m. Oct. 22. Michigan Manufacturing Technology Center. Event will discuss the need for effective succession planning throughout an organization to sustain stability and growth. Topics will include: Documenting job descriptions, executing effective performance reviews, implementing a capability database, conducting a training needs analysis and following a nine-block leadership competency model. Michigan Manufacturing Technology Center, Plymouth. $20. Contact: Theresa Payne, email: tpayne@the-center.org; phone: (888) 414-6682. UHY LLP Annual Manufacturing Outlook: Lean into Change and Innovation. 7:30-11:30 a.m. Oct. 23. UHY LLP. National manufacturing

Crain’s People on the Move showcases industry achievers and their companies to the Detroit business community.

ing and logistics company, acquired two facilities in Venlo, Netherlands, and Rijkevorsal, Belgium, from Van Soest Coldstores, Netherlands, a company that stores and transfers cooled and deep-frozen food products. Financial terms of the transaction were not disclosed. Websites: lineagelogistics.com, vansoest-be. eu  Best Life Brands LLC, Bloomfield Hills, a holding company, acquired Blue Moon Estate Sales, Raleigh, N.C., an estate sales franchise. Websites: bestlifebrands.com, bluemoonestatesales.com

practice leader Tom Alongi and industry thought leaders will discuss the changing landscape of the manufacturing space and how manufacturers will handle disruption. Detroit Athletic Club. Free. Pre-registration is required. Contact: Jessica Labut, email: jlabut@uhy-us.com; phone: (586) 843-2507. Women Who Fund Forum. 11 a.m.-4 p.m. Oct. 24. ACG Detroit Women’s Forum and University of Michigan Center for Venture Capital & Private Equity Finance, Ross School of Business. Mary Tolan, founder and managing partner of Chicago Pacific Founders, provider of health care management services, opens the forum with a perspective on investing in health care and industry opportunities. The program includes lunch and features panels on “The Rise of Investors Supporting Health Innovators” and “The Spectrum of Deal Sourcing and Post-Deal Governance.” UM Golf Course Clubhouse, Ann Arbor. $95. Contact: Mary Nickson, email: MNickson@umich.edu; phone: (734) 615-4424. Forbes Under 30 Summit. Oct. 2730. Forbes. The summit includes: a private music festival, speakers, investor speed-pitching, industry-focused field trips, a pub crawl, a food festival and community service. Masonic Temple. $595. Contact: Lexi Driscoll, email: 30under30@forbes.com Your Company’s Crisis: What You Need to Know Now. 8-11:30 a.m. Nov. 12. Detroit Regional Chamber. Program will include advice from human resources, legal and public relations experts to prepare for a crisis. Three examples of crises will be covered at this event: de-escalating disasters, protecting an organization’s image and solutions for cybersecurity crises. Complimentary breakfast will be provided. The Henry Hotel, Dearborn. $75 members; $95 nonmembers. Contact: Andrea Rayburn, email: arayburn@detroitchamber.com; phone: (313) 596-0340. To submit calendar items visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

Lear promotes company veteran to CFO

Lear Corp. has promoted Jason Cardew as senior vice president and chief financial officer, replacing Jeffrey Vanneste, who is retiring after more than 20 years with the company. Cardew, who has been with the Southfield-based automotive seatCardew ing supplier nearly 30 years, starts his new role Nov. 1, according to a news release. Vanneste’s last day is Oct. 31, but he will continue in an advisory role through February. “I would like to thank Jeff for his leadership, dedication and commitment to Lear. He played a crucial role in the development and execution of fundamental business strategies for the company …” President and CEO Ray Scott said in the release. “I also want to congratulate Jason, who brings deep knowledge of our company’s global finances and strategy.” Vanneste, who also spent time in the C suite at Southfield-based IAC Group, became permanent CFO of Lear in 2012 when he took over for Cardew, who had been in the position on an interim basis. Cardew, who joined the company in 1992, spent the past seven years as vice president of finance in its seating and e-systems businesses. He completed his undergraduate and MBA studies at Michigan State University.

Ann Arbor Symphony Orchestra names new executive director

The Ann Arbor Symphony Orchestra has promoted its director of marketing and communications to executive director. Tyler Rand, 28, will succeed Mary Steffek Blaske, who plans to retire in December after 25 years with the nonprofit. His role is effective Jan. 1, acRand cording to a news release. “After a months-long search with extensive input from staff, board members, musicians, and community members, the board has overwhelmingly endorsed Tyler’s appointment to this position,” Geoff Barnes, president of Ann Arbor Symphony Orchestra’s board of directors, said in the release. “Tyler has revitalized our marketing efforts and has brought a sophisticated level of musical knowledge to everything the A²SO does. He is committed to the A²SO’s continued musical excellence and extensive educational outreach in the community.” In his new role, Rand will help oversee the ongoing search for the nonprofit’s next music director, the release said. Music director and conductor Arie Lipsky left his post in June due to health issues after serving in the position for nearly two decades. Rand joined the organization as marketing and public relations manager in September 2018. He assumed the role of director of marketing and communications in May.

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

U Prep schools ‘pause’ pay raises after Whitmer’s charter school funding veto By Chad Livengood clivengood@crain.com

University Prep Schools is halting 3 percent pay raises the Detroit charter school system planned to give its 380 teachers at the end of this month after Gov. Gretchen Whitmer’s lineitem vetoed a $240-per-student increase in state aid for charter schools. “They’re on pause until we figure this out,” University Prep CEO Mark Ornstein told Crain’s. With nearly 5,000 students enrolled at its eight schools in Detroit, University Prep stands to lose about $1.2 million in additional state aid from Whitmer’s veto of a $35 million line in the $15 billion School Aid Fund budget designated for increased aid to public charter schools. “That’s huge,” Ornstein said of the cut. “We had planned to give (teachers) the 3 percent raise on October 30.” On Sept. 30, Whitmer made 147 line-item vetoes amounting to $947 million because of major disagreements over spending with the Republican-controlled Legislature.

PRESSURE FROM PAGE 1

“What’s the guarantee this won’t happen again? And the response was: ‘There isn’t one,’” said Melissa Roy, a Detroit-based public affairs consultant and registered lobbyist. Roy was not present at the meeting of multiclient lobbyists but said she spoke with one of Whitmer’s policy advisers after the $1 million grant she lobbied lawmakers for got axed. Roy represents the Autism Alliance of Michigan, which since 2014 has received an annual state grant for its autism navigators program, a hotline for adults with autism and families of autistic children who need help navigating government programs, health insurance and public education systems. The autism program was not in Whitmer’s budget plan introduced in March, but her staff encouraged the Autism Alliance and its board members to lobby for the money “and if the Legislature included it, the administration would come to the table as well,” Roy said. Despite laying waste to budget items Republicans and their outstate constituents hold dear, there’s no guarantee the GOP is coming back to the table to make amends. Senate Majority Leader Mike Shirkey and House Speaker Lee Chatfield essentially want Whitmer to publicly apologize for the vetoes and let the governor twist in the wind and defend her cuts. Whitmer’s decision to torpedo parts of the $60 billion state budget with the nearly $1 billion in line-item vetoes and $625 million of inner-departmental transfers has changed the dynamics of the already fragile relations of Michigan’s politically divided leaders. The governor’s vetoes were broadly designed to inflict pain on Republicans back home and eventually force them back to the negotiating table so the governor can get her non-transportation priorities funded.

Several of the Democratic governor’s spending vetoes appeared to be aimed at Republican constituencies, including for-profit and not-for-profit charter school operators. University Prep Schools is run by a not-forprofit operator and was founded by Doug Ross, one of Whitmer’s senior advisers. “Like any line-item, we have an opportunity to negotiate things back into the budget if the Legislature avails themselves of that opportunity,” Whitmer said Tuesday when asked at a press conference about charter school funding veto. Ornstein said the governor’s veto of only additional aid for charter school students sends a message that “they’re not as valued as a traditional public school student.” “You are literally using kids as pawns here,” Ornstein said. “Kids don’t care if they’re in charter or traditional public — and they probably don’t even know.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood But it might take a while. Payments will cease flowing this month from the Treasury Department to county sheriff ’s departments that patrol secondary roads and house low-risk offenders in county jails as well as subsidies for nursing homes, rural hospitals, isolated public schools and medical clinics on Beaver, Drummond and Mackinac islands. And charter schools won’t get the same $240-per-pupil increase as traditional public schools thanks to another Whitmer veto, causing schools to halt planned pay increases and trim other expenses two months into the school year. The veteran lobbyists summoned to the governor’s office said the pain of Whitmer’s vetoes may need to be felt outside the confines of the Capitol complex before the governor and legislative leaders restart budget talks. Meanwhile, groups like the Autism Alliance are trying to figure out a path forward without the state aid they’ve come to rely on. They are now emblematic of this budget battle as Republicans have framed Whitmer as an unfaithful ally for speaking at the group’s annual gala in April and then gutting one-fourth of its funding with a stroke of a pen in September. But the Autism Alliance’s lobbyist still can’t believe they’ve become entangled in a deeper stalemate between Whitmer and the Legislature over road funding, taxation and how big and expansive state government should be. “At this point, a $1 million Autism Alliance navigator isn’t the biggest leverage in the world,” Roy said. “It’s not a program that belongs or even fits in the negotiating table on these larger budget issues. ... It’s just baffling to us as to why we’re here right now. There’s no logic as to why we’re in the position that we’re in.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

Advertising Section

CLASSIFIEDS To place your listing, contact Suzanne Janik at 313-446-0455 or email sjanik@crain.com www.crainsdetroit.com/classifieds

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POSITIONS AVAILABLE

Application Development Manager (Multiple Positions)

(Accenture LLP; Detroit, MI): Manage project execution to ensure adherence to budget, schedule, and scope. Must have willingness and ability to travel domestically approximately 80% of the time to meet client needs. For complete job description, list of requirements, and to apply, go to: www.accenture.com/us-en/careers (Job# 00758440). Equal Opportunity Employer – Minorities/Women/Vets/Disabled

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Business & Integration Architecture Manager (Multiple Positions) (Accenture LLP; Detroit, MI): Define, analyze, solve, and document the business requirements and processes for Accenture or our clients’ program/project specifications and objectives. Must have willingness and ability to travel domestically approximately 80% of the time to meet client needs. For complete job description, list of requirements, and to apply, go to: www.accenture.com/us-en/careers (Job# 00758444). Equal Opportunity Employer – Minoritie s/Women/ Vets/D isabled

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

BANKS

How the banks rank

FROM PAGE 3

A comparison of the top banks in Michigan over the past decade.

The same pattern of more deposits but less market share also applies to Comerica, which is the second-largest bank in the market where it was once headquartered. The Dallas-based bank has $26 billion in deposits in metro Detroit, representing 18.6 percent of the market. That’s down 3.1 percentage points from five years ago when it had $22.8 billion in deposits. In 2006, a year prior to its HQ move, Comerica had just under 23 percent of market share, almost even with LaSalle Bank, which was acquired by Bank of America. “When you have a dominant position, it can be a little more challenging to grow with having only one way to go but down,” Michael Moran, senior consultant with ProBank Austin, said. “They’re still gaining deposits, but they’re losing market share — typically attributable to competitive pressures of local banks.” As with other large markets throughout the country, there’s been a flurry of M&A activity. Superior National Bank acquired Main Street Bank last month for $42 million, and Level One acquired Ann Arbor State Bank for $67.8 million in August. The most high-profile deal — TCF’s merger with Chemical Bank — is expected to create a formidable player in the market. Chemical’s $5 billion in deposits as of June, combined with TCF’s $2.7 billion, would propel the combined bank to the seventh-largest in metro Detroit with 5.6 percent market share. The firm has 8 percent market share statewide. The TCF of today was largely built through well-timed M&A deals — a

Top 10 banks in 2009 Bank

Deposits

Detroit area market share

Comerica

$21.4 billion

22.4 percent

Bank of America

$20.5 billion

21.5 percent

JPMorgan

$14.8 billion

15.5 percent

National City

$8.5 billion

9 percent

Flagstar

$6.2 billion

6.5 percent

RBS Citizens

$4.8 billion

5 percent

Fifth Third

$4.2 billion

4.5 percent

Huntington

$2.9 billion

3 percent

TCF

$1.3 billion

1.3 percent

Citizens

$1.2 billion

1.28 percent

Deposits

Detroit area market share

Top 10 banks in 2019 Bank

JPMorgan Chase

$36.6 billion

26 percent

Comerica

$26 billion

18.6 percent

Bank of America

$20.6 billion

14.7 percent

PNC

$11.2 billion

7.9 percent

Flagstar

$10.2 billion

7.3 percent

Huntington

$8.3 billion

5.9 percent

TCF/Chemical

$7.7 billion

5.6 percent

Fifth Third

$6.1 billion

4.4 percent

Citizens

$5.5 billion

3.9 percent

CIBC

$1.3 billion

0.9 percent

Source: Federal Deposit Insurance Corp.

strategy that its CEO told Crain’s will continue as it looks for more growth. Chemical and TCF finalized a $3.6 billion all-stock merger on Aug. 1, creating a bank with $47 billion in assets and $35 billion in deposits, the 27th-largest nationwide. Work is underway on its new 20-story headquarters at the corner of Woodward Avenue and Elizabeth Street in downtown Detroit.

Other market share moves While JPMorgan Chase and Comerica lost local market share, the third-largest bank in the market by deposits, Bank of America, gained ground. It grew from $11.4 billion in deposits and 10.8 percent of market share in 2014 to $20.6 billion and 14.7 percent of market share as of June. It’s still several paces behind a peak of 21.5 percent in 2009, when it had essentially the same amount of deposits as it does today. Troy-based Flagstar Bank also grew its market share, to 7.3 percent with $10.2 billion in deposits. Five years ago it had 4.9 percent of the market. Flagstar is the fifth-largest bank in the market, one place behind Pittsburgh-based PNC Financial Services, whose market share dropped from 10 percent in 2014 to 8 percent as of June. Coming in at number six is Columbus-based Huntington Bank with 5.9 percent of the market share, a jump of 1.5 percentage points from five years ago. TCF rounds out the top seven.

Fewer banks, fewer branches There are 43 banks operating in the

local market as of June, down from 51 in 2014 and 58 in 2009. The number of branches in the area has declined steadily, too, as how customers do their banking has changed. There are 945 branches throughout the designated market area, compared with 1,083 in 2014 and 1,195 in 2009, according to the FDIC data. Consolidation and the digitization of the financial industry has led to the closure of brick-and-mortar locations across the country. Experts say that consumers in smaller, underserved cities might be negatively impacted by the trend, but larger markets still have plenty of options and generally don’t feel a deficiency in service. Comerica has 130 branches in the local market, down from 153 five years ago, while JPMorgan Chase has 130, down from 171 in the same span. Moran said the shrinking footprints could be costing them some business, but branches are not as important as they once were. Ten years ago, closing a location often meant losing customers, but now, banks can retain most clients through digital channels. “A branch now is someone’s phone or computer screen,” Moran said. As big banks pour money into technology, community banks with far less capital find themselves at a disadvantage. Joining forces with other firms and pooling resources is often the only way to stay competitive. “The face of banking is changing,” Herndon said. Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

NO-FAULT FROM PAGE 3

The two public acts Whitmer signed May 30 at the Mackinac Policy Conference in May restored the right of medical providers to sue without involving the patient starting June 11. But the legal battles are still clogging up the courts. State Farm, the state’s largest nofault carrier, alone has 2,000 pending lawsuits across the state that are subject to the Covenant decision, said Paul Hudson, an attorney for State Farm and head of the appeals group at Miller, Canfield, Paddock and Stone PLC. “Providers have to overcome anti-assignment provisions to have a viable cause of action,” Hudson said during oral arguments Tuesday before the Michigan Supreme Court. Shah’s lawsuit against State Farm challenges a clause in the insurer’s contracts with motorists that prohibited them from assigning their right to sue to medical providers. “All we ask the court to do is to enforce State Farm’s assignment clause as written — and as written, it bars the plaintiffs’ assignments here,” Hudson told the justices. During the 2017 court fight in the Covenant case, State Farm’s attorneys had proposed a “solution” that injured drivers be allowed to assign their first-party lawsuit rights to their doctors without disclosing that the insurer’s policies has prohibited assignment of rights since 2010, said Shah’s attorney, Jonathan A. Green of Green & Green PLLC in Farmington Hills. Shah’s lawsuit asks the Michigan Supreme Court to declare State Farm’s anti-assignment clause illegal.

The two public acts Whitmer signed May 30 at the Mackinac Policy Conference in May restored the right of medical providers to sue without involving the patient starting June 11.

“The whole issue of assignments was a creation of State Farm,” Green said during oral arguments before the high court. “... They made arguments to this court knowing that this is what their policy was. They didn’t say, ‘Well, you can get assignments, but we’re not going to allow it.’” In arguing that State Farm’s contract wrongly denies the rights of Shah’s patients to give their doctor the right to sue, Green cited a 139-year-old Michigan Supreme Court ruling over a property insurance policy involving a livery stable that burned down. In that case, the livery stable’s owner had assigned its insurance policy to someone they owed a debt to make a claim against the insurance company. The anti-assignment clauses in State Farm’s no-fault plans sought to “limit State Farm’s relationship to just our insured” motorist in an effort to prevent multiple medical providers from filing multiple lawsuits over the same injured driver’s medical care, Hudson said. “And that means, our insured won’t be able to piecemeal assigned

medical bills,” Hudson said. During Green’s oral arguments, Justice Megan Cavanagh questioned whether allowing injured motorists to assign their claims to any medical providers creates “increased costs to having to defend multiple provider suits in multiple jurisdictions.” “That is a cost to the insurance company to retain counsel and defend in multiple venues,” Cavanagh said. Green noted multiple medical provider lawsuits can be consolidated in one court docket. “The other way to avoid the issue, frankly, is to pay the claim,” said Green, whose client filed at least 30 lawsuits in Oakland County in 2018 against 14 different auto insurance companies. “... The objection seems to be that they’re being called out to do what they were contracted to do — to pay the claim.” “If they’re not paying the claim, they get sued,” Green added. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

GJONAJ FROM PAGE 3

 Whether Gjonaj was “preparing to and/or already left the country to avoid prosecution.”  Whether he “fraudulently altered ... (real estate) purchase documents in order to ‘sell,’ really defraud, unsuspecting investors, interests in those and other properties” that Gjonaj did not own or even exist.  Whether he, as described in the lawsuit, “admitted to his crimes” to Masakowski in late June when confronted about them. The complaint response says that Gjonaj’s wife, Rose, a listed defendant in the August civil lawsuit along with a slew of limited-liability companies, has no knowledge of her husband’s business dealings and was not a party to any loans. (A former business partner was dismissed from the complaint last month.) Rose Gjonaj also filed a response Tuesday in which she says she has “no participation or knowledge” of her husband’s business affairs and that she didn’t accept money or agree to repay anyone. She also says she “never received any loans” as part of Viktor Gjonaj’s business dealings. She is represented by Mount Clemens-based Fischer, Garon and Hoyumpa PLLC. Emails were sent to her and her attorneys Tuesday night and Wednesday morning. Emails were also sent to St. Pierre as well as an attorney from Southfield-based law firm Jaffe Raitt Heuer & Weiss PC, which is representing Krstovski and Masakowski in the

KIRK PINHO/CRAIN’S DETROIT BUSINESS

FedEx notifications are affixed to the glass doors of the offices of Imperium.

case that’s before Judge James Alexander. “This kind of evasive responding to substantive allegations is not going to play well in front of Judge Alexander. He does not appreciate that, in my experience. You better have a good explanation for why something is or isn’t true,” said Kenneth Neuman, managing partner of Birmingham-based law firm Altior Law. He specializes in commercial and real estate litigation. “In my opinion, it’s intellectually dishonest to claim lack of knowledge on specific allegations against the defendant,” Neuman said. “The defendant does know whether they altered or manipulated or fabricated documents or whether there was a Ponzi scheme.” The Aug. 26 complaint centers around a series of Michigan real estate deals that Gjonaj, Krstovski and

Masakowski did in Macomb, Genesee and Montcalm counties over the course of the last few years. The lawsuit alleges Viktor Gjonaj doctored purchase agreements to make it appear to investors as if they were buying ownership interests in properties around the state, when in fact they were already owned by the plaintiffs, Krstovski and Masakowski. Imperium, which Gjonaj founded in 2017, collapsed after Gjonaj stopped showing up to work and wasn’t heard from for weeks, a former employee told Crain’s last month.

New lawsuits filed

No fewer than six lawsuits have been filed against Gjonaj in recent weeks in Oakland and Macomb counties alleging he owes at least nearly $5 million to a variety of investors and contractors.

A pair of new complaints filed Sept. 18 and Sept. 30 in Oakland County Circuit Court by Deda Dedvukaj and Kreshnik Fetahu, respectively, allege that he bilked them of a combined $700,000. Deda Dedvukaj claims he loaned Gjonaj and two related businesses (Imperium Investments LLC and Imperium Group LLC) $500,000 to be repaid by Aug. 7. Deda Dedvukaj says in the complaint that he “was not represented by counsel in the transaction or in memorializing it” and “expected that Gjonaj prepared the document comporting with applicable legal standards, relying upon Defendant Gjonaj’s years of extensive experience in real estate matters.” The money was to be invested in real estate. Fetahu in his Sept. 30 lawsuit says that in June, Gjonaj approached him about a real estate investment and said that he could purchase a 50 percent ownership stake in 71.1 acres of vacant land on Baldwin Road in Lake Orion for $200,000. The other 50 percent would be owned by Imperium Group, according to the complaint. Gjonaj allegedly then told Fetahu to transfer the $200,000 to Title Plus Title Services LLC, which the complaint calls “merely a shell limited liability company formed by Gjonaj and owned and/or controlled by Gjonaj.” The Fetahu complaint also says Gjonaj “did not intend to return” the $200,000 and “did not intend to go forward” with the purchase of the Baldwin Road land. Julia Blakeslee, the Bloomfield Hills attorney representing Deda

Dedvukaj and Fetahu, declined comment when contacted earlier this month about Dedvukaj’s lawsuit. An email was sent to her Tuesday morning about the Fetahu lawsuit. Jerome Morgan alleges in a lawsuit filed in Oakland County in August that he loaned Gjonaj $1.5 million to buy the Monroe Center retail strip mall housing a Staples office supply store, a Dunham’s sporting goods store and a Hobby Lobby. In another complaint, Gjonaj is alleged to have secured a $2.475 million loan from Ded Dedvukaj in exchange for membership interests in five limited liability companies, including two — Manchester Wilshire LLC and JVD I LLC — in which neither Gjonaj or his companies had a membership interest, according to court documents. It’s not known whether Ded Dedvukaj and Deda Dedvukaj are related. Still another lawsuit, filed by contractor Dan Ivanovic, claims Gjonaj hasn’t paid for $197,000 worth of work on a $2.25 million mansion that was being built for him in Washington Township. Krstovski’s and Masakowski’s lawsuit claims that Gjonaj purchased the property on which it is being built with Masakowski’s money. Kelly Rossman-McKinney, communications director for Attorney General Dana Nessel, said the office continues to look into the Gjonaj case but has not opened an investigation. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

PROTON FROM PAGE 1

One of its chief advantages over X-rays, or photon beams, which pass through a patient, is that proton beams deliver targeted radiation to the tumor and then stop without passing through other tissue. In 2008, McLaren was one of the first health systems in Michigan to indicate an interest in building a proton beam therapy center. In 2010, McLaren purchased the Russian-made Radiance 330 synchrotron particle accelerator machine that creates the protons. The high-energy protons are then directed with powerful magnets along a long metal tube to create a “pencil beam” scan that increases the accuracy and effectiveness of the beam delivered to the patient. Nationally, some 28 centers are operational in the U.S., including a single-room proton center at Beaumont Hospital in Royal Oak that uses a cyclotron particle accelerator. There are about four under development at costs that range from $30 million to more than $100 million, according to the National Association for Proton Therapy. After completing final testing and calibrations of the massive synchrotron, Chad Grant, president of 458-bed McLaren Regional Medical Center in Flint, said proton center doctors, physicists and engineers decided last fall to quietly open the facility in mid-December. Without public notice, McLaren proton center oncologists began evaluating potential patients to treat using a short list of cancer types, including prostate, kidney, head and neck, pancreatic, basal skull and chondrosarcoma. “We wanted to make sure everything was ready” and that there would be no false starts, Grant said. “We had three patients the first day, but really we started off intentionally slow, and it has been ramping up (to full schedule for one room) since July.” David Wood, an assistant post commander with the Michigan State Police in Marshall, was the first patient treated at the proton center on Dec. 17. After nine weeks and 45, 30-minute rounds of proton radiation therapy for advanced prostate cancer, Wood said he feels great some seven months after finishing treatment. “I am amazed how easy it has been. I will be ‘in remission’ the rest of my life. I will never get an all-clear because it is a hormonal-driven cancer,” said Wood, a state trooper for more than 30 years who plans to retire in April. “Physically, I am feeling good. Fatigue is the only issue because of the medicine. It was pretty advanced. ... It was not metastatic and into bones and lymph nodes. God took care of it with the treatment.” Like Wood, all 37 other patients McLaren has been treating so far have not missed a day of therapy and the data shows the proton beam scanning has hit its mark 100 percent of the time, said Hesham Gayar, medical director of the McLaren Proton Therapy Center. “We are 100 percent accurate. We measured it and validated it. I am very proud of that,” said Gayar, a radiation oncologist at Karmanos Cancer Institute at McLaren Flint who treated Wood. By the end of the first year, Grant projects about 100 patients will have been treated, primarily because only one room is operational and the intention was to go slowly the first six months. Once the second treatment room is opened in late spring 2020, 150 to 200 patients will be treated and by

MCLAREN HEALTHCARE CORP.

Dr. Hesham Gayar chats with David Wood, an assistant post commander with the Michigan State Police in Marshall, who was the first patient treated at the proton center on Dec. 17.

the third year, 250 to 300 patients. “We are really anticipating this taking off once we communicate to physicians (and the public) that we’re actually doing this,” Grant said. On an average day this year, Grant said, the center sees about 20 patients per day with an average treatment time of 30 minutes. Once all three rooms are operational, including the pediatric room possibly later in 2021, the center is expected to cycle through 60 to 70 patients per day. McLaren is projecting revenue for 2019 of $3 million, doubling in 2020 to $6 million and hitting the $10 million mark in 2021. Since July, McLaren’s proton center has been treating a wide variety of cancers, Gayar said. They include solid tumors of the head, neck and skull base, breast, lung, bladder, brain, central nervous system, liver, pancreas, prostate, spine and chest wall, and some pediatric, gynecological and gastrointestinal cancers. While the majority of patients so far have come from Michigan through the McLaren’s Karmanos Cancer Institute network, Gayar said, about 40 percent heard about it by word of mouth and called for information. “(For) about 20 percent of those patients, proton was the only option,” said Gayar. “When we have a candidate, we discuss and agree that the type of tumor and location” will make the therapy a good choice. Beaumont and McLaren’s radiation oncology department, like other health systems, also offers a variety of other photon-based radiation treatments that include adaptive radiation therapy, image-guided radiation therapy, high-dose rate brachytherapy and intraoperative radiation therapy — all intended to destroy cancer. But Gayar said he believes the longterm costs are lower with proton beam therapy because of fewer treatments and lower radiation dosage. He also believes cure rates are better for some cancers, including adult brain and spinal tumors and pediatric cancers. Many comparative studies are underway to prove effectiveness, he said.

Insurance coverage Proton beam therapy still is tough to get some insurers to pay for, although Medicare in 1997 approved its

use for most tumors. In a 2018 report, the Medicare Payment Advisory Commission, or MedPAC, said Medicare’s payment rates are substantially higher for proton beam therapy than other types of radiation therapy. MedPAC noted from 2010 to 2016, spending and volume for proton beam therapy in fee-for-service Medicare grew rapidly, driven by a sharp increase in the number of proton beam centers and Medicare’s relatively broad coverage of this treatment. During that period, spending rose from $47 million to $115 million. Despite Michigan now having two proton therapy centers, Gayar said projections are that proton therapy is a low-volume option that is expected to grow to 3 percent to 5 percent of all radiation oncology treatments over the next 10 to 15 years. Right now proton therapy is used in less than 1 percent of radiation treatments, he said. “At McLaren, we use proton therapy only when there is clinical advantage over X-rays,” Gayar said. Gayar said McLaren checks with health insurers before therapy begins to get coverage approved. He said the center works with every patient regardless of insurance and ability to pay to ensure they have the care they need. “We’ve had good success with Medicare. And some insurers may initially deny it, and then you have to appeal,” Gayar said. “We have to provide a lot of information. Sometimes they just look at the comparison (between the different radiation approaches).” Gayar said he understands insurance companies’ reluctance because proton beam treatment is new, but emerging research is beginning to show a range of positive benefits over traditional treatments.

the beam. Doctors also use a cone beam CT imaging system to control the location of the beam to the millimeter. Wood said he wasn’t nervous when he arrived with his wife, Marsha, as the first patient to be treated. Most visits were quick and non-eventful. However, one time he had to wait for 10 minutes while an engineer made a small adjustment in the movement of the CT scanner. “I went in for an MRI beforehand where they gave me the tattoos (to indicate where the beams will be directed),” Wood said. “I wasn’t nervous, just excited about being the first patient. I just go with the flow of things. I see too much happening in my job (as a state trooper) to be worried about it.” Wood said he entered the treatment room and lay down on the bed as technicians lined him with the lasers. “(Dr. Gayar) said, ‘You are about to make history.’ I said, ‘No, this is your day. It’s a piece of cake.’ I felt nothing, got off the table, and they gave me a tour of the building. The place was just humming with excitement about the first patient going in.” While Wood lay on the treatment bed, a robotic patient-positioning system moved him to the correct programmed position to allow the proton beams to be directed within a millimeter of the target. The technology allows for 360-degree rotation and unlimited treatment angles, Gayar said. “About six weeks in (of the nineweek treatment) I started to feel more fatigued. I exercised regularly until late January,” Wood said. “Fatigue was just my body trying to heal. (The radiation was) disposing of the cancer as protein and trying to repair healthy cells. The other good thing was a got two nice tan marks on my hips (where the proton beam was directed). It was never painful.”

Patient experience

Long road to proton treatments

When patients like Wood arrive at the McLaren Proton Beam Center they are greeted by nurses at the front desk. They already have been evaluated by oncologists affiliated with McLaren at Karmanos’ 16 cancer centers across Michigan. After patients enter the extra large treatment room, they are positioned on the bed that can rotate to position

In Michigan, proton beam therapy — an alternative to traditional radiation treatment that precisely targets cancer cells and avoids healthy organs and tissues — goes back to 2008 when the state began to craft rules that would allow hospitals to use the therapy. Hospitals competing to be the first hospital to open a center in-

cluded Beaumont, McLaren, Henry Ford Health System, Ascension St. John Providence Health System and the University of Michigan. A consortium of hospitals, led by Henry Ford and the UM Health System, even considered building a $300 million carbon ion therapy cancer center. Plans were tabled during the 2008-2009 recession. In July 2017, Michigan’s first proton beam therapy center opened at Beaumont Hospital. So far, 350 patients have been treated at Beaumont’s single-room center. The first year, the center treated more than 107 patients, far exceeding its 40-patient projection, said Craig Stevens, M.D., Beaumont’s chairman of radiation oncology. “Proton therapy offers targeted cancer treatments with fewer side effects than conventional radiation. This is especially true for patients with brain tumors, head and neck cancers, and left sided breast cancers. In addition, we have had numerous patients travel from other states to seek treatment and consult with our experts at Beaumont’s Proton Therapy Center,” Stevens said in a statement to Crain’s. Beaumont uses the ProteusOne proton beam therapy machine, a cyclotron particle accelerator. It was developed by Ion Beam Applications S.A. of Belgium.

Research efforts While Michigan’s interest in proton therapy only started in 2008, proton therapy has been used for treating patients since the 1970s. In 1990, the Loma Linda University Proton Therapy Treatment Center opened in California. Over the years, new technologies have lowered operational costs and improved effectiveness, but little comparative research has been performed, Gayar said. “We also have the responsibility to help define best utilization of proton therapy,” Gayar said. “To help show proof of clinical effectiveness, we are opening randomized clinical trials for multiple body sites including lung cancer, pancreatic cancer, prostate cancer and others.” Since the center opened, McLaren has been collecting data on patients treated and is participating in a number of research projects, including one that will test the use of proton beams to conduct high energy computed tomography scans. CT scanners now use X-ray images, but studies in Europe show that proton beams could be more accurate. Under the Patient Centered Outcomes Research Institute, Gayar said McLaren will participate in several multi-institutional breast and prostate cancer trials to compare outcomes of proton beam therapy with traditional photon, or X-ray, radiation treatment. PCORI was established by the Affordable Care Act of 2010. Medicare also will begin a study in 2020 to test a new episode-based payment model for radiation oncology that could show proton therapy treatment, in some cancer cases, to be more cost-effective than other forms of radiation treatment, Gayar said. Gayar said some patients with traditional photon radiation treatment can’t complete their treatment because of side effects. “The patients get so sore, cannot swallow food, or they have nausea and vomiting that they cannot go on,” he said. “We don’t have that problem with proton beam.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

MARIJUANA FROM PAGE 1

Michigan’s city involvement rate isn’t out of line with Colorado’s, said Josh Hovey, spokesman for the Michigan Cannabis Industry Association. Around 100 Colorado municipalities out of 272 have informed the state they’ll allow recreational pot businesses, the Associated Press reported. Colorado was among the first two states to legalize recreational cannabis. The association isn’t overly concerned, Hovey said, adding that while some rural areas tend to opt out, most “population centers” have not. However, he said, opt-outs can hurt accessibility and encourage black market sales. And Marijuana Business Daily wrote that local bans could impact its yearly sales estimate of $1.4 billion to $1.7 billion once the Michigan industry “matures.” “We’re focused on the communities that want to welcome these new businesses and see the economic development opportunity and tax revenue opportunity they offer and the jobs,” Hovey said. Detroit’s law department is working on new regulations to allow and govern recreational marijuana sales, city corporation counsel Lawrence García said in an emailed statement, while Grand Rapids also expects to adopt an ordinance soon, MiBiz reported. Lansing City Council adopted rules allowing recreational marijuana businesses last week, according to the Lansing State Journal. In metro Detroit, 21 out of 27 local units of government in Macomb County have opted out of recreational, including Sterling Heights and Clinton Charter Township, according to state data. Forty-one out of 62 Oakland County communities opted out so far, including Auburn Hills, Birmingham and Royal Oak; and 26 out of 43 Wayne County cities decided to at least temporarily prohibit them, including Dearborn and Grosse Pointe. For comparison, five communities each opted in for medical marijuana in Macomb, Oakland and Wayne counties. “I don’t think it’s unexpected to see so many (cities) opt out (of recreational),” said Douglas Mains, head of Detroit-based law firm Honigman LLP’s cannabis industry group. “With medical, you saw a couple larger cities go, like Lansing, which gave other municipalities a comfort level and template to follow.” Cities that wait can copy best practices and see the consequences before experiencing them themselves, while cities that jump in get the benefit of attracting the businesses looking to set up shop quickly, Mains said. While the act lets city governments decide, residents can also petition for a vote to reverse those decisions.

crainsdetroit.com Editor-in-Chief Keith E. Crain Publisher KC Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Lisa Rudy, (313) 446-6032 or lrudy@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Product Director Kim Waatti, (313) 446-6764 or kwaatti@crain.com Digital Portfolio Manager Tim Simpson, 313-446-6788 or tsimpson@crain.com Creative Director David Kordalski, (216) 771-5169 or dkordalski@crain.com Assistant Managing Editor Dawn Riffenburg, (313) 446-5800 or driffenburg@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Senior editor, Chad Livengood, (313) 446-1654 or clivengood@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

REPORTERS

ANNALISE FRANK/CRAIN’S DETROIT BUSINESS

Gage Cannabis Co. opened its first provisioning center in September in Ferndale. The city has two medical marijuana retailers and a third is incoming.

start doing business, LARA spokesman David Harns said. The emergency rules will remain in effect for six months and can be extended for another six months. To start, those getting licenses will be businesses that have already received medical licenses. There is no opt-out deadline, Harns said. However, business applications’ viability will be considered based on the date they apply — so if a city decides to institute a ban after Nov. 1 and an enterprise has already applied, the state will still issue them a license if criteria are met. As for any confusion: The state gave municipalities months to ask questions about the emergency rules and form their responses, Harns said, and “didn’t leave any room for ambiguity.” LARA’s rules put “muscles and skin” on the bones of the original, voter-initiated recreational marijuana statute, he said. But parts of the act itself have been interpreted in varying ways. Benjamin Sobczak, a partner with Detroit-based Dickinson Wright PLLC, said he sees litigation as inevitable over perceived lack of clarity in some details of the statute, such as co-location between medical and recreational operations, businesses that submit applications before cities opt out, or for cities that are regulating medical while banning recreational sales.

Emergency rules

Out and in

The state of Michigan released emergency rules in July in order to implement the Michigan Regulation and Taxation of Marijuana Act, with a four-month cushion between the rules’ release and when the Michigan Marijuana Regulatory Agency under the Department of Licensing and Regulatory Affairs plans to start taking business applications Nov. 1. It could start issuing licenses the same month. The department could not yet estimate when the first licensees would

Center Line, a Macomb County city of fewer than 9,000 residents, has joined 125 other communities in opting for medical marijuana. But it chose to not to partake in recreational, for now. “The law, as it’s written, is vague and does not allow for local control as effectively as medical marijuana law does,” especially for a small town with specific needs, said Dennis Champine, Center Line’s city manager, city clerk and DDA director. The City Council opted out in De-

cember, before the emergency rules were released. “What our City Council thought was, ‘Let’s stay opted out,’” Champine said. “‘When (the state) gets a more ... permanent set of rules, we can take a look at that and say yes or no at that point.’” Meanwhile, Ferndale’s City Council saw the emergency rules and instructed its staff to update the city’s medical marijuana ordinance to add recreational, Ferndale planning manager Justin Lyons said. The Planning Commission recommended approval of the amended ordinance Wednesday night with minor changes, and it could head to City Council as soon as Oct. 28, Lyons said. Two medical provisioning centers have opened in the approximately 20,000-resident city, with a third incoming. The two in business, Gage Cannabis Co. and LIV, plan to pursue recreational licenses, according to the companies. “Council’s opinion has been that we know this has been something the community has been interested in for a little while now and voted overwhelmingly (for it) last November, so their focus has been, ‘Where does it make sense for these facilities to be?’” Lyons said. Now that medical facilities have opened, “the city’s really been trying to collect data on how this will affect areas around these businesses, any safety concerns.”

Recreational rush Ahead of the expected recreational rush, Michigan governments and businesses navigate the landscape of medical marijuana, which was legalized through a 2008 ballot initiative. The Legislature passed bills in 2016 to regulate medical businesses. Michigan had 279,900 active medical marijuana cardholders and 38,500 caregivers as of Sept. 1 and 298 medical marijuana grower, processor, provisioning center and other licenses were issued and active as of

Sept. 12, according to LARA, which is responsible for administration and enforcement of the recreational act. An interactive Marijuana Regulatory Agency map shows active licenses. The medical industry raked in $69.9 million in sales in the second quarter of 2019 from 11,720 pounds of product, according to a quarterly report by the Marijuana Regulatory Agency under LARA. The state recorded $6.1 million in quarterly revenue. When it comes to how much revenue legal weed will generate, there is no consensus. VS Strategies, a Colorado-based cannabis consulting firm hired by the Michigan ballot initiative’s organizers, estimated tax revenue from marijuana sales would reach $53.7 million in the first year and $134 million by 2023 as the market matures. The state Senate Fiscal Agency estimated revenues at $77.1 million in 2019, growing to $262 million annually by 2022, Crain’s reported last fall. State marijuana revenue will come from a 6 percent sales tax and 10 percent excise tax, with 15 percent of the latter going to municipalities based on how many establishments they have in their borders. In California, where less than 20 percent of cities allowed recreational retailers as of late 2018 (under Michigan’s approximately 50 percent) and growers have complained of high taxes and complicated regulations, the industry hasn’t performed as well as envisioned, the Los Angeles Times reported in December. The state expected $471 million in revenue last fiscal year, under the previously projected $630 million, according to the L.A. Times. “It will take some time for it to be fully mature, and there will be bumps in the road like all legalized states have had, but Michigan’s market will be strong,” Hovey said in an email. Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

Annalise Frank, breaking news. (313) 446-0416 or afrank@crain.com Jay Greene, senior reporter, health care. (313) 446-0325 or jgreene@crain.com Anisa Jibrell, breaking news. (313) 446-1612 or ajibrell@crain.com Kurt Nagl, breaking news. (313) 446-0337 or knagl@crain.com Kirk Pinho, real estate. (313) 446-0412 or kpinho@crain.com Dustin Walsh, senior reporter, economic issues. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter, nonprofits and philanthropy. (313) 446-1694 or swelch@crain.com

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CUSTOMER SERVICE Single copy purchases, publication information, or membership inquiries: Call (877) 824-9374 or customerservice@crainsdetroit.com Reprints: Laura Picariello (732) 723-0569 or lpicariello@crain.com Crain’s Detroit Business is published by Crain Communications Inc. Chairman Keith E. Crain Vice Chairman Mary Kay Crain President KC Crain Senior Executive Vice President Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except the last issue in December, by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Contents copyright 2019 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is prohibited.

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 7 , 2 0 1 9

THE WEEK ON THE WEB

RUMBLINGS

Masco to sell subsidiary for $725 million

Jack White, Alice Cooper to headline Gibson fundraiser

SEPTEMBER 27-OCTOBER 3 | For more, visit crainsdetroit.com

ivonia-based Masco Corp. has made a deal to sell one of its window and door subsidiaries for $725 million after exploring strategic alternatives for its business. Masco (NYSE: MAS) entered an agreement to sell Washington-based Milgard Windows and Doors to Pennsylvania-based MI Windows and Doors, according to a news release from Masco. The sale is expected to close in the fourth quarter. It comes shortly after the company sold its UK Window Group. Masco completed that sale in September, spokeswoman Sue Sabo said in an email to Crain’s. It was sold to the “current UKWG leadership team and an outside equity investor.” Terms were not disclosed. Masco, whose brands include Behr, KraftMaid and Merillat, announced in March that it was seeking to divest from its cabinetry and window businesses, including Milgard, Ann Arbor-based Masco Cabinetry and UK Window Group. It said in June that it was hoping to sell each of the subsidiaries within six to nine months. Masco is shifting focus to the repair and remodeling segments of the housing market, such as plumbing and furnishings, as it divests from the more cyclical window and door products. In 2018, Masco’s cabinetry and windows and other specialty products segments pulled in $1.7 billion in net sales, $120 million in operating profit and $161 million in adjusted EBITDA. The segments represented 20 percent of net sales for Masco, which reported total revenue of $8.4 billion in 2018. Shares of Masco (NYSE: MASZ) rose $1.15, or 2.8 percent, to $42.83 after the deal was announced. Sabo said the company does “not anticipate any immediate changes in the day-to-day operation of the business” following the sale of Milgard, which employs 2,800 people. Including Milgard employees, Masco employs about 26,000 — 800 in Michigan.

BUSINESS NEWS J Aptiv PLC is acquiring a German micro duct supplier for $310 million in the latest move to bolster its electric vehicle and autonomous driving business. Aptiv, whose North American base is in Troy, signed an agreement to buy Systemtechnik GmbH, commonly called gabocom, from private equity firm Bregal Unternehmerkapital. J Blue Cross Blue Shield of Michigan is committing $5 million to support the revitalization of the East Warren/ Cadieux area on Detroit’s east side as part of Mayor Mike Duggan’s initiative to leverage private investments into community improvements. Blue Cross is teaming with communities in the area through the Strategic Neighborhood Fund and the Affordable Housing Leverage Fund with the investment that will be distributed through 2022. J Manufacturer Meritor Inc. said it has planned a global restructuring to cut labor costs because of anticipat-

MILGARD

Masco has agreed to sell Washington-based subsidiary Milgard Windows and Doors for $725 million.

Detroit digits A numbers-focused look at last week’s headlines:

$725M

Value of Masco’s window and door subsidiary sale

92 percent

Space leased in downtown Detroit’s most in-demand office buildings

$5M

Amount BCBSM is committing to Detroit’s East Warren/Cadieux area

ed declines in sales volumes for heavy trucks and trailers. The Troybased company said in a regulatory filing that the plan was approved and it expected to incur about $20 million in severance costs. J Southfield-based metal parts supplier Chassix Holdings Inc. is rebranding itself to Aludyne to better reflect the growth of its brand and role in the shifting mobility landscape. The new name, effective Oct. 1, reflects the trajectory of an evolving industry that calls for lighter and safer vehicle components. J Now in its 11th year, the patient-centered medical home project sponsored by Blue Cross Blue Shield of Michigan has saved $626 million in health care costs in reduced hospital admissions, emergency department visits, use of generic drugs and fewer expensive radiologic exams, the company said. Blue Cross provides financial incentives to primary care physicians to work more closely with patients and specialty doctors to coordinate their care. J More than $230,000 was raised at Arts, Beats & Eats in Royal Oak during Labor Day weekend for more than 60 nonprofits and community groups. The festival generated $233,049.26 for charitable organizations, a 12 percent increase from last year. J Residents in Brighton and surrounding areas have a new way to travel to Detroit Metropolitan Airport, thanks to a new stop operated by East Lansing-based luxury motor coach company Michigan Flyer LLC. The Brighton service began last week and includes 14 round trips to and from the airport per day. The stop is at the south parking lot of the Meijer

store at 8650 W. Grand River Ave. J A nearly 6,000-square-foot virtual golf center is to open in the Woodward Corners by Beaumont development in Royal Oak in December. The indoor golf simulation and training facility will be Los Angeles-based X-Golf America’s 10th facility in Michigan. X-Golf Royal Oak, led by franchisees Ben Lubs and Charlie Krisfalusi, will boast a half-dozen suites, a full bar and light food menu. J Developers of a new ride service say they will launch their first national test in metro Detroit in early January. The Zoom Ride service will be launched in a total of five U.S. cities next year, the Dearborn-based company said in a news release. Zoom Ride Chairman Bilal Hashwi and CEO Basel Yasin say the service will fill gaps in the current marketplace dominated by Uber and Lyft by improving customer and driver safety and increasing income for drivers. J Forever 21 Inc. filed for bankruptcy protection, the latest big fashion merchant who couldn’t cope with high rents and heavy competition as the shift to e-commerce cut a swath through traditional retailers. The privately held company based in Los Angeles said it will close up to 178 stores in the U.S.

REAL ESTATE NEWS J A 55,000-square-foot indoor adventure park is opening this week in Sterling Heights, and is expected to generate 120 jobs. The adventure park will boast attractions that are geared toward keeping kids active, franchisee Wes Ayar said. J Two women-owned businesses are planting their flags in the same building in Detroit’s Eastern Market. On the third floor of 1337 Division St., which is owned by Sanford Nelson’s Firm Real Estate company, massage studio Fauna Holistic opened in September as an alternative to luxury spas. Joining Fauna Holistic in the building later this year will be co-working space Seat Detroit. Seat Detroit bills itself as a co-working space for entrepreneurs, startups and freelancers. J A café with a fried chicken twist is being prepped at the space of a Krispy Crunchy Chicken that wasn’t meant to be in Detroit’s Jefferson-Chalmers neighborhood. Yellow Light Coffee & Donuts is targeting Jan. 1 for its debut at 1447 E. Jefferson Ave. after an estimated $150,000 build-out.

fundraiser for the Kirk Gibson Foundation for Parkinson’s, featuring Detroit music icons Jack White and Alice Cooper and the former Tiger himself, will be held at the Shinola Hotel later this month. The Devil’s Night fundraiser, slated for Oct. 30, will feature a conversation with the Detroit legends moderated by WDET’s Ann Delisi. It will cover a range of topics including music, baseball and Detroit, according to spokeswoman Bridget Burns. Established in 1996, the Kirk Gibson Foundation awards college scholarships to students at Waterford Kettering and Clarkston High Schools. In 2015 when Gibson was diagnosed with Parkinson’s disease, the organization expanded its purpose to raise awareness and funding for Parkinson’s research. Both White and Cooper are avid baseball fans. Gibson, who played 12 seasons with the Tigers, is an analyst for Fox Sports Detroit’s coverage of

the team. Earlier this year, he added special assistant to the team to his duties. The event, which will take place in the Birdy Room of the Shinola Hotel in downtown Detroit, will feature a short acoustic performance by White, along with a silent auction with items including a limited-edition Third Man Records turntable signed by White, a cooking class and dinner with San Morello Chef Andrew Carmellini, as well as chance to play in a table tennis match with Cooper or Gibson. Third Man Records was launched in 2001 by White, best known for his role as lead singer and guitarist of the White Stripes. The fundraiser starts at 6 p.m., and guests are encouraged to dress in costume. All of the proceeds from ticket sales and the silent auction will go toward the Kirk Gibson Foundation. Tickets are $350 and can be purchased at ow.ly/S22y50wAC5F.

DUSTIN WALSH/CRAIN’S DETROIT BUSINESS

Longtime Detroit Economic Club President Beth Chappell will concentrate on building the AutoMobili-D mobility symposium speaking program.

Auto show, longtime Econ Club president team up

he North American International Auto Show has linked up with somebody with a long record of booking top speakers to direct programming tied to the first-ever summer show next June. The show announced last week that longtime Detroit Economic Club President Beth Chappell would serve as director of special programs to “drive the next level of speaker engagement.” “Beth is a proven leader and a well-respected professional among executives in the industry,” said Rod Alberts, NAIAS executive director. “With her decades of experience, Beth will help the show attract the top minds and industry disrupters to Detroit in June. Our speakers and symposiums will be heard by thousands of media and industry members from around the world, and Beth will help draw the best of the best.” Chappell will concentrate on building the AutoMobili-D mobility symposium speaking program, which aims to bring together speakers from a variety of fields to examine the chang-

Chappell

ing ways people get around. “The NAIAS already attracts a global audience,” Chappell said in a statement. “Enhancing the AutoMobili-D thought leadership component will really up our game on the

world stage.” Chappell was owner and co-founder of RediMinds, a data strategy and consulting company she recently sold. Chappell retired in 2017 after 15 years as president and CEO of the Detroit Economic Club. The club is considered one of the nation’s premier speaking venues and has hosted world political leaders, CEOs and a wide variety of other leaders. The auto show’s move to June coincides with an expansion of the show outside the walls of TCF Center. The show is scheduled to run June 9-20.

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