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CRAIN’S Readers first for 30 Years
DETROIT BUSINESS
Detroit’s new high-tech parking system: Meter runs in sun,
Putting shift in paradigm shift: All-woman race team takes aim at Indy 500,
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JULY 27-AUGUST 2, 2015
Disability: Rolls rise, funding dries One out of 12 working-age adults in Michigan collects either SSDI or SSI benefits. Experts disagree on exactly why the state ranks as the fifth-fastest-growing in disability benefits claims. Is it lenient judges, the workforce, the brain drain? One thing seems clear: The federal disability fund will run out late next year. Two decades of kicking the can down the road has left a safety net system without a safety net. Michigan’s climbing enrollment rolls
Claims draining trust fund reserves
Spike in claims winding down
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Wayne County looks to squeeze revenue from its empty space By Kirk Pinho kpinho@crain.com
© Entire contents copyright 2015 by Crain Communications Inc. All rights reserved.
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In the kingdom of the broke, revenue generators are king. So as it tries to stem the financial bleeding and faces a Wednesday deadline to request a hearing on Gov. Rick Snyder’s declaration of a financial emergency, Wayne County and a consortium of local real estate companies are trying to repurpose and better use the space the county owns. That includes squeezing more revenue out of the Guardian Building downtown, reviewing all owned and leased properties, and making a final decision about the site of the halfbuilt county jail on Gratiot Avenue. Among the possibilities for the Guardian, the landmark 643,000square-foot building at 500 Griswold, are a more aggressive marketing campaign by 400 Monroe Associates LLC for event and meeting space on the 32nd floor to bring in more money and issuing a request for proposals to turn the building’s vault and the surrounding space on the bottom floor into a restaurant. Armed with a new management contract that the county says saves it about $190,000 per year and a lease
GLENN TRIEST
Wayne County has hired real estate companies to help it generate more revenue from the Guardian Building along with other real estate. More photos inside the Guardian Building,crainsdetroit.com. for the 11th and 12th floors by the Detroit Land Bank Authority that begins Saturday generating $464,000 per year, the Guardian Building is generating more revenue than it has in several years, according to Khalil Rahal, the interim director of the Wayne
County Economic Development Corp.
Craig Fahle, director of public affairs for the land bank, said the lease for about 27,000 square feet is a result of the agency “busting at the SEE SPACE, PAGE 21
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MICHIGAN
BRIEFS Apartments in the outfield? That’s the pitch in Lansing A new apartment development in downtown Lansing wants to replicate for tenants the experience of living near Wrigley Field, the home of the Chicago Cubs of Major League Baseball, MiBiz reports. Half of the 84 units in The Outfield complex overlook Cooley Law School Stadium, home of the minor-league Lansing Lugnuts. Rents in the nearly $11 million development will range from $850 to $1,600 a month, Pat Gillespie, president of the Gillespie Group, told MiBiz. Gillespie said he has received calls from other teams interested in similar projects but declined to identified them. The apartments are part of a $25 million renovation project that includes new restaurants, party decks and executive suites at the stadium.
Bus rapid transit seen as driver for Lansing economy Officials at the Capital Area Trans portation Authority , the Lansing area’s bus system, are confident that
a bus rapid transit system will begin operating in 2018 along the Michigan Avenue-Grand River Avenue corridor, the Greater Lansing Business Monthly reported. The $167 million project still needs approvals — most notably from the federal government, which is supplying most of the money. The route would feature dedicated bus lanes and would allow buses to avoid the dozens of traffic signals along the route. This will trim up to eight minutes from travel time between Lansing and Okemos. Said CATA board member Julie Brixie, who also is Meridian Township treasurer: “This has the potential to be the greatest economic driver we’ve seen in 20 years. It is, in fact, this potential that justifies the project.”
legan, should close in the third quarter, pending German regulatory approval, MiBiz reported. Terms of the deal were not disclosed. The acquisition builds on the last year’s purchase of Omega Pharma that better positioned Perrigo in the $30 billion European market for over-the-counter medications and nutritional products. Perrigo continues to pursue acquisitions as it faces a hostile takeover bid from Mylan N.V.
Brewers bemoan paying fees that fund wine industry Craft brewers want to change state law so that the annual licensing fees they pay can benefit research and promotion for their industry rather than support a competing beverage sector, MiBiz reported. Under current law, every dollar that alcohol manufacturers pay in licensing fees is earmarked to fund grape research for Michigan’s wine industry. While the fees for breweries are minimal, the fact that those dollars go to research that is of no benefit to their industry has some brewery executives crying in their beer.
Perrigo acquires German dietary supplements maker
MICH-CELLANEOUS
Perrigo Co. plc has acquired an-
䡲 Kalamazoo-based Stryker Corp.
other European company, this time landing German dietary supplements maker Naturwohl Pharma GmbH . The acquisition by Perrigo, an Irish-based company with its North American headquarters in Al-
plans to buy Muka Metal A.S., a Turkish company that produces and sells hospital beds, stretchers and furniture for patient rooms and accessories, MiBiz reported. Stryker said the cash deal should close in the third
quarter. Terms were not disclosed. 䡲 Rockford-based Wolverine World Wide Inc. will discontinue Cushe casual footwear, its smallest brand, and plans to close 55 underperforming stores over the next five years as their leases expire, MiBiz reported. The closures come on top of a previously announced plan to close 140 stores as consumer shopping shifts online. 䡲 A report from the state Office of the Auditor General said the Michigan Department of Treasury found that 76,000 tax assessments were issued with an incorrect balance, with some improperly referred to collections, The Associated Press reported. The state also was flagged for not pursuing delinquent debts in a timely manner and not monitoring a contractor hired to collect debts. Treasury agrees with most of the audit findings. 䡲 Another member of the nowclosed Sigma Alpha Mu fraternity at the University of Michigan pleaded guilty to a misdemeanor charge of malicious destruction of a building, connected to vandalism at Treetops
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BANKRUPTCIES . . . . . . . . . . . . . . . . . 13 CALENDAR . . . . . . . . . . . . . . . . . . . . . . . 17 CLASSIFIED ADS . . . . . . . . . . . . . . . . 17 DEALS & DETAILS . . . . . . . . . . . . . . . 16 MARY KRAMER . . . . . . . . . . . . . . . . . . . 6 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 6 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 16 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 23 WEEK ON THE WEB . . . . . . . . . . . . . . 23
COMPANY INDEX: SEE PAGE 21 Resort near Gaylord and Boyne High lands near Petoskey. The Michigan Daily and TV stations WPBN and WWTV reported that Jesse Krumholz,
22, faces sentencing Sept. 17. Treetops estimated $430,000 in costs from the Jan. 17-18 vandalism. 䡲 The National Science Foundation awarded $22.5 million to Michigan State University to support the BEA CON Center for the Study of Evolution in Action , The Associated Press re-
ported. 䡲
CORRECTION In the July 20 issue, stories on Page 9 and 11 should have said the state of Michigan provided 2013 graduate medical education funding of $163 million to 60 teaching hospitals in Michigan; the stories incorrectly said $263 million. The incorrect figures meant that a chart on Page 11 gave incorrect information about Michigan GME payments, total federal and state GME payments, GME revenue per resident and GME payments as a percent of net patient revenue. A corrected chart can be found at crainsdetroit.com/gme.
Read AheadOfTheCurve.wnj.com, the definitive law blog for navigating the automotive supply chain.
Warranty disputes, recalls, intellectual property theft, government investigations...there’s a lot at stake in the auto supply industry. So much, in fact, that our automotive attorneys represent ONLY suppliers. We represent more than 200 automotive suppliers, safely steering them through some serious hairpin turns. Contact us about preparing for the curves ahead.
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Time expires for city’s old parking meters To use new ParkDetroit system, including 4 new vendors, know your license plate number By Marti Benedetti Special to Crain’s Detroit Business
D
etroit COO Gary Brown and Municipal Parking Director Norman White will reveal on Tuesday details of a new high-tech parking system for downtown Detroit and nearby neighborhoods. The new partially solar-powered, multi-space kiosks will eliminate almost all of the old city meters. They are scheduled to be in place within a few weeks. Once installed, 500 kiosk pay stations will replace about 3,000 meters. Brown and White said the onstreet parking system, called ParkDetroit, will be one of the easiest to use in the nation — replacing a much-maligned and outdated system. The aggregate cost of the new system wasn’t disclosed in Crain’s interviews last week, but just the kiosk portion is $3.5 million. “For decades, residents and visitors have all been frustrated by our parking system, and our hardworking parking enforcement officers have usually gotten all the blame,” Brown said. “But those days are over, because in the Gary Brown: New coming weeks, the parking system is city of Detroit will “customer-friendly.” be home to the most comprehensive and customer-friendly parking meter system in the entire country.” For years, the city has been plagued with broken meters. And consumer habits are moving away from carrying around coins to feed meters. In addition, fees were hiked during the city’s bankruptcy reorganization; expired meter parking tickets were upped to $45. As part of the new system rollout, the parking ticket fee won’t change, but a problem that is more vexing to residents and businesses will be: Old parking meters, at least half of which don’t work, will be mostly gone. “This system alleviates all of that,” said Jamaine Dickens, city public affairs consultant for DMC Strategies in Detroit. “Instead of pay by space, we will have a pay-by-plate system. When a driver pulls their vehicle into a parking space, they punch their license plate number into the kiosk. They enter the time they want and pay with a credit or debit card or coins.” People typically don’t have their plate numbers committed to memory, but this system will be easier
to use if that number is memorized, Dickens said. The system includes contracts and collaboration among four companies: Cale America, Tampa, Fla., is the vendor for the pay stations; Charlotte, N.C.based Passport Parking is providing the mobile app; Genetec Inc., Montreal, has the license plate component; and Duncan Solutions Inc., Detroit, is responsible for parking enforcement. Soon the system will be fully installed downtown, in Midtown, in New Center and in a handful of neighborhood retail strips. Each strip will have a designated payment zone. Downtown parking will cost $2 per hour, Midtown $1.50 an hour and closein neighborhoods, $1. If a parker pays for a spot for one hour and uses only 30 minutes, he or she can move the vehicle to another spot in the same zone and use the remaining 30 minutes. Parkers also can set up a digital wallet, whereby, say, $20 worth of parking is purchased and used over time. Parkers can download a free mobile app to pay for parking. If a visitor predicts a business meeting will go for an hour, but the meeting goes for two, the visitor would get an alert on his or her phone, asking if they want to extend their time. Also, if someone has a vehicle parked in one part of town but has walked or been driven to another part of the city, he or she can add to their parking time from another kiosk. Dickens said as the system is installed over the next few weeks and people are learning how to use it, parking enforcement will be relaxed. Meter readers will be on hand to help walk parkers through the process. Instead of tickets, parkers will get an informational ticket with the website – www.parkdetroit.us — to help them learn the system. Some single-station meters will be maintained. Suburban cities such as Ferndale and Royal Oak have had parking kiosks for several years, but not the pay-by-plate system. While Detroit officials predict businesses and residents will appreciate the new system, early reaction is mixed. Brown had a meeting with business SEE PARKING, PAGE 22
COURTESY OF GRACE AUTOSPORT
When Beth Paretta (left) brings her all-woman Grace Autosport team to next year’s Indianapolis 500, Katherine Legge (right) will be behind the wheel.
All-woman race car team in high gear Grace Autosport accelerates toward Indy 500 By Bill Shea bshea@crain.com
When former SRT Motorsports/Fiat Chrysler Automobiles director Beth Paretta announced in May the creation of all-woman racing team Grace Autosport for next year’s centenary of the Indianapolis 500 , the news was met with a chorus of cheers from the open-wheel racing industry. Now, Paretta has to make it happen, and she’s been working on it from Birmingham-based The Paretta Co., the entity she created last fall for her personal business endeavors after FCA shuttered its SRT racing unit. Grace Autosport will align itself with an established racing team initially so it can pay for facilities, technology and expertise rather than immediately building everything from the ground up, Paretta said. She’s in talks with teams, but declined to disclose names. The effort, which also involved promoting technical education for girls, likely will require the operation to locate elsewhere, probably Indianapolis, Paretta said, because that’s the heart of the IndyCar industry. However, Grace Autosport would retain a presence in metro Detroit if the team were to align with a local
MARIA ESQUINCA/CDB
MUST READS OF THE WEEK How to keep a marina afloat
Name of the game is still cash
Eric Foster fell in love with a bankrupt marina three decades ago. In this week’s installment of the Looking Back series commemorating Crain’s 30th anniversary, Foster reports that things are going just swimmingly, Page 4
The top financial executives of Detroit’s four major sports teams huddled together during Crain’s CFO Awards event to talk about what keeps them up at night ... besides things like starting pitching, Page 7
manufacturer, which is Chevrolet when it comes to American openwheel racing. “We are now evaluating relationships with manufacturers,” she said. “If it was Detroit-based, it would make sense to be closer to here.” “Realistically, I could raise money and buy a brand new car and rent shop space, but we want to do this the right way,” she said. “Partnering allows affiliation and sharing knowledge.” Besides recruiting the best female motorsports talent, Paretta is in talks for the corporate and organizational sponsorships needed to offset the estimated $1 million needed to launch an IndyCar team for the Indianapolis 500. If enough funding can be raised, the goal is to run in as many IndyCar Series races — possibly including the Detroit Belle Isle Grand Prix in May — or even a full season. She’s been in talks with companies as possible lead and supporting sponsors, with the goal of having them in place by fall, she said. Sponsorships generate funding needed for a full racing operation. The Indianapolis Star in 2013 SEE GRACE, PAGE 22
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LOOKING BACK: On July 29, 1985, Crain’s reported on the new and growing Belle Maer Harbor marina in Harrison Township. One of the two founding partners remains to run the facility, which has benefited from changes in the marina culture. More at crainsdetroit.com/30 When he and Marc Howard bought Belle Maer Harbor in 1984, Eric Foster just wanted to fix it up and sell it at a profit. But he fell in love with the Harrison Township marina and still operates it.
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M
arc Howard was the pragmatic partner at Belle Maer Harbor marina in Harrison Township. In July 1985, 15 months after he and Eric Foster bought what had been the Blue Lagoon marina out of Chapter 11 bankruptcy for $2.2 million, Howard told Crain’s: “It would be a mistake for anyone in our position to fall in love with the property. It’s a business proposition. It’s not an emotional thing.� The two, he said, had a fourphase plan for what had been a dilapidated 60-acre property at the far eastern end of North River Road. The first three involved fixing the place up. The fourth? “Selling it at a profit.� Despite his partner’s advice, Eric Foster long ago fell in love with the place. Thirty years later, he is still running it, eager to take a visitor on a tour on his golf cart to see the improvements that have taken place over the years, and which are still ongoing. Howard ended up staying for the long haul, too. He was still a general partner when he died of cancer in 2003, and he is memorialized at the marina by a large black marble memorial near Lake St. Clair, atop of which sits a bronzed pair of cowboy boots. Why cowboy boots? “He’d go around the marina each day, and he always had cowboy boots on,� Foster said of Howard. “One day, someone asked him, ‘Why cowboy boots?’ He said, ‘I was raised in Nebraska, and these are my Nebraska boat shoes.’ � As for the profits, just because Howard and Foster decided to keep ownership of the marina didn’t mean they forgot about returns to their 10 limited partners in the Belle Maer Association LP. In 1987 and 1988, they sold 406 of the 836 boat slips in the marina as condominium slips.
“Within three or four years, our investors got their money back three or four times over,� said Foster. “They made so much from that sale, there hasn’t been any pressure to sell since.� Foster, a CPA and accountant, was the numbers guy in the part-
nership. “Marc said his job was to come up with ideas, my job was to pay for them,� said Foster, who put the syndication and bank financing together in 1983 that secured the property. SEE NEXT PAGE
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Before buying Blue Lagoon, Howard and Foster had been partners in Global Mobile Homes, a Livonia-based business with seven newsales locations. After they sold it to Champion Home Builders, they began looking for another business and settled on Blue Lagoon. They renamed the marina Belle Maer, a play on the French for “beautiful sea.” Instead of “Mer,” Howard decided they should use “Maer,” the “M” and “A” from “Marc,” and the “E” and “R” from “Eric.” And then they had to go about making “Belle” live up to its meaning. One of Howard’s first ideas was to line the five channels in the marina with small red maples, which 30 years later, on hot sunny days, provide shade and a place to picnic in front of tenants’ boats.
5
At the bottom of the Great Recession, Foster said, occupancy fell to 58 percent. Today, he only has eight slips left to rent. Foster is 63 now, and at the end of what he said is a $4 million major upgrade of the marina. He said that while he is still having fun running the place, it’s time to at least start thinking about selling. “I get enough inquiries. I won’t have to list it. If the right person asks me, and they want me to stick around for a year or two to help with the transition, that would be great,” he said. “I told my loan officer at Flagstar, I hope this will be my last five-year balloon loan, which will take me to Jan. 1, 2018,” he said. 䡲
At the bottom of the Great Recession, occupancy at Belle MaerHarbor marina fell to 58 percent.Today, only eight boat slips are available to rent. A $4 million renovation of the marina is nearly complete. COURTESY OF BELLE MAER HARBOR
Sprucing up But when the sale closed on May 1, 1984, fewer than 400 of the 640 slips then in place were usable. Docks had fallen into the water, breakwalls were collapsing, channels needed dredging so boats could come and go, electric lines didn’t work, and there was so much debris and so many dilapidated boats rotting on the grounds that the township fire department came out and incinerated the mess as a training exercise. Since then, Belle Maer has added two bathhouses, a large outdoor swimming pool, a bocce ball court, a kid’s playscape, horseshoe pits, a sand volleyball court and a putting green. There are also a large hangar that in the winter serves as a heated boat-storage facility and during the boating season contains a regulation basketball court and a regulation tennis court, and a large building that stores 108 boats on vertical racks that go to the ceiling. Owners drive into the marina and check in at the storage facility, and their boats are lifted off the racks and put in the water. “We try to make it more of a club,” Foster said. Nearly every weekend, there are special events — a fireworks night, a dockside concert, a decorated golfcart parade, bring-your-dog days, classic car shows, chili cook-offs and the like. Foster said that the marina culture has changed over the years, in part because of much higher fuel prices now than 30 years ago. “Boaters are taking fewer boat trips. They spend more time at the marina,” he said. “People started using their boats as a floating cottage. Instead of driving four hours to Traverse City, they drive for half an hour or an hour here. They’ll hang out on the boat all day, and they want their kids to be able to go off and have things to do.” Belle Maer employs 17 directly. Foster leases many of the operations at the marina, such as the fiberglass shop, the gas dock and convenience store, the canvas shop, and the boat sales and engine-repair shop, which together employ about another 40.
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CRAIN’S DETROIT BUSINESS
OPINION Time to get handle on disability costs W
atch daytime TV in Michigan and what do you see? A slew of ads from attorneys promising viewers a way to become part of the fastest-growing federal subsidy program: Social Security disability. One out of every 10 people in Michigan’s current labor force collects monthly checks from the federal disability program or its sister, the Supplemental Security Income program. As Chad Halcom reports on Page 1, Michigan ranks seventh among the states for the number of beneficiaries and had the fifth-largest increase for the 10 years ending in 2013. The numbers are worrisome for several reasons: First, the disability trust fund will run out of money late in 2016. Disability payments are still likely to be made, but they’ll either come from dollars now being spent elsewhere or further inflate the federal budget. Second, as talent worries grow among Michigan employers, fewer state residents are in the talent pool. There are a number of things that can be done to help, both short and long-term: Make it less profitable for attorneys to handle disability appeals regardless of their merit. Late-night TV is replete with ads soliciting claims because the government pays lawyer fees. That system seems designed to increase appeals — or even original claims. Focus on reducing the incidence of heart disease, Type 2 diabetes and other preventable diseases. Although much of the increase in disability payments is attributed to an aging population, disability recipients are pre-retirement age and presumably should mostly be healthy enough to work. Invest in services that would get people back to work who are able to do so and not be worse off financially because of it. Create a system to replace judges who consistently approve statistically too many or too few claims. Ideology shouldn’t be driving the decisions. The system is clearly broken, through misdirected incentives and poor management. Many fixes can be handled administratively, and doing that would be a good legacy for the Obama Administration.
Will looking back on events of 1967 move the region forward on race? re we ready to talk about 1967? The Detroit Historical Society thinks it’s time. Riot or rebellion, the 10 days that began with a police raid on a blind pig in Detroit on July 23, 1967, led to 43 deaths, thousands of injuries and millions of dollars in collateral damage – to bricks and mortar and the city’s psyche. The 50th anniversary will hit on July 23, 2017. (Ironically, July 24 is widely used as Detroit’s own anniversary of its founding in 1701.) The historical society’s “Detroit 1967 Project” carries a sub-theme: “Looking back to move forward.” Maybe that’s the opportunity for Detroit – and the entire region. “People are eager to talk,” said Bob Bury, society president who runs both the Detroit Historical Museum and Dossin Great Lakes Museum. “How to use this to move our community ahead will be harder.” About 125 people had signed up for the museum’s first oral-history collecting workshop this past Saturday.
A
MARY KRAMER Publisher mkramer@crain.com Additional workshops are scheduled for Aug. 6 at the museum and Aug. 15 at the Dossin museum on Belle Isle. Last week, a New York Times/CBS News survey found 57 percent describe race relations in this country as “generally bad.” Chalk that up in part, perhaps, to the questionable policing incidents, from Ferguson, Mo. to Texas to New York. That’s why a recent note from Joe Nuessendorfer of Livonia is noteworthy. Years ago, he had purchased a book-length report on the riots in John King Books’ rare book room. Two academics, including Sheldon Lachman, then a professor at
Wayne State University, conducted interviews in 1968 with 500 African American men who had been charged with various offenses during those turbulent July 1967 days. The report’s title: “The Detroit Riot of July 1967/A Psychological, Social, and Economic Profile of 500 Arrestees.” When asked about the causes of the disturbances, the No. 1 reason was broadly described by the researchers as “police action,” followed by general tension and frustration. Third were broad issues of civil rights and economics. It seems that the historical museum has a big chore ahead – getting people who have different interpretations of history to talk about the past and figure out how to use the conversations to move our region forward. Mary Kramer is publisher of Crain’s Detroit Business. Catch her take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760 and in her blog at www.crainsdetroit.com.
TALK ON THE WEB Re: Overspending cuts short Hazel Park thoroughbred season
This is so wonderful! This is the kind of news worth sharing. Emily Schreiber
Sounds like it’s time to free up that harness racing purse , give HP Raceway a fair split with Northville, and, finally, allow up to 200 slot machines and perhaps a few video poker games if either raceway wants them.
Re: Cost of insurance forces many in Detroit to ‘drive dirty’ Rather than cut the coverage mandated statewide, why not allow the auto
BrewPubNate
carriers to self-fund their medical ex penses through Blue Cross and Priority
Re: How volunteers transformed 100 blocks of Detroit
Health? Then they would get the discounts they are missing and the cost of auto insurance would go down statewide. It would also help folks with continuity of care and coordination of
Awesome work by awesome kids. Marlys Smith
Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity.
politically, but may reduce these residents’ roles in Detroit’s political process. Democracy demands public participation, but these high premiums make this less likely. Nat Pernick
benefits between the carriers. 302256
High Detroit auto insurance has another impact . To get better rates, many Detroiters use a non-Detroit address for their driver’s license and voter registration, which not only reduces the importance of Detroit
Re: Bill Shea’s blog on Kid Rock’s embrace of Confederate flag
Kid Rock can and should make his own decisions. This PC mob mentality is far more harmful to the U.S. JulitaStar
Re: Dems propose $530 million business tax hike for roads
Always wondered how Kid Rock and others have the nerve to display this flag in the North. It’s really a slap in the face of Union soldiers who served and sacrificed.
With the GOP senators holding road funding as a hostage to their collective desire to increase taxes, the door opens for really crazy pro posals such as this. The GOP Senate has no leadership. The governor is not helping, either.
Karin @ HHT
William J
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Pro sports CFOs: Revenue key to the ‘circle of life’ By Bill Shea bshea@crain.com
What keeps the top financial executives of Detroit’s four professional sports teams up at night? “Cash flow,” said Greg Campbell, executive vice president and CFO of the Detroit Pistons. That sentiment was echoed by the CFOs of the Detroit Tigers, Detroit Lions and Detroit Red Wings during a Crain’s awards event breakfast last week. Campbell was part of a sports business panel discussion Thursday morning at The Henry in Dearborn during Crain’s Detroit Business’ annual CFO of the Year awards. Moderating the panel was self-professed sports nut Rejji Hayes, CFO, treasurer and senior vice president of Novi-based ITC Holdings Corp. Also at Thursday’s breakfast, Crain’s honored the winners of the CFO of the Year for 2015. Featured in the May 24 print edition, the CFO awards highlight the important work that CFOs do, often behind the scenes. See profiles at crainsdetroit.com, under the awards navigation tab. Hayes’ first question was about the CFOs’ chief worries. Steve Quinn, CFO and vice president of finance and administration for the Tigers, had an additional take on what keeps him up at night: “Just turn on Fox Sports Detroit,” he said to laughter from the crowd of about 300 business executives. The Tigers have struggled this season, and there is heavy speculation the team may trade players soon. Campbell, of the Pistons, echoed that mindset: “Turning on ‘(ESPN) Sports Center’ at 2 a.m. and hearing ‘news flash from Detroit.’ Nothing good happens at 2 a.m.,” he said, chuckling. What makes the job of a pro sports CFO different from that of a steel manufacturer or telecom CFO is that so much of the team’s finances are a topic of public interest. Locally, there is discussion about the $535 million cost of the new Red Wings arena under construction, and fans and pundits spent weeks debating how much the Lions should have offered star defensive tackle Ndamukong Suh before he bolted for the Miami Dolphins for $114 million over the next six years. The CFOs have to manage those numbers on behalf of the team owners and front office. That’s why revenue creation is so important. Revenue buys talent, the Tigers’ Quinn said, so winning is important because it creates that revenue. “Onfield success translates into top-line revenue success, and top-line revenue allows you to put a competitive team on the field,” he said. Tigers owner Mike Ilitch, 86, has made it clear his goal is to win a World Series rather than to run a lucrative team — something evidenced by the team’s $173 million payroll. Lions CFO Allison Maki called revenue and winning a “circle of life” for the Lions. “The more success we have on the field directly correlates to that circle of life,” she said.
Maki also noted that NFL teams are unique in pro sports when it comes to local revenue, such as tickets, concessions and parking, because they play so many fewer games than the other leagues. “You’ve got eight chances to maximize your revenue,” she said. Insurance concerns are another area where sports CFOs may deal with unique challenges. The Red Wings, for example, spend millions on player and business insurance, said Paul MacDonald, the team’s vice president of finance since 2002. “You’ve got to convince owners you’ve
done enough to mitigate risk,” he said. The other three professional leagues have salary caps for player payroll, something that other professions don’t normally deal with. MacDonald said the cap introduced for the National Hockey League under its 2005 collective bargaining agreement with its players was a radical change. “We’ve had to totally change the way we do business,” he said. The title sponsor of the CFO of the Year event was Bank of Ameri ca/Merrill Lynch. 䡲
AARON ECKELS
Panelists during Crain’s CFO ofthe Yearawards event talked sports.From left: Steve Quinn ofthe Detroit Tigers,Paul MacDonald ofthe Detroit Red Wings,Allison Makiofthe Detroit Lions,Greg Campbell ofthe Detroit Pistons and moderatorRejji Hayes.
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SPECIAL REPORT: BUSINESS TOM HENDERSON Reporter’s Notebook thenderson@crain.com
Nothing gloomy about this cloud
INSURANCE
In 2008, when Mike Klein joined Online Tech Inc., an Ann Arbor data storage company, the cloud was that thing above you casting a shadow as you walked to lunch. Today, it is the force behind his company’s explosive growth and the reason that the NewsPress & Gazette Co. of St. Joseph, Mo., invested $20 million to buy a majority stake in Online Tech in 2012. The company focuses on industries that face strict compliance issues, such as health care, financial services and retailing. Last year, Online Tech opened data cenMike Klein ters in Westland and Indianapolis to go with two in Ann Arbor and one in Flint. Klein, who is co-CEO with Yan Ness, talked with Crain’s reporter Tom Henderson about cybersecurity and related issues. “The cloud” must have a sweet sound to you. Four years ago, no one was
talking about cloud computing. Now it’s more than 50 percent of our business. When I got here, we had 30,000 square feet of data center space. Now we have 160,000 square feet. Our data storage has been growing 102 percent a year over the last five years, and we’ve been growing revenue by 30-35 percent a year. What sort of data volumes are you talking about? We have 10 petabytes of
data stored in our centers now. One petabyte equals 1,000 terabytes, which equals 1 million gigabytes. Ten petabytes of storage is 20,000 years of continuously playing music and 133 years of continuous HD video. Security is obviously a huge issue. How do you head off trouble for your cus tomers? We do vulnerability scan-
ning; we do penetration testing. We find the holes in their firewall, which they are responsible to close. And we isolate every client from each other. If someone does get in to a client’s data from their end, they can’t get to any of our other clients. A lot of the credit goes to the processing credit industry security standards. No one who has fully implemented the standards has ever been breached. Yet, I’m guessing that despite all the safeguards, you spend a lot on cyberinsurance.
We have liability insurance through Lloyd’s of London, and we always recommend clients get their own insurance, too. We work in a world of human beings, and most mistakes in security are caused by human beings. The price of cyberinsurance has really come down in the last five or six years as more and more players come into the marketplace. 䡲
Head in the cloud? With the increase in reports about cybersecurity and data breaches, businesses need to know the risks and insure themselves accordingly By Tom Henderson thenderson@crain.com
espite all the publicity generated by cybersecurity breaches last year at Target, Sony, Goodwill, UPS and other companies, along with the massive breach disclosed this year at the U.S. government’s Office of Personnel Management involving 21 million current and former federal employees, too many companies remain ignorant of the risk, local insurance and legal experts say. “Companies often assume they’re covered by their regular insurance policies, but if they haven’t bought specific cybersecurity policies, they aren’t,” said Jim Giszczak, who specializes in cyber-related legal issues for Bloomfield Hills-based law firm McDonald Hopkins PLC . “It’s still a relatively new area of coverage, and most clients don’t realize they need it. “They might have business interruption insurance, but that won’t cover their losses if they
D
have a data breach. They need true cyber liability coverage. We make sure they have policies in place.” David Derigiotis, group vice president and director of professional liability for Burns & Wilcox, calls cybersecurity “still a very underserved area. Most businesses don’t understand their exposure. Most small- and medium-sized businesses don’t realize they are being targeted.” Burns & Wilcox is a subsidiary of the Farmington Hills-based Kaufman Financial Group. “Cyber insurance was a $2 billion market in the U.S. last year. It would be a $10 billion segment if business owners were educated,” Derigiotis said. Nonetheless, he said, Burns & Wilcox expects annual growth in cyber policy premiums of 35 percent to 50 percent a year for the foreseeable future. “We have had tremendous growth in the cyberspace,” he said. See BREACHES, PAGE 10
Data security is job security for one growing firm, Page 12
Data breach trends Here are the top six data breach trends, according to the 2015 Data Breach Industry Forecast published by Experian Information Solutions Inc., a credit reporting company.
1. Credit card breaches will rise over the next few months as hackers try to beat the October deadline set by Visa and MasterCard for merchants to accept only the new generation of credit cards that are embedded with computer chips.
2. Hackers increasingly will target data stored in the cloud. “Hackers are eager to capitalize on the value of consumer online credentials,” according to the report.
3. Expect more breaches of health care data. One reason: the growing number of access points to protected health info. Another: the growing popularity of wearable technology, which can transmit data to doctors but provide an entry point to hackers.
4. In light of all the recent high-profile hacks of major companies, legal and regulatory pressure will increase on CEOs and boards. “It is clear that security can no longer be viewed as just an IT issue,” the report said.
5. Despite all the headlines involving breaches by hackers and foreign countries, disgruntled or negligent employees will be companies’ biggest security threats.
6. The Internet of Things will become a buzzword in insurance circles. The term refers to the growing cloudbased connectivity of people and their devices, which may provide an easy entry point to all your devices and data.
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SPECIAL REPORT: BUSINESS INSURANCE
Promote your inner entrepreneur.
BREACHES FROM PAGE 9
Stewart Nelson, senior risk adviser at Kapnick Insurance Group in Ann Arbor, has focused on cyber insurance for 10 years and teaches continuing education courses on the topic to agents — he recently sold out a class of 80 — but only in the past year or so has he achieved a critical mass in terms of sales. “I’ve been waiting for this day, when we’d actually sell policies. It’s been a hot topic for public companies and is just now filtering down to private companies,” he said.
Repeat
‘You have to prepare’
Sell
For the vast majority of businesses, Nelson said, $1 million in cyber insurance is adequate. That amount of coverage costs $3,000 to $5,000 annually. Data storage companies and large health care organizations will need much more coverage, he said. Inge Beale, CEO of Lloyd’s of Lon don , said the market globally has grown from less than $1 billion four
years ago to about $2.5 billion today, most of it in the U.S. “There are so many ways to get into systems now. We tell companies, you have to prepare, and the No. 1 thing you can do to prepare for losses is to get cyber insurance,” said Raj Patel, leader of the cybersecurity practice at Southfield-based Plante PLLC.
Moran
“A year or two ago, clients wouldn’t listen to us. Now, they do.” Patel said his team hacks into customers’ sys- Jim Giszczak: tems, then tells Specializes in cyberthem how they related law. did it. “They’re always surprised their monitoring systems didn’t catch us,” he said. “Their systems are looking for unusual traffic, but most hackers aren’t making any noise.” Giszczak said publicity about high-profile breaches involving big companies or foreign governments such as China and North Korea
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leaves clients underestimating their risk. “They’ll say: ‘Nobody from China is going to hack me’ or ‘I’m not a retailer. I don’t take credit cards.’ They don’t realize it can be something as simple as computer theft out of the back of a car that will put them at risk,” he said. Or as mundane as an employee’s opening an email attachment that unleashes malware on an IT system. According to the 2015 Data Breach Industry Forecast report by Experian , disgruntled or negligent employees are companies’ biggest threats for security breaches. Mark Ford is practice leader for security and privacy for the life science and health care industry clients of Deloitte & Touche LLP . Those clients include Trinity Health, Henry Ford Health System , Cardinal Health and the University of Texas Health System. Deloitte bills itself as the largest cybersecurity consultant in the world.
Turning awareness into action Finally, Ford said, cybersecurity is being recognized as not just an issue for the chief information officer but for all of upper management, although awareness has been slow to translate into action. “I’ve talked to more boards of directors in the last year about this than in my entire career,” said Ford, a former officer in the U.S. Army Military Intelligence Corps who has been consulting on IT privacy and security for 18 years. “But they still tend to say: ‘Oh, we’ve got that covered. It’s an IT issue.’ They’re running with scissors.” Derigiotis and other insurance executives say the value they offer to customers isn’t just in covering losses but in bringing in IT consultants to conduct vulnerability testing of customer systems to find weak spots. “We’ve really evolved our coverage,” he said. “The value isn’t as a reactive solution when something happens, it’s a proactive solution up front. We give them a hacker’s view of their company.” McDonald Hopkins’ Giszczak said the theft of computers from a client more than eight years ago was the genesis for his current practice. “A lightbulb went off. I thought, ‘There might be a future in this,’ ” he said. Today, Giszczak heads a team of 20 attorneys, a national practice with clients facing regulatory-privacy issues in health care, banking and finance, and education. He also brings in IT specialists to assess client systems and their insurance needs. Clients don’t realize the range of potential costs involved in a breach, Giszczak said. 䡲 They’ll need a lawyer who specializes in cybersecurity, especially if they are in a business that has regulatory issues over privacy mandates where large fines are possible. SEE NEXT PAGE
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SPECIAL REPORT: BUSINESS INSURANCE FROM PREVIOUS PAGE
They’ll need forensic experts to figure out what went wrong and the extent of the breach. They might have to hire a call center if large numbers of clients are affected and do large mailings to alert customers to potential losses. “It’s a very bad day when you realize you don’t have coverage and are about to incur millions of dollars in damages,” Giszczak said. Said Giszczak, whose team at Deloitte also does a forensic examination of current IT security: “Insurance is part of your arsenal, but it’s not your only defense. You can’t say, ‘Oh, we’ve got insurance.’ ” In the long run, especially as hackers evolve in sophistication and increase their activity, security will be possible only if there are many more cybersecurity specialists nationwide, he said. “Talent is a very big issue,” Ford said. “There’s a short- Mark Ford: There’s age of people. a shortage of talent Every university in cybersecurity. in the country produces accountants. How many produce cyber specialists?” Said Patel: “We can’t find people right now.” His group at Plante Moran has 40, double from five years ago. “Our people are always being recruited.” Not if, but when Ty Frantz is the CFO of Style Crest Inc., a Fremont, Ohio, company that makes and is a wholesale distributor of building products for the mobile home industry. He has a Michigan sales force and truck routes here and recently got cyber insurance through the Kapnick Insurance Group. Frantz said his company decided to get insurance after reading about cyberbreaching at Anthem Inc. , the health insurer, in February. “It’s more of a question of when you have a breach than if,” he said. “Not having cyber insurance was a gap we wanted to fill. It’s an additional cost you incur, but it’s like any insurance.” Patel said a lot of companies end up with inadequate cyber policies that were “rushed to market, and agents don’t really understand,” he said. “What does the policy cover? Does it cover hardware? Software? People’s time? Insurance companies are still learning about how to do this.” Nelson said most cyber policies don’t cover the common practice of phishing. He said he knows of companies that received what seemed to be legitimate invoices, paid them and then found out they were fraudulent. But their cyber policies don’t cover the losses. “The average agent out there still doesn’t have a clue about what a cyber policy should have,” Nelson said. “Unfortunately, there’s no standards for policies out there. Each policy has differ-
ent exclusions, which are bombs waiting to go off. ‘Read’ is a fourletter word for agents, but customers really do need to read their policies.” Patel said that small and middlemarket companies in Michigan are more likely to be hurt by phishing expeditions than other forms of hacking. “Hackers do their homework. They can get enough background from emails to look legitimate,” he said. “They’ll get someone in management to approve a payment, and it’s too late by the time they realize it’s illegitimate.” Companies need to make sure that their policies cover cyber extortion, too, Patel said. Such extortion, which is growing in popularity, typically involves a message popping up on a monitor saying the company’s system is locked and management has X amount of time to pay a ransom before all the data are deleted. Paying the ransom is often a small fraction of the cost to replace all the lost data but may not be covered by insurance. Patel and Nelson say companies need to retain attorneys with cyber expertise to read their policies and make sure they know what they are covered for — and, more important, things they aren’t covered for but need to be. Claudia Rast, a cyber specialist in the Ann Arbor office of Butzel Long PC , said it is crucial for companies considering cloud-based software to manage their payroll, health care and human resources data to make sure that the company providing the cloud services can’t access the data and sell it to aggregators and that the data are stored on servers in the U.S. If a breach occurs, Rast said, investigators, including the FBI, need to be able to get into the data to find out what happened by whom, and that means having access to servers located here. Stephen Tupper, leader of the data security and e-commerce practice at Detroit-based Dykema Gossett PLLC, said cyber insurance in the U.S. is “pretty much the wild, Wild West. It’s still too expensive. Insurance companies are still trying to understand the risk and build in profit margins. If you don’t know the risks, you have to build in higher costs.” Mike Klein, co-CEO of Ann Arbor-based O n l i n e T e c h I n c . , a fast-growing provider of data storage, agrees that cyber insurance is expensive but said it has come down sharply in price in recent years as more insurance companies have started writing policies. There’s no guarantee that decline will continue, Tupper said. “Life insurance is built on understanding actuarial tables. We’re not anywhere close to that in cyber risk insurance,” he said. “It only takes this or that advance in technology to blow the model wide open.” Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2
The cost of data breaches The Traverse City-based Ponemon Institute LLC conducts independent research on privacy, data protection and information security policies and is the parent organization of the Responsible Information Management Council, made up of a cross section of IT experts from Fortune 500 companies to devise and carry out strategies to protect data. The institute publishes annual studies of global and national data breaches. Highlights of the 10th annual U.S. study, published in March:
The average cost of a data breach
The loss of customers after a
was $6.53 million for the 62 participating companies that suffered breaches in 2014. That’s up from $5.85 million in 2013, an increase of 11 percent. It was $3.54 million in 2006.
breach also varied widely by industry — 7.1 percent for financial, 6 percent for health care, 5.1 percent for pharmaceutical, 3 percent for hospitality, 2 percent for retail and 1.2 percent for communications.
The average cost of each lost or
Forty-nine percent of breaches are caused by malicious or criminal attack, 32 percent are system glitches and IT failures, and 19 percent involve negligent employees.
stolen record climbed from $201 in 2013 to $217 last year, an increase of 8 percent. The cost was $138 in 2006.
Of that 2014 cost, $74 was the direct cost to resolve the breach, such as legal fees and investments in technology; $143 was an indirect cost, which included losing customers.
The cost per record varied by industry — $398 for health care, $298 for pharmaceutical, $259 for financial, $225 for education, $189 for retail, $185 for media, $135 for hospitality, $73 for public agencies.
Malicious or criminal attacks are the most costly, with a per-record cost of $230. Companies that lost less than 1 percent of their customers after a breach had an organization cost on average of $5.5 million; those that lost more than 4 percent had a cost of $12.7 million.
Highlights of the second annual global study, published in May:
For 350 companies in 11 countries that suffered breaches and responded to the survey, the average cost of a breach was $3.79 million, a 23 percent increase over 2013. The cost was the highest in Germany, $4.89 million, and the lowest in India, $1.46 million. The average cost per stolen or lost record was $154, up 12 percent. Germany had the highest average, $211, with Brazil at $78 and India at $56.
Forty-seven percent of attacks were malicious or criminal, 29 percent involved system glitches, and 25 percent were a result of negligent employees or contractors. Companies in Brazil and France were the most likely to suffer a data breach, with companies in Canada and Germany the least likely.
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SPECIAL REPORT: BUSINESS INSURANCE
For Duo Security, data security is job security By Tom Henderson thenderson@crain.com
Every time there are headlines about a prominent company suffering an embarrassing, and costly, data breach, sales surge at Ann Arbor-based Duo Security Inc. , CEO Dug Song says. “Data breaches are job security for us,” Song said. Duo, founded in 2009, uses what it calls two-factor authentication to
offer highly secure, Web-based authentication to identify someone trying to access services in a computer or network. Song said Duo Security is doubling its employees annually and will hit 200 this year and is tripling revenue annually. It recently opened offices in San Mateo, Calif., and London. Duo Security, he said, has more than 6,000 customers in 80 coun-
“Most of the major data security companies are customers of ours, and they refer folks to us all the time.” Dug Song,CEO,Duo Security Inc.
tries, including Facebook , Para mount Pictures, Random House, Twit ter , Yelp , TripAdvisor , NASA and,
added recently, Sony — which could have used Duo’s services to fend off an alleged attack by
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North Korea last year. In April, the company announced it had raised a Series C funding round of $30 million led by a new investor, Menlo Park, Calif.based Redpoint Ventures , and joined by previous heavyweight California VC firms: San Franciscobased Benchmark Capital and True Ventures , Mountain View-based Google Ventures and Palo Altobased Radar Partners. Last September, Duo announced it had raised a Series B round of $12 million and now has raised a total of $48 million in equity capital. “Most of the major data security companies are customers of ours, and they refer folks to us all the time,” Song said. “And we do have quite a few customers that are insurance companies, and I know they refer people to us, too.” Customers pay an annual license fee on a per-employee basis for Duo’s technology, he said. “I’ve used Dug’s product with a couple of companies I work with,” said Stewart Nelson, senior risk adviser at Ann Arbor-based Kapnick Insurance Group. “I recommend to people they talk to Dug and build it into their systems.” Mark Ford, practice leader for security and privacy for the life science and health care industry clients of Southfield-based De loitte & Touche LLP, said he, too, recommends Duo Security to clients that need to upgrade network security. “We’re in the midst of implementing their technology at a major customer,” Ford said. In 2014, Duo Security was issued four patents related to the authentication of approved users of networked systems, including one for users of mobile devices. The company’s patent portfolio for 2014 was ranked 14th among the top 25 companies in Southeast Michigan in the Eureka index published by Crain’s on July 13. The index is based on an analysis of potential patent value by Ocean Tomo LLC , a Chicago-based patent research company. There were 103 companies in the region that were awarded three patents in the year, the minimum required to make the list. In 2000, Song was one of five self-proclaimed geeks and hackers who founded Arbor Networks, a University of Michigan spinoff that provided network security. In 2010, Arbor Networks was sold to Texasbased Tektronix Corp. Song was named to the 2012 class of Crain’s 40 under 40. 䡲 Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2
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Survey: Nearly 1 in 4 IT firms hit by breach Twenty-three percent of executives at technology companies say their firms have suffered a security breach in the past 12 months, according to the national annual Technology Industry Business Outlook survey conducted by KPMG LLP, the audit, tax and advisory firm. Three-fourths of executives surveyed say their companies will spend between 1 percent and 5 percent of annual revenue on IT security in the next 12 months. “The survey findings on security are an important marker, since tech companies are the pacesetters in IT security. How much and where tech companies spend on IT security, and how successful they are, can serve as guides for all other industries,” Gary Matuszak, global chairman of KPMG’s technology, media and telecommunications practice, said in a release. The KPMG survey was of upper managers at 111 U.S.-based technology companies. Of the respondents, 54 percent were in companies with revenue of more than $1 billion a year, with the rest at companies with annual revenue between $100 million and $1 billion. When asked what their companies’ largest revenue drivers would be in the next two years, the biggest response — 27 percent — was mobile, followed by health care IT, devices, applications, data and analytics, digital media, the cloud, social media, the shared economy, security and the Internet of Things. And the largest challenge for those businesses adapting to mobile and to the cloud? Cybersecurity, the execs said. 䡲 Tom Henderson
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CRAIN'S LIST: LARGEST BUSINESS INSURANCE COMPANIES Ranked by 2014 revenue Rank
Company Address Phone; website
Top executive(s)
Revenue ($000,000) 2014
Revenue ($000,000) 2013
Percent change
Premium volume ($000,000) 2014
Employees 2015 Detroit-area/ Total U.S.
1
Meadowbrook Inc. 26255 American Drive, Southfield 48034-6112 (248) 358-1100; www.meadowbrook.com
Robert Cubbin president and CEO
$135.0
$145.0 B
-7%%
$1,400.0
240 912
2
Northwestern Mutual-Troy C 901 Wilshire Drive, Suite 300, Troy 48084 (248) 244-5785; troy.nm.com
Brad Seitzinger managing partner
135.0
131.0
3%
NA
157 NA
Aon Corp. 3000 Town Center, Suite 3000, Southfield 48075 (248) 936-5200; www.aon.com
Carol Williams, resident managing director, CEO, Aon Risk Solutions; Paul Barbick, Michigan market leader, Aon Hewitt; and LeAnne McCorry, executive chairman and managing principal, Aon Risk Solutions Todd Piersol, executive vice president; Angela Garner, president; Paul Glantz and Doug Shepson, Administration
129.0
127.6
1%
NA
181 35,500
73.0
72.0
1%
NA
NA 437
3 4
Brown & Brown of Detroit 35735 Mound Road, Sterling Heights 48310 (586) 977-6300; www.bbdetroit.com
5
Arthur J. Gallagher & Co. 30150 Telegraph Road, Suite 408, Bingham Farms 48025 (248) 203-0626; www.ajg.com
Bryan Hirn area president
44.4
40.1
11%
892.1
79 16,000
6
Marsh One Towne Square, Suite 100, Southfield 48076 (248) 945-5600; www.marsh.com
Dan Deighton managing director and Southfield office head
42.0
NA
NA%
NA
141 NA
7
Marsh & McLennan Agency LLC - Michigan 3331 W. Big Beaver Road, Suite 200, Troy 48084 (248) 822-8000 and (734) 525-2463; www.mma-mi.com
Thomas McGraw CEO, Michigan
30.9
28.1
10%
1,175.0
130 130
8
LSG Insurance Partners 2600 S. Telegraph Road, Suite 100, Bloomfield Hills 48302 (248) 332-3100; www.lsgip.com
Jay Schreibman president and CEO
26.9
25.0
8%
1,130.9
91 105
9
Valenti, Trobec, Chandler Inc. 1175 W. Long Lake Road, Troy 48098 (248) 828-3377; www.vtcins.com
Alan Chandler, president and CEO; Terry Griffin, COO and Robert Trobec CFO/executive vice president
25.0
22.3
12%
NA
136 139
10
Kapnick Insurance Group 26100 American Drive, Suite 300, Southfield 48034 (248) 352-4455; www.kapnick.com
Jim Kapnick CEO
22.5
20.5
10%
NA
65 140
11
Hylant Group 24 Frank Lloyd Wright Drive, Suite J4100, Ann Arbor 48105 (734) 741-0044; www.hylant.com
Mark Miller regional vice president, Michigan
21.5
21.8
-1%
282.6
127 661
12
Michigan Financial Cos. Inc. 28411 Northwestern Highway, Suite 1300, Southfield 48034 (248) 663-4700; www.michiganfinancial.com
Nick Valenti president and CEO
16.2
16.1
1%
15.1
94 134
13
Daly Merritt Insurance 100 Maple, Wyandotte 48192 (734) 283-1400; www.dalymerritt.com
Martin Daly president and CEO
12.8
10.6
21%
130.3
54 54
14
A. E. Mourad Agency Inc. 28277 Dequindre Road, Madison Heights 48071 (248) 336-1600; www.aemourad.com
Tim Mourad president
10.3
9.9
4%
585.2
18 18
15
Ralph C. Wilson Agency Inc. 26026 Telegraph Road, Suite 100, Southfield 48086 (800) 638-1174; www.rcwa.net
Stefano Vannelli president, CEO and owner
7.8
7.5
4%
265.0
49 NA
16
Oswald Cos. 39572 Woodward Ave., Suite 201, Bloomfield Hills 48304 (248) 433-1466; oswaldcompanies.com
Donald Engle executive vice president, branch manager
7.6
6.4
19%
40.0
34 325
17
Korotkin Insurance Group 26877 Northwestern Highway, Suite 400, Southfield 48033 (248) 352-5140; www.korotkin.com
Kenneth Korotkin president
6.5
5.7
14%
53.0
NA 47
18
The Huttenlocher Group 1007 W. Huron, Waterford Township 48328 (248) 681-2100; www.hgway.com
David Huttenlocher CEO
6.1
6.0
2%
NA
35 42
This list is an approximate compilation of the largest such agencies in Wayne, Oakland, Macomb, Washtenaw and Livingston counties. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the companies. Companies with headquarters elsewhere are listed with the address and top executive of their main Detroit-area office. NA = not available.
B Company estimate. C Formerly Seitzinger Financial Group LIST RESEARCHED BY SONYA D. HILL
An expanded version of this list may be purchased at crainsdetroit.com/lists
LOOKING BACK: BUSINESS INSURANCE AGENCIES Revenue up 320% for top 10 The total revenue of the top 10 companies on Crain’s list of largest business insurance companies has risen 320 percent since Crain’s began recording revenue in 1997. And Southfield-based Meadowbrook Inc. has been the No. 1 company across those years, its annual revenue rising 170 percent. (See charts.) Among the major factors contributing to the industry’s growth overall have been mergers and acquisitions, diversification of business lines and geography, and steady rate increases, said Nick Valenti, CEO of Michigan Financial Cos. , and Robert Cubbin, CEO of Meadowbrook.
1000
Revenue of top 10 companies, in millions
No.1 Meadowbrook’s revenue, in millions 150
800
$147.0
120
$663.7
600 400
$531.0
90
$104.9
60
$360.3
200
$135.0
30
$281.4
$69.3 $50
$158.0
0
1997
2002
2007
2012
2014
0
1997
2002
2007
2012
2014
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PEOPLE
SPOTLIGHT
ON THE MOVE
RYAN MAIBACH, CEO, Barton Malow Co.; DOUG MAIBACH, chairman of Barton Malow Enterprises board
Construction company Barton Malow Co.
North
Glucksman
REAL ESTATE John North to CEO, Coldwell Banker Weir Manuel Brokerage, Bingham
Farms, from COO.
Kishore
formation group, Novi, from chief technology officer and vice president of engineering, MapQuest Inc., Birmingham.
RETAIL
Tom Mittelbrun
Steve Glucksman to vice presi-
dent, real estate, franchising and new business development, Art Van Furniture Inc., Warren, from executive vice president, stores and licensed operations, Ashley Furniture HomeStores division, Ashley Industries Inc., Brandon, Fla.
SERVICES Atul Kishore to executive vice president, Tweddle Group Inc., Novi
and Clinton Township, from staff officer/vice president of connected car, AAA National, Heathrow, Fla. Also, Ty Beltramo to chief innovation officer of international product in-
Beltramo
has changed its executive leadership team. Ryan Maibach, 41, has been named presiRyan Maibach dent, chairman and CEO of Southfield-based Barton Malow Co., and Doug Maibach, 53, will serve as chairman of the Barton Malow Enterprises board and continue as executive vice president of Barton Malow Co.
Ben Maibach III is stepping aside from his longtime roles as chairman of the Enterprises board and CEO of Barton Malow Co. to Doug Maibach the new role of chief community officer. Ryan Maibach holds a bachelor’s degree in construction engineering from Purdue University. Doug holds a bachelor’s degree in civil engineering from Michigan State University and an MBA from the University of Detroit Mercy. The Barton Malow Enterprises board is responsible for the overall direction of the enterprise, which includes Barton Malow Co. and United Integrity Assurance.
to executive vice president, Southeastern Michigan chapter of the National
People on the Move announcements are limited to management positions. Email cdbdepartments@crain.com. Include person’s name, new title, company, city in which the person will work, former title, former company (if not promoted from within) and former city in which the person worked. Photos are welcome, but we cannot guarantee they will be used.
Electrical Contractors Association,
Mittelbrun
Troy, from benefits director, Electrical Workers Joint Boards of Trustees, Warren. Mark Redman to corporate controller, Strategic Staffing Solutions Inc., Detroit, from CFO, Spartan Equities High Yield Fund I LLC, Northville.
Redman
Dagnese
TRANSPORTATION Joseph Dagnese to president, Conway Freight, Ann Arbor, from presi-
dent, Con-way Truckload, Joplin, Mo.
DEALS & DETAILS ACQUISITIONS & MERGERS Meritor Inc., Troy, has purchased the majority of assets of Sypris Solutions Inc., a manufacturing facility in Morganton, N.C. Website: meritor.com.
CONTRACTS Munetrix LLC, Auburn Hills, a data
aggregator offering reporting, financial management and forecasting tools for states, municipalities and schools, announced shared data services agreement with the Michigan Municipal Services Authority, Lansing, a public-private partnership created to deliver shared services to local units of government throughout Michigan. Websites: michiganmsa.org, munetrix.com. Qualitech, Bingham Farms, a technology integrator and software reseller, was selected by MIU Holdings LLC, St Clair Shores, a holding company, and Acquira Property Management LLC, Novi, a property management company, to purchase the Skyline Property Management Solution software. They have both contracted Qualitech for Skyline training. Website: qualitech.net.
EXPANSIONS Orangetheory Fitness, Fort Laud-
erdale, Fla., opened a studio at Woodland Plaza, 2246 S. Main St., Ann Arbor. Telephone: (734) 418-6260. Website: orangetheoryfitness.com.
Commercial Finance Experience
In Your Corner.
®
Ŷ Domestic and international bi-lateral
and syndicated commercial, realestate and asset-based financing. Ŷ Loan workouts, restructuring,
Kit and Ace, Vancouver, Canada, a luxury apparel retailer, has opened a store at 4240 Cass Ave., No. 106, Detroit. Website: kitandace.com.
NEW PRODUCTS ZF TRW, Livonia, a division of ZF
Friedrichshafen AG, announced that its third-generation video camera, the S-Cam 3, is starting production across four major global vehicle platforms through the end of 2015. Website: trw.com. Freudenberg-Nok Sealing Technologies, Plymouth, has introduced new
bankruptcy and collection.
materials that help aircraft manufacturers save weight and production costs while exceeding fire resistance and fireproof requirements for engine nacelles. Website: fnst.com.
STARTUPS LeibADR LLC, providing law firms
and the courts with mediation and arbitration services, has been established by attorney Michael Leib in Bloomfield Hills. Telephone: (248) 563-2500. Email: michael@leibadr.com.
First Tier Ranking in Corporate Law and Commercial and Construction Litigation
Contact David McLeod at dkmcleod@varnumlaw.com
Ŷ
Metro Detroit
Ŷ
Grand Rapids
Ŷ
Kalamazoo
Ŷ
Grand Haven
Ŷ
Lansing
Deals & Details guidelines. Email cdbdepartments@crain.com. Use any Deals & Details item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.
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CALENDAR
Data surprise: Region’s entrepreneurship ranks last By Gary Anglebrandt Special to Crain’s Detroit Business
Entrepreneurs in Michigan have enjoyed a lot of warm support since the Great Recession. That’s what makes an analysis done by a local professor all the more surprising. Numbers crunched by Jonathan Silberman, a professor at the Oakland University School of Business, show the metro Detroit ranking dead last among the country’s 15 largest metros when it comes to startups. The metro Detroit area — which in this analysis did not include techstartup haven Washtenaw County — had 220 new entrepreneurs per 100,000 people in Silberman’s study, which used a three-year moving averJonathan age based on 2013-2015. Silberman: Area At the top was the Miami too reliant on auto. area, with 520. The rankings were based on data from the entrepreneurialminded Kauffman Foundation, based in Kansas City. They go back to 2009, showing an overall decline in the annual rate of new entrepreneurs not only in Detroit but most of the 15 metros. This suggests that as the economy has improved, people have grown less enamored with the rewards of self-employment when jobs were dangled before them. Detroit’s 220 figure was, however, a slight increase from last year’s 190. Statewide trends are in line with what Silberman is reporting, said Diane Durance, president of Lansing-based nonprofit MiQuest. In March, MiQuest issued its latest Michigan Entrepreneurship Score Card, which it has been publishing for 11 years. The Score Card’s ranking of “entrepreneurial vitality” takes into account startup activity by measuring the number of self-
TUESDAY JULY 28
HealthcareNext: Risk-Taking Strategies. 7:309:30 a.m. Inforum. Laura Byars, vice president of human performance, Blue Cross Blue Shield of Michigan, looks at the impor-
employed people and net business churn. Michigan ranked a lowly 31st among states in 2013, the most recent year with data covered in the Score Card. Things have come a long way since MiQuest began tracking entrepreneurial activity, and Michigan has more entrepreneurial support programs than most states, Durance said. “When the economy was hit hard, a lot of people were out of work and starting their own businesses out of necessity, and fewer of those are happening (now). A lot of technology and manufacturing companies are desperately trying to hire people,” she said. New entrepreneurs are always good to keep the pipeline moving, but what Michigan’s entrepreneurial economy needs is more leaders and success stories — sources of revenue and jobs, she said. Silberman said his results, and other data he’s crunching, show Detroit is still too reliant on the automotive industry. And even that industry looks elsewhere when it comes to the next generation of automotive technologies, he said. He held up as an example Ford Motor Co.’s opening of a center for researching mobile and autonomous-driving technologies in Silicon Valley earlier this year. The Detroit area is “too automotive-centric, and automotive does not transfer out to new industries and ideas,” Silberman said. Silberman plans to issue analyses this year that speak to the deeper health of the local entrepreneurial economy, by looking at such things as startup survival rates and “opportunity entrepreneurs” — those who choose to become entrepreneurs, as opposed to those who take on the label after losing a job. Silberman already has looked at Kauffman Foundation data on opportunity entrepreneurs and said Detroit ranks 37th out of 40 metro areas in this regard, with 67 percent of entrepreneurs falling into this category, compared to 91.2 percent in the Silicon Valley city of San Jose, Calif.
tance of risk-taking strategies for careers in health care. St. John Macomb-Oakland Hospital, Madison Heights. $20 Inforum members, $30 nonmembers. Website: inforummichigan.org.
UPCOMING EVENTS Selling Smart Workshop — Strategies for Sell ing Professional Services. 11 a.m.-1 p.m. Aug. 5.
Ann Arbor Spark. Learn how to close more service contracts by following a systematic approach. Ann Arbor Spark. Free. Registration ends 24 hours before the event. Contact: alissa@annarborusa.org. Cuba: The Next Frontier. 8-11:30 a.m. Aug. 6. Automation Alley. What does the normalization and restoration of U.S.-Cuban diplomatic relations mean for U.S. business and industry? Speakers: Noel Nevshehir, director, international business, Automation Alley; Jeffrey DeLaurentis, chief of mission, U.S. interests section - Cuba; Dana McAllister, executive director, Cuban-American Chamber of Commerce. Automation Alley headquarters, Troy. $20 members, $40 nonmembers, $30 walkin members, $50 walk-in nonmembers. Preregistration ends Aug. 4. Contact: (800) 4275100; email: info@automationalley.com. Getting Innovation to Market in Michigan. 8 a.m.-2:30 p.m. Aug. 6. Planisware, Stage-Gate International. Best practice discussion on solving innovation and product development challenges in automotive and manufacturing. Speakers include: Richard Amori, Ford Motor Co.; Brad Barbera, former executive director at PDMA; Ken Kahn, DaVinci Center for Innovation; Ken Huskins, Stage-Gate. Michigan Union, Ann Arbor. Free. Contact: Theresa Hwang, (856) 220-1240; email : theresa.hwang@planisware.com.
JOB FRONT
POSITIONS AVAILABLE
POSITIONS AVAILABLE
POSITIONS WANTED
Kautex Inc. has an opening in Troy, MI for a Core Engineer to support Engineering processes related to the design of fuel tanks, SCR (Selective Catalytic Reduction), and CVS (Clear Vision Systems) system architecture to meet customer specifications and demands. Requires BS in Industrial Eng., Mech. Eng., (or 3 year degree + equivalent work exp.), + 5 years exp. in Manufacturing Eng. with production of automotive parts using a plastic blow molding process. Must have legal auth. to work permanently in the US. EOE. Submit resumes online via: http://www.textron.com/careers (Requisition ID 237136)
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The Inkster Housing Commission is seeking an Executive Director. Requirements: Bachelor’s Degree in business, public administration or related field (a Master’s is preferred); a min. of 10 yrs experience in public or private sector organization or government program management team; at least 5 yrs of progressively responsible management experience. Candidates should submit: 1) a letter of intent with salary/compensation expectation; 2) resume w/ salary & compensation history; and 3) a min. of 3 professional references. Submit applications via email to: Damon Duncan at: dduncan@clesiaventrues.com by 8-21-15
See Crainsdetroit.com/Section/Classifieds for more classified advertisements
Business Smart Week — Government Summit. 8:30 a.m.-4 p.m. Aug. 6. Asian Pacific American Chamber of Commerce. Access, information and opportunities to help build your business. Meet buyers from The Federal Reserve Bank of Chicago, City of Detroit, Wayne State University and Johnson Controls. Free. Register by July 30. Federal Reserve Bank of Chicago, Detroit branch. Contact: Sarah Lalone, sarah@apacc.net. Inside the CEO Mind. 8 a.m. Aug. 13. Detroit Regional Chamber. Tim Smith, CEO of Skidmore Studio shares his story and perspective on leadership. Skidmore Studio, Detroit. $30 chamber members, $55 nonmembers. Preregistration required. Contact: Marianne Alabastro, (313) 596-0479; e-mail: malabast@detroitchamber.com. Best Strategies in Supplier Diversity Luncheon. Noon-2 p.m. Aug. 19. Diversity Information Resources. Speaker: Eric Holder Jr., former U.S. attorney general. $124. Detroit Marriott Renaissance Center. Contact: Betsy Gabler, (612) 781-6819; email: info@diversityinfo resources.com. Open Shop in Woodward Corridor Tour. 1-4 p.m. Aug. 22. Build Institute. Commercial real estate tour will explore the Woodward Corridor with stops throughout the neighborhood, information on history and culture, visits to small businesses and tours of available commercial spaces. Woodward Corridor, Detroit. $50, $35 for Build grads. Contact: Jessica Meyer (313) 265-3590; email: jessica@buildinstitute.org; website: www.buildinstitute.org. Email Marketing for Success. 8:30-10 a.m. Aug. 25. Troy Chamber of Commerce. Kim Schott of Constant Contact will speak on mar-
keting activities that help a small business or organization achieve its objectives. Northwood University, Troy. $10; free for Troy Chamber members. Contact: Jaimi Brook, (248) 641-0031; email: jaimi@troychamber.com.
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Disability rolls surge in state One in 10 workers in Michigan collecting checks By Chad Halcom chalcom@crain.com
About half the 310,000 Michigan residents who left the labor force in the past decade may have landed in a federal assistance program for disabled adults — meaning many are unlikely to return to work even if the economy continues to improve. Just under 514,000 people — one of every 12 adults aged 18-64 statewide, and one of every 10 people in Michigan’s current labor force — collects either Social Security Disability Insurance, Supplemental Security Income or both, according to the most recent data from the Social Security Administration. In fact, Michigan has the seventh-largest population of such beneficiaries and had the fifthlargest increase in recipients for the 10-year period ending December 2013. And that’s even though it’s only the 10th most populous state — and the only state whose total population fell during that period. Experts say much of the uptick in benefit claims is attributable to the state’s demographics. Manufacturing and construction employees have more physical work demands and are more vulnerable in recessions, which is also when benefit applications tend to climb. But critics of the program say some growth is fueled by lenient administrative law judges, outdated or expansive government criteria, claims due to fraud — and a growth industry of attorneys handling claim appeals. Data shows that states with a more native-born workforce and a smaller immigrant population tend to create more disability claims — simply due to the work history requirements under the federal program. About 77 percent of Michigan residents in 2012, or 7.5 million people, were born in the state, more than any other state but Louisiana, according to U.S. Census Bureau microdata compiled by the University of Minnesota Population Center. But whatever the reasons individual workers qualify for benefits, the program tends to become a permanent exit from the workforce. Disability insurance recipients are almost 15 times as likely to leave the program by reaching retirement age, and shifting into another benefit program, than by finding gainful new employment, according to Social Security data. The trends may be hastening a bleak result. A new trustees report released last week shows that, without corrective action, the federal Disability Insurance Trust Fund will run out of assets in late 2016. (See related story, page 19.)
How does disability eligibility work? A person receiving Supplemental Security Income must have a qualifying disability and less than $2,000 in assets, or $3,000 if married. That asset tally excludes a primary residence, one car, burial funds or a few other exceptions. Social Security Disability Insurance is not restricted by assets, but an applicant should have worked 40 quarters in a job covered by Social Security or one quarter of his or her adult life to be fully insured, including 20 quarters or five years of the past 10 leading up to disability.
Some applicants can seek both benefits — more than one-fourth of SSI recipients also collect another Social Security benefit, according to recent reports. The SSI benefit is capped at $733 a month and can be reduced or even eliminated by other income. Disability insurance, meanwhile, paid an average of $1,146.42 a month to workers with disabilities in 2013 and more than $11 billion a month to all qualifying workers, spouses and adult children. Michigan residents collected about $468 million per month.
Outdated standards? Mark Warshawsky, visiting scholar at the Mercatus Center at George Mason University and co-author of an April paper on the disability crisis, said the program faces administrative problems as much as demographic ones. Warshawsky contends federal criteria in recent years give too much weight to age, English language proficiency, education and other nonmedical criteria. Even its medical criteria for disability are not updated enough to account for improved medical technology or labor force trends, he said. “When some of these criteria were created years ago, there was a level of rigidity in the workforce then, little fluidity between jobs. And not speaking English well could create a huge disadvantage,” he said. “Everything has changed in those years, people are working later in life, more languages are spoken, and there is not the same rigidity. If we had the money in the program, maybe we could weather the effects of these changes. But we don’t.” But other experts say the peculiarities of Michigan’s work-age population make for more claims. “There is a good deal of research that suggests once you get onto those benefit programs, very few get off,” said Donald Grimes, senior research associate at the University of Michigan Institute for Research on Labor, Employment and the Economy, which tracks economic and employment data. “But another big factor here was the big population of baby boomers in their 50s and 60s — that’s the prime age cohort that applies for disability. You also have a tremendous decline in the labor participation rate by 16-24 year-olds, and brain drain among young workers,” which skews workforce percentages toward more disability-prone older
people, he said.
Ages and ailments The benefits surge has been a long time coming, experts said. It may be a combination of recent changes both in workforce demographics, and in how benefits get awarded. Paul Morris, 59, of Pontiac, has been collecting disability for over a year after losing a mailroom job at The Palace of Auburn Hills over two years ago. Morris said he suffers hypertension and heart problems as well as sleep apnea. “I had a CPAP machine for my apnea that was covered by my wife’s insurance, but when she passed they wouldn’t cover it anymore,” he said. “She left a nice life insurance policy, and that helped me get through her funeral, but after that is when the stress started.” Morris said that on the advice of a doctor he started working with an advocate’s help in late 2013 and it took only about seven months to get his benefits approved. Since early 2014, he has received both a $1,073 monthly benefit, along with a $173 widower’s benefit for his wife, Regina, who died in 2009. The benefits have covered most monthly expenses, he said, although he has a steep co-payment on a Medicaid HMO plan and recently had to leave a home he was renting with two roommates who were no longer there to split the payment with him. Morris’ short turnaround time for getting benefits isn’t typical, but nearly 235,000 people, or nearly 27 percent of all new disability insurance beneficiaries, were in his age range, 55-59. A decade of data reveals that Social Security Disability Insurance, the monthly benefit program for the long-term disabled who were once gainfully employed, added more than 135,000 adults in Michi-
gan between December 2003 and December 2013. That’s not to be confused with Supplemental Security Income, or SSI, which uses similar medical criteria but is based on economic status, not employment history. Experts said many people will
continue to work even after developing an illness or injury that makes them eligible for disability, but later fall victim to layoffs and then have difficulty re-entering the workforce with their impairments. SEE NEXT PAGE
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Increase in benefit recipients drains trust fund reserves By Chad Halcom chalcom@crain.com
More people going on federal benefit rolls in the last several years, in Michigan and nationwide, is taking its toll at the federal trust fund for workers who left the labor force due to a long-term disability claim. A new report last week by the board of trustees for the trust embroiled in the debate — the Old-Age, Survivors Insurance and Disability Insurance Trust Funds — indicates the fund that
pays benefits to former workers with qualifying disabilities had just $60.2 billion in reserve assets at the end of 2014. That’s down from $90.4 billion at the end of 2013. The trust, established in 1957, has been losing money since 2008, when a slightly better than breakeven year had put its reserve assets to an all-time high of $215.8 billion. At the current rate of cash burn, Social Security expects the trust to be depleted before the end of 2016. The Obama administration has called for an interim fix by shoring up disability with a share of payroll
tax revenues that currently go toward retirement benefits. But the House of Representatives has previously blocked any transfer between the trusts without a broader Social Security reform plan. An insolvency, or depletion of the disability trust, would not necessarily mean the government cannot pay benefits — only that it would have no reserves to pay benefits. The Disability Insurance Trust Fund that pays SSDI benefits collected $110.1 billion from payroll taxes in 2014, plus about $3.3 billion in interest income, and paid out $141.6 billion in benefits, plus some administrative costs, for a net withdrawal of more than $30.2 billion. The federal Antideficiency Act prohibits government spending in excess of available or allocated funds. So once assets are gone, Social Security could continue disability on a pay-as-you go basis as payroll contributions continue. That could mean reducing all disability benefits about 20 percent, delaying the schedule of payments,
An insolvency would not necessarily mean the government cannot pay benefits — only that it would have no reserves to pay benefits. increasing the trust’s income via a payroll tax hike, or a combination of these — so long as each year’s revenue covers its expenses. Some experts told Crain’s the disability trust is running out of funds about the time that actuarial projections said it would, following the last reallocation back in 1994. But critics point out that actuaries once projected in 2004 that the fund would last at least a decade longer than it’s expected to, and the program has more beneficiaries now than some projections called for before the recession.
Michigan accounts for 4 percent of all workers collecting disability insurance benefits nationwide, according to Social Security data, and the average monthly benefit to disabled workers is $1,146. Another possibility for solving the financial conundrum is shifting funds from the separate Old Age and Survivors fund, which covers conventional retirement age benefits. In 1982, Congress granted temporary power to borrow $17.4 billion from disability insurance and the Medicare Hospital Insurance trust to up-fund OASI, ahead of an anticipated insolvency in 1983. In 1994, Congress approved a redistribution of the 6.2 percent Social Security payroll tax, from 0.6 percent going to disability insurance then, to 0.9 percent today. But the much larger Old Age and Survivors Fund is itself projected to become insolvent in 2035, so any redistribution of funds to Disability Insurance theoretically hastens that fund’s depletion. The Obama administration budget proposal for 2016 calls for adjusting
a portion of the 6.2 percent payroll tax that employers and employees alike pay into Social Security, to shore up the disability fund by $330 billion over five years. This would cause the larger retirement benefits trust to be depleted a year earlier, or around 2034. But the House earlier this year passed a measure introduced by Rep. Sam Johnson, R-Texas, that would forbid the chamber from considering any such transfers between funds unless it comes with a broader set of changes that improve the funding position of both trusts. Charles Ballard, a Michigan State University professor of tax policy and public economics, said restructuring the disability insurance program to adapt to recent changes in the workforce may be particularly difficult in the current political environment. “The disability insurance program is itself 58 years old. It’s an old program, and it’s hard to come up with the political will to do a thorough review and reform of it,” he said. 䡲
up scrutiny of disability and related safety net programs, as one of the newcomers to a joint state-federal initiative to crack down on disability fraud. Social Security’s federal Office of Inspector General and the Michigan Department of Human Services last fall launched a Cooperative Disability Investigations unit in Detroit to investigate suspicious claims in Michigan. The Detroit unit was the 26th of 28 such offices launched in 24 states and Puerto Rico, since the program’s inception in 1997. “We are getting plenty of tips, because the state is a great partner and we get plenty of referrals,” said Brad Martin, special agent for OIG and team leader of the new unit. “So even though we’re new, we have no lack of work.” As of February, six months after it was formed, the Detroit office had opened 26 new investigations and
saved about $370,000 to Social Security in disability program payments, denying or ending benefits in nine of the 10 cases it had closed, according to an OIG report. The same investigations yielded another $640,000 in savings to Medicaid, since SSI claimants are also Medicaid-eligible. Martin, a 15-year OIG veteran before the team leader appointment last summer, said the investigations unit typically gets requests from examiners within the Disability Determination Services in the state’s Human Services department, for individual claims that seem suspicious. But the team is also focusing on third-party representatives like doctors, attorneys or claims representatives for possible attempts to manufacture documents supporting claims. Whether offenders will be criminally prosecuted in Michigan,
as some have in other states, may come down to scale and cost. Martin said may investigations conclude with denying or canceling benefits.
Chad Halcom: (313) 446-6796 Twitter: @chadhalcom
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“People have different tolerances for the injuries they receive,” said Scott Imberman, associate professor of economics at Michigan State University and co-author of a recent report on the disability program. “If they have a good job, they may try to stay on and work through it. But once they lose that job in a downturn, then they might decide whether their chances are better at applying for disability versus retraining or getting hired somewhere else.”
How bad is it? Disability insurance grew by 538,000 beneficiaries in 2010, the biggest single year-over-year growth in the program. Considering the average wait time to get a benefit decision from an administrative law judge was nearly two years, most of those new recipients likely applied during the last recession. Some experts said the role of recessions can be overstated, though. Clifford Weisberg, president of Southfield-based Weisberg & Walkon PC who has practiced SSI and disability law for more than 30 years, said the aging workforce and several economic and demographic trends have all been converging. “It’s a tsunami of all these things happening at one time,” he said. “The baby boomers thing alone is just a part of it. You also have diabetes and obesity, where Michigan ranks as one of the worse among states. That goes to hypertension, cardiovascular disease and other things that qualify you.” Weisberg also said he is not convinced the rate of cash burn from new benefits is a real threat to the disability trust fund. “Due to the economy, at times the disability insurance fund is short, and routinely (federal offi-
cials) will borrow from one fund to adjust the other fund. … It’s actually pretty routine — only in this Congress nothing is routine anymore.” Said Gerald Freedman, one of the administrative law judges handling claims in Michigan: “Historically, you’ll see if Congress is packed with Republicans there’s an effort to do away with overly generous entitlements and have accountability. “Then, when the other side is in power, then there’s an outcry about long delays in getting decisions, applicants dying before their cases get heard and the country not paying attention to the disabled,” he said. “The truth about what should be done is probably in the middle.”
Tackling fraud Both sides of the debate over disability agree the system has abuses. Michigan already has saved $1 million during six months of ramped-
Judicial priorities Initially, Social Security refers claims for disability or SSI income to the state Disability Determination Services office, or other states’ equivalent agencies, for an examiner to collect records and make an initial determination of eligibility. In recent years, only about 35 percent of those decisions nationwide were in the applicant’s favor (in Michigan it’s averaged around 32 percent, according to the Social Security OIG) — but applicants can fare much better if they appeal. Once claims reached an administrative law judge, according to SoSEE DISABILITY, PAGE 20
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cial Security data, about 64 percent of decisions nationwide favored the claimant. For Southeast Michigan, some 59.9 percent of the nearly 79,000 decisions reached by about 40 judges in Detroit, Oak Park or Livonia since late 2009 were either partially or fully favorable. But results vary dramatically by judge, with individual award rates ranging from under 30 percent to more than 80 percent. “I would probably classify myself as more liberal in my interpretation of the (disability criteria) among my colleagues,” said Freedman, who had the highest payment approval rate of any judge in Metro Detroit, at more than 85 percent between 2010 and his retirement last August. “Some of my dearest friends who heard cases at the same offices had a payment rate closer to 30 percent. It was sometimes a matter of personal philosophy, although there are a lot of other factors too.” Those include speed or the rate at which judges hear and decide cases each month, he said, or how heavily a judge relies upon medical documentation. Generating medical records often requires insurance to cover the repeated medical visits necessary to diagnose some conditions — so better educated and better insured applicants have a better chance of getting benefits, even if they are likely to be
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Spike in disability claims winds down By Chad Halcom chalcom@crain.com
Bad luck can be good business for attorneys and advocate groups who help the disabled get benefits from the federal Social Security Administration — but local experts say the post-recession spike in claims is winding down. The number of awards to disabled workers and their dependents nationwide declined for the third year in a row in 2013, to 1.44 million from a peak of 1.74 million in 2010, according to administration reports. Binder & Binder LLC, the nation’s largest Social Security advocacy law firm that reported collecting $83.7 million in fees in 2013, filed for Chapter 11 bankruptcy last December, as it faced a slowdown in payments on SSA appeal judgments. Law firms like Binder also face tougher scrutiny from administrative law judges. The firm in court documents estimated its number of employees would drop from more than 960 last year to fewer than 400 over the next two years to cope with market changes and its own debts. In metro Detroit, the number of claim appeals to reach administrative law judges began less dependent on them.
Judicial discretion Among the bench of administrative law judges, 20 of the 30 who carried a statistically meaningful number of cases in Southeast Michigan had an approval or claim payment
sliding more than two years ago. This year is on pace for about 16,300 cases in 2015, off from 21,000 cases in 2012. And turnaround times for those appeals to reach decisions are shorter now than a few years ago, which can limit success fees. Federal law generally limits an applicant attorney’s contingency fees to 25 percent of back pay a beneficiary is entitled to at the time of an award, up to a $6,000 fee limit per case (so the sooner a judgment comes, the less back pay has amassed). Stuart Johnson, partner at Ball Johnson PC doing business as Disability Attorneys of Michigan in Warren, said the firm’s business representing Social Security Disability Insurance and Supplemental Security Income claims peaked with 12 attorneys who were in hearings nearly full time four years ago. Today, he said, the firm is 10 lawyers, and nine might be in hearings nearly full-time. “Right now it’s not nearly as good a time to try to become a Social Security lawyer,” he said. “Back then they were regularly making people wait 25 months for a hearing, and we thought it would take years to catch up on (judges’) backlog. But recently they caught it up so fast that I had cases (delayed) because they
rate within 10 percentage points of the regional average of 60 percent. But Judges Dennis Matulewicz and Mary Connolly in the Livonia office both consistently averaged around 80 percent approval of their cases since fiscal 2010, while fellow judges Ethel Revels and Oksana Xenos in Detroit averaged 36 percent and 28 percent approval, respectively. “It’s function of personality, somewhat,” said Stuart Johnson, partner at Ball Johnson PC doing business as Disability Attorneys of Michigan in Warren. “You might get an administrative law judge who has a sister with a mental illness and identifies with a certain condition very personally — or someone else with no family history and no empathy.” Xenos, Connolly, and Matulewicz did not respond to voicemail or email messages seeking comment. A report in November from the Social Security OIG to the House Committee on Oversight and Government reform indicated that 44 judges nationwide were “outliers” who reached more than 700 case decisions per year and allowed claims in 85 percent or more of them for two fiscal years since 2007. Collectively, the report indicates, those judges likely awarded an estimated 24,900 claims improperly, creating “questionable costs” of $2 billion over the period, based on a sampling of cases the OIG reviewed. “About 500 cases a year (reaching a decision) is the most can we expect of a judge to do a good job, and be fair to the workload climate,” Warshawsky said. Warshawsky said term limits for administrative law judges, who get lifetime appointments, might also help curb the disability cash burn. “It does seem from some research that the longer a judge is in office, the more lenient they tend to get, and that can be addressed with a time limit in office,” he said. The OIG report doesn’t identify the outlier judges, but none appear to be in Southeast Michigan. Only
were at a point where the judge couldn’t tell yet from the records if a condition was going to last (the required) 12 months.” As demand for lawyers grew after the recession, he said, so did competition — both from local firms and national practices that would send attorneys to Southeast Michigan for batches of cases or refer a set to local practitioners. That’s happening less often today, he said. Partner Roger Kline and associate Elizabeth Currey at Warren-based Mancini Schreuder Kline PC said the firm now devotes about one and one-half of its 10 attorneys to benefit claims, compared with two and one-half attorneys three years ago. Currey is a full-time benefits attorney and Kline estimates more than 40 percent of his practice is Social Security appeals; a third attorney retired two years ago, and the firm hasn’t needed to replace him due to the shorter backlog. “We were getting to a point where they were hearing cases in six to nine months, but in one office that backlog is up closer to 13 months recently,” Currey said. “Still, this region of the state is considered pretty quick compared to the nation as a whole.” 䡲
“In the aftermath of the Great Recession especially, disability became something like a segue into retirement.” Charles Ballard, Michigan State University
two judges here even occasionally approached the 700-ruling benchmark, since 2010. Freedman, the only judge who regularly exceeded 85 percent allowances, never exceeded 490 decisions per year.
Longevity risk? Of course, the longer people remain employed, before they retire, the greater chance they have of encountering an illness or injury that makes them disability eligible. Total new awards to disabled workers nationwide has declined each year since a peak of just over 1
million in 2010, but the percentage of those awards to beneficiaries 55 and older has increased over that period as well, according to Social Security data. In 2011 nearly 21 percent of those in civilian employment were 55 or older, compared with less than 14 percent a decade earlier, according to an analysis of Bureau of Labor Statistics data by the Conference Board. Charles Ballard, a professor of tax policy and public economics at Michigan State University , also said cyclical recessions can give laid off disabled workers a serious choice to make for the future. “In the aftermath of the great recession especially, disability became something like a segue into retirement. If you’re 58, disabled and displaced in a recession, and someone tells you there’s a demand for medical technician and health care jobs if you retrain, you might ask yourself: ‘Is that really going to happen with so many other people laid off, or is there another way?’” 䡲 Chad Halcom: (313) 446-6796 Twitter: @chadhalcom
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seams” in its current location in the 402,000-square-foot Cadillac Tower downtown. There it currently leases about 30,000 square feet. The Guardian Building space gives the land bank a better workflow and increased efficiency, and it will pay the same lease rate as it does in its Cadillac Tower location, Fahle said. If the positive trend for the Guardian Building continues, the county hopes repurposing the unused vault space and increased use of the 32nd floor will generate enough revenue to give it a difficult decision ahead: whether to maintain its ownership of the building or to continue down the path of selling it — but with a higher asking price — due to better building features. Yet the asking price, should it go on the market, will largely be driven by how much it takes to retire bond debt the county issued for building acquisition and improvements. Bond issues in 2008 and 2009 for acquisition and improvements to the Guardian Building and three other properties have a total liability of $75.9 million and gradually increasing annual payments. The average annual bond payments are $5.24 million, according to James Canning, director of public relations for Wayne County Executive Warren Evans. Detroit-based 400 Monroe — the managing partner of which is Nico Gatzaros, son of the late Greektown Casino-Hotel developer Ted Gatzaros — will be the main management company effective Saturday for the building and engage on a marketing campaign for the event space, the county said. The strategy is just one way the county — which is grappling with a $52 million structural budget deficit and a pension fund that is only about 44 percent funded — is attempting to squeeze as much cash as possible out of its real estate holdings, which Bloomfield Hills-based turnaround firm O’Keefe LLC found were underutilized in a March report.
‘Fail jail’ Another key county site: The Wayne County Jail on Gratiot Avenue
at St. Antoine Street. Construction on the project was suspended two years ago after a county report that the project would run $91 million over
GLENN TRIEST
The Guardian Building’s vault room is to be repurposed into a 75-seat restaurant as part of plans to derive new revenue from Wayne County’s real estate. planned budget. The county issued $200 million in bonds sold in 2010 to fund the jail’s construction, and after construction was halted, the state offered a former prison site 9 miles away on Mound Road in Detroit for a $1 annual lease as an alternative. But county commissioners put the kibosh on that discussion in October when they voted to pass a resolution to take two jail relocation proposals off the table and consider only completing the half-built facility or renovating existing facilities. Dan Gilbert’s Rock Ventures LLC, of which he his founder and chairman, had offered to pay the county $50 million for the Gratiot jail site along with the Frank Murphy Hall of Justice , a juvenile detention facility and other county buildings. This purchase would clear the way for a mixed-use development that would have included a hotel, housing and retail space. Gilbert, also the founder and chairman of Quicken Loans Inc., contends that the jail on Gratiot hinders the revitalization of downtown’s entertainment district. Matt Cullen, president and CEO of Rock Ventures, said in a statement that a redevelopment of the jail “should be of the quality and scale that is appropriate for building(s) that serve as the first impression for the millions of people who enter downtown Detroit annually off of the busy I-375 freeway from the north and Gratiot Avenue from the east.” “We remain interested in exploring options that would bring to life the vision of an exciting and distinct large-scale development that will bring jobs, an increased tax base and substantial economic activity to our urban core,” he said. Canning reiterated that the county will turn its attention to “solving the
INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: 20 Ball Johnson PC ................................................2 Belle Maer Harbor .............................................. 4 20 Binder & Binder LLC ........................................2 Burns & Wilcox .................................................. 9 Butzel Long ........................................................111 22 Chrysler Group LLC ..........................................2 Deloitte & Touche ...................................... 10, 12 Detroit Land Bank Authority ............................11 Detroit Lions ......................................................77 Detroit Pistons ..................................................77 Detroit Red Wings ..............................................77 Detroit Tigers ......................................................77 20 Disability Attorneys of Michigan ..................2 3 Duncan Solutions Inc. ......................................3 Duo Security .................................................... 12 Dykema Gossett .............................................. 11 22 Eastern Market Corp. ......................................2 3 Fiat Chrysler Automobiles ................................3 400 Monroe Associates LLC..............................11 22 GP Sports Management ................................2 3 Grace Autosport ................................................3 3 Indianapolis Motor Speedway ........................3
ITC Holdings Corp. ..............................................77 Kapnick Insurance Group .......................... 10, 12 22 Thomas Magee’s Sporting House ................2 20 Mancini Schreuder Kline PC ..........................2 McDonald Hopkins ............................................ 9 Michigan Dept. of Human Services .............. 19 Michigan State University ..................118, 19,20 MIQuest ............................................................ 17 Oakland University .......................................... 17 Online Tech .................................................... 9, 11 The Palace of Auburn Hills ..............................118 3 The Parette Co. ..................................................3 3 Park Detroit ........................................................3 3 Passport Parking ................................................3 22 Penske Corp. ....................................................2 Plante Moran .................................................. 10 Ponemon Institute............................................ 11 20 U.S. Bureau of Labor Statistics ....................2 U.S. Social Security Administration ...... 18, 20 University of Michigan .................................. 18 Wayne Cty. Economic Development Corp. ......11 Weisberg & Walkon PC .................................. 19
jail project” once Evans’ financial recovery plan — unveiled in April as a way to save the county $53.4 million annually — is implemented.
Other sites Several other county-owned and leased properties also are up for review. All told, the county owns 257 properties in 25 of its 43 communities. For example, the county owns the 190,000-square-foot office building at 640 Temple St. downtown and five former youth detention facilities totaling 434,000 square feet on East Forest Avenue between I-75 and Russell Street, according to the report. The O’Keefe report, which was done pro-bono, recommends selling these properties, as well as the Eloise Complex at 30712 Michigan Ave. in Westland and others. There are also county-owned properties that are recommended for consolidation; reviewing for sale; or turning over to the Regional Education Service Agency, or RESA, which provides school district services. The county pays $8.8 million per year in lease payments for 18 properties in Detroit, Wayne, Plymouth Township, Dearborn Heights, Taylor, Hamtramck and Lincoln Park totaling 743,000 square feet, according to the O’Keefe report. More than half ($5.6 million) of the county’s annual lease costs come from three leases: $1.6 million for 121,000 square feet in the Penobscot Building for the Wayne County Circuit Court; $2.8 million for 241,000 square feet for the Circuit Court, Probate Court and Clerk’s Office in the Coleman A. Young Municipal Center ; and $1.2 million for eight different departments in 105,000 square feet in the building at 400 Monroe St., owned by 400 Monroe Limited Partnership. Another significant previously county-owned property, the 226,000-square-foot Old Wayne County Building, at 600 Randolph St., and a 120-space county-owned parking lot at 400 E. Fort St. were purchased last year for $13.4 million by a private New York investment group.
Guardian backstory The county relocated its offices to the Guardian Building, constructed in 1929, in 2009 after a dispute over lease rates with Old Wayne County Building LP , the previous owner of the county’s former headquarters. The county bought the Guardian for $14.5 million from the Detroitbased Sterling Group. With the new strategy in place, besides 400 Monroe, there are a num-
Christos Moisides: Guardian could bring in extra $250,000.
21 ber of other consultants working for the county on the Guardian and other sites. Also part of the new management team: Farmington Hills-based Friedman Integrated Real Estate Solu tions LLC, which
will manage all accounting, help with marketing and renting out space to tenants; and Detroit-based developer The Roxbury Group, which is expected to redevelop the 35,000-square-foot county-owned Detroit Savings and Loan Building at 511 Woodward Ave. Detroit-based Park-Rite Inc. will manage valet parking at the Guardian Building and manage the 1,450-space First Street Parking Garage. Jones Lang LaSalle had been responsible for leasing and managing the Guardian Building and finding a buyer for the 511 Woodward building. More fully utilizing the Guardian Building’s 32nd floor for things like private events and weddings could bring in about $250,000 per year to the county in rental fees, while a new restaurant would bring in at least the same amount in lease costs, according to Christos Moisides, executive member of 400 Monroe Associates. That would be after between $500,000 and $1 million in buildout costs for the restaurant, which would likely be casual American fare to attract employees in the building for lunch, as well as perhaps breakfast, he said. The vault restaurant could accommodate around 75 people while the area around the vault could accommodate another 75, Moisides said. “It’s a beautiful building, and you want people to come down there and experience that,” he said. The new plans for the Guardian, and “the numerous other efforts we are making to implement our Recovery Plan and improve the trajectory of the county’s financial situation will make a difference,” said County Executive Warren Evans in a statement. But while generating more revenue is good, it’s important for the county to remember that filling the Guardian Building’s vacant space is far more effective when it comes to increasing its value than event rentals, said Jim Becker, principal and managing director of the Detroit office of Toronto-based brokerage firm Avison Young. The brokerage is one of 11 companies competing for a contract to sell the building. But Matt Farrell, executive principal and partner at Birmingham-based Core Partners Associates LLC , said “any cool and eclectic space in Detroit with the right operator can do well.” All told, he said pursuing both better space usage as well as a possible Guardian Building sale makes sense. “You’ve got to go both directions with the lease or the sale,” he said. “The revenue doesn’t justify the debt that they have on the property.” 䡲 Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB
CRAIN’S DETROIT BUSINESS www.crainsdetroit.com Editor-in-Chief Keith E. Crain Group Publisher and Editor Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Marla Wise, (313) 446-6032 or mwise@crain.com Executive Editor Cindy Goodaker, (313) 446-0460 or cgoodaker@crain.com Managing Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Director, Digital Strategy Nancy Hanus, (313) 4461621 or nhanus@crain.com Managing Editor/Custom and Special Projects Daniel Duggan, (313) 446-0414 or dduggan@crain.com Assistant Managing Editor Kristin Bull, (313) 446-1608 or kbull@crain.com Senior Editor/Design Bob Allen, (313) 446-0344 or ballen@crain.com Senior Editor Gary Piatek, (313) 446-0357 or gpiatek@crain.com Research and Data Editor Sonya Hill,(313) 446-0402 orshill@crain.com Web Producer Norman Witte III, (313) 446-6059 or nwitte@crain.com Editorial Support (313) 446-0419; YahNica Crawford, (313) 446-0329 Newsroom (313) 446-0329, FAX (313) 446-1687 , TIP LINE (313) 446-6766
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estimated that it cost about $1 million to run a car in that year’s 500, with expenses ranging from fees to equipment, fire suits, engines, repairs, tires and salaries. Paretta said that’s an accurate estimate of what it could cost to participate in the Indy 500 next year. Running a full or partial race season will up the amount of money needed. “We’d like to have a race or two under our belt, if not the four or five, before the 500,” she said. Paretta, 41, is an investor in Grace Autosport, and its public face, but the primary investor hasn’t been disclosed. Eight people will be full-time employees initially; and if the team ends up running the entire IndyCar season in 2016, it would need about 30 full-time staffers, she said. Paretta announced the creation and goals for Grace Autosport on May 15 at the Indianapolis Motor Speedway , site of the annual 500 since 1911. “We would love to have a woman’s name on the Borg-Warner Trophy in the next 10 years,” she said. The trophy has been present-
ed to the winner of the Indianapolis 500 since 1936.
Getting a Legge up The team’s driver is British openwheel racing veteran Katherine Legge, 35, who has competed in 11 IndyCar Series races over the past two years, including the 2013 Indianapolis 500. She finished 26th in the No. 81 Honda for Indianapolisbased Schmidt Peterson Motorsports. She drove in 2012 for Dragon Rac ing, owned by Jay Penske, son of Detroit racing industry icon Roger Penske. She finished 22nd in the 2012 Indy 500 in the No. 6 Chevy for Dragon. She won the 2005 Grand Prix of Long Beach in the developmental formula racing Toyota Atlantic Rac ing series.
Education aspect Legge is the Girl Scouts of America ambassador for STEM (science, technology, engineering, mathematics) education, and that’s a key element of Grace Autosport. Paretta intends to use the effort as a platform to promote STEM to school-age children and young adults in an effort to pursue education and careers in those fields.
“We need to create future engineers,” she said, noting the ongoing exodus of baby boomers. “They’re retiring and not being backfilled at the same rate.” Her hope, she said, is that kids, especially girls in fourth and fifth grades, are inspired by seeing a successful female race team on and off the track. The race team will be active in communities, such as visiting schools and science fairs, to expose children to the sort of jobs that STEM careers can lead to.
Under pressure Because of the very public announcement and goals, there is additional pressure and scrutiny on the team, Paretta said. “It’s really important to us to have success on the track,” she said. There also will be pressure because of the significance of the 2016 Indy 500: There could be up to 50 entries for the 33 starting spots in the race field, she said. The reality of the racing business is why she gave a 10-year goal to win the marquee race. “You’re not going to be fabulous out of the gate. To be good and consistent takes time,” she said. The team intends to also identify women to train and work as overthe-wall pit crew members, she said. Indiana University-Purdue Universi ty Indianapolis, which offers a bache-
lor’s degree in motorsports engineering, is providing two interns for the team.
The origins The idea for the all-female race team originated in a telephone conversation in October with Adrian Sussmann, managing director at Denver-based agency GP Sports Management, Paretta said. GP Sports represents Legge. Sussmann said he began repre-
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owners in Eastern Market on Wednesday about a plan to put parking meters in the neighborhood. The meeting was presented as one to gather feedback on a possible plan, but holes for the meters already have been drilled — suggesting that the plan is already well under way. “The kiosks haven’t gone up. If it means filling in the holes, it can be done,” said Dan Carmody, president of Eastern Market Corp. “Brown seemed to have a genuine willingness to listen and reconsider.” The plan at present is to set up meters on Russell Street Dan Carmody: from the Fisher Brown willing “to Freeway service listen and drive north to reconsider.” Wilkins Street. Meters elsewhere in the market, such as those on Gratiot Avenue, would be upgraded to the new system. The nonprofit hasn’t taken an of-
senting Legge about a year ago, and was brainstorming ideas to find her sponsorships and a team. “It’s all about getting them into race cars that can win races. To find sponsorship, you have to have something of value for sponsors,” he said. Sussmann was in a garage for some Formula 1 testing when he noticed several female engineers working together. “It popped into my head, ‘What if the whole team was women?’,” he said. That led to the phone call with Paretta, who was considering her next move after the SRT unit of Chrysler was being mothballed. Racing industry insiders have positive things to say about Paretta and her ability to make Grace Autosport successful. “The main thing I find interesting is that most race teams are run by people that used to race — they’re not necessarily business people,” said Wes Raynal, editor of AutoWeek, the motorsports enthusiast sister magazine of Crain’s Detroit Business. “But racing today is big business, and Paretta has the business background to see it through that lens and build her effort accordingly. ” Team Penske ’s Bud Denker, the event chairman of the Detroit Grand Prix and a senior vice president at Bloomfield Hills-based Penske Corp. , also praised Paretta and her effort and said he hopes “she is successful in her efforts to field an all-female team for the 100th anniversary of the Indianapolis 500.” “Beth has been a good friend of Team Penske for many years back to her involvement with the Dodge/SRT Motorsports program including our Sprint Cup Championship in 2012,” he said via email. “Beth has a passion for motorsports and is
“If I want my employees to park in a safe place, I have to give to them a $1.50-anhour raise.” Erik Olson,Thomas Magee’s Sporting House Whiskey Bar
ficial position on the meters yet, but of the 35 businesses represented at the meeting, most were against it, Carmody said. Eastern Market Corp. is in the midst of creating a development plan for the next 10 years. Carmody would like to postpone any parking changes so a comprehensive parking plan can be included in the overall development plan. Erik Olson, owner of Thomas Magee’s Sporting House Whiskey Bar, a bar in Eastern Market, said besides serving as a deterrent to customers, the meters would be an added expense for employees of businesses in the market. That’s because they’d have to pay $1.50 an hour to park during their shifts. “If I want my employees to park in a safe place, I have to give to them
relentless on pursuing the goals she has in front of her.”
From skis to speed Paretta has a BA in communications from Boston University and a finance/marketing-focused MBA from the University of Vermont. She was hired in 2011 by Chrysler Group LLC as marketing manager for SRT and motorsports. Before that, she was operations manager for Aston Martin, and she was named one of AutoWeek’s “10 Secret People” in 2009. She managed operations in eastern North America for the British luxury sports car maker. Before cars, she spent 14 years in ski sales as a buyer and wholesaler. After grad school, she sold Hondas and Audis before going to work for Volkswagen Credit. With Chrysler, the factory Viper team she ran won the United SportsCar GTLM Championship in 2014, a Trans Am TA2 championship in 2014 and the 2012 Sprint Cup Championship with the Dodge NASCAR program. Also on board with the Grace Autosport startup team are Catherine Crawford, aerodynamicist, principal of Denver-based Crawford Composites and a team supervisor in the IMSA Tudor United SportsCar Championship; Lauren Elkins, motorsports
engineer, track support technician and data analysis manager, who brings multiple years in IndyCar and sports car racing to the team; Jessica Rowe, a junior design engineer with a variety of race experience, both at the track and in the design office; and Barbara Burns, who specializes in communications, public relations, event management and media training for athletes and drivers. 䡲 Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19
a $1.50-an-hour raise,” Olson said. The 7 Mile Road and Livernois retail strip, historically known as the Avenue of Fashion, has been a test pilot for the parking system during the last couple of weeks. Don Studvent, owner of 1917 American Bistro on Livernois, said he is pleased with the new kiosks because he was tired of hearing customers complain about getting tickets when meters were broken. “The biggest thing with the new system is getting everyone to remember their license plate number,” he said. His restaurant also has an app so customers can pay him to refresh their meter via the app, providing them with an additional convenience. Rufus Bartell, owner of Simply Casual Clothing on Livernois, said he sees the kiosks as an improvement. “It creates a better ebb and flow in the parking environment. People aren’t tied to the meter.” The new system will not change the technology or systems at the few city-owned parking garages. Those have already been updated, Dickens said. 䡲 Gary Anglebrandt contributed to this report.
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WEEK 1,100 Quicken Loans workers to fill former Free Press, News building
T
he former Detroit Media Partnership building at 615 W. Lafayette Blvd. downtown is expected to become the home to up to 1,100 new Quicken Loans Inc. employees when its build-out is complete. According to a document detailing a request for city approval of a commercial rehabilitation district for the 404,000-square-foot building, the data center for Detroit-based Rocket Fiber LLC is also expected to be housed there. Molina Healthcare of Michigan occupies 30,000 square feet on the fifth floor. About 15,000 square feet of first-floor restaurant and/or retail space is also part of the plan. The redevelopment of the building, constructed in 1916, is expected to cost $54.6 million.
ON THE MOVE 䡲 Shani Penn was named chief of staff and chief talent officer of the Detroit-based Education Achievement Authority. Penn was chief of staff to former Detroit Emergency Manager Kevyn Orr and then an adviser to Gov. Rick Snyder. Also, former Team Detroit
senior vice president Stephanie Stevenson was
Shani Penn: named the Named to EAA post EAA’s new chief talent officer. 䡲 Maryjean Schenk, M.D., resigned as vice dean of medical education at the Wayne State University School of Medicine. Her replacement, Richard Baker, M.D., an ophthalmologist, was executive director of the Center for Health Services Research and chairman of the ophthalmology department at Charles Drew University of Medicine and Science in Los Angeles. 䡲 Matt Wesaw, the first Native American to head the Michigan Department of Civil Rights, will leave his executive director post in October. Wesaw, 62, said he wants to spend more time with his family.
ON THE WEB JULY 20-24
Detroit Digits A numbers-focused look at the week’s headlines:
$22B The 2014 revenue of Johnson Controls Inc.’s Plymouth Township-based automotive seating unit, which will be spun off into an independent publicly traded company. The transaction is expected to close in about 12 months.
2600 The address of the Bank of America building on W. Big Beaver Road in Troy. The 450,000-squarefoot building was sold for an undisclosed amount to New Yorkbased real estate trust Sovereign Partners LLC.
90 The expected number of retailers planned at the Outlets of Michigan mall in Romulus. The $100 million outlet center will include several national anchor tenants, such as those announced last week: Nike, Calvin Klein, Gap and Brooks Brothers. land Center in Harper Woods after owner Ashkenazy Acquisition Corp., which defaulted on the now-shuttered Northland Center, missed several payments on outstanding loans on the mall property. 䡲 Livonia-based Team Schostak sold 60 metro Detroit Burger King locations to Atlanta-based GPS Hospitality, which plans to renovate about 30 of the sites. 䡲 Michigan State University and Providence Hospital in Southfield are establishing a new medical school campus. The partnership creates the MSU College of Human Medicine’s seventh community campus in the state. 䡲 New Zealand-based invest-
COMPANY NEWS 䡲 ProNAI Therapeutics Inc., a Wayne State University biotech spinoff that moved its headquarters to Vancouver, British Columbia, last month but maintains a research facility in Plymouth Township, saw its stock price soar from $17 a share to more than $33 a share on its first day of trading July 16. 䡲 A federal judge named Syracuse, N.Y.-based Spinosa Management Group as receiver of the East-
ment group Kiwi Hospitality Detroit LLC acquired the former Holiday Inn of Southfield for $2.5 million and plans to invest more than $12 million to convert its buildings into three separate hotels. 䡲 The Grosse Pointe-based Ralph Wilson Foundation plans to spend down its $1.2 billion in assets over the next 20 years, supporting quality-of-life initiatives backed by the late Buffalo Bills owner Ralph Wilson, and hire its first president. 䡲 Allen Park-based Belle Tire Distributors Inc. is expanding into Indiana next month by opening the first of three locations in South Bend and Mishawaka.
OTHER NEWS 䡲 A coalition of unions called Citizens for Fair Taxes said it would
seek signatures to place a proposal on Michigan’s November ballot that would hike the state’s corporate tax by 5 percentage points to fund roads and bridges. 䡲 Hazel Park Raceway will end its thoroughbred racing season Aug. 8 due to a lack of funds, state regulators said. 䡲 The David Stott and Clark Lofts buildings in downtown Detroit were sold to Dan Gilbert for $14.9 million and $3.1 million, respectively, or nearly 50 percent more in total than two years ago, Wayne County land records show. 䡲 Crews from HGTV started capturing the renovation of the historic Ransom Gillis mansion in Detroit’s Brush Park. Nicole Curtis, a metro Detroit native and host of the network’s “Rehab Addict,” is leading the restoration, part of a $70 million area redevelopment. HGTV’s eight-part series will debut in November. 䡲 Actor Tim Allen, who grew up in Birmingham, will be grand marshal for the Nov. 26 America’s Thanksgiving Parade in Detroit. 䡲 The Windsor-Detroit Bridge Authority put out a “request for qualifications” for companies seeking roles in building the Gordie Howe International Bridge. 䡲 The World Cup-winning U.S. women’s national soccer team will play an exhibition against Australia at Detroit’s Ford Field Sept. 17. Tickets will go on sale July 31 via USSoccer.com, (877) 212-8898 and the Ford Field ticket office. 䡲 President Barack Obama plans to nominate economist Kathryn Dominguez, a University of Michigan professor, as a governor on the Federal Reserve Board.
OBITUARIES
NORMAN WITTE III
The restoration of the Ransom Gillis mansion in Detroit’s Brush Park will be the focus of an eight-week HGTV series.
䡲 Silas Norman Jr., M.D., associate dean of admissions, diversity and inclusion for the Wayne State University School of Medicine, died July 17 after a battle with cancer. He was 74.
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RUMBLINGS
SWEET POTATO SENSATIONS
Charice “Espy” Thomas grabs Hillary Clinton for a selfie during the presidential candidate’s impromptu visit to the Thomas family’s Sweet Potato Sensations restaurant.
Hillary Clinton causes a sensation for Sweet Potato Sensations weet Potato Sensations got a bump in business after a drop-in visit by Hillary Clinton last Tuesday. “It’s definitely given us a little spike,” said Charice Thomas, a manager of the family-owned business. The restaurant had no idea Clinton was coming for a visit. A woman came into the restaurant Tuesday asking to speak with the owner, Cassandra Thomas, who was busy at that moment. The woman kept pressing until Charice — “Espy,” as she is known to customers — said, “Ma’am, what’s going on?” “I don’t mean to make a big deal ... but Hillary Clinton is coming.” “When?” “In 15 minutes.” Clinton ate sweet potato cobbler, sweet potato cornbread and sweet potato and pecan ice cream. Espy said Clinton was very down-to-earth. “It was just like kicking it with any other person,” she said. Clinton told the family she’d heard about the northwest Detroit restaurant by asking around for a “unique and different Detroit small business” she could visit.
S
Driverless driving: Trip elicits range of emotions When Delphi engineers undertook a nine-day, 3,400-mile journey from San Francisco to New York City in a driverless research vehicle in March, they got interesting reactions. Mike Pozsar, vice president of electronic controls, told a crowd at the Automated Vehicle Symposium in Ann Arbor last week that the test vehicle obeyed traffic laws at all times — even when that meant going 55 mph when the rest of traffic was moving much faster. “You can imagine the reaction of the drivers around us,” Pozsar said. “Oh, boy. It’s a good thing engineers have thick skin. All kinds of indecent hand gestures were made to our drivers.” Those honked-off motorists were in for a shock once they drew abreast of the vehicle. “When people passed us, they’d
see no one had their hands on the steering wheel,” Pozsar said.
Playground honors Adcraft Hall of Famer: Fabulous The late Detroit radio legend Bill Burton, known for pulling stunts and his “be fabulous” catchphrase, was scheduled to have a playground dedicated in his honor by the Adcraft Club of Detroit. Burton, former president and COO of the Radio Advertising Group, was an Adcraft member for 54 years. He was inducted into Adcraft’s Hall of Fame in 2005. He died last December at 85. Burton’s ability to market Detroit to the likes of Tom Izzo, Joan Rivers and Al Sharpton helped Adcraft thrive, said Mike Riley, an organizer of the Adcraft event. Adcraft, a Bill Burton: Play- marketing and ground in his honor advertising association, began cleaning up blighted playgrounds 11 years ago as part of its Project Playground Initiative. This was the first time it built a playground and dedicated it to a former member. The park was expected to be built Saturday morning at Mason Academy on Detroit’s west side. The $10,000 project was sponsored by CBS, Say Media and AutoTrader.
Lions’ healthier suite menus: Some say kale yes Detroit Lions fans in Ford Field suites will be able to celebrate touchdowns this season with freerange rosemary garlic chicken, salmon sliders and a salad with kale, tofu and chickpeas. The new fare is part of the “Healthy Choice” program launched by the team and St. Joseph Mercy Health System. Besides the menu updates, St. Joseph and the Lions will work together on other initiatives, including the annual Taste of the Lions fundraiser to benefit Eastern Market.
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