Crain's Detroit Business, April 24, 2017 issue by Crain's Detroit Business

APRIL 24 - 30, 2017

Dissident shareholders look to shake up Rockwell

Alibaba takes aim at Michigan Chinese giant’s CEO Jack Ma said to attend promo event. Page 3

Want company to move faster on drug. Page 4

Real Estate

Retail

What’s in store for retail?

The Macy’s store at Eastland Center in Harper Woods closed in March, as part of a plan announced in August to close 100 stores across the country in a move to cut costs and free up capital for investment in growth areas.

Closings, job losses aren’t the whole story as business evolves dwalsh@crain.com

LARRY PEPLIN

SEE RETAIL, PAGE 18

ANNALISE FRANK/CRAIN’S DETROIT BUSINESS

The 1,700-square-foot Bonobos location on Woodward Avenue in downtown Detroit opened in February. The store carries a slim inventory for customers to see and try on, then have purchases shipped to them.

crainsdetroit.com Vol. 33 No 17

NEWSPAPER

By Kirk Pinho kpinho@crain.com

By Dustin Walsh

The future of retail isn’t as simple as “the internet is taking over.” The supposed bricks-and-mortar retail apocalypse is overstated. But the face of the industry and its jobs is changing drastically, in ways that are likely to benefit city centers like Detroit at the expense of rural and suburban shopping centers, reversing a decades-long trend. Nationally, the retail sector lost 30,000 jobs in March, a decline that’s expected to be exacerbated by the winddown of several major department stores like Macy’s and Sears, which are expected Keith Crain: to close 218 locations Will brick and this year. This led to mortar go headlines last week away? Page 8 like “The Silent Crisis of Retail” and “The retail apocalypse is creating a ‘slow-rolling crisis’ that is rippling through the U.S. economy.” “The people that work in retail stores will lose their jobs, then spend less money in retail stores because they are no longer employed,” Mark Cohen, the director of retail studies at Columbia Business School, told Business Insider last week. “That creates a cascade of economic challenges.” Local experts, however, say the retail jobs picture is more complicated, calling the job losses a correction or blip in the overall market as retailers shift from rural and suburban centers to the city. Alarmists point to the rise of e-commerce, which has risen roughly 40 percent year-over-year, but still only accounts for 9 percent of total

After false starts, an opportunity for McLouth

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Dozens of trees, with their white blossoms greeting spring, line West Jefferson Avenue’s median in Trenton, a startling contrast to what immediately lies to the east. A mammoth 180 acre-plus industrial property, housing a 1 millionsquare-foot building with shattered windows, has confounded local, county, state and even federal officials for more than a decade. It may finally be on its way to being transformed. The question is: Into what? It wasn’t all that long ago that its waterfront location along the Detroit River prompted a developer to conjure up plans for a sprawling mixeduse development with more than 2,000 residences and hundreds of thousands of square feet of commercial space, but local real estate experts generally believe it’s best suited for industrial use. Whatever developer ends up with the site best known as the former McLouth Steel Products Corp. property — now that Wayne County has foreclosed on it for $3.7 million in unpaid property taxes — Jim Roberts: The will have to grap- site is “a toughy.” ple with environmental issues stemming from decades of use as a steel manufacturing plant. “You’re asking a $1 billion question, and I think everybody is scratching their heads,” said Jim Roberts, a senior vice president of industrial brokerage for the Southfield SEE MCLOUTH, PAGE 19

Selling done right Wells Fargo case raises question: How do companies design culture and incentives that don’t encourage unethical behavior? Page 10

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

MICHIGAN BRIEFS

INSIDE

Business leaders urge ending public pensions Michigan should get out of the business of offering government workers pension and health care benefits in retirement, under new recommendations from the state's top business executives. Instead, the state should move all newly hired public school teachers and municipal employees into defined-contribution, 401(k)-style, retirement plans, stop offering health insurance to new hires and give retirees incentives to buy coverage from private insurers, according to a report released Monday by Business Leaders for Michigan, the state's business roundtable. Business Leaders for Michigan, led by President and CEO Doug Rothwell, issued the report the same day it held a summit on state and local fiscal stability in Lansing. Lansing-based Public Sector Consultants conducted the research and analysis for BLM. The organization believes any benefits restructuring should be done in a way that preserves coverage promised and offered to existing retirees. "It's time to make Michigan governments recession-proof," the

Flint’s mayor recommended Tuesday that the city continue getting its drinking water from a Detroit-area system for the long term. group wrote, a position motivated by the possibility that the U.S. and Michigan economies could dip back into recession within a few years after a lengthy, if slow, recovery. Central to that is promoting policies to improve Michigan's longterm economic growth, the report suggests. Addressing employee legacy costs, both for pensions and retiree health care benefits, is critical

if schools, municipalities and the state are to be able to withstand economic trouble.

Flint mayor wants to keep city on Detroit water Flint's mayor recommended Tuesday that the city continue getting its drinking water from a Detroit-area system for the long term, following a crisis that left the sup-

ply contaminated with lead, The Associated Press reported. Karen Weaver's announcement Tuesday is a reversal. Last year, Weaver said the city of 100,000 residents would stick with a plan to draw from a pipeline to Lake Huron that is under construction. But she re-evaluated that decision as a condition of receiving $100 million in federal funding to address the manmade disaster. Weaver said switching the water source again is too risky and staying with Detroit's water supply from Lake Huron is less expensive. Flint returned to that source in October 2015 after it was discovered that Flint River water was not treated to reduce lead pipe corrosion for 18 months. Under a 30-year contract agreement with the Great Lakes Water Authority, Flint will get a $7 million annual credit from the GLWA to pay toward its portion of bonds for the Karegnondi Water Authority's $300 million pipeline from Lake Huron.

State jobless rate up from a year ago Michigan's unemployment rate fell to 5.1 percent in March while the number of people entering the

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COMPANY INDEX: SEE PAGE 22 workforce continued to grow, the state said Wednesday, according to The Associated Press. The Michigan Department of Technology, Management & Budget said the rate fell from 5.3 percent in February compared with a national March rate of 4.5 percent. Last month's jobless rate in Michigan was two-tenths of a percentage point higher than the state's yearago rate of 4.9 percent. The agency said the state's workforce rose by 6,000 with an increase in total employment of 17,000 jobs. The number of unemployed workers fell by 11,000. “While these latest numbers are certainly promising, we must not become complacent," Gov. Rick Snyder said in a statement.

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Retail

Jewelry store renovation finds gems

Commerce

Simmons and Clark Jewelers refreshes store, bridal business By Chad Livengood

BLOOMBERG

Jack Ma, Alibaba’s founder and one of China’s wealthiest people, is expected to attend an event in Michigan this summer.

clivengood@crain.com

When a contractor began renovations last fall at Simmons and Clark Jewelers, third-generation owner Michael Simmons was told the downtown Detroit jewelry store’s original display cases couldn’t be spared. The large glass display cases lining both walls of the store at 1535 Broadway St. had been plastered over twice during previous renovations — once in the 1950s and again in the late 1970s when a drop ceiling was installed. “As they started demoing it ... they found the original showcases were like pristine, untouched,” Simmons said. “We knew what was there, but every designer told me, ‘Oh, I’m sure they glued, nailed, painted over it. It will look horrible.” Instead, they looked perfect to Simmons, who plans to fill them once again with jewelry and assorted wares for a budding bridal business that he credits to an influx of new downtown residents. Simmons and Clark, a downtown Detroit mainstay since 1925 with an SEE JEWELER, PAGE 20

Health care

Alibaba to take aim at Michigan with 1st event By Dustin Walsh dwalsh@crain.com

Committees move forward with integrating behavioral, physical health systems By Jay Greene jgreene@crain.com

“Just because you make it one entity doesn’t mean you reduce anything.” Willie Brooks, Oakland County Community Mental Health Authority

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

Michael Simmons, third-generation owner of Simmons and Clark Jewelers, stands by large glass display cases lining both walls that were uncovered during a recent renovation of the downtown Detroit jewlery store.

Michigan lawmakers made it clear last week that they are aiming to go against recommendations from a statewide mental health panel and give HMOs at least a piece of Michigan’s $2.6 billion Medicaid mental health budget. There’s a long way to go in the budget process and details remain to be ironed out, but it’s an apparent victory for the health plans that has further raised alarm among supporters of the current public system. Both House and Senate budget subcommittees approved language that would carve out test programs that could lead to a privatization of management of the system through managed care plans, which already administer physical health care Medicaid benefits. Instead of approving the recom-

mendations of a multi-stakeholder mental health committee known as the Section 298 Workgroup to retain and improve the current public Medicaid mental health system, the appropriations subcommittees rewrote budget language that could lead to more Medicaid health plan involvement in the current public system and consolidation of 10 regional mental health organizations into one superagency. It is unclear how the Michigan House and Senate will resolve differences between their budgets that resulted in four sometimes conflicting reform proposals. Full House and Senate appropriations committees are expected to meet this week to finalize the Michigan Department of Health and Human Services budgets. For example, the House subcommittee replaced 2016 budget language known as Section 298 by ask-

ing MDHHS for a plan to create a statewide public behavioral health managed care organization. The statewide organization would manage services to nearly 350,000 people served by the current system. Under the plan, MDHHS would be instructed to come back by next March 15 with an implementation timetable and plan. Currently, the Medicaid behavioral health system is managed by 10 public regional agencies known as prepaid inpatient health plans. In 2014, the state consolidated 18 PIHP regions into 10. House Appropriations Subcommittee Chairman Edward Canfield, R-Sebawaing, told Crain’s that creating a statewide PIHP could improve clinical services and generate administrative savings. Estimates have ranged as high as $200 million annually.

“We need a pilot to see how it works with mind and body.” Jim Marleau, HHS Subcommittee

SEE HEALTH, PAGE 20

MUST READS OF THE WEEK

Familiar faces in running at OU

Trust: The most powerful currency

Paying for success

But it’s scarce, writes Ron Fournier, and businesses have the best shot in our society at changing that. Page 8

National Kidney Foundation program is one of first in Michigan to use new nonprofit financing model. Page 6

Former Kelly Services CEO Carl Camden, former UM Health CEO Ora Hirsch Pescovitz are finalists for president job. Page 16

China’s largest e-commerce company, Alibaba Group Holding Ltd., will host an event in Detroit this summer to lure Michigan agriculture firms to export to China, according to a source with knowledge of the matter who requested anonymity. The procurement event, the first in the state for Alibaba, will be held at Cobo Center in late June, the conference center confirmed, though specific dates are not confirmed. Michigan’s small- and medium-sized food producers will hear pitches from Alibaba on how its e-commerce platforms could open up the Chinese market for Michigan, the source said. Jack Ma, Alibaba’s founder and one of China’s wealthiest people, is expected to attend. Michigan exported $3.2 billion in products to China in 2016, making it the state’s third-largest export partner behind only Mexico and Canada. Automotive parts leads the list of exports to China, followed by agricultural products like soybeans, feed grain, dairy and vegetables. Founded in Hangzhou, China in 1999, Ma has built Alibaba into one of China’s largest companies, with a market capitalization of nearly $284 billion — more than Wal-Mart Stores Inc. at $227 billion, but less than competitor Amazon Inc. at $433 billion. Alibaba’s 2014 initial public offering raised $25 billion on the New York Stock Exchange and introduced Alibaba to Western investors, though the company remains mostly unknown to U.S. shoppers despite its more than 450 million customers in more than 200 countries. SEE ALIBABA, PAGE 20

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Rockwell Medical involved in board proxy fight, lawsuit with major shareholders By Jay Greene jgreene@crain.com

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Rockwell Medical Inc. of Wixom is embroiled in a dispute with two large shareholders in the company who are critical of the company’s growth, governance structure and alleged lack of communication with shareholders. They want a seat on the governing board, which will expand to six this summer. The dispute has spilled into court with claims and counter-claims between Rockwell (NASDAQ: RMTI), a biopharmaceutical company targeting end-stage and chronic kidney disease, and top executives at Jackson-based Richmond Brothers Inc. and Tri-Star Management in Minneapolis. Richmond Brothers and Tri-Star, and their clients, represent 6.1 million shares, or 11.9 percent of Rockwell’s outstanding common stock. David Richmond is chairman of Richmond Brothers and Mark Ravich is co-founder and president of Tri-Star. The outspoken shareholders have been asking Rockwell for several months to improve sales of Triferic and Calcitriol, restructure governance and add a shareholder representative to the now five-member board. In 2015, Rockwell won FDA approval for Triferic, a promising iron replacement therapy that is getting good reviews by clinicians in an ongoing drug sample program, but sales have been sluggish for a number of reasons. Calcitriol is a generic drug for patients undergoing chronic kidney dialysis. Once the FDA approves Calcitriol for manufacturing by Rockwell, expected this year, the company intends to market the active vitamin D-based injectable drug for hemodialysis patients. Rockwell President, CEO and Chairman Rob Chioini: Rob Chioini told Rockwell Crain's he has president, CEO, reached out to chairman the disgruntled shareholders to explain the company’s long-term strategy is to grow revenue by first securing the highest Medicare reimbursement possible, signing lucrative contracts with national dialysis companies for Triferic and expanding sales internationally through partnerships. “We address their concerns when they come up. We communicated with him (Richmond) perfectly,” Chioini said. “We have met with and tried to work with David (Richmond) and for whatever reason, we are where we are today.” Officials for Richmond and Ravich declined to talk on the record with Crain's about Rockwell. Instead, they pointed to various press statements and SEC filings. On April 5, Richmond and Ravich filed a proxy statement with the SEC

in connection with Rockwell's upcoming annual summer shareholder meeting. The meeting is scheduled for June 1. The Richmond statement questions Rockwell’s recent announcement to improve corporate governance and contends the company would not have taken action if not for their criticism. “History has shown that the company has not been interested in making proactive change absent a looming proxy contest,” said a statement from Richmond and Ravich. “We are also concerned that the company’s newly acquired interest in improving its corporate governance practices may be abandoned if a public shareholder representative is not elected to the board.” Richmond and Ravich have asked shareholders to support their nominee — Ravich himself — for election to the now five-member Rockwell board. It will expand to six at the June 1 annual shareholders meeting. “We are seeking representation on the board because we believe that the board will benefit from the addition of a direct shareholder representative committed to good corporate governance practices and an objective of enhancing value for the benefit of all Rockwell shareholders,” the statement said. Richmond said in the statement that Rockwell has had two years to improve sales of Triferic and Calcitriol and that the company continues to flounder financially. For fiscal 2016 that ended Dec. 31, Rockwell generated sales of $53.3 million, down from $55.4 million in 2015. Net loss for 2016 was $19.8 million, or 39 cents per share, compared with a loss of $14.4 million, 29 cents per share, in 2015. Two sources, who asked to remain anonymous, told Crain’s that it is not unusual for some people who invest in startup biopharmaceutical companies to get impatient with the time it takes to monetize intellectual property like prescription drugs. The pipeline from idea to clinical studies to federal approval and then sales can sometimes take 12 years or more, they said. Since 1995, when Rockwell was founded by Chioini, the company has evolved from a medical device clinic selling dialysis kits and related items to a fully integrated drug company. It now has 300 employees with plants in Michigan, Texas and South Carolina. “Unfortunately, management and the board have failed to heed these signals of shareholder discontent and have persisted in running Rockwell as if it were a private company not accountable to the interests of public shareholders,” according to a March 2 statement by Richmond. Chioini told Crain’s that management takes seriously shareholders’ concerns. He said Rockwell is in the process of improving the board and has proposed a number of other improvements. Last June, Robin Smith, former CEO of NeoStem, was appointed to the board. This year, Chioini is recommending election of David Domzalski,

49, a drug company executive with more than 20 years experience. He has been president of Foamix Pharmaceuticals Inc. since 2014. Moreover, in an April 4 statement, Rockwell said it has implemented the following governance improvements: appointed Patrick Bagley as lead independent director; and formed a governance and nominating committee. It also is proposing several new compensation governance practices for 2017, including the annual bonus program and added management share ownership guidelines, an anti-pledging and anti-hedging policy, a clawback policy, a cap on annual bonus payouts and hiring of an independent compensation consultant. In SEC filings, Richmond and Ravich made suggestions to improve the board and management, including adding a shareholder and expanding clinical trials, but all have been rejected, they said. For example, Richmond and Ravich have complained that Rockwell failed to communicate its Triferic pricing strategy to shareholders. “It has now been over two years since the approval of Triferic (September 2015) and more than three years since the approval of Calcitriol, the company’s vitamin D drug, and Rockwell has failed to generate revenue from either," said Richmond in a March 2 statement. "We believe this clearly calls into question management’s strategy and competency to successfully build shareholder value.” On Friday, Rockwell’s shares were trading at $8.01, down from about $11 right after the FDA approved Triferic in January 2015 and lower than the company's five-year high of $16 in 2011. At the time Rockwell secured FDA approval for Triferic, Chioini told Crain's Triferic was expected to boost Rockwell annual sales by at least $200 million and as high as $600 million over the next five years. “This is a pretty big deal for a lot of reasons — for our company and for the 400,000 patients in the U.S. that can use this drug,” Chioini said in a March 2015 interview. “It is a business-changing kind of event.” But later that year, in November, Rockwell announced it would seek transitional add-on payments for Triferic from Medicare instead of bundled pricing, which is what Medicare offered Rockwell. Transitional payments are higher prices Medicare pays for new drugs for two years to encourage use by providers. Chioini said seeking transitional payments for Triferic was the right decision, even if it means sacrificing short-term revenue gains. He said he expects Medicare will approve transitional payments this year. “Transitional is a better payment than the bundle. We are actively marketing the drug,” said Chioini, adding that Rockwell has been providing Triferic as free samples to dialysis centers and is getting positive SEE ROCKWELL,PAGE 5

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

ROCKWELL FROM PAGE 4

feedback about how the drug is helping patients. “We are also very pleased with the response, and the positive clinical findings being reported from dialysis providers using Triferic through our drug sample program. Our marketing and education efforts on Triferic have been well-received and continue to be very effective,” Chioini said. But over the past 12 months, as Richmond and Ravich began to criticize Rockwell’s pricing strategy and issuing press releases and statements criticizing Rockwell’s management and governance, Rockwell this year filed a lawsuit against Richmond Brothers alleging certain violations of the Securities Exchange Act of 1934. Rockwell alleged that Richmond and Ravich, along with four other shareholders, failed to file a 13D document on time with the SEC that informed the company that certain shareholders were working together in concert and had effectively become “activist” in nature. Richmond and Ravich said they filed the so-called 13D document earlier this year as soon as they were legally required. “We believe Rockwell’s allegations are baseless and untrue. We intend to vigorously defend ourselves against these accusations, and we believe that the facts are on our side. In our view, this lawsuit is nothing more than a desperate attempt to derail our nominations and maintain the status quo.” Chioini said Rockwell filed the lawsuit because Richmond and Ravich failed to inform the SEC in a timely fashion that they had become activist investors. A hearing is set for May 3 in the U.S. District Court in Detroit. “They (Richmond and Ravich) made it sound like management is bullying them,” said Chioini. “I have reached out to them. We are hoping to get this resolved before our board meeting. We are wasting a lot of time and expense.” In a 2015 interview with Crain’s, Chioini said Rockwell planted to negotiate contracts with leading national dialysis companies, including DaVita Kidney Care and U.S. Renal Care. “The strategy hasn’t changed. We will still sell and market with (dialysis companies),” he said. “What has changed is that we are waiting for (Medicare) to grant us transitional payments for Triferic.” Chioini said he has been to Washington, D.C., at least 30 times to talk with officials with the Centers for Medicare and Medicaid Services. "We think we are close and will get it this year," he said. But in the meantime, Richmond said in statements that Triferic sales have been much lower than shareholders expected. Last month, Rockwell released financial results for the fourth quarter of 2016 that were $13.4 million in sales, or $700,000 lower than the same period in 2015. Net loss was $5.1 million or 10 cents per share compared to a $5.8 million loss, or 12 cents per share in the same period in 2015. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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Michigan tests â&#x20AC;&#x2DC;pay- for-successâ&#x20AC;&#x2122; model for diabetes prevention By Sherri Welch swelch@crain.com

A new type of financing is linking private investors who want to do good â&#x20AC;&#x201D; and make some money in the process â&#x20AC;&#x201D; with nonprofits looking to get upfront funding for programs where theyâ&#x20AC;&#x2122;re paid for results. The model is set to get another early test drive in Michigan, expanding a proven diabetes prevention program offered by the National Kidney Foundation of Michigan in six Metro Detroit and West Michigan counties. For nonprofits, the model promises a new funding stream outside of traditional grant-making and philanthropy â&#x20AC;&#x201D; if they can deliver. Through the pay-for-success model, known as â&#x20AC;&#x153;pay for success,â&#x20AC;? private investors front the costs to scale a program thatâ&#x20AC;&#x2122;s shown some degree of success in tackling a persistent social issue. That investment is often called a â&#x20AC;&#x153;social impact bond.â&#x20AC;? Back-end payers such as the government or health insurance companies pay for the services on the back end, returning money to investors â&#x20AC;&#x201D; but only if the charity meets predeter-

mined benchmarks for performance. Hence â&#x20AC;&#x153;pay for success.â&#x20AC;? The goal is lower-cost, preventive interventions that can save money for the payer in the long term. The Ann Arbor-based National Kidney Foundation is one of three social services agencies chosen nationally by New York-based Local Initiatives Support Corp. to receive technical assistance to help it launch the model. Its pay-for-success program will follow another launched in Michigan last August to improve outcomes for at-risk mothers and babies and about a dozen other projects around the country. Thereâ&#x20AC;&#x2122;s a plethora of evidence that shows the diabetes prevention program works in terms of spurring people to lose weight and to increase their physical activity, said Charlene Cole, director of program operations. By financing expansion of the program through a social impact bond, everybody wins, she said. â&#x20AC;&#x153;It will save health insurers money; the Kidney Foundation will be happy because itâ&#x20AC;&#x2122;s serving more people, and investors will get some small return on their investment.â&#x20AC;?

The first program financed through the model launched in the U.S. in 2012, two years after its emergence in the United Kingdom. Since then, more than a dozen projects have launched around the country addressing issues ranging from homelessness to recidivism to early childhood education. Another 50 are in development, according to Payforsuccess.org, a site that provides education and information on pay for success and is managed by the New York-based Nonprofit Finance Fund. Traditionally, contracts or grants to support social service programs focus on short-term results such as the number of people coming through or graduating from a training program. Social impact bond models seek longer-term outcomes such as the ability of a job training graduate to get a job and the amount of money he is able to make as a result of the program. Investors include commercial banks, community development financial institutions, foundations, and theoretically, individuals, said Jennifer Oertel, who is group leader of tax-exempt organizations and the impact

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investing practice at law firm Jaffe Raitt and a member of the advisory committee on impact investing for the Case Foundation. Impact investing has become a hot topic, she said. â&#x20AC;&#x153;People want a return on their money and want Jennifer Oertel: to create social Impact investing a good, so banks hot topic. and financial advisers are looking for products to do this.â&#x20AC;? Though the model is risky for investors, â&#x20AC;&#x153;We anticipate this is going to just increase with the wealth shift to millennials,â&#x20AC;? Oertel said. Michigan was one of eight states chosen in a national competition in 2013 to receive technical assistance from the Social Impact Bond Technical Assistance Lab at Harvard Kennedy School to explore tackling persistent social problems with pay for-success contracts funded by social impact bonds. The Rockefeller Foundation and the Laura and John Arnold Foundation supported the technical assistance. After nearly three years of development, the stateâ&#x20AC;&#x2122;s first pay-for-success program launched last August to expand Spectrum Healthâ&#x20AC;&#x2122;s Strong Beginnings program through a pilot that will serve an estimated 1,700 families in Kent County, with the goal of reducing preterm birth and rapid repeat pregnancy. The program focuses on improving health and early childhood development outcomes for high-risk mothers and their babies through home-visitation, community programs and better coordination of care throughout pregnancy until the childâ&#x20AC;&#x2122;s second birthday. Eight community agencies, including the state population-based Maternal Infant Health program, are collaborating on the program, which aims to improve maternal and child health among African-Americans and Latinas and eliminate racial disparities in birth outcomes. The National Kidney Foundation is now trying the model out, with LISCâ&#x20AC;&#x2122;s help, to expand a diabetes prevention program it has offered since 2012. About 1,700 people at risk for developing diabetes have enrolled in the diabetes prevention program since its launch, said Arthur Franke, senior vice president, chief science officer at the National Kidney Foundation. Nearly half of those in the program lost more than 5 percent of their body weight, and participants increased their level of physical activity to an average of 221 minutes per week. Both are proven to reduce progression to Type II Diabetes. But the people at greatest risk, low-income people not covered by Medicare or private insurance, donâ&#x20AC;&#x2122;t have access to this program, because Medicaid insurers donâ&#x20AC;&#x2122;t cover it, Franke said. Through the pay-for-success model, the National Kidney Foundation plans to expand the program to at-risk, low-income populations in Oakland,

Wayne, Macomb, Genesee, Kent and Muskegon counties. The National Kidney Foundation is seeking $1.5 million to expand the program, Franke said, with a goal of adding 1,000 new people annually during the three-year program. LISC is assisting the foundation in setting up an agreement with investors, a third-party validator that measures the success of the program based against the outcomes promised and the back-end payers that would benefit from the cost savings. Private investment in the program is likely to include a mix of grants, recoverable grants, junior debt and senior debt funding provided through banks, community development financial institutions, businesses and/ or foundations, said Anna Smukowski, LISCâ&#x20AC;&#x2122;s pay-for-success program manager, in an email. Investors are interested in the model, she said, because it provides a forum for impacting investing which produces social and/or environmental returns, as well as a financial return. It aligns with the mission-orientation of foundations seeking to improve the quality of life for people, community development financial institutions and philanthropic arms of banks, and through measurement of program effectiveness, it ensures investments measurably improve the lives of the people served, she said. Medicaid health plans like Meridian Health, Molina Healthcare, Health Alliance Plan and others that stand to gain cost savings from people not progressing to diabetes are expected to pay on the back end, Franke said. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re wanting to talk to any health plans that offer Medicaid. ... Weâ&#x20AC;&#x2122;d like to demonstrate that the program has proven success with that population.â&#x20AC;? As interest in pay-for-success initiatives and social impact bond programs have spread in recent years at the local, state, and federal levels, results have been mixed, according to the National Council of Nonprofits. The new funding mechanisms are not the cure-all remedy for every social problem or public funding shortfall as promoted by some, and theyâ&#x20AC;&#x2122;re not the guaranteed disaster others call them, the council said. Pay-for-success models can be considered in instances where data can be measured accurately, said David Thompson, vice president of public policy for the National Council of Nonprofits, in an email. The initial target populations â&#x20AC;&#x201C; prison recidivism rates, early childhood development are ideal because they have large populations and existing sets of data. But the challenge is that not all things can be measured, he said. â&#x20AC;&#x153;The biggest concern about payfor-success programs is that worthy interventions and innovative approaches are ignored when an outsider party cannot identify in advance which metrics will show success,â&#x20AC;? Thompson said. â&#x20AC;&#x153;The result can be that the easily measured items get funding and the best solutions are left out of consideration.â&#x20AC;? Sherri Welch: 313 (446-1694) Twitter: @Sherri Welch

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Developer to renovate St. Charles School for luxury condos By Annalise Frank afrank@crain.com

Developer Banyan Investments LLC plans to transform a historic school building into 25 luxury condos — an addition to the growing body of upscale residential spaces in Detroit’s West Village neighborhood. Detroit-based Banyan aims to preserve as much as it can of the century-old St. Charles School when it remodels the building over the next year to build about 25 units, Banyan CEO Aamir Farooqi said. Detroit Mayor Mike Duggan and Banyon plan to break ground on the Saint Charles Residences site at 1454 Townsend St. on May 1. Farooqi did not release exact figures on the investment. The condos will be priced from about $275,000 to $470,000 when build-out is complete in around 12 months, Farooqi said. Sizes will range from less than 1,000 square feet to about 1,600 square feet, with high ceilings, large windows, luxury master suites and an open concept design. Amenities will include outdoor space and secure parking. Banyan plans to construct an additional floor on top of the three-story school, which he said has likely been vacant for more than two decades. A nearly 1,700-square-foot penthouse condo and several smaller units will be built on the new floor. The project’s architects are Royal Oak-based FX Architecture LLC and New York-based Gensler. The real estate broker is Detroit-based The Loft Warehouse Corp. Invest Detroit and the Michigan Strategic Fund are investors, according to a media advisory. The site in the Villages of Detroit is getting a brownfield tax credit from the city, as well as an abatement under the Neighborhood Enterprise Zone program, according to the advisory. The city said it will release details on its contributions the week of the groundbreaking. Banyan started out restoring single-family homes and renting them out in the Indian Village, English Village and Boston-Edison areas of Detroit. About three years ago, he started moving into mixeduse buildings. “So St. Charles represents a continuation of our upward trend in taking on larger and larger and more impactful projects in this part of the city,” Farooqi said. “We’re confident this will be exactly the right thing to (be) the catalyst.” The catalyst, that is, for development in the neighborhood and a move toward a greener, more walkable city — with its history in-

A rendering shows the Saint Charles Residences, a luxury condo building that Banyan Investments LLC plans to open next year in the renovated St. Charles School at 1454 Townsend St. in Detroit’s West Village neighborhood.

tact. “It’s easy for people to come in and replace because it’s easier, it’s quicker, it’s cheaper,” he said. “To refresh and renew and repurpose is not as easy and is not for the faint of heart, but I think the result is significantly more uplifting.” Annalise Frank: (313) 446-0416 Twitter: @annalise_frank PHOTO BY BANYAN INVESTMENTS LLC

The Detroit Regional Chamber Mackinac Policy Conference, MAY 30 – JUNE 2, 2017

No one covers the Detroit Regional Chamber Mackinac Policy Conference like Crain’s Detroit Business. This annual power feature is distributed at Mackinac, May 30 – June 2. Reach an audience of over 26,000 of the area’s most influential business, civic and government leaders at the conference and in the regular print distribution of

Crain’s on June 5.

FEATURED IN THIS ISSUE:

• Michigan Change Makers: The power players and business leaders in the state • What’s Your Superpower? Feature on local business and leadership heroes • Lists: Private 200 and Graduate Degree Programs A comprehensive list of the biggest and best in each category

Crain’s Annual Mackinac Edition | ISSUE DATE: June 5 | EARLY CLOSE: May 8 For advertising opportunities, contact Lisa Rudy at lrudy@crain.com or (313) 446.6032.

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OPINION

Trust: The most powerful, and scarce, currency

Rates of trust in organizations

usiness is a cause of, and a possible solution to, an existential crisis of trust in Ameri-

ca. As part of a trend that began with the Vietnam War and Watergate, people have lost faith in U.S. social institutions. Government, politics, corporations, the media, organized religion, organized labor, banks, businesses, schools, charities and other mainstays of a healthy society are failing to adapt quickly Richard Edelman: enough for a Slightly optimistic population bufmessage. feted by wrenching economic, technological and demographic change. In 2012, I reported on this crisis for a National Journal cover story called “In Nothing We Trust,” and the findings were chilling: “Seven in 10 Americans believe that the country is on the wrong track; eight in 10 are dissatisfied with the way the nation is being governed. Only 23 percent have confidence in banks, and just 19 per-

Business is the most trusted among the people who are uncertain about the system. Categories of how people feel about current system

RON FOURNIER Publisher and Editor

Uncertain about the system

cent have confidence in big business. Less than half the population expresses ‘a great deal’ of confidence in the public-school system or organized religion.” That same year, Richard Edelman, president and CEO of his namesake public relations company, flew to Davos, Switzerland, with a 32-slide presentation warning the world’s political and business elite that, based on his firm’s polling, government and corporate leaders were the least-trusted people on earth. The 2012 Edelman Trust Barometer depressed Davos. On Wednesday, Edelman brought the 2017 Trust Barometer to the Detroit Economic Club with a slightly more optimistic message for Michigan business leaders. On one hand, business has played a role in stoking the public’s anxiety. Edelman’s polling suggests that:

Believe the system is working

Will brick and mortar go away? It wasn’t that many years ago when Wal-Mart changed the face of America. What had been a small, Arkansas-based retail chain of “big box” stores went national in the 1970s, putting a lot of small retailers out of business with a combination of merchandise under one roof. That was one revolution. We may be poised for a another. An Amazon revolution. Shoppers are diminishing dramatically in many bricks-and-mortar stores. Many folks are shopping online. No one is quite sure they know what to do about it. Sears, J.C. Penney, Macy’s — all have been closing stores. Like many other habits, “going shopping” or “going to the mall” might just be a thing of the past, though some discount stores seem to be doing OK. Meanwhile, some retailers are trying to convince potential customers that they can order online, then pick up the merchandise at the store. Retailers need foot traffic to stay

KEITH CRAIN Editor-in-chief

in business. They'll have to figure out how to entice shoppers to leave their computers and head for the stores. Great customer service is a start. But real estate owners must be becoming a bit nervous when they notice that the traffic at so many malls is off significantly. One anchor that closes leaves a big hole. But some retail is showing signs of life. Shops are opening in downtown Detroit and other downtowns — something we haven’t seen in half a century. Retailing is changing, and there will be some winners and losers — it’s just too soon to tell which is which. Even the smartest folks in retailing haven’t figured it out yet.

NGOs

Believe the system is failing

Business

Media

Government

51%

47%

37%

29%

57%

58%

50%

53%

52%

58%

47%

62%

NGO = nongovernment organization Source: 2017 Edelman Trust Barometer J 53 percent of people believe business and industry are moving too fast. J 50 percent believe globalization is taking us in the wrong direction. J 60 percent believe they’re losing their jobs due to a lack of training and foreign competition, and almost as many blame immigrants and automation. At the same time, among people who are still uncertain about whether the system is failing, businesses are far more trusted than government or the media. In a telephone interview, Edelman called the business community “the last retaining wall” holding back a complete collapse in the public’s faith in the future.

“Since the Great Recession, businesses kept their head down and said nothing because they’re afraid of getting whacked by an angry public,” Edelman told me. “That’s exactly the wrong thing to do because people are desperate for leadership and solutions.” Smart business people will fill that breach, he said. “What people want the most is to be trained for the future. That’s a big deal. That’s something we can do in business,” Edelman said. Americans also want their companies to be good corporate citizens and to treat their customers fairly, which is why United Airlines’ mistreatment of

a passenger was a public relations crisis — not just for one company, Edelman said, but for the entire American business community. “This is the time for businesses to step up and do job training,” he continued. “Try to give a forward-looking policy. If we’re going to have driverless vehicles or have stores with no salespeople, who is going to train Americans for the next generation of jobs?” The answer, he said, should be big business. Corporate America should get in front of the problem before politicians prescribe half-baked solutions. “This is an opportunity for businesses to come up with good public policy and not wait for government to hit you over the head with all kinds of regulations,” he said. Framing and funding public policy on this level is something we’ve come to expect of Congress, not C-suites. But Edelman has a question for metro Detroit’s business leaders: Who do you trust to get this right? Ron Fournier is publisher and editor of Crain’s Detroit Business. Catch him at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760.

LETTERS Bank of America has commitment to region

Editor: In her March 12, 2017, article (“Michigan National innovator Stoddard’s saga offers some lessons for today”), Mary Kramer made several statements about the commitments Michigan’s banks, like ourselves, have made to the community and the customer experience. Many of these statements deserve some updating, as they certainly don’t reflect the depth and breadth of Bank of America’s commitment to the region and the state of Michigan. As one of Michigan’s prominent financial institutions, Bank of America is engaged and committed to our community through consumer product innovation, local philanthropy and volunteerism, workforce development and job training and business lending. Let’s start with product innovation. Bank of America is the national leader in mobile banking, the fastest-growing element of the consumer banking segment. In fact, Bank of America’s mobile banking app is consistently voted among the best. We’ve also extended that innovation to our MyMerrill experience for investors and CashPro experience for commercial banking clients. None of these innovations would be possi-

ble without Bank of America’s $3 billion annual investment in client-facing software development. With respect to the community, Bank of America annually contributes in excess of $3 million to nonprofit organizations delivering critical services and programs to Michigan’s residents and our economy. Our approximately 1,700 Bank of America employees throughout Michigan gave more than 25,000 volunteer hours last year to help alleviate issues surrounding concerns of hunger, housing and jobs. In support of metro Detroit’s revitalization, Bank of America has joined with private, public and philanthropic partners to develop far-reaching programs for our neighbors and neighborhoods. These efforts focus on core issues like workforce development and education; community development and housing, including a 0 percent interest Home Loan Program for Detroit homeowners to help with health and safety issues and alleviate neighborhood blight; and urgent needs like hunger or emergency shelter. With respect to support for Michigan’s economy, last year in Michigan, Bank of America extended more than $440 million in new credit to small business owners and $3.4

billion in loans to commercial business. Our consumer bank also meets the ever-changing needs of our customers through advanced mobile banking services, and our financial centers serve over 1.7 million households in Michigan. With antecedents to 1896, Bank of America is grounded in Michigan communities and sensitive to their needs. We understand that the longterm success of our business is directly tied to how we treat our employees, the responsible and innovative products we offer our customers, as well as the investments we make in our local communities. We’re proud and committed to doing our part to improve the financial lives of Michiganders and moving the Michigan economy forward. Matt Elliott Michigan market president, Bank of America Business Banking Midwest Region executive Send your letters: Crain’s Detroit Business will consider for publication all signed letters to the editor that do not defame individuals or organizations. Letters may be edited for length and clarity. Email: rfournier@crain.com

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Keeping news media strong a win for everyone Hardly a day goes by without the news media itself being part of a national story, whether it’s jousting with Trump’s beleaguered press secretary (or the president’s tweets) or Bill O’Reilly getting fired at Fox News. But the real story in media just might be more local: the waning strength of news gathering operations in Michigan. Of course, Crain’s Detroit Business remains the best source of local and regional business news in Southeast Michigan. But looking around the statewide landscape, print, broadcast and even digital newsrooms are shrinking. News has become something of a commodity, and nobody seems to want to pay for it. Advertisers, meanwhile, have more channels than ever to reach their target customers. So revenue has fallen. Daily newspapers have disappeared or reduced publication schedules. The U.S. had about 400 fewer daily newspapers in 2014 than in 1981. A few weeks ago, an accomplished business leader in Ann Arbor confessed to me: “We used to complain bitterly about the Ann Arbor News. Now that (the daily edition is) gone, we really miss it.” Maybe more Ann Arbor companies should have advertised in the paper. Media is a business. That’s one of the points I made at my induction into the Michigan Journalism Hall of Fame earlier this month in East Lansing. Journalism purists may have been surprised, even offended, by my proposing that reporters and editors be at the table when decisions are made about changing business models for their companies. The business folks and the newsroom have to work together to serve readers and advertising clients in new and maybe surprising ways in order to keep newsgather-

TALK ON THE WEB Re: Little Caesars Arena to host Frozen Four, wrestling, basketball Keep filling up our venues - the goal should be as near to 365 days a year use as possible, OK maybe Christmas off. E M Parmelee

After 92 years in Detroit, Simmons and Clark Jewelers refreshes store Congratulations to Simmons & Clark Jewelers and the Simmons family. A great time to upgrade while the downtown is under going a renaissance. Marc

MARY KRAMER Group Publisher

ing efforts strong. Last week, the Detroit chapter of the Society of Professional Journalists celebrated local journalism with its annual awards. It seemed a

smaller gathering than in some years. Crain’s Detroit Business was well represented in the awards — Kirk Pinho, Lindsay VanHulle, Tom Henderson and Dustin Walsh received awards for their work. (Chad Livengood also was honored for reporting at his prior employer.) We’re proud of those awards. One of them was a great reminder of why local journalism matters. In May 2016, Walsh wrote about a man with autism who had three college degrees but couldn’t land a job. That story not only led to a job

for Steven Glowacki, but 25 companies approached the Autism Alliance of Michigan to learn more about employing people with autism. A second story, on a pilot program at Ford Motor Co. for employees with autism, drew another 25 companies. “We’re juggling these 50 companies and overwhelmed by the significant interest of companies who now want to hire individuals with autism,” Autism Alliance CEO Colleen Allen told me last week. And the alliance now has more than 300 job seekers because of

10% SAVINGS When your business is more energy efficient, it’s also more profitable—and DTE Energy wants to help make that happen. Take John Logiudice, owner of Florentine Pizzeria, for example. DTE worked with him to make some small changes that led to big savings. Simply installing a programmable thermostat, sink aerators, LED lights and a prerinse spray valve in the kitchen saved John around 10% a month on his energy bill. If you’d like to manage energy use to save money at your business, visit dteenergy.com/savenow.

Dustin’s work. That’s called impact, the kind that changes lives. This is an important time in the news media business. Without adequate revenue, newsrooms can shrink. And we all lose.

Mary Kramer is group 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.

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SPECIAL REPORT: LAW

D3DAMON VIA ISTOCK

Instilling a healthy corporate culture Avoid what happened at Wells Fargo by ensuring associates meet goals honestly, experts say By Doug Henze

Special to Crain’s Detroit Business

Companies seeking to steer clear of a Wells Fargo & Co.-style ethics breach need to put safeguards — not just performance targets — in place, Michigan business school experts say. The much-publicized banking scandal, where associates opened bogus customer accounts to satisfy management sales goals, resulted in 2,500 employee terminations and the downfall of CEO John Stumpf and community banking head Carrie Tolstedt. Wells Fargo, which agreed in September to pay $185 million in fines, has clawed back millions of dollars in compensation from those leaders. “It’s a lesson that needs to be renewed every 10 years, it seems,” said Robert M. Wiseman, senior associate dean of the Eli Broad College of Business at Michigan State University. “When you set up an incentive system to encourage people to do one thing, you will often get something completely different that you didn’t anticipate.” When management reinforces a desired outcome with a reward, such as a bonus, or with a punishment — termination for failing to hit a goal, for example — employees often find a way. “These people are not dumb,” Wiseman said. “They’re going to figure out the shortcut to get that outcome. (In Wells Fargo’s case), the

easiest way to do it is not to convince the customer. It’s just to open the accounts. The customer might say, ‘No.’” The mistake managers make, in the name of efficiency, is to assume incentives alone will get the job done, Wiseman said. “You need more than just the incentive system,” Wiseman said. “You need monitoring or culture.” With the monitoring model, managers act more like sports referees, using oversight to ensure employees meet goals honestly. Instilling a healthy corporate culture can result in associates doing the right thing voluntarily. “There are very clear values communicated: This is who we are,” Wiseman said. Businesses can have the best of both worlds — strong financial performance and principled behavior, experts agree. “High goals embedded in an ethical culture is much less likely to lead to a bad result,” said Dave Mayer, associate professor of management and organization at the Stephen M. Ross School of Business at the University of Michigan. Creating that culture begins before employees are hired. “Who are you recruiting?” Mayer asked. And once an associate is hired, how are they socialized?

“You need more than just the incentive system. You need monitoring or culture.” Robert M. Wiseman, senior associate dean of the Eli Broad College of Business at Michigan State University.

While recently teaching a class of executives, Mayer posed this question: If someone in your organization was a high performer, but also a bit of a jerk, how likely would it be that he or she were promoted? The answer surprised him. “A number of people in the class said that would be the norm — as long as they’re a high performer,” he said. “That would be a red flag for me.” There’s nothing wrong with using incentives, Mayer points out. Studies have shown it’s an effective way to drive performance. But managers who focus only on financial results are asking for trouble, he said. “It’s at the root of a lot of corporate scandals,” he said, pointing to the financial crisis of 2008, which led to the Great Recession, and to General Motors Co.’s reluctance to recall vehicles with faulty ignition switches, which were blamed for

deaths in several accidents. Mayer encourages managers to be proactive in heading off bad behavior. With a stressful deadline coming up, a supervisor needs to remind a team, “Let’s make sure we’re not stepping over the line,” he said. Mayer also cautions against quashing dissent in the ranks. Whistleblowers often come forward at their own peril. “There are stories about people being vilified for speaking out against company norms,” he said. “Make sure they are celebrated, rather than punished. You have to err on the side of being overly supportive and grateful of the feedback or employees simply won’t speak up.” Most corporations put employees through some type of training — either online or by bringing in a consultant — to try to encourage ethical behavior, Mayer said. But its effectiveness depends on whether workers believe it has more than public relations or legal value. “Employees have to believe management really cares about it,” he said. Genuinely expecting moral behavior from your employees, while raiding the company coffers, won’t fly, either. “Employees are hypersensitive to hypocrisy,” Mayer said. One way corporate leaders get themselves and their companies into trouble is by being SEE ETHICS, PAGE 11

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Amid tough talk on immigration, fewer firms apply for H-1B visas President Donald Trump signed an executive order last week raising the bar for companies to hire foreign skilled workers. But if applications for H-1B worker visas are any indication, his tough talk on immigration is already making companies reluctant to hire foreign workers. Trump traveled to a manufacturing plant in Kenosha, Wis., to sign the order, which was designed to curb the use of H-1B worker visas. These visas allow employers to bring in foreign workers for three years to fill jobs they can’t fill with qualified U.S. workers, The Hill reported. The order came only a day after the U.S. Customs and Immigration Services announced a reduction in H-1B visa applications for 2018. USCIS reported 199,000 applications were received for the one-week lottery process that began last week. That was a 15 percent reduction from last year’s total of about 236,000. Experts predicted a record year for H-1B visas. The theory was employers would double down on commititng to a more secure visa than other categories. The experts were wrong. Those same experts now believe that major users of H-1B visas — which have received copious press and angst from politicians over their use of the federal program — may have backed off of mass filings this year. “Maybe the heavy H-1B filers did a lot less — that would be enough (to reduce the applications significantly),” Michael Nowlan, partner and co-leader of the immigration practice group at Clark Hill PLC in Detroit, told Crain’s. The American Immigration Lawyers Association, in a statement to its members, said that India-based IT firms reduced the number of applications for their workers, keeping those jobs in India instead of moving those workers to the U.S. During his presidential campaign, Trump introduced laid-off Americans who were asked to train foreign replacements including at The Walt Disney Co., calling the practice “outrageous” and “demeaning,” The New York Times reported. Disney and others reportedly were issued H-1Bs, only to train those employees in the U.S. before shipping those jobs to countries including In-

ETHICS FROM PAGE 10

hyper-focused on the short term, said Albert Spalding, associate professor in the Mike Ilitch School of Business at Wayne State University. “Stockholders want a long-term view from their manager,” he said. “Don’t look at, ‘What can I do to maximize what’s going on today?’” When incentivizing sales associates, for example, businesses should look at quality of sales, as well as sales totals, Spalding said. Customer satisfaction surveys and customer longevity could come into play. Boards of directors could use the same measuring stick for top executives, Spalding said. Incentives for things such as customer retention — versus unsustainable profit growth

DUSTIN WALSH dwalsh@crain.com

dia. It’s not against the rules because the U.S. jobs were eliminated, therefore not displacing American workers with a foreigner working in the U.S. Under Trump, USCIS and the U.S. Department of Justice have said they will perform more investigations on companies considered “H-1B dependent,” meaning 15 percent or more of their workers are on H-1B visas. In Michigan, the average salary for an H-1B visa application, including extensions, was $72,687.53 in 2015, according to the Department of Labor. Trump’s executive order directed the U.S. Labor, Justice, Homeland Security and State departments to undertake a review of the H-1B program and make recommendations to address the perceived misuse, The Hill reported. This could include moving the wage threshold higher. It’s also expected to raise the qualifications for an H-1B visa applicant — which currently requires applicants to hold a bachelor’s degree or higher. However, if the number of applications received this year is an indicator, the threat of an H-1B overhaul and the White House’s tough stance on immigration appears to already be impacting the H-1B program. Aimee Guthat, a senior attorney at immigration-focused law firm Fragomen, Del Rey, Bernsen & Loewy PLLC in Troy, previously told Crain’s that the anxiety over Trump’s harsh immigration stance was likely to lead to fewer H-1B applications, with immigrants deciding to leave the U.S. for friendlier countries. “While there hasn’t been much in policy, at least nothing with teeth, the perception on immigration has a lot of people afraid for what the future holds and I’ve had discussions with people maybe looking to leave and seek employment outside the U.S.,” Guthat said. through cost-cutting — would create a more stable company. “Compensation that’s mapped to a single factor, like stock price or sales, can tend to create a conflict,” he said. “You sometimes have the entire executive suite focused on, ‘What can we do to jack up the stock price?’” Building a company that avoids legal and ethical pitfalls shouldn’t rest on the shoulders of management alone, Mayer said. Associates need to act ethically themselves, while also pointing out problems to managers in a nonthreatening way that puts the company’s interests first, Mayer said. “Loyalty is a great thing, but if that means you’re not speaking up about an ignition switch or the accounts at Wells Fargo, that’s not doing the greater good for society,” he said.

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C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

CRAIN'S LIST: LARGEST LAW FIRMS

Ranked by number of attorneys in Southeast Michigan Rank

Company Address Phone; website

Top local executive

David Foltyn Honigman Miller Schwartz and Cohn LLP 2290 First National Building, 660 Woodward Ave., chairman and CEO Detroit 48226-3506 (313) 465-7000; www.honigman.com

Total local attorneys Other Jan. Staff Senior full-time Michigan Worldwide 2017/ Partners Associates attorney attorney attorneys Jan. Jan. 2016 2017 2017 2017 2017 2017 2017 2017 Representative clients

207 222

248

271

Dickinson Wright PLLC 500 Woodward Ave., Suite 4000, Detroit 48226 (313) 223-3500; www.dickinsonwright.com

William Burgess CEO

172 172

131

216

440

Dykema Gossett PLLC 400 Renaissance Center, Detroit 48243 (313) 568-6800; www.dykema.com

Peter Kellett chairman and CEO

139 148

166

420

USAA, Ford Motor Co., JP Morgan Chase, General Motors, Toyota, ITG Brands

Bodman PLC Sixth Floor at Ford Field, 1901 St. Antoine St., Detroit 48226 (313) 259-7777; www.bodmanlaw.com

Ralph McDowell chairman

135 135

139

Miller, Canfield, Paddock and Stone PLC 150 W. Jefferson Ave., Suite 2500, Detroit 48226-4415 (313) 963-6420; www.millercanfield.com

Michael McGee CEO

132 135

172

205

Comerica Bank; Archdiocese of Detroit; Blue Cross Blue Shield of Michigan; Lear Corp.; Ford family; Meridian Health Plan; The Huntington National Bank; Art Van Furniture; Cerberus Capital Management FCA US, Comerica, Consumers Energy, University of Michigan, City of Detroit, Barton Malow, Siemens, Valassis Communications, Olympia Development

Butzel Long PC 150 W. Jefferson Ave., Suite 100, Detroit 48226 (313) 225-7000; www.butzel.com

Justin Klimko president and managing shareholder Bill Sider CEO and managing partner

119 119

119

143

108 108

108

Sun Communities, Inc., Redico, Strength Partners, Inland Pipe Rehabilitation.

John Hern CEO

107 119

132

315

Dennis Cowan Plunkett Cooney PC 38505 Woodward Ave., Suite 100, Bloomfield Hills president and CEO 48304 (248) 901-4000; www.plunkettcooney.com

90 98

127

147

Bank of America, Beaumont Health System, First American Title Insurance Co., Frankenmuth Mutual Insurance Co., Huntington National Bank, Liberty Mutual Insurance Co., Michigan Municipal League Liability & Property Pool, PNC Bank, State Farm Insurance, Wal-Mart Stores NA

4 5 6 7

Jaffe Raitt Heuer & Weiss PC 27777 Franklin Road, Suite 2500, Southfield 48034-8214 (248) 351-3000; www.jaffelaw.com

Clark Hill PLC 500 Woodward Ave., Suite 3500, Detroit 48226 (313) 965-8300; www.clarkhill.com

9 10

Kitch Drutchas Wagner Valitutti & Sherbrook 1 Woodward Ave., Suite 2400, Detroit 48226-5485 (313) 965-7900; www.kitch.com

Mark Wisniewski chairman and CEO

87 95

101

Brooks Kushman PC 1000 Town Center, 22nd Floor, Southfield 48075 (248) 358-4400; www.BrooksKushman.com

Mark Cantor president

80 78

Ford Motor Co., Lear Corp., 5-Hour Energy, HoMedics, MASCO, Wayne State University, USC Stevens Institute for Innovation, Office Depot

Howard & Howard Attorneys PLLC 450 W. Fourth St., Royal Oak 48067 (248) 645-1483; www.howardandhoward.com

Mark Davis president and CEO

70 70

134

BASF Corp., BMO Harris Bank N.A., Konami Gaming Inc., Martinrea International Inc., Stryker Corp., ThyssenKrupp

Garan Lucow Miller PC 1155 Brewery Park Blvd., Suite 200, Detroit 48207 (313) 446-1530; www.garanlucow.com

Robert Goldstein chairman of executive committee

63 60

Executive committee

62 70

Giarmarco, Mullins & Horton PC 101 W. Big Beaver Road, 10th Floor Columbia Center, Troy 48084-5280 (248) 457-7000; www.gmhlaw.com

Harness, Dickey & Pierce PLC 5445 Corporate Drive, Suite 200, Troy 48098 (248) 641-1600; www.hdp.com

Executive committee

60 57

114

Zausmer, August & Caldwell PC 31700 Middlebelt Road, Suite 150, Farmington Hills 48334 (248) 851-4111; www.zac.com

Mark Zausmer managing shareholder

60 45

55 59

Philadelphia Insurance, State Farm Insurance, ITC Holdings, Michigan Department of Transportation, Everest National Insurance Co., Auto Owners Insurance Co., EMC Insurance Co., SMART, WalMart Stores, Great Lakes Water Authority NA

55 55

52 52

51 51

Auto accident victims; Social Security disability; dog bite victims; premises liability

50 47

49 49

15 17 17 19 20 21 22

Elaine Sawyer, Hewson & Van Hellemont, P.C. 25900 Greenfield Road, Suite 650, Oak Park 48237 Michael Jolet, Diane Hewson, Robert (248) 968-5200; www.vanhewpc.com Steffes senior partners Executive committee Kerr, Russell and Weber PLC 500 Woodward Ave., Suite 2500, Detroit 48226 (313) 961-0200; www.kerr-russell.com Bruce Truex, Secrest, Wardle, Lynch, president and coHampton, Truex and Morley P.C. managing partner; 2600 Troy Center Drive, P.O. Box 5025, Troy Mark Morley, co48007-5025 managing partner (248) 851-9500; www.secrestwardle.com Michael Morse The Mike Morse Law Firm attorney/owner 24901 Northwestern Highway, Suite 700, Southfield 48075 (248) 350-9050; www.855mikewins.com Neil MacCallum, Collins Einhorn Farrell PC 4000 Town Center, Ninth Floor, Southfield 48075 chairman; Michael Sullivan, president (248) 355-4141; www.ceflawyers.com Sullivan, Ward, Asher & Patton PC 25800 Northwestern Highway., 1000 Maccabees Center, Southfield 48075-8412 (248) 746-0700; www.swappc.com

Anthony Asher president and CEO

This list is an approximate compilation of the largest law firms in Wayne, Oakland, Macomb, Washtenaw and Livingston counties. Total number of attorneys does not include of counsel. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the law firms. Firms with headquarters elsewhere are listed with the address and top executive of their main Detroit-area office. NA = not available. If you believe your company should be on this list, contact Sonya Hill at shill@crain.com.

An expanded version of this list is available with a Crainâ&#x20AC;&#x2122;s data membership at crainsdetroit.com/lists

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

CRAIN'S LIST: LARGEST GREATER MICHIGAN LAW FIRMS

Ranked by number of attorneys outside Southeast Michigan Rank

Company Address Phone; website

Top Michigan executive

Outstate attorneys Jan. 2017/ 2016

Worldwide attorneys Jan. 2017/ 2016 Michigan office locations

Representative clients

Warner Norcross & Judd LLP 900 Fifth Third Center, 111 Lyon St. NW, Grand Rapids 49503 (616) 752-2000; www.wnj.com

Douglas Dozeman managing partner

156 163

195 201

Grand Rapids, Southfield, Macomb County, Midland, Muskegon, Kalamazoo, Holland, Lansing

Amway, Consumers Energy, Dow Chemical, Fifth Third Bank, MAHLE Industries, Perrigo, Robert Bosch, Spectrum Health, Stryker, Whirlpool

David Khorey and Thomas Kyros, managing partners

122 117

158 151

Miller Johnson 45 Ottawa Ave. SW, Suite 1100, Grand Rapids 49503 (616) 831-1700; www.millerjohnson.com

Craig Mutch managing member

99 101

Grand Rapids, Grand Haven, Kalamazoo, Lansing, metro Detroit, Novi, Ann Arbor, Hastings Grand Rapids, Kalamazoo

Varnum LLP 333 Bridge St. NW, Grand Rapids 49501-0352 (616) 336-6000; www.varnumlaw.com

Foster Swift Collins & Smith PC 313 S. Washington Square, Lansing 48933 (517) 371-8100; www.fosterswift.com

Michael Sanders president

75 72

97 91

Lansing, Southfield, Grand Rapids, Detroit, Holland, St. Joseph

Smith Haughey Rice & Roegge PC 100 Monroe Center, Grand Rapids 49503 (616) 774-8000; www.shrr.com

William Jack, Jr. CEO

68 63

78 68

Grand Rapids, Traverse City, Holland, Muskegon, Ann Arbor

Dickinson Wright PLLC 500 Woodward Ave., Suite 4000, Detroit 48226 (313) 223-3500; www.dickinsonwright.com

William Burgess CEO

44 43

440 415

Ann Arbor, Troy, Detroit, Grand Rapids, Lansing, Saginaw

Rhoades McKee PC 55 Campau Ave. NW, Suite 300, Grand Rapids 49503 (616) 235-3500; www.rhoadesmckee.com

Paul McCarthy president, executive committee member

43 45

Holland, Grand Rapids

41 36

271 276

Ann Arbor, Bloomfield Hills, Detroit, Grand Rapids, Kalamazoo, Lansing

Detroit Institute of Arts, Diplomat Pharmacy Inc., General Motors LLC, Huron Capital Partners LLC, Kellogg Co., Ramco-Gershenson Properties Trust, Quicken Loans Inc., Rockbridge Growth Equity LLC, Taubman Centers Inc., Trinity Health FCA US, Comerica, Consumers Energy, University of Michigan, City of Detroit, Barton Malow, Siemens, Valassis Communications, Olympia Development, Wells Fargo Bank NA Bank of America, Beaumont Health System, First American Title Insurance Co., Frankenmuth Mutual Insurance Co., Huntington National Bank, Liberty Mutual Insurance Co., Michigan Municipal League Liability & Property Pool, PNC Bank, State Farm Insurance, Wal-Mart Stores NA

David Foltyn Honigman Miller Schwartz and Cohn LLP 2290 First National Building, 660 Woodward Ave., Detroit chairman and CEO 48226-3506 (313) 465-7000; www.honigman.com

Benteler Automotive Corp., Bronson Healthcare, Covenant Health, Gordon Food Service, Kellogg Co., Metro Health, Spectrum Health, Stryker Corp., Trinity Health, Washtenaw County NA

Miller, Canfield, Paddock and Stone PLC 150 W. Jefferson, Suite 2500, Detroit 48226 (313) 963-6420; www.millercanfield.com

Michael McGee CEO

40 41

205 254

Detroit, Ann Arbor, Grand Rapids, Kalamazoo, Lansing, Troy

Plunkett Cooney PC 38505 Woodward Ave., Suite 100, Bloomfield Hills 48304 (248) 901-4000; www.plunkettcooney.com

Dennis Cowan president and CEO

37 32

147 142

Bloomfield Hills, Detroit, Flint, Grand Rapids, Kalamazoo, East Lansing, Marquette, Mt. Clemens, Petoskey

Fraser Trebilcock Davis & Dunlap PC 124 W. Allegan, Suite 1000, Lansing 48933 (517) 482-5800; www.fraserlawfirm.com

Brian P. Morley president

36 34

40 36

Lansing, Detroit, Grand Rapids

Mika Meyers PLC 900 Monroe Ave. NW, Grand Rapids 49503 (616) 632-8000; www.mikameyers.com

Douglas Donnell managing member

33 33

Grand Rapids, Caledonia, Rockford, Manistee

Dykema Gossett PLLC 400 Renaissance Center, Detroit 48243 (313) 568-6800; www.dykema.com

Peter Kellett chairman and CEO

27 31

420 436

Ann Arbor, Bloomfield Hills, Detroit, Grand Rapids, Lansing

USAA, Ford Motor Co., JP Morgan Chase, General Motors, Toyota, ITG Brands

Thrun Law Firm PC 2900 West Road, East Lansing 48823 (517) 484-8000; www.thrunlaw.com

Gordon VanWieren president

26 25

26 28

East Lansing, Novi, Grand Rapids, Traverse City

Clark Hill PLC 500 Woodward Ave., Suite 3500, Detroit 48226 (313) 965-8300; www.clarkhill.com

John Hern CEO

25 24

315 292

Birmingham, Detroit, Grand Rapids, Lansing

Braun Kendrick Finkbeiner PLC 4301 Fashion Square Blvd., Saginaw 48603 (989) 498-2100; www.braunkendrick.com

Timothy Curtiss managing partner

24 24

Saginaw, Midland, Mount Pleasant

McShane & Bowie PLC 99 Monroe Ave. NW, Suite 1100, Grand Rapids 49503 (616) 732-5000; www.msblaw.com

John Grant managing partner

22 20

Grand Rapids

General Motors, NSI- A Division of West Bend Insurance, Saginaw Valley State University, Frankenmuth Mutual Insurance, Merrill Tool, Dow Chemical, McLaren Health Care, Great Lakes Bay Health Centers NA

Barnes & Thornburg LLP 171 Monroe Ave. NW, Suite 1000, Grand Rapids 49503-2694 (616) 742-3930; www.btlaw.com

Robert Sikkel Grand Rapids office managing partner

19 21

493 472

Grand Rapids

Price Heneveld LLP 695 Kenmoor Ave. SE, Grand Rapids 49546 (616) 949-9610; www.priceheneveld.com

Kevin Grzelak managing partner

18 16

Grand Rapids

Scholten Fant PC 100 N. Third St., Grand Haven 49417 (616) 842-3030; www.scholtenfant.com

Robert Sulliivan managing Shareholder

18 17

Grand Haven

Loomis, Ewert, Parsley, Davis & Gotting PC 124 W. Allegan St., No. 700, Lansing 48933 (517) 482-2400; www.loomislaw.com

Kevin Roragen president

18 21

Lansing

Lewis, Reed & Allen PC 136 E. Michigan Ave., Suite 800, Kalamazoo 49007 (269) 388-7600; www.lewisreedallen.com

William Redmond managing partner

17 15

0 15

Kalamazoo

Cunningham Dalman PC 321 Settlers Road, P.O. Box 1767, Holland 49422-1767 (616) 392-1821; holland-law.com

Jeffrey Helder managing partner

15 16

Holland

13 14

65 66

Troy, Grand Rapids, Lansing

Secrest, Wardle, Lynch, Hampton, Truex and Morley PC Bruce Truex, president 2600 Troy Center Drive, P.O. Box 5025, Troy 48007-5025 and co-managing partner; Mark Morley, (248) 851-9500; www.secrestwardle.com co-managing partner

9 10

16 17 18

Wolverine World Wide Inc., Gordon Food Service Inc., Trinity Health/Mercy Health Partners, Faurecia NA, Amway, Quanex Building Products Inc., Pilkington North America Inc., Rockwell Collins, The Dow Chemical Co., and Whirlpool Corning, Ford Motor, Gentex Corp., LECO, NASA, Quality Edge, SAF-Holland, Schwabe, Steelcase, Whirlpool Corp.

This list is an approximate compilation of the largest law firms with a presence outside of Wayne, Oakland, Macomb, Washtenaw and Livingston counties. Total number of attorneys does not include "of counsel." It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the law firms. Firms are listed with the address and top executive of their main Michigan office. NA = not available. If you believe your company should be on this list, contact Sonya Hill at shill@crain.com.

An expanded version of this list is available with a Crainâ&#x20AC;&#x2122;s data membership at crainsdetroit.com/lists

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

DEALS & DETAILS

CONTRACTS

Qualitech, Bingham Farms, a technology integrator and software reseller, was selected by Property Services Group Inc., Bloomfield Hills, an asset management firm, to install its hosted VOIP phone system. Website: qualitech.net.

Road, Van Buren Township. Telephone: (734) 325-7567. Website: whichwich.com.

website. Website: downtownplymouth.org.

J Dominos Pizza Inc., Ann Arbor, a pizza delivery franchise, has opened a store in Cyberjaya, Malaysia. Website: dominos.com.

EXPANSIONS

NEW SERVICES

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

TUESDAY APRIL 25

“We recently switched to imageOne. Not only was it a substantial cost savings, but the overall experience has been extraordinary.” -Michael P. Kolb Chief Information & Security Officer Dickinson Wright

Starting Up: An Introduction to Michigan’s Entrepreneurial Ecosystem.

9:30-11 a.m. Macomb-Oakland University Incubator. John Eaton, client strategist for the Macomb-Oakland University Incubator, will discuss resources the state of Michigan offers including: business incubators, SmartZones, various support services, university technology acceleration and commercialization, and funding programs. Velocity Center, Sterling Heights. Free. Contact: Joan Carleton, phone: (586) 884-9324; email: macinc@oakland.edu.

THURSDAY APRIL 27

How to Use Social Media to Grow Your Business. 8-11 a.m. National Asso-

One Of The World’s Top Sandler Training Companies

Learn how to create an ELITE team to take your company to the next level! Murray Feldman

WWJ Business Editor

Featuring Gerry Weinberg

ciation of Women Business Owners. Best practices to promote a business; tip and tricks to maximize exposure; how to stay on top of the ever changing social mediums; key to personal vs. business use. Presenter is Deidre Bounds, CEO of Ignite Social Media. Bank of America, Troy. Free members; $15 nonmembers. Website: nawbogdc. org

FRIDAY Alana Nicol

CEO of President of Gerry Weinberg & Associates, Inc.

If you’re a CEO, President or Business Owner, who is: • frustrated with unpaid consulting and how long it takes to close business? • unsure your existing salespeople have what it takes to grow your company? • disappointed that your vision isn’t met?

Wednesday, May 17th 11:30 AM – 2:00 PM Andiamo Bloomfield Twp. Investment: Sponsored by Gerry Weinberg & Associates and WWJ Newsradio

To Register or For More Information, Visit: www.gerryweinberg.sandler.com or Call (248) 353-4030 | RSVP Required Registration must be confirmed by a team member from Gerry Weinberg & Associates, Inc.

J The Plymouth Downtown Development Authority, Plymouth, launched a new mobile friendly

APRIL 28

13th Annual MHCC Public Policy & Economic Forum Breakfast. 7:30-10

a.m. Michigan Hispanic Chamber of Commerce. Topic: “Growing Hispanic Influence in America: From the Ballot Box to the Grocery Store.” Speakers include Stacie de Armas, vice president of Strategic Initiatives & Consumer Engagement at Nielsen; and producer and media strategist Jenny Alonzo, who serves as the co-chair of the Nielsen Hispanic Latino Advisory Council. Also featured will be HBE owner and CEO Anita-Maria Quillen from Diversified Engineering & Plastics. MGM Grand, Detroit. $100. Contact: Laura Bates, email: policy@ mhcc.org Comerica Bank Women’s Business Symposium. 11:30 a.m.-3 p.m. Key-

note speaker: Leeza Gibbons, TV host and author, on “Fierce Optimism: Seven Secrets for Playing Nice and Winning Big.” Panelists include: Florine Mark, president and CEO, the WW Group; Jeanette Pierce, founder and executive director, Detroit Experience Factory; Lydia Gutierrez, president and

CEO, Hacienda Mexican Foods; Tanya Allen, president and CEO, ForeverFresh. Marriott Troy. $60; $500 for table of 10. Website: http:// events.comerica.com/wbsmi

UPCOMING EVENTS

Fixing Michigan’s Talent Crisis. 11:30 a.m.-1:30 p.m. May 1. Detroit Economic Club. Learn how employers are closing the gap between the skills they need to run their businesses and the skills available in today’s workforce. Speakers inCynthia Pasky clude: Timothy Meyer, chancellor, Oakland Community College; Cynthia Pasky, founder, president and CEO, Strategic Staffing Solutions; Andra Rush, Andra Rush founder, president and CEO, The Rush Group LLC. Moderator is Nolan Finley, editorial page editor, The Detroit News. MotorCity Casino Hotel, Detroit. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org. Corporate Responsibility Summit. 8:30 a.m.-4:30 p.m. May 2. Automotive Industry Action Group. Global business issues today require companies to manage myriad topics ranging from worker rights and environmental management to innovation, and the growth of legislative and customer mandates. Suburban Collection Showplace, Novi. $720 member, $920 nonmember. Contact: Greg Creason, phone: (248) 358-9775; email: gcreason@aiag. org; website: http://bit.ly/aiagCRsummit2017 Small Business Workshop on Business Sustainability. 7:30 a.m.-1 p.m.

May 3. The Lee Group. A panel will talk about what it takes to become a sustainable enterprise. Breakout sessions will focus on: knowing customers and potential customers, leadership and skills required to get to the next level, managing numbers and understanding a business model, and effectively amplifying messages in a cost-effi-

cient manner. David Zilko, president and CEO, Fuel Leadership, will provide the opening keynote comments while Carla Walker-Miller, president and CEO, Walker-Miller Energy Services LLC, will provide closing comments. TechTown, Detroit. $75. Contact: Mark Lee, phone: (734) 507-0866; email: msl60@comcast.net; website: http://leegroupinnovation.com/ small-business-workshop/ Creating a Sales-Centric Organization. 8-10 a.m. May 3. Inforum. Find

out how to use every customer touchpoint — from the receptionist to the CEO — to enhance customer engagement with a company. Create tools that attract, gain, retain, and influence customers’ behavior. Presented by Cynthia Barnes, sales performance coach. Michigan. com, Detroit. $60 members; $85 nonmembers. Website: inforummichigan.org Hacking Health Windsor-Detroit III. 5 p.m. May 5 to 4 p.m. May 7. WEtech Alliance and TechTown Detroit. A weekend-long cross-border hackathon for healthcare innovation with IT and healthcare professionals across the US-Canada border to collaborate, dream up and design apps for patient-centric care. TechTown, Detroit. $35 Canadian. Website: https://www.eventbrite.ca/e/ hacking-health-windsor-detroitiii-tickets-32057192927 Automotive Roundtable: Staying Relevant in a Time of Revolutionary Industry Transformation. 5-8 p.m. May

17. Marketing and Sales Executives of Detroit. Panelists include: Julie Martin, vice president sales, Hella; Jim Seta, global vice president, automotive bearing sales, SKF USA Automotive. Moderator: Glenn Stevens, vice president, MICHauto, Detroit Regional Chamber. Marriott, Southfield. $50 member; $65 nonmember. Website: www. msedetroit.org Calendar guidelines. Visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

Report: Gig work could prevent working poor from getting ahead By Lindsay VanHulle

Crain’s Detroit Business/Bridge Magazine

One workforce trend that could make it harder to lift the working poor into financial stability: The rise of the gig economy. Perhaps best personified by drivers for San Francisco-based ride-hailing companies Uber and Lyft, gig work — that which is hired on short-term contracts or by the task — offers flexibility and, sometimes, a bump in pay for the working poor. But that comes with long-term costs — the lack of a traditional career ladder that offers advancement or health benefits that offer a cushion in tough times. While workers of all stripes can pick up freelance or project jobs to make an extra buck, the gig life poses that particular conundrum for Michigan’s working poor, according to a report out this month by the Michigan Association of United Ways. The report studies the economic plight of a population often referred to as the working poor. In 2009, United Way coined the group ALICE, for “asset-limited, income-constrained but employed.” An ALICE household generally has income above the federal poverty limit, but doesn’t earn enough to afford basic expenses, such as housing and child care. About a quarter of Michigan households can be considered ALICE; four in 10 are either ALICE or impoverished. That rate has persisted since the first Michigan report was issued in 2014. “The nature of work is changing dramatically in Michigan and across the country, and these changes impact ALICE workers disproportionately,” the report’s authors wrote. “The most significant change is that low-wage jobs, especially those in the service sector, are increasingly shifting away from traditional fulltime employment with benefits towards part-time, on-demand or contingent employment with fluctuating hours and few benefits.” Michigan’s labor pool is dominated by low-wage jobs, with nearly two-thirds of all jobs paying less than $20 per hour, according to United Way researchers, citing U.S. Bureau of Labor Statistics data. It’s the prevalence of low-wage jobs in Michigan that has researchers watching the potential effects of the economy’s shift toward project-based work. On one hand, “income earned through alternative and supplemental employment is increasingly critical for many ALICE families,” the authors of the Michigan report wrote. “These positions may help ALICE households who need to fill shortterm gaps in standard employment, and may provide more lucrative opportunities than exist in the traditional employment market.” On the other: “The U.S. Government Accountability Office’s report on the contingent workforce found that core contingent workers are less likely to have a high school de-

gree and more likely to have low family income. They are more likely to experience job instability, have worker-safety issues and feel less satisfied with their benefits and employment arrangements than standard full-time workers.” That GAO report, published in April 2015, reviewed a variety of federal data sources and found that workers unattached to permanent employment are less likely to have benefits provided by an employer and more likely to earn less on an hourly and annual basis than their permanent counterparts. The nature of gig work has drummed up new legal questions, including the definition of “employee” and whether worker protections like overtime pay, paid leave and health benefits extend to contracted workers not permanently on a company’s payroll. It also could make collecting employment data more difficult for these types of studies, said Nancy Lindman, interim CEO of the Michigan Association of United Ways. For that reason, it’s hard to get an accurate count of how many people hold gig jobs in Michigan. Not only that, but available data is undecided on what type of worker — independent contractor, self-employed person, temp laborer and others — should be included in the definition of a contingent worker, and whether people who take on gigs are using them to make ends meet or as a side job to create a financial cushion. Nationally, the share of contractors, freelancers and temp workers increased from an estimated 10.7 percent in 2005 to nearly 16 percent in 2015, according to research published last year by economists at Harvard and Princeton universities. An estimated 53 million Americans freelance, based on the findings in 2014 of a survey of more than 5,000 people commissioned by Freelancers Union and Elance-oDesk, a freelance platform now called Upwork. In a survey last summer, the Washington, D.C.-based Pew Research Center found that 5 percent of Americans earned some income over the past year by using an online job platform to pick up work in information technology or performing data entry. Another 2 percent made money by driving for a ride-hailing company, and 1 percent picked up shopping, delivery or cleaning tasks. “At one end of the spectrum are casual users who perform mostly online tasks in their spare time. These users tend to take on these jobs for modest amounts of money,” wrote Aaron Smith, an associate director of research on internet and technology issues for Pew. “At the other end are dedicated users who rely on the income they earn from these digital platforms to a much greater extent; who are more likely to gravitate towards physical tasks; and whose usage of these platforms

is motivated largely by financial considerations or the need to find work that can fit around the other demands on their time, such as schooling or child care.” Pew’s research found 60 percent of people who use online platforms for work consider the income from that labor “essential” or “important” and are more likely to not have attended college and have lower household incomes. On the flip side, people who use digital networks to sell goods over the internet are more likely to be well-to-do and better-educated, Pew found. “If you retitle ‘dead-end job’ ‘gig,’ then it has cachet,” said Jerry Davis, a management professor at the University of Michigan’s Ross School of Business, who is skeptical of the gig economy’s Jerry Davis: Call ability to conthem tasks, not tribute to ecojobs. nomic mobility. “You shouldn’t call them jobs. They are tasks.” Practically speaking, Davis said, a driver for San Francisco-based Uber isn’t going to be promoted to program the ride-hailing company’s mobile app, which its drivers use to pick up rides. In a December 2015 paper he wrote for the Brookings Institution, Davis argues the shift in American corporate culture away from labor and management toward shareholder interests is one reason why the gig economy has taken hold. He noted that Wal-Mart Stores Inc.’s share price dipped by nearly 3 percent after the Bentonville, Ark.based discount retailer announced plans to raise its starting wage at its U.S. stores to $9 per hour — an estimated $1 billion impact to the company’s bottom line. “That’s a real advantage for people working at Wal-Mart,” Davis said. “They were trying to do the right thing, arguably, here, but Wall Street does not reward you for that.” The question for economists is how people will get ahead in careers when signs indicate that work will be organized on a more impromptu basis, he said. For instance: What happens to an Uber driver if he or she can’t give rides because a child is sick at home or is somehow injured? Davis argues that the answer could look like the generous social safety net in Denmark, which could help workers in the gig economy choose to take on tasks because of their flexibility and short-term nature rather than out of need. A system that provides for gaps in employment or income, health care and retirement, he contends, could help the U.S. avoid becoming a society “with a few rich people and a whole lot of poor people desperately making it from day to day.”

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

Pinnacle Homes targets ‘active adult’ homeowners By Tyler Clifford tclifford@crain.com

A little more than a year ago, Tom Allam and his wife Sandy agreed it was time to downsize. The couple of nearly 50 years was living in northern Washington Township in a 4,000-square-foot home they had built in 1998. With both of their sons out of the house and living on their own, Tom Allam said it was time to move to a place that offered flexibility, leisure and independence. “What motivated us was the extent of the outside work when you have an acre property and a back pond,” he said. “We wanted to move to an easier lifestyle where the snow and the grass is done.” In February, the Allams moved into a newly built ranch-style house in a community in Washington Township near Mound and 26 Mile roads called Glacier Club, part of Bloomfield Hills-based Pinnacle Homes of Michigan LLC’s Aspire Collection. The Aspire Collection is a network of neighborhood developments in Southeast Michigan launched three years ago. They offer about 2,000-square-foot homes with two to three bedrooms, 2 1/2 bathrooms and an attached garage for two to three cars. Pinnacle Homes builds about 2025 homes a year in each of its eight communities, targeting a demographic of people 50 years old and older that Managing Director Howard Fingeroot calls “active adult.” This group is made up of people who are looking to downsize or empty nesters — those whose children are away at college or have moved out, he said. “A majority of the folks that we see, they would do something called age in place,” Fingeroot said. “They’re not looking to retire and move to Florida. They just want a different home and different lifestyle in the place they live.” The active adult is a growing demographic locally and nationally, made up by the baby boomer generation, people born following World War II between 1945 and 1964. It was been the largest American generation in history up until the millennial generation. “Fifty-five is the new 40. They view themselves as being very active,” Home Builders Association of Southeastern Michigan CEO Michael Stoskopf said. “They want ranch style, main floor living with a small basement and a smaller lot. They’d rather be out traveling and biking as opposed to mowing 3 acres of lawn in a 3,000-square-foot house. It creates a more convenient lifestyle, and from a new home construction standpoint that's easy.” The 50-plus demographic has jumped by more than 25 percent since the turn of the millennium, according to U.S. Census records. In 2000, more than 1.2 million people 50 and older lived in Southeast Michigan and more than 76.5 million in the United States. By the 2010 census, more than 1.5 million lived

PHOTOS COURTESY OF PINNACLE HOMES

Homebuyers can select from two to three floor plans, pick a lot and personalize the design of a home as part of Pinnacle Homes’ Aspire Collection.

A rendering of a 2,000-square-foot ranch offered by Pinnacle Homes in its Northridge development in Clarkston. in Southeast Michigan and 99 million across the country. In 2015, those numbers jumped to nearly 1.6 million in Southeast Michigan and nearly 111 million in the United States, the Southeast Michigan Council of Governments and U.S. Census Bureau estimated. With a smaller Generation X and larger millennial generation following baby boomers, Stoskopf said he thinks the active adult market will be sustainable for the next 50 years. “You’ll see a little bit of a dip, but then you’ll get to a point where millennials are going to start to retire,” he said. “The oldest millennial is 37, which sounds surprising. ... In 20 years we’ll have the first two years of the millennial generation turning 55 and then you'll have a volume perspective slightly larger than the baby boomer generation. Will preferences change? That’s how businesses that are addressing the active adult lifestyle are going to have to look at it.” To address the emerging active adult market, Pinnacle Homes al-

lows buyers to pick a plot, choose from two to three floor plans and personalize the design. The home is built within about eight months, Pinnacle’s Fingeroot said. “We’re developers and homebuilders. We develop the subdivision and then we build all the homes,” he said. “These are ranch homes that are highly amenitized. We are not only providing the house, but given the location and everything else we are providing a lifestyle for these buyers.” The Aspire Collection parallels the $1.2 billion planned Blossom Collection led by Auburn Hillsbased Moceri Cos., which in October announced a $300 million development at the Maple Lane Golf Club in Sterling Heights. Pinnacle Homes plans to build more than 500 homes for its Aspire Collection in Clarkston, West Bloomfield, South Lyon, Northville, Canton, Superior Township and Washington Township, Fingeroot said. The communities are made up of as many as 17 homes in the Lega-

cy Hills community in West Bloomfield to 200 homes in Glacier Club. Homes start as low as $300,000 in The Corners at Cherry Hill Village in Canton to $900,000 in Legacy Hills in West Bloomfield. Fingeroot said about 100 homes in the collection have been sold with about 70 fully built thus far. He said the Aspire Collection will exceed more than $250 million in development. The homes are designed by Troybased Martini-Samartino Design Group LLC, Bloomfield Hills-based Alexander V. Bogaerts and Associates PC and Pontiac-based TK Designs Inc. The communities offer maintenance-free luxury ranch home living where the association cuts the lawn, shovels the snow and handles landscaping. Association dues are $100-$200 a month, Fingeroot said, giving residents the freedom to get up and go as they please. Allam, who owns Shelby Township-based Allam Financial Services Group Inc., said the couple’s 2,000-square-foot home backs up to Glacier Club Golf Course and provides access to nearby doctors and shopping, freedom and leisure that he and his wife need. The home is an open concept that connects the kitchen, dining room and family room with windows that overlook a golf course. It’s also close to his office on Van Dyke Avenue and 26 Mile Road, the Macomb Orchard Trail for Sandy to do her daily 4-mile walk, and it’s 10 minutes away from Rochester where they visit frequently. “There are just a lot of factors. At our age, we’re at the point where we said we’re not going to have that outside stuff or stairs,” he said. “And we travel to San Antonio four times a year to see our 11- and 14-year-old grandsons.”

OU selects finalists for president post Oakland University has named the two finalists in its search for a new president: Carl Camden, president and CEO of Kelly Services Inc.; and Ora Hirsch Pescovitz, M.D., former CEO of University of Michigan Health System. Camden, 62, who has been with the Troy-based staffing company for 22 years, said he will step down from Kelly Services effective May 10. Current Executive Vice President and COO George Corona will replace him, Camden said. Camden previously worked as a department chair at Cleveland State University. He earned three degrees by the age of 25: a doctorate from The Ohio State University, a master’s degree at Central Missouri State University Carl Camden and a bachelor's from Southwest Baptist University. “I had long communicated that I wanted to return ultimately to public service after I left the business world and would be open to the right opportunity, and Oakland University became that opportunity,” he said. “In our conversations with Carl (Camden), he has a unique view of the confluence of higher education and jobs,” DeVore said. “It wasn't really that he’s a CEO of a public company (as much) as it was that he’s a CEO of a public staffing company. If you think about where the economy is going in the jobs area, he has a pretty competent background.” The other candidate, Pescovitz, is currently Eli Lilly and Co.’s senior vice president and U.S. medical leader for Lilly Bio-Medicines. She is a renowned pediatric endocrinologist and researcher who has published more than 190 papers and books. She also serves as an adjunct professor of pediatrics at the Indiana University Ora Hirsch School of MediPescovitz cine. “There’s lots of people in this community that know (Pescovitz) and have a high regard for her,” DeVore said. “She’s kind of a prolific fundraiser, for one, but also a very good strategic fundraiser and she has a great story…I really feel like she’s broken a lot of barriers in her career and I think she’d be an inspiration for a lot of people.” The university's board of trustees will vote on the two candidates and announce their decision May 4.

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Macyâ&#x20AC;&#x2122;s closed at Eastland Center in Harper Woods earlier this year, as part of a restructuring of the department store chain.

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retail sales. Jennifer Ward-Batts, an assistant professor at Wayne State University with a specialty in labor and demographic economics, believes the recent national decline in jobs is a correction, or fluctuation, from retailers that over-hired coming out of the Great Recession thanks to better-than-expected consumer sentiment. â&#x20AC;&#x153;Retail trade as a whole is still ahead of pre-Recession figures,â&#x20AC;? Ward-Batts said. â&#x20AC;&#x153;This appears to me to be a leveling off or a correction. I expect retail jobs to remain steady for some time as we see population gains even in a shifting economy.â&#x20AC;? The retail anxiety is almost entirely boiling out of the accelerating decline of department stores, which have been dismantled department by department for more than a decade, said Robert Gibbs, a retail and urban planning expert who is the managing principal of Birmingham-based Gibbs Planning Group Inc. Locally, Macyâ&#x20AC;&#x2122;s Inc. closed stores at Westland and Eastland Center in Harper Woods earlier this year, putting 227 people out of jobs. Sears Holdings Inc. will close its Kmart stores in Plymouth, Roseville, Waterford Township, Westland and Garden City. But these stores arenâ&#x20AC;&#x2122;t losing outright to the internet, but to discount stores like T.J. Maxx, H&M and the various cosmetics stores. â&#x20AC;&#x153;The store closures have been overhyped this year,â&#x20AC;? Gibbs said â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re at a tipping point with department store closures, but itâ&#x20AC;&#x2122;s really rightsizing for the market.â&#x20AC;? Retailers are now faced with complicated metrics for success, much like other industries, such as manufacturing, have become accustomed to. â&#x20AC;&#x153;What weâ&#x20AC;&#x2122;re seeing is the unproductive retail environments closing; stores that were over-spaced and deferred technology investments,â&#x20AC;?

said Ken Nisch, chairman of JGA, a brand strategy and retail design firm in Southfield. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s not uncommon in business and the result will be structural changes, mostly positive ones for shoppers.â&#x20AC;? Nisch and Gibbs join the fray of experts that believe the mall environment, particularly rural and suburban malls, will sunset sooner than later. Not a single new enclosed mall has been built in the U.S. in the past decade. Gibbs said more than half of the nationâ&#x20AC;&#x2122;s indoor malls will close in the next few years as the department stores unravel, which could lead to significant job losses. But those holes are likely to be filled, at least partially, by a shift in retail demand, with stores looking to move from the suburban malls to more dense downtown locations, like Detroit, Royal Oak and Grosse Pointe, Gibbs said. This, however, is not expected to harm the large, higher-end malls like The Somerset Collection in Troy and Twelve Oaks Mall in Novi, Nisch said. â&#x20AC;&#x153;Consumers will always choose Somerset over the Macomb Mall,â&#x20AC;? Nisch said. â&#x20AC;&#x153;The modern consumer wants a certain kind of shopping trip and are willing to drive past one to go to another in a more centralized location with restaurants, theaters, etc.â&#x20AC;? Moving to downtowns puts retailers near the in-demand restaurants, office buildings and housing. Nisch pointed to retailers like Warby Parker and Bonobos, which both recently opened in downtown Detroit, as successful examples of the future of retail â&#x20AC;&#x201D; low-square footage, service-intensive environments that also have an online component. Both retailers serve customers in-store, but ship actual products from their fulfillment centers. Brickand-mortar stores play a crucial presence in online sales, as twothirds of customers purchasing online use a store before or after the transaction, and 55 percent of consumers prefer to use both stores

and online throughout the shopping experience, according to a 2014 study by A.T. Kearney. â&#x20AC;&#x153;They donâ&#x20AC;&#x2122;t need seas of people effectively babysitting inventory,â&#x20AC;? Nisch said. â&#x20AC;&#x153;This provides a high-level sales interface with more workers per square feet.â&#x20AC;? While this condensed retail environment naturally requires fewer employees, those in demand tend to be higher-paid, Ward-Batts said. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re getting rid of cashiers and gaining full-service salespeople,â&#x20AC;? Ward-Batts said. â&#x20AC;&#x153;This is raising wages and helping our economy.â&#x20AC;? Retail sales employment rose nearly 13 percent between May 2012 and May 2016, according to the latest available data from the Bureau of Labor Statistics. Cashier employment rose only marginally at 1.7 percent. The average hourly wage in retail sales in Michigan was $12.54 in May 2016, compared with $10.53 for cashiers, according to BLS data.Ward-Batts said population growth in Michigan and rising household income in Southeast Michigan, particularly Oakland County and Detroit, could lead to more retail to support those areas. The rise of retail in Oakland County and Detroit has led to the lowest retail vacancy rates since 2007, according to a recent retail investment forecast by California commercial real estate firm Marcus & Millichap. The forecast also expects the opening of the QLine streetcar line and Little Caesars Arena to drive more retail investment into Detroit. â&#x20AC;&#x153;People want to put on their dark jeans, as my daughter says, to go downtown to eat and shop,â&#x20AC;? said Nisch. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s part of an experience, not just to stock up on socks. You can do that online now. There are always winners and losers in retail ... and right now the middle is a tough place to be ... and itâ&#x20AC;&#x2122;s not that the whole (retail) thing is deteriorating, itâ&#x20AC;&#x2122;s bifurcating. Just like jobs.â&#x20AC;? Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

MCLOUTH FROM PAGE 1

office of Colliers International Inc. who grew up in nearby Riverview. “It’s a toughy. I’m a betting man and I wouldn’t touch that, even with your money.” The Michigan Department of Environmental Quality and the U.S. Environmental Protection Agency are evaluating whether it should become a Superfund site, said Jim Wagner, Trenton’s city administrator. Being given that designation would bring in federal resources for site cleanup and, at the same time, seek reimbursement from those deemed responsible for any pollution on it — which could make the task of transforming an environmentally difficult property a little easier to swallow. “It can be a turn-off for developers, but it doesn’t have to be,” said Joseph Walczak, environmental quality specialist for the DEQ. “If there are developers interested, the DEQ and EPA will work with them.” Regardless, redevelopment will be a monumental task. “Whether it’s the county, the state or the city of Trenton, now they are the dog with proverbial vehicle by the car bumper, holding on and wonderPeter Rogers: ing what do they Monumental task do,” said Peter for any entity. Rogers, vice president of investment brokerage in the Southfield office of Los Angeles-based CBRE Inc.

Property foreclosure On March 31, the county foreclosed on Detroit Steel Co. LLC, which owns the site at West Jefferson and Sibley Road for unpaid property taxes dating back to 2006, said Wayne County Treasurer Eric Sabree. The entity, which is registered to Michael Wilkinson, had payment plans but had only paid taxes for a couple of the years since then, he said. With the foreclosure, the right-offirst-refusal process begins, with the county offering the property for sale to the state for its fair market value of $4.65 million, Sabree said. If the state declines to buy it by a May 13 deadline, the county would offer it to the city for sale for the unpaid property taxes, less city taxes. If the city declines, the county would have the option to buy it, a decision that would have to be made by Executive Warren Evans’ administration and the county commission, Sabree said. Khalil Rahal, the county economic development director, said he has received interest in the property but declined to say from whom. “There are a lot of development opportunities for the site,” Rahal said. “It has a deep water port. It has three rail lines that go through there, and is close to highways, the airport and the international border. There are only four ways to ship things — road, air, rail and sea — and it has proximity to all of those.”

KIRK PINHO/CRAIN’S DETROIT BUSINESS

Local real estate experts believe the McLouth site is best suited for industrial use. If the state, city and county decline to purchase it, it would go to public auction — perhaps the normal tax-foreclosure auctions held in September and October, or a special auction before those, Sabree said. “The goal of the city and the county is to have a developer before an auction,” Sabree said. About two years ago, Colliers International listed the site on behalf of Detroit Steel for sale for $42 million. Any redevelopment plan would be the latest in a long string of failed attempts to revive the plant or bring an entirely new use to the site. In 2008, then-Mayor Gerald Brown said a New York investor had planned to invest hundreds of millions in the site. Richard Barr, a partner at Detroit-based Honigman Miller Schwartz and Cohn LLP, represented the property owner, Michael Wilkinson, in the negotiations. Last week, Barr said he hadn’t represented Wilkinson, who bought the property in 1996 out of bankruptcy, in several years. There was a plan in the mid 2000s to transform the site into what was called “Bay Village of Trenton,” a massive and ultimately failed plan to bring 2,400 residential units, 600,000 square feet of retail, 35 acres of green space and a marina, the Michigan Economic Development Corp. said in a memo at the time.

store and transfer bulk materials, the July 2016 report says. Wagner says 19,000 tons of sugar cane sit in piles on the site, and a DEQ report says other materials there include steel, aluminum and salt.

EPA response In 2009, contaminated groundwater from the Moroun-owned portion of the site leaked out into West Jeffer-

Best use? Local real estate experts believe the McLouth site is best suited for industrial use rather than a complete transformation into a mixed-use development. The trouble is finding the right user who doesn’t mind the location or the cleanup, said Roberts. “One of the nice things about living

in Wyandotte, Trenton or Riverview is that you’re kind of removed from things. That’s part of its charm and attraction,” he said. “But for businesspeople, it just seems so far away from the freeways and things of that nature.” Others with first-hand experience with the site think mixed-use redevelopment is likely out of the question. “We looked at this site years ago when Wilkerson was involved,” said Larry Goss, executive vice president of Bingham Farms-based Core Partners LLC. “Ultimately I think some form of intermodal site probably is the best use. There are much better mixed use sites these days to choose from.” Brad Viergever, associate broker and principal for Southfield-based Signature Associates, has taken clients through the site for possible redevelopment. Most were eying industrial use, he said. CBRE’s Rogers agreed. “It may be a great location for multifamily and mixed-use development, but the cost to develop and clean it up may be prohibitive where you can’t get that price point back out of it,” he said. “And maybe that kicks you back into the industrial.” Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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Materials on site When Detroit Steel purchased the site and McLouth Steel’s assets during its 1996 Chapter 11 bankruptcy case for $31 million plus $16.9 million to creditors, it was about 273 acres and stretched across Trenton’s northern border into Riverview, according to DEQ reports from December 2014 and July 2016. Then in 2000, Manuel “Matty” Moroun’s Crown Enterprises Inc. purchased 76 acres on the north end of the site — 36 in Trenton and 40 in Riverview — from Detroit Steel. (A spokesman for Moroun declined to comment on rumors that he was interested in buying the foreclosed property now.) From 1954 to 1996, the property operated as a steel mill, using blast furnaces, basic oxygen furnaces, electric arc furnaces, a hot strip rolling mill, soaking pits and pickle lines, according to a July 2016 DEQ inspection report. Some of the building space is being used as an intermodal terminal to

son Avenue, the DEQ’s Walczak said. A passing motorcyclist subsequently slid and fell into the water. He suffered caustic burns, Walczak said. That was one of three incidents — one, a fire, and another, PCBs (polychlorinated biphenyls) from contaminated electrical equipment leaking into the ground — requiring emergency EPA response. Those three incidents helped trigger the site being considered for the National Priorities List, being placed on which qualifies them for Superfund status. In 2008-09, the EPA spent $2 million removing more than 3,700 PCB-contaminated capacitors, almost 40,000 gallons of PCB oil and almost 1,900 containers of contaminated waste, according to the December 2014 DEQ report.

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HEALTH FROM PAGE 3

“We don’t want to compromise the vulnerable, so we need to move slowly in the process,” said Canfield, a family physician. “The statewide PIHP will contract with the community mental health programs and their providers,” he said. “There won’t be any changes at the provider level.” Willie Brooks, CEO of the Oakland County Community Mental Health Authority, said moving to a statewide PIHP would be a disaster for vulnerable people served by mental health organizations because they would lose the benefits of local administrative control. “Just because you make it one entity doesn’t mean you reduce anything. You still have to manage functions and take on reporting and contracting requirements,” said Brooks. “It’s a terrible idea to reduce (the number of PIHPs), and the people you serve are not having their best interests considered.” The House budget also would ask MDHHS to work with any willing community mental health agency and Medicaid health plan that operates in Kent County to test a full physical and behavioral inteDom Pallone: A grated care plan. pilot removes Under that barriers. plan, the local mental health agency and one or more Medicaid HMOs would join forces to manage Medicaid patients in that market.

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

However, Dom Pallone, executive director of the Michigan Association of Health Plans, said he wants to ask legislators to tweak the final language to allow for Medicaid health plans to solely manage the integrated pilot program. “We also believe that a pilot that removes financial barriers to care by utilizing highly regulated health plans can meet the core values published in the 298 Facilitation Workgroup report,” Pallone said. Canfield said many of the details of the House boilerplate would have to be refined by MDHHS before going into effect and referred questions to MDHHS staff. But officials with MDHHS, who would design the pilot, declined to comment last week. Meanwhile, the Senate MDHHS appropriations subcommittee approved a new boilerplate and a revised Section 298 boilerplate of their own. The committee voted to continue improving the current system, but also develop an unspecified number of Medicaid health plan pilot programs to integrate behavioral and physical health services and work toward a single contracting model by Sept. 30, 2020. Under the Senate plan, Michigan’s 11 Medicaid HMOs could eventually manage both the state's $9 billion physical health and $2.6 billion behavioral health system. Future state Legislatures would have to approve any final reform plan. HHS Subcommittee Chairman Jim Marleau, R-Lake Orion, said he supports Medicaid health plan pilots to integrate physical and behavioral health. “We need a pilot to see how it works with mind and body,” Mar-

“We have been dancing around the concept of integration far too long and the Legislature needs to force things to happen.” Sen. Mike Shirkey, R-Clarklake

leau said. “It is very expensive now, and costs are rising. We don't want the system to be more expensive with the same results.” The single Medicaid health plan contracting model and health plan pilot projects were proposed in an amendment by Sen. Mike Shirkey, R-Clarklake. It created a new boilerplate, Section 234, that calls for MDHHS to develop Medicaid pilot projects and a goal to fully turn over funding to Medicaid health plans by 2020. “We have been dancing around the concept of integration far too long and the Legislature needs to force things to happen,” said Shirkey. Bob Sheehan, CEO of the Michigan Association of Community Mental Health Boards, said he is disappointed with the votes of the committees and plans to continBob Sheehan: ue to press the Disappointed with case that Medicvotes. aid HMOs should not take over the entire Medicaid system. On reaching consensus on revised House and Senate Section 298 and Section 234 boilerplates to

JEWELER

ALIBABA

FROM PAGE 3

iconic blue neon sign, celebrated its recent renovations with an open house last week for longtime customers to see the restorations. Michael Simmons’ 92-year-old father, George, who still works in the store occasionally, was on hand for the festivities. The renovated store no longer has a drop ceiling. The tall ceilings now display three circular chandeliers displaying original Simmons and Clark Jewelers newspaper advertisements from the 1930s and 1940s. George Simmons’ father, Fred, started the jewelry store with co-founder Harry Clark on Oct. 1, 1925, in a building next door to the current store they’ve been in since 1934. Fred Simmons and Harry Clark were pioneers in selling jewelry on credit. “It’s where it actually started — in Detroit, buying jewelry on credit,” Michael Simmons said. Staying in business for 92 years hasn’t been easy. “Dad would term it ‘the great roller coaster ride,’” Simmons said. “And we’re very conservative in what we do.”

present to Snyder in a budget, Marleau and Canfield said it can be accomplished because all parties want to improve services and reduce state costs. “We will have to sit down with the House, staff, the fiscal agencies and DHHS and go through the whole thing,” Marleau said. “There will be give and take and we will come out with an agreement.” Despite disregarding most of the Section 298 Workgroup, which met last year to come up with a 91-page final report and a 500-page addendum to the legislature, the various competing financing models are seen as a legislative compromise with Medicaid health plans and the public behavioral health service industry. The House subcommittee also ordered MDHHS to report on progress made during the year by Medicaid HMOs and mental health organizations in improving care coordination for patients with mental illness, developmental disabilities and substance abuse problems. All Senate and House proposals would follow the 18 core values for patient services established last year by the Section 298 Workgroup. Those include person-centered planning, self-determination and community inclusion. But 14 mental health advocacy organizations disagreed that turn-

FROM PAGE 3

Yet U.S. tech companies are aware of Alibaba’s presence. Jerry Wang, a co-founder of Yahoo Inc., serves on Alibaba’s board and Yahoo has a $40 billion stake in the company, Fortune reported in March. Earlier this year, Ma wrote in a Wall Street Journal op-ed that Alibaba would enroll 1 million U.S. small businesses to its various e-commerce platforms, primarily on its Taobao and Tmall websites. The company claims its hosts 10 million merchants in China that employ 30 million people. In January, Ant Financial Services Group, the payment affiliate of Alibaba, announced it would buy Dallas-based money-transfer company MoneyGram International Inc. for roughly $880 million. Ma has also said he plans to use Alibaba to connect U.S. manufacturers with Chinese suppliers, Fortune reported. China and Michigan have had a lu-

ing over state behavioral funding to Medicaid health plans can be accomplished without loss of key services and personal touch. Last week they sent a three-page letter to legislators and state officials that warned of the dangers of turning over funding to the HMOs. They called for legislators to focus on the workgroup report and improving the current system. “We know the (Medicaid health plans) have been lobbying legislators hard. If the Legislature ultimately decides it wants to help these entities make more money at the expense of our constituents, we will do everything we can to prevent that,” Kevin Fischer, executive director of the National Alliance on Mental Illness, Michigan, said in a statement. Elmer Cerano, executive director of the Michigan Advocacy and Protection Services, said legislators should prohibit the transfer of Medicaid dollars to the health plans. “We are afraid that privatization and profitization of Medicaid is real risky for people with disabilities,” Cerano said. Sheehan said community mental health agencies have been comprehensively improving integration of behavioral and physical health services at the patient level the past two years and should be given more resources to continue their mission. “I need to remind people that we are at the beginning of a discussion,” Canfield said. “We haven’t really approved anything, and the governor hasn’t signed anything into law.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Jack Ma has also said he plans to use Alibaba to connect U.S. manufacturers with Chinese suppliers. crative business connection for decades. Major Michigan companies already operate in China, such as Ford Motor Co., General Motors Co., Dow Chemical Co., Whirlpool Corp., BorgWarner Inc., Key Safety Systems Inc., among others. China’s Shanghai Automotive Industry Corp., Aviation Industry Corp. of China, Fuyao Auto Glass, Wanxiang Group and others own several Michigan auto companies. The agriculture event could serve as a litmus test for Alibaba’s reception in the area with the Chinese company returning to the region to expand on those relationships.

BANKRUPTCIES

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

An iconic blue neon sign marks the front of the Simmons and Clark Jewelers store in Detroit.

The following business filed for bankruptcy protection in U.S. Bankruptcy Court in Detroit April 13-20. Under Chapter 11, a company files for reorganization.

J NS Private Equity I, LLC, 7071 Orchard Lake Road, Suite 250, West Bloomfield Township, voluntary Chapter 11. Assets and liabilities are not available.

8,000 JOBS

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GET INVOLVED TODAY BY VISITING G www.gdyt.org gd t g or contact Ricardo Marble at MarbleR@detroitmi.gov

HIGHLIGHT A SUPERHERO IN 3 EASY STEPS

EVERY COMPANY HAS ONE:

a messenger; a collaborator; a comedian; a trailblazer. A company is only as successful as the personalities who make up its workforce. Whatever your colleague’s superpower may be, Crain Custom Content will tell the story. And if you can’t identify just one superhero, we can tell the story of your company’s superpower in the same creative, engaging way. RESERVATIONS DUE: MAY 5 | PRINT DATE: JUNE 5 For details and rates contact us at advertisingCDB@crainsdetroit.com or (313)446-0455

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C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

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Budget proposal includes spending cuts, making room for tax cut or debt payments By Lindsay VanHulle

Crain’s Detroit Business/Bridge Magazine

LANSING — Republican leaders in the House and Senate are proposing to spend more than $270 million less from Michigan’s general fund on state programs and services next year than Gov. Rick Snyder, as legislators consider revisiting an income tax cut or paying down debt. Budget subcommittees in both chambers have approved department spending plans that reduce funding for some of Snyder’s proposals — including in health care and economic development — and shift funding for others out of the state’s roughly $10 billion general fund for the fiscal year that starts Oct. 1. Building room into the budget could put a plan to roll back the state’s 4.25 percent income tax back in play. Favored by House Speaker Tom Leonard, the House in February failed to secure enough votes to cut the state’s income tax rate to 3.9 percent by 2021 over concerns about potential revenue implications. “We’d still love to talk about it. That’s still a priority for this caucus,” said Gideon D’Assandro, a spokesman for Leonard, of a proposed income tax cut. “The speaker has said the whole time that he’d be willing to come back to it and talk about it in concert with the budget, because some members would like to do it that way.” The Michigan Department of Health and Human Services, which makes up nearly half of total state spending, would see the largest impact from some of the Legislature’s proposed reductions. The House and Senate proposed significantly lower general-fund spending on health programs than Snyder did — roughly $120 million and $112 million, respectively, below the governor’s recommendation. Leaders of the House and Senate’s health budget panels — Rep. Edward “Ned” Canfield, R-Sebewaing, and Sen. Jim Marleau, R-Lake Orion, respectively — both told Crain’s that they were given budget targets by legislative leaders. Marleau said he hopes to persuade leaders to reinstate some of the $112 million in budget reductions, especially a 50-cent-per-hour direct care worker pay raise and a $7 million program that gives food and heat assistance to poor residents, which the House agreed to fund. He said the Legislature wants to have some flexibility to fund additional or emergency programs later in the budget cycle, though he acknowledged that some legislators want to use budget savings to reduce the state’s long term debt and fund a state income tax cut. “I don’t know what we will do. A tax decrease is one of them,” said Marleau, adding that “leadership didn’t tell me why they want lower budget targets.” Canfield said the HHS budget should include savings because he believes if the federal Affordable

Care Act eventually is repealed, Michigan will receive less funding from the federal government for health programs. Uncertainty lingers over the federal health care law after the House GOP majority in Washington couldn’t get enough support for a replacement bill. “If we get (Medicaid) block grants (in 2018), we will have to balance the budget with far more cuts in programs than we are doing now,” he said. “It is more prudent to just not fund increases in programs now.” Sen. Curtis Hertel Jr., a Democrat from Ingham County’s Meridian Township, called attempts at cutting Michigan’s income tax “a complete political gimmick” and said it shouldn’t be used as a reason to slash funding for health and human services, in particular. “I’m very concerned about this idea that the House and Senate are trying to make cuts in vital programs to try to justify a tax decrease that will do almost nothing for the average citizen,” he said. “(It) deinvests in the places where we need to make investments right now.”

within the talent department. They include $25.9 million for the Going Pro campaign, formerly known as the Skilled Trades Training Program, which administers training programs to companies; and $22.7 million for the unemployment agency, according to the state budget office. A House budget subcommittee agreed with Snyder’s proposal to increase funding for the Going Pro program by $10 million in one-time funds — bringing the total amount to $40.9 million — but would budget the entire program from the Contingent Fund, according to the nonpartisan House Fiscal Agency. The House also would move the entire $9.8 million Community Ventures program, which helps the long-term unemployed who live in four qualifying cities find work, from the general fund to the Contingent Fund. The Senate would fund $5 million of the Going Pro program from the penalty and interest money. The House Fiscal Agency estimated the Contingent Fund would have a balance of $148.7 million by the end of this fiscal year in September.

frastructure and paying down debt. The latter could include addressing the state’s unfunded retirement obligations. No consensus has emerged, Meekhof said, though his preference would be to address debt. “I think more and more that they understand the smart policy of paying down debt so you have more money to invest in infrastructure, you have more money to invest in education,” he said. As for an income tax cut, Meekhof said: “Speaker Leonard’s talked about it a little bit. We have not.” D’Assandro said the spending reduction targets are a goal of House Republicans to pare back spending to force government to operate more efficiently, not necessarily tied to an income tax cut. Amber McCann, a spokeswoman for Meekhof, said the spending targets are to create flexibility in budgeting, in part because the state will hold a second revenue estimating conference in May to determine whether revenue is on track with earlier estimates.

Snyder’s proposal

“I’m very concerned about this idea that the House and Senate are trying to make cuts in vital programs to try to justify a tax decrease that will do almost nothing for the average citizen.”

Health reductions

One way the administration and legislative leaders have proposed reducing general-fund spending is to use money from a fund that contains penalties paid by people accused of unemployment insurance fraud for some economic development programs. The move, while allowed under state law, is also controversial. The state remains tied up in a scandal involving the Unemployment Insurance Agency, which relied on a computer to decide fraudulent claims and wound up wrongly accusing potentially thousands of people of benefits fraud, and advocates for claimants believe the state shouldn’t spend a dime of the penalties and interest fund until all cases are reviewed and people repaid. The Unemployment Insurance Agency is a defendant in five lawsuits related to its procedures, spokesman Dave Murray said, including a potential class-action case. The unemployment office came under fire for relying on a software program to flag fraudulent benefits claims without review from a live person. The state’s Talent Investment Agency, housed within the Michigan Department of Talent and Economic Development with authority over the unemployment office, has since returned to having a person review the computer’s findings. The state has committed to reviewing all fraud allegations between October 2013 and August 2015 that were determined by the computer. Snyder, a Republican, released his budget proposal in February that would use the same amount of funding from the penalty and interest account within what is known as the Contingent Fund as in the current fiscal year for two specific programs

Sen. Curtis Hertel Jr.

Yet a judge could force the state to repay plaintiffs and unemployment benefits claimants if it’s determined that the state is at fault. “We’ll have to fund it if damages are awarded,” D’Assandro said, adding that House Republicans don’t believe a judgment is likely this year. “At this point, the money was going to sit there until the next budget,” prompting interest in spending on programs. Senate Majority Leader Arlan Meekhof told reporters last week that Republicans in his chamber are leaning toward a few interests, including tax cuts, investing in in-

Among business-related programs, a House budget subcommittee approved a spending plan for the talent and economic development department that would use $62.5 million less from the state’s general fund than Snyder proposed. The Senate would slightly increase general-fund spending for the department, though both chambers want to eliminate the governor’s proposal to expand a program, called Rising Tide, that helps at-risk communities with redevelopment. The House also eliminated Snyder’s recommendation to invest $5 million in one-time funding for a marketing program to attract talent to Michigan, while the Senate shifted the marketing program under the umbrella of the state’s Pure Michigan tourism campaign. On the health side, general-fund budget reductions include such areas as direct care provider wages, staff for state psychiatric hospitals and autism services. The early budget proposals will now be worked out in both chambers over the next few months. Crain’s Detroit Business reporter Jay Greene contributed to this report.

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: Alibaba Group Holding Ltd.

National Kidney Foundation of MI

Banyan Investments LLC

Oakland University

Eastland Center

Pinnacle Homes of Michigan LLC

Eli Broad College of Business Macy’s

10 1

Richmond Brothers

Rockwell Medical Inc.

Michigan Associated of United Ways

Simmons and Clark Jewelers

Mike Ilitch School of Business

Stephen Ross School of Business

3 10, 15

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 4 , 2 0 1 7

THE WEEK ON THE WEB

RUMBLINGS

APRIL 15-21 | For more, visit crainsdetroit.com

Little Caesars Arena, metro Detroit to host NCAA events

Detroit Digits A numbers-focused look at last week's headlines.

$4 billion

ittle Caesars Arena will host the 2020 Frozen Four men’s ice hockey tournament, one of seven NCAA championship events awarded to Detroit, the association announced last week. “We would have been pleased with three,” Detroit Sports Commission director Kris Smith said in a conference call Tuesday. “Four or five and we’d have been sitting in dreamland. Seven ... was just wow. It speaks to the fact that this community is strong.” Smith said it's important for the city to get in the regular rotation for hosting the Frozen Four because “this is Hockeytown, and we have a very strong hockey pedigree here.” He said the different men's and women’s NCAA sports being hosted in metro Detroit — hockey, basketball, golf, wrestling, fencing, bowling — represent the diversity of the community. He said the events will bring exposure to the area and have a positive economic impact. The Detroit Sports Commission in August submitted 54 applications to bring 15 college championships in nine sports to the region in coming years, including NCAA basketball, hockey, wrestling and football across different divisions. The nonprofit commission, in charge of seeking amateur and college events for the area, teamed with the University of Detroit Mercy, Oakland University, the University of Michigan, Michigan State University, Wayne State University, Adrian College, Olympia Entertainment, the Detroit Red Wings and Detroit Lions.

Business news: A newly released disclosure showed that several prominent Michigan companies and businesspeople made donations to help bankroll President Donald Trumps inauguration, including Midland-based Dow Chemical Co., Detroit’s Quicken Loans Inc. and Ford Motor Co. J The popular Dearborn costume and theatrical supply shop Lynch's will close in June, after third-generation owner Patrick Lynch and his wife Susan decided to sell the building and retire. J Longtime Detroit sports radio personality Terry Foster, a former Detroit News columnist who suffered a stroke last year, said that he's immediately retiring from his co-hosting gig at WXYT-FM 97.1’s highly rated afternoon sports talk show. J Sacred Heart Major Seminary is demolishing a blighted apartment building as part of a planned campus expansion with parking and landscaping on a 2½ acres it bought from the city of Detroit. J

The Victors for Michigan fundraising campaign goal that the University of Michigan surpassed more than a year and a half ahead of its target to do so.

The number of nationally televised games the Detroit Lions will get in 2017 to showcase their brand.

3.1%

The tuition hike the Macomb Community College board approved for the 2017-18 school year.

Detroit City Football Club named Detroit-based Alternatives For Girls as its 2017 charity partner. The fundraiser game is June 23 against Kalamazoo FC. J Penn Station East Coast Subs, which wants to open 38 more stores in metro Detroit over the next five years, is offering new franchisees a year free of paying royalties to help drive that expansion. J Automation Alley, a Troy-based manufacturing and technology business association, is launching a cross-discipline conference called Integr8 scheduled for Nov. 9 in Detroit. J Detroit-based Xenith LLC will be the exclusive helmet provider for Rivals Professional Football League athletes, the Detroit-based development league announced. J Veteran TV news anchor Carmen Harlan, who retired last fall after nearly 40 years on Detroit NBC affiliate WDIV-Channel 4, will be the voice of on-board announcements for M-1 Rail’s QLine streetcar to debut May 12. J The dearth of available homes and condominiums for sale in metro Detroit continues to push median sale prices higher, Farmington HillsJ

based Realcomp Ltd. II said in a new report comparing March sales numbers to March 2016. J Cleary University in Livingston County has been accepted as a member of the National Association of Intercollegiate Athletics, effective Aug. 1. J Single match tickets for Detroit City Football Club went on sale last week for 11 home games at Keyworth Stadium in Hamtramck.

Other news: Wayne County has granted Chicago-based Walsh Construction a twoweek extension on its May 3 deadline for submitting a proposal to restart construction of the jail on Gratiot Avenue to come up with a smaller 1,600-bed alternative plan. J The Detroit public schools’ board has selected Nikolai Vitti, a Detroit native who is now superintendent of the Duval County, Fla., schools, as its choice to become the district’s new superintendent. J Boyer Park on Detroit’s southwest side was among the first 10 to be improved under the two-year 40 Neighborhood Parks program launched last spring. J Detroit’s Board of Water Commissioners voted to slash a $750-peracre monthly drainage fee to $125 for businesses, churches and other property owners following months of outcry over the charges. J Henry Ford College President Stanley Jensen, who headed up a cost-saving effort that brought the school out of a $16 million budget deficit, will retire from his post effective June 30, 2018. J The Kresge Foundation announced it has awarded $2 million to 17 new projects aimed at revitalizing Detroit neighborhoods. It’s the third and final round of the foundation's $5 million Kresge Innovative Projects: Detroit initiative launched three years ago. J

Obituary: Patricia Serwach, a McLaren Health Care executive and founder and publisher of the defunct Heritage: A Journal of Grosse Pointe Life, died Thursday at her home near Moran in the Upper Peninsula of complications from cancer. She was 68. J

TYLER CLIFFORD/CRAIN’S DETROIT BUSINESS

The Press Room Café has opened in the former Detroit News building at 615 W. Lafayette Blvd. with food stalls from celebrity chef Fabio Viviani of “Top Chef” fame.

Retired Justice Young courted for Senate run

etired state Supreme Court Justice Robert Young Jr. is being courted to run for the U.S. Senate in 2018 to take on incumbent Democratic Sen. Debbie Stabenow. “I think he’s thinking about it. I know a lot of people are talking to him about,” said Ron Weiser, chairman of the Michigan Republican Party. Young announced last month he would retire after 18 years on the state's highest court and return to private law practice at the Robert Young Jr. Dickinson Wright law firm. His last day was April 17, a Supreme Court spokesman said. He spent the past six years as chief justice of the Supreme Court and was seen as a steady leader after years of acrimony among some of justices on the high court. Last year, then-candidate Donald Trump floated Young's name as a jurist he'd consider nominating for the U.S. Supreme Court if elected president. Young, a native of Detroit, confirmed Friday he's being courted to run. “I never imagined when I decided it was time to leave the court that there

would be such interest in my future,” Young said in a statement. "As when I was placed on the president’s Supreme Court list, the encouragement for me to run for some other office is flattering.” The prospect of Young’s potential candidacy comes as Republicans are searching for a viable challenger to try to unseat Stabenow, a three-term incumbent who reported $4.3 million in campaign cash on hand at the end of March. Some Republicans have been trying to get U.S. Rep. Fred Upton of St. Joseph to challenge Stabenow, who has been a bipartisan ally of his at times over the years. “Those are the only two names I hear on a consistent basis,” GOP consultant Stu Sandler said of Young and Upton. Sandler is co-founder of the Lansing-based Grand River Strategies political consulting firm and said he hasn’t talked to Young directly about the Senate race. Republican strategist John Yob, owner of the Grand Rapids-based Strategic National consulting firm, sees Young as a “formidable candidate” who could put together a winning coalition. Aside from Young, Weiser said there are other Republicans considering a Senate campaign, but he declined to identify them.

DETROIT FITNESS FOUNDATION

A rendering of the to-be-built velodrome at Detroit’s Tolan Playfield.

Velodrome to host track championships in 2017, ’18 T he to-be-built indoor cycling velodrome at Detroit’s Tolan Playfield will host USA Cycling men’s and women’s U.S. National Track Championships in 2017 and 2018. The three days of cycling are scheduled for Oct. 19-21. Next year’s dates have not yet been set, said Dale Hughes, the velodrome’s developer and organizer of the nonprofit Detroit Fitness Foundation that’s working in collaboration with the city to create the privately-funded $4 million multisport building. Ticket prices for the championships have not yet been set. The facility will have just under 1,000 seats, and Hughes said most of the audience will come from livestreaming. The races are what is known as a madison tournament, which is two-rider relay team in a field of 20 to 30 teams. The construction permit to build

the 64,000-square-foot facility, which will include the cycling track and separate recreation fields inside an air dome, was granted Thursday, Hughes said. Work will begin this week, and the opening is scheduled for September. The general contractor is Wixom-based Quadrants Development LLC and Guelph, Ontario-based Farley Group is the air dome provider. Hughes said he’s seeking an international company to buy the naming rights for the facility. The city announced the velodrome project in January as part of its planned improvements to Tolan Playfield at I-75 and Mack Avenue. The dome also will have indoor lanes for running, walking and skating, and a multipurpose infield. The park will get a playground, picnic space, a skateboard ramp and horseshoe pits.