Crain's Detroit Business, Aug. 6, 2018 issue by Crain's Detroit Business

Ann Arbor driven by auto research Page 10

AUGUST 6 - 12, 2018 | crainsdetroit.com

Math Corps adds five DPSCD schools Page 3

ELECTION

A primary primer: Six things to know

By Chad Livengood clivengood@crain.com

An unpredictable electorate. A Detroit mayor trying to flex his political muscle. A new test for suburban voter appetite for regional transit. Metro Detroit businessmen betting big portions of their wealth on campaigns for public office. Tuesday's primary election in

Michigan will shape the state’s political climate for years to come. Here are six things people in business should watch in Tuesday’s primary:

Democratic primary free-for-all Michigan’s Democratic primary is attracting national attention as for-

mer Detroit health department director Abdul El-Sayed attempts to knock off the longtime favorite to win the nomination, Gretchen Whitmer, a former state senator from East Lansing. Whitmer has all of the big endorsements — Detroit Mayor Mike Duggan, the United Auto Workers and other unions representing skilled trades, teachers and public sector

workers. She’s also been aided by trial attorneys such as Mark Bernstein of The Sam Bernstein Law Firm and the Detroit Regional Chamber. But it’s those Whitmer backers — and the big money that comes with their support — that El-Sayed is campaigning against as he tries to foment a ballot box revolt among progressives upset with Democratic Party leadership.

And then there’s Shri Thanedar, the serial entrepreneur from Ann Arbor who has pumped $10 million of his personal fortune into the race with a saturation of television, mail, digital and billboard advertising. Thanedar is said to have made inroads in Detroit, where Whitmer has struggled at times, despite having Duggan’s endorsement. SEE PRIMARY, PAGE 21

JAKEOLIMB/GETTY IMAGES

TECHNOLOGY

Duo Security’s mammoth deal could have ripple effects

By Annalise Frank

Last fall, Duo Security Inc. toasted a venture capital deal that valued the company at more than a billion dollars. Now, just nine months later, its founders and investors are toasting a sale of the company that more than doubled that value.

And the ripples from that deal could be felt for years to come. Last week, the Ann Arbor-based computer security company agreed to be acquired by Cisco Systems Inc. for $2.35 billion nine months after being valued at half that amount. The San Jose, Calif.-based networking giant will take over the fast-climb-

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ing cybersecurity firm in what is believed to be the biggest acquisition of a venture capital-backed startup in Michigan history. Transactions of this scale portend major local growth and a bigger name for the enterprise’s home city, experts said. They used terms including “watershed” and “explosive” to describe potential ripples in the teenage venture capital hub of Ann Arbor — and throughout Michigan. Cisco will pay in cash and assumed equity awards for Duo Security’s outstanding shares, warrants and equity incentives, Cisco vice president of corporate development Rob Salvagno said on an investor and media call following the Thursday announcement. Cisco expects to close in the first quarter of its fiscal 2019. SEE DUO SECURITY, PAGE 17

PETER BAKER

Duo Security co-founder and CEO Dug Song (left), Cisco security business SVP Gee Rittenhouse and Duo Security co-founder and CTO Jon Oberheide.

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MICHIGAN BRIEFS

INSIDE

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

Judge dismisses Snyder, others from Flint classaction lawsuit A class-action lawsuit against 21 defendants stemming from the Flint water crisis will move forward, but Gov. Rick Snyder and several other key defendants have been dismissed from the litigation, U.S. District Court Judge Judith E. Levy ruled in an order issued last Wednesday, Gongwer and the Associated Press reported. Along with Snyder, the state of Michigan, former Department of Environmental Quality Director Dan Wyant, former Flint Emergency Manager Ed Kurtz, former Flint Mayor Dayne Walling and former Department of Health and Human Services employee Nancy Peeler were also dismissed from the federal litigation. Numerous other claims by the plaintiffs against the various defendants including a charge of a state-created danger, as well as violations of the Equal Protection Clause, negligence, gross negligence and fraud were also dismissed by Levy, as were professional negligence and bodily integrity claims against some defendants. Levy said the lawsuit filed on behalf of residents and businesses

didn’t claim Snyder knew of risks when the city switched to Flint River water in 2014. The corrosive water caused lead to leach from old plumbing. Those remaining include former state Treasurer Andy Dillon and Department of Health and Human Services Director Nick Lyon. Lyon also has been criminally charged, but his attorneys say he’s not responsible. Levy also dismissed race, civil rights and negligence claims.

Grand Rapids names city manager

The Grand Rapids City Commission has appointed the city’s first African-American city manager. Mark Washington was chosen over city managers of Novi and Ferndale. He comes to the West Michigan city from Austin, Texas, where he most recently served as assistant city manager for three years, according to a city news release. He had been with the city of Austin since 2009 and in local government for more than 20 years. Former city manager Greg Sundstrom retired in February after eight years in the position and 35 in government service. Former Deputy City Manager Eric DeLong has served in the interim, and Washington is expected to start in September. “I was very impressed with all the

BLOOMBERG

U.S. District Judge Judith Levy ruled that a lawsuit didn’t claim Michigan Gov. Rick Snyder knew of risks when the city switched to Flint River water in 2014.

interviews. That said, I was happy to know that Mark Washington was very familiar with GARE (Government Alliance on Race and Equity) and that he set up an equity office in Austin,” Ruth Kelly, second ward commissioner, said in the release. “Equity is one of our main focuses.” Washington will manage about 1,500 city employees, seven labor unions and 13 collective bargaining agreements, and a budget of $590 million for the city of approximately 200,000 residents. He learned about Grand Rapids in 2016 through his work for the city of

Austin and Racial Equity Here, an initiative for improving race equality. Grand Rapids has also served as a pilot city for the project.

Company develops energy-efficient seats

Promethient Inc. of Traverse City, with backing by French interior modules supplier Faurecia, is working on an advanced energy-saving seat heating and cooling system that could be ready for production in 2021, Automotive News reported. The local company is aiming for its weight-activated seat heating and

THE ROI OF ESG:

HOW ENVIRONMENTAL, SOCIAL AND GOVERNANCE PRACTICES IMPACT CORPORATE VALUE Companies of all sizes are increasingly being held accountable for their Environmental, Social and Governance (ESG) performance. ESG encompasses everything from diversity and inclusion, to consumer demands and transparency, to supplier engagement and corporate board behavior. Hear from local business executives about how they leverage ESG factors as a proxy for good management, t, a tool for talent and retention, and a source for value creation. FEATURING:

CALENDAR

CLASSIFIEDS

DEALS & DETAILS

KEITH CRAIN

OPINION

OTHER VOICES

PEOPLE

RUMBLINGS

WEEK ON THE WEB

cooling system to replace today’s convective systems, which heat or cool seats by moving air through perforations in the upholstery. Promethient’s Thermavance uses two main components to heat and cool seats: a heat pump under the seat and a thermally efficient form of carbon called graphene, which quickly transfers heat to or away from the seating surface. Pressure from weight on the seat activates the thin layer of graphene, which is embedded just under the upholstery. It’s a temperature-control system that is conductive, explained Promethient CEO Bill Myers on the sidelines of the CAR Management Briefing Seminars.

CORRECTION A story on Page 10 of the July 23 issue had an incorrect name for Troybased executive search firm Harvey Hohauser & Associates.

The

ROI of

ESG

WHEN: Thursday, Sept. 6 • 3:00 – 6:00pm WHERE: Waterview Loft at Port Authority 130 Atwater St., Detroit WHAT: Complimentary event includes cocktails, appetizers and networking on the Detroit riverfront.

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Frank Venegas Jr.

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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 U G U S T 6 , 2 0 1 8

ANALYSIS

The tariffs that nobody wanted to talk about T R AV E R S E CITY — At one of the largest automotive business conferences in North America — the Center for Automotive Research’s ManDUSTIN agement BriefWALSH ing Seminars — there was a glaring omission in the discussions. Tariffs. Running from keynote address to meetings last week, most auto executives were uninterested in discussing the impact of tariffs — despite experts warning the U.S. tariff on steel and aluminum could cost the industry 45,000 jobs and the Trump administration’s threat of a 25 percent imported car tariff could cost more than 195,000 jobs and decrease U.S. auto sales by two million units. Instead these executives discussed mobility and disruption from new technologies and the policy decisions that could alter the future of transportation. In other words, we were in Traverse City having a tea party in the middle of a hurricane. There are a few answers to why traps stayed shut about the biggest political impact on car sales since the Great Recession. Fear remains the biggest concern. Fear of what the president of the United States could do in retaliation for publicly defying him. The president could, theoretically, eliminate the biggest competitive advantage for U.S. automakers in a single tweet — the Chicken Tax. Somewhat ironically, domestic automakers’ big edge in the local market stems from a tariff — yes, a tariff — on imported trucks. Profit margins are so high on trucks, top-end models can boast a profit margin of $50,000 in some cases. Trucks are easily the most profitable vehicles in the U.S. market. In the midst of a trade war with Mexico, Canada, European Union and China, the Chicken Tax is He Who Must Not Be Named. You may have noticed the recent talks between European Commission President Jean-Claude Juncker and President Donald Trump omitted any discussions about automotive tariffs. If there is a global battle on tariffs, the less their name is spoken, the less they are on the table. The history of the Chicken Tax, which includes a 25 percent tariff on trucks, is interesting enough to discuss here. SEE TARIFFS, PAGE 17

NONPROFITS

Making a model of Math Corps Joseph Ratcliff III instructs students at Math Corps last week at Wayne State University.

LARRY PEPLIN FOR CRAIN’S

Program spins off from Wayne State University, expands to new sites By Sherri Welch swelch@crain.com

Like most middle school students, Anshalay Robinson had ideas for how she’d spend her summer. And none of them had anything to do with school or math. But her mother heard about the Wayne State University Math Corps, a six-week on-campus summer camp, and pushed her into attending. It took exactly one day for Robinson, a seventh-grader at Burton International Academy in Detroit, to change her mind about going. “As soon as I hopped in the car (after the first day) ... I told my mom it

Need to know

Math Corps, a mentoring and math program, is spinning off from Wayne State University J

J Move comes as it prepares to take program into five DPSCD middle schools through new pilot J National expansion, documenting program’s success and reasons for it also underway with NSF grant

was great,” she said. Math Corps, founded in 1991, is a combined academic and mentoring program for Detroit public school students in grades 6-12. It features a

summer camp, year-round Saturday programs, and enrichment courses for elementary school children. In addition to math, it also focuses on life skills, said Executive Director Steven Kahn. Speaking to Math Corps visitors gathered in a small Wayne State University classroom last week, Robinson and other kids talked about being bored in class during the school year. Sometimes, they said, when substitute teachers were brought in for large parts of the school year, students just killed time, not learning anything and falling behind, so they weren’t prepared the following year.

“In school they don’t really push us,” Robinson said. “Sometimes, I don’t even want to get out of bed.” But at Math Corps, humor, freedom of expression and universal acceptance are core to the culture, along with an expectation that students work hard. “I jump out of bed and want to come,” Robinson said, eliciting silent “jazz hands” of approval from the students and teacher assistants around her. The other students and teachers are starting to feel like family, said Robinson. SEE MATH, PAGE 18

CONSTRUCTION

After sale, Pinnacle Homes ready to grow By Kirk Pinho kpinho@crain.com

LARRY PEPLIN FOR CRAIN’S

Howard Fingeroot is area president of what is now Pinnacle Homes by M/I Homes after a year-long courtship between his Bloomfield Hills-based homebuilding company Pinnacle Homes of Michigan LLC and M/I Homes Inc., a publicly traded Columbus, Ohio-based builder.

It’s June, and Howard Fingeroot is less than four months into his marriage. The area president of what is now Pinnacle Homes by M/I Homes, Fingeroot describes a year-long courtship between his Bloomfield Hills-based homebuilding company Pinnacle Homes of Michigan LLC and M/I Homes Inc., a publicly traded Columbus, Ohio-based builder (NYSE: MHO). On March 1, the two companies made their relationship formal with M/I Homes closing on the purchase of Pinnacle. “Within five minutes, I kind of

Need to know

JJCompany anticipates approximately 25 percent increase in home sales compared to last year JJMost building permits issued last year in SE Michigan since 2005 JJHigher-end homes range from $200,000-$300,000

knew this was a good fit,” Fingeroot said in an interview in his second-floor office in a nondescript Bloomfield Township office building overlooking the Village at Bloomfield redevelopment project. “Literally after five minutes I knew we were going to sell to them.” SEE PINNACLE, PAGE 22

MUST READS OF THE WEEK Detroit City Football Club looks to change status

Second tower at Crowne Plaza on hold

Scaring up a new haunted house strategy

Detroit City FC itches to go pro, maybe this fall. Page 6

Detroit City Council holds up decision on new 500-room hotel downtown. Page 13

Erebus haunted house to change scare strategy, hire 250 for fall season. Page 7

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Construction crews spent most of last week fixing damage from a massive water main break on historic West Canfield Street between Second and Third avenues in Detroit’s Midtown neighborhoods. A 30-inch water main pipeline installed in 1886 broke on July 28, flooding the cobblestone street and causing some nearby businesses to temporarily close.

Aging infrastructure lurks beneath city’s revitalization The water pipeline that burst open and flooded a historic street in Midtown late last month was laid below the cobblestone-covered street when Grover Cleveland was president. That there’s a 132-year-old 30-inch water main supplying water to one of Detroit’s oldest and quickly transforming neighborhoods is not a surprise to city officials who have been trying cobble together money every year to address decades of disinvestment in underground infrastructure in Michigan’s largest city. In fact, it’s not the Victorian-era pipes that the city’s utility agencies always worry about, said Gary Brown, director of the Detroit Water and Sewerage Department. “Just because it’s a hundred years old, some of the hundred-year-old material is actually better than the pipes put in after World War II,” said Brown, who is pretty sure there’s still water flowing through wooden pipes along older streets between Jefferson Avenue and the Detroit River. The pipeline break along historic West Canfield Street between Second and Third streets damaged lawns, moved sidewalk flags and caused part of the street to cave in. It also caused some of the trendy shops and restaurants like Jolly Pumpkin Pizzeria & Brewery on Canfield between Cass Avenue and Second to temporarily close on a Saturday in late July. In this part of Detroit, water main breaks and disruptions in service are an annual occurrence — and a cost of doing business, said Scott Lowell, owner of the Traffic Jam & Snug restaurant at Second and Canfield. “We have a water main break here on Second about once a year,” Lowell said. “It’s not newsworthy. We have to close for business. They come out, dig it up, replace it and turn it back on.” Every water main break in Detroit may not be newsworthy. But it’s certainly noteworthy that as this city experiences revitalization, an influx of new residents and busi-

CHAD LIVENGOOD clivengood@crain.com

“We have a water main break here on Second about once a year. It’s not newsworthy. We have to close for business. They come out, dig it up, replace it and turn it back on.” Scott Lowell, owner of the Traffic Jam & Snug restaurant

nesses and nears the four-year mark since emerging from a painful bankruptcy, the balance sheets showing budget surpluses don’t tell the whole story. While Second Avenue looks nice, with fresh asphalt, painted bike lanes and once-blighted buildings getting rehabilitated, there’s an aging infrastructure lurking below that went largely neglected for a half-century or more that needs to be fixed eventually. “We didn’t wind up in bankruptcy in one day. We worked our way there over decades,” said Brown, a retired deputy police chief-turned-municipal administrator. The bankruptcy itself helped free up more badly needed cash for infrastructure. The spinoff of DWSD’s wholesale water supply operations to the Great Lakes Water Authority came with a $50 million annual lease payment for Detroit’s assets that have supplied

water to 4 million people in southeast Michigan for nearly 60 years. DWSD, which now is focused on retail water sales to residential and commercial customers in Detroit, borrowed $500 million against the $50 million annual lease payment to fund five years of infrastructure improvement projects. About $13 million of the lease payment from GLWA goes to repaying the bonds each year, Brown said. In the 15 years leading up to Detroit’s 2013 bankruptcy filing, less than one-half of one percent of the city’s water main pipelines were replaced, and breaks and water flooding city streets became as normal as broken streetlights, Brown said. With the new lease payment, which is largely shouldered by suburban customers, Detroit is replacing 2 percent of its aging infrastructure annually, according to Brown. “Now that the dollars are available to rebuild the system, you should start to see over the next three to five years the frequency of breaks go down,” Brown said. That would be welcome news to business owners like Lowell, who also have to deal with occasional power outages that shut down his restaurant for hours at a time. Lowell also recognizes that Detroit is not alone in facing a looming crisis in neglected and outdated infrastructure. Last fall, up to 300,000 residents and businesses in Oakland County lost water for several days after a 48inch water main broke in Farmington Hills, exposing a lack of redundancy in the system. In late 2016, Fraser’s infamous 250-foot-long sinkhole caused a sewer line to collapse, requiring a $75 million fix to restore the flow of waste for a half-million Macomb County residents. “Maybe we’ll be the innovator in how we solve it,” Lowell said. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

October 5

Manufacturing Day in Macomb County

Macomb County Manufacturing Day Manufacturing Day is a celebration of modern manufacturing meant to inspire the next generation of manufacturers. On October 5, Macomb County will celebrate its sixth annual Manufacturing Day. Thanks to the willingness of local companies to get involved, an estimated 2,500 high school students will visit area plants to see the industry in action and learn about career opportunities.

Thanks to our 2018 participating companies: AGS Automotive AIM Computer Solutions, Inc. Baker Industries BMT Aerospace Brose, Jefferson BTM Company CERATIZIT USA COE Press Equipment College Park Industries Complete Prototype Services Cosworth Dominion Technologies Group Drake Enterprises, Inc. DWM Holdings Eckhart Eclipse Mold Faurecia Fraser Interiors Plant FCA US, LLC Fisher Dynamics Flex-N-Gate - Shelby Township Flex-N-Gate - Warren Ford - Romeo Engine Plant Fori Automation, Inc. Futuramic Tool & Engineering Gage Built General Motors - Warren Transmission Greene Metal Products HTI Cybernetics Jac Products JB Cutting, Inc. K&K Stamping KUKA North America

L&L Products Lanzen, Inc. Luckmarr Plastics LumaSmart Technology Macomb Sheet Metal MAG Automotive Magna PowerTrain - Sterling Heights Master Pneumatic-Detroit Inc. MB Aerospace MFC Netform Mitsubishi Chemical Performance Polymers, Inc. National Bronze MFG Co. Orlandi Gear Company Paragon Technologies Paslin PCS Company Proper Group International PTI Engineered Plastics RCO Engineering, Inc. Romeo Rim Steptron Technologies Summit Plastic Molding, Inc. Supreme Gear Company Industries Synergy Prototype Stamping Tarus Products, Inc. TransNav Troy Laser & Fab Weldaloy Whitlam Group Witco Inc. Yates Industries

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Detroit City FC itches to go pro, maybe this fall By Bill Shea bshea@crain.com

Detroit City FC ended its season last week on a mixed note. It drew a team-record 7,887 fans for its season-ending international friendly against Italy’s Frosinone Calcio at Hamtramck’s Keyworth Stadium. But the newly promoted first division club clobbered Detroit City, which was missing many of its starters, to the tune of 10-0 in the worst drubbing since the semi-pro team launched in 2012. That mix of positive and negative may be indicative of the club’s future. Detroit City is in talks with a handful of other clubs to launch a standalone professional league, which means a major increase in expenses and a new player roster. Turning pro, which team co-owner and CEO Sean Mann said likely will happen this fall, is a risk but fulfills DCFC’s long-term business strategy of boosting revenue by adding more matches. The team’s current organizational home is the 90-plus-team National Premier Soccer League, but that fourth-tier amateur league offers only a 12-game regular-season schedule, with six of those at home. DCFC has grown immensely popular in its short history, averaging 5,946 fans per match this season. That topped the NPSL, and was better than 25 of the 33 clubs in the United Soccer League that’s two tiers above the NPSL on the U.S. soccer organizational pyramid. Quite simply, DCFC’s fans want more games, and its owners think they can satisfy that thirst (and need for more money to pay expenses) by turning pro in a league with more matches. The question is whether increased revenue from more matches will outpace the costs of going pro — namely, player salaries, the expenses of staging more games and more travel. It’s also not yet clear if Detroit City will need deeper pockets than its current five-man ownership group. “It depends on the scenario if we need outside investment,” Mann said. The team’s budget this season was $1.5 million, with most revenue generated by ticket, merchandise and corporate advertising sales. The books don’t close until the end of the year, so it’s not yet known if the club was profitable this season, Mann said. DCFC doesn’t pay its players, but it will if it turns professional. How much it pays them remains to be seen. Mann pointed to the second-tier United Soccer League, which has many clubs owned or linked to Major League Soccer, as a template for potential labor costs. “Nearly every team has a six-figure payroll,” Mann said, adding that labor costs for some USL teams run from $250,000 to $1 million. DCFC’s roster of 20-some players will transition from primarily collegians, who cannot accept salaries or perks without jeopardizing their amateur status for NCAA eligibility, to paid professionals. Yet those players won’t be full-time soccer players, Mann said. They’ll play and get paid for it, but will have other jobs or teams to round out a living wage, he said. That makes such a league semipro from a player perspective.

DETROIT CITY FC

Detroit City FC drew a team-record 7,887 fans recently at Keyworth Stadium in Hamtramck.

“The worst case is we stay at current level. That’s not such a dire thing by any means, but we’ve grown from an operational business perspective beyond what this model offers.” Sean Mann

Need to know

JJPopular semi-pro soccer club wants more matches via pro league JJOwnership expects to join a newly formed league this fall JJTeam-record 7,887 fans saw 10-0 friendly loss to top-division Italian club

The plan to acquire new players for professional play has been in the works for some time, Mann said, but he didn’t disclose details. It’s not yet clear if the team will raise season- and single-game ticket prices to help offset expenses in 2019. Rochester sports entrepreneur Andy Appleby, who led a consortium that owned the second-division British soccer club Derby County FC from 2008-15, said he’s been impressed with Detroit City’s growth but has words of caution for their next steps. “I really think DCFC has done a remarkable job of gradually building up their fan base, and it does make sense to go to the next level league,” he said via email. “My only caution would be for them to be careful in the amount of games they add to their

home schedule. They have a nice formula now, but I wouldn’t think they’d want to triple the amount of games at home right away.”

Growing pains DCFC has been seeking to turn pro for several years, and it came close in 2017 only to get sidetracked because of discord and legal issues among the higher-level leagues. It was in talks with the North American Soccer League to join that second-division league, but the NASL lost its sanctioning from the Chicago-based U.S. Soccer Federation in 2017 and subsequently halted play. DCFC was functionally left with no choice but to remain in the NPSL. It wasn’t interested in joining the USL. If talks with like-minded clubs fail to result in a new pro league, Detroit City will again return to the NPSL for an eighth season, Mann said. That would financially shackle a team poised to move beyond its amateur status. “The worst case is we stay at current level. That’s not such a dire thing by any means, but we’ve grown from an operational business perspective beyond what this model offers,” Mann said. “We have all kinds of conversations going on. It puts us in a bind the longer it drags out.” A new league would need at least eight teams to make it work from a competition, travel and scheduling perspective, he said, and ideally more. Mann declined to say what other teams are in talks to form a new league with DCFC, or whether it would seek sanctioning by U.S. governing bodies. The club has hired a Detroit ad agency, Lafayette America, to craft marketing and branding campaigns when the transition happens.

Fly the friendly DCFC also needs to get its new league sorted out so it can get its slate of international friendlies on the 2019 schedule. The team had four this season, and matches with the Mexican, German and Italian teams all drew more than 7,000 fans. They’re complicated and expensive to stage, but also generate more revenue, Mann said. He declined to say who DCFC is in talks with for next summer’s friendlies, but did say that “prominent” German and Mexican first-division clubs are interested. The overseas clubs that came to Keyworth won’t be back in 2019, but may in years after that, he said. The schedule likely will feature just a couple of international matches next year, Mann said. That’s an ideal number, especially if DCFC is playing more regular-season league matches. Getting those high-profile international friendlies locked down and on the schedule can take up to six months, he added, and DCFC gets calls almost weekly from clubs seeking a match. “What happens often is Wild, Wild West. Some clubs call just weeks out,” Mann said. The matches also would burnish DCFC’s growing profile and credibility in international soccer circles, he added, and expanding the club’s profile and brand is a vital aspect of growing the business. On the pitch, the club is still a work in progress. Tuesday’s 10-0 drubbing wasn’t reflective of the team’s general competitiveness — many of its players already had returned to school for their upcoming NCAA seasons. DCFC fielded a patchwork squad against Frosinone Calcio, which was recently promoted to Italy’s top divi-

sion to play against global soccer powerhouses such as Inter Milan and Juventas. By contrast, the NPSL is an amateur league and is the unofficial fourth division on the U.S. soccer pyramid that’s topped by Major League Soccer. Frosinone, in addition to using the DCFC to grow its American fan base, played its starters as it prepares for Serie A league play that begins later this month. “They definitely flexed their muscles and that shows us there’s a huge gulf between them and the fourth division,” Mann said. Detroit City also is putting together plans for upgrades at its leased venue, city-owned Keyworth Stadium, which likely will include more bathrooms and a new pitch. Mann said the new field will likely be artificial turf because Keyworth is a shared community space, and putting in natural grass would require expensive upkeep and locking out the public to ensure the field is preserved. The team doesn’t want to do that, he said. Plans and costs are still being finalized, Mann said. Forming a new league, renovating the stadium and getting foreign clubs on the schedule aren’t the only major projects on DCFC’s off-season to-do list. It’s in the final phases of a $1 million renovation of the building at 3401 E. Lafayette St. in Detroit that will open Oct. 1 as the Detroit City Fieldhouse. The 75,000-square-foot former ice rink-turned-soccer venue will offer drinks, food and TV screens at its clubhouse bar overlooking two artificial turf soccer fields, which will be installed this week. Registration is open for co-ed, women’s, men’s and youth leagues that will play on the indoor fields. Bill Shea: 313 (446-1626) Twitter: @Bill_Shea19

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Erebus haunted house to change strategy, hire 250 By Kurt Nagl knagl@crain.com

The popular Erebus Haunted Attraction is looking ahead to Halloween with a new strategy for scaring up business. Instead of investing more in mechanical theatrics — think bloodthirsty zombie heads springing from dark corners — owners of the four-story terror warehouse in Pontiac are focusing on training actors to wreak the havoc. That’s not to say there won’t be plenty of stomach-turning synthetic scares; and the bottomless pit, spike spindle and buried-alive room will all return. The goal this year, though, is to “let the actors shine more,” co-owner Ed Terebus said. Patrons want the most scream for their buck and, in a business where nearly all revenue is earned in a two-month span, Terebus feels the pressure to deliver. As the 55-year-old put it, the haunted house’s new direction is win-win. “It’s fun being scared, but it’s a whole lot more fun scaring people,” he said. Erebus is seeking to hire 250 people who feel the same way. Auditions are taking place in mid-August. Those chosen will participate in a two-day unpaid training session called “boo school” with newly hired head of personnel Jerome Helton. Pay for the job is minimum wage — $9.25 an hour — and hours are flexible. “If you’re coming for the money, that’s not what I’m looking for,” Terebus said. “People coming here are passionate about scaring people. It’s a cool family. Everybody hangs out, likes each other.” “Boo school” is a playful moniker, but training is serious business this time around, unlike years past, Terebus said. Helton has extensive experience in the performing arts and went through Disney’s leadership program. His role is to train workers to handle unpredictable behavior by patrons in the haunted house, which can make for interesting — and sometimes dangerous — interactions. “A lot of people when they get scared, they go into that fight or flight mode, and if they go into that fight mode, you want to maintain that arm’s length away,” Terebus said. Through past experimentation, the owners found that allowing actors to touch patrons simply does not work. “Too many unpredictabilities there. Too many guys with too high of testosterone, especially today with sexual harassment, so we created things to touch people,” Terebus said, explaining that this is where the mechanical props come into play. With a beefed-up staff, owners plan to have 100 actors working per night and 30 more working security and selling merchandise. Terebus said he invests “hundreds of thousands of dollars” each season in the haunted house. The scare business is lucrative — when it comes around once a year. Halloween spending in the U.S. reached $9.1 billion in 2017, up from $8.4 billion in 2016, according to the National Retail Federation. The haunted attractions industry

EREBUS HAUNTED ATTRACTION

Erebus Haunted Attraction is looking to hire 250 actors for the Pontiac site leading up to Halloween season.

Need to know

“If you’re coming for the money, that’s not what I’m looking for. People coming here are passionate about scaring people. It’s a cool family. Everybody hangs out, likes each other.”

JJOpen auditions for seasonal actors

scheduled in mid-August

JJOwners of longtime attraction in downtown Pontiac to steer away from mechanical scares JJHaunted house opens Sept. 21 and runs six weekends through Nov. 3

includes trade shows, seminars, magazines, suppliers and experts, according to the Haunted Attraction Association. Tickets to Erebus cost the same

Ed Terebus

as last year, $19-$28 depending on the day. They can be purchased online or in person.

Owners make the bulk of their money during Halloween season. The haunted house opens Sept. 21

and runs just six weekends through Nov. 3. After that, it’s all about budgeting for next year. Terebus would not disclose annual revenue but did say sales have grown modestly year over year. His haunted house at 18 S. Perry St. in downtown Pontiac, which boasts a more than half-mile walk-through, is a long way from the 1,200-squarefoot pop-up operation Terebus and his brother, James, 39, started in Warren in 1981. Their haunted house now takes up more than half of the 113,000-square-foot building. To supplement the revenue drought in the offseason, the brothers bought an old Salvation Army building nearby in 2012 and began converting it into a themed escape room business. Part of it opened last year, and they are working to build out more soon. “High-end escape rooms” is the idea, Terebus said. “A one-hour adventure where you get to be top cop and solve the crime, be president and claim the throne, be a criminal and escape prison …” With fall fast approaching, Terebus is funneling all of his energy into the haunted house and its new strategy. He calls Southeast Michigan the haunted house capital of the world, and he and his brother have “invested millions” over the last 20 years to make Erebus among the most popular. “We’re looking to take it to the next level as far as actors go,” Terebus said.

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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 U G U S T 6 , 2 0 1 8

OPINION EDITORIAL

Don’t be confused; vote yes on SMART

he election Tuesday that might hold the most potential for surprise is one that should be routine: the renewal of the SMART transit millage. Clearly, some important people are worried it might not pass. Oakland County Executive L. Brooks Patterson and Macomb County Executive Mark Hackel took the extraordinary step of calling a press conference to remind voters that this SMART millage isn’t the same thing as the Regional Transit Authority millage that voters turned down nearly two years ago. The worry is that voters might confuse the two, especially in Macomb County, where 60 percent of voters opposed the massive RTA expansion in 2016. Of course, Patterson and Hackel helped cause this confusion in the first place with their staunch opposition to putting a new RTA plan on the ballot. Another twist: On the Oakland and Macomb ballots, the millage renewal appears as a request for an increase, from .9926 mills to 1 mill. Voters approved 1 mill in 2014, but because of a Headlee amendment-mandated rollback in the rate since then, they’ve paid slightly less. In short: Voters might see the word “increase” and reflexively say no. But it’s important to note that the difference between those rates is nearly invisible. At 1 mill, property owners would pay $100 a year on a house worth $200,000. The “increase” would add 75 CENTS to that. We’ve previously backed finding a solution through the RTA, a solution that wouldn’t require going back to voters every four years to keep such a basic service. We still think that’s the way to go, but it’s not happening this year. There are positive signs. We are encouraged by rumblings from additional communities, such as Novi, that they are interested in opting in to SMART after years of opting out. Voters should pass this renewal, which is not a tax increase in any meaningful sense, because the regional economy already feels the pinch of a lack of transportation options and difficulty in recruiting workers. SMART says 70 percent of its riders are riding its buses to get to work. SMART is far from a perfect system, but a defeat of the millage would cause major headaches for workers and employers and risk, say, cutting Macomb County workers off from jobs around the region. This is basic stuff if you want to have a 21st century economy. Get out and vote Tuesday, and vote yes on SMART.

LETTERS

Chamber members’ actions caused rise in incivility In Crain’s July 23 issue, the Detroit Regional Chamber placed an advertisement advocating for civility in public discourse, but what this statement failed to address is the causes for the rise in incivility. As the 2016 election demonstrated, the public is incredibly frustrated by a political status quo that gives disproportionate power and rewards to special interests. Donald Trump and Bernie Sanders both rose to popularity on their repeated campaign promise to change this system. Many accept President Trump’s own uncivil public discourse as a justifiable cost for the promised disruption to the political status quo. The Detroit Regional Chamber is proud to stand for civility, as it should. But what it doesn’t advertise is that many of its members have

been subjected to harsh public statements because they funded a lawsuit to prevent a referendum from making it on the ballot this November, a referendum that at least 425,000 Michiganders support. The lawsuit didn’t challenge that Republican legislators used their authority to draw district lines that favored their party and its candidates in elections — maps and voting statistics make this fact abundantly clear. Instead, it challenged whether citizens should even have the chance to vote to remove this power from the Legislature and instead vest it in a newly formed commission designed to be insulated from the influence of the political parties and the special interests that finance them. Chambers of Commerce and their members are some of the most powerful special interest groups in our state and nation. When they use large sums of money and little-understood legal processes with the aim of preventing citizens from voting on a

popular proposal, their members should expect to be harshly called out. Threats of violence and coercion are completely unacceptable. However, protests, boycotts and public shaming of the chamber members responsible for this lawsuit are not uncivil acts. Such public disputes may prove necessary to reveal the actions members may prefer to hide, and if the result is fairer elections and better representatives — the chief aim of this proposal — they will have helped engender a more civil citizenry. Andrew I. Rodney West Bloomfield Township

More on WJR Hear Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning on WJR 760 AM’s Paul W. Smith Show.

It only would take a miracle I

f we want to see some extraordinary economic activity overnight, with little or any extra effort, then I think we should all hope for a miracle. Now I understand that they are few and far between. But that hasn’t stopped the very patient and faithful people of Detroit, who have kept hoping and praying for decades. I’m not talking about a Detroit rebound. That’s already happening. I’m also not talking about the idea of the Detroit Tigers winning most of their remaining games and making the playoffs. That would be a miracle,

KEITH CRAIN Editor-in-chief

but let’s be plausible here. The miracle I want to see that’s not impossible? A long playoff run and a

Super Bowl for our forlorn Detroit Lions. Curse or no curse, we have a new coach, and you and I never should underestimate the power of that new hope, if there is any left after all these years of disappointment. But there’s always a chance that the fresh start could help something special happen this fall. If we are going to dream, why not dream big? Detroit isn’t hosting the Super Bowl, but a playoff run would help fill restaurants and hotels and surely put

There’s always a chance that the fresh start could help something special happen this fall. a smile on the face of Larry Alexander, head of the Detroit Metro Convention & Visitors Bureau — if his heart can stand all the excitement. If the Lions had home-field advantage all the way through, it seems like

the economic impact could be more than a Super Bowl. If we want a nice replacement for the North American International Auto Show in January, having the Lions come alive and make the playoffs year in and year out would be just the ticket. It might be too much to hope for the Tigers and Lions to hit the big time in the same year. It happened once, in 1935. Can you imagine? Heck, if you are going to dream, dream big. Miracles happen. Why not in Detroit?

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 6 , 2 0 1 8

Fair and free global trade is best for Michigan

ichigan has experienced remarkable economic recovery since the Great Recession. While the news is filled with discussion about using tariffs to achieve increased growth, the Michigan Manufacturers Association has concerns about the economic risks for Michigan. Manufacturers employ 620,000 men and women who earn $9.8 billion in total wages and produce $73.7 billion of the gross state product. With Michigan’s robust economic recovery, we are leading the nation in manufacturing job growth having created 166,100 new manufacturing jobs since January of 2010. Michigan is a large manufacturing state relying heavily on free and fair global trade to grow and create jobs. We have a long and storied history as the home of the automotive industry. The automotive sector is the core of the state economy, with the very substantial automotive supplier presence and the country’s highest concentration of tool and die companies. In its “Trade Briefing: Consumer Impact of Potential U.S. Section 232 Tariffs and Quotas on Imported Automobiles & Automotive Parts” (July 2018), the Center for Automotive Research estimates that the average consumer price of a vehicle sold in the United States will increase by $980 (10 percent tariff with exemptions for Canada and Mexico) to $4,400 (25 percent tariff applied to all imports). With over 70 percent of 2017 U.S. auto parts exported to Canada and Mexico, CAR estimates automotive demand will fall by 493,600 to 2 million vehicles due to tariff and quota implementation. The automotive industry is truly

OTHER VOICES Chuck Hadden

global, with thousands of parts being incorporated into vehicles and exported around the world. Tariffs ultimately increase the cost of all goods, as other countries retaliate to level

the playing field. If tariffs increase the cost of Michigan-made products, Michigan will lose jobs and capital investment. With our state’s concentration of manufacturing, Michigan has a lot at risk. Michigan is at its best, with the greatest opportunity for job growth and increased economic vitality, when we can engage in free and fair global trade rooted in a rules-based international trading system that seeks to eliminate market-distorting governmental intervention. While we share the president’s goal of greater economic vitality, we believe improvements can be made through

measures such as anti-dumping investigations and blocking intellectual property infringement. National security remains an important goal for the nation and should always be part of the freetrade conversation. However, higher prices caused by global uncertainty on the terms of international trade hinders our state’s economic recovery. Manufacturing investment and growth drove Michigan’s remarkable story of recovery. Having moved from one of the highest unemployment rates in the nation at the end of the last decade to leading the nation

in manufacturing job growth in 2018, Michigan’s recovery stands as a shining example of success. We have expressed our concerns to U.S. Secretary of Commerce Wilbur Ross and asked that the proposed tariffs not be adopted. Michigan’s recovery depends on the free- and fairtrade policies that encourage billions of dollars of manufacturing capital investment in our state and support hundreds of thousands of Michigan families. Chuck Hadden is president and CEO of the Michigan Manufacturers Association.

TALK ON THE WEB

Re: Gordon Foods to open its first grocery store in Detroit Another grocery store option for downtown, Meijer ... Whole foods ... Gordon Foods ... now all they need are small scale 24-hour grocery stores something like the stores in New York or at least stay open late. carbest123 What a great company! So nice to see them opening on Jefferson! ADA3

Re: Cisco to acquire Duo Security in $2.35 billion deal

Sweet returns for investors and employees with all those options. Nice indeed. William Rauwerdink

Re: Chamber loses fight to keep proposal off ballot

If they really wanted no gerrymandering, then they would have had 13 people with no political affiliation, not the mix proposed. You really want fair representation, abolish the party system and have the candidates stand on their own merit. MarkYTH

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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 U G U S T 6 , 2 0 1 8

FOCUS

ANN ARBOR REAL ESTATE

Burlington Office Complex, Ann Arbor. OXFORD COS.

Housing demand, auto research drive market Jeff Hauptman, the CEO of Ann Arbor-based Oxford Cos., oversees the largest portfolio of Ann Arbor real estate outside of the University of Michigan. Three years ago, his company executed a $102 million deal to buy more than 700,000 square feet of commercial space, exponentially increasing the company’s portfolio. Today it has 2.4 million square feet under ownership and management. He spoke with Crain’s Detroit Business real estate reporter Kirk Pinho about how Ann Arbor’s commercial real estate market is performing and trends that are front and center. The conversation has been edited and condensed. What’s the overall state of the Ann Arbor office market these days?

I would say Ann Arbor office is on fire right now. We have activity in everything from expansions to tech. We have industries coming in that haven’t been in the market before. Let me give you a sense of things: We probably have about 40 percent of the vacant square footage on the south side, which has the largest amount of office space. We probably have a little over 40 percent of the vacancies in that market. One individual property is 40 plus percent of that at 777 Eisenhower, and we have activity on virtually every one of our vacant spaces there right now. What trends have you noticed in terms of tenancy? Types of companies moving in and expanding?

I can’t name specific companies, but there is more auto research related

Need to know

JJAuto research at Willow Run driving

commercial office demand

JJCity is looking to create more affordable housing JJCost of parking is detracting people from downtown

and manufacturing, some of which is being generated by what’s going on at Willow Run with the development of automated cars. That whole project is so big that you’re getting a lot of manufacturers, suppliers and research companies that are looking for places that have solid office space to go to our State and Eisenhower (properties) in the Briarwood area. There, they can jump on I-94 and they can be at Willow Run in just minutes, then they have the benefit of being right there in Ann Arbor, which attracts a lot of the technical people and engineers. Ann Arbor is often seen as having a built-in real estate market with the University of Michigan being there. How is that trickling down throughout the different types of space?

There are about 82,000 cars that find their way into Ann Arbor every morning and leave every evening. There is a tremendous number of commuters. There is a real interest from the university, the city and Ann Arbor SPARK to find ways to get more housing within the city to get the most cars off the road. The city itself is looking to try to devise affordable housing, like workforce housing. They are not looking

at people in the 30-60 percent AMI (area median income) range; they are talking about people that are median income. Occupancies are on the rise, and we are basically always full in terms of housing. It’s nearly impossible to find a house in the $200,000 to $300,000 range, and nearly impossible to find a good apartment.

downtown, what people are starting to realize. ... We are downtown. We have about 40 people down here and it costs us $10.60 per square foot annualized for parking. That’s on top of rent and utilities. We are seeing people leave downtown and come to the Briarwood market because of the cost of parking downtown.

Have office landlords had to offer much in the way of concessions in recent years to lure or retain tenants?

We still see a lot of developments up in the air downtown, a lot of housing. We have a 300,000-square-foot development called the Library Loft development that has been a source of controversy, which Core Spaces out of Chicago is developing. There is also the Y Lot downtown, which is a big deal. Dennis Dahlmann bought it about five years ago and the storyline was that he would build a new building, but he never did. (The city is now trying to buy it back from Dahlmann.) The city, SPARK and university are all in alignment that we need to make the whole State/Eisenhower market more pedestrian friendly, get more housing and more retail that’s walkable. There are a lot of opportunities to develop housing in Ann Arbor and it needs it. There is not a lot of drive for new office, but within probably about a year, you’re not going to have much vacancy. We are probably going to be at 98 percent (in our portfolio) in six months. There will be opportunities to build new. From a retail standpoint, our retail market tends to be very strong if properties are priced at market.

For office space, concessions have gone down over the years and rents have gone up. One of the advantages that the office landlords still have is that our rents are still lower than what it costs to build a new building. You look at our portfolio of buildings, a lot of them were built in the 1980s but the locations are fantastic. They can charge in the mid-$20s per square for those with a new build out. And there is still that disconnect (between what it costs to build a new building and the rents it can command); we still need to see rents come up in that regard. Office rents downtown have increased 25 percent in the last three years, while the northeast side and the Briarwood area have remained relatively stagnant. Why is that?

A couple things. Vacancy rates on the northeast side typically are lower than downtown, historically. Rents have gone up a little bit but concessions have gone down, and the same thing with the northeast side. We are not seeing as much of free rents or TIs (tenant improvements). With

What else should our readers know?

‘There are about 82,000 cars that find their way into Ann Arbor every morning and leave every evening. There is a tremendous number of commuters. There is a real interest from the university, the city and Ann Arbor SPARK to find ways to get more housing within the city to get the most cars off the road.’ Jeff Hauptman

Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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 U G U S T 6 , 2 0 1 8

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By Kirk Pinho

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kpinho@crain.com

A mixed-use development on Wayne State University-owned land thatâ&#x20AC;&#x2122;s taken five years to get off the ground is now being proposed as condominiums instead of apartments. But a key university official in the negotiations between WSU and Detroit-based Broder & Sachse Real Estate Services Inc. is hinting that the university could scrap the mixed-use plans for the site altogether and go in a new direction with the 1.5-acre site at Cass Avenue and Canfield Street next to University Towers Apartments. It had been planned for 248 apartments, a 120-room hotel, 19,000 square feet of retail and a 300-person conference center after awarding an April 2013 request for proposals to Broder & Sachse and entering into a memorandum of understanding for the $60 million project with the developer in November 2013. â&#x20AC;&#x153;(Thereâ&#x20AC;&#x2122;s) another very important possibility, that we donâ&#x20AC;&#x2122;t go out with another RFP or the same development strategy,â&#x20AC;? William Decatur, Wayne Stateâ&#x20AC;&#x2122;s vice president of finance and business, said Wednesday morning. â&#x20AC;&#x153;The market has changed dramatically, the university has changed. Itâ&#x20AC;&#x2122;s growing and maybe we use that land for university purposes. We are just kicking off a master planning process

Need to know

JJThe Vernor development, with

apartments, hotel and retail, is years behind schedule JJWayne State, which owns the property,

is considering whether to move in a different direction with 1.5-acre site

JJDeveloper Broder & Sachse is shifting from apartments to condos after re-examining project economics

that will look at highest and best use of that property.â&#x20AC;? Construction on the project known as The Vernor was expected to begin in 2015 and be complete by 2016. â&#x20AC;&#x153;Broder & Sachse continues to move forward with plans for the development of the site for residential and hospitality uses,â&#x20AC;? Broder & Sachse CEO Richard Broder said in a statement. But Decatur said the company has been â&#x20AC;&#x153;past all the datesâ&#x20AC;? on various milestones spelled out in the MOU, â&#x20AC;&#x153;including design, including evidence of financing, everything.â&#x20AC;? â&#x20AC;&#x153;The negotiations have been going on for quite some time. They have been dragging out. The university is considering its options,â&#x20AC;? Decatur said. That includes continuing to work with Broder on plans that would shift the apartment component to condos. The property would have originally been leased to Broder & Sachse, but

would be sold to the company under the condo plan. Thatâ&#x20AC;&#x2122;s because projects are completed using master deeds, and individual units are then sold to buyers; if Broder & Sachse leased the land, it would eventually return to the university at the end of that agreement, Decatur said. He said the condos are being proposed instead of apartments â&#x20AC;&#x153;due to their economic analysis.â&#x20AC;? Broder & Sachse declined to provide additional details on the negotiations between it and the university. In 2016, Brooklyn-based furniture retailer West Elm announced it was opening a boutique hotel in Detroit; it was anticipated to go on the Wayne State site. But earlier this year, West Elm announced instead that it was putting the hotel in the footprint of a planned mixed-use development currently called South of Mack Avenue. Detroit-based The Roxbury Group is the developer of the hotel project. Broder & Sachse has developed The Albert apartment building in Capitol Park and The Scott at Brush Park on Woodward Avenue at Erskine, and is in the process of redeveloping the building formerly known as the Milner Arms apartments, now The Hamilton at Martin Luther King Jr. Boulevard west of Woodward. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Crainâ&#x20AC;&#x2122;s seeks Best-Managed Nonprofits Crainâ&#x20AC;&#x2122;s Best Managed Nonprofit program this year will focus on how nonprofits are using data to solve issues and better meet their missions. This could include how an organization is collecting and acting on its own data or on shared data collected by another source. All applications must include the following: J A completed nomination form. J A copy of the most recent audited financial statement. J A copy of the most recent IRS 990 form. J A copy of the organizationâ&#x20AC;&#x2122;s code of ethics.

Applicants for the award must be a 501(c)(3) with headquarters in Wayne, Washtenaw, Oakland, Macomb or Livingston counties. First-place winners within the last 10 years are not eligible; neither are hospitals, HMOs, medical clinics, business and professional organizations, schools, churches or foundations.

The deadline to nominate is Monday, Aug. 20. Finalists will be interviewed by judges the morning of Tuesday, Oct. 23. Winners will be profiled in the Dec. 10 issue, receive a â&#x20AC;&#x153;best-managedâ&#x20AC;? logo from Crainâ&#x20AC;&#x2122;s for use in promotional material and will be recognized at Crainâ&#x20AC;&#x2122;s Newsmaker of the Year lunch early next year. For information about the program, email senior reporter Sherri Welch at swelch@crain.com or call (313) 446-1694. For technical questions, contact Keenan Covington at kcovington@crain.com or (313) 4460417.

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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 U G U S T 6 , 2 0 1 8

RISE executive leaving to run Rebel Nell full time By Bill Shea bshea@crain.com

Amy Peterson got to live her dream job. Now, she’s going to work full time to help disadvantaged women in Detroit work toward theirs. Peterson, who turns 38 on Wednesday, spent 11 years with the Detroit Tigers’ front office, and now will exit the executive role she took last year with billionaire Stephen Ross’ national anti-racism initiative to instead run Rebel Nell L3C, the local jewelry maker she co-founded in 2013 as a way to help women transition from homeless shelters to independence. She’s nervous about leaving the well-established and well-funded corporate roles to be her own boss in what remains a growing startup. “It was a great move (to leave the Tigers for the Ross Initiative in Sports for Equality in November), but I realized that I have this passion for Rebel Nell,” she said. “How big can it grow? How many women can we help? I’m terrified, scared and all of those things, but it’s the right thing for me to do right now.” Peterson is CEO at Rebel Nell, which hires disadvantaged women in Detroit to design and manufacture jewelry — examples include necklaces, rings and cuff links — and other products adorned with colorful graffiti flaked from walls in Detroit. The company’s core mission is to hire, educate and empower those women as a way to transition out of homelessness.

Focus on growing brand Peterson co-founded the company in 2013 with Diana Russell, who is its creative director, and later added Julie Rhodes as co-owner and director of sales and marketing. Rebel Nell sold its first items at Detroit’s Dally in the Alley in 2013, and will launch new products — Peterson said they’re still a secret — at this year’s Dally on Sept. 8. Since launching, Rebel Nell hit $1 million in sales at the end of last year, Peterson said, and the goal is to have about $300,000 in sales for 2018. She said the business turns a profit, albeit a small one. Running Rebel Nell full time will allow her to grow sales and bolster the empowerment programming, Peterson said. Ramping up details of those efforts will begin in earnest after she leaves RISE on Aug. 15. “My big focus will be growing the brand and what exactly does that

“I’m terrified, scared and all of those things, but it’s the right thing for me to do right now,” Amy Peterson said of her leap to run Rebel Nell full time.

Need to know

JJAmy Peterson is leaving Stephen Ross’

anti-racism nonprofit

JJCo-founded Detroit-based jewelry maker that aids homeless women JJCumulative sales since 2013 launch hit $1 million last year

mean,” she said. That includes building stronger relationships with Rebel Nell’s 35 retailers across 11 states; expansion of Rebel Nell production to other cities within two or three years; and expanding the company’s corporate team-building efforts. That latter goal bolsters Rebel Nell’s social activism. “We have companies come in and make jewelry, interact with women, and hopefully break down stereotypes about homelessness,” Peterson said. Rebel Nell has 10 employees, including interns, and is about to hire its 18th and 19th women out of shel-

ters. The company works to place them in full-time jobs after learning skills at Rebel Nell, which operates out of the Ponyride shared workspace in Corktown. A longer-term goal is to open a combination manufacturing space and flagship brick-and-mortar storefront in Detroit, Peterson said. “This is our home and where we started,” she said.

Roots in sports business At RISE, she’s vice president of special project and general counsel. The nonprofit is the sports-based anti-racism initiative created in 2015 by Detroit-born real estate billionaire and Miami Dolphins owner Stephen Ross, and led by CEO Jocelyn Benson, the former dean of Wayne State University Law School in Detroit. It was Benson, Peterson said, who encouraged her to join RISE after working for the Tigers in a variety of roles. And now Benson is supportive

of her decision to run Rebel Nell full time. “She’s been very encouraging of me to take leap to run Rebel Nell,” she said. Rebel Nell takes its name from one of the towering American female social activists of the 20th century — First Lady Eleanor “Little Nell” Roosevelt. “Because the women we employ are rebelling against what society has handed them and moving forward with their lives (plus graffiti is often viewed as rebellious) it seemed perfectly fitting to call ourselves Rebel Nell,” the company wrote on its website. “Eleanor Roosevelt was a pioneer and a rebel, standing up for everything our company works hard for before our time, and reminding us daily of what we believe in.” While Rebel Nell is her outlet to help women, Peterson still wants to work again in sports. She spent 11 years in community affairs, corporate sales and as associate counsel for the

REBEL NELL

Detroit Tigers. “I certainly have a tug toward the sports industry. I was fortunate to get to fulfill that dream. I’m certainly interested in going back. I’d love to run a professional sports organization. Rebel Nell will give me the experience and expertise to do that someday,” she said. The Western New York native got her law degree and MBA from schools in Boston. Her undergrad degree in history is from Kenyon College in Ohio, where she played women’s rugby team for two years. Her husband, Antonio Luck, is a 2008 Crain’s 20 in their 20s honoree who is managing director of Endeavor Detroit, a nonprofit mentorship program for business leaders. He was formerly business development manager at Delphi Technologies Inc. and worked for the Michigan Economic Development Corp. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

Donald Golden, founder of D.O.C. Optics, dies at 99 By Kurt Nagl knagl@crain.com

Donald L. Golden, an optometrist who broke conventions and built an eyeglasses empire in metro Detroit, died July 30 in Miami. He was 99. Golden died just two months before turning 100, according to an obituary released by his family. He opened his first office in 1946 at the First National Building in downtown Detroit and started D.O.C. Optics Corp. shortly after. At the time, the young optometrist was one of the first in his field to use traditional advertising to build his business. He faced heavy criticism for using newspaper, television and radio ads to

market his products, but others soon adopted the practice after seeing how well it worked. “He was often shunned by his optometrist peers because he Donald Golden: was an ‘advertisUsed advertising ing doctor,’” said to build business. his son, Richard S. Golden. “He fought and stuck up for his rights. His harshest critics joined him.” Golden was also passionate about contact lenses, a new concept at the

time. He became a contact lens specialist and “champion of innovation,” according to his obituary. He opened a contact lens laboratory in New York City and distributed the lenses to hundreds of practices around the country. D.O.C. eventually grew into a company of more than 100 stores in Michigan at its peak. Golden retired unofficially in 1986 when he handed over the reins to his son, Richard. Under his son’s creative direction, D.O.C. crafted some of metro Detroit’s most memorable ad campaigns, including the “sexy specs” TV commercial featuring Richard’s quintessentially ’90s dance moves.

Golden’s wife of 61 years, Norma, also played an important role in building the company, along with their other sons, Michael and Randal. D.O.C. sold for $90 million in 2007 to Italian eyeglass giant Luxottica. Richard Golden still runs SEE Inc., a company he founded in 1998 that is based in Birmingham and operates 42 designer eyeglass stores. Richard Golden said the single most important lesson his father taught him was resilience. He said his father’s decision to follow his gut is the reason he thrived as a businessman. “That was the key to his success,”

the son said. “If you believe in something that you know is right, but maybe other people aren’t agreeing with you and you thought it through and know it’s the way to go, don’t give up and succumb to the pressure. Stick with it.” Golden was active in charity work in Miami and metro Detroit for many years, supporting Jewish causes, hospitals and education. He was preceded in death by his wife, Norma. He remarried and is survived by his wife, Marion; sons Michael, Richard and Randal; stepson Danny Bloomfield; stepdaughter Tania Bloomfield; six grandchildren, and five great-grandchildren.

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Council holding up new 500-room hotel at Crowne Plaza By Chad Livengood

clivengood@crain.com

Detroit City Council is holding up construction of a new 28-story 500bed hotel across from Cobo Center over concerns about the existing Crowne Plaza hotel’s customer service, an unsubstantiated bed bug infestation and treatment of employees after a failed unionization vote. In June, City Council voted down a site plan request from the owners of the Crowne Plaza to build a second 338-foot hotel that would connect to Cobo Center with a pedestrian bridge over Washington Boulevard, sending the project back to committee and delaying the developer’s construction schedule. The delay came just before the NCAA passed over Detroit for hosting the Final Four college basketball championship in 2023-2026 because of a shortage of downtown hotels with 400 rooms or more. The former Pontchartrain Hotel, now branded as a Crowne Plaza since reopening in 2014, has 367 guest rooms. Operadora de Servicio Para Hoteles de Lujo, a Mexican and European investor group that owns the Crowne Plaza, had hoped to break ground this fall on the new $164 million hotel at the intersection of Washington Boulevard and West Jefferson Avenue, said John Sabbagh, general manager of the Crowne Plaza. But the construction groundbreaking has been pushed back to January while the hotelier tries to navigate the

OPERADORA DE SERVICIO PARA HOTELES DE LUJO

The owner of the Crowne Plaza hotel in downtown Detroit (formerly the Hotel Pontchartrain), submitted plans to the city in December to build a 28-story hotel tower at the corner of Washington Boulevard and West Jefferson Avenue.

final hurdle at City Council after first submitting its site plans in December. The hotel developer estimates a 18-month construction schedule for the 448,000-square-foot building. Unlike other real estate development projects downtown, the hotel developer is not asking for any tax breaks or incentives and is financing the full cost of the project, Sabbagh said. Councilwoman Janeé Ayers said the council is scrutinizing the Crowne Plaza’s expansion plans because the hotel’s operators haven’t addressed complaints about customer service, which include a bed bug problem in 2015 that patrons complained about

on the online review forum Yelp.com. “How do you ask for a second tower when you can’t get the first one right? That’s crazy to me,” Ayers told Crain’s. “Anybody that’s just saying we’re holding something up, I would direct them to the Yelp reviews for the Crowne Plaza.” In April, the city Planning Commission referred the project back to the city’s health department and Buildings, Safety, Engineering and Environmental Department “to investigate allegations of a bed bug infestation,” according to a July 20 memo to City Council from City Planning Commission Chair Alton James. The health and building depart-

ments found no current bed bug problems, the city memo said. Crowne Plaza also has clearance from two different pest control companies, Sabbagh said. “Given that the city (departments) ... were satisfied with its findings upon re-inspection and no issues associated with the design or proposed construction of a second tower on the site in question, the (planning) commission reissues our recommendation for approval of the proposed expansion,” James wrote in the memo to council members. “As long as the hotel is employing industry standard practices and addressing circumstances as they arise, this issue should not impact operations beyond what other hotels experience in this market.” Crowne Plaza’s owners have been pushing for City Council reconsideration at Tuesday’s meeting because the council is recessing for the month of August and won't be back in session until after Labor Day. The hotel hired Lansing lobbyist Kenneth Cole of Governmental Consultant Services Inc. to lobby for approval. Cole also is the lobbyist for Mayor Mike Duggan’s administration. Sabbagh said the “hypothetical bed bug scenario” was a “tactic” to delay the project and “slander” the hotel. “The bed bug thing is definitely a red herring,” Sabbagh told Crain’s. As of Monday, the Crowne Plaza project was not on the council’s agenda, likely delaying a decision until

N O N P RO F I T

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mid-September. Councilman Gabe Leland, 7th District, voted against the plan after hearing concerns about the hotel’s treatment of employees “dating back many years.” “I know the hotel’s been doing better in regard to their employees, so my vote might change when this vote comes back up,” Leland told Crain's. The Crowne Plaza’s owners have received approval from the city’s planning department for the new hotel tower, which will feature a 146-spot parking deck on nine floors between the ground-level lobby and 494 hotel rooms in the tower. The hotel’s ownership group has letters of intent from multiple hotel brands to potentially operate the two towers as a dual-brand hotel with separate entrances, but shared meeting space, Sabbagh said. The Detroit Regional Convention Facility Authority, which operates Cobo Center, has agreed to lease up to 400 market-rate parking spaces at Cobo Center to the new hotel, according to a letter of support the convention authority sent City Planning Director Maurice Cox in February. Councilman Roy McCalister, 2nd District, said he’s heard complaints from visitors about the Crowne Plaza’s conditions and customer service. “I’m all for business coming in, but let’s have good business,” McCalister said. “Let’s fix one issue, let’s tighten that up, before you build another one.”

CA L L :

WHO’S THE BEST-MANAGED? Nonprofits are the heartbeat of counties across the country. They provide resources to those most in need, bring attention to pressing issues, and help inspire others to make positive change. Now, it’s their turn to be recognized. Nominate the best-managed nonprofit in the Metro Detroit area. We want to know which nonprofits are making the most out of their data – collected or received from outside sources – to make smarter and more impactful management decisions. Applicant must be a 501(c)(3) with headquarters in one of the following counties:

◆ Wayne ◆ Washtenaw ◆ Oakland

◆ Macomb ◆ Livingston

The deadline to nominate is Monday, Aug. 20 and finalist interviews will be conducted on the morning of Tuesday, Oct. 23.

Place your nominations today at crainsdetroit.com/nominate.

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 6 , 2 0 1 8

Care One grows business in temp staffing industry By Jay Greene jgreene@crain.com

Ypsilanti-based Care One Inc. is one of those firms that has enjoyed double-digit growth the past six years as it helps companies fill holes in their workforces with temporary staffing. As a recently certified LGBT business, Care One owner and founder Steven Cook says his 25-year-old company hasn’t changed much in philosophy or customer service over the years, even as the health care industry it serves has gone through many changes. But Cook says “the whole industry, home care and health care staffing, has changed completely” as hiring and purchasing contracts have, in some cases, gone to large national companies and placement of temporary employees has led to more permanent hirings. Specializing in health care, Care One finds nurses, home health aides, dentists, social workers, surgical and lab technicians, pharmacists and others for companies needing shortterm, long-term or per diem workers. “We have experienced pretty substantial growth in the last five to six years by honing our skills and marketing techniques because we are in a strange business,” Cook said. “We have clients on both sides. We place employees at companies, and then the provider becomes a client as well as the facility.” Some 20 years ago, 30 percent of temp employees would eventually be hired at the company. The majority would work a few weeks or months, then be placed at another company. But now, 80 percent to 90 percent of temporary employees, on average, eventually become a full-time employee with the company with which they are placed, Cook said. Generally, the placement lasts 13 weeks to six months. “There is an advantage for firms to use temporary employees. Companies that hire temporary employees benefit because they don’t spend money unnecessarily training employees,” he said.

How Care One began In 1993, Cook started Care One with 14 employees. He was the general manager for an air freight company and when the firm was acquired, he wanted to be his own boss. So, Cook took his severance pay, did some research, and picked the health care industry. “Everything pointed to health care because baby boomers were getting older,” Cook said. His first contract was W.A. Foote Memorial Hospital, which is now Henry Ford Allegiance Hospital. “When we started, nobody was doing temp services in Jackson,” he said. Now, Care One has nearly 250 employees and Cook projects revenue to come close to $6 million this year. “We have had substantial growth. It’s been double-digits, 13 to 16 percent, the past few years,” he said. To find employees, Cook said he does things slightly differently than his much larger staffing competitors. They place ads on Jobs.com or Monster.com and people email resumes. “Everything became very digital. There is no face-to-face communication. My competitors take in resumes and forward them on to health care organizations. We don’t do that. We have lots of face-to-face and tele-

Care One owner and founder Steven Cook says his 25-year-old company hasn’t changed much in philosophy or customer service over the years.

Need to know

JJCare One health care staffing has

steadily grown revenue by double-digits the past six years to hit $6 million JJThe LGBT-certified company works with a variety of clients ranging from corrections, nursing homes, pharmacy and home health JJNearly 90 percent of temporary staff become permanent hires, depending on the industry

phone communication. Because health care is so personal, you have to be personal,” he said. Many health care companies, including those in long-term care or residential assistance, are struggling to find new employees to meet minimum staffing requirements. RNs, LPNs, nurses’ aides and charge nurses are in high demand, he said. “There is a combination of turnover and growth. In Jackson and really Michigan, we have an aging of the workforce, and the amount of new facilities that have opened up in Jackson, companies are trying to staff those positions. It is not a job everybody wants to do.” While hospitals had been a chief source of contracts, Cook said the hospital market changed in the last three years. Instead of hiring through human resource departments, hospitals turned over temporary staffing to purchasing departments. “I still don’t fully understand it. We had very successful placements at hospitals through HR, but hospitals now use group purchasing organizations to get lower-cost contracts,” Cook said.

For example, a hospital or health care system issues a request for proposal for nursing services with a group purchasing organization of which it is a member and staffing companies, usually national, bid for the contracts. “Hospitals now put our RFPs for nurse services same as Band-Aids or laundry services, like widgets,” Cook said. “This removes the personal touch. People are placed without ever meeting them. Now hospitals deal with fairly large suppliers. Sometimes (GPOs) contract with agencies like ours, which is what we are trying to do.” Cook said the GPOs are contracting with national staffing agencies and shying away from hometown agencies. “We know our people, but placements are becoming less successful. If I were a nurse, I would be hesitant to send my resume to a staffing agency that is not based in the area I live,” he said.

Corrections industry Besides health care staffing, which includes nursing homes, hospitals, residential care, dentists and psychologists, social workers and nurses, Care One focuses on health care staffing with the Michigan Department of Corrections. “Corrections is a big area. We are 14 years into corrections and currently in our third contract,” Cook said. “We are one of six agencies who provide staff for the entire state.” Personnel placed include dentists, medical assistants, registered nurses and licensed practical nurses. “Corrections is not really what peo-

ple perceive it to be. A lot of nurses go into it a little hesitant, but once they get into the arena they are very pleased,” Cook said. “Eighty-five percent of placements are taken full time." Of the approximate 111 temporary jobs, Care One places 45 percent, or about 50, of the current total, said Lia Gulick, health services administrator with the MDOC, which employs 1,466 full-time equivalent health care workers. Gulick said of the 50 temporary workers Care One places, 26 are registered nurses. “Temporary staff fill in for vacations and in places where we can’t recruit,” Gulick said. “They cover for gaps when we can’t fill a position, or people go on military or FMLA leave.” Gulick said she doesn’t have statistics on how often MDOC hires temporary workers. “If they like the job we would hire them,” she said. “They are a good source to fill out our positions. It gives us the ability to see them, see how they work.” MDOC also contracts with Corizon Correctional Healthcare, the state’s in-prison health care provider, for physicians and psychiatrists and some pharmacy services. Cook said turnover in corrections is mostly due at the MDOC to an aging workforce. “They are losing a lot to retirement. Some changes with the (union) contracts. Some people get out before the new contracts kick in,” he said.

LGBT certification Cook said he sought certification last year from the National LGBT Chamber of Commerce because an in-

CARE ONE INC.

creasing number of state and local governments view gay and lesbians as a minority. “There are many state and federal contracts out there, and they are very open to using LGBT businesses,” Cook said. The national LGBT chamber verifies that eligible businesses are majority-owned by LGBT individuals and grants the designation as part of its supplier diversity initiative. “It puts you in the same advantage as a woman-owned or minority-owned business,” said Cook. “A majority of health care organizations have large numbers of LGBT employees and this has given us the ability to go after contracts we probably wouldn’t have done before.” Cook said because Care One is smaller it can’t give as large as price breaks as larger national companies. “It gives us a boost in scoring and an ability to get us to the next level. It has opened some doors to the possibility of moving forward and puts us in touch with more employers,” he said. But Cook said it is too early to tell if Care One will do better financially because of the certification. “It has no impact on our temporary employees or recruiting,” he said “We have always been LGBT-friendly and that never has been a barrier to people coming to work here.” Cook said it is hard to tell if more LGBT people are applying for jobs at Care One. “People in the area have known about us for years because of the events we sponsor and just who we are,” he said. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 6 , 2 0 1 8

Adient scrapped its plan to spend nearly $100 million relocating its main office from Plymouth to the Marquette Building at 243 W. Congress St. in Detroit in June. ADIENT PLC

Adient CTO: Detroit investment was a mistake By Dustin Walsh dwalsh@crain.com

TRAVERSE CITY — Adient plc’s more than $36 million investment to move its headquarters to Detroit was a mistake. CTO Detlef Juerss said the company’s investment priorities since spinning off from M i l w a u kee-based Johnson Controls Inc. in October 2016 have been misDetlef Juerss: guided and that Transitioning focus of company. under new interim CEO Fritz Henderson the company is refocusing on operations and performance. “We’ve been a little distracted,” Juerss said Monday at the Center for Automotive Research’s Management Briefing Seminars in Traverse City. “We’re now transitioning to a focus on the day-to-day business ...

Need to know

JJSeating supplier scrapped plan to spend nearly $100 million relocating headquarters JJPlymouth-based company refocusing on operations JJWill open a new U.S. plant in the future

not just the finer things in life.” The focus on new automotive business on the West Coast, including the $360 million acquisition of Futuris Group in 2017, pulled the supplier too far from its traditional automakers as it tried to win contracts from automakers such as Tesla and Faraday Future. And the relocation was ill-advised as Adient gained its footing as a new supplier, he said. Adient scrapped its plan to spend nearly $100 million on relocating its main office from Plymouth to the Marquette Building at 243 W. Congress St. in Detroit in June, days after the retirement of

Bruce McDonald, its then-chairman and CEO. Adient acquired the building in 2016 for $16.9 million and paid about $19.23 million combined for a parking deck and surface parking lot near the building. The company acquired the building from Mexican businessman Carlos Slim Helu, who bought the Marquette Building for $5.8 million in 2014. “Detroit was not the right timing,” Juerss said. “We should have spent that money somewhere else.” That investment should have gone to plant operations, upgrading aging infrastructure and equipment, he said, noting the company hadn’t invested in domestic manufacturing in some time. Juerss also confirmed the company will invest in a new plant in the U.S. in the coming years, though declined to reveal the level of investment and location. Adient will invest in upgrading plants through increased automation and equipment, he said.

“Fritz is taking a 180-degree change in many aspects of our business,” Juerss said. “Our strategy now is on our traditional customers and delivering flawless launches while investing in automation.” Since spinning off from JCI, Adient has struggled to maintain consistent profitability, reporting a $1.5 billion loss in 2016 before recovering to a net income of $877 million last year. In 2018, its balance sheet has been dragged down by its money-losing seat structures and mechanisms division with its $3.3 billion in debt. In the second fiscal quarter of 2018, Adient reported a net loss of $168 million on revenue of $4.6 billion but recovered in the third quarter with a $54 million profit. Juerss said the problems with Adient started before the spinoff, including major problems with the integration of German seat mechanisms supplier C. Rob. Hammerstein Group, which JCI acquired in 2011.

Juerss said he believes investing in operations will stabilize its balance sheet and create more value for its customers while also not sacrificing jobs. “Because we believe regional manufacturing the jobs will stay in the region, even with automation,” Juerss said. “They’ll just be different jobs.” Aside from new investments, Adient plans to announce several new partnerships to expand its scope, Juerss said, including with a “big” announcement with a consumer electronics company. In January, Adient and Boeing partnered to create a new joint venture, Adient Aerospace, to manufacture seating products for airlines and aircraft leasing companies. “We see the tiered structure of automotive diluting a little bit in this race to create the right alliances,” Juerss said. “These partnerships provide a clear direction for growth in areas we haven’t always performed in.”

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 6 , 2 0 1 8

DEALS & DETAILS

SPOTLIGHT Kroger names new Michigan president

ACQUISITIONS & MERGERS J DexKo Global Inc., Novi, supplier of trailer running gear, chassis assemblies and related components, has acquired CM Trailer Parts, Auckland, New Zealand, supplier of caravan and trailer axles, leaf springs, couplings and other trailer components. Websites: dexko.com, cmtrailer.co.nz

CONTRACTS J Henry Ford Health System, Detroit, a nonprofit health system, and NeuroTrauma Sciences LLC, Alpharetta, Ga., a biopharmaceutical company, have formed a subsidiary, NeurExo Sciences LLC, to advance technology for treating stroke and traumatic brain injury including concussion and neuropathies. Websites: HenryFord.com, neurotraumasciences.com J Pet Supplies Plus, Livonia, a pet retail franchise, has an agreement with Merrick Pet Care, Hereford, Texas, a pet food maker, and Kong,

Golden, Colo., a pet toy supplier, to support K9s For Warriors, Ponte Vedra Beach, Fla., a nonprofit organization that provides service canines to veterans. Pet Supplies Plus will be donating $100,000; Merrick is donating 10,000 cans of Backcountry dog food, while Kong is giving 10,000 toys to the organization. Websites: petsuppliesplus.com, merrickpetcare.com, kongcompany.com J Naturalicious LLC, Detroit, a hair care and beauty supply company, has an agreement to offer its Hello Gorgeous Hair Care System in nearly 100 locations of Sally Beauty Supply LLC, Denton, Texas, a beauty supply company. Websites: naturalicious.net, sallybeauty.com J Compuware Corp., Detroit, a software company, acquired a piece of software from Xact Consulting A/S, Hvidovre, Denmark, a computer consulting firm, and partnered with Parasoft Corp., Monrovia, Calif., a software vendor. The acquisition and partnership are part of a plan for smoother and quicker development and updating

of mainframe applications. Websites: compuware.com, xact.dk/en, parasoft.com J Faurecia, Auburn Hills, an automotive technology supplier, has invested in the startup SubPac, Los Angeles, Calif., an audio technology company. Faurecia will integrate SubPac’s technology into the seat as part of the company’s audio bubble system. Websites: faurecia.com, subpac.com

NAME CHANGE MedTest Holdings, Canton Township, a provider of products and services for decentralized clinical diagnostic testing, has changed its corporate name to MedTest Dx. Website: medtestdx.com

NEW PRODUCTS J Acromag Inc., Wixom, a designer and manufacturer of industrial electronics, measurement and control products, has new quad-port gigabit ethernet XMC modules available for use on embedded computing carri-

er boards. Website: acromag.com J WildFire Software, Detroit, has launched a user growth platform and referral network for apps, including a virtual currency, WildFire Coins, in which users are incentivized to explore new apps, refer more friends and engage for longer, as a way for app developers of all sizes, especially indie game developers, to get noticed in the marketplace. Website: wildfire.software J Federal-Mogul Powertrain, designer and manufacturer of powertrain systems and a division of Federal-Mogul LLC, Southfield, has launched textile sleeving for crash protection and impact resistance. Available for heavy-duty and light vehicles, CrushShield 2448 features a heat shrinkable design that absorbs and disperses energy during a crash, protecting sensitive vehicle components including air conditioning lines, fuel lines, hoses and high-voltage cables. Website: federalmogul.com Submit Deals & Details items to cdbdepartments@crain.com

Neighborhoods chief gets replacement

CALENDAR UPCOMING EVENTS Social Media for Business Growth. 9-11:30 a.m. Aug. 15. Oakland County Economic and Community Affairs. Terry Bean, Motor City Connect, will present what works, what to avoid and how to use LinkedIn, YouTube, Facebook and Twitter. Topics include: three things to do to find success on each platform, how to use status updates that gain attention, ways to manage priorities, how to make posting simpler and fastest way to grow an

The Kroger Co. named Ken DeLuca president of its Michigan division, 30 years after he started as a store clerk. DeLuca begins his new job Wednesday, the Cincinnati-based grocery retailer said in a news release. He moves from a previous role as vice president of operations for the Dillons division. The longDeLuca time Kroger employee replaces Scott Hays, who was promoted to president of the Cincinnati/Dayton division. DeLuca, a Wayne State University graduate, is back in the state where he started working for Kroger as a store clerk in 1988, the release said. He worked his way up and moved to the Columbus division in 2004. He then climbed through several vice presidential positions for Kroger’s Dillons store brand.

audience. $40. Oakland County Executive Office Building Conference Center, Waterford. Phone: (248) 858-0783; email: smallbusiness@ oakgov.com Measuring the Effectiveness of Goals with Metrics. 8:30 a.m.10:30 a.m. Aug. 16. Michigan Manufacturing Technology Center. Program helps assess a company’s performance, establish relevant business metrics and prevent goals from being missed in the future. Workshop is focused on achieving

positive organizational change. Michigan Manufacturing Technology Center, Plymouth. Free. Contact: Theresa Gaston, phone: (734) 451-4208; email: inquiry@the-center.org; website: the-center.org Marshall Plan for Talent Workshop. 1-3:30 p.m. Aug. 16. Lawrence Technological University. Roger Curtis, director of the Michigan Department of Talent and Economic Development, will provide an overview of Gov. Rick Snyder’s Marshall Plan for Talent to prepare students

ADVERTISING SECTION To place your listing, please visit: www.crainsdetroit.com/onthemove or for more information, call Debora Stein at (917) 226-5470, email: dstein@crain.com

ACCOUNTING Matthew Aldrich Director, Technology and Management Consulting

RSM US LLP Matthew Aldrich has joined RSM in Detroit as a Director responsible for Technology & Management Consulting. He is a CPA with over 25 years of public accounting, corporate finance, and consulting experience with prior roles at Deloitte, Johnson & Johnson, IBM and Accenture. Matthew will be focused on helping CFOs elevate the value of finance through insightful planning and analysis, cost improvement, and value enhancement. He has extensive experience in automotive, manufacturing, and high tech.

ACCOUNTING Bryan Bays Manager, Tax Services

RSM US LLP Bryan has joined RSM’s team as a State and Local Tax Manager, bringing with him 12 years of experience. He has focused on tax services for a variety of industries, including global automotive and manufacturing, tech companies and service companies. Bryan brings with him a broad range of compliance, consulting, and controversy experience from working in public accounting, industry and government.

KNOW SOMEONE ON THE MOVE?

For more information or questions regarding advertising in this section, please call Debora Stein at (917) 226-5470 or email: dstein@crain.com

and adults for jobs. Free with online registration. Lawrence Technological University. Contact: Mark Brucki, email: mbrucki@ltu.edu Market Research Basics. 9-11:30 a.m. Aug. 30. Oakland County One Stop Shop Business Center. Workshop helps businesses find customers, identify competitors, perform competitive analysis, identify new site locations, target direct mail campaigns, reveal untapped markets and expand to new and appropriate markets. Oakland County Executive Office Building Conference Center, Waterford Township. Free. Registration required. Phone: (248) 858-0783; email: smallbusiness@oakgov.com; website: e v e n t b r i t e . c o m / e / m a r k e t- r e search-basics-august-30-registration-46439188864 Michigan’s Competitive Advantage: The URC, Economy and Our Collective Future. 11:30 a.m.-1:30 p.m. Sept. 5. Detroit Economic Club. Presidents from Michigan’s University Research Corridor will release findings from its 2018 Economic Impact Report by Anderson Economic Group. Includes: Interim Michigan State University President John Engler, University of Michigan President Mark Schlissel and Wayne State University President M. Roy Wilson, M.D. $45 members, $55 guests of members, $75 nonmembers. Westin Book Cadillac. Phone: (313) 963-8547; email: info@econclub.org; website: econclub.org To submit calendar items visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

Jimmy Settles, the recently retired United Auto Workers-Ford vice president, will be Detroit’s new group executive of neighborhoods. Charlie Beckham, 71, whose career in Detroit government spanned 40 years serving six mayors of the city, has announced that he will retire Sept. 1. He is well-known in the city and has served every mayoral administration since Settles Coleman A. Young. He first retired in 2010 while chief administrative officer for Mayor Dave Bing. Settles, 68, will take up the post Sept. 4. His first task will be going on a “listening tour” of staff and residents, he said last Tuesday. In his new city position he will oversee seven district managers, who are direct links between residents and the city for complaints and community issues. Duggan introduced the Department of Neighborhoods in 2014 as a key plank of his campaign.

Packard Plant development director resigns

The director of development for the Packard Plant Project, Kari Smith, has left her job leading its attempted revitalization. Smith confirmed to Crain’s that she resigned from her job with Arte Express Detroit LLC, run by Peru-based developer Fernando Palazuelo. Joseph Kopietz, a member of Detroit-based Clark Hill's real estate group representing Arte Express, said Smith was instrumental in predevelopment work but Palazuelo wanted to take the company in a new direction.

RAIN C R A I N ’ S D E T R O ICT B’SUDSETROIT I N EBSUSINESS S // A U G U S T 6 , 2 0 1 8

August 6, 2018

DUO SECURITY

Started in 2010, Duo Security provides a cloud-based product Duo Security co-founder and CEO suite that offers clients authenticaDug Song will continue to lead his tion procedures and user access 8-year-old internet security provider policies to prevent security breachas its general manager. The firm he es and account takeovers. The flagco-founded will become part of Cis- ship product that launched its earco’s networking and security unit led ly success was its two-factor authentication system — a simpler, by David Goeckeler. more intuitive alternative in an overly complicated industry, Song Investment branches wrote in a published letter to emOften when a startup goes public ployees. “We’ve made our mark on the inor is acquired, senior leadership members peel off after a few years, dustry,” he wrote. “With this deal, we using accrued expertise and capital will realize significant value for our to start or fund new ventures, said shareholders, while gaining the opChris Rizik, CEO and fund manager portunity to leverage Cisco’s global for the Ann Arbor-based Renaissance scale and resources to democratize security faster without compromisVenture Capital Fund. “If you look five years from now, I ing our vision ... They agree with us wouldn’t be surprised if we have 12- on the past state of security, and 15 companies coming from the tree we’re going to fix it together.” The acquisition is part of a move of Duo Security,” Rizik said. As of now, founders Song and Jon into the cloud era and toward recurOberheide are staying on. They’re ring revenue streams for Cisco, tradiknown through Duo as startup men- tionally a designer and manufacturer tors in Washtenaw County and in- of IT and networking products. Cisco aims to grow Duo Security's creasingly in Detroit. “Seeing (Song and Oberheide) presence in Michigan, Cisco spokesbe able to scale a very large cyber- man Jim Brady told Crain’s in an security company with their head- email. More details on integration quarters maintained in Ann Arbor and branding are to come as planning progresses. (as opposed to The impact on on a coast) is a “We gotta appeal to Security unique type of those people (on the Duo employees is experience that also unclear. The they will then coasts), because networking giant be able to help that’s where the plans to take on others repli- money is. This is the “vast majoricate,” said Emity” of Duo Seculy Heintz, the way markets get rity’s 740 emfounder of Ann built ... Once you ployees, he said. A r b o r - b a s e d have a blockbuster “The combistartup Entrynation of our Point and for- (acquisition) like companies will mer associate this, people begin to help build on the director of the pay attention.” promise of doing Michigan Venthe right thing for ture Capital As- — David Brophy, a finance professor our customers,” sociation. “So at the University of Michigan’s Ross Song told inveshaving this ex- School of Business and director of tor and media perienced seri- the school’s Office for the Study listeners during al entrepreneur of Private Equity Finance. the Thursday talent in Michigan is a huge deal, as far as men- call. He was not available for an intertorship goes. In addition to the view last week. Song did acknowledge in the letter connections they’ve built on the coasts, in the Midwest, it’s going to to employees that they must be be a really big catalyst for the re- “wondering what this means for each of you” and said the company’s valgion.” Duo Security made news in fall ues remain the same. But he did not 2017 for raising the largest round of provide more details on any potential venture capital funding in Michigan’s staffing changes, or lack thereof. Song was one of Crain’s Newsmakhistory: $70 million. It was then valers of the Year for 2017 and a Crain’s ued at $1.17 billion. The lucrative Series D funding 2017 Michigan Change Maker. Song round was led by companies based and co-founder Oberheide were recon the coasts: Palo Alto, Ca- ognized by the Michigan Venture lif.-based Meritech Capital Part- Capital Association as Entrepreneurs ners and New York City-based of the Year in November. The company reported more than Lead Edge Capital Management $100 million in annual recurring revLLC. It had also picked up two new in- enue for 2017, up from $73 million in vestors: Foster City, Calif.-based 2016. It has 12,000 customers, inGeodesic Capital and Switzer- cluding Facebook and Paramount land-based Index Ventures. Others Pictures. In addition to its Ann Arbor included existing investors Menlo and Detroit hubs, it has offices in Park, Calif.-based Redpoint Ventures Austin, Texas; San Mateo, Calif.; and and Palo Alto, Calif.-based True Ven- London. Cisco (NASDAQ: CSCO) reported tures. “We gotta appeal to those people $48 billion in revenue in fiscal 2017, a (on the coasts), because that’s 2 percent decline from 2016’s $48.7 where the money is,” said David billion. The global company had Brophy, a finance professor at the 72,900 employees as of 2017. It deUniversity of Michigan’s Ross signs, makes and sells IP-based netSchool of Business and director of working products for the communithe school’s Office for the Study of cations and IT industries, and Private Equity Finance. “This is the provides related services. Attorneys from Gunderson Dettway markets get built ... Once you have a blockbuster (acquisition) mer’s Silicon Valley and Ann Arbor like this, people begin to pay atten- offices represented Duo Security in the agreement. tion.” FROM PAGE 1

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Founding philosophy

TARIFFS

Page17 17

Following World War II, U.S. chicken farming established factory-like efficiency and mass-produced so much poultry that farmers began exporting excess supply, tanking global poultry prices. In trade speak, this is called dumping — something the U.S. has criticized China of doing with its steel oversupply. France and West Germany retaliated with tariffs on U.S. chicken imports. President Lyndon Johnson, just in office following the assassination of John F. Kennedy, decided to up the stakes in a tit-for-tat move. In 1963, the U.S. implemented a 25 percent tariff on potato starch, dextrin, brandy and light trucks. The move collapsed the U.S. truck business for Volkswagen and later Toyota. Toyota, of course, inevitably invested in U.S. operations, and the Japanese automaker now assembles its Tundra full-size pickup in San Antonio. Domestic automakers have since continued to lobby to keep the Chicken Tax long after tariffs on U.S. poultry subsided — though China has maintained a ban on U.S. poultry imports since 2005. A research expert told me the automakers are “terrified” the president, who has proven unpredictable for the industry, could give away the Chicken Tax in negotiations if they speak up too loudly. The few executives willing to discuss tariffs believe their impact will be muted because the administration will wrap up trade negotiations quickly. Claus Mohlenkamp, CEO of Freudenberg Sealing Technologies, which operates its North American headquarters in Plymouth Township, said the supplier is passing any rise in steel costs through to its customers. He views the 25 percent tariff on foreign steel that has

caused domestic steel prices to rise 20 percent since the beginning of the year as a matter of inflation. “We always have pricing pressures, and steel is not a big-ticket item for us ... (but) we have to pass it on; we cannot absorb it,” Mohlenkamp said in an interview. “It’s not a big deal yet. I think it will be settled (soon).” Yet those automakers feeling the tariff pain already are shockingly mum on the issue. Earlier this month, General Motors Co. updated its 2018 earnings guidance, also revealing $300 million in additional commodity costs in its second quarter. GM CFO Chuck Stevens told investors the rising costs were tied to a host of factors, not just U.S. steel and aluminum tariffs. GM did, however, warn the Trump administration in June of the impact of the White House’s threat to slap a 25 percent tariff on imported cars. “Increased import tariffs could lead to a smaller GM, a reduced presence at home and risk less — not more — U.S. jobs,” the automaker said in submitted comments to the U.S. Department of Commerce. But automakers are generally relying on their industry groups, such as the Alliance of Automobile Manufacturers, and lobbyists in Washington, D.C., to influence U.S. Trade Representative Robert Lighthizer and President Trump. So there we were, at a large automotive business conference, with no automakers on panels to discuss material tariff impacts. Instead panelists had forecasting experts. It’s of note that a panel on the North American Free Trade Agreement featured government representatives from Canada and Mexico, but no U.S. official agreed to CAR’s invite to speak. It’s possible our trade officials feared having to defend the Chicken Tax in a public forum. Maybe they had a scheduling conflict. Or maybe they were just chicken.

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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 U G U S T 6 , 2 0 1 8

Visitors observe a Math Corps class at Wayne State University last week. LARRY PEPLIN FOR CRAIN’S

MATH FROM PAGE 3

Vision to grow and franchise WSU Math Corps, which is attracting national and international attention, is spinning off from the university as it begins to expand to new sites. The program is heading into DPS middle schools in the coming academic year through a new pilot with the district, other states with a $3 million National Sciences Foundation Steven Kahn: grant and possiProgram is not bly the West Afrionly about math. can countries of Ghana and Nigeria, which have been benchmarking it. It’s a story not often told: a Detroit nonprofit exporting an impactful program. But the program hasn’t spread in Detroit beyond the approximately 3,000 students who’ve come through over its 26-year-history. Math Corps has applied for a 501(c)3 nonprofit status and plans to launch a search for a new executive director to lead the nonprofit as it expands and looks to franchise its model. The program has garnered national attention, winning the New York Life Foundation’s 2016 Excellence in Summer Learning Award and recognition from both President Bill Clinton and President Barack Obama’s Advisory Commission on Educational Excellence. It was also the subject of an award-winning documentary on PBS. Yet the free program has laid low for the most part, focused on providing a safe place for Detroit kids too often living amid violence and poverty, and a family that accepts them as

SHERRI WELCH/CRAIN’S DETROIT BUSINESS

Anshalay Robinson is a seventh grade student participating in the Wayne State University Math Corps.

they are, supports them no matter what and celebrates their successes with them. Operating on a budget of just $600,000 funded through individual donations, foundation grants and this year, support from WSU, the program has provided the summer camp for and Saturday meet-ups during the school year to 400-500 kids from Detroit Public Schools Community District and public charter schools in Detroit each year.

Kids teaching kids Many of the kids who come in seventh grade come back for a second year and then again and again after that, year after year. They are first the student, then a mentor and teacher themselves (earning a small stipend) as they move into high school and college, while continuing to learn from college student alumni of the program and Math Corps’ founders. “It’s a self-perpetuating army of kids teaching kids” that’s about 3,000

strong, now, said Kahn, who co-founded the program with Leonard Boehm, a retired WSU senior lecturer in mathematics who is “minister of humor” at Math Corps. “And there are nine kids that are our grandchildren, meaning their parents were our kids” at some point during the Math Corps’ history, he said. The program’s rules of behavior and promptness are strict, but kids respond to the love, respect, humor and high expectations that form its basis. The founders, college and high school teaching assistants and mentors impart values like kindness and integrity along with life skills. And because the founders are mathematicians, the program teaches middle school and high school kids math. Kids coming to the Detroit camp in grades 7-9 score an average of 30 percent on internal, pre-program tests. Within six weeks, their scores rise to 90 percent, Kahn said. After some catch-up, seventh-grade students are up to grade level in math as they enter the school year. And by the summer before they enter ninth grade, they’re doing firstyear high school algebra, Kahn said. “So finally, now instead of catching up, we pull ahead.” Math Corps students average 21 on the math sections of the ACT, compared to the average of 16 for students in Detroit public schools, Kahn said. Still, the program was never only about math, he said. “Forget about the future … today I have to make sure every one of my kids is safe, has breakfast, a hug if they need it, gets told a joke if they need it,” he said. “Everything starts with believing in your kids. It’s so simple and so easily dismissed.”

One-year DPS pilot program If you’re lucky, you can get to the point where instead of thinking about the 100 kids in your classroom

every summer and Saturday, you can think about the 100,000 kids who are not, Kahn said. And then, you can do something about it. Math Corps has agreed to bring the program to five DPSCD middle schools through a one-year pilot that will provide additional math instruction to middle school students starting in sixth grade. The goal, Kahn said, is to ensure that every student in the pilot is proficient in math at grade level and ready for algebra when it’s time to enter high school. “We envision we’d continue into the seventh and eighth grade, and we expect that with success, the program would be scaled up,” Kahn said. DPSCD Superintendent Nikolai Vitti called Math Corps “an excellent program” based on talking to students who have participated. “Lessons are hands on, fun, research based, and motivating,” he said. “It also is thoughtful about building the next generation of math teachers and leaders.” The NSF grant is helping duplicate Math Corps in other areas, starting in Cleveland, Philadelphia and Utica, N.Y., cities that had already made moves to adopt the program through informal agreements. As in Detroit, the new sites are all connected with local higher education institutions. Now in its second year, the fouryear NSF grant is also funding a study of which pieces of Math Corps’ model are essential to replicating its success in other places, measuring math scores, getting feedback from participating youth in other cities to ensure the culture of the Detroit program has fully translated, and looking at the broader impact the program is having on participants in suicide, substance abuse, incarceration and college enrollment rates. “Anecdotally, it seems clear Math Corps has put a sizable dent” in those things, Kahn said. Sherri Welch: 313 (446-1694) Twitter: @SherriWelch

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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 6 , 2 0 1 8

Untraceable cash spills into governor’s race By Chad Livengood

Campaign cash

Three of the leading candidates to be Michigan’s next chief executive have benefited from large sums of cash that can’t be easily followed to their original sources because of federal laws allowing not-for-profit organizations to influence elections outside of the state’s campaign finance law. Former state Sen. Gretchen Whitmer’s campaign for the Democratic nomination for governor has been aided by $550,000 in concealed donations from two entities that don’t appear to exist in public records. Attorney General Bill Schuette’s bid for the Republican nomination in Tuesday’s primary also has been boosted by $1.2 million in untraceable donations flowing from two so-called “dark money” front organizations that can legally conceal the identities of their donors. And Lt. Gov. Brian Calley got $1.3 million of free advertising through a TV commercial promoting his work with Gov. Rick Snyder turning around Michigan’s economy that was paid for by a Snyder-led group that doesn’t have to disclose its funding sources. The undisclosed cash has become a hot issue in Tuesday’s Democratic primary, where former Detroit health department director Abdul El-Sayed is waging a campaign against what he calls Whitmer’s “corporate dark money PAC.” In Whitmer’s case, an organization called Build a Better Michigan that aired $1.8 million on TV ads for her benefit received a $300,000 donation from the Progressive Advocacy Trust in East Lansing and $250,000 from the Philip A. Hart Democratic Club in Mt. Clemens. Those donations to the pro-Whitmer group have fueled questions from her Democratic opponents as to whether those mystery entities are operating for the sole purpose of concealing corporate money from a big business like Blue Cross Blue Shield of Michigan, which has allied with Whitmer but not made a traceable donation to her bid to be governor. Those donations to the pro-Whitm“Build a Better Michigan is nothing but a shell for dark money PACs and unlimited money from corporate CEOs who have interest in a Whitmer-led Michigan,” said Adam Joseph, spokesman for El-Sayed. “There is only one reason these corporations and secretive groups are shelling out thousands of dollars to try and get Gretchen Whitmer elected: they want to keep their privilege in a Whitmer administration.” A spokesman for Whitmer declined Tuesday to comment. But whether Blue Cross Blue Shield played any role in helping bankroll the pro-Whitmer group Build a Better Michigan is a lingering question the state’s largest health insurance company won’t answer. A spokeswoman for Blue Cross declined to answer direct questions from Crain’s about whether the insurer has donated corporate funds to either the Progressive Advocacy Trust or the Philip A. Hart Democratic Club in the past two years. “BCBSM has no comment,” said Helen Stojic, director of corporate

Attorney General Bill Schuette, Lt. Gov. Brian Calley and former Senate Minority Leader Gretchen Whitmer have raked in big donations from business executives and organized labor. For Schuette, his donations went to both his campaign committee and Better Jobs, Stronger Families, a political action committee supporting his candidacy. Calley’s top donors gave money to his campaign committee and two super PACs called MIPAC and Calley Continues Comeback Inc. Whitmer’s top donors gave money to both her campaign committee and Build a Better Michigan, a political organization supporting her campaign and operating under section 527 of the Internal Revenue Service code.

clivengood@crain.com

Bill Schuette campaign and PAC

Brian Calley campaign and PACs

Fund for Michigan's Tomorows

$300,000 Daniel DeVos, CEO, DP Fox Ventures LLC, Grand Rapids

Better Jobs Stronger Families Policy Solutions

$275,000 William Parfet, Northwood Group LLC

Pete Karmanos, Maddog Technology

$256,800 T.E. Adderley, executive chairman, Kelly Services

Mohammad Qazi, Ciena Healthcare

$250,000 James Nicholson, PVS Chemicals

Oakland Financial Corp., Sterling Heights

$250,000 Stephen Polk, CEO of Highgate LLC

TSG Interactive US Services (Linwood, NJ)

$200,000 Alro Steel Corp., Jackson

Gretchen Whitmer campaign and 527 group

$506,800 Progressive Advocacy Trust (Ingham County Democratic Party Administrative Account) $323,541 Phil Hart Democratic Club $250,000 EMILY's List -- NF Fund $113,600 Teamsters DRIVE Committee

$300,000

$250,000 $250,000 $250,000

$100,000 United Auto Workers

$250,000

$75,000 Michigan Laborers

$219,000

Roger Penske & Penske Corp.

$175,000 Michigan Beer & Wine Wholesalers

$40,350 Michigan Regional Council of Carpenters

$218,000

Mickey Shapiro, president of Lautrec Ltd. In Farmington Hills

$100,000 Michigan Beer & Wine Wholesalers

$40,350 Michigan Association of Justice (trial attorneys)

$128,000

J.M. Jung, Birmingham investor

$100,000 Dave Meador, DTE Energy

$20,000 United Food and Commercial Workers

$125,000

$10,000 Mark Bernstein and Bernstein Family PAC

$100,000

Fisher Contracting Co., Midland

$50,000 Lynn Linn Chen-Zang, Zhang Financial

Source: Michigan Secretary of State, IRS reports

Need to know

JJWhitmer, Schuette and Calley benefit

from so-called “dark money” donations

JJBlue Cross won’t comment on whether it donated to pass-through entities helping Whitmer JJCorporate money has been raised as political issue in the race, especially among Democrats

affairs for Blue Cross. Separately, the Blue Cross political action committee donated $42,500 to Schuette’s campaign, while executives at the insurance company held a fundraiser for Whitmer in March at the Firebird Tavern in Detroit that attracted 200 attendees and generated $144,710 for Whitmer’s campaign coffers — her biggest fundraiser of the year. But the Blue Cross PAC has reported no direct donations to Whitmer’s campaign or Build a Better Michigan. Stojic declined to explain the strategy behind the PAC’s donations.

‘Huge gaping hole’ in election law The Philip A. Hart Democratic Club’s donation to Build a Better Michigan cannot be traced in public records and disclosures, in part, because the entity doesn’t appear to exist in state or federal corporation records. There is a federal PAC called the Philip A. Hart Democratic Club that runs bingo games to generate money to fund political activities and shares the same address as the Macomb County Democratic Party. But the club’s federal PAC didn’t have enough money on hand in June to donate $250,000 to the Whitmer group, records show. “The Phil Hart Democratic Club made a contribution to the Build A Better Michigan fund from Club funds in an account different from the federal PAC,” the club’s president, Julie Matuzak, said in a statement to Crain’s.

Matuzak, a lobbyist for the American Federation of Teachers and Democratic political operative, did not respond to questions about what kind of legal entity controls the bank account that wrote the $250,000 check to the pro-Whitmer group. When asked whether the group received a donation from Blue Cross, Matuzak replied: “The PHDC (has) never received any corporate money.” There’s no record of a separate not-for-profit organization registered under the same name of Philip A. Hart Democratic Club — named after the mid-20th Century U.S. senator from Michigan — with either the Internal Revenue Service, the Michigan Department of Licensing and Regulatory Affairs or the state Bureau of Elections. The group dissolved a state PAC in 2002, records show. Progressive Advocacy Trust also is not registered with the IRS as a political organization, but is listed in the pro-Whitmer group’s financial disclosure as the “administrative account” of the Ingham County Democratic Party. Whitmer represented Ingham County for 14 years in the Legislature and for six months in 2016 as an interim county prosecutor. Some of Progressive Advocacy Trust’s money can be traced through donations it received from an organization that is legally required to report its political spending. In February, the Michigan Pipe Trades Association, which represents plumbing and pipefitters unions, donated $250,000 to Progressive Advocacy Trust, according to a disclosure report filed with the Federal Election Commission. Both the Progressive Advocacy Trust and Phil Hart Democratic Club are operating under a “huge gaping hole” in the law that exempts them from disclosing their spending activities or existence because they’re affiliated with a county political party, said Craig Mauger,

executive director of the Michigan Campaign Finance Network. “They don’t have to file with the IRS and they don’t have to file with the state because there’s a hole between the two laws,” Mauger said. Progressive Advocacy Trust is exempt from the reporting requirements of other not-for-profit organizations, spokesman Mark Fisk said. “The Progressive Advocacy Trust chose to participate in Build a Better Michigan’s effort because both organizations are non-political organizations that share similar core values,” said Fisk, a Democratic political consultant with the East Lansing firm Byrum & Fisk Communications. “The PAT believes — like BBM does — that affordable health care, improving our infrastructure, making sure we have safe drinking water and repealing the retirement tax need to be priorities.” “Once BBM began its effort in earnest, it was decided we should support it,” Fisk added. Build a Better Michigan, or BBM, is registered with the IRS as a 527 political organization and is headed by Lansing political consultant Mark Burton, Whitmer’s former chief of staff. Burton did not respond to questions about the source of Progressive Advocacy Trust and Philip A. Hart Democratic Club’s funds and what type of legal entities made the $550,000 in donations to his group. Ann Arbor businessman Shri Thanedar, who has poured $10 million of his personal fortune into trying to win the Democratic gubernatorial nomination, said the “untransparent” nature of the money being funneled to the pro-Whitmer group is troubling. “This gives another way for corporations and the rich to influence a candidate,” Thanedar said. “My own money is not tainted.” El-Sayed’s campaign spokesman said Whitmer and Build a Better Michigan should “come clean about the dark money sources that

they are using to corrupt our Democratic primary.” The Philip A. Hart Democratic Club also has been aggressively involved in the six-candidate Democratic primary for the Macomb County clerk/register of deeds. The club has sent Macomb County voters multiple mail advertisements attacking state Sen. Steve Bieda of Warren and supporting former state Rep. Fred Miller of Clinton Township. None of the heavy spending in the county clerk’s race has shown up in the group’s federal PAC reports with the FEC, meaning it also is likely coming from the same account that donated money to the pro-Whitmer group. “It’s an undemocratic slush fund,” said Michael Radtke, campaign manager for Bieda, who has filed a complaint against the Phil Hart Democratic Club with the FEC.

From transparent to dark In the Republican primary, Better Jobs Stronger Families, the super political action committee supporting Schuette’s campaign and attacking his chief Republican rival, Lt. Gov. Brian Calley, had been operating with $1.5 million in traceable donations from businesses and wealthy individuals. The PAC’s donors included Ciena Healthcare CEO Mohammad Qazi and Maddog Technology founder Peter Karmanos, who both contributed $250,000. Sterling Heightsbased Oakland Financial Corp. and the real estate management company of Bloomfield Hills real estate investor C. Michael Kojaian also donated $250,000 to the proSchuette super PAC. But on July 24, the money trail underwriting Schuette’s super PAC became impossible to follow. Better Jobs Stronger Families reported two donations totaling $575,000 from two not-for-profit

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trail PAC

reling rofit

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 6 , 2 0 1 8 entities called the Fund for Michigan’s Tomorrows ($300,0000) and Better Jobs Stronger Families Policy Solutions ($275,000). Better Jobs Stronger Families Policy Solutions is registered with the IRS as a so-called social welfare organization. And even though the group has a similar name to the pro-Schuette super PAC, “it’s a separate organization focused on policy advocacy,” said Charlie Spies, a Washington, D.C. campaign finance attorney at Clark Hill PLC, and the group’s counsel. “It is a 501c4 organization that does not publicly disclose its donors,” Spies told Crain’s. Under IRS rules, a 501c4 not-forprofit organization can engage in political activity if its spending amounts to less than 50 percent of its total spending. “We’re going to comply with all proper federal policies,” said Stu Sandler, a Republican political strategist with the Lansing firm Grand River Strategies who is involved in both the PAC and the 501c4. The Fund for Michigan’s Tomorrows is another 501c4 organization that’s promoted Schuette’s candidacy with $628,000 in broadcast television ads, according to the Michigan Campaign Finance Network’s data from the TV ad-tracking firm Kantar Media/CMAG. State corporations records show the Fund for Michigan’s Tomorrows is led by Ric Olson and Joe Affholter, two executives at Gantec Inc., a biotech firm in Schuette’s hometown of Midland. They did not return messages seeking comment.

Ads supporting Calley In July, a group Snyder’s allies created in 2015 to promote his record as governor and Michigan’s “comeback” launched a one-minute $1.3 million ad campaign featuring Snyder and Calley and highlighting the state’s economic progress over the past seven years. Making Government Accountable, a nonprofit organized under section 501c4 of the IRS code, ran the statewide television ad from July 12-20. The TV ad’s theme mirrored Calley’s campaign focus of continuing the Snyder administration’s work in the next term. “As a 501c4, we do not disclose our donors per the law,” spokesman Kristopher Johnson said in an email. But the group’s donations have shown up in public disclosures for another Snyder-run entity called Moving Michigan Forward, a 501c4 organization that began publishing its quarterly financial reports in 2013. Snyder created the Moving Michigan Forward fund to replace his former NERD Fund after being criticized for taking money from undisclosed donors to pay for governmental expenses, including the salary of a top aide. According to the Michigan Campaign Finance Network, Calley’s campaign for governor also has benefited from $389,000 in television ads paid for by the Fund for Michigan Jobs, a nonprofit that was used last year to fund Calley’s failed part-time Legislature initiative with untraceable donations. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

PRIMARY FROM PAGE 1

It’s hard to tell how this race will turn out. Democratic voters in Michigan shocked pollsters and pundits in March 2016 when Vermont Sen. Bernie Sanders upset former Secretary of State Hillary Clinton in the presidential primary. But Sanders benefited from a surge of voters in college towns, which are vacant in early August. Nonetheless, Sanders is coming to Detroit and Ypsilanti on Sunday to campaign for El-Sayed — and help the young doctor from Shelby Township try to replicate his path to victory.

The Duggan slate Detroit Mayor Mike Duggan isn’t on the ballot, but he has a lot riding on Tuesday’s primary. After a series of legislative losses and setbacks, Duggan has set about this year trying to build a more politically loyal Detroit caucus among Democrats, whose races are all but decided in the primaries. The mayor’s Duggan Leadership Fund political action committee has donated money directly to four House candidates and two Senate candidates he’s trying to help get elected. Undisclosed donors to a billboard campaign supporting Duggan’s auto insurance reform agenda have been promoting two candidates backed by the mayor: Adam Hollier in an 11-candidate state Senate race on the city’s east side and Marshall Bullock, a district director for Duggan. Bullock is running in the 4th District in parts of Detroit, Allen Park, Lincoln Park and Southgate against state Rep. Fred Durhal III, who voted against Duggan’s auto insurance legislation last fall. Duggan immediately vowed to campaign against Durhal and others who handed him a big legislative defeat. Hollier is running in the 2nd District and his primary opponent is former state Rep. Brian Banks, who also has opposed Duggan’s “drivers choice” insurance reform and has sided with medical providers. Duggan’s leadership PAC poured $15,000 into Hollier’s campaign and $10,000 in Bullock’s committee through July 22, according to spending reports.

Trump vs. Snyder politics in GOP primary Attorney General Bill Schuette and Lt. Gov. Brian Calley’s primary showdown has turned into a battle over allegiance to the president and governor. Schuette and his allies have reminded voters early and often that he’s endorsed by President Donald Trump, while Calley dropped his endorsement of Trump in the 2016 election. Schuette’s camp believes it will be a litmus test for the conservative voters who show up to vote in August primaries. Calley has adopted a different tack, essentially offering voters a third term of Gov. Rick Snyder’s leadership and touting Michigan’s economic turnaround in the past seven years. Snyder’s allies in the business community have spent mightily helping aid Calley’s bid for the Republican nomination, even as polls have consistently showed Schuette as the frontrunner, by double digits. Calley’s campaign has recently targeted independent and Republican women voters in the suburbs with

television advertising showing Calley playing the piano and talking about getting things done in Lansing. “I’m the only candidate who isn’t just talk — I've done it,” he said in the ad. “Let’s continue the comeback.” Schuette has taken a harder edge in trying to paint Calley as a moderate, running TV ads that criticize Calley for voting for the Michigan Business Tax as a state representative. Calley later cast the tie-breaking vote in 2011 in the Senate for the 6 percent corporate income tax that replaced the much-derided MBT. The final week of the race was dominated by a liberal political organization’s release of Schuette’s private emails that showed he met with taxpayer-funded staff in his state office in Detroit in June 2015 to plan for the Republican National Convention in July 2016. It follows questions Crain’s raised in May about Schuette using state employees to complete multimillion-dollar real estate transactions involving oceanfront property in the U.S. Virgin Islands that he inherited from his late stepfather, Carl Gerstacker, a former CEO of Dow Chemical Co. Schuette brushed off questions last week about his apparent use of state facilities to conduct personal

pitch for James. “Rarely have I seen a candidate with such great potential,” Trump wrote on Twitter about James, an Iraq War helicopter pilot and son of James Group International founder John A. James. Both James and Pensler have touted their business credentials — and traded a few barbs over their experience. Pensler’s Korex Cos. is a contract manufacturer for brand-name and store-brand dishwasher detergents. He has plants in Wixom, Chicago and Toronto. James’ Detroit-based Renaissance Global Logistics exports American-made engines, transmissions and other auto parts for Ford Motor Co. and General Motors Co. to vehicle assembly plants in 19 different countries. Both men have a front-row seat to Trump’s trade war. Canada slapped a retaliatory tariff on Pensler’s Michigan and Illinois-made dishwasher detergent; James’ entire business revolves around Ford and GM’s global operations and the free flow of auto parts between the U.S. and its trading partners. But both men have played it safe in

2009 bailouts of General Motors Co. and Chrysler Group LLC. In southern Macomb and southeast Oakland counties, there’s a contested Democratic primary to succeed retiring U.S. Rep. Sander Levin between Levin’s son, Andy, former state Rep. Ellen Lipton and labor and employment attorney Martin Brook. On Tuesday, the next member of Congress to represent Detroit and its first-ring western suburbs will be all but decided in the Democratic primary to fill the remaining two months of the 13th Congressional District seat vacated by former U.S. Rep. John Conyers Jr.’s abrupt retirement last year. Since the district is a Democratic stronghold, the winner of the regular primary will likely prevail in November general election. Six Democrats are vying for that seat: former state Reps. Rashida Tlaib and Shanelle Jackson; City Council President Brenda Jones; state Sens. Coleman Young II and Ian Conyers; and Westland Mayor Bill Wild, the only suburban candidate. If Wild were to win, Michigan would have no member of Congress from Detroit.

“This is about Trump. President Trump endorsed me and my main opponent (Calley) abandoned Trump — and most Republicans have abandoned him.”

“I’m the only candidate who isn’t just talk — I’ve done it,” he said in the ad. “Let’s continue the comeback.”

Flying under the radar of TV ads in the governor’s race and contentious local elections is the four-year renewal of the SMART bus millage in participating communities in Wayne and Oakland counties and countywide in Macomb County. In Macomb County, SMART’s supporters like County Executive Mark Hackel are nervous that the 1-mill renewal could be defeated in a primary where anti-tax voters normally turn out for Republican primaries. In arguing against a new regional transit tax, Hackel has contended the SMART millage could go down in Macomb County and leave the state’s third-largest county without any mass transit options. Michigan Taxpayers Alliance, a conservative group run by Macomb County Commissioner Leon Drolet, has been sending voters in Macomb mail advertisements in recent weeks portraying SMART buses as empty and alluding the regional transit tax debate Hackel has been engaged in with Duggan and Wayne County Executive Warren Evans. Despite a push from metro Detroit CEOs for the regional transit tax, there has not been a visible SMART millage renewal campaign in the suburbs this summer. In June, the Suburban Mobility Authority for Regional Transportation notified the state that the bus system would have to lay off 268 workers in Macomb County if the millage renewal is rejected by voters.

— Bill Schuette

and political business during work hours, which is prohibited under state law. “This is about Trump,” Schuette said. “President Trump endorsed me and my main opponent (Calley) abandoned Trump — and most Republicans have abandoned him.”

U.S. Senate GOP primary: Businessman vs. businessman Businessman Sandy Pensler is about to find out if spending $5 million of one’s personal fortune to win a U.S. Senate Republican primary without President Trump’s support is a good investment. Pensler, the founder and president of Grosse Pointe Park-based Pensler Capital Corp., is battling Renaissance Global Logistics CEO John E. James for the chance to take on incumbent Democratic Sen. Debbie Stabenow in the November general election. And James appears to have all of the momentum after Trump gave him a glowing endorsement on Twitter and signed onto a fundraiser

— Brian Calley

the primary, voicing general support for Trump’s approach to negotiating better trade deals for America.

Congressional seats up for grabs Congressional seats don’t come open in Michigan very often — and three are up for grabs this year. Lena Epstein, a third-generation co-owner of Vesco Oil Corp. in Southfield, is trying to win a hotly contested Republican primary in the 11th Congressional District in Oakland and Wayne counties. Epstein, of Bloomfield Hills, is seen as the frontrunner in a field that includes state Rep. Klint Kesto of West Bloomfield Township, former Rep. Rocky Raczkowski of Troy, state Sen. Mike Kowall of White Lake Township and former U.S. Rep. Kerry Bentivolio of Milford. On the Democratic side, there’s a similarly crowded field of five candidates that includes entrepreneur Suneel Gupta; state Rep. Tim Greimel; Fayrouz Saad, a former director of Detroit’s Office of Immigrant Affairs; and Haley Stevens, who was chief of staff for the Obama administration’s Auto Task Force during the

SMART millage renewal uncertainty

Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 6 , 2 0 1 8

Pinnacle Homes under construction in Oakland County. LARRY PEPLIN FOR CRAIN’S

PINNACLE FROM PAGE 3

Today the company, which employs about 65 locally, anticipates an approximately 25 percent increase in the number of homes it sells compared to last year.

Turbulent start Fingeroot and his partner, Steve Friedman, started Pinnacle in 2005 after decades in the homebuilding industry with other companies: Fingeroot with Pulte Homes, which at the time was based in Atlanta, and Friedman with his The Selective Group, which he sold to Dallas-based giant Centex Corp. Friedman was a co-owner of Pinnacle and is no longer involved in the operation. It was a turbulent time to start a company in the field as the market was beginning its downward slump and the recession wasn’t far from hitting the national economy, but Fingeroot and Friedman were able to build the firm in part because it had no debt. So it began taking land positions, buying up property on the cheap as prices were devalued when people couldn’t afford homes. “From 2005 to 2008, we were kind of ramping up our land positions, not building houses but holding land,” Fingeroot said. “While nobody wishes for anything like that again, I look back and say it created opportunities for us, as well. From 2008-10, we looked for opportunities for real estate positions that basically companies gave back to banks, and fortunately for us, there were a lot at that time.” He acknowledges that it was uncharted territory and a move that could have ended badly. “It was risky,” he said. “Nobody knew. You didn’t know whether it would be one, five or 20 years before it came back.”

Building permits climb But thankfully for Fingeroot and his team, the homebuilding market did — to a point. Last year was the busiest in terms of residential building permit issuance since 2005, including for condominiums and apartments. In 2017,

Single-family home permits Single-family home building permits by year in Southeast Michigan. Year

Number of permits

Year

Number of permits

1969

5,635

1994

15,699

1970

13,825

1995

16,585

1971

21,626

1996

18,307

1972

17,460

1997

17,379

1973

15,942

1998

18,669

1974

10,754

1999

18,373

1975

10,839

2000

16,471

1976

14,257

2001

13,994

1977

19,464

2002

14,064

1978

19,778

2003

15,051

1979

13,756

2004

15,370

1980

5,771

2005

11,798

1981

2,974

2006

6,930

1982

1,738

2007

3,594

1983

5,739

2008

1,985

1984

6,809

2009

1,331

1985

9,843

2010

2,476

1986

12,006

2011

3,106

1987

12,300

2012

4,198

1988

12,284

2013

5,687

1989

12,400

2014

4,919

1990

10,681

2015

5,154

1991

10,618

2016

5,607

1992

11,891

2017

6,342

1993

13,137

Source: Southeast Michigan Council of Governments

there were 11,120 permits issued in the seven-county region, according to the Southeast Michigan Council of Governments, or SEMCOG. That region includes Wayne, Oakland, Macomb, Livingston, Washtenaw, Monroe and St. Clair counties. In 2016, there were 9,565 permits issued. Single-family permits totaled 6,321 last year, a 13 percent bump from the 5,607 issued in 2016, according to SEMCOG. While those numbers are healthier than the anemic years of 2008 and 2009 at the apex of the recession, they are nowhere near the highs of the early 2000s, when 14,000 new single-family home building

permits were issued annually from the start of the new century to 2005, SEMCOG data show.

Courting suitors The genesis of Pinnacle’s sale, which closed March 1 following a year-long process, came when the company was seeking capital to ramp up its growth. So Fingeroot reached out to Zelman & Associates, the New York City-based investment banking firm, to help put the ball in motion. “We were growing and successful for a number of years with profitable growth from year to year, so we were

looking for ways to continue that growth through capitalization,” Fingeroot said. “In one of our calls (with Zelman), they said, ‘Would you be interested in selling?’” From there, a roughly 80-page confidential information memorandum with the company’s financials and market position was prepared over the course of a couple of months. Zelman assembled a list of the nation’s top homebuilders that expressed interest in setting up operations in the Midwest, or Detroit in particular. Those companies then received letters marketing what was only described as a “private homebuilder in Michigan” as a possible acquisition target. And when all was said and done, a half-dozen or so would-be suitors visited Fingeroot and toured Pinnacle’s developments. “We kind of gave the dog and pony show, drove them through our communities,” he said. “Some were interested after they saw what they saw; others said they weren’t available then but maybe in a year. And a few percolated to the top, and M/I Homes was one of them.”

Eyes on Metro Detroit Even from four hours away in Columbus, Ohio, Robert Schottenstein has had Southeast Michigan on his radar. Even though for years the decline of the Midwest had been the overarching theme of analyses and the news media, the chairman and CEO of M/I Homes knew there was more to the region than just the decline of manufacturing and the havoc it has wrought on state and local economies. “We believed, even though the national buzz was this ‘The Rustbelt is dead’ narrative, that Detroit was experiencing a resurgence and that it always had been a wonderful area with a lot of great companies and businesses.” And one of those was Pinnacle, he said. “Good operations. Good locations. Well-built homes. A good reputation in the market, good financial performance, and then we met the people,” Schottenstein said, rattling off what he described as Pinnacle’s strengths. Dominic Moceri, partner with his siblings in the Auburn Hills-based

Moceri Cos. homebuilding company, said M/I Homes keeping Fingeroot at the top of the team was the right choice. “He is a great builder, very ethical and it’s a great buy for a national company to have him at the helm to run their local division,” Moceri said. It wasn’t long after what Schottenstein characterized as the “first date” in the eventual marriage between Pinnacle and M/I Homes, which had $1.96 billion in revenue last year, that he knew his company would be adding its 16th homebuilding market to its portfolio: Metro Detroit. “Going into the recession, we were in nine markets and we are now in 16,” he said. “As much as we felt great about the nine markets we were in, we knew we weren’t in the only nine good homebuilding markets in the United States ... Then along came Detroit.” Moceri attributed part of the region’s draw as lower costs of land. “The profit margins are quite compressed in other markets and there is room here to add extra quality to the homes,” Moceri said.

SE Mich. in demand Like M/I Homes overall is growing its presence nationally, Pinnacle too hopes to continue on that trajectory. The company, which builds single-family homes, townhomes and empty-nester communities, focuses on the higher end of the market, with townhomes starting in the high $200,000s and empty-nester and single-family homes starting in the mid $300,000s. It has projects in sought-after suburbs like Washington Township, Commerce Township, Novi, Northville, Canton Township, Clarkston and other communities in Wayne, Oakland, Macomb, Livingston and Washtenaw counties. Fingeroot said that in 2016, the company sold about 150 homes. Last year, it was 200. And this year, it is expected to sell about 250. “There is an opportunity,” he said. “We see strong demand, increasing demand, and we think Southeast Michigan is a dynamite place to be.” Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 6 , 2 0 1 8

THE WEEK ON THE WEB

RUMBLINGS

Beaumont to pay $84.5M to settle whistleblower complaints

Old Woodward gets ready for its new debut

JULY 27-AUGUST 2 | For more, visit crainsdetroit.com

eaumont Health has agreed to pay an $84.5 million settlement to the U.S. Department of Justice, state of Michigan and four whistleblowers for violating federal laws that bar hospitals from overcompensating physicians and filing false claims. The settlement resolves whistleblower lawsuits filed by four former employees and physicians of Beaumont that go back to contract arrangements with physicians from 2004 to 2012. The DOJ in Detroit has been investigating the allegations about the physician contracts, including those in oncology, cardiology and ophthalmology, since 2010. Beaumont was informed of the investigation in 2011. The Justice Department said in a statement that Beaumont violated the federal False Claims Act by engaging in improper relationships with eight referring physicians that led to the submission of false claims to the Medicare, Medicaid and the military Tricare programs. The eight physicians were not named in initial DOJ documents, but the whistleblower lawsuits list more than a dozen well-known current and former Beaumont physicians and executives as plaintiffs or those involved in the schemes. “Offering financial incentives to physicians in return for patient referrals undermines the integrity of our health care system,” Acting Assistant Attorney General Chad Readler of the DOJ’s Civil Division said in a statement. “Patients deserve the unfettered, independent judgment of their health care professionals.” Beaumont CEO John Fox, who was hired in January 2015 to replace Gene Michalski, said the resolution of the case “reflects Beaumont Health’s commitment to the future of health care in Southeastern Michigan.” Fox started work in March. “Since the formation of Beaumont Health in 2014, the new management team has implemented additional compliance and legal review processes to ensure our effective compliance with the complex regulations applicable to health systems and to provide additional assurance that these types of issues do not arise again,” Fox said. Under the settlement, Beaumont also will enter into a five-year corporate integrity agreement with the U.S. Department of Health and Human Services. “That agreement is consistent with and will complement our current commitment to effective compliance policies and processes,” Fox said. “We will continue to work with the HHS to ensure the highest levels of compliance and transparency at all levels of the organization. Most importantly, we will continue forward with our focus on our critical mission of delivering compassionate, extraordinary care to our patients, families and the communities we serve.” Beaumont Health was formed in 2014 through the merger of Beaumont Health System, Oakwood Healthcare and Botsford Hospital. Officials for Beaumont said the federal investigation was disclosed to all board mem-

Under a settlement, Beaumont Health will enter into a five-year corporate integrity agreement with the U.S. Department of Health and Human Services.

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

7,887

The number of fans Detroit City FC drew for its 10-0 loss last week, setting a team record.

$15

The minimum wage Detroit janitors got in union negotiations with employers, averting a strike.

3,000

The number of people who were expected to attend the National Association of Black Journalists conference in Detroit last week.

bers and executives at the time, and references to the problems were contained in public financial documents. The four whistleblowers, who filed separate actions that the DOJ consolidated into one case, are David Felton, M.D.; Karen “Bobbie” Carbone; Cathryn Pawlusiak and Karen Houghton. The DOJ has not determined the shares to be awarded to the whistleblowers out of the total fine. The cases allege that between 2004 and 2012, Beaumont provided compensation substantially higher than fair market value, and free or below-market-value office space and employees to certain physicians to secure their patient referrals. The compensation was excessive and in violation of federal anti-kickback statute and the Stark Law. The eight doctors then submitted claims for services provided to these illegally referred patients, in violation of the False Claims Act, DOJ said. In addition, the settlement also resolves claims that Beaumont allegedly misrepresented that a CT radiology center qualified as an outpatient department of Beaumont in claims to federal health care programs.

BUSINESS NEWS J Gordon Food Service will open its first location in Detroit Monday on East Jefferson Avenue, just east of downtown. J Detroit-based Crain Communications Inc. has agreed to sell the trade publication InvestmentNews to London-based Vitesse Media plc for approximately $27.1 million. J Troy-based Plex Systems Inc. acquired an Indianapolis-based compa-

ny in pursuit of expanding its operations in the industrial internet of things. J In a rare intra-division trade, the Detroit Tigers said they sent outfielder Leonys Martin and a minor-league pitcher to the Cleveland Indians in exchange for prospect Willi Castro. J The nearly 150-year-old Michigan Catholic newspaper will cease publication later this month to make way for a new digital service called Detroit Catholic, amid falling circulation and rising costs. J Well-known downtown Detroit sports bar Cobo Joe’s closed permanently last week after the Red Wings’ move out of Joe Louis Arena crippled business. J In other watering-hole news, Detroit’s iconic Anchor Bar, a drinking spot near Joe Louis Arena that’s long served local journalists and Red Wings fans, is being sold to Birmingham-based developer Elia Group. J The Royal Oak Chamber of Commerce is hosting a job fair Aug. 14-15 to help staff the new Hyatt Place hotel that is expected to open in the city’s downtown this fall.

fter a four-month shutdown, Old Woodward Avenue in downtown Birmingham is just about ready for traffic. The four-block stretch of the city center, from Brown Street to Oakland Avenue, is to reopen Aug. 12, said Ingrid Tighe, executive director of the Birmingham Shopping District. Crews are putting the finishing touches on a $7 million overhaul of the downtown streetscape and infrastructure, replacing orange barrels with new planters. Construction included a new road, sewer system, water main, sidewalks, crosswalks, benches, lighting and parking meters. Those strolling the freshly poured sidewalks are also noticing wider walkways, outlets on benches, glossy finishes to the pavement and new locust and pine trees. “All these small details are tying the project together,” Tighe said. Brian Stokes, general manager of Social Kitchen and Bar, is among those eager to welcome back cars. His restaurant at 225 E. Maple Road was affected by difficult accessibility and a spate of water main breaks from construction. Stokes said business has been

down about 15 percent year-overyear, but more people are coming in since the new sidewalks were completed last week. He expects a big boost now. “Birmingham is such a pedestrian town. Now that they finally have the sidewalks opened, it’s really helped,” he said. “I think people will be coming down just to see what all the fuss was about down here.” The city launched a campaign to keep residents up to date on construction, and it worked with the Birmingham Shopping District for a strategy to mitigate impact to local businesses. One of the most successful parts of that effort was the “shopping bucks” initiative. Tighe said the campaign, which involved giving patrons coupons to stores and restaurants to encourage them to visit, exhausted its $50,000 budget and helped lure shoppers downtown. And the free valet parking worked so well that the city is planning to establish two permanent valet services — one on South Old Woodward Avenue and one on Hamilton Road. Instead of being free for the first two hours, however, they will likely cost $5.

OTHER NEWS J Two doctors and the owner of a medical clinic in Oak Park, along with two other employees, were indicted last week, accused of operating a $20 million opioid distribution ring. J A labor union representing faculty at Wayne State University has filed two unfair labor practice charges against the university’s medical school over what the union called “merger” talks with Henry Ford Health System. J Eddie Money and alternative rock band Awolnation will headline the 21st annual Ford Arts, Beats & Eats in downtown Royal Oak Labor Day weekend. The festival is also planning new beer stations and has signed on new restaurants, including Imperial of Ferndale. J Preservation Detroit is leaving the David Mackenzie House on the Wayne State University campus as it settles into a new home at Bethel Community Transformation Center in the city’s North End. J A Walled Lake restaurant owner was indicted for $1 million in employment tax fraud. He also allegedly did not file an income tax return after selling the Detroit strip club he owned, The Coliseum. J The state closed Detroit-based Greater Christ Baptist Church Credit Union last Tuesday after discovering that the financial institution was “operating in an unsafe and unsound manner,” it said in a news release.

WARBY PARKER

Eyeglasses retailer Warby Parker’s new Ann Arbor store will be filled with pencils it’s selling to benefit nonprofit 826 Michigan.

Ann Arbor Warby Parker has pencil-centric format E

yeglasses retailer Warby Parker plans to open a store in Ann Arbor store Saturday, lined with pencils it’s selling for charity. Pencils — the “ultimate writing implements,” according to the retailer — will be displayed in a range of colors around the glasses store, and reflected in its design. The writing tools are made in partnership with New York City-based CW Pencil Enterprise, Warby Parker said in a news release. They will be for sale, four for $2, with all proceeds going to Ann Arbor-based writing-centric nonprofit 826 Michigan. It also has a presence in Detroit.

New York-based Warby Parker placed pencils at its Cambridge, Mass., store last year and decided the gambit was successful enough to implement fully at a new store, the release said. The pencils are decorated with cheeky sayings, including “chew in case of emergency” and “ask me about my pencil,” according to the release. The Warby Parker Pencil Room at 304 S. Main St. will be the retailer’s third store in Michigan, and 75th overall. It opened in Somerset Collection in Troy earlier this summer and in downtown Detroit in 2016.