16 minute read
Guest Columnist Obligation of nonprofit directors
Richard L. Weber is an attorney with Bond, Schoeneck & King, PLLC in Syracuse. He specializes in business litigation, trust and estate litigation, and property disputes. To contact him, send an email to rweber@bsk.com.
High-profile Case Shines a Spotlight on Obligation of Nonprofit Directors
By Richard L. Weber, Esq.
Nonprofit organizations are an es- nonprofit boards cannot merely “show up” sential fixture in our communities. at monthly meetings and “rubber stamp” Often, the engine that drives a non- the actions of the organization’s executives profit is its board of directors. and staff; individual directors who abdicate
Service on a nonprofit board is to be their duties could incur significant individcommended. However, a recent court case ual liability. Each and every director must underscores how important it is that indi- be mindful of the fiduciary duties and vidual directors understand the fiduciary obligations that come with board service, obligations that come with nonprofit board including: service. • the duty of care, which demands
In September 2019, The College of New acting in good faith with the appropriate Rochelle filed for bankruptcy after 115 years degree of diligence, care and skill required of operation. This particular bankruptcy was for the position, and includes (among other commenced in The United States Bankruptcy things) attending and actively participating Court for the Southern District of New York at board meetings, reviewing reports and as a “Chapter 11” filing — a variation of minutes of the board and the organization, bankruptcy that seeks “reorganization” of and engaging in periodic review or audit the insolvent organization to satisfy debts of the organization’s employees and operand (if possible) move forward with con- ational practices; tinued operation in some form in the future. • the duty of obedience, which requires
Over the following months, a number compliance with applicable law and reguof creditors filed claims in the bankruptcy, lations and the organization’s internal govseeking to recover payment on debts owed erning documents and mission statement; by the college, and the campus itself was put this duty includes monitoring the operations up for auction. On Jan. 14, 2021 the Guest Columnist of the organization to make sure it remains committee established to properly focused on its protect the interests of unsecured creditors core mission; and commenced a lawsuit directly against former •the duty of loyalty to the organization, members of the college’s board of trustees. which demands that a board member put The complaint in the lawsuit asserts (among the best interests of the organization above other things) that the former trustees improp- his or her individual interests. erly “delegated near complete control” over Fortunately, the majority of nonproft financial decisions to certain college admin- organizations have diligent and engaged istrators, failed to install proper corporate board members, and good internal govergovernance systems and safeguards, enabled nance practices. Yet it is essential that an misuse and depletion of college endowment individual serving on a nonprofit board of funds, and failed to ensure proper payment directors take the time to personally review of payroll taxes and other liabilities. the organization’s formation and gover-
In particular, the complaint alleges that nance documents (including its mission the trustees failed to adequately supervise statement and bylaws), and become familiar the college’s former treasurer - vice president with the organization’s assets (including real of finance, which enabled that individual to property and accounts), finances (including engage in unlawful misconduct and misman- tax filings and audited financial statements) agement of assets (actions for which he was and operations. ultimately prosecuted by the Department of Nonprofit boards should consider Justice and sentenced to a three-year prison obtaining “directors and officers” insurterm). ance coverage (aka “D&O” coverage) and
The complaint seeks significant finan- employee “fidelity insurance” in order cial recovery directly from each individual to protect board members that diligently trustee, and asserts that each trustee bears perform their duties. responsibility for the tens of millions of Finally, organizations should consider dollars of liabilities incurred by the college retaining outside accountants and attorneys prior to the bankruptcy. to review operations on a periodic basis with
The College of New Rochelle case is an eye toward ensuring compliance with all strong reminder that individuals serving on applicable laws and obligations.
uccess StoryS
By Ken Sturtz
Vincent “Vinny” Lobdell Jr., HealthWay’s president, and his father, Vincent Lobdell Sr., who serves as CEO and chairman of the company
HealthWay Expands Dramatically as Demand for Its Air Filtration Products Surges
Company’s workforce in Pulaski more than doubled in less than year
You can find them in hospitals, daycare centers and offices. Tens of thousands have been placed in the classrooms of the nation’s largest school systems and on buses too. They’ve even been shipped to China, Italy and the United Arab Emirates.
And it’s all the work of a family-owned company in Pulaski.
A year ago, HealthWay Family of Brands was a small but fast-growing business manufacturing medical-grade air purifiers. But since the pandemic began, it’s experienced soaring growth as demand for its products has skyrocketed.
“It’s been intense,” says Vincent “Vinny” Lobdell Jr., HealthWay’s president. “It’s been just such a substantial demand.”
The company, which has a significant workforce overseas, employed roughly 40 to 45 people in Central New York before the pandemic. They added 60 employees here throughout 2020 to keep up with demand and plan to hire another 50 to 60 in the first part of this year, Lobdell says. Those jobs will include positions in manufacturing, engineering, marketing, sales and finance.
HealthWay added approximately 35,000-square-feet of space at two facilities in the Pulaski area last year. Plans for this year include building another 35,000-square-feet.
In some ways Lobdell and his father, Vincent Lobdell Sr., who serves as CEO and chairman, have been preparing their company for this moment for years.
“With my father and myself, we spent the greater part of three decades pursuing something we believed in with the idea that eventually it would be something the world would open its eyes to,” Lobdell says.
In 1981, the elder Lobdell went into business developing air filtration systems. He began by building products in the air quality space for other companies, focusing on business-to-business sales. In 2004, father
Tens of thousands of HealthWay purification systems have been placed in the New York City School District, the largest school system in the country, in the Chicago Public Schools and hospitals around the country, including Upstate, Crouse and Oswego in Central New York.
and son started HealthWay with a single employee. Most of its sales were still business-to-business. As they expanded their line of air cleaning systems in 2016, the family opted to open a plant in Pulaski rather than China.
In 2017, HealthWay launched its Intellipure brand and began marketing and selling its products to consumers. The company was growing at a rate of 7% to 10% and continuing to invest and innovate when the pandemic hit, Lobdell says.
HealthWay’s air purifiers use a patented disinfecting filtration system (DFS) technology that the company says is 40 times more efficient than HEPA filters. Its products have not been certified by regulators to remove the virus that causes COVID-19, but previous tests showed their filters remove 99.99% of the H1N1 virus, which is smaller than the current virus.
The company’s air purifying equipment ranges from smaller portable air purifiers that can be set up in a single room to commercial filtration systems meant for large buildings.
“I think a lot of experts would say we had innovated and put ourselves in the position to really be the only global air cleaning manufacturer to have a solution from a small bedroom to a large skyscraper,” Lobdell says. “And I think that’s why we’ve been able to capture this opportunity.”
Lobdell says he and his father have invested years in finding a meaningful solution to air pollution, which the World Health Organization has said poses a major threat to public health. But people tend not to worry about things they can’t see and Lobdell says it has taken the pandemic to open the public’s eyes to the deadly threat of air pollution.
“We’re really about providing true solutions,” he says. “We have innovated and put 30 years of investment and effort and hard work into this space. A lot of times that doesn’t pay off on a balance sheet right away.”
Their work has resulted in a product line that is both scalable and adaptable. As an example of the benefits, Lobdell cites school districts, which are often located in older buildings.
“You can’t adapt a commercial air cleaner to the HVAC system, so they went with small portables,” he says.
In 2020, HealthWay deployed more than 200,000 portable air purifiers to classrooms in schools across the U.S. Tens of thousands of purification systems were placed in the New York City School District, the largest school system in the country. Many major school districts in the nation have adopted HealthWay’s purifiers. Nearly 30,000 units were placed in the Chicago Public Schools alone. Hospitals around the country have also used the purifiers, including Upstate, Crouse and Oswego in Central New York.
Late last year, Academy Bus, the largest private carrier in New Jersey, announced it planned to install portable HealthWay air purification units on each of its buses.
HealthWay’s products also went abroad. In December 2019, the company was called upon to collaborate with healthcare institutions in China to help combat cross-contamination. Its systems were later used in field hospitals in the United Arab Emirates and then Italy when the infection rates spiked in those countries.
The demand for HealthWay’s products doesn’t show signs of letting up anytime soon. Lobdell says sales this year are likely to exceed 2020. The company has a backlog of almost $30 million in revenue and pending deals of upwards of $100 million in sales.
“Growing the business is great,” Lobdell says. “But being able to provide something that really matters during the worst health crisis in history has been something we’re really grateful for and proud of.” Vincent “Vinny” Lobdell Jr. demonstrates a class one laser particle counter on their 950P unit. Each unit is individually tested with a class one laser particle counter and is certified to exceed traditional HEPA filtration, showing the highest level of ultrafine particle removal.
Christian Cobb, vice president of marketing, points out the equipment that produces air filtration systems at HealthWay.
He praised the commitment of the company’s employees around the globe who committed to working round the clock to provide help combatting the pandemic.
Nor have the events of the last year caused the company’s owners to rethink their decision to invest in Pulaski.
“We’re committed to the local community,” Lobdell says. “We could really move our business anywhere, but the community matters so much to my father and myself. We’re so grateful to represent and support small town America and most importantly Central New York and that’s why we continue to invest here.”
Started How I Got
Continued on page 15
business and me and helped get everything set up and going.
Q.: Did you have to borrow money?
A.: [Larry] helped me secure $75,000 in financing through the U.S. Small Business Administration. I learned about the Business Expansion Center in Oswego, a county owned and operated business incubator facility, while doing that coursework. We moved there in 2002. I didn’t have to pay property taxes, I received a great deal on rent, and there were many other positive aspects, including a shipping dock. I would then purchase the former Dubois Inn building in Minetto and ran operations there until 2007.
Q.: Can you characterize some of the obstacles you faced as a business owner?
A.: Unfortunately, the business did fall upon hard times. In 2004, there was a safety recall involving Aqua Scout water scooters, a product that the business imported and was heavily involved in. I lost about $150,000 due to the recall, and this occurred while I still had a sizable loan to pay on, and a brand new car. Around that time, other major corporations such as Lexar and SanDisk had gotten into high-speed memory flash drives, and we started to sell their products. They ended up outgrowing us and essentially strictly dealt products to stores such as Best Buy and Circuit City. We eventually got squeezed out of the game. Between 2005-2008, I spent all the money that I had previously made on just dealing with problems.
Q.: How did you recover from that?
A.: We then affiliated with a Taiwanese company in 2007 — Phison — that developed a top-end solidstate memory controller that was hands-down faster than any hybrid hard drive. We also developed our own brand name of solid-state drives ‘What most people do when they are buying solid state drives is hop online and check out the latest reviews of what is the best thing out there. If you are not on the top of that list, you’re not going to be in contention.’
— MyDigitalSSD — that still exists today. Phison had previously released a controller that had questionable quality, subsequently earning a poor reputation worldwide as a result.
However, I saw the positives with its newer version and began to change people’s perception of the product. I turned it into more of a “best bang for your buck” type play.
Phison supported my efforts, and to this day looks to me for ideas that it can develop. Last year, we dealt $1.5 million worth of its products and Phison has represented a steady revenue stream for us since 2011.
However, it’s not all rainbows and sunshine. Last year was expected to be one of the best years we would ever have in our history, and we were targeting $10 million in sales.
But COVID-19 hit, and the year went downhill and we fell far short of our expectations.
Everything shut down; everything stopped. All the businesses that were buying all those products that we sell, they immediately stopped buying anything.
It didn’t matter what it was; they wouldn’t buy it even if they needed it. They just couldn’t get approval from any budget or financing source.
Q.: What were the keys to drawing in and maintaining a customer base in the early phases of the business?
A.: If you do business with an entity such as an industrial company, you’re going to get that return over and over again. Perhaps they have new machines coming on line, and they need the same thing they bought for the last machine. There is enough of that, but in most cases, when you purchase a solid state drive, it’s going to last at least three years until you think about buying another one. They don’t even remember where they bought the last one. What most people do when they are buying solid state drives is hop online and check out the latest reviews of what is the best thing out there. If you are not on the top of that list, you’re not going to be in contention.
When we first started, we used email blasts to customers to update them on the latest and greatest products. For example, the compact flash was growing fast, and it went from having 64 kilobyte to having 8-megabyte cards in less than six months. Then it grew all the way to 64 megabytes over the next six months, and then 128, 256, and 512. So we would email all these customers to update them on the latest developments. If we had an upgraded version of a product that a customer purchased before, we would blast them and they would really get on board with it. We sell mostly to IT companies and individuals. I would say our average customer is a college graduate aged 35 to 55.
Best Business Directory
AUTO SALES & SERVICE
Bellinger Auto Sales & Service. Third generation business. Used cars, towing, general auto repair & accessories. Truck repair. Oil, lube & filter service. 2746 County Route 57. Call 593-1332 or fax 598-5286.
Jake’s Automotive of Oswego, Inc. Auto repair and service of brakes, steering, suspension, diagnostics, oil change, tires & more. We also sell performance parts. 801 E. Seneca St., Oswego. 315-342-6871.
Munski Automotive. Brakes, exhaust, NYS inspections, shocks & struts, steering & suspension, check engine & ABS light, tires. 14 West Seneca St., Oswego 315-343-6229. Visit us on the web: www. munskiauto.com.
Port City Car Care. Oil, lube, NYSI, alignments, tires, brakes, electrical, air conditioning, suspension, tune-ups & timing belts, complete car care. We do it all! Over 28 years’ experience, 20 Ohio St. Phone 315-207-0500 or visit us on the web at www.portcitycarcare.com
BIKES, SERVICE
Murdock’s. Oswego County’s only authorized Trek dealer. We service all brands of bikes. Check out our website: www.murdockssports.com or call us 315-342-6848.
COPY + PRINT
Port City Copy Center. Your one-stop for all of your printing needs. 115 W. Thrd St., Oswego. 315-2166163.
DEMOLITION
Fisher Companies. Commercial & residential demolition. Great prices. Fully insured. Free estimates. 48 years of experience. Call us at 315-652-3773 or visit www.johnefisherconstruction.com..
EXCAVATING
Gilbert Excavating. Septic systems. Gravel & top soil. Septic tank pumping. 685 County Route 3, Fulton. Call 315-593-2472.
JANITORIAL SERVICES
Looking for good service, start by calling LC Cleaners at 315-744-2205. We clean dirt cheap. We will also disinfect your office. Please leave message on our phone. We will be happy to call you back.
KILN-DRIED HARDWOODS
Lakeshore Hardwoods. We stock kiln-dried cherry, walnut, maple, butternut, ash, oak, basswood, mahogany, cedar figured woods, and exotics. Also, hardwood flooring, moldings, stair parts & woodworking supplies. 266 Manwaring Road, Pulaski. 315-298-6407 or visit www.lakeshorehardwoods.com.
LAND SURVEYOR
Robert M. Burleigh, licensed land surveyor. Quality land surveying. Residential, subdivision, commercial, boundary surveying. 315-593-2231.
LUMBER
White’s Lumber. Four locations to serve you. Pulaski: State Route 13, 315-298-6575; Watertown: N. Rutland Street, 315-788-6200; Clayton: James Street, 315686-1892; Gouverneur: Depot Street, 315-287-1892.
PICTURE FRAMING
Picture Connection. Custom matting & framing for photos, posters, prints, oils & more. Shadow boxes, object framing, art print source. 169 W. First St., Oswego. 315-343-2908.
PLUMBING & HEATING SUPPLY
Pullen’s Plumbing & Heating Supply has a large variety of plumbing & heating repair parts & fixtures. Water heater, furnace, boiler & all plumbing installations available. We do our own excavating for water service & sewer replacement. 22 Ohio St., Oswego, 315-343-1906.
PLUMBING & HVAC
AHR Plumbing & HVAC service, sewer cleaning, hydrojetting, video inspections, water heater installs, new construction & remodel service & repairs. 315668-6569 AHRPlumbing.com.
SCREEN PRINTING & EMBROIDERY
Valti Graphics-Creating garment graphics on customized apparel in screen printing, embroidery, Greek apparel & custom lettering. 152 W. Bridge St., Oswego. 315-342-4912.
TRACTOR/LAWN
RanMar Tractor Supply. Sales and service of new and used tractors and farm equipment – 5219 US Rte. 11 Pulaski – 315-298-5109.
