It’s likely there soon won’t be a Cardinal Fastener &Specialty Co. anymore, though workers at the companythat was hailed as a symbol of wind energy’s potential tobenefit area manufacturers apparently will continue tomake bolts at its plant in Bedford — at least if Germany’sWurth Group has its way.
Wurth Group North America Inc. has agreed to buyCardinal’s assets, including its equipment, for $3.9 million,according to documents that are part of Cardinal’s bank-ruptcy filing in Cleveland. Other bidders will be able tooutbid Wurth, which is a stalking-horse bidder thatemerged from Cardinal’s efforts to sell itself, at an auc-tion set for Oct. 26, pending Bankruptcy Court approval.
Wurth also would have an opportunity to increase itsown bid, if other buyers emerge at the auction, lawyers
In a multifaceted business careeras part of one of Lake County’s best-known families, Richard Osborne Sr.has made life tough for bankers bybeing an activist shareholder. Mr. Osborne even has sued to forecloseon a mortgage he held on a property
FINANCEBusinesses and organizations employ more creative financing to initiate deals ■■ Page 13PLUS: WORKPLACE BANKING ■■ ACCOUNTING NICHES ■■ & MORE
NEW
SPAP
ER
ERIC MULL
Independence-based Quasar Energy Group and Forest City Enterprises Inc. have formed a joint venture to build digesters on properties thereal estate giant owns, manages and develops, including this site in Collinwood.
Forest City Enterprises, Quasar partner on construction of waste conversion technology to generate electricity
In its effort to make naturalgas from America’s organicwaste, Quasar EnergyGroup has a big ally.
Forest City Enterprises Inc.and Quasar are in the process ofbuilding what Jon Ratner sayswill be the first of many anaero-bic digesters on properties thatthe Cleveland-based real estategiant owns, manages or develops.
The digester technology — which canconvert materials such as sewage, cropwaste and grease into methane — blewaway other renewable energy technologies
Forest City has considered implementingon its properties, said Mr. Ratner, its vicepresident of sustainability initiatives.
That’s one reason why Forest City decidedSee QUASAR Page 25
See OSBORNE Page 26
See CARDINAL Page 24
Posterchild forwind likelyto be soldStalking horse bidder emerges with$3.9M offer for Cardinal Fastener
Banks sue to forecloseon real estate investor
INSIDESponsors look for home runs
Sponsorship partners of the Cavaliers, Indians andBrowns want to directly tie more traffic to their doorsand have bolstered their marketing programs in response. Read Joel Hammond’s story on Page 6.
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22 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM SEPTEMBER 26 - OCTOBER 2, 2011
COMING NEXT WEEK
We’ll take a look at the effects that Facebook,Twitter and other social media sites have hadon jury selection and jury trials. We’ll explore someof the challenges theypresent, plus muchmore, in our Legal Affairs section.
Social media on trial
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WRONG DIRECTIONSAT scores across the board are falling, and in the writing and critical reading categories, they’rethe worst on record. The declines recorded by the College Board aren’t huge, but there’s a steadypattern of weakening for the last several years. Here are the scores since 2006, when writing wasadded as a separate element on the SATs. The test, in case you’ve forgotten, uses a 200- to 800-point scale.
Total group mean SAT scoresCollege-bound seniors, 2006-2011
Critical reading Mathematics Writing
SOURCE: THE COLLEGE BOARD; HTTP://PROFESSIONALS.COLLEGEBOARD.COM
Big Issue ...........10Classified ..........26Editorial ............10Going Places .....12
SEPTEMBER 26 - OCTOBER 2, 2011 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 3
INSIGHTTHE WEEK INQUOTES
“A lot of companieslike Cardinal invest alot of capital and invest a lot of timeand money on variousalternative energysources, like wind andsolar. They need afaster turnaround ontheir investments andthey’re not getting itright now.”— Cleveland bankruptcy attorneyJean Robertson. Page One
New ownerof Agilysysdivision eyesgrowth here
“We buy more thanwe sell, and wheneveryou do that, you’relosing wealth. Thetrade deficit is realmoney and it must berepaid.”— Dave Frengel, vice presidentof government relations, PennUnited Technologies. Page 8
“Today, money isavailable, but it’s onlyavailable under certain circumstancesor conditions. … Sowe’re having to findcreative ways to freethat money up.”— Randy Markey, managingpartner for Capital AccelerationPartners. Page 13
“I think there’s goingto be a greater emphasis on CPAsgaining more creden-tials. … We’re a cre-dential-crazy society.”— Clarke Price, president andCEO of The Ohio Society of CPAs.Page 18
Toronto firm OnX seesopportunity to diversifyBy CHUCK [email protected]
Agilysys Inc. may be moving toGeorgia, but the division that accountsfor most of its sales is stickingaround.
A few things are changing, though.For one, the division now operatesunder the name of its new owner,OnX Enterprise Solutions Ltd., aToronto company that on Aug. 1closed a deal to buy Agilysys’ Tech-nology Solutions Group for $64 million.
OnX also plans to move the mainoffice of the former TSG division toMayfield Heights from Solon by theend of the year, said OnX chairmanBart Foster. Plus, OnX plans to putmore emphasis on getting the formerTSG division to sell services in addi-tion to the computer hardware andsoftware that makes up the bulk ofits revenue, and OnX aims to increasecollaboration between TSG teamsthat sell different brands of technol-ogy, Mr. Foster said.
That new strategy should help thedivision become more than thetransactional, low-margin businessit was under Agilysys, he said.
“If you do that, lots of good thingshappen,” Mr. Foster said.
OnX and TSG — which both pro-vide hardware, software and servicesfor large data centers — will havecombined revenue of about $750million. The company aims to boostthat figure to $1 billion over the nextfew years, through acquisition andgrowth of its current business, Mr.Foster said.
First, though, the company willexpand TSG’s presence in NortheastOhio. OnX plans to add 20 to 25 people to TSG’s local staff over thenext three or four months, Mr. Fostersaid. They will provide the adminis-trative services the division will losewhen Agilysys moves to Alpharetta,Ga., which is scheduled to happen
See ONX Page 23
Pickwick & Frolic runs into IRS trouble E. Fourth St. club owner says he has addressed tax problemsBy STAN BULLARD
Behind the scenes at Pickwick &Frolic Restaurant and Club on EastFourth Street in downtown Cleve-land, things have been glum, butowner Nick Kostis said the businesshas shaken off a bout of fiscal illness,gotten healthy and is going on withthe show.
The problems hit center stageAug. 19 when the Internal RevenueService filed a tax lien against thecompany for a total of $148,193 inunpaid federal taxes, penalties and
fees. That filing came afterthe state of Ohio sued Hilarities Comedy Club, inthe lower level of Pickwick& Frolic, for a total of$170,000 in unpaid state in-come taxes in five Cuya-hoga County Court of Com-mon Pleas cases betweenOct. 19 and Dec. 6 of last year.
Mr. Kostis said last week he is negotiating payment plans with theIRS and has paid the past-due state
taxes, but the liens havenot been released so far.
“I’ve been in business along time. I’m not proud ofthis and I’m taking care ofit,” Mr. Kostis said. “Mybusiness did the best itcould, but it’s a responsi-bility I have.”
Mr. Kostis said he plansto keep the business going and talksabout renewing his options to leasethe space at 2031-2039 E. Fourth for
as many of the next three, five-yearperiods as he can with MRN Inc.,developer of the East Fourth StreetNeighborhood.
The venue has made adjustmentsto adapt to the weak economy.
“We cut marginal and weakhours from our operation andpushed it into the hours when weare most productive,” Mr. Kostissaid. The changes were tough, butnecessary, to keep quality intact atthe 900-seat venue that houses a
comedy club, a nightclub-stylerestaurant, a martini bar and a 150-seat sit-down restaurant.
Specifically, the showplace shutMondays, dropped indoor lunchhours in 2010, dropped lunch at theoutdoor patio this past summer,eliminated a Tuesday show and Sun-day brunch, and added a mysterydinner theater to its offerings. Bytrimming days and shifts, Hilaritiescut staff to a total of 100 full- andpart-time employees from a high of147 in 2008.
The changes have made the See PICKWICK Page 23
Kostis
RUGGERO FATICA PHOTOS
Four Progressive Corp. employees — from left, Dave Krew (keyboards), Mitch Gluhank (guitar), Steve Wieclaw (leadsinger) and Mark Malysa (bass) — make up The Messengers. Drummer Jeffrey Briglia was not at this practice.
READYTOROCKProgressive fivesome set to take on global corporate titans
With axes heldhigh, ProgressiveCorp. will battlecorporate jug-
gernauts such as Starbucksand Mattel in the coming days.Not with the values of theirstock, but rather with howhard their employees can rock.
A group of employees fromthe auto insurance giant inMayfield Village has made it tothe finals of the Fortune Battleof the Corporate Bands — anevent held at the Rock and RollHall of Fame and Museum forthe last 10 years to benefit theCleveland museum’s educa-tional activities. Mr. Krew, a Progressive controller, at practice
IRS proposal benefits employersInitiative could simplifycompany managementof health care plans
By JERRY GEISELBusiness Insurance
WASHINGTON — A new InternalRevenue Service proposal wouldmake it easier for employers to determine if their health care plansare “affordable” and exempt from astiff financial penalty mandated bythe health care reform law.
Under the law, starting in 2014,employers are liable for an annual
$3,000-per-employee penalty foremployees whose required healthinsurance premium contribution for single coverage exceeds 9.5% offamily income and the employeesare eligible for federal premium sub-sidies to buy coverage through stateinsurance exchanges.
Following up on a promise madein August, the IRS on Tuesday, Sept.13, asked for public comment on aproposed safe harbor in which cover-age would be considered affordable aslong as the premium contribution forsingle coverage did not exceed 9.5%of an employee’s W-2 wages.
employers know) instead of eachemployee’s household income (whichemployers generally would notknow), the safe harbor could providea more workable and practical methodfor measuring the affordability of anemployer’s coverage,” the IRS said.
Rich Stover, a principal with BuckConsultants in Secaucus, N.J., saidthe IRS proposal “is a real positivefor employers.”
Anne Waidmann, a director withPricewaterhouseCoopers in Wash-ington, agreed.
“Employers welcome a safe har-bor that will enable them to deter-mine, based on information theyhave, whether their plans are ‘afford-able’ under the law,” Ms. Waidmannsaid. “They should not have to facesignificant penalties simply becausethey have no access to their employ-ees’ household income.”
To qualify for the safe harbor, anemployer would need to meet cer-tain requirements, including offeringfull-time employees the opportunityto enroll in a qualified employer-sponsored plan and that the re-quired employee premium contri-bution for individual coverage in anemployer’s lowest-cost plan avail-able to the employee not exceed9.5% of the employee’s W-2 wages.
Application of the safe harborwould be determined at the end of acalendar year and on an employee-by-employee basis.
“The employer would determinewhether it met the proposed afford-ability safe harbor for 2014 for anemployee by looking at that employee’sW-2 wages for 2014 and comparing9.5% of that amount to the employee’s2014 premium contribution,” theIRS said. ■
Jerry Geisel is editor-at-large atBusiness Insurance, a sister publi-cation of Crain’s Cleveland Business.
ON THE WEB Story from www.CrainsCleveland.com.
PSC Metals bolstersregional market share
Scrap company PSC MetalsInc., which is based inMayfield Heights, said it
has expanded operations in threestates with the purchase of ShapiroBrothers Inc. in Festus, Mo.
Terms of the deal were notdisclosed. Shapiro Brothers,founded in 1946, buys, sells andprocesses ferrous and non-fer-rous scrap, including industrialand obsolete grades of scrap.
It operates two sites in Missouri, one in Illinois and an-other in Arkansas. The company,owned by Greg and DavidShapiro, has 63 employees, allof whom will remain with PSCMetals.
20110926-NEWS--5-NAT-CCI-CL_-- 9/22/2011 8:49 AM Page 1
“Sponsors are requesting more engagement ... in a moreconcerted effort to measure return on investment.” – John Penhollow, vice president of corporate sales and service, Cleveland Browns
66 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM SEPTEMBER 26 - OCTOBER 2, 2011
“ Cox is responsive to our needs because they’re local. And in business, location really is everything.”
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FROM A BUSINESS OWNERnsights
In sponsorship shift, sports teams must drive trafficCorporate partners now look for more to deals than simple signage By JOEL [email protected]
Sponsorship partners of theCleveland Browns, Indians andCavaliers are asking for more thanthe traditional advertising give-and-take these days.
In the past, the sponsor relation-ship amounted to nothing morethan, say, Medina-based DiscountDrug Mart paying any or all of thoseteams for signage at the venueswhere they play, or perhaps to bedesignated their “official” drug-store.
A shift in that relationship is forcing the teams to bring more tothe table, and it’s resulting in newmarketing programs, with the goalof driving more traffic to the sponsors’ doors. The latest is an extension of Discount Drug Mart’s“Pro Points” program, a frequent-shopper deal where customers canbuy certain products and earnpoints toward merchandise orunique experiences.
The Browns on Sept. 16 announcedthey joined the program, whichDiscount Drug Mart began three
years ago with the Cavaliers at theheight of LeBron James’ popularity.It later added the American HockeyLeague’s Lake Erie Monsters, theCleveland Gladiators of the ArenaFootball League and the ClevelandIndians.
Rewards — full details are avail-able at http://discount-drugmart.com/ProPoints.asp — range fromteam hats to on-field, -court or -iceexperiences, such as a Cavs fantasybasketball game, a Zamboni ride orthe opportunity to “steal secondbase” when the Indians switch bagsin the middle of games.
“It’s part of a shift in what we dofor a living,” said John Penhollow,the Browns’ vice president of cor-porate sales and service. “Gone arethe days when we’re going to sell youa sign. We have to drive traffic totheir stores. We have to reward consumers for their support of usand the retailer.”
The Browns also are working ona similar partnership with Giant Eagle, in which customers who buya still-to-be-determined number ofproducts from a certain pool will receive a buy-one, get-one-free
ticket coupon. That’s an offshoot of the Pittsburgh-based grocer’s partnership with the Steelers, inwhich Steeler fans could buy sevenproducts and receive a $7 couponfor the team’s merchandise shops.
“We want to blow that one out ofthe water,” Mr. Penhollow said.
A word from our sponsors …Discount Drug Mart rode the
LeBron wave through the early partof its “Cavs Cash” and “MonstersMoney” programs, the precursor tothe now-broader “Pro Points.” Thecompany, though, found a voidonce basketball season was over;the Indians then approached thechain and joined in, followed by theBrowns.
Dave Bergman, the company’svice president of advertising, saidcustomers clamored for inclusionof the Browns, who also will unveila concession voucher program forCleveland Browns Stadium avail-able only at Drug Mart stores: Buy$10 vouchers for $8.
Mr. Bergman said the company’schallenge to the teams was to developopportunities for customers that
money can’t buy, such as the expe-riences mentioned above. Theproducts tied to the program allhave experienced “nice little lifts” insales, Mr. Bergman said, and ven-dors, too, have benefited, with theability to use the teams’ brands atpoint-of-sale displays or in signage.
“We’re really happy with wherewe are now with the program,” Mr.Bergman said. “When we first started,we lost excitement when the Cavs’season ended; now we’re running365 days a year.”
The Indians, meanwhile, in Juneunveiled a similar rewards programwith BP, wherein BP customers whobuy more than 10 gallons of gas onfive occasions earn two free ticketsto an Indians game.
Indians senior director of communications Curtis Danburgsaid that partnership — along withprograms with Bank of America andUnited Airlines, among others —stemmed from sponsors’ desire forgreater activation of their messages.
“We’ve seen this grow over thelast five years or so,” Mr. Danburgsaid. “For us, it’s an extension of ourbrand in the market and offers incremental revenue growth oppor-tunities.”The Cavaliers, in additionto their Discount Drug Mart partic-
ipation, worked with Kia to offertwo free tickets to customers whotook new-car test drives; Giant Eagle on a deal in which shopperscould receive a free ticket with a $25Stouffer’s purchase in one transac-tion; and Pepsi on a $10 ticket dis-count with certain purchases.
The Browns, Mr. Penhollow said,also are working with banking partner PNC on a similar partnership,again in an effort to get customersto the company’s doorstep. Mr.Penhollow said PNC research hasshown the company converts 70%of walk-ins to some sort of broadercustomer. Details still are being finalized, but an early front-runnerwould include some kind of Brownsapparel giveaway for signing up fora new account.
“Sponsors are requesting moreengagement on our end in a moreconcerted effort to measure returnon investment,” Mr. Penhollowsaid. “We also know that we’rebound by on-field performance; webuild and plan like we’re not goingto win any games, because we can’tcontrol wins on the business side.
“We can control going to marketon innovative programs and doingdeals we know have great poten-tial,” he said. ■
East Side commercial activity indicates optimismInvestors snatch upChagrin Blvd. sites By STAN [email protected]
New investments in older officebuildings on Chagrin Boulevard are anindicator of fresh strength in the streetconsidered the heart of the commer-cial market in the eastern suburbs.
An investor group led by Beach-wood office building investor MarkMunsell last Wednesday, Sept. 21,paid $4 million to buy the vacancy-riddled Commerce Park I, II and IIIoffice buildings from Renaissance ParkLLC in a transaction that includedlender Advantage Capital Manage-ment LLC of St. Paul, Minn., accordingto Cuyahoga County land records.
The price paid was 36% below theoriginal asking price of $6.25 million.
The massive Commerce Park I, IIand III complex at 23210 Chagrin Blvd.helped put the street on the map inthe 1970s as a multitenant officemarket providing an alternative todowntown. In a nine-story officebuilding and two five-story struc-tures, Commerce Park has 181,000square feet of office space atop a 500-space underground parking garage.The buildings in the aggregate carrya 60% vacancy rate.
Mr. Munsell, who heads the newownership group Commerce ParkPlace Holdings LLC, said, “We are goingto maintain the properties as officebuildings. We are working on ourrenovation plans for the properties.”
As the owner of the adjoiningCommerce Park IV and V officebuildings, Mr. Munsell long was seenas the natural buyer for the complexwhen the three older buildings wentinto receivership in 2008.
“It’s in my backyard,” Mr. Munsellsaid of acquiring the buildings nextto where his Munsell Realty Advisorsis based. “I see this as an opportunityto renovate some 40-year-old buildingsand bring them back to market because of their location.”
Mr. Munsell said his team willmanage the rejuvenation and leasingprocess. Real estate broker Ostendorf-Morris Co., where Mr. Munsell’s son,David Munsell, works as an assistantproperty manager, will handle day-to-day operations. The complex has asmall amount of retail space, but it’sprimarily office space.
The new ownership’s work is cutout for it.
Steve Egar, owner of the Egar Associates real estate brokerage, saidthe complex needs substantial rein-vestment and repairs to the under-ground parking garage. Even so, Mr.Egar said Mr. Munsell is one of thefew owners who have the “experi-ence and contacts” to make a go ofthe project. It will take great effort,Mr. Egar said, to restore the complexto the status it enjoyed when it wasseen as a gateway to the Beachwoodoffice market from Shaker Heights.
Mr. Munsell declined to identifyhis investors, but one that surfacedis intriguing.
David Heller, a principal of the NRPGroup in Garfield Heights, confirmedvia email that he invested with Mr.Munsell in the office buildings as apersonal investment. NRP is a na-tionally active developer and operatorof low-income, senior citizen andmarket-rate apartments. NRP is notgiven to office investments outside itsown headquarters.
Commerce Park Square I, II and
III also had interest from buyersfrom throughout the United States andCanada, according to Mark Abood,a senior vice president at the Chart-well Group brokerage in Clevelandthat managed and marketed theproperty for the lender. More thana dozen out-of-towners consideredit, Mr. Abood said, but “in the end itwas the local investors who tookadvantage of the opportunity.”
Down the road …Another vintage office building
on Chagrin also traded recently, butit was in anything but challengingcircumstances.
WI-FI Pepper Pike LLC, an investment group connected withWeiss Properties of Skokie, Ill., on
Aug. 31 acquired the eastern buildingof the two-building Courtlandscomplex, 29125 Chagrin in PepperPike, for $3.5 million.
The seller of the 35,000-square-foot building was Courtland HallLLC, an investor group led by devel-oper Bart Simon, who built thestructure in 1979. Mr. Simon, chair-man of North Pointe Realty in May-field Heights, said his firm will continue to lease and manage thebuilding, which has remained fullyleased for 20 years.
The property was debt-free, Mr.Simon said in an interview lastweek. He said he could not com-ment more because he signed anondisclosure agreement. Officialsat Weiss Properties did not return
three calls about the transaction.However, the sale price for the
Georgian-styled Courtland buildingspeaks for itself.
The $3.5 million purchase priceindicated by Cuyahoga County landrecords broke stride with other recenttransactions that were below the valueassigned by the county for propertytaxes purposes. The county assigns thebuilding a tax value of $2.8 million.By contrast, the three CommercePark buildings had a tax value of$4.6 million, which is 13% morethan the new owner paid for them.
The Courtlands building benefitsfrom a significant improvement inits surroundings. It’s next doorneighbor is Eton Chagrin Boule-vard, a lifestyle center that opened
THE LATEST ACTIVITYRecent activity on Chagrin
Boulevard, considered the center of the eastern suburbscommercial real estate market:
■ Veteran investor Mark Munsellbuys Commerce Park I, II and IIIcomplex, which has a 60% vacancyrate
■ An Illinois investor groupbought part of the Courtlands com-plex, which is debt-free and sold formore than the value assigned it byCuyahoga County for tax purposes.
in 2005 in Woodmere Village. Theredo by developers Robert Stark andJeffrey Friedman in 2005 expandedand updated the former Eton Collec-tion, which Mr. Simon had devel-oped and sold to Mr. Friedman andthe Milstein family. ■
PolyOne’s scorecard program earns high marksBy FRANK ESPOSITOPlastics News
Polymer compounder PolyOneCorp. is making progress on theperformance scorecard program itlaunched last year with its top sup-pliers.
PolyOne now has its 20 largestmaterials suppliers based on dollaramount enrolled in the program,according to Tom Kedrowski, senior vice president of supplychain and operations of the companybased in Avon Lake. Mr. Kedrowskisaid PolyOne hopes to expand theprogram to include its 50 largestsuppliers by the end of 2012.
PolyOne also wants to make theprogram more electronic and inter-
active.Suppliers’ reaction to the pro-
gram — which measures their per-formance in several categories —has been “mostly positive,” Mr.Kedrowski said.
“A lot of our suppliers have cometo the table with ideas on how theycan meet their goals and perform atthe number they’re expected todo,” he said.
PolyOne also has made adjust-ments on its side of the business.
“In the past few years we’ve idledsome obsolete capacity, added somenew lines and also invested in some(existing) lines,” Mr. Kedrowski said.“We’ve reconfigured some plantsand are cross-sharing betweenbusinesses like performance prod-
ucts and specialty products.”Through the ups and downs of
recent years, PolyOne has contin-ued to emphasize the importanceof collaboration, Mr. Kedrowskisaid.
“Some suppliers have growntheir business with us because oflongtime activity,” Mr. Kedrowskisaid. “That’s more important with aspecialty company like us.
“You need a solid supply chain,and some customers have growntremendously with us because ofthat,” he said. ■
Frank Esposito is a senior reporterwith Plastics News, a sister publi-cation of Crain’s Cleveland Busi-ness.
Manufacturing stakeholdersaddress industry concerns By DAN [email protected]
If the United States wants to havea robust manufacturing sector, itsgovernment needs to take steps toensure the nation’s key industriessucceed — or at least that Americancompanies have a chance to com-pete fairly against their counterpartsoverseas.
That was the word from a slew ofexperts and affected parties from industry, government, labor andacademic circles who met last Mon-day, Sept. 19, in Rootstown for whatwas billed as the Northeast OhioSummit on the Revitalization ofManufacturing. The event was puttogether by the Coalition for a Pros-perous America, a nonprofit groupin Washington, D.C., that focuses onissues affecting U.S. trade. It was co-chaired by U.S. Reps. Bill Johnson,R-Marietta, and Tim Ryan, D-Niles.
Many attendees shared their frus-tration with the trade imbalance thatexists between the United States andthe rest of the world and its effect onthe nation and its economy.
“It’s the trade deficit, stupid,” pro-claimed Dave Frengel, vice presidentof government relations for PennUnited Technologies, a Pennsylvania-based metal stamping and machiningcompany that serves markets suchas oil and gas exploration, medicaldevice manufacturing and defensecontracting.
“We buy more than we sell, andwhenever you do that, you’re losingwealth,” Mr. Frengel said. “The tradedeficit is real money, and it must berepaid.”
Mr. Frengel and others at theRootstown meeting rattled off a longlist of factors that they said make foran uphill battle for U.S. manufactur-ers at home and abroad. Those factors ranged from Chinese currencymanipulation that artificially keepsthe price of Chinese goods low in theUnited States to the subsidization by other countries of key industriesuntil they become large enough todominate globally.
Tax matters matter, tooSometimes, the advantages afforded
to foreign companies are obvious, aswhen a foreign government subsi-dizes a company with cheap raw ma-terials or protects its domestic mar-ket with tariffs. But sometimes the
advantages come from unexpectedsources, such as national sales taxesor value-added taxes, said CharlesBlum, president of the InternationalAdvisory Services Group, a tradeconsulting firm in Washington, D.C.
For instance, Mr. Blum said U.S.companies often are at a disadvan-tage because foreign nations havesales or value-added taxes, which areapplied to all goods sold in a country,regardless of their origin. Many of those foreign nations use thosetaxes as trade tools, forgiving themamong trading partners with similartaxes and thus allowing them to export to one another and avoid theimpact of the tax on the cost of theirgoods. The United States has no sim-ilar tax to rebate, so U.S. goods aresubjected to the full brunt of suchtaxes, which sometimes are as highas 10%, putting them at a price dis-advantage.
Other nations also have loweredor eliminated their corporate taxesin favor of such so-called “consump-tion taxes,” Mr. Blum said, puttingU.S. companies at a double disad-vantage because they must includein their prices taxes incurred both athome and abroad.
Add up the combined effects ofcurrency manipulation and tax disadvantages and U.S. companiesface an almost impossible competi-tive environment — one where thecost of their goods overseas could bedriven up by 25% or more, Mr. Blumsaid.
In search of a strategyThe group stopped short of issuing
a list of specific ways to fix the prob-lem, but instead asked that the fed-
eral government adopt some sort ofgeneral manufacturing strategy.
Already, most American manufac-turers left standing are doing a goodportion of their business overseas,often causing them to have mixed allegiances because they serve theirstockholders first and their nationsecond, members of the group said.Many U.S. companies that makegoods for American consumers havedisappeared over the years, theysaid, but could return if trade policeswere changed.
“If we would have been here(holding a similar meeting) 10 yearsago, we would have twice as manypeople in this room, that’s what’shappened to us already,” said BobBaugh, executive director of the Industrial Union Council of the AFL-CIO.
“I can only think of two countriesthat don’t have a national manufac-turing strategy — England and theU.S.,” Mr. Baugh said, noting thatboth of those nations have seen theirindustrial bases decline in recentyears.
One measure many in the groupdid endorse was an effort in the U.S.Congress to address Chinese currencymanipulation.
Known as the Currency Reformfor Fair Trade Act, the measure waspassed by the House of Representa-tives in the last Congress but failed tomake it before the Senate. The bill isstill active, though, and it has morethan 200 sponsors in the House,which is expected to take it up againthis year.
It’s supported by, among others,U.S. Sen. Sherrod Brown, D-Avon,who sponsored it in the Senate last year, along with Sen. OlympiaSnowe, a Republican from Maine.
Ohio’s other U.S. senator, RobPortman, a Republican, was not inattendance at the Rootstown meeting,where it was suggested he is opposed to such a measure. But Mr.Portman’s office said that’s not nec-essarily true. Even if he hasn’t signedon so far to support the legislation,he’s aware of the problem, his officesaid.
“We’re looking at that legislation,”said Christine Mangi, a spokes-woman for Sen. Portman.
She added, “Sen. Portman believes China is not playing by therules and does believe that they aremanipulating their currency.” ■
TROUBLED SECTOR
U.S. manufacturing interestsrelayed their industry concernslast Monday, Sept. 19, at asummit in Rootstown. Amongtheir concerns:
■ Trade deficit■ China’s alleged currency
manipulation, which artificially keepsthe cost of that nation’s goods low
■ Burdensome taxes, which putthe U.S. at a disadvantage with othernations with more favorable policies
SEPTEMBER 26 - OCTOBER 2, 2011 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 9
STRONGER TOGETHER
Schottenstein Zox & Dunn Joins Ice Miller
reputation and deep roots in the
| | | |
Indianapolis | | www.icemiller.com
TAX LIENSThe Internal Revenue Service filed taxliens against the following businessesin the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protectthe interests of the federal government.The lien is a public notice to creditorsthat the government has a claim againsta company’s property. Liens reportedhere are $5,000 and higher. Dateslisted are the dates the documentswere filed in the Recorder’s Office.
LIENS FILEDAction Staffing Personnel6100 Rockside Woods Blvd., Suite350, IndependenceID: 34-1573403Date filed: Aug. 4, 2011Type: Employer’s withholdingAmount: $1,266,034
Hilarities Comedy Club Ltd.2035 E. Fourth St., ClevelandID: 34-1877231Date filed: Aug, 30, 2011Type: Employer’s withholdingAmount: $148,193
Konstanzer Masonry Inc.514 Dover Center Road, Bay VillageID: 34-0967162Date filed: Aug. 2, 2011Type: Employer’s withholding, unemploymentAmount: $112,288
Brickman & Sons Inc.21900 Euclid Ave., EuclidID: 34-1034740Date filed: Aug. 23, 2011Type: Corporate incomeAmount: $98,817
TJRB Corp.5160 W. 164th St., Brook ParkID: 20-0249775Date filed: Aug. 23, 2011Type: Employer’s withholdingAmount: $70,266
NIA Childcare Enterprise Inc. AllHis Children4020 Verona Road, ClevelandID: 16-1749820Date filed: Aug. 25, 2011Type: Employer’s withholdingAmount: $48,825
Rainbow Child Day Care CenterNo. 2 Inc.24349 Lorain Road, North OlmstedID: 34-1932457Date filed: Aug. 18, 2011Type: Employer’s withholdingAmount: $43,990
Apple Child Care Inc.6827 Bunker Road, North RoyaltonID: 34-1489009
Date filed: Aug. 4, 2011Type: Employer’s withholdingAmount: $39,516
Loving Cup Solutions & Health Care16360 Broadway Ave., B-201, Maple HeightsID: 41-2226815Date filed: Aug. 16, 2011Type: Employer’s withholding, unemploymentAmount: $37,248
Petroleum Maintenance Electronics Inc.1210 E. 286th St., EuclidID: 34-1432857Date filed: Aug. 9, 2022Type: Employer’s withholdingAmount: $33,057
Gray Container LLC
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■ The Morning Roundup: Acollection of the day’s businessnews from Ohio’s daily papers
20110926-NEWS--9-NAT-CCI-CL_-- 9/22/2011 8:52 AM Page 1
It’s hard not to appreciate the factthat Gov. John Kasich decided tohold a two-day energy summit lastweek in Columbus, nor to ignore the
estimated 1,000 people who attendedthe gathering.
Sure, many of them were lobbyistsfrom special interests, or executives fromcompanies (or those hoping tobe) in some sector of this bur-geoning industry. That’s fine,because we should want peopleat such a conference to be morethan the academic types who helpspot opportunities or advise ofpitfalls. It was important that folkswere there who want to makemoney in energy, because that’show we’ll attract fresh invest-ment dollars and create jobs.
And although the 800-pound gorilla inthe ballroom probably was shale oil andgas — given the massive deposits thathave been forecast in the Marcellus andUtica shales deep beneath our state’slands — a comprehensive energy policyalso must include Ohio’s existing gas and
electric utilities, coal mining companiesand alternative/renewable energy indus-tries such as wind, water and solar.
The governor can be — and usually is— very blunt, which most Ohioans prob-ably see as both a blessing and a curse,depending on what he says. But I thinkwe all should agree with (and be concerned
about) this classic “Kasichism”regarding the conference and itsimportance: Ohio, he said, “hasno energy policy.”
That’s about as blunt as itgets, and the fact that it’s trueshould concern us deeply.
“This is not just about taxcredits,” the governor wasquoted as saying in his intro-ductory remarks. “We’re look-ing at everything. We’re looking
at generation. We’re looking at coal.“Ohio is in a really good position to
create a model that might be useful forthe entire rest of the country.”
Conscious of the stir already createdover new legislation that would lessen thedemands on electric utilities reaching
those renewable mandates, the governorsaid he didn’t want to end them, but wasopen to some modification. And cogen-eration — the capture and reuse of wasteheat from industrial sources — also mustbe considered as part of a comprehen-sive Ohio plan, he said.
In its coverage of the conference’sopening day, The Columbus Dispatchpublished a photo of what appeared tobe fewer than 20 environmental activistsrallying outside. It’s a good reminderthat there are many more people con-cerned with the state’s energy future andjob creation, but doesn’t mean com-mon-sense environmental protectionshouldn’t be a prominent part of anycomprehensive energy plan.
Here’s hoping we get a good plan, andhave the courage and wisdom to stickwith it, regardless of what party controlsstate government. Success here promisessuccess elsewhere.
As the governor said, perhaps with thetiniest glimpse into his political aspira-tions, “and if we can do it in Ohio … whycan’t we do it in America?” ■
1100 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM SEPTEMBER 26 - OCTOBER 2, 2011
Rigged voteoliticians should not pick their own voters;voters should pick their politicians.
That 12-word sentence written by StateSen. Tom Sawyer in a commentary that
appeared in last Tuesday’s Akron Beacon Journalstates simply and precisely why the congressionalredistricting map devised by Ohio’s Republicanleadership is an abomination.
As Sen. Sawyer, an Akron Democrat, wrote in hiscommentary, voters “should have a fighting chanceof choosing their own representatives in fair elec-tions held in districts that are on the up-and-up.”This map fails to achieve that standard.
Rather, the map creates contrived congressionaldistricts and essentially sets up rigged elections,with a dozen of the 16 districts loaded with voterswho favor Republicans. It is a joke, though consid-ering that representative governance is at stake, theredistricting plan is anything but laughable.
Most Cleveland-area residents already have heardof the thin, oddly shaped congressional district hugging the lakeshore from Toledo to Clevelandthat likely would pit two popular Democratic incumbents — U.S. Reps. Marcy Kaptur and DennisKucinich — against each other. However, the sinisternature of the map doesn’t end there.
Residents of the city of Toledo no longer would berepresented by a single member of Congress, asthey are now by Rep. Kaptur. Rather, the map splitsToledo among three districts that currently are represented by Rep. Kaptur and two Republicans,Jim Jordan and Bob Latta.
The people of Toledo would be right to questionwhether their interests would be represented wellby Reps. Jordan and Latta, given that the two men’sdistricts largely encompass rural communities. AndToledoans aren’t the only Ohioans who must bescratching their heads wondering how carving theirtown or county into two districts, and in some casesmore, will provide them with proper representationin the House.
It’s impossible to depoliticize entirely the redis-tricting process that takes place after every 10-yearcensus. The party in power always will try to pressits advantage.
However, this episode and past redistricting abusesillustrate the wisdom behind a constitutionalamendment proposed two years ago by then-statesenator (now Ohio Secretary of State) Jon Hustedthat would have improved the process by whichcongressional boundaries are drawn.
Under the Husted plan, an Apportionment Boardconsisting of seven members (the governor, secre-tary of state, auditor, House speaker, Senate presi-dent, and minority leaders in the House and Senate)would not have been able to move a redistrictingplan forward without the approval of a supermajorityof five members. And of those members voting infavor, at least two votes would have needed to comefrom members aligned with the minority party.
Shortsighted Democrats short-circuited that proposal. Now that the worm has turned, theywould be wise to resurrect the idea — and if they do,Republicans would be wise to remember they maynot be in power in 2021.
RYAN GULLATTWilloughbyI believe they’re necessary.They’re supposed to protectpeople from losing their jobs,but it can be a catch-22. Ifyou’re not doing your job, youmight not get fired.
THE BIG ISSUE
ALICIA LENHARTClevelandI think they protect the workers.My mom worked in a factoryfor 30 years and alwaysthought (the union) had herbest interest at hand.
KEN KOCHEVARBroadview Heights(Unions) drive up costs andcreate problems, so I’m in support of Senate Bill 5.
MIKE CERMAKClevelandIn most cases it definitely pro-tects workers. … It’s difficultto say. There can be issueswith any organizational struc-ture where the opportunity forabuse exists.
Do you think organized labor helps protect wages and conditions for workers generally, or that its net effectis to drive up costs and make unionized companies unable to compete?
➤➤➤➤ Watch more of these responses by visiting the Multimedia section at www.CrainsCleveland.com.
SEPTEMBER 26 - OCTOBER 2, 2011 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 11
Kent State University’s College of Business Administration is proud to welcome Leo Plante as its new Goodyear Executive Professor. Plante is a self-employed investment banker and venture capitalist who has worked in the investment banking divisions of Goldman Sachs Group, Inc. and Citibank. He also has taught finance and economics at several colleges and universities.
The Goodyear Executive Professorship was established in 1973 by The Goodyear Tire and Rubber Company to provide a bridge between the academic and business communities. This is accomplished by bringing an experienced corporate executive to the Kent State campus, as the Goodyear Executive Professor, to
instruct students and to participate in and direct university programs designed to enhance the preparedness of future managers and executives through the examination and mastery of “real world” aspects of business.
Kent State University, Kent State and KSU are registered trademarks and may not be used without permission. Kent State University is committed to attaining excellence through the recruitment and retention of a diverse student body and workforce. 11-2246
Kent State Welcomes Goodyear Executive Professor, Leo Plante.
216.755.1225
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The perfect place for your morning coffee,breakfast meeting, a productive lunch
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Private seating areas for up to 10 people and ultra high speed WiFi.
Aeros owner’s reversal on saleprompts layoffs in front officeBy JOEL [email protected]
A change of heart by the owner ofthe Akron Aeros has resulted infront office layoffs at the ClevelandIndians’ Class AA affiliate.
Team owner Mike Agganis, inpreparations to sell the team to anunidentified ownership group afterthe 2011 season, authorized fivenew hires — new directors of mediaand marketing; merchandise;group sales; food and beverage; andstadium operations — heading intothe season that recently concluded.
According to Dan Foust, one ofthose affected by the layoffs, Mr.Agganis viewed the additions as a way to ease the transition to thenew owner. The hires were amongthe recommendations made byChuck Domino, a consultant hiredby Mr. Agganis who was named the2010 Eastern League Executive ofthe Year for his work in getting theexpansion Richmond (Va.) FlyingSquirrels up and running.
Mr. Domino, according to Mr.Foust, said the Aeros’ staff was insufficient to run a Class AA teamproperly; his first move was to hireJim Pfander as the club’s executivevice president and chief operating
officer.But, Mr. Foust said, Mr. Agganis
changed his mind about the salelate in the season, and chose instead to lay off the key staff mem-bers hired before this season. Thegroup includes Mr. Foust, whoserved as the team’s media andmarketing chief.
Mr. Domino, whom The AkronBeacon Journal speculated lastmonth was a possible buyer, alsowill not return, Mr. Foust said. Mr.Domino still is listed as the “chiefmanaging executive” of the Rich-mond team. Mr. Foust said theAeros’ staff never knew the identityof the prospective buyer.
Mr. Pfander said last week thatMr. Agganis’ son, Greg, will take ona bigger role in the club’s day-to-day operations, and the duo — real estate players in the Boston areawho fly to Northeast Ohio on week-ends during baseball season —sought a return to the team’s moretraditional staffing level.
Greg Agganis did not return amessage left with the Aeros, andthrough Mr. Pfander said only thatthe Aeros are not for sale. Mr.Domino and other Flying Squirrelsfront office staff members were ona retreat, according to a customer
service representative in Rich-mond.
Mr. Pfander said the team wouldcontinue to be as aggressive in pro-motions and new ideas as it wasthis year, when it grabbed nation-wide attention for many features,perhaps most significantly its newfood options. Those included a 19-ounce hot dog/kielbasa/bratwurstcombo; a 14-inch, half-pound hotdog; a one-pound customizable hotdog, with up to 40 toppings (includ-ing peanut butter and jelly); and afive-pound ice cream sundae with aone-pound brownie and four wholebananas.
The team’s success with thosepromotions and others, plus im-proved ticket sales make the layoffsfrustrating for Mr. Foust — thoughhe said he harbors no ill will.
“We met and exceeded many ofour goals,” said Mr. Foust, who before joining the Aeros worked forthe Indians in sales for 19 years.“There were great things going onat Canal Park, with ticket sales andpromotions. We were making inroads into Canton, as well.
“I’m sure they’ll continue to havesuccess.”
The Aeros drew 266,265 fans in2011, a 1.8% increase from 2010. ■
Charles Bowman thinks he’sbuilding a better mousetrap — makethat web tool — for communitiestrying to attract businesses.
His Business Assistance Recruit-ment Calculator, or BARC, allowsbusinesses and their site selectors tosurf quickly and anonymously forkey, location-specific financial infor-mation on the websites of cities thatbuy the online service when they’relooking for the best location for anew plant, warehouse or office.
The online data services mostcommunities, real estate brokersand economic development groupsoffer businesses and their site selec-tors focus on basic demographic information and real estate listings.
Typical is the website for Colum-bus 2020, the nonprofit that works toattract business to central Ohio. Ithelps site selectors collect facts andfigures about the size and educationalattainment of the region’s workforce, as well as data about spaceand land available for sale or lease.
BARC is different, Mr. Bowman said.It can help “if you’re looking at the
bottom-line issues: What am I goingto pay every month in electric bills?How much tax am I going to payfrom one community to another?,”
Mr. Bowman said in a telephone interview from the office of his CDJConsulting in Kent.
“Sometimes, those can be thedefining bottom-line issues,” saidMr. Bowman, a former city managerin Geneva and Xenia.
Site selectors prefer the anonymityof the web because companies begincasting about for new locations before they’re ready to announcetheir plans to employees or homecommunities. The information BARCprovides usually is only availablewith a phone call or visit.
At the moment, Mr. Bowman isworking on BARC calculators forfour cities, all in Ohio. The city ofCanal Fulton went live in the middleof August.
“Even though the city of CanalFulton is a small town, we havemany businesses that compete andinteract on a global scale,” said citymanager Mark Cozy. “Having BARCon our website opens the doors ofour local economy to global oppor-tunities.”
Canal Fulton’s calculator can befound at http://www.cityofcanalfulton-oh.gov/Residents/Default.aspx.
Calculators for Painesville, OakHarbor and Sebring should be up inthe next few months. Mr. Bowmansaid he plans to market a productthat will include tax and utility data
for about 400 Ohio municipalitiesthat maintain economic develop-ment programs and then take BARCbeyond the state’s borders. ■
RISE AND SHINEOur signature Ideas at Dawn breakfast series offers business professionals
a chance to network and glean more insight on selected themes that could improve an organization’s performance and bottom-line results.
Don’t miss the next installment in our series —“2013 Federal Estate Tax Increases by 20%” —from 7 a.m. to 9:30 a.m. on Wednesday, Oct.12, at The Ritz-Carlton in Cleveland. Visit http://www.CrainsCleveland.com/breakfast for details.
1122 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM SEPTEMBER 26 - OCTOBER 2, 2011
GOING PLACESJOB CHANGES
EDUCATIONCUYAHOGA COMMUNITY COLLEGE:Paul Gasparro to president, EasternCampus.
CONSTRUCTIONCHESLER CONSTRUCTION LLC:Chika Aizu to senior vice president.
DISTRIBUTIONCHAS. E. PHIPPS CO.: Ben Brownto branch operations manager.
EDUCATIONHATHAWAY BROWN SCHOOL:Torrey McMillan to director, Center for Sustainability; Paul Maes
to athletic director.
NOTRE DAME-CATHEDRAL LATINSCHOOL: Vincent Bonacci to assistant principal, student life; Kara Simone to communications coordinator.
ENTERTAINMENTGREATER CLEVELAND AQUARIUM:Tamera Lash Brown to general manager.
FINANCECHASE: Christine A. Kelly to seniorvice president, market manager.
KEYBANK: Peter D. Wheeler to senior vice president, health care segment team leader, Global TreasuryManagement Group.
TRISTATE CAPITAL BANK:John Barrett to regional president,Ohio.
FINANCIAL SERVICEBROWN GIBBONS LANG & CO.:Matthew Beesley to senior analyst;David Jusseaume to analyst.GRANT THORNTON LLP: JasonMayausky, Aimee Scullin andWendy Wadsworth to managers.HILLYER GROUP: Robert Nagy tosenior workout specialist.
HEALTH CAREMETROHEALTH SYSTEM: MavisBechtle to chief nursing officer; Dr.Joshua Friedman to Department ofPediatrics.
INSURANCEBRUNSWICK COS.: Jeff McQuate
to surety bonds account executive;Stacey Gleason to professional liability specialist; Jodi Morris to personal lines client specialist.
KAISER PERMANENTE: Lisa Flanagan to manager, client services;June Sladek to manager, businessdevelopment; Kerry Dease to clinicalrisk manager, Ohio region.
MEDICAL MUTUAL OF OHIO: MattStein to director, enterprise technologydevelopment and innovation.
LEGALBUCKINGHAM, DOOLITTLE & BURROUGHS: Paul ChristopherFilon to attorney, Intellectual PropertyPractice Group.
MANUFACTURINGATHENS FOODS: Scott Sumser topresident.
MARKETINGSTERN: Mike Rini to vice president,interactive services; Danielle Fisherto traffic manager; ChristinaSochacky to account executive; Lauren Yusko to public relations account executive.TRIAD COMMUNICATIONS/NEXTLEVEL INTERACTIVE: Jason Swankto manager, integrated client strate-gies and business development.
NONPROFITLIFEBANC: Cynthia Rosa to chiefadministrative officer; Dan Martinellito director of preservation services.NEAR WEST THEATRE: Hans Holznagel to chief operating officer.
REAL ESTATEREISENFELD & CO: S. Colin Petryto retail sales specialist.
SERVICESAFEGUARD PROPERTIES: KathyCogan to assistant vice president, account management; GeorgeMehok to chief information officer.
TECHNOLOGYDATACORE CONSULTING: CarleyRigby to executive assistant/marketingmanager.MCPC INC.: Lynee Bixler to assis-tant marketing manager; Matt Previtsand Rosanna Del Rio to accountmanagers; Tim Alspach to productspecialist, Smartnet; Erik Hindererand Dave Jessup to network engi-neers.SPARK BASE: Ted Frank to chiefoperating officer.
BOARDSELIZA JENNINGS SENIOR CARENETWORK: Katie Ramella to chair;Rick J. Weigle Jr. to vice chair; Susan O. Scheutzow to secretary;Patricia Scanlon to treasurer; Barrie B. Spang to assistant secre-tary and assistant treasurer.
AWARDSASSOCIATION OF FUNDRAISINGPROFESSIONALS, GREATERCLEVELAND CHAPTER: Pat Egan(Beyond Fundraising) received the2011 Outstanding Fundraising Execu-tive Award.
SEPTEMBER 26 - OCTOBER 2, 2011 CRAIN’S CLEVELAND BUSINESS 13
18 ACCOUNTINGFIRMS MOVE
TO SPECIALIZEDSKILL SETS.
More banksreimagineworkplaceprogramsThey offer outreach to new client baseBy MICHELLE [email protected]
Anumber of banks are injecting themselves intocompany lunchrooms andoffices to reach the live
audiences that have become hardto access in today’s increasinglymobile and online banking world.
In what some are calling a resur-gence, several institutions have introduced or revamped workplacebanking programs, offering employees of participating busi-nesses discounted products andon-site seminars to attract potentialcustomers.
In a rarer move, U.S. Bank lastMarch actually opened a branch inside Summa Akron City Hospital.It is the bank’s first workplacebranch in this geography, but it’spart of a network of 70 such loca-tions across the country.
From Daniel Hoke’s perspective,U.S. Bank’s efforts are one exampleof how more banks are returning tothe workplace to meet potentialcustomers.
“As banks continue to adjust tothe new norm of the economy andregulations, it appears (to be) acost-effective way to get out of thebranch and get in front of cus-tomers,” said Mr. Hoke, U.S. Bank’ssenior vice president and divisionmanager who oversees the bank’snontraditional locations group.
Rodney Drake, who overseesKeyBank’s Key@Work program forthe Cleveland district, also has observed more competition in thespace.
“(Workplace banking) is a greatacquisition tool to be able to get ourmessage and our story … to a clientbase that we don’t have,” Mr. Drakeexplained. “Banks are taking everyopportunity that they can get to getin front of a large audience.
“With the use of online and mobile banking, you don’t havetraffic in the branches sometimesas much as you had, so where areyou going to get that traffic from?”he added. “This is an avenue thatwe can use to get that, by linkingarms with an employer.”
Reinvestments paying offThough not new, Key@Work has
been marketed more consistentlyin the past year after a period of rebranding, Mr. Drake said. Thenumber of employers in Ohio participating in Key@Work grew
See WORKPLACE Page 17
PATCHING TOGETHER
A PLANCreativity rules as organizations seek new ways to fund projects
The parking lot project under construc-tion at The Union Club of Clevelandwasn’t made possible by a bank loan.
Instead, the club employed a less common form of financing: It sent a letter lastNovember to its 950 members, soliciting their interest in zero-coupon notes, and withinweeks, club members had committed to funding 100% of the lot’s purchase price.
Per the arrangement, themembers will be paid interest,but not for five years.
Other businesses and organi-zations also are turning to formsof financing one might call cre-ative or uncommon to free up cash and to embark on projects and expansions. Some haveborrowed from family and friends. Others havefound ways to turn their working capital into cashso they don’t need money from outside sources.
Their reasons for using creative financing vary,but probably the most common is the unavail-ability of bank financing. Many business owners complain that the only businesses thatcan get bank loans are those that don’t need it.
For more information call Sean Richardson, Northcoast Region CEO, at 216.802.6565
We believe in Greater Cleveland and we’re lending to the businesses that make it great.Let us show you why these local companies chose FirstMerit in 2011.
Carbide Industries LLC
Central Carbide LLCManufacturer of calcium
carbide and acetylene
Participation in a multi-bankcredit facilityJanuary 2011
Raven Lining Systems, Inc.Manufacture and sales of high performance
coatings for wastewater treatment and water infrastructure
Term Loan FinancingJanuary 2011
PanzicaConstruction Company
Building contractor and constructionmanager for the commercial, industrial
and institutional markets
Working Capital Line of CreditJanuary 2011
L&M Auto Specialty LLCComplete Auto Care Provider
Real Estate FinancingJanuary 2011
Vintage DevelopmentGroup LLC
Chagrin River Walk LLCReal estate developers and
property managers
Real Estate FinancingFebruary 2011
Stoddard NLA LLCManufacturer and distributor of collector
Porsche car parts
Working Capital and TermFinancing
March 2011
National ThreadedFasteners Ltd.
Flange bolt importer and distributor
Working Capital FinancingMarch 2011
Branam Fastening Systems, Inc.
OEM distributor of fasteners, hardware and stud welding products
Line of Credit andEquipment Financing
March 2011
Pearne & Gordon LLPIntellectual property law fi rm providing
patent and trademark services
Working Capital FinancingJune 2011
Playhouse SquareFoundation
Performing arts center
Participation in multi-bankrevolving credit and
Allen Theatre renovation loanMay 2011
MPDS Memphis Ltd.Emerald Overlook
MPDS West Park Ltd.Canterbury Court
Multi-Unit ApartmentCommunity Managers
Real Estate FinancingMay 2011
ConsolidatedInvestmentCorporation
Real estate investment, management and development company
Real Estate FinancingMay 2011
SpringCoMetal Coatings, Inc.
Versatile metal coating job shop withmultiple coating and plating capabilities
Working Capital, Equipment andCommercial Real Estate Financing
May 2011
Monclova One LLCRedwood Management specializes in the
development and management of apartment communities
Multi Family ConstructionFinancingJune 2011
Davco Fastener Co.Industrial Fastener Distribution
Working Capital andReal Estate Financing
June 2011
WXZ Residential Group / Hazel LLC
Commercial Real Estate Developer
Multi Family ConstructionFinancingJuly 2011
20110926-NEWS--14-NAT-CCI-CL_-- 9/22/2011 8:51 AM Page 1
r Cleveland, one partnership at a time.
Member FDIC
KR Northwest LLCRedwood Management specializes in the
development and management of apartment communities
Multi Family ConstructionFinancing
January 2011
Duke Graphics, Inc.Full service print, direct mail and
fulfi llment provider
Working Capital, Equipment and Real Estate Financing
January 2011
Harbor Communications LLC
Business media company with magazines, websites and events for industries served
Line of CreditFebruary 2011
ShaleConstructionServices LLC
Equipment rental, inspection andengineering services related to stormwater, erosion and sediment control
Equipment FinancingFebruary 2011
GPDDevelopment LLC
Commercial Real Estate Developer
Real Estate FinancingJune 2011
D&S Custom Van, Inc.
M.C. Mobility Systems, Inc.Full service collision and restyling center
and mobility products dealer
Working Capital FinancingJune 2011
Moving Solutions, Inc.Customized moving services for
local and long distance
Real Estate, Equipment andWorking Capital Financing
June 2011
Hemingway at Boston Heights LLC
Construction and mini-perm fi nancing of a 25,000 sf
offi ce buildingJuly 2011
State RoadAssociates
Commercial Real Estate Developer
Finance of Commercial Out LotsJuly 2011
Hodell-Natco Industries, Inc.
Nationwide, solution-focused wholesale distributor of fasteners and chain
ABL FinancingAugust 2011
Sea-Land Chemical Co.100% employee owned specialtychemical distribution company
ABL FinancingAugust, 2011
Choice Child Care andPreschool, Inc.
Provider of quality childcare andeducational programs
Construction FinancingApril 2011
Ciro’s PropertyManagement, Inc.
Real Estate Owner and Manager
Commercial Owner-Occupied and Investment Real Estate Financing
April 2011
Sheoga Hardwood Flooring & Paneling, Inc.
Manufacturer of solid, high qualityhardwood fl ooring and paneling
Working Capital FinancingApril 2011
Presrite CorporationHigh-tech metal forging for a variety
of industrial applications
Participation in a multi-bankcredit facility
May 2011
ContinentalEnterprises Ltd.
Luxury Apartment Community
Real Estate Refi nancingJune 2011
20110926-NEWS--15-NAT-CCI-CL_-- 9/22/2011 8:51 AM Page 1
16 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM SEPTEMBER 26 - OCTOBER 2, 2011
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FINANCE
When using alternativefinancing outlets, bewarepossible securities issues
Credit tightening — indeedthe virtual freeze in banklending that resulted fromthe subprime mortgage
financial crisis — has caused busi-nesses of all sizes to consider financing their operations fromnontraditional lending sources.
As banks reduce or decline to renew lines of credit or impose unduly restrictive loan covenants,more businesses are looking beyondthe primary lending markets. Someconsider borrowing funds from fami-ly, friends and even people unknownto them who are introduced throughbusiness brokers or “finders.”
In return for the loaned funds,the business provides these privatelenders with short- or medium-termpromissory notes, usually withabove-market interest rates.
It seems a “win-win” scenario —the lenders typically receive interestat a rate much higher than today’snominal fixed interest rates, andthe business obtains the funds thatit needs free of bank restrictions,burdensome loan documents andexpensive legal bills from thebank’s lawyers for providing whatappear to be form (and non-nego-tiable) documents.
If your business is not eligible forbank financing, there may be fewother choices. And the legal cost offinancing with notes appears to bevirtually nonexistent. Fill-in-the-blank forms of promissory notesare available on the Internet andfrom legal-form suppliers. Youmight think that you do not evenhave to retain a lawyer.
Right? Well, maybe not when youraise the money.
But you will need a lawyer — andan expensive one at that — if, afteryou issue the notes, you find thatyou are being investigated by theSecurities and Exchange Commission,the Ohio Division of Securities orother state securities regulator (if anyof your note holders are out of state).
These agencies might be interestedin whether you were selling securitieswithout registration or an exemptionfrom registration under federal andstate securities laws, or committingsecurities fraud because you did notprovide your investors with full disclosure regarding your business.
Yes, your note holders are investors, and the notes you sold aresecurities under federal and statelaw. It has been more than 20 yearssince the United States SupremeCourt, in Reeves v. Ernst & Young,held that promissory notes issuedto finance a business and sold as investments (as opposed to notesgiven to commercial banks), are securities, and are therefore subjectto federal and state regulations.
The consequences of issuingpromissory notes in such circum-stances can be horrific. It actuallycan be a criminal offense to sell unregistered securities or to sell securities without full disclosure —even if you did not realize you werebreaking the law.
Moreover, the SEC could seek aninjunction that would essentially shutdown your business, and require“disgorgement” of all the proceeds
of the illegal sales. It may also seekto impose catastrophic civil penaltiesfor as much as $725,000 for eachsale deemed illegal.
The Ohio Division of Securitiescan, among other things, issue acease-and-desist order, and both theSEC and the Division of Securitieshave broad powers to obtain docu-ments and compel testimony — thecosts of which can quickly exhaustthe target’s resource.
There’s more. Investors themselvescan bring civil suits for rescission oftheir investments — even if thenotes are not yet due.
The securities laws do not respectthe legal distinction between thebusiness and business owner. Individuals who sell securities in violation of the securities laws do nothave the protection of their corporateor limited liability company entity.
Scare tactics, one might say. Evensophisticated business people mightinquire how the regulators will knowthat money was raised from privateinvestors using promissory notes.
There are a number of ways notesales come to regulators’ attention. Apotential investor might consult withan attorney before investing.
If the business should default ona note, or even seek an extension,the note holder might hire an attor-ney regarding available remedies.In either case, the attorney wouldlikely realize there were securitieslaws issues, and could contact fed-eral or state regulatory authorities.Investors themselves might also filea complaint with the SEC or the state.
The Ohio Division of Securitieswebsite lists sales of promissorynotes as “one of the top five invest-ment scams” and provides an on-line form for filing a complaint.
Fortunately, there are ways forbusinesses to legally issue promis-sory notes for financing purposes.This requires structuring the salesto be exempt from federal and statesecurities registration, generallythrough the nonpublic offering(better known as the private place-ment) exemption.
The intrastate offering exemption,which requires, among otherthings, that the business and all ofthe investors be residents of thesame state, may be an option.
The exemption process is complicated, can be expensive, andwill likely result in a notice or otherfiling with the SEC and applicablestate or states. But it is much lessexpensive, and the outcome infi-nitely better, than an SEC or OhioDivision of Securities investigation. ■
Mr. May is a securities lawyer andpartner in the Cleveland office ofWeston Hurd LLP.
20110926-NEWS--16-NAT-CCI-CL_-- 9/22/2011 8:54 AM Page 1
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FINANCE
Workplace: Employees benefit from perk220% from the second quarter of 2010to the second quarter of this year,he said.
The program offers certain dis-counts and waives certain require-ments for employees of participatingcompanies.
It also is one of many workplacebanking programs centered on educating people about budgeting,credit scores, saving and morethrough lunch-and-learn sessionsand seminars. These are lessons,bankers say, that are in particulardemand by employers and con-sumers today.
“It really speaks to what’s happenedin the world economy over the pastcouple of years,” said Ken Marble-stone, president for Charter One,Ohio, which relaunched its workplacebanking program in July. “It’s become just so abundantly clearover the last few years that peopleneed more education around finan-cial literacy.”
Charter One over the summerfinished the rollout of YourPlaceBanking across the bank’s 12-statefootprint, which involved the additionof eight regional managers.
The bank previously offered onlydiscounted products for employees,but gone are the days when institu-tions can attract customers by offering one-time freebies or discounts,Mr. Marblestone said. So this time,the bank is coupling discountedproducts with financial education.
The effort appears to be payingoff: About 10% of the new checkingaccounts Charter One has openedin Ohio this year were openedthrough YourPlace Banking, Mr.Marblestone said.
“That’s powerful,” he said.When workplace banking provides
financial education, it tends to leadto fuller relationships through whichconsumers use multiple products,said Greg Mulach, senior vice presi-dent and head of retail banking forNortheast Ohio for Fifth Third Bank.
“The relationships tend to staywith us longer,” Mr. Mulach said.“We’re not just a branch that theygo to visit. We’re now part of offeringsolutions to their life.”
Fifth Third Bank is another thatrecently reinvigorated its workplacebanking. In the past year, it hashired a team of four and focused onmarketing its program as a “finan-cial wellness package” to human resources departments.
Profit marginsIt tends to be cheaper for a bank
to open a branch inside an existingfacility — like U.S. Bank did at Summa Akron City Hospital — thanit is to build a standalone branch,Mr. Hoke said.
For employers, workplace bankingprograms serve as a no-cost enhance-ment to employee benefits.
And at a time when many a business is scrutinizing expenses,adding a bank tenant is one way togenerate additional revenue, Mr.Hoke noted. U.S. Bank is a tenant ofall of the companies in which it operates, and the bank is receivinga steady stream of requests fromcompanies interested in its nontra-ditional branching, he said.
Summa Health System pursuedan in-house branch after it receiveda flier in the mail, said Don Smith,system director of food, nutrition
continued from PAGE 13 and retail services.“Over the past several years,
we’ve gone from a traditional typeof service environment to more of amall concept,” Mr. Smith explained.“We now have an on-site pharmacy,we have on-site restaurants and wehave this bank.”
The biggest advantage, he added,is creating a full-service environ-ment for Summa’s employees.Though he’s not sure how much ofa draw the U.S. Bank branch is foremployees, Mr. Smith said he’sheard employees say they’ve received loans since it opened andalso have enjoyed the convenience
of not needing to make anotherstop to withdraw money.
Patrick Retko, human resourcesmanager for U.S. Cotton LLC, believes having a bank more avail-able to his employees has madethe work force happier. CharterOne bankers began last fall partici-pating in new employee orienta-tions and offering “lunch-and-learns” about once a quarter.
“They are now understandingthings,” he said of employees.“They’re less stressed out about financial situations that they mightcome into. I’ve had employees inpretty difficult situations that have
gone to Charter One and gottenthem resolved.”
U.S. Cotton, which is headquar-tered in Gastonia, N.C., but housesits largest manufacturing facility in Cleveland, also has seen an
increase in its 401(k) enrollments.And more than 10 of the company’semployees who previously wereblacklisted from banks now havedepository relationships withCharter One, Mr. Retko said. ■
U.S. Bank lastMarch opened abranch insideSumma AkronCity Hospital.
20110926-NEWS--17-NAT-CCI-CL_-- 9/22/2011 10:58 AM Page 1
18 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM SEPTEMBER 26 - OCTOBER 2, 2011
OUR INDEPENDENCEIS YOUR PEACE OF MIND
FINANCE
In accounting, it pays to be specialAs generalists become scarce, more firms shift to focusing on defined areas of expertiseBy AMY ANN [email protected]
Dave Brockman, co-founderand managing director ofBCG & Co. in Akron, saidclient needs initially drove
his 25-year-old firm to first create aspecialty practice in 1989.
And it must have been a goodmove. Today, one-third of Mr.Brockman’s 100-employee firm stillis involved with that same specialty— technology.
“That’s an area that’s been a realdifferentiator for us,” Mr. Brockmansaid. “It’s been a way to really stickout from the crowd.”
While specializations are nothingnew, industry insiders say that to anever-increasing degree today’s accounting firms are striving to implement the same strategy thatMr. Brockman used more than twodecades ago.
They’re staking their claims tospecific areas of expertise, and inthe process many are finding newavenues of opportunity both interms of expanding client bases andservice lines.
“You don’t try to be all things toall people,” Mr. Brockman said.“Everything has gotten so complexthese days, it’s difficult to knoweverything about everything.”
Greg Skoda, chairman and one ofthe founders of Mayfield Village-based Skoda Minotti, said that thebusiness climate is such that accounting firms have to continue
to find more ways to add value forclients.
Mr. Skoda’s firm specializes in arange of services and industries,from information technology, marketing and business valuationto nonprofits, biotechnology andinsurance. “As you learn the nuances in any of these industries… you really can provide a differentservice,” he said.
And while Mr. Skoda said therealways will be a place for the smallgeneralist firm, there’s a chancethat a client’s needs eventually may outgrow such a firm’s capabil-ities.
“If you’re going to try to surviveas just a generalist, someone isprobably going to come and takeyour client away,” he said. “It’s notjust a Cleveland, Ohio, trend; it’s anational trend.”
Taking it national For some Northeast Ohio firms,
having a defined area of expertiseand a reputation in a certain specialty has helped in reaching aclient base outside the region.
Cohen Fund Audit Services, forone, is 100% focused on the invest-ment industry. Led by presidentPeggy McCaffrey, it has become anational practice since it was spunoff as a separate entity from Cohen& Co. in 2003.
Just this month, Cohen Fund Audit Services opened a Milwaukeeoffice, which is the first outsideOhio for the 35-person practice.There are three people in the Wis-consin office.
“We’ve experienced a wonderfulgrowth rate,” said Ms. McCaffrey,who helped with the creation of thepractice. “This niche has allowed usopportunities.”
Indeed, Ms. McCaffrey estimatesthat the practice has logged an average of 15% growth in revenueeach year since its beginning. Lessthan 20% of the practice’s clientsare in Northeast Ohio.
Richard C. Fedorovich, CEO andmanaging partner of Bober,Markey, Fedorovich & Co., said hisAkron-based firm’s reputation inmiddle-market mergers and acqui-sitions work has served it well in attracting clients from outside theregion.
“We end up getting business fromall different corners of the UnitedStates,” said Mr. Fedorovich, whosefirm covers a range of industriesfrom manufacturing and construc-tion to family owned businessesand nonprofits.
He said one downfall of having a specialization in a particular industry can be a business’ reluc-tance to work with an accountingfirm that has a competitor as aclient. Others, meanwhile, say thatspecialties can lead to referrals ofwork between firms — oftentimesoutside the market — when aclient’s needs fall out of a firm’s areas of expertise.
Even so, Mr. Fedorovich believeshaving specialties and dedicatedteams is a benefit both to the firmand the client.
“It allows us to recognize oppor-tunities that others might not be
able to ferret out,” he said. “It reallyis a more well-rounded service offering to our clients.”
It’s also why Mr. Fedorovich regularly keeps tabs on what otherfirms are doing in terms of specialties.In particular, he takes note of annual benchmarking reports thattrack the activity of the tops firms inthe country.
“What I do annually … I take alook at our subspecialties and overlay it to make sure we’re notmissing anything,” he said.
Staking out specialtiesAt Mr. Brockman’s BCG & Co.,
business and demographic devel-opments have continued to motivatesegmentation beyond technology.Forensic accounting, wealth management and globalization, allare receiving increasing levels of attention, Mr. Brockman said.
For example, earlier this yearBCG began actively marketing andmaking available as a service toother CPA firms a fraud reportinghotline — Red Flag Reporting — aprogram through which employeescan report unethical behavior. Theventure to date has two dozenclients and nine affiliated accountingfirms.
Of course, developing a specialtypractice can require a significantinvestment of time, so it’s not surprising that Clarke Price, presi-dent and CEO of The Ohio Societyof CPAs, said he has seen an uptickin the number of firms beingbought for their expertise.
“It’s a jump-start, if you will, inthe process,” Mr. Price said. When a firm is purchased, not only doesthe book of business change handsbut professionals possessing specialized knowledge typically areacquired as well.
Skoda Minotti, for one, this summer acquired Cleveland marketing firm Hilty Moore & Asso-ciates Inc. along with the company’svisual marketing division, Brand-EyeD, as a way to enhance the expertise and depth of the firm’smarketing capabilities.
Mr. Price said unique specialtiesare becoming harder to find asmore professionals claim areas ofexpertise. And that’s where firmsmight have to start proving they aremore than just competent in a certain area.
“I think there’s going to be agreater emphasis on CPAs gainingmore credentials. … I think that is atrend that’s going to continue,” hesaid. “We’re a credential-crazy society.” ■
WHAT’S HOTAccording to the region’s
accounting professionals, thereare a number specialty areasthat are receiving extra atten-tion these days.
They are:■ Forensic accounting■ Wealth management■ Globalization/international
services■ Business valuation■ Estate planning■ Succession planning■ Nonprofits■ Mergers and acquisition
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ANorth Canton bank is positioning itself to growat a level it previouslycouldn’t, now that a regu-
latory order against it has been lifted.Premier Bank & Trust, formerly
Ohio Legacy Bank, recently filedwith its regulator, the U.S. Comp-troller of the Currency, to open abranch.
It also aims to increase its commercial lending following the removal on Sept. 9 of a February2009 consent order, which imposedstrict capital requirements thatlimited what growth could occur,said Rick L. Hull, president and CEO.
The four-branch institution hadbeen critically undercapitalized, primarily as a result of losses relatedto commercial real estate.
Premier Bank intends to open abranch by the first of the year in St. Clairsville, in Belmont County, because clients of its trust opera-tions there have requested a branchpresence, Mr. Hull said. Prior to thetermination of the consent order,the bank’s regulator would not have
allowed a branch to open, he said.However, Premier Bank plans to
concentrate most of its efforts togrow market share in Summit andStark counties.
It’s selling two branches inWooster, where its predecessorbank was founded but where it hasnot commanded impressive marketshare. The deal with The Commer-cial & Savings Bank in Millersburg isto close in mid-October.
The sale of those offices’ depositswill result in an infusion of $3.75million in capital, bolstering thebank’s already well-capitalized status.
The institution is exploringwhether it will open other branches,as well as loan production offices,in new locations, Mr. Hull said.
Already, Premier Bank has
improved its book of commercialloan business: Through June, ithad grown commercial loans byalmost $20 million year-to-date,and the growth continues “to be really robust and growing at agreater rate,” Mr. Hull said.
“Our intent is to move quickly,”he said. “What I see out of my fellow community bankers isthey’re just not doing anything. Ithink that’s crazy. I think you’vegot an opportunity now that youcan go ahead and pick up commu-nity business … now that biggerbanks have pulled back.”
Bob Belden, who has been on thebank’s board since Ohio Legacywas formed in 2000, is pleasedwith new management’s successin capitalizing the bank and gettingits assets “under control.”
The removal of the consent order comes 18 months after agroup of investors led by Mr. Hullrecapitalized the bank and intro-duced new management.
Mr. Belden said he and other Premier Bank leaders would like tosee the bank return to profitability.The bank last made a profit in thefirst quarter of 2009, Mr. Hull said. ■
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FINANCE
North Canton bank eyeing a biggerpiece of pie in Stark, Summit countiesWith regulatory order lifted, it plans to grow commercial lending
“What I see out of my fellowcommunity bankers isthey’re just not doing any-thing. I think that’s crazy.”
– Rick L. Hullpresident and CEO,
Premier Bank & Trust
20110926-NEWS--20-NAT-CCI-CL_-- 9/22/2011 9:02 AM Page 1
SEPTEMBER 26 - OCTOBER 2, 2011 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 21
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“Technology companiesface unique legal issues.Thankfully, we don’t facethem alone.”
MIKE BRODERICKCo-founder & CEOTurning Technologies
FINANCE
Patchwork: Low rates draw alternative lenders The way Randy Markey sees it,
creative financing is being soughtafter more today than in years past.And it will continue to be sought after, he believes, as long as insta-bility and uncertainty reign.
“In ’06, ’07, if you could breathe,you pretty much could get access tocapital,” said Mr. Markey, managingpartner for Capital Acceleration Part-ners, a Cleveland private equity firm.
Banks are not looking at assetsand providing the same advancerates they used to, and receivables,inventory valuations and real estatecollateral values are more suspect,Mr. Markey explained.
“Today, money is available, butit’s only available under certain circumstances or conditions,” hesaid. “So we’re having to find cre-ative ways to free that money up.”
Ins and outsMr. Markey, for one, is working
with investors to create a group ofguarantors to enable one of hisfirm’s portfolio companies to getthe bank financing it needs for areal estate-based project. The busi-ness owner, he explained, doesn’thave the liquidity to satisfy thebank on a personal guarantee basis.
“If he had that much money, hewouldn’t need to borrow it,” he said.
So Capital Acceleration Partnerseffectively is fabricating that liquidityby assembling the group of guaran-tors. In exchange, the high-net-worth individuals will receive aguarantor fee and ownership in theentity, Mr. Markey explained.
“This project won’t get done if wedon’t do something to help him getcreative,” he said.
Mr. Markey anticipates the need tobe creative will persist for the fore-seeable future as banks continue todoubt borrowers’ capacity to repay.
“It’s an interesting conundrum,”he said. “The actual cost of debtcapital is lower than it’s been in along time … but you can’t get it unless you don’t need it.”
Some business owners are lookinginward, not outward, to drum upmoney.
Quality Synthetic Rubber in Twins-burg has freed up some $3 millionto $4 million by scrutinizing cash tiedup in its inventory, its receivables(money owed to it) and money itowes to its creditors.
The manufacturer of siliconerubber parts a couple years agohired the Pittsburgh company,WCP International LLC, to assist itin the process, said Mark Gamble,chief financial officer for QSR.
WCP’s president, Graham Lloyd,provides a disciplined method thatinvolves reducing excess invento-ries, making customers live by thecompany’s terms and convincingvendors to extend the company itself favorable terms.
Quality Synthetic Rubber is usingthe freed-up cash to buy equipmentand for physical expansion, Mr.Gamble said.
“What it’s allowed us to do is to nothave to finance where we might havehad to,” he said. “This is somethingthat we can control. It’s a cost-saver,too, from an interest standpoint.”
‘It’s personal’For The Union Club, the decision
to use creative financing was morea matter of timing.
The club had long wanted the ad-
continued from PAGE 13 jacent parking lot property, explained Eric V. Bacon, past pres-ident of The Union Club, and theproperty had come up for sale anddown in price. The club wouldneed $1 million fast.
Its bank offered to extend half ofwhat it needed.
In the end, thanks to members’willingness to invest, The UnionClub raised more than enough tobuy the property. It had used zero-coupon notes in 2004 to help fund a$7 million refurbishment, and its re-payment last summer of thosenotes ensured it success in sellingthe notes again, Mr. Bacon said.
Plus, at a time when interest
rates remain historically low, thereturn it offered was highly attrac-tive, he added.
“You can’t get 5.5% from manyplaces,” he said. “I think somepeople jumped right in and said,‘I’ll lend you the money, heck yes.’”
Considering today’s low interestrate spread, now is an opportunetime for entities to employ this formof financing, Mr. Bacon said. But noteveryone can or should do it, he said.
“You need to start worryingabout (repayment) the momentyou get it,” Mr. Bacon said. “Youdon’t start worrying about it themoment before it’s due.
“It’s personal,” he added. “I’m
not taking a loan from the bank. I’mtaking a loan from people I know.”
By the time repayment of thesezero-coupon notes is due, the clubwill have paid down some bank debtand will borrow again from the bankto pay back the notes, he said.
In the meantime, the club a fewweeks ago started construction onthe parking lot. The project shouldbe complete by late October.
Relationship issuesThere are advantages and disad-
vantages to all forms of financing. Granting someone equity in
one’s company is quite expensive.And when a business owner borrowsmoney from family and friends —which they may find more availableas people experience improved
liquidity — it’s friendly money thatcarries professional and personalrisk, noted John Dearborn, presidentof JumpStart Inc., which assistsand invests in high-tech startupcompanies in Northeast Ohio.
“They (family) can provide greatterms and lots of forgiveness ifdates aren’t met,” he said. “Thedisadvantage is it can make for astrained relationship.”
Vendors, too, seem to have moreliquidity today, and so some busi-nesses have benefitted from askingtheir vendors and professional ser-vice providers, such as lawyers, toextend payment terms.
Problems can arise in instanceswhere vendors ask in return to be acompany’s exclusive vendor, butdon’t prove to be competent. ■
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Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee theselistings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual lists and The Book ofLists are available to purchase at www.crainscleveland.com.
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Paramount Distillers Inc. ofCleveland, which was founded amonth after the repeal of Prohibi-tion in 1934, has been sold to a St.Louis-based producer and marketerof distilled alcoholic beverages andliqueurs.
Luxco Inc. agreed to buy all theshares outstanding of Paramountand a Paramount subsidiary,Meier’s Wine Cellars in Cincinnati.
Terms were not disclosed. Luxcosaid it expects the deal to be com-pleted by the end of September. Itplans to continue to operate Para-mount’s production operations inCleveland and Cincinnati.
“The acquisition is a strategicmove for Luxco which allows us toincrease our presence in marketslike Ohio and Iowa while also givingus the opportunity to grow our wineportfolio and expand our capabili-ties into other product lines suh asthe non-alcohol products as pro-
duced by Meier’s,” said Donn Lux,chairman and CEO of Luxco, in astatement.
Luxco has $220 million in salesand about 180 employees.
Paramount CEO Robert Szabodid not respond to a phone call todiscuss the sale. In a statement, Mr.Szabo said Luxco “has the resourcesand capabilities to expand our port-folio of great products into manymarkets across the United States.”
The company’s website statesthat J.F. Moessmer founded Para-mount on West 106th Street in Cleve-land. By 1946, according to the web-site, “the company had grown andprospered enough to require morespace and was moved to a largerheadquarters a few blocks away onBerea Road.”
Paramount’s headquarters at3116 Berea Road “accommodatesnot only a production area, but lab-oratories, labelling and bottling as-sembly lines, larger warehousing fa-cilities and an in-house print shop,”according to the website. ■
St. Louis firm buysParamount Distillers entertainment center and
restaurant profitable again,even with 20% lower grosssales than in 2007, Mr. Kostissaid, though he declined todisclose sales figures. He saidhe made partial payments —paying as much as he couldswing — to the federal andstate tax authorities for a timeas a way to keep going but nowis current on taxes and otherbills.“I’m not a big corpora-tion,” Mr. Kostis said. “I’m oneguy, and I’m a hands-on ownerwho works in the club.”
Mr. Kostis is not the firstrestaurateur to make such achoice.
A poor Band-Aid“I have seen many restau-
rants, when they have cash flowproblem, do this,” Adam Berebit-sky, managing director at theSS&G Certified Public Accoun-tants and Advisers firm, said.
“They ‘borrow’ from their employees and the government bynot making tax and withholdingpayments for them,” said Mr.
Berebitsky, who has a substantialbackground working with restau-rant owners but no business ties toMr. Kostis. “It’s one of the many rea-
sons restaurants fail, as thispractice is a Band-Aid to a big-ger problem. It’s a poor way tofund cash flow.”
When Mr. Kostis opened theclub in a former S.S. Kresgestore in 2002, he was the firstdestination-oriented restaurantand entertainment operator —even before the House of Blues— in what is now the busy EastFourth area, with its ninerestaurants and nightclubs.
Mr. Kostis said he has suf-fered during the recession andthe slow recovery from it. He alsonoted more than 1,000 restau-rant seats have been addeddowntown since he set up shop.
“Should we not have EastFourth? Or West Sixth? I won’tsay that,” Mr. Kostis said. “Theproblem we have is there is notenough Monday-to-Thursdayevening business.”
This year was looking gooduntil gas prices spiked. Mr.Kostis said, but he is looking for-
ward to the holidays to perk thingsup. The addition of the new MedicalMart and Cleveland ConventionCenter also should help, he said. ■
before March 31, 2012. Most of the 70 local TSG employees
work in sales, and a few others workin its legal and marketing depart-ments, Mr. Foster said.
“We’ve got to build our own ITteam and build our own accountingteam,” he said.
Time to downsizeThe division will need a new
headquarters, too, but not becauseit needs more space. It’s in theprocess of finalizing a lease on23,000 square feet in MayfieldHeights, which would give it asmaller office than it had on Foun-tain Parkway in Solon, where itsemployees share space with formerAgilysys colleagues. Agilysys, whichhas been struggling for severalyears, announced its planned moveto Georgia shortly after saying itwould sell TSG.
Although TSG will grow in North-east Ohio, OnX has eliminated 30 to40 positions across TSG’s footprintbecause of operational redundan-cies, Mr. Foster said. The divisionstill will employ about 300 people,though, as OnX is adding a similar
number of people in other posi-tions, he said.
Mr. Foster also is an operatingpartner at Marlin Equity Partners, aprivate equity firm in Segundo,Calif., that owns a majority stake inOnX.
Visions of more profits aheadMarlin in March bought the
OnX shares owned by co-founderPhil DeLeon, who retired, and itbought some shares owned by Shel-don Pollack, who remains on OnX’sboard. In addition to Marlin andMr. Pollack, OnX CEO Ed Vos, whois based in Toronto, also ownsshares and sits on the company’sboard.
About half of the company’s top executives are employed by theTSG division, which is bigger thanOnX was before the acquisition.TSG employs about 300 people,while the rest of OnX employs about 200, and TSG had sales of$474 million in the fiscal year thatended March 31, while the rest ofOnX has annual sales of about $220million.
Buying TSG gave OnX a fast wayto expand beyond its core market in
Canada, Mr. Foster said. Though Agilysys considered TSG a low-marginbusiness, he expects that, with helpfrom Marlin Equity Partners, OnXcan get the division to a point whereprofit margins hit 7% to 8% beforeinterest, depreciation, taxation andamortization.
“It can be a very profitable busi-ness,” he said. ■
continued from PAGE 3
continued from PAGE 3
OnX: Business profitability a priority
Pickwick: Glut of eateries affects operation
STAN BULLARD
Pickwick & Frolic Restaurant and Club on EastFourth Street is addressing its financial issues.
working on the case said.“It’s a win-win for the Northeast
Ohio region to have a good and important business like Cardinal Fas-tener be picked up by a company likeWurth Group that is so successfuland has a strong performance history and financial backing,” saidWurth’s Cleveland-based attorney,Tom Wearsch, a partner with Baker& Hostetler.
Cardinal, based in Bedford Heights,filed for Chapter 11 bankruptcy pro-tection from creditors last June 30,unable to keep up with paymentson its debt after investing heavily inequipment to make bolts for the windenergy business. Company presi-dent John Grabner did not respond
to email requests for comment on theSept. 15 motion to sell the companyto Wurth, though he previously said hehoped to bring Cardinal out of bank-ruptcy and maintain operations aftera reorganization of the company.
It now appears as though Cardinal’sassets will be sold and used by abuyer, possibly Wurth, but that Car-dinal will not survive as a company.
Mr. Wearsch said his client hopesto take over Cardinal’s operationvia the sale of assets; that would include Cardinal’s wind energybusiness, which he said fits withWurth’s global strategy to expandin the renewable energy sector.
While Wurth is not committinglegally to keep the plant where it isindefinitely — and the company
does have similar operations in theUnited States already — Mr. Wearschsaid it intends to keep the plantopen. He noted that one of the assets Wurth purposefully is buyingis Cardinal’s existing lease, whichextends through the year 2023, according to court documents.
That outcome likely would meancontinued employment for the 20or so workers still at Cardinal, basedon the post-bankruptcy headcountlast provided by Mr. Grabner in July.Cardinal had about 50 employeesbefore the bankruptcy filing and apeak of more than 60 in 2010, Mr.Grabner previously has said.
Ready for a ‘robust auction’Creditors are just happy that
2244 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM SEPTEMBER 26 - OCTOBER 2, 2011
Cardinal: Investments proved too costlycontinued from PAGE 1
trative costs of the bankruptcy,which have yet to be determined,said Ms. Roberston, who is chair-woman of the business restructuringand insolvency practice at Calfee,Halter and Griswold.
At least coming up with the $3.9million shouldn’t be a problem forWurth. The company, which, likeCardinal, makes bolts and other fasteners, had 2010 revenue of about$11.6 billion at the current conver-sion rate of euros to dollars.
Cardinal’s lawyer, Rocco Debitetto,said the company is continuing tomarket itself and hopes there will bemore bidding when the actual auc-tion takes place.
“We’re teed up for a very robustauction,” said Mr. Debitetto, a part-ner with Hahn Loeser in Cleveland.
The attorneys working on the casesaid they were pleased to see astrategic buyer emerge for the com-pany, which they maintain is a best-case scenario for Cardinal. Farworse, they said, would have been asimple liquidation of the company’sequipment, which most likely wouldhave been crated up and shipped toa buyer elsewhere.
Unexpected outcomeCardinal’s bankruptcy was a
surprise to many. The company washeld out by a host of luminaries andrenewable energy advocates as ashining example of how a U.S. man-ufacturer could capitalize on thegrowing wind energy market. Presi-dent Barack Obama even visited thecompany in 2009 to highlight its suc-cess in the wind energy sector.
Cardinal’s own bankruptcy filing isa paradox. While many bankruptcy filings lament the misfortunes of acompany by talking about how acore industry collapsed or a key cus-tomer went belly up, Cardinal’s filingalmost boasts of the company’s suc-cess. Its overall business was up by38% in 2010 and its wind-relatedsales grew by more than 200% thatyear, Cardinal’s filing states.
Nonetheless, it appears as thoughthe company overreached when itcame to investing in new equipmentand other capital expenditures, andeven those growing revenues weren’tenough to keep up with paymentson its debt.
“In Cardinal Fastener’s defense, alot of companies like Cardinal investa lot of capital and invest a lot of timeand money on various alternativeenergy sources, like wind and solar,”Ms. Robertson said. “They need a fasterturnaround on their investments,and they’re not getting it right now.”
Cardinal might have been caughtin the middle of a bad trading situa-tion — one faced by many in the U.S.wind industry at the moment, saidEd Weston, president of the Cleve-land-based Great Lakes Wind Network,which represents more than 1,000suppliers to the wind energy sector.
“In the face of falling wind turbineprices, many U.S. manufacturers aregetting pinched,” Mr. Weston said.
Companies in the wind energysector in the United States also longhave complained that on-again, off-again tax incentives don’t help; that’sbecause their business requires major, long-term capital investmentsto succeed. While other nations arefostering the growth of their windenergy industries, the United Stateslargely lets the sector sink or swimon its own, even while subsidizingother, competing energy sources,wind advocates say.
“And unlike other governments inCanada, Brazil and China, ours hasn’tyet chosen to provide incentives thatwould directly benefit to our manu-facturing base,” Mr. Weston said. ■
someone apparently is going to step upand buy the company, said Clevelandbankruptcy attorney Jean Robert-son, who represents a group of about200 unsecured creditors that rangefrom private investors to vendors.
But the creditors she representsstill are bracing for a loss, accordingto Ms. Robertson — “and it will beway more than 50%” of their debtoutstanding, she said.
Unsecured creditors are owedabout $3 million, Ms. Robertsonsaid. Cardinal’s primary bank, WellsFargo, is in line ahead of them to bepaid, she said. It’s owed $1.8 million.
Another $851,396 is owed to theGrow America Fund, a lending armof the nonprofit National Develop-ment Council that also will be paidbefore unsecured creditors. Thatleaves only about $1.3 million to payunsecured creditors, but even thatfigure does not include the adminis-
On Saturday, Oct. 1, the five-member band known as The Messengers will face seven otheracts from around the world that playunder various corporate umbrellas.They include Starbucks’ “Metal-libuxx” from Seattle, Mattel’s “TheToys” from El Segundo, Calif., andProcter & Gamble’s “Kash is King”from Panama City, Panama.
The winner will be named the“Best Corporate Band” in Americaby Fortune magazine. (Eat your heartout, 2012 Rock Hall nominees.)
The Messengers’ appearance isthe first by a Cleveland-area bandin the finals since 2003, when agroup from the former NationalCity Corp., known as Yield to Matu-rity, made an appearance. A Cleve-land group, however, has yet to takethe top honor.
Cracking the finals is a long timecoming for The Messengers, whohave made a stab at the competi-tion for the last five years, said DaveKrew, Progressive’s controller andthe band’s keyboardist. The band,members of which also play in other groups in the region, prac-tices at least once a week, but Mr.Krew said The Messengers plan to
amp up their practice schedule thisweek as the event approaches.
“The competition is tough, but Ithink we feel we gave a pretty goodeffort this year,” Mr. Krew said.
The band is named after Progres-sive’s other spokesperson — themysterious mustached man dubbed“The Messenger” — and not thesassy sales lady, Flo. Vocalist SteveWieclaw, a business analyst at Progressive, dons the same facialhair and camel-colored coat as TheMessenger during performances.
“Progressive has so many creative,intelligent people walking around.Just being able to work with thesepeople and create things outside ofwork is fun,” said Mark Malysa, Progressive’s marketing process
manager and the band’s bassist.“We have a great time with it. Welove music. All the guys in the bandare great to work with.”
Mr. Krew was hesitant to sharedetails about this Saturday’s perfor-mance at the Rock Hall other thanto say the band’s repertoire in thepast has included songs from artistssuch as the Rolling Stones, DoobieBrothers, the Hollies and StevieWonder. However, Mr. Krew con-firmed to the dismay of many thatFlo, who was named advertising’sgreatest character ever by Enter-tainment Weekly, would not makean appearance.
Steve Dobo, director of sponsorshipand promotions at the Rock Hall,said the event is about “breakingdown barriers” in corporate Americaby bringing harmony to the work-place through music. Mr. Dobo didn’thave an exact number on hand, butsaid the event has raised “hundredsof thousands of dollars” for theRock Hall’s education activities.
“There’s no filter,” Mr. Dobo said.“It’s about putting together a unit ofpeople who love to play. What’sgreat to see is a lot of these peoplein a million years would never get achance to play at the Rock Hall.” ■
“It’s about putting togethera unit of people who loveto play. ... A lot of these people in a million yearswould never get achance to play at theRock Hall.” – Steve Dobo, director of spon-sorship and promotions, Rock andRoll Hall of Fame and Museum
SEPTEMBER 26 - OCTOBER 2, 2011 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 25
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to form a joint venture with Indepen-dence-based Quasar to build a digester at the site of the formerGeneral Motors Fisher Body Plantin Cleveland’s Collinwood neigh-borhood.
The two companies already areworking on projects that could result in the construction of sixmore digesters on Forest City prop-erties, Mr. Ratner said. Many moreshould follow over the next fiveyears or so, he said.
“We’d hope that we’re buildinghundreds across the U.S.,” he said.
Since 2007, Quasar has built fivedigester plants, located in Akron,Columbus, Wooster and Zanesvillein Ohio and in Rutland, Mass. Thecompany is constructing or isscheduled to start building 14 moreover the next few months, includingthe Collinwood digester and plantsin Wooster (which would have twodigesters), North Ridgeville and Bar-berton. Forty more are “in the pipe-line,” said Quasar president Mel Kurtz.
The Collinwood plant will use thenatural gas it creates to generateelectricity for Cleveland Public Power.The city-owned utility has agreed tobuy power from the digester for 10years, which will help it meet a statelaw that requires utilities to usemore renewable energy.
The Collinwood plant will be capable of generating 1 megawatt ofelectricity and 4.3 million Britishthermal units of heat per hour, butMr. Kurtz said he’d like eventuallyto sell natural gas straight from theplant, perhaps to drivers of truckspowered by natural gas.
The two companies combinedwill invest about $5 million in theproject, which is owned through ajoint venture. They’ll get some ofthat money back: The plant is one of eight Quasar projects that each was awarded $1 million in federalstimulus money through the Ohio Department of Development.
All of Quasar’s projects so far have
received government subsidies, butMr. Kurtz said that in time theywon’t need them. The subsidies arenecessary for now, however, becauseQuasar still is perfecting its technol-ogy and convincing customers thatit works, he said.
“It’s not until after there’s enoughsuccess stories that it is viable,” Mr.Kurtz said, noting that Quasar takesequity stakes in all its plants. A company representative declined togive revenue figures for Quasar orsay whether it was profitable.
The waste digestion process —which produces methane with thehelp of bacteria that digest the wasteinside tanks void of oxygen — ischeaper than renewable technolo-gies such as wind and solar becauseit can produce power constantly,Mr. Kurtz said, and because thecompany gets paid by the peoplewho produce the waste becausethey want to get rid of it.
Only one, two or three people areneeded to run Quasar’s digesters.Still, the company’s efforts couldlead to big-time job creation inNortheast Ohio, Mr. Kurtz said.
For one, Quasar, which wasformed in 2006, employs about 60people. The company also hires local contractors where it builds digesters, and manufacturers inNortheast Ohio help it build partsfor the plants, which can processbetween 550,000 and 1.3 milliongallons of waste at a time.
“It’s not the operation, it’s thepreparation,” Mr. Kurtz said.
Forest City hopes to use theCollinwood digester plant to attractmore companies to that area, saidJohn Neely, project manager for thecompany’s land group. That outcomewould be a boon to Forest City, whichowns 20 acres that have been emptysince the GM plant was torn down.
“You use this to kick-start indus-trial development,” said Mr. Neely,who contacted Quasar after seeinga presentation the company madeat the Great Lakes Science Center. ■
continued from PAGE 3
Rock: No Cleveland band has won
RUGGERO FATICA
Messengers lead vocalist Steve Wieclaw at practice last week
Quasar: Success stories wantedcontinued from PAGE 1
2266 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM SEPTEMBER 26 - OCTOBER 2, 2011
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that he sold to another developer.Now, Mr. Osborne is receiving
big-time grief from bankers, asthree lenders have sued to fore-close on about 20% of his propertyportfolio.
Home Savings and Loan Co. isMr. Osborne’s biggest problem, asthe Youngstown-based bank in thelast month has sued to foreclose onsix of his commercial and industrialproperties in Lake County for a totalof $15 million. The most prominentof the properties hit with judg-ments and foreclosure actions isGreat Lakes Plaza, a 50,000-square-foot shopping center in Mentor.
Now the one-time owner of theformer Great Lakes Bank who isknown for investing in area savingsand loans as far back as the 1970s iscrying foul in his dispute withHome Savings.
Mr. Osborne said he is currentwith payments on his Home Sav-ings loans, but the bank has goneafter him because of unpaid taxeson the properties. Mr. Osborne saidas someone who has owned twobanks, he only would sue becauseof missed payments, never over un-paid taxes.
“Why foreclose on someone who
is current on the loan?,” Mr. Os-borne said. As for the missed taxpayments, he said simply, “Theseare tough times,” and skipping taxpayments is a normal strategy forproperty owners in economic andreal estate downturns.
Mr. Osborne maintains the HomeSavings’ lawsuits are a strategy toforce him to put up more assets toguarantee a $6.5 million loan — withat least three missed payments —that he and Cleveland investorSteve Calabrese owe on a 100-acreparcel they own on the Willoughby-Mentor border. Home Savings hasnot foreclosed on that loan.
Mr. Osborne said the two havebeen unable to develop the site formultiple reasons despite a decadeof trying; one obstacle is that it hasundevelopable wetlands on it. Hemaintains Home Savings sued toforeclose on the other properties toforce him to put up more collateralon the property because Patrick Bevack, CEO of Home Savings, is “agood friend” of Mr. Calabrese. Oth-erwise, Mr. Osborne asked, whydidn’t the bank sue to forecloseover the land loan?
Mr. Calabrese, a frequent stockinvestor and property investmentpartner with Mr. Osborne, did not
return three calls from Crain’s.Jude Nohra, Home Savings gen-
eral counsel, said the bank does notcomment on ongoing litigation.
A taxing matterHome Savings has reason to be
tough on big borrowers.The bank is operating under stip-
ulations and consent decrees datingto 2008 that it entered into after receiving cease-and-desist ordersfrom the Federal Deposit InsuranceCorp. and the Office of Thrift Supervision requiring it to raise cap-ital, to reduce debt exposure and totake other fiscal fitness measures.
In an Aug. 12 Securities and Exchange Commission filing, HomeSavings said it has trimmed itsportfolio of residential, commercialand construction loans by 9%, to$1.25 billion as of last June 30 from$1.3 billion on Dec. 31, 2010.
Asked why Home Savings did notsue on the land loan, Mr. Nohra
said it does not discuss customermatters. Mr. Nohra said he doesnot know if Mr. Bevack or otherHome Savings execs are on friendlyterms with Mr. Calabrese outsidethe customer relationship.
Mr. Osborne said the bank is“trying to steal my rents” with theforeclosures.
Although Home Savings wouldnot discuss the legal issues, thebank might hesitate to foreclose onthe 100-acre land loan for a simplereason: Land does not producecash flow like developed propertiescan. Fallow land generally eats cashfor property taxes. A difficult-to-develop property or land site wouldbe even less desirable to a lenderthan one with a development planapproved by all appropriate gov-ernment agencies.
David Browning, managing director of the Cleveland office ofCB Richard Ellis who serves regu-larly as a court-appointed receiver fordistressed properties, said banksconsider non-payment of propertytaxes a technical default. Lenderstake it seriously, he said, becauseunpaid taxes could cost them theability to seize a property at sheriffsale or at a minimum reduce theamount they could recoup on a loan.
‘I plan to pay my bills’In a surprise, Mr. Osborne said
he signed personally for the real estate loans. That puts his other assets — substantial in his case — atrisk. Mr. Osborne’s assets include hisMentor-based Osair industrial gasbusiness, stock in other public com-panies and his most recent invest-ment darlings, oil and gas interests.
Professional real estate develop-ers typically steer clear of undertakingsuch mortgages, called recourseloans, because a bad deal could expose personal assets or profitableproperties to lender actions. Whydid Mr. Osborne sign personally?
“I plan to pay my bills,” Mr. Os-borne said. Asked if he might beforced to reorganize his assets un-der federal bankruptcy laws, Mr.Osborne said he does not think so.
Mr. Osborne said the foreclo-suresuits mean he likely will be un-able to pay nearly $2 million he haspromised to local charities, thelargest among them a $1 millionpledge to Lake Hospital Systems.
He believes the dilemma he facesthreatens entrepreneurs.
“Why would you ever want totake a risk again after being treatedlike this?” he asked. ■
continued from PAGE 1
Osborne: Activist shareholder perplexed by situation“Why foreclose on some-one who is current on theloan?” – Richard Osborne Sr., activistbank shareholder and real estateinvestor
A memorable role in 9/11 Memorial■ If you get a chance to visit the new 9/11Memorial, sensors will spot you on your wayin and on your way out.
A Youngstown company provided thesensor system that is used to count thenumber of people who enter the memorialpark, which was builton the site where thetwin towers oncestood, and the nearbypreview site, whichincludes informationabout the NationalSeptember 11 Memo-rial & Museum.
The company,SenSource Inc., sellsand installs the sen-sors, which can beused to count peopleor vehicles and can tell whether they arecoming or going. It also developed softwarethat communicates with the sensors andhelps users analyze trends related to thedata.
The 9-year-old company, which employs17, got the job through a referral from another customer, the David RubensteinAtrium, which is a public gathering place inNew York City.
SenSource didn’t make much money — ifany — off the contract, which was relativelysmall, said company president Joseph Vara-calli. The work might help boost Sen-Source’s reputation, but the company tookthe job because it wanted to do something
good for the country, Mr. Varacalli said.“We were just all proud to be selected for
that,” he said. — Chuck Soder
Helping doctors help themselves■ With the heavy course load of medicalschool, physicians find little time to brush
up on the intricaciesof health care or per-sonal finance, so theMetroHealth Systemis offering a slate offree courses to helpfine-tune their employ-ees’ business acumen.
Launched by thecounty-subsidizedhealth system’s newchair of medicine, Dr.Michael Wolfe, theidea of the program is
to help residents, fellows and faculty atMetroHealth learn about business topics,such as transitioning from a medical stu-dent to a practicing physician, budgetingand finance and maintaining a work-lifebalance.
“We’re training physicians,” Dr. Wolfesaid. “An informed trainee does a much betterjob in general. Medicine is tough enough asit is.”
Dr. Wolfe said the program also is gearedtoward grooming future health care admin-istrators as hospitals likely will be more fre-quently run by physicians with businesstraining.
About 70 individuals are signed up for the
program, which launched last week andruns once a month through next May. If theprogram is successful, Dr. Wolfe said hewould like to open it to other physiciantrainees in the region and even across thecountry through video conferencing.
“The fact is, medicine has become a bigbusiness,” he said. “Not only a big businessin terms of how a hospital works, but wedon’t learn anything about mortgages or investments in medical school.” — TimothyMagaw
Downstate law firm gains upstate presence■ A Columbus law firm has expanded intoNortheast Ohio with the opening this monthof a Medina office led by an attorney whorepresented a national insurer for nearlytwo decades.
Brian D. Kerns, at present the only attor-ney in the new office of Wiles, Boyle, Burk-holder & Bringardner Co., also establishedthe Cleveland office for his previous employer, State Automobile Insurance Cos.
Wiles Boyle’s Medina office is the third forthe firm, which also has an office in Cincin-nati. The new location provides the firm thestatewide presence it has been seeking, Mr.Kerns said.
Mr. Kerns will handle both insurance defense and insurance coverage work. Thefirm’s other practice areas will expand intoNortheast Ohio, too, and Mr. Kerns antici-pates his office will hire a few lawyers with-in its first year in Northeast Ohio, dependingon business volume and the economy.— Michelle Park
WHAT’S NEW
THE COMPANY: The Garland Co.,ClevelandTHE PRODUCT: Tuff-Coat wall coating
Garland says this low-solvent, emulsifiedpoly-resin architectural wall coating “damp-proofs and beautifies all types of exterior andinterior masonry wall surfaces,” includingconcrete, brick, stucco and exterior insulatingfinishing systems.
The coating “provides heavy-bodied pro-tection against moisture, UV, fumes, and freshor salt water, while allowing water vapor toescape the structure through its breathablefilm,” according to Garland, a maker of roofingand building maintenance systems.
Tuff-Coat wall coating hides stains and dis-colorations, according to the company. Italso is alkali-resistant and provides a wash-able surface. Garland says Tuff-Coat is avail-able in both a smooth and textured finish,and its low-odor formula meets VOC regula-tory requirements in all 50 states.
Garland product manager Tom Stuewesays most coating failures on concrete build-ings “are caused by using the wrong coatingmaterial,” such as a coating that is not alka-li-tolerant, or by using paint instead of a high-performance coating.
For information about Tuff-Coat, visitwww.GarlandCo.com.
REPORTERS’ NOTEBOOKBEHIND THE NEWS WITH CRAIN’S WRITERS
THEINSIDER
THEWEEK SEPTEMBER 19 - 25
The big story: The developer of the $275 mil-lion Flats East Bank project is butting heads withthe Cleveland-Cuyahoga County Port Authorityover the maritime agency’s plans for its propertyalong the lakefront. Developer Scott Wolstein, inan exchange of emails with Port Authority pres-ident William Friedman, said the port’s newstrategic plan “could not conceivably be moreoffensive to our vision for the development ofthis area of the city, and, frankly, it may welljeopardize the entire Phase 2 development (ofthe Flats East Bank) that is based on a significantresidential component.” The strategic plan com-mits the Port Authority to keep its docks at themouth of the Cuyahoga River.
A life of impact: Albert J. Weatherhead III, alongtime Case Western Reserve Universitybenefactor and chairman and CEO of Weather-head Industries in Twinsburg, died Sept. 20 at the age of 86. CWRU trustees renamed the college’s management school after the Weather-head family in 1980 following a $3 million dona-tion to the school. Among other gifts, Mr. Weath-erhead also endowed three faculty positions atthe university. He founded Weatherchem, amaker of dispensing closures, in 1971 when hebought Ankeny Co., a small tooling business inTwinsburg.
Nice greeting: Cleveland International Fundannounced it expects to provide up to $65 mil-lion of financing to assist American Greetings Corp.
in the construc-tion of its newworld headquar-ters in Westlake.The fund alsowill provide $10million to StarkEnterprises forthe accompany-
ing expansion planned at Crocker Park in West-lake. The loan is scheduled to close by spring2012.
Cashing in: Amusement park operator CedarFair L.P. agreed to sell its California’s GreatAmerica amusement park in Santa Clara, Calif.,to California-based real estate investment firmJMA Ventures LLC for $70 million in cash. San-dusky-based Cedar Fair bought the park in 2006and expects to use proceeds from the sale to re-duce its senior secured debt.
What becomes a Legend most: RPM International Inc. said its RPM2 business unitagreed to buy the Legend Brands family of com-panies, which provide equipment and servicesrelated to water and fire damage restoration,professional cleaning and environmental con-trol. The Medina-based maker of coatings andsealants did not say how much it will pay for Leg-end Brands, which is based in Burlington, Wash.,and has annual sales of more than $70 million.
This and that: Columnist Connie Schultz,whose work brought The Plain Dealer a PulitzerPrize, resigned from her post, stating that “in re-cent weeks, it has become painfully clear that myindependence, professionally and personally, ispossible only if I’m no longer writing for thenewspaper that covers my husband’s senaterace on a daily basis.” Her husband is U.S. Sen.Sherrod Brown, D-Avon. … Northeast Ohio isone of 20 regions in the country that won achunk of $37 million available in a White Housecompetition to support high-growth industries.The region will receive a $2 million grant for aprogram led by JumpStart Inc., Lorain CountyCommunity College, Magnet and NorTech thatis designed to accelerate the rate at which proto-types in the advanced energy and flexible elec-tronics sectors go to market.
SEPTEMBER 26 - OCTOBER 2, 2011 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 27
BEST OF THE BLOGSExcerpts from recent blog entries onCrainsCleveland.com
D.C. will drink in thedelights of Arabica■ You might be able to get a taste — ormake that a sip — of Cleveland on your nexttrip to Washington, D.C.
The Washington Business Journal report-ed that Arabica Café is poised to enter metroWashington. Initial plans call for sevenstores in the region — one later this year,and six in 2012.
Sam Saa of Metropolitan Restaurant Bro-kerage bought the development rights forArabica in D.C., Virginia and Maryland, thenewspaper reported.
“There’s not a lot of competition in thissegment around here,” Mr. Saa said.
Arabica has about 40 stores, mostly in Ohio.
Clevelanders need tobuff up on their reading■ Clearly, Clevelanders need to spend moretime reading Men’s Health maga-zine.
If we did, maybe we wouldn’trank 99th out of 100 in the mag-azine’s list of America’s mosteducated cities.
Men’s Health says it “tabu-lated the Department of Edu-cation’s high-school gradua-tion rates, along with U.S.Census figures on school enrollment (kindergartenthrough grad school) and educa-tion levels of people over 25 (less than highschool, associate’s or bachelor’s degree,graduate or professional degree). We alsotapped SimplyMap to find out how manyhouseholds have student loans or takeadult-education courses.”
Cleveland earned an “F” grade and
topped only Miami. A total of 15 cities, in-cluding Toledo, also earned Fs. The best ed-ucated cities in America, according to Men’sHealth, are Madison, Wis., and Plano, Texas.
So, Clevelanders, here’s your brain-buildinghomework: Go to the newsstand or library,get a copy of Men’s Health and do somereading. The September issue — it’s the onewith Bill from “True Blood” on the cover —features coverlines that include the following:
■ Sexiest female athletes reveal all!■ Lose your gut!■ Amazing abs!■ 15 sizzling sex secrets■ 10 muscle foodsAt the very least, Men’s Health will teach
you to use exclamation marks! A lot!
U.S. isn’t making quick workof its Internet infrastructure■ When it comes to Internet speed, Ohio isa laggard — as is the entire country, in aglobal context.
That’s the conclusion to be drawn from aNew York Times story about a recent studyfrom Pando Networks.
Pando, which helps con-sumers accelerate downloads,found the United States as a wholeranks 25th in Internet speed, be-hind even Romania. South Koreahas the fastest speeds in the world.
Within U.S. borders, Idaho hasthe slowest average Internet con-nection, with what Pando called a“dismal” average of 318 kilobytes persecond. Rhode Island sets the pace inAmerica, at 894 kilobytes per second.
What’s the difference? “In Idaho, itwould take you 9.42 seconds to download astandard music file compared with 3.36 sec-onds in Rhode Island,” The Times noted.
Ohio, unfortunately, is much closer to theIdaho side of the scale, with a mediocrespeed of 451 kilobytes per second.
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Terry says, “Anybody who is interested in buying a Porsche should take a trip out to Porsche of North Olmsted. I always know I can get what I want right away. I’ve sent a bunch of folks there and everyone feels it’s the most first-class operation they’ve ever seen. The showroom is state-of-the-art. If you haven’t been there, you owe it to yourself to go. I can’t imagine buying a Porsche or getting service from anybody but Porsche of North Olmsted.”
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