Crain's Cleveland Business

By SHANNON [email protected]

Chancellor University has existed quietly at Chester Avenue and East40th Street since it transformed fromfinancially downtrodden Myers

University two years ago.But behind the blue and silver façade,

the for-profit school has been plagued by a revolving door of executives, has resorted tounconventional recruiting practices such ashitting up homeless shelters to build enroll-ment and is fighting to maintain its accredi-tation. It’s a far cry from the high hopes oncetouted by Chancellor’s new owners.

Significant Partners LLC of Solana Beach,

Calif., bought Chancellor in September 2008for $5.25 million. The purchase followed yearsof financial struggles for Myers University,which had failed to close deals with multiplebuyers.

Initially, Significant Partners, headed byMichael Clifford, had grand plans to buildChancellor into a sizable school that offeredclasses in person and online. And, by all measures,Chancellor seemed to be off to a good start.

Significant Partners reduced undergraduatetuition by 30% and lowered graduate tuition by

14%, increased full-time faculty to 26 from 16and created 30 online courses. Mr. Cliffordalso convinced former General Electric Co.CEO Jack Welch to invest $2 million into whatis now the Jack Welch Management Institute,the online MBA program launched this year atChancellor.

Shaun Redgate, Chancellor’s chief operating officer, told Crain’s for a story thatran in May 2009 that the goal was to reach1,050 students by fall 2010, which would allow Chancellor to break even.

Instead, Chancellor reported only 422 studentsas of April 2010, prior to spring commence-ment, according to the Higher Learning Commission in Chicago, which accreditsChancellor. Catherine Nita, Chancellor’s executive director of human resources, wouldnot disclose current enrollment.

Who’s at the helm?Mr. Clifford declined to speak to Crain’s for

this story, as did several other Chancellor employees. Mr. Clifford’s public relationsrepresentative, Holt Hackney, confirmed that“Michael is no longer on the board” at Chan-cellor, “opting instead to focus on some of hisphilanthropic ventures.”

“(Losing accreditation) ... might make problems for investors because(Chancellor) couldn’t attract students.”– Robert Appleson, vice president of accreditation relations, Higher Learning Commission

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Foundation giftallows Rock Hallto establish itsfirst endowment$5M from N.Y. anniversary concertshelps solidify future in Cleveland

By SCOTT [email protected]

Here’s something you probably didn’tget for your birthday: $5 million. Andyour party almost certainly didn’t feature music legends such as U2,

Mick Jagger and Bruce Springsteen.But the Rock and Roll Hall of Fame and Museum

Inc., which on Sept. 2 celebrates 15 years in busi-ness along Cleveland’s lakefront, finds itself insomething of a privileged position as a teenager.

The New York-based Rock and Roll Hall ofFame Foundation, formed 10 years prior to themuseum’s opening, is making a $5 million gift tothe Rock Hall to establish the institution’s firstsignificant endowment. The money comes fromproceeds from the Rock Hall’s 25th anniversary

For-profit Chancellor in hot water

Private equity firmtakes control of Fairmount Minerals

INSIDEColleges unveil poshnew athletic digs

The facilities, including at Akronand Kent State (right), help schools generate excitement among alumni— and help recruiting. Page 3

Buyout of Chardon outfit made possible by loosened credit market

See ENDOWMENT Page 17

See FAIRMOUNT Page 17

See CHANCELLOR Page 16

Accrediting body watching closely amid questions over leadership, recruiting practices

INSIDE A SCHOOL’S FALL FROM GRACE

KEVIN MAZUR/WIREIMAGE.COM

Last fall’s concerts at Madison Square Garden (featuring Aretha Franklinand Annie Lennox) will help establish a new endowment for the Rock andRoll Hall of Fame and Museum.

By DAN [email protected]

New York private equity firm American Securities Capital Partners has taken control of Chardon-basedFairmount Minerals in a leveraged buyout financedlargely with $700 million in debt that likely could nothave been raised last year.

“Fairmount was at a point in our history where, forseveral reasons, we thought it was time to bring an investor into the company,” Fairmount chief financialofficer Jenniffer Deckard said. “We started talking to AmSecurities last year. … We felt they were a great culturalfit.”

20100816-NEWS--1-NAT-CCI-CL_-- 8/13/2010 3:14 PM Page 1

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Most frequent complaints PercentageClaim denials 30.9%

Claim settlement/payment delays 17.5

Unsatisfactory settlement/offer 13.0

Policy cancellation/non-renewal 5.3

Claim denials were by far the most common complaint of Ohio insurance con-sumers in 2009, according to statistics from the Ohio Department of Insurance.Nearly one-third of 5,453 complaints to the department last year related toclaim denials. The health insurance category drew the most complaints.

Complaints by coverage PercentageHealth/accident 40.5%

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INSIGHT

THE WEEK IN QUOTES“If (the Rock Hall) isgoing to be on the level of a significantcultural organization,an endowment is critical. It’s somethingthat hopefully can beadded to over time tohelp keep the museumat the top of its game.”— Joel Peresman, president andCEO, Rock and Roll Hall of FameFoundation. Page One

“We could lose half ofthe funding for thecommunity in oneyear. We’ll be facedwith serious conse-quences. People coulddie if we make thosecuts.”— William Denihan, CEO, Alcohol, Drug Addiction and Mental Health Services Board ofCuyahoga County. Page 4

Arcade readied for sheriff’s saleHeavy interest possible as other downtownprojects take root and Hyatt brand remainsBy STAN [email protected]

The Hyatt Regency Cleveland atthe Arcade, a premier downtownlandmark, stands to undergo a sheriff’s foreclosure sale that willput its ownership in play just as thepromise of a planned medical mart,convention center and casino hikesinterest in the city’s long-languishing

hotel market.Cuyahoga County Common

Pleas Judge Nancy Margaret Russoon July 27 issued a foreclosure decreein a case filed by Bank of Americaafter property owner Arcade LLC —a joint venture of real estate devel-oper Related Midwest Co. and Hyatt Hotels Corp, both of Chicago— defaulted on a loan in April 2009.

“Reasonable minds can come to

but one conclusion, being that (the)plaintiff is entitled to judgment,”Judge Russo wrote. Bank of Americaholds a $14 million mortgage on thebuilding, which has a 293-room hoteland two floors of retail space. Thebank’s loan originally was for $33million but was reduced throughpayments and modifications overthe years.

Judge Russo ordered the partiesto provide documentation to thesheriff by Sept. 27 to ready the prop-erty at 401 Euclid Ave. for a laterforeclosure sale.

However, one big issue remains

unresolved.Minneapolis-based US Bank, as

the trustee of a $6 million bond issue that is supported by tax-incre-ment financing and helped financeimprovements to the Arcade by Related Midwest and Hyatt, hasasked the court to order the property’snext owners to continue to makeservice payments on the bonds.

Local governments aid real estateprojects with tax-increment financing(TIF) by allowing developers to usea portion of future tax proceeds fromthose projects to cover payments on

See ARCADE Page 17

See SONY Page 6

“I think there is a perception that community banks, orsmaller banks, werelargely exempt fromthe bill. … We believethat’s absolutely untrue.”— Michael Van Buskirk, president, Ohio Bankers League.Page 11

“A holding companyis just an extra expense unless youneed it. … We figure itwould be $600,000 to$800,000 in additionalannual expenses.”— Bill Valerian, chairman andCEO, Liberty Bank in Beachwood.Page 11

Cleveland music exec who beat Sony still tangled in litigation Claims lawyer in Meat Loaf album case failed to protect him from partnersBy JAY MILLER

[email protected]

Steve Popovich won the admira-tion of many in the music industry in2005 when he and his Cleveland International Records won a $5.1million verdict in federal districtcourt in Cleveland against industrygiant Sony Music Entertainment Inc.

Sony had failed to credit Mr.Popovich’s record label when it issued compact discs by Meat Loaf,a recording artist who had signed with

Cleveland International back in thedays of vinyl but whose recordingscontinue to sell to this day.

Now Mr. Popovich, who’s livingin Murfreesboro, Tenn., is contendingin court that a mishandling of thelegal action against Sony will costhim more than $2 million becauseof a judgment awarded to his formerbusiness partners in Cleveland Entertainment Inc., which was the

parent of Cleveland International.Mr. Popovich’s latest lawsuit,

filed July 22 in Cuyahoga CountyCommon Pleas Court, charges thelate David Webster and the firm nowcalled Webster Dubyak & Weyls Co. LPA with negligence in their conduct of Mr. Popovich’s litigationagainst Sony. In his complaint, Mr.Popovich argues his former lawyersfailed to protect him from claims

from his minority business partnersin Cleveland Entertainment Inc., inwhich Mr. Popovich was majorityshareholder and president.

The lawsuit contends that if Mr.Webster and his firm had handledthe case against Sony properly, Mr.Popovich could have avoided a $1.8 million payout and $500,000 inlegal fees for an upfront cost of aslittle as $100.

Mr. Webster died from cancer inMarch 2009; at the time, he was president-elect of the ClevelandMetropolitan Bar Association.

Robert Dubyak, a partner in thecurrent firm, told Crain’s that thepresent firm and its lawyers have noliability for what transpired. He saidthe Sony case was tried before he orany of the practice’s current lawyerscame to the firm.

But Mr. Dubyak still came to Mr.Webster’s defense.

PHOTOS COURTESY OF KENT STATE UNIVERSITY/UNIVERSITY OF TOLEDO ATHLETIC COMMUNICATIONS

Upgrades at Kent State’s Dix Stadium included aesthetic improvements, such as a new entryway, and a new scoreboard. The University of Toledo, meanwhile, in February openedthe doors to its $9 million Fetterman Training Center.

AN ATHLETIC‘ARMS RACE’MAC schools see posh new, upgraded

facilities as ticket to growth

By JOEL [email protected]

Whether it was before thecrippling recession hit orduring the worst of it, well-heeled alumni have

continued donating to their alma maters’athletic departments — and thoseschools are taking advantage.

Sparkling new athletic facilities andmultimillion-dollar renovations havepopped up across the country, includingon the campuses ofseveral members of theCleveland-based Mid-American Conference,Akron and Kent State among them.

Akron opened InfoCision Stadium lastSeptember, while Kent State two yearsago completed a $10 million renovationto Dix Stadium that included a newscoreboard and aesthetic improvementsthroughout the 41-year-old stadium.

And it appears, despite calls for reducingoften-outlandish spending in collegeathletics, that a majority of these projectsare being paid for without dipping into

INSIDE: Photos of othernew athletic projects at Mid-American Conferencecampuses. Page 10

See RACE Page 10



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Volume 31, Number 32 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of May and fifth week ofMay, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH44113-1230. Copyright © 2010 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $1.50.POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373.

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Mental health agencies fear ’11 cutsNew formula used todivvy up funds couldhurt Cuyahoga County

By SHANNON [email protected]

William Denihan feels as if localmental health care providers dodgeda nuclear bomb, but fears another ison the way.

Though the state chose not to alterthe way it allocates money for mentalhealth services in the fiscal year thatbegan July 1, it is considering bigchanges for the fiscal year beginningJuly 1, 2011, which also marks thestart of the state’s biennium budget,said Mr. Denihan, CEO of the Alcohol,Drug Addiction and Mental HealthServices Board of Cuyahoga County,or ADAMHS.

“We could lose half of the fundingfor the community in one year. We’llbe faced with serious consequences,”he said. “People could die if we makethose cuts.”

The state could cut its support formental health services by as much as 40%, which would affect peoplewithout private insurance or Medic-aid coverage, said Lovell Custard,president and CEO of Murtis TaylorHuman Services System, which pro-vides mental health services to about6,000 people in Cuyahoga County.

Although the Ohio Department ofMental Health can’t say how muchthe budget for mental health servicesmay be reduced, Mr. Denihan saidit’s a foregone conclusion cuts will bemade because the state is staring at abudget hole of an estimated $5 billionto $8 billion in the next biennium.

At issue is the formula used to provide state support for mental healthservices. If overhauled, the formulalikely would hinge largely on popu-lation, Mr. Denihan said, which means

Cuyahoga County would receive lessstate money because its populationhas declined.

The U.S. Census Bureau estimatedCuyahoga County’s population at1.2 million in April 2009, down 8.5%from 1.39 million in 2000. Mean-while, the ADAMHS board served48,449 people in Cuyahoga Countywith a mental illness or addiction inthe fiscal year that ended June 30,2009, which is 5.7% higher than the45,816 served in the fiscal 2008.

To prepare for what Mr. Denihanbelieves is an inevitable state budgethit, he has begun reducing theADAMHS board’s budget and is advising the nonprofit agencies hisoffice works with to do the same.

In July 2009, the Cuyahoga CountyMental Health Board and the Alcoholand Drug Addiction Services Boardof Cuyahoga County merged to create the ADAMHS board. That unionresulted in the elimination of 30 positions and a savings of $2.5 million.

In addition, the ADAMHS boardmoved into the United Bank Buildingat 2012 W. 25th St. in Cleveland,which saved $400,000 a year in rent.

Mr. Denihan said he’ll continueto reduce his budget and not allprograms will survive the process.

“We have to continue to reprioritizeto become far more cost-effective atwhat we do,” he said.

Shared sacrificeLocal nonprofits that provide

mental health and addiction servicesalso will need to make changes ifthey want to continue to receivecounty support, Mr. Denihan said.

“There are still a high number of(nonprofit) agencies out there,” hesaid. “Many programs will have toconsider consolidation and merging.”

Mr. Custard said Murtis Taylorcurrently partners with other agen-cies to refer patients, and he hopesto find more such partners. Its budgetalready is constricted, so partnering

is about the only option Murtis Taylorhas to stretch its resources further.

“It’s getting tight,” he said. “For thelast 10 years, everybody has beenmoving to be as efficient as possible.”

Murtis Taylor received $2 millionfrom the ADAMHS board in the fiscalyear that began July 1, down from$2.8 million in the fiscal year thatbegan a year earlier, Mr. Custard said.

In response, he is hiring onlythose who directly serve patientsand is implementing new technologyto save money in the long run.

“We recognize we have got to survive in the immediate time, butwe’re trying to figure out how to become more efficient,” Mr. Custardsaid. “It’s going to be through com-puter technology and we’re tryingto implement that in record speeds.”

Systemic problemsIn the meantime, the mental

health system is failing, Mr. Denihansaid. The county’s 34 intake officesfor new patients were closed morethan they were open last year, sopatients have nowhere to go buthospital emergency rooms, he said.

With state support down and localsupport flat at best, the ADAMHSboard has no money to treat thosewith mild and moderate mental illnesses, so those people will sinkinto a more dire mental state andwill remain there longer than otherswho receive treatment, he said.

That trend became evident as accessibility to services declined whileforeclosures soared, credit was hardto get, money was tight and jobswere lost — all of which led to higherdepression and suicide rates, Mr.Denihan said.

He is using such statistics to urgelegislators to retain mental healthsupport as they try to plug the holein the state budget. He hopes legis-lators eventually will hear his pleasbecause the mental health safetynet is tattered. ■

Avon trash hauler adds East 37th spaceBy DAN [email protected]

Between Cuyahoga County’s plansto build a medical merchandise martand ongoing demolition and rehabwork, Mike Cooper figures it’s timeto bring his trash-hauling companyto the big city.

Cooper Disposal, of Avon, plansto expand into new digs on East 37th

Street and will begin operationsthere in November, Mr. Coopersaid. The company bought the landand will begin construction in September, he said.

Mr. Cooper has been building hisbusiness in Avon since he quit a six-figure job at a large waste manage-ment company in 2006, cashed inhis 401(k) and bought a huge Volvogarbage truck that he didn’t knowhow to drive, but somehow got tohis driveway alone.

“My neighbors thought I wasnuts,” Mr. Cooper said.

He now has 12 employees, sixtrucks, 180 commercial trash con-

tainers and revenue that Mr. Cooperexpects will grow to $3 million thisyear from $2 million in 2009. Hemanages it all like an air traffic controller, with each day’s pickupand delivery requests spread out onhis desk, schedules on his computerand a phone constantly to his ear sothat he can talk to both customersand on-the-road drivers.

Cooper Disposal doesn’t takecans from in front of houses anddoes little work with the kinds ofdumpsters people see behindrestaurants and other small estab-lishments. Its bread and butter ishauling boxes that are from 10 cubic yards to 40 cubic yards in size— the kind that can be left at a construction or demolition site,filled with materials by builders andthen hauled away and replaced ondemand.

About 75% of Mr. Cooper’s busi-ness comes from the constructionmarket, which he said he’s pene-trated in spite of a general slowdownin that sector. He has picked up work

at the Cleveland Clinic and at variousrehabs around Cleveland, where hesees his business growing fastest.

“And that cycle is going to reallyhit in about two years now, with themedical mart and all the other development,” he predicts.

Rick Josie, Mr. Cooper’s old bossat both Karas Trucking and BFI,said he’s not surprised to see hisformer top sales rep do well.

“I had 12 reps, and I wished everyone of them was Mike Cooper,” Mr.Josie said.

Mr. Cooper said he’ll keep theAvon facility open in order to havetwo hubs from which to operate. Inthe meantime, he said, he’s thinkingup new sources of revenue. A trashsorting facility at the new operationwill be one, because it will generaterecyclable materials he can sell. Another might be to sell advertisingspace on his trash containers,which often sit in high-traffic areasalongside big projects.

“They’re huge. It would be like agiant billboard. Why not?” he said. ■


“It is unfortunate that the legacyof a great lawyer like David Websteris so casually tarnished after his deathby a former client for whom Daveachieved nothing less than an extra-ordinary result,” Mr. Dubyak said inan e-mailed statement. Mr. Dubyak’sstatement added that those namedin the suit “plan to pursue claimsagainst Mr. Popovich for bringingthe suit and for fees owed to Mr.Webster’s estate.”

Mr. Popovich’s attorney in thecurrent case took issue with that


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Nonprofit expands offerings for disabledBy SHANNON [email protected]

After nearly four decades of quietlyproviding services for the develop-mentally disabled, Koinonia Homes Inc.is expanding its operations in a big way.

In the last two years, the nonprofithas acquired nine existing grouphomes and opened one and hasdoubled its employee roster to morethan 500, said Diane Beastrom, presi-dent and CEO of Koinonia, which isbased in Independence. Koinoniaalso expects its revenue to climb to aprojected $23.6 million this yearfrom $13.6 million in 2008.

Last summer, Koinonia hiredCleveland operations managementfirm Applied Technology SystemsInc. to further develop its leadershipteam — from employees to boardmembers, Ms. Beastrom said.Koinonia leaders then worked withthe nonprofit’s employees and theCuyahoga County Board of Develop-mental Disabilities to determine thecounty’s needs, she said.

As a result, Koinonia expandedthe offerings of its adult day supportand vocational services center inBrooklyn Heights. It added autismservices and personalized vocationalprograms, as well as services to carefor people in small settings. The vocational programs focus on whatKoinonia’s clients can do well, suchas make jewelry, answer phones ordo janitorial work, and help thosepeople enhance their skills so theycan get jobs, Ms. Beastrom said.

“Our hope is that a number offolks will get experience and create arésumé and then become employedby one of the companies in ourarea,” she said.

The changes have been fruitful.The center in Brooklyn Heights nowserves 130 people, up from 35 twoyears ago, Ms. Beastrom said.

Koinonia also has been reachingout to more businesses in the areato create partnerships in which theycould volunteer or help providespecial programming for the non-profit’s clients.

As the population ages and theprevalence of autism increases, thecounty’s Board of DevelopmentalDisabilities has seen an increasedneed for various services, said LulaHolt Robertson, a spokeswoman forthe county board.

Specifically, as people with devel-opmental disabilities get older, theirparents no longer can care for them,so they need places to live. The countyboard contracts with Koinonia torun some of the county’s grouphomes and to provide residentialservices, Ms. Holt Robertson said.

In all, Koinonia now operates 21group homes — including one thatopened in July in Strongsville — andprovides services at 43 other loca-tions throughout Cuyahoga County.

Koinonia will continue to explorethe needs of Cuyahoga County’s developmentally disabled and willconsider expanding to meet them,she said. The organization hopes toraise more private funds throughincreased marketing and expansionof its board, Ms. Beastrom said. ■

Sony: Suit stems from royaltiescontinued from PAGE 3 view of the matter.

“He feels severely wronged, is all Ican say,” said G. Timothy Marshall.

Singing a different tuneMr. Popovich, who grew up in

Lake County, has had a long careerin the music business in Cleveland,New York and eventually Nashville.He had his first success at divisionsof CBS Records, which later was bought by Sony, and later for Poly-gram Records in Nashville. When he wasn’t working in those two musiccapitals, Mr. Popovich would returnto Cleveland to run various iterationsof Cleveland International.

The current legal battle tracesback to 1977 and the release of MeatLoaf’s first album, “Bat Out of Hell,”by Cleveland International throughEpic Records, which would becomea Sony subsidiary. That vinyl record,No. 343 on Rolling Stone magazine’stop 500 albums of all time, became asurprise hit.

Mr. Popovich has been at oddswith Sony since the mid-1990s overroyalties owed him from the MeatLoaf recordings. In 1998 Sony settledthe royalty lawsuit by paying Mr.Popovich $6.7 million in back royaltiesand advances on future royalties. Asecond lawsuit over royalties wasfiled in 2006 by Mr. Popovich anddismissed in 2009.

The most recent lawsuit is the direct result of a 2005 verdict againstSony in a lawsuit Mr. Popovich broughtagainst the recording giant becauseit had left Cleveland International’slogo off a number of Meat Loaf CDs.

In settling the earlier royalty lawsuit,Mr. Popovich and Sony agreed to include a Cleveland InternationalRecords logo on CDs derived fromfour Meat Loaf master recordings,according to some of the lawsuits.Sony didn’t add the logo for morethan a year and later said the absenceof the Cleveland International logowas inadvertent.

However, a jury awarded Mr.Popovich $5.1 million because of theomission; the amount grew to $5.8million when interest was added in2008 after a Sony appeal was rejectedby the U.S. Sixth Circuit in Cincinnati.

But the lawsuits didn’t end there.In 2006, after the district court

victory, Samuel Lederman and Stan-ford Snyder, two New York-area men,sued Mr. Popovich for a share of theSony money. Messrs. Lederman andSnyder had invested in ClevelandEntertainment in 1977, with Mr.Popovich owning a 51% interest, Mr.Lederman 20% and Mr. Snyder 29%.The company stopped doing businessin 1983 and formally was dissolvedin 1991, according to court filings.

Mr. Popovich, through Mr. Webster,argued in the case filed by the twomen that he alone retained the rightsto the Cleveland International nameand record label. Mr. Popovich’s motion also argued that Messrs. Led-erman and Snyder never sought tointervene in the logo suit and neverclaimed any interest in Mr. Popovich’slawsuit. (The pair had been involvedin the earlier suit over royalties.)

Messrs. Lederman and Snyder argued that as shareholders of Cleve-land Entertainment, they were entitledto part of the Sony money and that Mr.Popovich had abandoned his fidu-ciary responsibilities to ClevelandEntertainment shareholders.

A jury found in favor of Messrs.Lederman and Snyder and awardedthe pair $1.81 million.

$100 vs. $1.8 millionIn his current lawsuit against the

late Mr. Webster and his law firm,Mr. Popovich said the Lederman/Snyder lawsuit also cost him$500,000 in legal fees.

His complaint contends that thelawyers never advised Mr. Popovichthat he might have a fiduciary responsibility to his former partners.It also says that “the gravest act ofnegligence exhibited by the (Websterlawyers) was that none of (the lawyers)approached Lederman and/or Snyderto obtain a release of their rights inregard to the Logo Litigation.”

Worse, Mr. Popovich’s lawsuitstates, lawyers for Messrs. Ledermanand Snyder had told Mr. Popovich’snew lawyer that had the Websterlawyers asked the New York menwhether they wanted to participatein the lawsuit or instead would signreleases giving Mr. Popovich theright to pursue a claim for himself,“their legal counsel informedPopovich’s legal counsel in the Led-erman Lawsuit that they would havesigned any release for about FiftyDollars!” ■



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KornblutFreemanMcRill

BrabhamWebleyRyland

MoodyLinvilleDavies

JOB CHANGES

ARCHITECTUREDOMOKUR ARCHITECTS: LucasW. Kraft to project architect.

EDUCATIONSAINT IGNATIUS HIGH SCHOOL:Gerald Skoch to vice president andchief mission officer; Keith Mokristo alumni director; Lisa Metro to director of communications; RoryHennessy to dean of students; RyanFranzinger to assistant to the deanof students.

FINANCIAL SERVICEPLANTE & MORAN PLLC: MattNobles to associate. SS&G: Scott McRill to director,transaction advisory services group. WALTHALL, DRAKE & WALLACE:Janice Canfield, Judy Mondry andPaul Weisinger to senior managers;Lauren Van Camp to in charge;Eric Schmidt and Brian Ditz to level II.

LEGALBUCKINGHAM, DOOLITTLE &BURROUGHS LLP: Barry Y. Freeman to partner. COWDEN & HUMPHREY CO. LPA:Russell D. Kornblut to partner andmanaging partner, Florida. KOHRMAN JACKSON & KRANTZPLL: Susan O. Scheutzow to partner and chair, health care practice group. MEYERS, ROMAN, FRIEDBERG &LEWIS: Rachel L. Steinlage to associate. OTT & ASSOCIATES CO. LPA:Justin M. Ritch to associate. TAFT STETTINIUS & HOLLISTERLLP: Joshua M. Ryland to partner.

MANUFACTURINGBRENNAN INDUSTRIES: Ted Moyer to vice president, national andinternational sales; Bill Jarrell tovice president, marketing and procurement; Jeff Worobel to director of finance. DIEBOLD INC.: David J. Kennedyto director, regional security. EATON CORP.: Gareth Webley tovice president, IT security and chiefinformation security officer. GOLDSMITH & EGGLETON INC.:Jeff Brabham to director, globalsales; Eric Davies to director, manufacturing operations. QUANEX BUILDING PRODUCTSCORP.: August J. Coppola to senior vice president; Pete Donoghue

to vice president of sales, engineered products group; David Marlar to general manager, Truseal.

MARKETINGSOOY+CO: Bob Slatt to multimediaand web designer.

NONPROFITCONSTRUCTION EMPLOYERS ASSOCIATION: Tim Linville to executive vice president. LAKEWOOD SENIOR CITIZENSINC.: Curt Brosky to president, CEO.NORTHCOAST CONFLICT SOLU-TIONS: Joyce A. Banjac to vicepresident, chief strategist for organizational markets.

REAL ESTATECB RICHARD ELLIS: Kelly Moodyto investment specialist.

SERVICEINFOCISION: Dave Hamrick tochief financial officer. WINGSPAN CARE GROUP: BethCohen Pollack to director of organizational advancement.

TECHNOLOGYATNETPLUS INC.: Antony Cannonand Dave Bullard to IT specialists;Angela Provencal to administrativeassistant.

BOARDSCLEVELAND PLAY HOUSE:Sandra Kiely Kolb to chair; WalterKalberer and Alec Pendleton tovice chairs. NATIONAL ASSOCIATION OFWOMEN BUSINESS OWNERS:Marguerite I. Harkness to president; Barbara Blake to immediate past president; Mary Cilia to president elect; JenniferCorso, Elaine Deiderich, Liz Radivoyevitch and Pam Ryan tovice presidents.NORTHERN OHIO SOCIETY FORHEALTHCARE ENGINEERING:John D’Angelo (Cleveland Clinic) topresident; Jeff Disrud to programvice chair; Ron Snodgrass to treasurer; Bill Rundle, JenniferStull and Angela Timperio to committee chairs.

AWARDSLAKEWOOD CHAMBER OF COM-MERCE: Scott Duennes (CornucopiaInc./Nature’s Bin) received the 2010Business Person of the Year Award;Diane Helbig (Seize This Day Coaching) received the 2010

Outstanding New Member Award. OHIO SOCIETY OF PROFESSIONALENGINEERS: Thomas E. Mosure(MS Consultants Inc.) received the2010 President’s Award.

Send information for Going Places [email protected].

Timken Co. plansto invest about $50million in its steel operations in Canton.

Slated to begin this year, the investment covers the installation ofa new intermediate finishing line atTimken’s Gambrinus Steel Plant andexpansion of the steel lay-downyard at the Harrison Steel Plant’ssmall-bar mill.

Timken said its Steel Group hashad a “significant increase in demand across all markets, and2010 sales are expected to increase by 70% to 80% comparedto 2009.” Sal Miraglia, president-steel for Timken, said the planned

investments inCanton “havethe goal of

both meeting demand and continuingto improve the long-term competi-tiveness of our operations.”

The company did not say how theinvestments would affect employmentlevels at the two operations.

Timken’s utilization capacity fellto an all-time low of 25% in 2009,the company previously said, and ithas been working to increase thatnumber and cut lead times for cus-tomers. Timken had increased itsutilization to 75% of capacity as ofearly August and was still rampingup further, it said. — Dan Shingler

Timken to invest $50M in steel unitON THE WEB Story from www.CrainsCleveland.com.


Region ahead of tech race; keep up pace

Words can be powerful, asPresident Barack Obamashowed in his campaign forthe White House. Trouble is,

as another eloquent Democrat learned inthe Oval Office, they also can come backto haunt you.

Ah, who could forget Bill Clinton’smemorable line, “It depends onwhat your definition of ‘is’ is.”

So now we have Mr. Obama— staring at a potential slew oflosses in the coming midtermelections — scrambling to winback support from businessleaders. Many, including formerdonors, aren’t inclined to help.

Instead, some are just plainangry. Angry about health care“reform” that was shoved downAmerican voters’ throats. Angry aboutthe massive deficit we’re piling on top ofthe troubling deficits left behind by President Bush and his wars.

But what business leaders might bemost angry about are the tirades Mr.Obama launched while wooing the left-most bloc of his party. The president railed

against “fat-cat bankers” and the “reckless”actions of, first, Wall Street, and more recently, BP, after its disastrous oil spill.

A recent Associated Press story quotedVerizon CEO Ivan Seidenberg, who’schairman of the Business Roundtable,saying the president has created “an increasingly hostile environment for

investment and job creation.”The head of the U.S. Chamberof Commerce decried a “cumu-lative job-killing impact of over-regulation” from the adminis-tration. And Forbes publisherSteve Forbes said: “The truth is that not even the Franklin Roosevelt administration wasas hostile and ignorant aboutfree enterprise as this adminis-tration is.”

The president has worsened his situa-tion by his appointments. Not a singleformer corporate executive is among his Cabinet members. This is not what America needs at a time of graveeconomic challenges.

* * * *CLEVELAND SCHOOLS CEO EUGENE

Sanders, who’s working overtime to remakethe troubled district, recently took a nearlyunprecedented step when he yanked theprincipal and entire teaching staff fromthe woefully underperforming Andrew J.Rickoff Elementary School. The onlyproblem is that the school’s staff — pro-tected by its union — has been scatteredaround the district to spread its members’underperformance to other buildings.

What a shame. Across Cleveland thereare examples of schools run by devotedadministrators and teachers who areproving they can take average (and oftenchallenged) students and help themprogress academically. But they’re notdoing it in union-dominated public schoolbuildings. They’re doing it in schools in which the staffs care more about academic progress than how many daysoff they get in their next contract or howsoon they can get out and into the comfortable world of retirement.

In a perfect world, Dr. Sanders couldimplement his entire turnaround plan,but that would require a cooperativeunion rather than one dominated by an“us-versus-them” mentality. ■


Not likelyS

tuart Garson, chairman of Cuyahoga County’sDemocratic Party, is wasting his breath incalling for county commissioner JimmyDimora and county auditor Frank Russo to

resign. They haven’t put the public first for the lasttwo years, so why should they do so now with onlyfive months to go in their jobs?

It’s not as though Messrs. Dimora and Russohaven’t heard this plea before in the two years sincetheir homes and county offices were raided as partof a federal public corruption investigation in Cuya-hoga County. Heck, we used this space 14 monthsago to urge Mr. Dimora to resign because of thecloud his presence was casting over the operationsof county government.

No dice.Now comes Mr. Garson, who last week said the

ongoing investigation centering on his two fellowDemocrats “compromised the public’s trust inthese officeholders and their effectiveness to carryout the duties of these offices.” Of course, Mr. Garson as party chairman also would like to see theduo disappear from their public roles because of thestigma they could attach to Democrats who are running for county offices this fall.

We doubt Mr. Garson will get his wish. Thechange in the form of county government that votersenacted last November will put an end to the jobs ofMessrs. Dimora and Russo shortly after the electionsthis fall. Why should they quit cashing their countypaychecks and building their pension benefits nowwith the finish line so near?

Besides, it doesn’t seem to be in the makeup of either man to take the honorable course of steppingaside so they no longer taint the public’s perceptionof how the business of government is done in Cuyahoga County. If anything, Mr. Dimora has beendefiant in his insistence that he has no intention ofleaving his job one day sooner than he must.

So, Mr. Garson, hang in there. And let’s all hopethat voters choose candidates for county executiveand county council based on qualifications and notparty affiliation so that Cuyahoga County can getpast this ugly period of corruption and self-servingleadership in the halls of government.

Be first

We’re still not sold on casinos as economicdevelopment tools. However, Ohio votersdecided otherwise last fall when they approved the creation of casinos in

Cleveland, Cincinnati, Columbus and Toledo. So, ifwe’re going to do it, let’s do it right — and let’s do itfirst to gain an edge on those other towns.

The local powers that be apparently are of thesame mind, based on last Thursday’s announcementby Harrah’s Entertainment Inc. and Dan Gilbert’sRock Gaming that they’re exploring the opening asearly as next year of a temporary casino in the HigbeeBuilding downtown. The two companies saidthey’re considering that possibility in response “tothe encouragement of city and regional leadership.”To which we say, “Go for it.”

FROM THE PUBLISHER

PERSONAL VIEW

BRIANTUCKER

The president reaps what he’s sown

PUBLISHER/EDITORIAL DIRECTOR:Brian D.Tucker ([email protected])

EDITOR:Mark Dodosh ([email protected])

MANAGING EDITOR:Scott Suttell ([email protected])

OPINION

By SCOT ROURKE

Back in the days when changecould take generations and geographic location and naturalresources largely determined a

community’s economic potential, Cleve-land was among the wealthiest and mostentrepreneurial communities in theworld. Needless to say, we have lost thatedge.

But even in an era when technologyfacilitates change seemingly overnight,Northeast Ohio has tremendous resourcesand a terrific opportunity to reinvent itself as a leader in the 21st-centuryknowledge economy.

To compete in an economy poweredby high-speed Internet, known as broad-band, we have to migrate our systems

away from the notion that physical assets and blue-collar skill sets will fuelour competitiveness. We need to align ourresources around the skills that lend tothe manufacture and distribution of verydifferent products — information andknowledge. It is these new skills, and theability of business and government toadapt and innovate with the latest tech-nology tools, that will drive job creation.

The good news is that Northeast Ohiohas a key advantage. In fact, the region ismany years ahead of its U.S. peers andmuch of the world. Since 2003, we havebeen quietly building one of the largest

and fastest private communications networks in the world, to serve as thefoundation for Cleveland’s potentialresurgence for innovation and transfor-mation — a high-speed, regional, fiber-optic broadband array run by nonprofitOneCommunity.

In February, we launched a $13 million construction project that creates200 jobs and expands connection to 22counties across Northeast Ohio as part ofa national pilot project that will linkmore than 100 hospitals on a single,high-capacity, community network. Thisenables the sharing of electronic medicalrecords and images across health systemsto improve health care services and reducecosts. That means specialists from theCleveland Clinic or Summa Health will

Mr. Rourke is president and CEO ofOneCommunity, a nonprofit organizationdedicated to accelerating the region’s useof information technology.

See VIEW Page 9



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SELL MORE.

“ Everybody here deals with customers at some level. So everybody gets training.” Mark Trushel President Mantaline Corp 135 employees

ROBERT BLOMQUISTMayor, Olmsted FallsNo, I can’t say I would. Atthe end of your career, it’smore a summary of whatyou’ve done throughoutthe years. I can’t say Iwould make a statementlike that.

➤➤➤➤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.

THE BIG ISSUEAre there days when you would like to emulate Steven Slater, the JetBlue flight attendant who curseda passenger and fled the plane by going down the emergency slide?

ANNE MCCAFFERTYClevelandI can’t say I (would). I don’thave that kind of stressfulcareer, but I can under-stand (Slater’s actions)working in that line of business.

LINDA HENNESSYWestlakeOf course; who wouldn’t?Everybody has frustra-tions.

TRAVIS EVANSClevelandNo, I’m just not that typeof person. I’m pretty reserved and I keep everything to myself.

View: Cleveland can be world tech leaderbe able to see rural patients via two-way video, while wireless devicesinstantly send readings and imagesfor diagnosis and treatment. We’repoised to lead the world in adaptingto and adopting “telemedicine.”

In March, a coalition led byOneCommunity was awarded $18.7million over two years for a nationalpilot project aimed at reducing the“digital divide.” The grant createsmore than 100 direct jobs and willbuild capacity to train and equipcitizens in Cleveland, Akron, 10 rural counties in Ohio and cities inthree other states. This will enable26,000 households that successfullycomplete the program to accessbetter jobs, education, health careand government services.

Leaders from dozens of countrieshave visited Cleveland to learnmore about our collaborative andinnovative approach. In turn, we’vevisited and advised numerous U.S.cities, not to mention governmentsworldwide, including China, South

Korea and Australia. As a primer on the urgency of our

opportunity, we recently spoke withMayor Maeng of Seoul, South Korea,considered the world’s most digitalcity. Citizens can access literallyhundreds of government servicesfor their families or businesses online,with just a TV remote control (nocomputer needed). With this incred-ible digital infrastructure in place,Seoul is now aligning its educationaland innovation systems to leveragethis platform so it can become a leaderin a global, knowledge-based economy.

They’re not there yet, but weshould be very afraid. Our kids aregoing to compete for jobs with kidsfrom South Korea and other digitallyadvanced regions. Their collectivetools and skills are bringing talentsand innovations here to compete in our very own marketplace. TheUnited States — widely regarded ashaving one of the slowest and mostexpensive broadband infrastruc-tures of the industrialized world —is at a great disadvantage.

Fortunately, we in NortheastOhio have a digital platform for collaboration and innovation that is almost unparalleled. We have anamazing leapfrog opportunity infront of us. We need to rally, to embrace our leadership position inthis arena and launch an offensive.

It’s essential that we work togetherto further develop a regional visionfor collaboration and sharing of resources leveraging our platformto make the Cleveland area a worldleader, as we were a century agoduring the second Industrial Revo-lution. But the question remains,can we adapt our culture and skills,align our resources, and apply ourunparalleled work ethic to lead theinformation revolution?

Time will tell, but we have no excuses. Unlike our peers across the country, we have nothing forwhich to wait. Our moment is here.Let’s take the lead on broadband asa community imperative and makethe choice to compete and becomea global leader again. ■

continued from PAGE 8

FDA clears Thermedx’s surgical fluidBy SHANNON [email protected]

Solon medical device makerThermedx LLC has received U.S.Food and Drug Administrationclearance for its fluid warming machine and has begun marketingthe device in the United States andEurope.

The 37-5 Fluid Management System warms fluids that go intothe body during surgery in about 15seconds, said John Kurowski, a registered nurse and vice presidentof sales and marketing for Thermedx.Previous methods of warming fluids such as saline includedputting them in a blanket warmerfor up to 30 minutes, he said.

The 3-year-old, 12-employeecompany has hired a sales rep in Atlanta and will hire salespeople inCleveland, Dallas and Tampa — allof which have track records of

welcoming new health care devices,Mr. Kurowksi said — in the comingweeks. Thermedx also has contractedwith distributors on the East andWest coasts, as well as in Europe, hesaid.

The Fluid Management Systemwill be launched at the Associationfor Perioperative Practice conferencein England in October, Mr. Kurowskisaid. Thermedx will begin marketingthe device in Denmark, Holland,Norway and Sweden in the firstquarter of next year and in Germanynext summer, he said.

The Fluid Management Systemhas been received well by local hospitals, Mr. Kurowski said.

“I haven’t had a door closed onme yet,” he said. “There is a lot offocus on temperature managementas it relates to patient outcomes.”

Cleveland Clinic’s Hillcrest Hos-pital is among those medical centers that will participate in a

pilot program in which they will getthe Fluid Management System forfree and will report their experiencesback to Thermedx, Mr. Kurowskisaid.

Dr. Marcus Tower, chairman ofobstetrics and gynecology at Hill-crest and a member of the Ther-medx medical advisory board, saidHillcrest will begin testing the FluidManagement System over the nextthree to four months. He has highexpectations for the machine because, in the past, fluids could betoo hot or too cold for patients, andthere was not a good way to monitorconstantly temperatures of the fluids.

“This provides us with the capa-bility of monitoring the tempera-ture of fluids we irrigate the patientwith,” Dr. Tower said. “If the fluidsare not right, the patient can becomehypothermic very quickly” andcould go into heart failure. ■



general funds or asking students tobear more of the cost.

Kent’s upgrades were paid for byprivate support and did not impactthe university’s budget, while Akronbenefited from a combined $15 million from Akron-based InfoCisionand Summa Health System and hasno immediate plans to charge studentsan additional fee.

“Our members are being finan-cially prudent in doing these upgrades.They’re raising dollars and investingthem back into programs,” said MACcommissioner Jon Steinbrecher.“There’s no doubt they’re coming tothe realization that you have to makeyour program attractive to prospec-tive student athletes, to the fans.”

Other MAC schools have joined orare joining the parade:

■ Toledo in February opened itsnew Fetterman Training Center, a $9million indoor facility used by itsfootball, track, basketball and golfteams;

■ Bowling Green’s $36 millionStroh Center, a new home for its basketball and volleyball teams andother general uses, will open nextfall, four years after the school openedits Sebo Center, an $11.6 million facility in its football stadium’s northend zone that serves strength andconditioning, treatment and rehab,and academic training needs; and

■ Ball State, in Muncie, Ind., andNorthern Illinois, in De Kalb, Ill., in2007 completed $13 million and $14million projects, respectively.

Toledo paid for its new facilitythrough private donations andkicked in some money from its capitalprojects budget; BG’s Sebo Center wasfunded fully through private dona-tions, though the Stroh Center — after $14 million in private donations— will need $16 million in studentfees once it opens.

One thing leads to anotherCoaches polled July 30 at the

MAC’s annual media day at FordField in Detroit sang the facilities’praises. Rob Ianello, Akron’s first-year head coach, and Tim Beckman,

Race: Coaches rave about facilities’ impact in recruitingcontinued from PAGE 3

PHOTOS COURTESY BOWLING GREEN/AKRON ATHLETIC COMMUNICATIONS

ABOVE: Bowling Green’s Sebo Center closed off the north end zone at Doyt L. PerryStadium. BELOW: Akron played its first game in InfoCision Stadium in September.Both facilities have been credited in assisting recruiting at the respective schools.

in his second year at Toledo after aspell on Ohio State’s staff, each saidthe respective universities’ plansplayed major roles in their decisionsto accept positions at those schools.

“I talk to friends in college foot-ball and they tell me you can drop(InfoCision Stadium) in a (South-eastern Conference) city and itwould fit right in,” said Mr. Ianello,a former assistant at Notre Dame.“It’s a lot different than the RubberBowl, for sure.”

Many of the schools with newdigs have seen jumps in recruiting.According to leading evaluator Rivals, Kent has ranked third, first

and third in MAC recruiting overthe last three years; Akron was second in 2009, and Toledo hasranked first, fourth and second.

“It’s an arms race,” said RickChryst, the former commissioner ofthe MAC and now of counsel inWalter & Haverfield’s sports lawpractice group. “(Recruits) can tellpretty quickly if something is tiredor fresh.”

Better facilities mean better recruits,and better recruits often lead to abetter team, more exposure for theschool and more enthusiasm fromalumni — and potentially more donations, which got this whole

thing started. Mark Rosentraub, who chairs the

sport management department atthe University of Michigan said athletic revenues are tertiary when itcomes to projects such as these; instead, it’s philanthropic commit-ments, and student attraction and retention that truly make investmentsworthwhile.

Kent State coach Doug Martin, entering his seventh year at thehelm, said he’s already seen the formeraffected by Dix Stadium’s facelift.

“We notice a difference in recruiting,but we have to catch up to others still,”Mr. Martin said. “But it’s been veryobvious to the administration the effects the upgrades have had, andformer players and other alumni seewhat’s there now and are pleased.”

And though those athletic rev-enues aren’t always goal No. 1, thosebetter players attracted by updatedfacilities every so often can lead thelittle guy to the promised land. Look no further than Boise State,which reportedly took home about$3.5 million — after splitting with five other nonautomatic-qualifying conferences and its own conferencemembers — by advancing to the2007 Fiesta Bowl.

The Broncos, after another solidseason last year in which they againplayed in the Fiesta Bowl, likely willbe in the top five in preseason polls,setting them up for another big-moneyrun.

By comparison, Northern Illinoisreportedly lost $740,000 total on itslast three bowl trips, to San Diego;Shreveport, La.; and Toronto, respec-tively. The losses stem from travelcosts and ticket guarantees; the latter is required by bowls, as schoolsmust buy a certain amount of tickets, then take a loss on whateverportion of them they don’t sell.

“That’s speculative, but certainlyplays a part in the decisions,” Mr.Rosentraub said. “But generally,these facility decisions are made in the school’s best interest; these institutions are not run by peoplewho got there by making huge mistakes.” ■

Continuity ofcare at heartof doctor’sat-home planBy SHANNON [email protected]

Psychiatry patients often fallthrough the health care cracks andfail to follow up with their physi-

cians, but a localdoctor is launchinga home healthcare company thatwill bring psychi-atry and healthcare services tothe patient.

Dr. RakeshRanjan, who owns

a psychiatry practice and a drug-testing firm called Charak ClinicalResearch Center in Garfield Heights,has launched Spectrum HomeHealth Care. The company providesin-home health care and psychiatricservices in Cuyahoga, Lake, Medinaand Summit counties.

Dr. Ranjan already has hired 15nurses, home health aides, socialworkers, and physical, occupationaland speech therapists to take care ofexisting clients who are on a waitinglist to receive in-home services. Hesaid he expects to hire up to 30 morehome health aides, nurses and sales-people by the end of the year as thenew business ramps up.

According to Dr. Ranjan, the VisitingNurse Association of Ohio currentlyis the only organization that provideshome health and psychiatry servicesin Greater Cleveland. Because somepatients who receive health or psychiatric care in a hospital butdon’t receive in-home follow up carefail to adhere to their doctors’ orders,their condition worsens once athome and they wind up back in thehospital, Dr. Ranjan said.

“There is no continuity of care and that’s where most patients fallthrough the cracks,” he said.

Indeed, there is more need forjoint home health and psychiatryservices than currently can be handled in Northeast Ohio, saidJohn Nisky, a clinical supervisor forCenpatico, the behavioral healtharm of the Buckeye CommunityHealth Plan, which coordinates carefor Ohio’s Medicaid enrollees andothers who are on similar govern-ment-sponsored health plans.

Cenpatico serves the aged, blindand disabled in eight Northeast Ohiocounties, Mr. Nisky said. About athird of his clients have mentalhealth issues and many lack the abilityto have someone work with them after they leave the hospital to makesure they follow the doctor’s ordersso they can better control theirsymptoms.

Mr. Nisky said Cenpatico will con-tinue to work with the Visiting NurseAssociation for home health andpsychiatry services. It also will startreferring patients to Spectrum.

“We hope to maintain an individualwithin the community, keep themliving in their homes, keep them living with their families,” he said.

Dr. Ranjan said he is in talks withother health care providers, nursinghomes and insurers to refer patientsto Spectrum and to his clinical prac-tice, which opened an office in Men-tor on Aug. 2. ■

Cleveland plans to market big Flats parcelAfter cleanup, site could solve city’s lack of industrial space to lure potential employers

By JAY [email protected]

The city of Cleveland for yearshas struggled to compete for newplants and warehouses because itdidn’t have a big, ready-to-use indus-trial site to offer new or expandingbusinesses.

It has taken a step to change thatsituation.

The city last month won controlof a 54-acre site in the Flats that itplans to clean up environmentallyand make available to show devel-opers, real estate brokers and siteselectors. The acreage on the eastside of the Cuyahoga River once hada coke oven on it that fed theArcelorMittal steel mill, but couldbe home to a large plant or ware-house or could be broken up intoparcels for an industrial park.

The plan for the cleanup alsoshould help the Cleveland-Cuya-

hoga County Port Authority find aplace for river dredgings, a problemthat has become a heavy burden forthe port operator.

“We’re excited to get started,”said Tracey Nichols, the city’s directorof economic development. “We’reexpecting to be able to put 300,000square feet of commercial/industrialproperty onto the market.”

Ms. Nichols said it will take a yearfor contractors to clean up environ-mental hazards and fill the site. Shesaid such a large piece of land willhelp keep companies already inCleveland that need to expand fromfleeing for distant suburbs.

Joseph Martanovic, an industrialreal estate broker with the ColliersOstendorf Morris real estate brokerage,agreed.

“This is great for the city,” Mr.Martanovic said. “There’s a dearthof industrial sites in CuyahogaCounty and less in Cleveland.”

The lower Flats in the last severalyears have attracted two steel ware-houses that wanted to be near thesteel mill. In 2005 Heidtman SteelProducts Inc. of Toledo built a270,000-square-foot service centeron what is now Heidtman Parkwaynear the ArcelorMittal plant. Then in2009, Steel Warehouse Inc., a steeldistributor based in South Bend,

Ind., opened an 86,000-square-footwarehouse nearby on 17 acres on Independence Avenue.

The city has secured a $5 millionJob Ready Sites grant from the stateto clean up the property, whichArcelorMittal is donating after thecity reimburses the company $1 million for some cleanup costs already undertaken.

Acquiring the property has theadded benefit of taking pressure offthe Port Authority to find a dumpsite for material that is dredged fromthe Cuyahoga River bottom to keepthe shipping channel clear. The citywill need at least 300,000 cubic yardsof material to fill and cover the Flatsproperty. That’s at least a year of river dredging material.

The city has three other propertiesit is redeveloping for its industrialland bank. Two are on the West Side.One is the 22-acre former MidlandSteel plant, and the other, called theTrinity site after a building that hadbeen on the property, is 5.6 acres.The city also is marketing three acresin the Flats that once housed a city-owned asphalt plant. ■

Ranjan


doesn’t have any desire to bring inthe extra regulator that wouldcome with a holding company.

Nor does he see a need to keepthe extra set of books, to track twosets of earnings and to maintaintwo boards that would almost certainly have the same people onthem — all of which cost money.

That’s because Liberty justwants to do traditional bankingand has no plans to get into sidelines such as insurance or toembark on an aggressive acquisi-tion strategy. A holding company,which can own more than justbanks, would afford such opportu-nities, but Liberty is not pursuing

those ends, Mr. Valerian said.Traditionally, holding companies

have been seen as vehicles thatwere useful in buying, starting upor capitalizing banks and other financial subsidiaries.

Investors buy stock in the holding company, which uses atleast some of that money to serveas capital for the bank or thriftsubsidiary. Unlike a stand-alonebank, a holding company can buyits own stock, so investors can turnto it as a buyer if they need to liquidate their holdings.

And that’s still a good reason toform a holding company, saidRocky River attorney Francis X.

Grady, a regulatory specialist whoadvises small banks across thecountry on such matters.

Strong pointsThe thing investors must

remember, especially today, Mr.Grady warns, is that regulators willexpect the holding company toserve as an ongoing “source ofstrength” to the bank or banks thatit owns. Banks can still upstreamtheir excess earnings to the holdingcompany — but the holding company’s obligation does notend there or with its initial capital-ization of the bank it owns.

FINANCEI N S I D E

AUGUST 16-22, 2010 CRAIN’S CLEVELAND BUSINESS 11

13 ADVISER:PROPOSED RULEFOR REPORTINGREVENUE OPENSEYES.

SMALLBANKS, BIGBURDENS

Bank holding companies sometimes seen as not worth troubleAdditional opportunities afforded by parentdon’t always outweigh another regulator, costs

By DAN [email protected]

Bank holding companiesused to be the norm whenstructuring even a small regional bank, but in light

of recent regulations — and thefortunes of some holding companiesand their directors — they’re oftenbecoming seen more as an unnec-essary burden than a shield againstliabilities or the key to growth and

expansion. “A holding company is just an

extra expense unless you need it,”said Bill Valerian, chairman andCEO of Liberty Bank in Beachwood.“We figure it would be $600,000 to$800,000 in additional annual expenses.”

Mr. Valerian said his bank is doing very well as a stand-alonenationally chartered commercialbank — no holding company,thank you very much — and he See HOLDING Page 13

Despite perceptions, little guys are expecting impact from banking reform

By JAY MILLER [email protected]

According to Michael Van Buskirk, president of the Ohio Bankers League,the recently passed banking reformlegislation will generate 100 pages of

new regulations for each worker of the averagecommunity bank in Ohio.

He said the average small bank in this statehas 40 employees, and he expects the newDodd-Frank Wall Street Reform and ConsumerProtection Act, passed last month by Congressand signed into law by President Barack Obama, to generate at least 4,000 pages of newregulations.

So, not surprisingly, he scoffs at the notionby some that the new law won’t affect the average small bank.

“I think there is a perception that communitybanks, or smaller banks, were largely exemptfrom the bill,” he said. “We believe that’s absolutely untrue.”

He’s especially bugged because, he said,“When you consider these guys had no role incausing the problem, this is a huge burdenthey are going to be addressing.”

Mr. Van Buskirk also complained that thebill created some loopholes that will allowsome small bank competitors, such as autodealers who make car loans, to avoid the same level of regulation as the banks face.

The community banks are exempt from

See SMALL Page 13

“When you consider (small banks) had no rolein causing the problem, this is a huge burdenthey are going to be addressing.”

– Michael Van Buskirkpresident, Ohio Bankers League


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FINANCE

Credit mismatch hurts spendingConsumer scores aredown, while lenders’standards are higher

GOING DOWN

By CHUCK [email protected]

If consumer spending is consid-ered a weapon in the battleagainst recession, then North-east Ohio and the rest of the

country are fighting with somewounded soldiers.

Consumers’ credit scores havedropped during each of the pasttwo years, a trend that could limitconsumer spending and, therefore,slow the economy’s recovery.

Several financial experts inNortheast Ohio say they are seeingmore people with reduced creditscores, referred to as “the credit-scorewounded” by Jay Seaton, area president for the nonprofit Consumer Credit Counseling Service.

For Mr. Seaton’s part, he’s seeingan increase in the number of peoplewho show up to the financial educa-tion seminars he hosts locally, sayingtheir credit scores have been hurt bythe economic downturn. At the sametime, lenders are requiring highercredit scores to get loans, said Mr.Seaton, whose organization is part ofthe Columbus-based Apprisen familyof financial companies.

That mismatch is driving consumers to put off big purchasesso they can repair their credit first.

“The words that are most commonright now: ‘I’m waiting,’” Mr. Seatonsaid.

In April, 17.9% of the U.S. popu-lation had FICO credit scores above800, down from 18.2% in 2009 and18.7% in 2008, according to statisticsfrom Fair Isaac Corp. of Minneapolis,which issues the scores. Conversely,the number of people with badscores is up: 25.5% of the populationin April had scores below 600, compared to 25.2% in 2009 and24.1% in 2008.

Generally, scores above 720 areconsidered good, according to SanFrancisco-based Credit.com, whichprovides financial information to

FICO scores over the past 2½ years indicate an increase in consumer credit risk,according to an analysis of data from Equifax.

Score April 2010 April 2009 April 2008300-499 6.9% 7.4% 7.2%

500-549 9.0 8.7 8.2

550-599 9.6 9.1 8.7

600-649 9.5 9.5 9.6

650-699 11.9 12.0 12.0

SOURCE: WWW.BANKINGANALYTICSBLOG.FICO.COM

consumers.The changes amount to “the first

meaningful decrease in distributionin about 20 years,” said JohnUlzheimer, president of consumereducation for Credit.com. Reducedscores and increased lending standardsalready are resulting in fewer largepurchases and increased interestrates for consumers who do get loans.

He doesn’t expect scores to swingback up anytime soon because it cantake time for people to rebuild them.And they’ll need jobs to do that.

“You can’t pay your way out ofdebt if you’re not employed or you’reunderemployed,” Mr. Ulzheimer said.

Ripple effectLow scores reduce people’s ability

to buy homes and cars or to getmoney to start or expand a business,said Lisa Oliver, president of Key-Bank’s Cleveland District. She addedthat banks also consider other factorsbefore lending money, such as aperson’s income and whether theloan is backed by adequate collateral.

In response to the recession, KeyBank over the last two years has“made the appropriate adjustments”in terms of how strict the bank iswhen evaluating credit scores, Ms.Oliver said. However, she expectsmore people will be able to meet increased standards over time: Shethinks credit scores are inching up.

That would be good news for theeconomy. Credit can fuel purchases,which can help create jobs. As

people make more money, theyshould be able to raise their creditscores further, Ms. Oliver said.

John Martin would go only so faras to say he thinks credit scores arestabilizing. The CEO of EmeraldGroup Credit Union Inc. in GarfieldHeights said his organization overthe past few years has been seeingreduced credit scores among itsmembers, who all live, work, studyor worship in Cuyahoga County. Inrare cases, the credit union has hadto reduce or even cancel lines ofcredit, he said.

Reduced lending hurts the non-profit credit union’s income, Mr.Martin said. He added that lowerscores hurt the economy as a wholenot only because some borrowerscan’t get loans, but also because otherswind up with higher interest rates —and less money in their wallets.

“It’s going to reduce the disposableincome people have,” Mr. Martin said.

Jim Axner, director of mortgagelending for Howard Hanna, said theresidential real estate services company hasn’t felt a big impactbecause of the drop in credit scores.However, he noted that HowardHanna, which is based in Pittsburghand has offices in Cleveland, followslending guidelines set by FreddieMac and Fannie Mae.

Those standards have risen to thepoint where someone with a FICOscore of 620 might have a hard timegetting a home loan.

“A few years ago we had a homefor that score. Today we do not,”Mr. Axner said.

Northeast Ohio’s car dealersaren’t feeling much impact from thedrop in credit scores either, said LouVitantonio, president of the GreaterCleveland Automobile Dealers’ Association. Dealers are shelteredsomewhat because cars cost lessthan homes and because consumerscan opt for less expensive cars if theycan’t get a loan or a good interestrate for more expensive models.

“It’s just affecting the ability of theconsumer to get the absolute high-est-tier rate,” Mr. Vitantonio said.

The upsideSo who might benefit from reduced

credit scores? Maybe so-called payday lenders, who lend freely butcharge particularly high interest rates,said Mr. Ulzheimer of Credit.com.

But the real beneficiaries mightbe the people who need to learn afew hard lessons.

“The silver lining of the creditcrunch is people will start realizing, ‘Imessed up, and I messed up big. I’mthe one that they’re talking about onthe news every night,’” he said. ■

Hometown boy leads Akronbank’s charge into ChicagoFirstMerit’s Greig cut his teeth in Windy CityBy STEVE DANIELSCrain’s Chicago Business

Paul Greig is elbowingback into theChicago bankingmarket, by way of

Northeast Ohio.Four years after leaving

town to become CEO ofAkron-based FirstMerit Corp., thelongtime Chicago banker outbid ahost of far larger banks and privateequity investors in May for Midwest Bank & Trust Co., a failedlender in the Chicago suburb ofMelrose Park. Midwest’s 26 localbranches, along with two smalleracquisitions, made FirstMerit theChicago area’s 14th-biggest bank bydeposits.

Now the former college basketballplayer must prove he can competein his hometown. Chicago is thenation’s most fragmented and hotlycontested banking market.

Nobody knows this better thanMr. Greig, 54, a veteran of Chicago’sAmerican National Bank, the trainingground for many bank CEOs. Before taking over FirstMerit, heran the Chicago-area operations ofCharter One, a unit of Royal Bankof Scotland PLC.

Mr. Greig grew up in Chicago’sMontclare neighborhood, attendingLuther North High School on thecity’s Northwest Side. His fatherwas a shoe buyer for Sears Roebuck& Co., and he describes his upbringing as middle class.

“Just like every other kid, Iplayed a lot of sandlot baseball,”he said. At Wheaton College, heplayed two years of basketball.

The hoops bug bit the 6-foot-6-inch Mr. Greig hard. Until threeyears ago, he says, he played pickup and league basketball fourtimes a week, only giving it up after“too many charley horses.”

“I was afraid that worse was tocome,” he said.

‘Never been shy’After college he joined American

National in 1978 and stayed as thebank was acquired by First ChicagoCorp., then by Bank One Corp. andby JPMorgan Chase & Co.

Those who know Mr. Greig describehim as intense and tenacious.

“He’s never been shy aboutpushing people on the basketballcourt,” said longtime friend TedKoenig, who runs Chicago-basednon-bank lender Monroe CapitalLLC. Whether it’s in the gym or inbusiness, winning “matters tohim,” Mr. Koenig said.

The Midwest Bank deal was aclassic example. With more than $3billion in assets and a solid depositfranchise, Midwest was the mosthighly coveted of the more than 20Chicago-area banks that have failedin the last 18 months. In the FederalDeposit Insurance Corp.’s auction,Mr. Greig left nothing to chance,stomping seven other contenders byoffering a 2.7% premium to thebank’s assets.

Unlike Chicago banking deansJohn McKinnon of Wintrust Financial Corp. and Norman Bobinsof PrivateBank, both of whom

mentored Mr. Greig in hisearly days at American National, Mr. Greig isn’t aconsummate networkerand charmer. He can beblunt and irascible.

“He’s classic Midwest, no pretense,” said StanleyCalderon, one of Mr.Greig’s former bosses at

Bank One and the man who assigned Mr. Greig the job of turningaround Bank One’s underperformingWisconsin franchise in 1999. Mr.Greig improved results, Mr. Calderonsays, not through a brilliant strategybut by setting and enforcing higherstandards.

At FirstMerit, Mr. Greig is turning the financial crisis to hisadvantage by snapping up distressed Chicago-area banks. In less than a year, FirstMerit hasamassed $4 billion in Chicago-areaassets, more than one-quarter ofits $14.5 billion total.

With 54 Chicago-area branches,Mr. Greig’s challenge is to recruit alocal lending team and build fromthe base he’s bought.

And unlike in Northeast Ohio,where FirstMerit has touted itshometown roots to pry businessfrom rivals such as the former National City Corp., which was gobbled up by Pittsburgh-basedPNC Financial Services Group Inc.— Mr. Greig’s bank is the outsider ina market flush with local competitors.

Another bank?“Does Chicago really need

another bank? I certainly don’tthink so,” said John Rodis, an analyst at Howe Barnes Hoefer &Arnett Inc. in St. Louis.

But, like others, Mr. Rodis saidMr. Greig’s familiarity with Chicagohelps put investors’ minds at ease.FirstMerit’s stock is trading atmore than twice its tangible bookvalue, giving it a clear advantageover its Chicago peers, which tradeat no more than 1.3 times tangiblebook value. Unlike most Chicagobanks, FirstMerit stayed profitablethrough the crisis, taking advantageof a loan cleanup Mr. Greig oversawjust before the housing collapse.

Also, FirstMerit repaid its federalbailout funds within months, whileall of Chicago’s midsize banks continue to hold theirs.

With Chicago the growth enginefor FirstMerit and Mr. Greig’s personal connections to the city,many wonder whether he will movethe 165-year-old bank to his home-town. But “as you drive into Akron,the FirstMerit name is everywhere,”said Terry McEvoy, an analyst at Oppenheimer & Co. in New York. “Itwould be very difficult for them toreally pick up and move.”

For his part, Mr. Greig said: “Itwould be unlikely in the immediatefuture to move the headquarters toChicago.”

What about the intermediate orlonger-term future?

“I couldn’t comment.” ■

Steve Daniels is a senior reporter withCrain’s Chicago Business, a sisterpublication of Crain’s ClevelandBusiness.

Greig


If the holding company fails tosupport its bank, the holding company itself can become liable— as witnessed just this summerwhen regulators went after bankruptAmTrust Financial Corp., the former parent of AmTrust Bank.

Regulators seized the bank at theend of 2009 and this summer tookaction to collect more than $500million from the holding company,outside of its bankruptcy proceedings,claiming that the holding companyfailed to serve as a “source ofstrength” for the bank it owned.

“You’ll see that on every enforce-ment action or written agreementbetween a bank and its regulatorstoday,” Mr. Grady said. “Every single one says, ‘The holding company shall serve as a source ofstrength to the subsidiary bank.’”

Some banks are even trying to getout from beneath holding companyparents when those arrangements nolonger provide the bank with the required source of strength. For instance, Ohio Commerce Bank inBeachwood bought out its holdingcompany, Capital Bancorp, last December. What had been a sourceof strength became a parent company that itself was struggling —with bad loans from some of its othermore than 50 bank subsidiaries, Mr. Duncan said.

“They were just the opposite whenwe started,” he said, noting thatwhen Ohio Commerce began opera-tions in 2006, Capital Bancorp had $5

some of the act’s more stringentrequirements on calculating invested capital. However, theystill will have to contend with theregulations created by the new Bureau of Consumer FinancialProtection, such as potential newlimits on debit card fees.

At least those new rules, though,will be enforced on the smallerbanks by their current regulators,such as the Federal Deposit Insur-ance Corp., not the new consumerbureau. The larger banks will havea new set of consumer bureau regulators going over their booksas well as the usual bank examiners.

Wait and seeStill, small banks may be over-

whelmed by the new consumer finance rules and could be forcedto merge. Mr. Van Buskirk said heknows of one bank in Eastern Ohiothat has six employees and nowwill have to pour over and complywith the same thousands of pagesof new regulations that larger,well-staffed banks do.

“Bigger banks have the scale tohave specialists, (regulatory) compliance departments, inter-nally,” he said, while small banks,which have survived and avoidedthe problems of larger banks because of their intimate knowl-edge of their home communities,may be overwhelmed and couldlose their autonomy.

“It’s hard to believe that by forcing(smaller banks) to sell to somebodybigger because they can’t copewith the regulatory tidal wave,

anybody’s interest has beenserved,” he said.

First Federal of Lakewood is takinga wait-and-see approach, since thelegislation is new and enablingregulations have yet to be written.But it expects higher costs.

“We’re not certain exactly how(the legislation) is going to playout — it’s 2,000 pages — but weanticipate increased complianceand administrative costs,” saidThomas Fraser, the bank’s execu-tive vice president and chief lendingofficer. “We haven’t reacted yet,and we’re going to watch the rule-making process.

“The issues and consequenceswill be worked out over the nextsix to 18 months,” he said.

Eloise L. Mackus, interim CEO ofCFBank of Fairlawn, which has fourbanking offices, said she, too, wor-ries about added costs of regulation.

“Our greatest concern, as it waswith TARP and Sarbanes-Oxley, isthat there is a disproportionatenegative impact on smaller insti-tutions,” she said. “There may beunintended consequences forsmall institutions that cannot afford the regulatory burden.”

She said the regulations thatcame with the Troubled Asset Relief Program, or TARP, turnedout to be much more onerous thananyone expected and probablywould have affected how financialinstitutions would have viewedparticipating in the program.

Central Federal Corp., CFBank’sholding company, took a $7 million loan from TARP, whichwas enacted in 2008 to help

strengthen financial institutions.The Sarbanes-Oxley Act of 2002created tighter financial and reporting controls on all publiccompanies and accounting firms.

“We constantly have to addressthe regulations to make sure every-thing we’re doing is compliant,”she said.

Cost of doing businessDaniel E. Klimas, president and

chief executive officer of LNB Bancorp Inc. and Lorain NationalBank, also is concerned abouthigher compliance costs, and heexpects the new law to affect hisbank’s debit card fees income.

“The one that will have the mostimmediate impact is the chargeson fees for debit cards,” he said.“That’s certainly a source of income for us.”

Mr. Klimas said fees are a largerpart of the revenue of many smallerbanks and that debit card fee incomeaccounts for between 5% and 10%of his bank’s fee income. “We’reevaluating all consumer productsto make up lost revenue,” he said,though he added that Lorain National hasn’t yet decided on anychanges in fees, such as eliminatingor reducing free checking accounts.

He also is concerned that figuring out how new regulationswill affect the bank’s operation andmaking sure that the bank properlycomplies will be expensive.

“We have a relatively small staff,and we don’t have a large compli-ance group,” he said. “So we mayhave to outsource (some of thework) or hire some more folks.” ■


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FINANCE

Construction industrywatches potential impactof revenue reporting rule

AARONCOOK

ADVISER

Construction contractorssoon could face a dramaticchange in how they are allowed to book revenue in

their financial statements. The proposed accounting rule would affect many industries, but perhapsnone more so than the constructionindustry that has used the currentmethod for decades.

The rule could have implicationsfor how contracts are written andpriced, how banking and bondingcredit decisions are made, and howperformance is measured.

The change — proposed by theFinancial Accounting StandardsBoard and the International Accounting Standards Board — hasdrawn plenty of criticism from theconstruction industry. Among thecriticism is that the proposal is toobroad and does not adequately address the unique aspects of theconstruction industry. Some arguethat the costs simply outweigh anybenefits from the proposed rule.

Others fear that the new rulecould lead to manipulation of revenue and less consistency in financial statements.

Currently, contractors utilize thepercentage-of-completion methodof revenue recognition. Thismethod recognizes revenue basedon a percentage of the contractprice. Generally, the percentage iscalculated based on the contractcosts incurred to date as a proportionof the estimated total contract cost.

This is commonly known as thecost-to-cost method of calculatingpercent complete. The current ruleis simple, cost-effective and wellunderstood by the industry and itsstakeholders.

Although the proposed rule continues to allow the cost-to-costmethod, it suggests that othermethods more accurately depictcontract performance. One suchmethod calculates the percentage ofcompletion based on the contractor’ssurvey of the goods and services installed to date.

By using this method, a contractorwould need to estimate the value ofthe goods and services transferredto the customer and record thisamount as revenue.

Whereas the cost-to-cost methodis relatively easy to recalculate andcorroborate, the revenue recognizedunder this method would be difficultto challenge by auditors and usersof the financial statements.

In fact, under this method, itwould not be uncommon for twosimilar contractors to draw differentconclusions as to the percentage ofcompletion. This could result inless consistency and comparabilityof financial statements throughoutthe industry.

In addition, under the proposedrule, contractors have more flexibilityin determining a profit center. Under the current rule, the entirecontract is generally accounted foras a single profit center.

This includes any change ordersthat modify the original contract. Theproposed rule allows for distinctcontract performance obligations to

be accounted for as separate profitcenters. A performance obligationis considered distinct if it can besold separately, or if it has a distinctfunction and profit margin.

For example, a contractor mightdetermine that site preparation andsite finishing are distinct performanceobligations separate from otherconstruction services. The contractorwould need to allocate to each performance obligation its stand-alone selling price.

However, in the absence of astand-alone selling price, a contractormust estimate the value of eachperformance obligation. In doing so,the contractor would assign profitto each performance obligation,which may or may not be represen-tative of the economic reality. Thiscould result in revenue recognitionthat differs significantly from thecurrent rule.

It would be difficult for auditorsand users of financial statements tochallenge the contractor’s estimate.Furthermore, because most projectsextend beyond one accounting period, this creates an opportunityto move profit from one period toanother.

For instance, a contractor couldallocate more profit to performanceobligations that are satisfied in a particular accounting period. Consequently, this might entice acontractor to manage contract profitin such a way to comply with bankand bonding credit requirements.

To the extent that contractorscontinue to utilize the cost-to-costmethod and account for contracts asa single profit center, the proposedrule might not have a significantimpact on revenue recognition.

However, the proposed rule provides much more latitude tocontractors who choose the newmethod of accounting. Again, thiscould lead to less consistency andcomparability of financial informa-tion and could provide a vehicle forcontractors to manage earnings.

The accounting boards have notyet announced when the proposedrule will take effect. There may befurther revisions based on publiccomments, which are being takenuntil Oct. 22. At this juncture, it isdifficult to determine if contractorswill choose to change their accounting method.

One thing that appears certain ischange is coming soon, as the finalstandard is scheduled to be issuedin 2011. ■

Mr. Cook is a senior manager with theregional accounting and businessconsulting firm Meaden & Moore,headquartered in Cleveland.

Small: Compliance costs surely will risecontinued from PAGE 11


Holding: Strength may disappearbillion in assets, a strong capital baseand was in fact a source of strength— as well as a willing buyer for minority shareholders in the bank’sfirst few years of operation.

“Unfortunately, their (bankingand loan) concentrations were inplaces like Michigan and Las Vegas,which were not good places to be,”Mr. Duncan said.

Holding companies on holdNow, Ohio Commerce is a stand-

alone state-chartered bank, with noplans of forming a holding companyas it sticks to its basic business oftaking deposits and working hard tomake good loans, said Mr. Duncan.

Might it some day form a holdingcompany? Perhaps, but it wouldprobably require something like avery attractive acquisition of anotherbank that required it to raise morecapital, Mr. Duncan said.

Right now, things are relativelyquiet in the banking arena. Mergersand acquisitions don’t happen as often as they used to. The Internethas made it more difficult for banksto get into insurance or other finan-cial products with the assurance theircustomers will buy them.

And, as Mr. Duncan pointed out,there are a slew of new regulationsmost bankers have yet to understand.

“I think holding companyarrangements, like a lot of things inour industry, are just on hold rightnow,” Mr. Duncan said. ■


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DOWNTOWN CLEVELAND OFFICE BUILDINGSRANKED BY RENTABLE BUILDING AREA

RankNameAddress

Rentablebuilding area

Square feetavailable % leased

Rent persquare foot

($) Tenants

Year builtBuildingheight Owner

Primary leasingcompany

1 Anthony J. Celebrezze Federal Building1240 E. Ninth St. , Cleveland 44114 1,462,628 0 100.0 NA The Defense Finance and Accounting

Service, Cleveland Site, federal offices1966NA U.S. Government U.S. General Services

Administration

2 Key Tower127 Public Square, Cleveland 44115 1,322,917 99,231 95.3 27.00-29.00 KeyCorp, Thompson Hine LLP, Deloitte

LLP1991947

Wells Real Estate FundsNorcross, Ga.

Jacobs Real EstateServices LLC(440) 808-7492Cleveland

3 Huntington Building925 Euclid Ave., Cleveland 44115 1,292,748 335,049 85.7 12.00-16.00

Huntington National Bank, Ernst &Young, Porter, Wright, Morris & Arthur,Tucker Ellis & West LLP

1924289

Optima International LLCMiami Beach

Hines InterestsHouston

4 200 Public Square200 Public Square, Cleveland 44114 1,270,204 220,376 90.7 23.00-25.00

Cliffs Natural Resources, McKinsey &Co., PricewaterhouseCoopers LLP,Management Recruiters International

1985658

Harbor Group InternationalLLCNorfolk, Va.

Grubb & Ellis Co.(216) 861-3040Cleveland

5 Public Square Tech Center158-218 Euclid Ave., Cleveland 44114 932,000 441,000 52.7 18.00-21.00 Cadillac Ranch 1931

NAMorgan Reed GroupMiami


6 Landmark Office Towers101 W. Prospect Ave., Cleveland 44115 900,000 0 100.0 NA Sherwin-Williams Co. 1931

NASherwin-WilliamsDevelopmentCleveland

Breen & Co.(216) 902-8150Cleveland

7 Higbee Building100 Public Square, Cleveland 44113 872,000 435,273 50.1 18.00-21.00 Key Bank, Greater Cleveland

Partnership, Positively Cleveland1931195

Forest Bay Tower City LLCCleveland

CB Richard Ellis Inc.(216) 687-1800Cleveland

8 NorthPoint Tower and Office Complex(1)901-1001 Lakeside Ave. E., Cleveland 44114 820,795 109,530 87.1 18.50-24.00 Jones Day, Oglebay Norton, Kaiser

Permanente, Towers Watson1980; 1990

285CommonWealth REITNewton, Mass.

REIT Management &Research

9 Carl B. Stokes U.S. Courthouse801 Superior Ave., Cleveland 44113 800,000 0 100.0 NA

Federal and district courts, Clerk of theU. S. District Court, U. S. Attorney,Probation Services

2002430

U.S. General ServicesAdministration

U.S. General ServicesAdministration

10 PNC Center1900 E. Ninth St., Cleveland 44114 789,491 0 100.0 NA PNC, Baker & Hostetler LLP 1980

410PNC Realty ServicesPittsburgh NA

11 Tower at Erieview1301 E. Ninth St., Cleveland 44114 703,205 253,052 72.3 13.50-22.50 Dollar Bank, Barnes Group, Walter &

Haverfield LLP, Weston, Hurd LLP1964529

Minshall Development Co.Bethesda, Md.

Chartwell Group LLC(216) 360-0009Cleveland

12 Eaton Center1111 Superior Ave., Cleveland 44114 614,850 131,883 94.0 13.50-17.50 Eaton Corp., Hyatt Legal Plans Inc.,

Brown Gibbons Lang & Co.1983356

Sovereign Group LLCNew York


13 Terminal Tower50 Public Square, Cleveland 44113 585,000 97,631 83.3 15.00-22.00

Forest City Enterprises Inc.,Morgenthaler Ventures, Riverside, FallsCommunications

1930708

Forest City Enterprises Inc.Cleveland


14 1100 Superior Ave.1100 Superior Ave. E., Cleveland 44114 576,086 133,583 79.3 11.00-19.95 First American Title Insurance Co.,

Littler Mendelson PC1972280

American LandmarkProperties Ltd.Skokie, Ill.


15 Penton Media Building1300 E. Ninth St., Cleveland 44114 575,000 52,891 93.8 15.50-19.00 Penton Media, Chartis 1972

270KBS Realty AdvisorsNewport Beach, Calif.


16 One Cleveland Center1375 E. Ninth St., Cleveland 44114 541,505 144,089 79.0 8.00-22.00

Sammy's Catering, Internal RevenueService, Kohrman, Jackson Krantz PLL,KPMG

1983450

Optima Management GroupLLCMiami Beach

Optima ManagementGroup LLCMiami Beach

17 Fifth Third Center600 Superior Ave. E., Cleveland 44114 508,397 86,169 88.2 19.00-22.00

Fifth Third Bank, McDonald HopkinsLLC, UBS Financial Services, BrouseMcDowell, Buckley King

1992446

Behringer HarvardAddison, Texas


18 IMG Center1360 E. Ninth St., Cleveland 44114 506,656 26,919 94.7 12.00-17.00

IMG Worldwide Inc., MAI WealthAdvisors LLC, Oswald Cos., ChicagoTitle

1965NA

Manchester Realty LLCCleveland

Breen & Co.(216) 902-8150Cleveland

19 Key Bank Center800 Superior Ave., Cleveland 44114 475,600 139,204 84.7 18.00 KeyCorp, Calfee Halter & Griswold 1969

305LNR Partners LLCMiami Beach


20 45 Erieview Plaza45 Erieview Plaza, Cleveland 44114 463,992 213,943 NA 17.00-19.00 AT&T 1983

253Inland American Real EstateTrustOak Brook, Ill.

Jones Lang LaSalleAmericas Inc.(216) 861-7171Cleveland

21 Frank J. Lausche State Office Building615 W. Superior Ave, Cleveland 44113 456,610 0 100.0 NA

Ohio Lottery Commission, Adult ParoleAuthority, Bureau of Workers'Compensation

1979204

Ohio Building AuthorityColumbus

Jones Lang LaSalleAmericas Inc.(216) 861-7171Cleveland

22 Hanna Building1400-1422 Euclid Ave., Cleveland 44115 437,060 145,396 77.9 13.00-15.50

Turner Construction, The ClevelandFoundation, Great Lakes Publishing,Moscarino & Treu, United Agencies

1921194

PSC Hanna BuildingCleveland

PlayhouseSquare RealEstate ServiceCleveland

23 M.K. Ferguson Building - Tower City Center1500 W. Third St., Cleveland 44115 434,491 69,637 84.0 15.50-18.00 JPMorgan Chase & Co., Quicken Loans

Inc., Squire Sanders & Dempsey LLP1934NA



24 Ameritrust Tower900 Euclid Ave., Cleveland 44115 428,400 428,400 0.0 NA NA 1971

383Cuyahoga CountyCleveland

Cuyahoga CountyCleveland

25 55 Public Square55 Public Square, Cleveland 44113 423,821 107,576 82.0 16.00-18.00

Computer Task Group, Climaco,Mansour, Gavin, Gerlack & Manos,Polytech Inc., Zashin and Rich LPA

1958300

Optima 55 Public SquareLLCMiami Beach

Optima ManagementGroup LLCMiami Beach

26 Halle Building1228 Euclid Ave., Cleveland 44115 383,000 196,545 65.0 15.50-18.00

Grant Thornton LLP, Council forEconomic Opportunities in GreaterCleveland, Michael Baker Jr. Inc.,

1910NA



27 Medical Mutual Building2060 E. Ninth St., Cleveland 44115 381,000 0 100.0 NA Medical Mutual 1910

NABentleyForbesLos Angeles NA

28 Standard Building1370 Ontario St., Cleveland 44113 350,000 111,387 69.8 10.50-14.50 NA 1925

NABrotherhood of LocomotiveEngineers and TrainmenCleveland

Chartwell Group LLC(216) 360-0009Cleveland

29 1717 E. Ninth St. Building1717 E. Ninth St., Cleveland 44114 346,500 266,666 23.0 23.00 NA 1958

275Sovereign Partners LLCNew York City


30 Ohio Savings Bank1801 E. Ninth St., Cleveland 44114 333,592 39,405 88.2 17.50

Ohio Savings Bank, Boyd Watterson,Gries Financial, Pearne & Gordon LLP,Northwestern Mutual Financial Network

1975250

AmTrust BankFederal Deposit InsuranceCorp.Washington D.C.

NA

31 Skylight Office Tower1660 W. Second St., Cleveland 44113 314,899 77,256 76.4 19.00-23.00

Ulmer & Berne LLP, Capgemini,Skylight Financial Group, Hard RockCafe

1991NA



Source: CoStar Property, www.costar.com. Additional information from web sources and leasing companies. Crain's Cleveland Business does not independently verify theinformation and there is no guarantee these listings are complete or accurate. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com.(1) 901 Lakeside is 100% leased. Square feet available and % leased is for 1001 Lakeside.

RESEARCHED BY Deborah W. Hillyer


In addition, George Kidd is nolonger Chancellor’s president, Mr.Redgate resigned last March and isnow vice president of Light Universityin Forest, Va., and former ChancellorCEO Ronald Kennedy resigned inMay 2009 after six months on thejob.

Last November, Chancellor hireda new CEO, Bob Barker, who wasfounder of EDU Interactive in SanDiego, Calif., and Barker Educa-tional Services of Scottsdale, Ariz.,both of which are education mar-keting firms. He also is no longerwith Chancellor, as confirmed by awoman who answered the mainswitchboard at Chancellor.

Robert Daugherty, who is listedas Chancellor’s interim president onthe Higher Learning Commission’sweb site, last week declined commentabout the school except to refer tohimself as a consultant to Chancellor.Mr. Daugherty is chairman andmanaging partner of Knowledge Investment Partners in Cleveland,which describes itself on its website as an investment managementfirm for institutional investors andhigh net worth individuals.

Other members of the adminis-trative team also were let go in recent months, though Ms. Nita wouldnot comment on those departures,saying the board of directors wouldissue a statement when anychanges in leadership are made.

Chancellor board member GavinGray, an executive at investmentfirm Selected Interests in Austin,Texas, did not return two phonecalls from Crain’s. His secretary saidhe is on vacation and could not return calls until Aug. 23.

The question remains as to whois steering the ship at Chancellor.

Accreditation at riskThe Higher Learning Commis-

sion has questions about leadershipas well. The commission last Feb.25 issued to Chancellor a “Show-Cause Order,” which means Chan-cellor might not meet criteria for accreditation — a critical stamp of approval if schools expect to attractthe tuition dollars of students whorely on financial aid from the government.

Specifically, the commissionquestioned whether Chancellormeets accreditation criteria relatedto board governance, finances andassessment of student learning.

The show-cause order statedChancellor’s “governance and administrative structures (must)promote effective leadership andsupport collaborative processesthat enable the organization to fulfill its mission.”

The order also challenged Chan-cellor on whether its financial resources were sufficient to supportits programs and “for maintainingand strengthening their quality inthe future.” Finally, the commis-sion said Chancellor must demon-strate student learning and teachingeffectiveness, clearly outline itsgoals for student achievement andmust be able to assess educationalprograms effectively.

Chancellor must submit a show-cause report to the commission byDec. 1. The commission then willsend a team to the university to investigate and will decide by February if Chancellor is worthy ofaccreditation. If Chancellor doesnot submit a show-cause report byDec. 1, its accreditation will be

revoked, the commission stated.A show-cause order is more serious

than a probation order, whichChancellor was placed on last year,said Robert Appleson, vice presi-dent of accreditation relations atthe Higher Learning Commission.

“With probation, they’re reallyfinding the institution in danger ofnot meeting criteria of accreditation,”Mr. Appleson said. “With a show-causeorder, the finding is the institutionmay not now be meeting criteria.

“It’s a very difficult situation,”Mr. Appleson added. “Show-causehas very definite issues … than hadbeen raised with probation.”

Big money in the balanceWithout accreditation, students

would not be eligible for federal student aid. That development couldbe devastating for Chancellor because 71% of its students receivedfederal grants and 71% secured federal loans in the 2008-2009 schoolyear, which is the most recent infor-mation available from the NationalCenter for Education Statistics inthe U.S. Department of Education.

A loss of accreditation also wouldmean many college credits earnedby Chancellor students wouldn’ttransfer to other universities. In addition, employers are less likelyto hire graduates of an unaccreditedcollege, Mr. Appleson said.

Losing accreditation “wouldn’tcause the school to close, but itmight make problems for investorsbecause (Chancellor) couldn’t attractstudents,” Mr. Appleson said.

Accreditation isn’t easy to attain,said Kevin Kinser, an associate professor of educational adminis-tration and policy studies who alsostudies for-profit universities at theUniversity at Albany, State Univer-sities of New York.

“They can’t simply move over toanother accrediting agency becausethey’ve been determined ineligibleby one agency,” Mr. Kinser said,who added, “That could really put acrimp on the business plan.”

Last October, the Ohio Board ofRegents told Chancellor to complywith state standards such asdemonstrating faculty credentials,using standardized placement testsand developing a capital equipmentreplacement and financing plan.

The regents ruled that Chancellormet all state standards and the schoolwas granted provisional authoriza-tion for its degree programs. However,Chancellor must submit progressreports to the regents in September2010, 2011 and 2012 to sustain itsprogram authorization.

Hitting up the homelessAccreditation issues haven’t

stopped Chancellor from recruitingstudents, sometimes in unconven-tional ways. In September 2009,Chancellor approached local home-less shelters to recruit the homeless,who are eligible for federal studentloans and grants.

Chip Joseph, executive directorof Y-Haven homeless shelter, saidChancellor officials came to Y-Havenlast fall and promised to providefree group workshops to the home-less in exchange for being able totalk to them about enrolling inclasses at Chancellor.

“They came and spoke to a largemeeting of our residents. A couplewere interested in what they had tooffer, (but) I don’t think they actuallytook the bait,” Mr. Joseph said.

At Chancellor’s request, Lutheran

Metropolitan Ministry presidentand CEO Carol Fredrich attendedan informational meeting last fall atChancellor, which was interested inrecruiting the homeless, said MeganBillow, director of communicationsat the ministry. However, Ms.Fredrick had a bad feeling about theeffort and asked Chancellor not tocontact her again, Ms. Billow said.

“We advocate for people who arerepressed and hurting,” but do notcondone “any behavior that perpet-uates unemployment, homelessnessand poverty,” Ms. Billow said.

Brian Davis, executive director ofthe Northeast Ohio Coalition forthe Homeless, said he had similarexperiences with the University ofPhoenix, the most recent of whichwas last March. The University ofPhoenix, which also is a for-profitschool with locations in NortheastOhio, “claimed they were going toset up computer classes for the general population if they were allowed to come in and make apitch for the University of Phoenix,”Mr. Davis said.

The University of Phoenix was permitted to talk to the coalition’sclients, but the computer classesnever materialized, Mr. Davis said.

“They definitely recruited people,unfortunately, but those guys nevercompleted one semester and they’vestill got the loans,” Mr. Davis said.

In its defense, the University ofPhoenix responded with an e-mailedstatement that read: “University ofPhoenix does not condone the recruitment of residents fromhomeless shelters or transitionalhousing, which would violate multiple provisions of our code ofbusiness conduct and ethics as wellas enrollment policies, resulting in disciplinary action up to and including termination. University ofPhoenix is committed to providingaccess to a quality education, whilebetter identifying and enrollingonly those students who have a rea-sonable chance of success in ourrigorous degree programs.”

Suitor in the wings?Mr. Joseph said he will not allow

Chancellor officials to speak to hisresidents in the future. He relies onCuyahoga Community College,which he said comes in each weekto help the homeless overcome pre-vious, unpaid college loans, applyfor grants and enroll in nonprofitcolleges or vocational schools.

Despite its problems, Chancellormight live on.

David Lee, chancellor at the for-profit University of Northern Virginia,said he and his partners would enter-tain taking Chancellor off the handsof its investors if the school main-tained its accreditation.

UNVA Properties Inc., an invest-ment group associated with theUniversity of Northern Virginia, entered into an agreement in 2007to buy Myers University, but thedeal fell through. While Mr. Lee saidhe and his partners at UNVA lost about$2.5 million in that deal, Chancellorstill is an attractive option.

“Sure, we’re interested, but howinterested depends on what’s goingon,” Mr. Lee said. “UNVA is prof-itable, and we do have resources.”

As for Mr. Welch, the iconic former head of General Electric, itisn’t known what he thinks of thegoings on at Chancellor. Mr.Welch’s secretary said last week heis on vacation and could not bereached for comment. ■


Chancellor: Progress report due Dec. 1continued from PAGE 1


TIF-related debt. Judge Russo toldCrain’s she intends to decide the TIFissue prior to the still-unscheduledsheriff’s sale. A court-approved preliminary judgment indicates USBank would recoup missed TIF pay-ments, but doesn’t speak to futurepayments.

A US Bank filing in the case argues that the judge must requirethe future owner of the property tocontinue TIF payments or it woulddamage the ability of local govern-ments in Ohio to use TIF in the future.

“This will have serious economicrepercussions beyond this case,”Cleveland attorney James Grovewrote in a court filing for US Bank.

Check’s not comingThe TIF issue notwithstanding,

Judge Russo’s partial disposition ofthe case indicates the prized HyattRegency will remain in place.

Hyatt Hotels spokeswoman Laurie Cole said Hyatt intends tocontinue operating the hotel underits long-term management agreement.She said the court decision on theownership would make no changein its day-to-day operations forguest and employees. She declinedto comment on the company standingto lose its 50% stake in the real estate when a sheriff’s sale occurs.

Curt Bailey, president of RelatedMidwest, a unit of Related Cos. inNew York, did not return three callsby Crain’s deadline last week.

Given the severity of the recessionand the weakness of the nationaland local hotel industry, it is unlikelythe property would sell for enoughmoney to cover all the parties thathold debt against the $50 millionproject. That debt includes a $2 million Cuyahoga County loan anda $1 million city of Cleveland loan.

“I’m not waiting for our $2 million

to come in the mail,” said JamesHerron, deputy director of CuyahogaCounty’s economic developmentoffice. “We are so subordinate it’sunlikely there will be anything left.”

Bond insurance would protect investors who bought the TIFbonds, Mr. Herron said.

Asset managementMichael Sturges, owner of Sturges

Advisors, a real estate consultancyin Rocky River, said financial hair-cuts for lenders are likely in theforeclosure sale because bidders figure to be bottom fishers interestedin the hotel only if they can buy it ata substantial discount.

However, Mr. Sturges said Bankof America has shown a tendency toretain ownership of properties it recoups if offers do not meet its desires. He said many veterans ofprior downturns do not want to sellat a discount today to see the prop-erties gain in value later.

The Hyatt will be attractive because of its luxury brand, Mr.Sturges said. The Arcade’s locationwill become more valuable if themedical mart, convention centerand casino become realities at near-by sites, he said.

The makeover of the Arcade adecade ago from stores and officesto the hotel-retail complex mademuch-needed structural repairs tothe 120-year-old indoor shoppingcenter, which was called “a crystalpalace” when it opened in 1890. Observers maintain it was a worthydeal despite the problems today.

“I’m not happy to lose $2 millionof the taxpayer’s money, but youhave to go back and remember thiswas a civic project,” CuyahogaCounty’s Mr. Herron said.

Judge Russo added, “Everyoneworking on this case agrees it is oneof the city’s greatest assets.” ■


concerts last fall at Madison SquareGarden in New York, which featuredrock ’n’ roll royalty — U2 and Messrs.Jagger and Springsteen only weresome of the big names on the pro-gram — performing over two nights.

Terry Stewart, president andCEO of the Rock Hall, said the endowment gives the museum theability to focus on raising long-termfunds that will secure the institu-tion’s future in Cleveland.

“It’s another layer of financial security, a tranche of dollars … tohelp us get things done here,” hesaid.

Indeed, “getting things done” atthe Rock Hall these days encom-passes many elements. Chief amongthem, Mr. Stewart said, are:

■ opening to the public (in May2011) its library and archives on thecampus of Cuyahoga CommunityCollege;

■ completing a major redesign ofthe museum to improve signageand to guide visitors in a morechronological fashion through thehistory of rock music;

■ expanding distance-learningand other educational programs;and

■ staging a 15th anniversary cele-bration Sept. 2-5 that will include a tribute to U.S. Sen. GeorgeVoinovich, who as mayor of Cleve-land and governor of Ohio was

instrumental in helping the RockHall secure funds to guarantee themuseum would be built in Cleveland.

“People are united by the love ofthis music,” Mr. Stewart said. “Wehave honed a business model thatenables us to fulfill the mission ofeducating fans and scholars aboutthe history of the music.”

Game-changerAn important part of making the

museum’s business model sustainableis the creation of the endowment.

Joel Peresman, president andCEO of the Rock Hall Foundation,said 100% of the net proceeds fromthe Madison Square Garden showswere set aside to create the endow-ment. The $5 million contributioncould rise, he said, as the founda-tion reaps additional revenue frominternational broadcast license feesfrom the shows and from sales of aDVD that will be released in lateSeptember. That DVD will includethe four-hour HBO broadcast plus90 minutes of bonus material, Mr.Peresman said.

The shows were a high-profilemarketing event for the Rock Hallthat will have an impact on the museum for years to come, Mr.Peresman said.

“If (the Rock Hall) is going to beon the level of a significant culturalorganization, an endowment iscritical,” Mr. Peresman said. “It’s

something that hopefully can beadded to over time to help keep themuseum at the top of its game.”

Endowments, on the most basiclevel, protect institutions becausethey provide a cushion for theproverbial rainy day when revenuesfall sharply. (And you might havenoticed that in the last coupleyears, it has been pretty rainy.)

David C. Hammack, the HiramC. Haydn professor of history atCase Western Reserve Universitywho has written extensively aboutfoundations and the U.S. nonprofitsector, said an endowment provides“a degree of stability” for institu-tions such as the Rock Hall.

Assuming annual investmentgains of 5%, a $5 million endow-ment would provide the Rock Hallwith an additional $250,000 a year,Prof. Hammack said. The Rock Hallin 2009 had operating expenses of$21.9 million, so $250,000 is a fairlymodest amount, though Prof.Hammack said it would enableRock Hall officials to be “morestrategic in thinking about the typeof exhibits they do and the types ofeducational programs they offer.”

In addition to providing thefunds for the endowment, thefoundation in the past five yearshas contributed more than $13 million to the museum in Cleveland,Mr. Peresman said. Included in thatmoney is annual support for capital

needs, an $8 million gift toward a$35 million capital campaign, and$1 million to develop a long-termdigital strategy and to redesign theRock Hall’s web site, RockHall.com.

“It has just made a huge differ-ence here,” Mr. Stewart said of thestepped-up financial backing forthe museum from the foundation.

Brian Kenyon, chief financial officer at the Rock Hall, said thethree-year, $35 million capital cam-paign is about $1.5 million fromcompletion. It’s that campaign thatis paying for the library and archivesat Tri-C and the museum redesign.Mr. Kenyon said the redesign, whichbegins this fall, will be structured insuch a way that the museum remainsopen throughout the project.

Foot in the doorThe museum’s business model is

based on what Rock Hall officialscall “door, store and more” revenuesthat fund operations.

Mr. Kenyon said 70% to 80% ofRock Hall revenues come in theform of earned income from the“door” — admissions to the museum— and the “store” — sales at themuseum store. The rest falls in the“more” category of contributed in-come such as grants, sponsorshipsand memberships. It’s an unusualmix in the museum world, whereinstitutions typically don’t generatesuch a high percentage of revenue

from admissions and store sales.“Our earned revenues are first in

class,” Mr. Kenyon said. Nonetheless,he said the museum’s long-termgoal is to reduce gradually theearned income percentage and toincrease the percentage from thecontributed side, while at the sametime pushing total revenues higher.

That’s a worthwhile goal, Prof.Hammack said, so the museum isn’t living “hand to mouth” in relyingquite as heavily on admissions. Buthe said the popular nature of the artform the Rock Hall celebratesmakes it easier to sustain a modelthat leans on earned income.

The Rock Hall reported 2009 attendance hit 477,800, an increaseof 8.5% from 2008. Mr. Stewart attributed the rise in part to a downeconomy that kept people close to home, but also to improved marketing efforts that drew visitorsfrom outside the region and to interest stoked by the 2009 Rock Hallinduction in Cleveland.

Mr. Peresman said the museumis in “a strong position” as it turns15 years old but needs to keep innovating to fulfill its mission.

“Even in good economic times,people think carefully about how tospend their money,” he said. “Wehave a rare asset here and need tokeep giving them a good experi-ence so they continue to find valuein what we do.” ■

Ms. Deckard said American Securities paid an undisclosedamount for its equity stake in Fair-mount. To make the deal work,Fairmount borrowed $700 millionthat was used primarily to buyshares from existing shareholders,leaving American Securities with a controlling 51% stake in the company. Fairmount has fewerthan 200 shareholders, and many ofthem have been invested in thecompany for 30 years, she said.

The transaction was the talk ofinvestment banking circles after itclosed Aug. 5. The deal happenedwith the help of 13 banks and“dozens” of private investors — andprobably could not have been puttogether last year, when financingfor buyers such as American Secu-rities was nonexistent, Ms. Deckardtold Crain’s. In addition to the $700million, Fairmount obtained a new$75 million line of credit simultane-ously, Ms. Decker said.

Moody’s Investors Service gaveFairmount a B1 credit rating and astable rating outlook before thedeal closed. Ms. Deckard said thecompany’s debt level as a portion ofits balance sheet has been higher inthe past and that Fairmount was“very comfortable” with the newdebt taken on.

Fairmount provides specializedsand to oil and gas producers,foundries and other industrial users.It had 2009 revenues of $400 millionin a “down” year, and has alwaysbeen profitable, Ms. Deckard said.

Three birds with one stoneThe deal with American Securities

gives Fairmount a new partner andsource of additional capital if itneeds it for its ongoing capital expansion plans, Ms. Deckard said.

In the meantime, the transactionaccomplishes two other goals. It allows the company to diversify theholdings of its employee pensionplan and to provide some liquidityfor its long-term investors.

The pension plan holds Fairmountstock as well as other investments.As the value of Fairmount stockwent up, it came to represent agreater percentage of the plan’sholdings, according to FairmountCEO Chuck Fowler. The new cashwill allow Fairmount to liquidatesome of that stock and diversify theplan’s investments.

Fairmount could have cashedout some of its longtime investorson its own, but that would havemeant using debt and other financialresources that would be better puttoward its ongoing expansion, Ms.Deckard said. Some of the company’schief markets, in particular the oiland gas exploration market, itslargest, have been growing rapidlythis year. As a result, Fairmount hasbeen investing heavily in the UnitedStates, Mexico and China to takeadvantage of higher demand for itssand, which is used in fracturingtechniques that help extract hydro-carbons from oil and gas wells.

When the company saw a chanceto better its existing shareholders,its employee stock plan and its capital expansion strategies all atonce, it took advantage of it.

“Those three significant capitalneeds, all coming at the same time,combined with what we felt was alot of available money in the invest-ment arena looking for good assets,”made the transaction compelling,Ms. Deckard said.

In its comfort zoneThis is not the first time Fairmount

has had a private equity firm as a

majority shareholder. Beachwood-based Kirtland Capital Corp. held a51% stake in Fairmount from 1996to 2003, said Kirtland CEO JohnNestor. Mr Nestor said Fairmountwas a great investment for Kirtland,and Ms. Deckard said the experiencehelped give Fairmount the confi-dence to work with another well-respected private equity firm suchas American Securities.

Mr. Nestor said he was happy tosee some of Fairmount’s othershareholders benefit from the deal.

American Securities did not com-ment on the reasons for its investment.However, in an e-mailed statement,American Securities managing director Matthew LeBaron said hisfirm “is pleased to have acquired amajority interest in Fairmount Minerals, and to partner with thecompany’s management team tosupport the continued growth ofthe business.”

Ms. Deckard said Fairmount like-wise is pleased that American Secu-rities makes investments for as longas 25 years instead of the five- toseven-year investment cycles ofmost private equity firms and thatit’s fully supportive of Fairmountcontinuing its contributions to organizations in Northeast Ohio.Fairmount runs a foundationthrough which it funnels severalmillion dollars each year to variousnonprofits, Ms. Deckard said.

“Supporting the local community,especially in Geauga County, is veryimportant to us,” Ms. Deckard said.

The deal will have no effect onFairmount’s more than 500 em-ployees, including the approxi-mately 100 who work in Chardon.

“We will not expect any changesas a result of this transaction, otherthan some augmented capabili-ties,” Ms. Deckard said. ■

Endowment: Foundation backing ‘a huge difference’

Fairmount: Investments now diversified


continued from PAGE 1continued from PAGE 3

Arcade: Lender may hold property


Type: Employer’s withholding, unemploymentAmount: $122,561

Little Miracles Child Care andLearning Center Inc.22683 Euclid Ave., EuclidID: 34-1691019Date filed: July 9, 2010Type: Employer’s withholding, unemploymentAmount: $110,541

Lassiter Corp. Financial Bookkeeping Services3700 Kelley Ave., Cleveland

ID: 34-1271717Date filed: July 7, 2010Type: Employer’s withholding, unemploymentAmount: $89,027

Great Lakes Welding & Boiler Co.5716 Brookpark Road, ClevelandID: 34-1244690Date filed: July 1, 2010Type: Employer’s withholding, failureto file complete returnAmount: $86,813

Menber Corp., Pizza Pan15240 Trails Landing, Strongsville


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TAX LIENSThe Internal Revenue Service filed taxliens against the following businessesin the Cuyahoga County Recorder’sOffice. The IRS files a tax lien to protect the interests of the federalgovernment. The lien is a public notice to creditors that the govern-ment has a claim against a company’sproperty. Liens reported here are$5,000 and higher. Dates listed arethe dates the documents were filed inthe Recorder’s Office.

LIENS FILEDAutomatic Stamp Products Inc.1822 Columbus Road, ClevelandID: 34-0665901Date filed: July 9, 2010Type: Employer’s withholdingAmount: $327,117

PJO Inc.20800 Center Ridge Road, Rocky RiverID: 34-1923810Date filed: July 7, 2010

ID/file date: 20-3870400/July 13, 2010Type: Employer’s withholding, unemploymentAmount: $61,209

Viatical Escrow Services LLC1300 E. Ninth St., No. 1400, ClevelandID/file date: 31-1522795/July 7, 2010Type: Employer’s withholdingAmount: $49,696

Medical Care Center LLC1250 Superior Ave. E., ClevelandID/file date: 34-1905631/July 7, 2010Type: Employer’s withholdingAmount: $49,522


Forest City? Green space? It makes perfect sense■ Forest City Enterprises Inc. is planning aplanet-friendly experiment with the old JCrew store in Tower City Center.

The Cleveland-based real estate developerbefore the holiday seasonaims to turn the two-storyretail space into a sustain-ability hub tentatively calledthe Green Exchange.

Forest City is just startingto recruit tenants, which couldinclude retailers selling recycled and environmentallyfriendly goods, farmers ped-dling fresh produce or evennonprofits spreading theword about sustainability issues. Among those Forest

City is trying to lure are large retailers openingsmaller versions of their stores focused solely on “green” products, said Jill Ziegler,program manager for sustainability initia-tives with Forest City.

“We’ve envisioned all sorts of possibilities,”Ms. Ziegler said.

Though the location could change, ForestCity prefers the J Crew space, which consistsof 8,000 square feet on two floors overlookingthe food court and could accommodate astreet entrance. Forest City has createdsketches showing what the Green Exchangemight look like: A long sign made of recycledwood hangs over the entrance, and moreused wood beams line the ceiling. Recycledchain link fences separate each store.

The character of the space largely will bedetermined by what tenants sign on, Ms.Ziegler said. The company surveyed morethan 40 relevant companies and organiza-tions, and 80% expressed interest, she said.

Various shops that sell green productshave popped up throughout the region overthe past two years, partly driven by growingenvironmental awareness.

Tower City would be a great spot for suchstores, Ms. Ziegler said, because it is easy toget to by bus, rapid train or foot.

“It really makes sense to have somethinglike this down here,” she said. — ChuckSoder

For this renaissance man, the play’s now the thing■ Joel Levin isn’t just an entrepreneur, alawyer, an academic or an author.

Like his hero, former Supreme Court Justice Benjamin Cardoza, Mr. Levin doesn’tthink people should be characterized sosimply. After all, what’s to stop him from becoming, say, a playwright?

A play written by the Cleveland Heightsresident will debut at a small theater in Sedona, Ariz., this September.

The play, “Marrano Justice,” focuses onthe professional and personal life of Mr.Cardoza, a massively influential judge whowas both Hispanic and Jewish. However,Mr. Levin does take a few artistic liberties:During the play, set in the 1920s and 1930s,Mr. Cardoza is visited by the long-deadTomás de Torquemada, a leader of theSpanish Inquisition. The two men argue

about the Inquisition, a tribunal that killedthousands of non-Christians starting in the1490s. Mr. Cardoza, as you might guess, argues on the side of tolerance.

Mr. Levin founded both Think-A-Moveand Milicom, sister companies in Beach-wood designing equipment for the military,medical and telecommunications sectors.He heads Levin & Associates law firm indowntown Cleveland, holds a professorshipat Case Western Reserve University and haswritten three books on law.

And a play.“You can be a lot of things,” he said. —

Chuck Soder

Lakewood seeks helpinghand for entrepreneurs■ The city of Lakewood is looking for somehelp for its small businesses, so it is creatingan Entrepreneur-in-Residence program.

Nathan Kelly, Lakewood’s director ofplanning and development, said the citywants someone who can offer advice andhelp Lakewood’s small and home-basedbusinesses find the financial resources togrow. The city’s request for proposals says itwill provide flexible hours, office space and a“modest stipend” for the part-time position.

The western suburb is partnering with theLakewood Chamber of Commerce, Pillars ofLakewood and Lakewood Alive to sponsorthe program.

Interested candidates should submit theirrésumés and proposals to the city by noonon Friday, Aug. 27. The RFP is available on-line at www.onelakewood.com. — Jay Miller

WHAT’S NEW

REPORTERS’ NOTEBOOKBEHIND THE NEWS WITH CRAIN’S WRITERS

THEINSIDER

THEWEEK AUGUST 9 – 15

The big story: Rock Gaming LLC, a companyheaded by Cleveland Cavaliers owner DanGilbert, selected Harrah’s Entertainment Inc. as

its partner in a joint venturethat would develop and operate planned downtowncasinos in Cleveland andCincinnati. And the two revealed that a temporarycasino in Cleveland could bein place by as early as nextyear in the former HigbeeBuilding, which is close to

the planned development site of a permanentcasino near the Cuyahoga River. The two com-panies said proposed terms of their non-bindingjoint venture agreement “contemplate Harrah’smaking a significant minority investment in theprojects and serving as the day-to-day casinomanager in both cities.”

Powering down: FirstEnergy Corp. plans toreduce operations at some of its smaller powerplants in a move that could result in a writeoff ofup to $287 million, or as much as 59 cents ashare, in the third quarter. The Akron-basedelectric company said the reductions will takeplace at three Northeast Ohio plants and one inNorthwest Ohio due to lower demand for elec-tricity in the sluggish economy. FirstEnergy saidcoal-fired plants in Ashtabula, Cleveland andEastlake, and three of four units at a plant in Oregon, Ohio, near Toledo, will operate only ona limited basis.

A call for change: Investor Umberto Fedelihas acquired a 5.2% stake in LNB Bancorp Inc.,the parent of Lorain National Bank, where hehopes to bring change to a company he says is at a “critical crossroads.” Among the possiblechanges envisioned by Mr. Fedeli: reducing thesize of the company’s board and exploring amerger with another Northeast Ohio bank. Mr.Fedeli, president and CEO of The Fedeli Group,an insurance brokerage and consulting firm inIndependence, and a longtime investor in localbanks, disclosed his ownership of 383,500 sharesof LNB stock in a Securities and Exchange Commission filing. He acquired the shares foran aggregate purchase price of $1.35 million.

Public plans: Trucking company Panther Expedited Services Inc. in Seville filed paperworkwith the Securities and Exchange Commissionfor a proposed initial public offering of its common stock. Panther said it hasn’t determinedthe number of shares it plans to offer or the pricerange at which the stock would be sold. Thestock would be sold by Panther, and if the under-writers exercise their over-allotment option, bycertain selling stockholders. Panther only wouldreceive proceeds from stock sold by the company.

Cleaning up: Primus Capital Funds of May-field Heights and Great Hill Partners LLC ofBoston acquired SterilMed Inc., a Minnesotacompany that cleans what otherwise would besingle-use medical devices. The two private equity firms said they invested in SterilMed because of its growth trajectory and because its services help hospitals cut costs. SterilMed provides reprocessed devices and small equip-ment repair services to more than 1,700 healthcare facilities in North America.

Here to stay: The Mid-American Conferenceannounced an extension of its contract withQuicken Loans Arena and will hold its men’sand women’s basketball tournaments at The Qthrough 2017. The men’s tournament has beenheld at The Q/Gund Arena since 2000, the winnerreceiving an automatic bid into the NCAA tour-nament. There was some doubt about the futureof the women’s tournament, but it too will con-tinue in Cleveland.


Excerpts from blog entries on CrainsCleveland.com.

BEST OF THE BLOGS

Kennedy Center presidentis at their Beck and call■ The Beck Center for the Arts in Lakewoodwas one of the institutions mentioned in aWashington Post story about the efforts ofKennedy Center president Michael M. Kaiserto help arts organizations nationwide.

Mr. Kaiser recently completed a 15-month, 50-state “Arts in Crisis” tour in whichhe participated in forums with 11,000 artists,arts administrators and board members.

Some were at the Beck Center, which inspring 2009 was in danger of not making itspayroll and was facing weak ticket sales forshows such as “Ma Rainey’s Black Bottom”and “The Farnsworth Invention.”

Lucinda Einhouse, president of theBeck Center, told The Post, “Every-one in the region was uneasy aboutthe economy. Our organization hadno cash reserves.” Ms. Einhouse“sent out an appeal for $150,000,saying if the money wasn’t raised,the doors would close. It worked,”the newspaper reported.

In a meeting in April 2009 with Mr.Kaiser and the Kennedy Center staff,she said, “They commended us forour honesty and transparency. Oneof the things that Michael Kaiser told uswas the importance of the visibilityof the institution during a ... crisis.”

So when Mr. Kaiser stopped inCleveland again during his tour, ThePost said, Ms. Einhouse was there,ready to heed other dictates, such as:If you have to make reductions, start in theback office, and promote what you do best.

“Right now we are doing ‘The Producers’and it is selling gangbusters,” Ms. Ein-house said.

Taxpayers see redover traffic cameras■ Red-light traffic cameras are becoming ahot political topic in Cleveland and else-where, according to an Aug. 8 story in TheNew York Times.

Matt Brakey, a 29-year-old Republicanbusinessman seeking a spot on the Cuya-hoga County Council, was among the politi-cians cited in the piece. He proclaimed hisopposition to the cameras at a recent rally.

“There were lots of honks” at the inter-section where the rally was held, said Mr.Brakey, a first-time candidate for office.“This issue really taps into the general dissatisfaction with government.”

The Times said outrage over the cameras“echoes the general concerns about

government that have fueled protestmovements like the Tea Party. But the

protests also underscore the stingmany Americans feel in these eco-nomic times at having to pay finesof $25, $50 or $100 for traffic in-fractions that, in some cases, theyhad no idea they committed.”

Mr. Brakey told the newspaper,“It’s a huge pocketbook issue. I’vetalked to people who can’t renewtheir driver’s license because they

have all these tickets.” Nearly 550 local governments na-

tionwide use traffic cameras, whicharen’t very good at doing whatthey’re supposed to do.

“A study of seven communitiesby the Federal Highway Administra-tion found that while broadside col-

lisions were reduced by 25% at intersec-tions with traffic lights that had a camera,there was also a 15% increase in rear-endcollisions, possibly caused by driversslamming on their brakes at the sight ofthe devices,” The Times reported.

COMPANY: Duck-brand Duct Tape,AvonPRODUCT: Zig-Zag Zebra, SpottedLeopard and other new tape patterns

You’re not still using silver duct tape, areyou? If so, there’s a colorful new world outthere, and the people who make Duck-brandduct tape are making it brighter.

The company says its new designer tapesoffer a dash of inspiration for creative craftprojects or some pizzazz to household repairs.

Making their debuts as the first animalprints in the Duck tape line are Zig-Zag Zebraand Spotted Leopard. If you want to channelyour inner flower child, check out Cosmic Tie-Dye, a bright mix of pink, orange and yellow.It joins the previously released Totally Tie-Dye, a meshing of cool blue, purple and pinktones.

There are two other new color patterns.The flame-inspired Hot Rod Duck tape crackles with bursts of yellow and orangefire. And the Digital Camo Duck tape offers apixelated blend of neutral earth tone colors.

These new patterns join more than 20Duck brand colors and patterns.

For information, visit www.DuckBrand.com.

Send new product information to managingeditor Scott Suttell at [email protected].

FILE PHOTO/MARC GOLUB

Gilbert


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