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20130429-NEWS--25-NAT-CCI-CL_--

4/26/2013

2:43 PM

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JASON MILLER

Home-delivery tubes for The Plain Dealer and the Elyria Chronicle-Telegram are shown along a street in Avon, which is one of the areas in which the Chronicle-Telegram hopes to take advantage of the PD’s reduced home delivery.

CAN SUBURBAN DAILIES MOVE IN ON PD’S TURF? Smaller NE Ohio papers plan to take advantage of cut in home delivery by their big rival By JAY MILLER jmiller@crain.com

BILL BISHOP

Bill Hudnutt, general manager of the Elyria Chronicle-Telegram, left, is shown with Paul B. Martin, president and CEO of Lorain County Printing and Publishing Co.

NEWSPAPER CIRCULATION

17

Daily Sunday Akron Beacon Journal x-82,054 116,546 Elyria Chronicle-Telegram 24,274 24,014 (Lake County) News-Herald 37,218 34,570 (Lorain) Morning Journal 22,487 21,046 Medina Gazette 11,853 — ■ x-The Beacon Journal daily circulation is Monday through Friday only. The paper’s Saturday circulation is 101,430. ■ Source: Alliance for Audited Media. Average paid circulation as of Sept. 30, 2012.

T

he handful of Northeast Ohio newspapers that plan to continue publishing seven days a week see a modest opportunity ahead when The Plain Dealer cuts back home delivery to three days a week later this summer. However, none is expected to make a full-blown assault on the Cleveland market, as has happened in New Orleans after that city’s Times-Picayune switched to publishing only three days a week. Although it is too early for them to say definitely what their plans will be — particularly because The Plain Dealer hasn’t said which days, other than Sunday, it will offer home delivery — publishers of the region’s larger community newspapers said they are gearing up for possible circulation inroads on the edges of their current footprints. See SUBURBAN Page 22

0

NEWSPAPER

74470 83781

7

SPECIAL SECTION

FINANCE Few advisers are in their 20s and 30s, which is a concern to many firms ■ Pages 15-19 PLUS: ADVISER ■ PUBLIC VS. PRIVATE ■ & MORE

Entire contents © 2013 by Crain Communications Inc. Vol. 34, No. 17


20130429-NEWS--26-NAT-CCI-CL_--

4/25/2013

12:08 PM

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$ YOUR WEALTH IS ABOUT MORE THAN DOLLARS AND CENTS. IT’S ALSO ABOUT KEEPING THE FAMILY BUSINESS IN THE FAMILY. That’s why Fifth Third Private Bank Advisors want to know about more than just your assets. Asking about your family, passions and the legacy you want to create helps us design a personalized plan specifically tailored to accomplish your goals. Put our more than 100 years of curiosity to work for you. And the family business. Learn more at 53.com/privatebank. Deposit and credit products provided by Fifth Third Bank. Member FDIC. Equal Housing Lender. Fifth Third Private Bank is a division of Fifth Third Bank offering banking, investment and insurance products and services. Fifth Third Bancorp provides access to investments and investment services through various subsidiaries, including Fifth Third Securities. Fifth Third Securities is the trade name used by Fifth Third Securities, Inc., member FINRA/SIPC, a registered broker-dealer and registered investment advisor. Registration does not imply a certain level of skill or training. Investments, investment services and insurance: Are Not FDIC Insured - Offer No Bank Guarantee - May Lose Value Are Not Insured By Any Federal Government Agency - Are Not A Deposit Insurance products made available through Fifth Third Insurance Agency, Inc. © Fifth Third Bank 2013.

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20130429-NEWS--1-NAT-CCI-CL_--

4/26/2013

2:41 PM

Page 1

$2.00/APRIL 29 - MAY 5, 2013

State could give area incubators major makeover Proposal would push groups to share money, get startups out faster By CHUCK SODER csoder@crain.com

JASON MILLER

Home-delivery tubes for The Plain Dealer and the Elyria Chronicle-Telegram are shown along a street in Avon, which is one of the areas in which the Chronicle-Telegram hopes to take advantage of the PD’s reduced home delivery.

Big changes could be on the way for Ohio business incubators that receive state money — and they are changes some incubator directors don’t like. The Ohio Third Frontier Com-

CAN SUBURBAN DAILIES MOVE IN ON PD’S TURF? Smaller NE Ohio papers plan to take advantage of cut in home delivery by their big rival By JAY MILLER jmiller@crain.com

BILL BISHOP

Bill Hudnutt, general manager of the Elyria Chronicle-Telegram, left, is shown with Paul B. Martin, president and CEO of Lorain County Printing and Publishing Co.

NEWSPAPER CIRCULATION

17

Daily Sunday Akron Beacon Journal x-82,054 116,546 Elyria Chronicle-Telegram 24,274 24,014 (Lake County) News-Herald 37,218 34,570 (Lorain) Morning Journal 22,487 21,046 Medina Gazette 11,853 — ■ x-The Beacon Journal daily circulation is Monday through Friday only. The paper’s Saturday circulation is 101,430. ■ Source: Alliance for Audited Media. Average paid circulation as of Sept. 30, 2012.

T

he handful of Northeast Ohio newspapers that plan to continue publishing seven days a week see a modest opportunity ahead when The Plain Dealer cuts back home delivery to three days a week later this summer. However, none is expected to make a full-blown assault on the Cleveland market, as has happened in New Orleans after that city’s Times-Picayune switched to publishing only three days a week. Although it is too early for them to say definitely what their plans will be — particularly because The Plain Dealer hasn’t said which days, other than Sunday, it will offer home delivery — publishers of the region’s larger community newspapers said they are gearing up for possible circulation inroads on the edges of their current footprints. See SUBURBAN Page 22

0

NEWSPAPER

74470 83781

7

SPECIAL SECTION

FINANCE Few advisers are in their 20s and 30s, which is a concern to many firms ■ Pages 15-19 PLUS: ADVISER ■ PUBLIC VS. PRIVATE ■ & MORE

Entire contents © 2013 by Crain Communications Inc. Vol. 34, No. 17

mission is considering three ideas that would reshape the state’s Edison Technology Incubator Program. If the commission adopts the ideas as they stand, the program’s 11 incubators would need to compete with other incubators for state money. They’d also need to push more mature companies to set up shop elsewhere, in some cases. And they’d need to take one-third of the money they spend on operations and give it directly to the startup companies they support. See INCUBATORS Page 24

INSIDE It’s the go-to team in sports Buffy Filippell, left, and her 24/7 virtual job fair, TeamWork Online, works with almost all of the clubs in pro sports. The company matches potential employees and teams with vacancies. PAGE 3

Clinic’s Alliance is growing stronger More than 5,100 independent docs are gaining access to hospital system By TIMOTHY MAGAW tmagaw@crain.com

The Cleveland Clinic is in the hunt for independent physicians who want a taste of the way the health care behemoth practices medicine — a quest that, if successful, could offer the Clinic exposure in new geographic markets without the cost of hefty capital investments. As part of its so-called Quality Alliance, the Clinic isn’t necessarily looking to gobble up independent physician practices and slap the Clinic logo on their doors. Instead, the health system is offering independent doctors access to clinical data, protocols for caring for certain conditions and a robust information technology

platform that allows physicians to track their patients’ progress and compare the performance of their practices with others in the alliance. “Our goal isn’t to have everybody become a mini Cleveland Clinic,” said Dr. Tarek Elsawy, chief medical officer of the Clinic’s Community Physician Partnership and Quality Alliance. “Our goal is to leverage the knowledge we’ve developed here and share it with our partners.” Launched in 2010, the Quality Alliance initially was developed as a way for the Clinic to align with private practice physicians that worked with the Clinic’s eight community hospitals in Northeast Ohio. The alliance began with 50 physician members and since has ballooned to include more than 5,100 members — a collective that now includes the Clinic’s own docs. After seeing success locally, the Clinic started pitching the benefits of the Quality Alliance beyond See ALLIANCE Page 23


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4/26/2013

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CRAIN’S CLEVELAND BUSINESS

COMING NEXT WEEK Difficulties of going global How does a company or entrepreneur pursue opportunities across the globe? Crain’s will explore that topic and much more, including staffing concerns, in next week’s International Business section.

REGULAR FEATURES Big Issue .....................11 Classified ....................24 Editorial ......................10 From the Publisher ......10

Going Places ...............13 Letters ........................10 Reporters’ Notebook....25 What’s New..................25

WWW.CRAINSCLEVELAND.COM

APRIL 29 - MAY 5, 2013

CHIPPING IN In the private sector, 82% of workers who received medical care benefits were required to share in the cost of single coverage, and 91% of workers were required to share in the cost of family coverage, according to March data compiled by the U.S. Bureau of Labor Statistics. The smallest establishments — those employing 49 workers or fewer — were more likely to provide coverage at no cost to employees than large companies. Here’s a breakdown of the data:

Contribution requirement

No employee contribution

All

1-49 workers

SINGLE COVERAGE 18% 25%

500+workers

13%

Employee contribution required

82%

75%

87%

Contribution requirement

All

1-49 workers

500+workers

No employee contribution

FAMILY COVERAGE 9% 12%

Employee contribution required

91%

88%

Source: U.S. Bureau of Labor Statistics; www.bls.gov

10% 90%

700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 Phone: (216) 522-1383 Fax: (216) 694-4264 www.crainscleveland.com Publisher/editorial director: Brian D. Tucker (btucker@crain.com) Editor: Mark Dodosh (mdodosh@crain.com) Managing editor: Scott Suttell (ssuttell@crain.com) Sections editor: Amy Ann Stoessel (astoessel@crain.com) Assistant editor: Kevin Kleps (kkleps@crain.com) Sports Senior reporter: Stan Bullard (sbullard@crain.com) Real estate and construction Reporters: Jay Miller (jmiller@crain.com) Government Chuck Soder (csoder@crain.com) Technology Dan Shingler (dshingler@crain.com) Energy, steel and automotive Tim Magaw (tmagaw@crain.com) Health care and education Michelle Park (mpark@crain.com) Finance Rachel Abbey McCafferty (rmcafferty@crain.com) Manufacturing and energy Research editor: Deborah W. Hillyer (dhillyer@crain.com) Cartoonist/illustrator: Rich Williams Marketing director: Lori Yannucci Grim (lgrim@crain.com) Events Manager/Operations & Logistics: Christian Hendricks (chendricks@crain.com) Events Manager/Promotions & Sponsor Relations: Jessica Snyder (jdsnyder@crain.com) Advertising director: Nicole Mastrangelo (nmastrangelo@crain.com) Senior account executive: Adam Mandell (amandell@crain.com) Account executives: Dawn Donegan (ddonegan@crain.com) Andy Hollander (ahollander@crain.com) Lindsie Bowman (lbowman@crain.com) John Banks (jbanks@crain.com) Sales and marketing assistant: Michelle Sustar (msustar@crain.com) Office coordinator: Denise Donaldson (ddonaldson@crain.com) Digital strategy and development manager: Stephen Herron (sherron@crain.com) Web/Print production director: Craig L. Mackey (cmackey@crain.com) Production assistant/video editor: Steven Bennett (sbennett@crain.com) Graphic designer: Lauren M. Rafferty (lrafferty@crain.com) Billing: Susan Jaranowski, 313-446-6024 (sjaranowski@crain.com) Credit: Todd Masura, 313-446-6097 (tmasura@crain.com)

Crain Communications Inc. Keith E. Crain: Chairman Rance Crain: President Merrilee Crain: Secretary Mary Kay Crain: Treasurer William A. Morrow: Executive vice president/operations Brian D. Tucker: Vice president Paul Dalpiaz: Chief Information Officer Dave Kamis: Vice president/production & manufacturing Mary Kramer: Group publisher G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan, 48207-9911, or email to customerservice@crainscleveland.com, or call 877-824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777. Reprints: Call 1-800-290-5460 Ext. 125 Audit Bureau of Circulation


20130429-NEWS--3-NAT-CCI-CL_--

4/26/2013

1:55 PM

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APRIL 29 - MAY 5, 2013

CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

3

INSIGHT

Schools buy into technology boom Startups respond to growing reliance of students, teachers on innovative tools By CHUCK SODER csoder@crain.com

A few weeks ago, Don Greenberg had lunch with a superintendent who used to forbid students from using their smart phones at school. But his attitude toward technology in the classroom has changed, which bodes well for Mr. Greenberg, CEO of eGenio Education Solutions in Cleveland. His startup is one of many Northeast Ohio companies riding a wave of interest in education technology. A growing number of schools are deciding that they need it. Students expect to have it. And investors nationwide are pouring money into the sector to meet that demand. U.S. companies in what is often called the “ed tech” sector raised $629 million in venture capital last

year, a 40% jump from $448 million in 2011, according to figures from the MoneyTree Report by PwC and the National Venture Capital Greenberg Association. The increase is all the more impressive because the 2011 figure blows away most of the totals from the previous 10 years, according to the report, which is based on data from Thomson Reuters. Some of that money has found its way to companies such as eGenio, which since mid-2010 has raised $1.1 million from investors and secured some debt financing. Mr. Greenberg said he and co-founder David Berman picked the right time to start the company, which sells software that among other things allows teachers to aggregate educational materials into electronic lesson plans, distribute assignments to students and manage their classrooms. See SCHOOLS Page 8

UH distributor will be an arm’s length away JANET CENTURY

TeamWork Online founder Buffy Filippell was the first female sports agent ever hired by IMG.

HER TEAM IS TOUGH TO BEAT TeamWork Online has built huge following in pro sports with its unique hiring hub

By KEVIN KLEPS kkleps@crain.com

T

eamWork Online’s first client was the XFL in 2001. The renegade professional football league run by World Wrestling Entertainment owner Vince McMahon lasted all of one season. TeamWork Online — a virtual sports networking job fair with a staff of four full-timers in Shaker Heights — is still going strong. TeamWork was born when founder Buffy Filippell — who, upon her hiring in 1978, was the first female sports agent at sports See TEAM Page 21

Owens & Minor plans to move big distribution center and bring jobs here By JAY MILLER jmiller@crain.com

A Fortune 500 medical supply company plans to move a distribution center into the city of Cleveland, to a piece of city-owned land overlooking Lake Erie and the East Shoreway. Owens & Minor Distribution Inc. is the first big company to help University Hospitals Health System fulfill its ambition to bring its suppliers into the city of Cleveland. UH is a

significant client of Owens & Minor, and this move is an outgrowth of the health system’s “Vision 2010” plan to better integrate itself into its surrounding community. The $7.5 million project will bring 31 jobs into the city with the expectation the number could double in the years ahead. “We are attempting to really do what we can to invest in the city of Cleveland and our region,” said Heidi Gartland, vice president of government relations for UH. “They (Owens & Minor) have been our major distributing arm for a number of years.” Richmond, Va.-based Owens & Minor will occupy the majority of a 75,000-square-foot building that a real estate developer and investor will construct at Marquette Avenue See DISTRIBUTOR Page 8

THE WEEK IN QUOTES “We do expect to pick up some subscribers. Whether that’s a few hundred or a few thousand at each property is as yet to be determined. We should pick up some advertising dollars as well.”

“We have LaunchHouse for technology companies, but we need something similar for food businesses.”

“It’s hard for a 27-year-old female in a fee-based environment to get the trust of a 67-year-old retiring man to manage his money. … And so there are moments when you can feel a little disheartened.”

— Jeff Sudbrook, president and publisher of The Morning Journal in Lorain and The News-Herald in Lake County. Page One

— Carolyn Priemer, co-founder, Cleveland Culinary Launch & Kitchen. Page 6

— Elizabeth Verner, adviser (right), NCA Financial Planners, Mayfield Heights. Page 15

“I do think we will see more go-private transactions as we work through 2013 and certainly as we work into 2014 and ’15.” — Randy Paine, co-head of KeyBanc Capital Markets. Page 15


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4/26/2013

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CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

National Interstate founder, board at odds over nomination

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Even though his son’s name isn’t on the proxy mailed to shareholders, the founder of National Interstate Corp. is confident he and other like-minded shareholders can elect him to the company’s board of directors. Alan R. Spachman — who started the Richfield specialty insurance company in 1989 and was its CEO until 2007 — said he, with his family, is the company’s second-largest shareholder. A director himself, he nominated his 38-year-old son, Michael A. Spachman, because he’s dissatisfied with the way the board appointed a new independent director, Donald W. Schwegman, in February. That’s the same month Mr. Spachman said he was voted out as National Interstate’s chairman. While he said he harbors “no ill will� toward the new director, Mr. Spachman doesn’t like how the board appointed Mr. Schwegman, a lead client service partner for complex insurance organizations for more than 20 years at Deloitte, according to public filings. Mr. Spachman said no public search was conducted and no other candidates were presented. “I think it’s fair to say that I’m personally not completely satisfied with the way we’ve managed our affairs at the board level over the past few months,� he added, declining to be “more direct.� Mr. Spachman said he’s also driven to elect his son because two of the company’s independent directors — or those unaffiliated with National Interstate’s majority owner,

Bring morale up. About thirty stories.

Great American Insurance Co. of Cincinnati, and its parent, American Financial Group Inc. — are 70-plus years old. “We have a couple older gentleman who’ve already announced that they won’t be able to serve on the board for much longer,â€? said Mr. Spachman, who now is president and owner of Belmont Insurance Services LLC in South Carolina. “My nomination of Michael Spachman was my attempt to bring on a new independent director that would be able to serve ‌ for a number of years.â€? The matter is up for a vote at the company’s annual meeting this Thursday, May 2.

Company favors incumbents National Interstate in its proxy statement acknowledged Alan Spachman’s nomination. â€œâ€Ś We have received notice that he has nominated his son for election as a Class I director at the annual meeting, and accordingly, we believe that Mr. Alan Spachman may not support one or more of our nominees,â€? the company’s public filing stated. National Interstate recommended to shareholders that they elect six incumbents for the terms that will end in 2015. The nominees are Mr. Schwegman; Joseph E. (Jeff) Consolino, board chairman and chief financial officer of American Financial Group; David W. Michelson, National Interstate’s president and CEO; and three others, including two who also work for Great American Insurance. Although his son’s name didn’t pass muster for the official ballot, Mr. Spachman said it’s “highly likelyâ€? Michael Spachman will be elected through his efforts and those of “a few more like-minded shareholders.â€? National Interstate announced last week it received notice last Tuesday, April 23, that a shareholder intends to invoke cumulative voting for

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the election of directors. Mr. Spachman said he did send such notice. Under Ohio General Corporation Law, cumulative voting allows a shareholder to multiply the number of shares owned on the record date by the number of directors to be elected and to cast the total for one nominee or distribute the votes among the nominees. For instance, if a stockholder owns 100 common shares and there are six directors to be elected, the stockholder may allocate 600 votes for one nominee or distribute the votes among two or more directors. According to public filings, Alan Spachman owns 1.7 million National Interstate shares, or 8.6% of the shares outstanding. In addition, he is the beneficiary, but not the trustee, of two trusts that hold another 463,229 shares. National Interstate’s majority owner, Great American Insurance, owns 10.2 million shares, or 51.8% of the shares outstanding. Representatives for Mr. Consolino and National Interstate declined comment.

RĂŠsumĂŠ does the talking Both Alan and Michael Spachman are aware that concerns of nepotism may exist. But, Alan Spachman insisted, “This has nothing to do with my son.â€? “This is the fact that he’s a shareholder, that he’s a young professional director candidate and he has an interest in serving,â€? Mr. Spachman said. “I will say that my son’s resume speaks for itself.â€? Michael Spachman is a commercial mortgage broker in San Francisco. While Michael declined to identify his specific stake in National Interstate, he said it’s a major portion of his wife’s and his net worth. This would be his first board directorship. “I feel like I have the skills and interest to represent the shareholders well,â€? Michael Spachman said. â– 

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Opens May 11

bined issues on the fourth week of December and fifth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright Š 2013 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 800-290-5460 Ext. 136


20130429-NEWS--5-NAT-CCI-CL_--

4/25/2013

12:09 PM

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CRAIN’S CLEVELAND BUSINESS

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Cleveland Culinary Launch & Kitchen co-founders Tim Skaryd, left, and Carolyn Priemer are shown in one of the kitchens at the facility as chef Patrick Kander, right, prepares a meal.

New space is perfect recipe for chefs who are on move Cleveland kitchen gives entrepreneurs more room to help their business grow

“The economy is changing. Growth is coming to Cleveland through entrepreneurs and young people.” – Bill Hildebrandt, owner, Hildebrandt Provisions Co.

By KATHY AMES CARR clbfreelancer@crain.com

Kitchens heat up

Cleveland’s artisan food community is ripe with established and new ventures alike, though some only have so much room to grow. Organizers of the new Cleveland Culinary Launch & Kitchen are looking to give those entrepreneurs their space in the form of a shared commercial kitchen and business incubator. “We want to help food businesses succeed,” co-founder Carolyn Priemer said. The 3,800-square-foot kitchen at 2800 Euclid Ave. in Cleveland’s MidTown neighborhood has stations for canning, catering, baking, thermal processing and dry packing. It also offers dry storage and 300 square feet of refrigeration and freezer space for caterers, food truck operators, chefs and specialty product makers. Cleveland Culinary Launch & Kitchen is among an emerging batch of urban community kitchens that provide affordable kitchen space to fledgling food entrepreneurs. The community kitchens help address the constraints food artisans face in working out of their homes or from church kitchens. They also can promote a bit of cross-pollination in the business. “I’m looking forward to meeting prospective clients and watching the other businesses grow,” said Patrick Kander, who in late February relocated his Choice Catering business from his Lyndhurst home to the incubator. Organizers over the last couple weeks have been courting potential users that include a chocolatier, ice

Other community kitchen projects are materializing throughout Cleveland. Bill Hildebrandt, whose Hildebrandt Provisions Co. located near the West Side Market serves as a hub for food entrepreneurs and artists, is opening later this summer a 2,000-square-foot shared commercial-style restaurant kitchen he calls “The Meating Place.” The name pays tribute to the 115,000-square-foot building’s roots as a meat processing facility during the late 1800s through the early 1970s. “The economy is changing. Growth is coming to Cleveland through entrepreneurs and young people,” Mr. Hildebrandt said. “I’m trying to provide opportunity and space to help people express their talents and their particular art of creating.” Burton, Bell, Carr Development Inc. last September opened CornUcopia, a community kitchen, as part of a $1.3 million project that also includes a healthy restaurant and community space for the Kinsman neighborhood. CornUcopia provides health and wellness classes, junior chef classes and family cooking demonstrations, and is part of the 28-acre Urban Agriculture Innovation Zone that aims to revitalize the inner-city area. “We see health and wellness as an important component of community development,” said Timothy Tramble, executive director of the nonprofit community development organization. ■

JASON MILLER

Chef Patrick Kander prepares a meal in one of the new kitchens at the Cleveland Culinary Launch & Kitchen. cream maker and food truck operators. “We have someone interested who produces higher-end, all-natural sauces and only can go to Athens or Bowling Green for commercial canning,” kitchen co-founder Timothy Skaryd said. “It’s also ideal for chefs who want to do (research and development) but don’t have extra space in their restaurant kitchens.” Rates for using the kitchen range from $16 to $24 an hour and include secured 24-hour access. “We have LaunchHouse for technology companies, but we need something similar for food businesses,” Ms. Priemer said, referring to the local business accelerator. If the project takes off as planned, the next step is to build out surrounding space for workshops, programming and events, Ms. Priemer said. The space that Cleveland State University formerly occupied became available about a month ago once the institution’s catering arm moved into the new student center. Ms. Priemer’s family-owned company, J & M Real Estate Advisors, is a partner in the project and manages the six-story building within which the venture is located.


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CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

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Akron center has been TPC says its new cables will better big driver for Hankook serve customers in food industry By MIKE McNULTY Rubber & Plastics News

Hankook Tire Co. was a relatively small tire manufacturer in 1992 when the Korean company decided to open its first overseas research and development center in Akron. That step proved to be an important one for the ambitious tire maker. Even back then, it had its sights set on climbing the tire rankings globally. Though it had a long way to go, it figured a research center located in a key area of America eventually would help it gain ground on U.S. soil. It was right. The Akron R&D center, now located in Uniontown and the only one the company operates in North America, has been a driving force in helping to expand Wayne, N.J.based Hankook Tire America Inc. and its South Korean parent over the last 21 years. It also plays a pivotal role within the company’s R&D global network. Hankook was much smaller in 1992, but was growing, said Thomas Kenny, the company’s new vice president of technology and head of the Hankook Akron Technical Center. The company had one factory when he joined the business in 1994. It has added six since then. Tire industry veteran Ray Labutta was in charge of the center when it opened. He spearheaded the move from small quarters to a larger facility that Hankook built in 1996 in Uniontown, located on the outskirts of Akron. Mr. Labutta recently retired after serving for 20 years in the post Mr. Kenny now holds.

Keen vision Before taking over his present position, Mr. Kenny spent 14 years in the center’s tire development sector and four years as manager of tire development and engineering. He said Hankook showed great foresight when it added the center. He noted that the company needed a presence in North America to build its business outward. It is one of several moves Han-

kook made in the last 20 years that have vaulted it from the back of the pack to the front in the tire industry. “We’re a critical part of Hankook,� Mr. Kenny said. “The company has been growing by about 15% to 20% a year and wants to be in the top five by 2020.� Hankook had global sales in 1992 of $759 million; it posted 2012 sales of $6.26 billion, with an estimated $1.4 billion of that coming from North America. Mr. Kenny came on board two years before the research center moved to its sprawling, 48,000square-foot building in Uniontown, which is in Stark County. “We had 15 people working for us then,� Mr. Kenny said. “Today, we have 40.�

Big into R&D The center primarily handles tire development for the North American market. The majority of that work focuses on original equipment for the U.S. market, Mr. Kenny said. “We also have research and test departments and a fully functioning lab that develops compounds for use in this market as well,� he said. Hankook earmarks about 5% of its annual sales toward R&D, “so there is a large commitment,� Mr. Kenny said. Byeong Jin Lee, who in January was named president of Hankook Tire America Corp., said the Akron Technical Center is “one of our company’s most valuable resources.� Hankook operates three other R&D centers — a primary operation in Daejon, South Korea, and regional sites in Germany and China. The company is building another R&D center in South Korea that is twice the size of the present operation in the country. Hankook built the Uniontown building with growth in mind, Mr. Kenny said. ■ Mike McNulty is a senior reporter at Rubber & Plastics News, a sister publication of Crain’s Cleveland Business.

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com

TPC Wire & Cable Corp. doesn’t make its cables, but it is taking an active role in designing them. The supplier of industrial cord, cable and connectors recently developed an antimicrobial cable, inspired by the needs of its food and beverage industry customers. The Defender cable uses silver ion technology mixed in the jacket of an electrical cable to eliminate bacteria and fungi. Mixing the silver ion directly into the cable jacket — rather than coating the jacket — makes it more resilient, according to TPC product manager Todd Hadbavny. He said the antimicrobial nature of the cable lasts as long as the cable itself, standing up to water, scratches and other abrasions. According to the information about the cable, independent lab tests found the silver ion-based additive eliminates 99% of gram-neg-

ative bacteria, such as e. coli, and gram-positive bacteria, such as listeria, as well as fungi and mold growth, within 24 hours. That’s important for food producing and food packaging companies. This type of cable might be used in areas that the average consumer doesn’t think of as needing to be clean, such as a control circuit in a packaging plant or lighting in a brewery, said Jay Hathaway, TPC food and beverage segment manager. But if it’s not sanitary, bacteria can spread, leading to ill consumers, lawsuits and damaged brands. “Spending a little more on a cable up front pays a lot of dividends in the long run,� said Mr. Hathaway, who noted that cables with mold or fungi growth must be removed and replaced, costing a plant time and money. The Defender cable, which was released last November, could help TPC break into new markets. Marketing manager Carol Sabovik said TPC has served the food in-

dustry for awhile, but this new material could open doors in the medical field, which also has a need for antimicrobial materials. Before designing a product, TPC’s team gathers feedback from potential customers, said product manager David Sedivy. Then, the company chooses a supplier that can create the desired product for TPC. Mr. Sedivy declined to identify the company that produces the Defender cable. Mr. Sedivy expects to see more of this type of development in the future as the company works to create more proprietary compounds. He said TPC wants to create compounds that improve on the materials already available in the marketplace. TPC, which was founded in 1979, consolidated its plants and offices in Macedonia last summer, Ms. Sabovik said. It employs about 150 people and is a portfolio company of Chicago-based private equity firm Pfingsten Partners LLC. ■

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Schools: Startups are aided by trend continued from PAGE 3

Over the last few years Mr. Greenberg has watched schools stop taking their students’ smart phones and become more open to new, high-tech ideas that could help them teach more effectively and save money. “It’s a positive for us. It’s a positive for education in general,” he said, noting that eGenio’s software is used by “several thousand” students in Ohio and Texas. The trend is helping other local startups, too. DecisionDesk of Lakewood in March announced it had raised $1.75 million, which includes $1 million from North Coast Angel Fund and the individual investors that belong to the group, as well as $750,000 from the Innovation Ohio Loan Fund. The company plans to use the money to market its software, which helps universities and businesses review applications that require video and other multimedia elements. Like others interviewed for this story, DecisionDesk CEO John Knific said the rise of “cloud” software, which is delivered via the Internet, has made it easier for schools to try out new technologies. Instead of spending a ton of money upfront on licenses and computer servers to run software on site, schools now can lease the technology. Universities — the core of DecisionDesk’s customer base — have taken a liking to the company’s cloud software. The 15-employee company has more than 100 customers, up from about 30 last year. “The opportunities have just exploded,” Mr. Knific said.

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APRIL 29 - MAY 5, 2013

The ed tech sector is particularly hot in Youngstown — so much so that the Youngstown Business Incubator now considers the category one of its specialties, accord-

“The opportunities have just exploded.” – John Knific, CEO, DecisionDesk, on doing business with universities ing to Jim Cossler, the incubator’s “chief evangelist.” Mr. Cossler said a Youngstown startup called Learning Egg is “probably progressing faster and further than any company we’ve worked with.” Learning Egg this fall launched its Lighting Grader software, which lets teachers create tests, grade them and analyze the results. It’s used by more than 70 schools and another 160 individual teachers. The incubator has a few other ed tech startups, including one that signed up last week. Another is about to join because of a partnership between the incubator and its biggest tenant, Turning Technologies, which sells handheld “clickers” that schools and businesses use to quiz or poll people, be they in classrooms or conference halls. Turning Technologies’ nonprofit foundation, working with the incubator, last week named the winners of its first “Ed Tech Idea Challenge,” which aims to help companies with ideas that could change the way education is delivered. Though the company that won the challenge’s $20,000 grant is based in New York, the Turning Foundation named a second winner — a Youngstownbased group that wants to commercialize software that uses data to help teachers figure out which instruction methods work best for different students with autism. That group received no formal prize but was invited to join the Youngstown Business Incubator. Mr. Cossler said he expects the contest to attract other ed tech startups to the incubator in the future, regardless of where they’re based.

Opportunity knocks Aside from cloud computing, other factors driving the ed tech trend include improved video technology, rising student expectations and the spread of mobile devices, which create a new way to reach students, said Bob Sopko, who until November was manager of strategic technology partnerships at Case Western Reserve University. Mr Sopko now is director of CWRU’s Blackstone LaunchPad entrepreneurship program, which has provided assistance to a new student-led company called Sapphire Education. The company’s software — which is meant to help students track their progress and find ways to improve it — is cloudbased, and it takes advantage of students’ proclivity for portable gadgets. “Now they’ve got a laptop, a tablet and a smart phone,” Mr. Sopko said. “They’re completely engaged at all times.” Primus sees opportunity in ed tech, too, which is why the private equity firm based in Mayfield Heights plans to start making more investments in the sector, especially at the K-12 level, said managing director Scott Harper. But Mr. Harper warned that a lot of ed tech companies are going to fail. They face some big challenges, he said: State and federal money for education is tight, the education sales cycle is highly seasonal, and it’s not easy to displace a big incumbent ed tech company, such as Blackboard. “The big challenge here is not product development,” he said. Yet, big opportunities remain, because people are tired of throwing money at schools that don’t seem to improve, Mr. Harper said. “The market is going to force the education space to become more productive,” he said. ■

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and South Marginal Drive near the East 55th Street entrance to the East Shoreway/Interstate 90. The developer, Brookwood Capital Partners of Raleigh, N.C., is buying and leasing 8.4 acres now owned by the city of Cleveland and taking an option on city land that has enough room for a 25,000square-foot expansion. Dean Huibregtse, Owens & Minor’s area sales director, said the company has outgrown its 50,000square-foot building in Glenwillow and was encouraged by UH to find a new home close to the hospital’s main campus. “We’re excited to partner with UH and the city and this is a natural progression in that partnership,” Mr. Huibregtse said. “We’re excited to come into Cleveland.” Mr. Huibregtse said he hopes construction can begin this summer so the company can move in spring 2014. Owens & Minor has been in Glenwillow for six years. It also serves the Cleveland Clinic and Akron’s Summa Health System, and Mr. Huibregtse said the company hopes to build the business with its expanded footprint. UH’s Ms. Gartland said the Owens & Minor relationship essen-

tially outsources the distribution and logistics services for the hospital system, which has operations spread across Northeast Ohio. “They have been our major distribution arm for a number of years,” she said. “Hospitals have gone into just-in-time inventory.” The Owens & Minor distribution center receives supplies bought by the hospital system and delivers supplies across the system as needed.

Overcoming site problems As a part of the deal to build the structure for Owens & Minor, Brookwood Capital will get a 10-year, 60% tax abatement. Economic development director Tracey Nichols told a Cleveland City Council committee last Tuesday, April 23, that the tax abatement will help compensate for unexpected geotechnical issues found at the site as the deal developed. The property, though now hundreds of feet from the lake shore, has site problems common to filled lakefront property. As a result, the deal is complicated. Brookwood Capital is buying only a part of the city-owned parcel of land since the northern edge is legally considered a part of Lake Erie and state law does not allow

anything south of the 1876 shoreline to be sold, only leased. So, Brookwood will hold a 50-year lease on part of the property with an option for another 49 years. Brookwood will pay $238,495 to buy 5.6 acres and will pay $5,346 a year to lease 2.8 acres under what is called a submerged land lease. At City Council’s insistence, the building will be constructed in a way that it can earn what’s called LEED Silver certification. LEED is a nationally recognized program for benchmarking the environmental performance and energy efficiency of a newly constructed or renovated building. University Hospitals has been focusing on maximizing support of the East Side Cleveland community since it adopted Vision 2010 in 2005 as it embarked on a $750 million building program. Along with Cleveland Clinic, it has pledged to create jobs and build community wealth. Both hospitals committed to the Cleveland Foundation to support its local business development effort that led to the Evergreen Cooperative Laundry, a workerowned business on East 105th Street that now cleans bed linens and other laundry for the two hospitals. ■


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PUBLISHER/EDITORIAL DIRECTOR:

Brian D. Tucker (btucker@crain.com) EDITOR:

Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:

Scott Suttell (ssuttell@crain.com)

OPINION

Kill cafés III

L

ast Wednesday’s sudden revelation by Ohio Senate President Keith Faber that his chamber will take immediate action on a bill to ban Internet cafés is a welcome development that comes not a moment too soon for law enforcement agencies concerned about illegal gambling operations. Too bad it didn’t come until after a bit of public embarrassment for members of Sen. Faber’s party. Until last week, the Republican-controlled Senate had been seen as dragging its feet on House Bill 7. It’s the measure that would put most Internet cafés out of business because it would restrict the size of the payoffs on the slots-like “sweepstakes” games played at the parlors. Republican leaders don’t like the characterization that they were in no hurry to move ahead with HB 7. They particularly take issue with a mid-April story in The Columbus Dispatch. The newspaper reported that key Senate members had put the brakes on the bill, then rushed off the same day to attend a dinner hosted by lobbyists for Pong Marketing and Promotions Inc., a Canadian company providing software and technical support to Internet cafés. They would move the dinner from the pricey Hyde Park Prime Steakhouse to another restaurant after a Dispatch reporter got wind of the gathering. Maybe the senators were going to the dinner to educate themselves about the business of Internet cafés. Or maybe they hoped to bump into some of the café interests who, according to The Dispatch, contributed more than $110,000 to the campaigns of state lawmakers last year. John McClelland, director of communications for the Ohio Senate Republican Caucus, said in e-mailed comments last Wednesday that it “should be clear that Senator Faber’s intent from the outset of this General Assembly has been to shut them (Internet cafés) down, but he wanted to give his colleagues the opportunity to understand all sides of the debate.” “No one in the caucus at any time contemplated doing nothing,” Mr. McClelland wrote. We’re not sure Ohio Attorney General Mike DeWine was as convinced about the Senate’s intentions. Rather than await passage of a bill to squelch the cafés, Mr. DeWine and various law enforcement authorities plowed ahead with a legal crusade to close them one by one. Just two weeks ago, Mr. DeWine and Cuyahoga County Prosecutor Timothy McGinty executed search warrants on six Internet cafés they said were operating illegally. According to an announcement about the raids, the action not only involved the offices of the county prosecutor and the attorney general, but also was done in connection with the state Bureau of Criminal Investigation, Ohio Investigative Unit of the Ohio Department of Public Safety, U.S. Postal Inspection Service, U.S. Secret Service, Parma Heights Police Department, and law enforcement agencies in New Jersey. Imagine the time, money and human resources that would need to be devoted to this process if a bill banning cafés did not pass. It would be a crime that would rest on the heads of Senate Republicans. They cannot act fast enough.

FROM THE PUBLISHER

Term limits in Congress? No way of interest for federal elected officials to ow’s this for an inane, useless prevent the states from making the deciproposal, trotted out on the sion on whether their own national stage for litterms should be limited.” tle more than public- BRIAN The group and its backers in ity: term limits in Congress. TUCKER Congress attribute public disThere is a part of me that satisfaction with Capitol Hill as doesn’t even want to identify the driving force behind their the sponsors in the House (Matt efforts. Well, there is doubtless Salmon, an Arizona Republia substantial amount of irritacan) and Senate (David Vitter, a tion about how business is Louisiana Republican), because done in Washington, but term that’s what they want. These limits are anything but a two lawmakers want to be able panacea. to crow in their home states Anyone listening — even a little bit — to that they tried to change Washington. such an argument ought to chat with folks These two have introduced amendhere in the Buckeye State, where term limments to the U.S. Constitution that its have wrought havoc and created even would limit House members to three more divisiveness in Columbus. terms (six years) and senators to two In our General Assembly, first-term terms (12 years). House members angle for their chance According to a news release distribto be Speaker, and it can happen as soon uted by some group calling itself “U.S. as his or her second term when a third of Term Limits,” nearly 75% of the responthe body is being turned over every two dents to a recent Gallup survey said they years. It’s just plain scary that such a would vote for term limits. powerful job can be held by such an The news release quoted Phil Blumel, inexperienced legislator. Second-term identified as president of U.S. Term Limstate House members start their planits, saying, “The public clearly wants ning for what office they’ll next seek if term limits, and it is the ultimate conflict

H

they should win a third term. People bounce back and forth between the House and Ohio Senate. It’s a mess. And further, term limits have only increased the power of the lobbyists and staff members, who become the only folks in Columbus around long enough to have institutional memory and longterm contacts. Add to that the natural American nastiness that has enveloped political discourse, and the result is guaranteed toxicity of debate and next to no bipartisan cooperation. This so-called national group quotes Rep. Salmon as saying, “The people hold the legislative branch of our federal government in such low regard largely because they believe that they are no longer represented by fellow citizens but instead by professional politicians.” Well, the gentleman from Arizona may be right about Americans holding lawmakers in low regard, but that’s not a problem term limits can fix. People need to simply boot the non-performers out of office. As has been said, we have the term limit system we need and should stay with: elections. ■

LETTERS

Truth in shale debate hard to ascertain ■ The headline on Brian Tucker’s April 1 commentary read, “Truth gets in the way of fracking furor.” But whose truth is getting in the way of the fracking furor? You are certain of what you know, Mr. Tucker. It’s what you don’t know that is disturbing. Do you know anything about ecosystems, habitats or perhaps the water cycle? Water is the one resource for which there is no substitute. In a recent issue of Shale magazine, which Crain’s produces, I read that each fracking well can use as much as 4.5 million gallons of water. The December 2012 issue predicted that by 2015 there would be over 2,000 shale wells in Ohio, which can mean 9 billon gallons of water removed from the water cycle. Gone.

WRITE TO US Send your letters to: Mark Dodosh, editor, Crain’s Cleveland Business, 700 W. St. Clair Ave., Suite 310, Cleveland, OH 441131230; Email: editor@crainscleveland.com

Buried. Why can’t fracking water be recycled? The pressurized fracking fluids are made of water, sand and chemicals. Do you know what chemicals are used? Not even the EPA knows. It’s a trade secret … shhhh. Did you know that there are over 2,000 chemicals, of which 625 are known carcinogens, which can be used in the fracking process? I wonder how many grams, ounces or pounds of chemicals

are used per gallon in fracking fluids? A tiny bit? What measurement is a tiny bit? What is the per particle chemical in a gallon of water times a million or billion? Shale magazine, in a March 2013 article, “A Lack of Transparency,” provides little light on what chemicals are used because it’s secret. “Ohio’s Utica Shale is relatively new, so information is at a premium. The current system doesn’t make much sense to many.” That statement was on Page 14. The truth is there is an absence of knowledge of the risks. Cheap, easy gas slows our progress toward more affordable alternatives, including conservation. See LETTERS Page 11


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11

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It’s innocent until proven guilty at this point. It doesn’t matter.

I think that’s completely unnecessary. Technically, his job as the owner was to hire people to run the team for him. He’s done that. He should stay away and leave the Browns to Banner (Browns CEO Jim Banner) to run.

I like the Browns. I like football. I just want the Browns to win, regardless what’s going on.

They’re separate. I don’t really feel they pertain to each other. If they find something Browns-related, that would be a different story. It really doesn’t matter because they say people who micromanage do more harm than good.

Accelerating success.

Letters: Too many breaks in the state continued from PAGE 10

Methane gas can leak into the environment, short-circuiting the green gas benefit we are seeing. Judith A. Majher Kirtland

Close tax loopholes ■ The Crain’s editorial board was right on the mark in its April 15 editorial, “Tax sieve,” suggesting that the issue of evaluating tax breaks deserves more attention in the debate over state tax reform. There are two bills in the Ohio House of Representatives that would create formal procedures to evaluate whether the 129 tax breaks listed in the state Tax Department’s report on tax expenditures are working as they should. Both of these bills — HB 81, sponsored by Rep. Mike Foley of Cleveland, and HB 24, sponsored by Rep. Terry Boose of Norwalk — are excellent starting points for reform. In the 2011 budget debate, the Ohio Senate had an evaluation process in its version of the budget bill but it did not survive conference committee negotiations. Clearly, the concept of closing tax loopholes has some traction in the Ohio Statehouse, but has yet to be embraced by legislative leadership. Ideally, proposals for reform should go further and require a sunset clause (automatic repeal every eight years, for instance) for all tax breaks. This would force supporters of tax breaks to justify their existence and would focus legislators’ minds on dealing with the issue. In an era of tight budgets, we cannot afford to let the current lax approach continue. Jon Honeck Director, public policy The Center for Community Solutions Columbus

State should give up workers’ comp fight ■ It is time for Bureau of Workers’ Compensation administrator Stephen Buehrer to end the injustice suffered by nearly 270,000 businesses at the hands of the BWC by overcharging those businesses for premiums of nearly $860 million. This is not an opinion, it is fact. A fact substantiated by the former administrator of the BWC and the bureau’s own actuarial experts. And it is a fact determined by the Court of Common Pleas in Cuyahoga County in the case of San Allen Inc., et al, vs. Stephen Buehrer, Administrator of the Ohio BWC. Administrator Buehrer said recently he had a “fiduciary duty” to appeal the case. Clearly, his sense of fiduciary duty needs re-examination. He has said on many occasions his duty as administrator is to make the BWC more “business friendly.” How appealing this case advances that goal is more than problematic. To his credit, the administrator has said he is open to settlement. Unfortunately, he has rejected four separate settlement offers out-ofhand. If the BWC is serious about settlement, it is time for it to make a legitimate counteroffer. The BWC has already paid outside counsel over $3 million in fees. While its attorneys have little or no incentive to resolve this matter, it is clearly in the interest of class members and all Ohioans to bring this matter to a conclusion. The class members are not the enemy. They are the small and midsize businesses that form the backbone of the state’s economy. They employ Ohioans and fuel communities of every size throughout the

state. The overcharges that the bureau forced them to pay stripped them of vital financial resources — the lifeblood of any business — that they would have reinvested and used to grow their companies, creating more jobs and strengthening our state’s economy. Instead, under the bureau’s policies, job creators saw their premiums skyrocket on average 700% and in some cases as high as 2,000% to pay for discounts for favored groups of businesses. Unfortunately, because of those policies, far too many businesses were forced into bankruptcy. As an added incentive to resolve this case, the BWC needs to consider that each day of delay costs the bureau $73,000 in post-judgment interest — that’s over $27 million a year. The bureau’s decision to appeal (an appeal legal experts say they are unlikely to win) could result in additional costs to the bureau in excess of $100 million. That doesn’t include legal fees and other expenses. After six years and nearly $4 million in legal fees, now is the time for the BWC to recognize that its “fiduciary responsibility” to class members and Ohio taxpayers will be better fulfilled by engaging independent legal experts to review the bureau’s basis for appeal to see the futility of its position and its limited chances for success. It is clearly in the best interest of all of the parties to resolve this case as soon as possible and for the BWC to fulfill its fiduciary responsibility to the 270,000 businesses it overcharged. Earl Stein President Pay Us Back Ohio BWC Inc. Owner Corky & Lenny’s Delicatessen

Send us your Human Resources Leaders nominations Crain’s is looking for human resources professionals who have built their company or organization with the best people, talent, development and culture. Nominations can be made by filling out a form at:

www.CrainsCleveland.com. The deadline is 5 p.m. on May 20. If you have any questions, contact Michelle Sustar at 216-771-5371 or msustar@crain.com.

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BRIGHT SPOTS Bright Spots is a period feature in Crain’s highlighting positive business developments in the region. To submit information, email Scott Suttell at ssuttell@crain.com. ■ Clinical stage biotechnology company Athersys Inc. of Cleveland said the Medicines and Healthcare Products Regulatory Agency in the United Kingdom has approved the company’s application to expand its ongoing Phase 2 study evaluating the administration of its MultiStem therapy to patients who have suffered an ischemic stroke. Enrollment at U.K. sites is expected to begin after a final ethics committee review and the completion of preparations at participating

clinical centers. “The MHRA authorization will enable us to bring several leading United Kingdom stroke centers into the study, which will help us to speed the completion of the stroke clinical trial,” said Gil Van Bokkelen, chairman and CEO of Athersys, in a statement. “The authorization is also noteworthy as it marks the initiation of MultiStem clinical development activity in the United Kingdom.” The Phase 2 study is a double blind, placebo-controlled trial evaluating the safety and efficacy of MultiStem cells when administered to patients who have suffered a

moderate to moderately severe stroke, as defined by a National Institutes of Health Stroke Scale score of 8 to 20. Athersys said patients enrolled in the study receive a single intravenous dose of MultiStem therapy or placebo in the 24 to 36 hours following the stroke, which is “a significant extension of the current treatment window over existing standard of care.” The study is expected to enroll 136 patients in total and currently is conducted at multiple centers throughout the United States. ■ Cleveland-based Veritix has introduced PlayThru, a game-

based verification service that offers an easy-to-use alternative to Captcha technology. Veritix said it partnered with a company called Are You a Human to offer the service for online ticket purchases, which eliminates the need for buyers to enter difficultto-read Captcha words that sometimes require multiple entry attempts. Instead, Veritix said, “consumers engage with short, simple, and interactive games to verify that they are human.” Quicken Loans Arena will be the first Veritix client to use PlayThru, which will be available for all arena events. PlayThru “eliminates a significant barrier for consumers buying

More than 300 people attended the 2013 CIO of the Year awards, which honored some of the most innovative chief information officers in Northeast Ohio. The March 16 event was hosted by both Crain’s and the Northeast Ohio Software Association.

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1. Over 300 people attended Tuesday’s event, in partnership with NEOSA’s Tech Week. 2. Attendees from SS&G came out to support their colleague and CIO Finalist Jerry Justice. 3. A group from event sponsor Cox Business enjoy themselves during the pre-event networking.

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tickets online by giving them an easier way to verify they are human,” Veritix said. Use of PlayThru’s gamebased verification results in a 40% increase in submission rates compared with Captcha, according to the Cleveland company. In addition, 98% of users prefer PlayThru to Captcha, and users have a 98.7% accuracy rate through the game-based verification, Veritix said. ■ Welding is a relatively new Merit Badge in the world of the Boy Scouts of America, and Lincoln Electric Co. has stepped up to help scouts earn the distinction — and help U.S. companies get an early jump in filling their skilled labor gap. About 100 scouts received handson welding training on April 13 at Lincoln Electric’s headquarters, 22801 St. Clair Ave. in Euclid. The Welding Merit Badge debuted in February 2012, with collaboration from the American Welding Society and industrial partners. To earn the badge, scouts “must learn welding safety requirements, demonstrate first aid procedures that may be needed in the welding environment, demonstrate proficiency in skill sets related to the welding of joints, and learn about careers in various industries that employ welding skills,” according to a news release from Lincoln Electric. “Lincoln Electric is helping Scouts get excited about such career options as welding, engineering and manufacturing in a hands-on way, while earning their badges,” said Carl Peters, Lincoln Electric’s director of technical training, in a statement. “They get to explore different career pathways by trying something new,” he said. “And they’ll get a sense of accomplishment when they walk away with their own welding project — a specially designed eagle.” ■ Two partners at Cleveland law firm giant Jones Day were named by Law360 as among the nation’s top five “Rising Stars” in their respective practices. The distinction went to Jones Day M&A partner James Dougherty and to one of the firm’s intellectual property partners, Ryan McCrum. ■ The George Gund Foundation announced that Horace “Treye” Johnson III, director of athletics and student activities at Saint Martin de Porres High School in Cleveland, has been named the 2013-2015 George Gund Foundation Fellow. The fellows program, started in 2004, “provides an opportunity for promising young professionals to work inside the foundation,” according to a news release. Each fellow, selected from a nationwide pool of applicants, works at the foundation for two years. Mr. Johnson, who joined Saint Martin de Porres in 2008, has a bachelor’s degree in communications from John Carroll University and a master’s degree in sports administration from the University of Louisville. He also has worked as assistant director of admissions for Cleveland’s Saint Ignatius High School; as a program coordinator at the Booker T. Washington Center in Erie, Pa.; and as a guest relations associate and weekend facilities manager for the Muhammad Ali Center in Louisville. He will join the foundation on July 1.


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Timken is raising its Faircrest presence Huge vertical caster will cost $200M and improve plant’s steel production by 25% By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com

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Crews dig the hole for Timken’s new vertical caster at the Faircrest Steel Plant in Canton. The caster will extend more than 75 feet below the ground.

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If Timken Co.’s future vertical caster was plunked down in the deepest part of Lake Erie, its top still would reach above the waves. As it is, the pricey piece of equipment, which will pour molten metal on a continuous basis, forming hardened steel, will rise high above most of Stark County at Timken’s Faircrest Steel Plant in Canton. Timken spokesman Dan Minnich said the structure housing the caster is expected to reach 175 feet above ground and more than 75 feet below. Crews already are hard at work digging the giant hole for the continuous caster, which should be installed and operational by the second half of 2014. The caster investment, at about $200 million, is the biggest Timken has made in Faircrest since the plant was built in 1985, said Erich Williams, manager of steel communications. And the Canton-based maker of bearings and steel is expecting it to pay off in a big way. The continuous caster will make Faircrest more efficient and will improve the quality of the steel it creates, said Tom Moline, vice president of steel manufacturing. Because the new caster won’t bend the steel on its long drop, it will be stronger. Steel becomes less pure when it is bent, Mr. Williams said, adding that strength comes into play in high-stress uses, such as drilling. Mr. Moline said when this investment and others Timken is making this year in Faircrest are complete, the plant will be able to ship about 175,000 more tons of steel per year. That’s close to a 25% increase for the maker of steel alloy bars. Faircrest’s current capacity is about 750,000 tons. Mr. Moline said he expects the changes at the 375-employee Faircrest plant to increase the company’s steel shipping capacity by about 15% overall.

All about timing The investments come during a tumultuous time for Timken. Two of its shareholders, asset management firm Relational Investors LLC and the California State Teachers’ Retirement System, have been calling for Timken to split its steel and bearings operations into two separate businesses, arguing that the split would be beneficial to the company’s stock value. A representative of Timken said the company is not commenting publicly on the proposal, but it has launched a website that calls for shareholders to vote against it. Just what the investments in Faircrest will mean for unionized production workers at the plant is a matter of interpretation. Tony Montana, a spokesman for the United Steelworkers, said that after years of seeing jobs disappear,

The new forge press at Timken’s Faircrest Steel Plant in Canton is completely automated.

ON THE WEB For a slideshow from Timken’s steel plant, log on to: tinyurl.com/cgjyjtf the “added job security” that the investments represent is a positive for Timken union members. However, Joe Hoagland, president of Steelworkers Local 1123, which represents hourly workers at Faircrest, wasn’t as upbeat as Mr. Montana about what the equipment would mean for Timken’s employees. Mr. Hoagland said he would take the investment as job security and as a sign that Timken intends to stay in Canton, but noted that there would be no net gain of jobs. Some people could lose jobs or be displaced as the workflow at the plant changes, but other jobs could be created by the new machines, he said. Still, Mr. Hoagland sees value in the investment. “Progress is progress, and you have to stay competitive,” Mr. Hoagland said. Mr. Moline said demand in the markets Faircrest serves has been increasing, especially in the oil, gas and industrial fields. Mr. Minnich said the decision to invest in this equipment was made before the shale movement took off, but the company has seen opportunity for growth in supplying the energy industry. “It was time to make an investment,” Mr. Moline said.

Rolling along The investments at Faircrest add up to about $265 million, including an inspection line, Mr. Minnich said. A ladle refiner and the continuous caster together will cost about $225 million. Also among those expenditures is a new in-line forge press, an approximately $35 million investment Timken commissioned on April 10. The forge press takes a red-hot, 28-inch square ingot and presses it down to 22 inches as easily as shaping clay. Mr. Moline said the process makes the center of the ingot stronger and cuts down on the number of times an ingot must pass through the rolling mill. This piece of equipment allows the steel to move straight from the forge press to the rolling mill without being reheated, which reduces production time and thus increases capacity, said Bob Perez, a team leader at Faircrest. The Timken team said the machine was the first of its kind in North America. ■


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FINANCE

INSIDE

18 ADVISER: LOWERING THE COSTS INVOLVED IN 401(K) PLANS.

MARC GOLUB

Elizabeth Verner, 27, is among the 6% of financial advisers who are 36 or younger, according to the Financial Planning Association.

YOUNGER GENERATION NEEDS IN ON THE PLAN Few financial advisers are in their 20s and 30s, which is a problem some firms are trying to solve before it’s too late

By MICHELLE PARK mpark@crain.com

I

t’s not uncommon for Elizabeth Verner to provide financial guidance to clients who have children as young as she is. What is uncommon is Ms. Verner herself. A certified financial planner at age 27, she is half the average age of her brethren. See PLANS Page 16

BY THE NUMBERS A look at the transaction value, in billions, of U.S. companies going private, along with initial public offerings, since 2003: Year Private Deals IPO Deals 2003 $10.0 122 $14.3 82 2004 $46.2 82 $44.3 232 2005 $93.3 103 $36.2 203 2006 $320.1 166 $43.2 199 2007 $316.6 148 $46.8 205 2008 $48.4 81 $26.8 31 2009 $11.3 72 $17.5 52 2010 $67.8 101 $37.2 123 2011 $49.8 91 $34.8 116 2012 $42.1 101 $41.0 126 x-2013 $50.7 21 $10.5 43 x-Through April 16 Source: Thomson Reuters

Private is preferred route for some Megadeals such as recent proposals involving Heinz, American Greetings and Dell may get others thinking By MICHELLE PARK mpark@crain.com

T

hree well-known, arguably iconic, companies that sell greeting cards, computers and ketchup have undertaken a common course of action this year: They’re going private. And Northeast Ohio bankers and advisers

say the cash is available and the cost savings are compelling enough that more public companies are likely to follow suit. “When private equity firms and companies see those transactions being completed, it gets their thought process going,” said Randy Paine, co-head of KeyBanc Capital Markets, the investment banking arm of Cleveland-based KeyCorp.

“When private equity firms and companies see those transactions being completed, it gets their thought process going.” – Randy Paine co-head, KeyBanc Capital Markets “I think there are a lot of boards of directors and management teams that see those transactions and think, ‘Huh? Should we be See PRIVATE Page 17


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Plans: Financial adviser positions are expected to grow 32% by 2020 continued from PAGE 15

“Going to national events and conferences, I am in the minority,” she said. “It can get kind of lonely.” There is a pressing need to make young advisers less the anomaly, financial advisers say. Of those members of the Financial Planning Association who disclose their age, only 6% are 36 or younger. The average age of members of the group, which represents tens of thousands involved in providing financial planning services, is 52. Combine that with an increased demand for financial advice from Baby Boomers approaching retirement age, and the math works out like this: The Bureau of Labor Statistics projects 32% growth in the number of personal financial adviser jobs between 2010 and 2020 — a rate that is “much faster than the average for all occupations.” In order to retire themselves, financial advisers will need young advisers to whom they can transition their books of business. “Now, that generation is really seeing they’re not going to do this forever,” said Michael Branham, president of the Denver-based FPA. “Their firms have to move into other hands at some point, and they need to make sure those other hands are qualified.” At the same time that the opportunity for the industry is great, it’s never been harder to break into it, many insiders say. Large companies’ training programs that used to take in robust numbers of would-be advisers have been pared back, in many cases because they weren’t profitable, in large part because most trainees didn’t stick to the profession. In addition, the business of financial advice today is much more fee-based. That presents a challenge for making a living because young advisers — who have a lot yet to prove before they can build a sizable book of business — must rely increasingly on earning a fee based on a percentage of the assets they manage. (Not every organization in the business pays a salary.) Ms. Verner, who in 2011 passed the 10-hour certified financial

“Now, that generation is really seeing they’re not going to do this forever. Their firms have to move into other hands at some point, and they need to make sure those other hands are qualified.” – Michael Branham president, Financial Planning Association planner exam and is an adviser with NCA Financial Planners in Mayfield Heights, knows firsthand the challenges of breaking into the business. “It’s hard for a 27-year-old female in a fee-based environment to get the trust of a 67-year-old retiring man to manage his money,” she said. “And so there are moments when you can feel a little disheartened. You have the knowledge, you have the expertise, you have the support behind you, but … it’s the look (of being young) you’re being judged upon.”

Training wheels To meet the demand driven by Baby Boomers and the fact that people are increasingly responsible for their own financial futures — read: fewer defined benefit pension plans and Social Security’s solvency problems — firms and organizations are mobilizing to attract, mentor and appropriately train Generations X and Y. More universities offer curricula that prepare students to sit for the certified financial planner exam, Mr. Branham said, though many local advisers say they know of few such programs in Northeast Ohio. One is at the University of Akron. “The real challenge is to find career paths for young planners in the profession itself,” Mr. Branham said. “Who’s willing to train them and make them part of a viable business?” The onus, he said, is on wealth management firms to appeal to young people and to build an infrastructure that provides them a career path. A number of Northeast Ohio firms have created positions to do

that. Key Private Bank, whose 300 fee-only advisers counsel wealthy clients across KeyBank’s footprint, started a wealth associate program about three years ago. Baby Boomer demand was a primary motivation, said Veena Khanna, director of wealth advisory services for Key Private Bank. “As they mature out of … business, no matter who they are and what occupation, they’re going to need wealth planning advice,” she said. To date, Key’s program has hired 16 people, predominantly out of college, into the new position of wealth associate, Ms. Khanna said. “I think it’s in everyone’s best interest to pull them in early, teach them the ropes,” Ms. Khanna said. Ms. Verner’s firm, NCA Financial Planners, hired her in as a paraplanner. Though it’s a decades-old practice for NCA, more firms have launched apprentice-like programs, including Cornerstone Wealth Advisors, the Minneapolis firm for which Mr. Branham works. It started hiring college graduates into a three-year “residency” program in 2010. In the paraplanner role, Ms. Verner sat in client meetings, learned the fundamentals and gained her industry licenses. In September 2011, she learned she’d passed the certified financial planner exam, which covers a range of concepts including insurance planning, estate planning and ethics, and about six months ago, after roughly five years with NCA, she was promoted to financial adviser. Ms. Verner, who is paid a salary, now is at work building a book of business. She also is helping start a NexGen group of the local chapter of the Financial Planning Association, which is seeking advisers 36 and younger. Of the Northeast Ohio group’s 288 members, 21 meet the age criteria of the next generation group, though not everyone necessarily reports their age, Ms. Verner noted. “There’s so few of us,” she said. “It’s needed that we have an opportunity to communicate with each other.” ■

Despite efforts, some barriers remain

O

ne of the greatest barriers to entry into financial advising is one’s ability to make a living, said Kevin Myeroff, president and CEO of NCA Financial Planners in Mayfield Heights. Ten years ago, nearly 100% of NCA’s business was commissionbased, or “eat what you kill,” as some in the industry put it. Now, less than 1% of the firm’s revenue comes from commission. “There are more avenues than ever before to learn this business,” said Mr. Myeroff, 52. But, “it takes many years of building up clients until you have enough assets when you can make a living off of fees. Back in the old days, you could just sell a lot of products and make enough money. So it takes some real

staying power. “If we don’t have people to step in, then we’re going to have a humongous void between the people that need these services and the people there are to provide these services,” Mr. Myeroff added. “This has become a very, very specialized business, and if people don’t come in to learn it, the cost of getting financial planning advice will go up and up. There will be an industry created of people who don’t know what they’re doing.” Another barrier to entry is the job’s difficulty, said Ed Vargo, senior financial planner with Burning River Advisory Group in Westlake. “It’s not good enough just to know the numbers,” he said. “Sitting down

in front of a client to ask them to write you a check for $100,000 … the skill set that’s required on an interpersonal level, to get them to trust you, that’s really hard to train.” For his part, Bob Smith, whose firm employs 12 people, six of whom are younger than 32, isn’t sorry that it’s tough to break in. “Barriers are a good thing to make sure people don’t start practicing independently before they’re ready,” said Mr. Smith, president and CEO of Spero-Smith Investment Advisers in Beachwood. “I would argue that we have not enough barriers. Just look at everything from scams (and) inappropriate investments that have been made. It argues for barriers, regulation and good judgment.” — Michelle Park


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Private: Disclosing numbers to the public can come at a cost continued from PAGE 15

thinking about this? Can we optimize the value that we create for our shareholders by pursuing this course of action?’ ” he said. The announcement came April 1 that the Weiss family and American Greetings Corp. had struck a deal for the Weisses — who lead the company — to acquire it. Also in the first quarter came the news that H.J. Heinz Co., the publicly traded Pittsburgh food company, had agreed to be acquired by Berkshire Hathaway and 3G Capital for $28 billion, including debt — the largest food acquisition on record. A shareholder vote on that deal is scheduled for this Tuesday, April 30. And then there’s computer maker, Dell Inc., which has signed a definitive agreement to sell to founder, chairman and CEO Michael Dell and private equity firm, Silver Lake Partners, for $24.4 billion. Already as of April 16, the dollar value of going-private mergers and acquisitions in the United States — $50.7 billion — exceeded the full-year dollar value of such deals in 2012 ($42.1 billion) and in 2011 ($49.8 billion), according to Thomson Reuters. KeyBanc Capital Markets has seen more M&A activity over the last nine months, including more companies contemplating going private, Mr. Paine said. “I do think we will see more go-private transactions as we work through 2013 and certainly as we work into 2014 and ’15,” said Mr. Paine, whose company advised the Weiss family on its transaction and raised a good portion of the capital for it. “Private equity firms have a lot of capital to deploy, and the debt capital markets are wide open,” he said. “Every type of capital is available right now.”

Private eyes Fifth Third Bank’s Northeastern Ohio affiliate has engaged over the last 12 months in more conversations with clients about their strategic options, including going private, than it has in the several years prior, said Jerry Kelsheimer, president and CEO of the affiliate. There have been seven Ohio companies that have gone private since 2009, according to Thomson Reuters, including the sale to a private equity firm of fabric and crafts retailer Jo-Ann Stores Inc. of Hudson in 2010 and a deal for Max & Erma’s Restaurants Inc. in 2008. Company executives pondering such deals tend to discuss the way the market values their businesses, the costs of compliance and reporting — particularly because of the Sarbanes-Oxley Act of 2002 — and having to do public disclosure, Mr. Kelsheimer said. “When you disclose to the public … you’re also disclosing to your competitors,” Mr. Kelsheimer said. “The other side of that is each time you write a disclosure, it takes time and effort and it costs something.” Liquidity is available to finance the “good, sound transactions in the marketplace,” Mr. Kelsheimer said. When asked whether Fifth Third faces stiff competition in financing such deals, he replied, “I think banks that are well capital-

WHAT THEY’RE SAYING ON PUBLIC VS. PRIVATE “I do think we will see more go-private transactions as we work through 2013 and certainly as we work into 2014 and ’15.” – Randy Paine co-head, KeyBanc Capital Markets ized and that are strong today are very interested in growing their balance sheets.” The only counterpoint KeyBanc Capital Markets’ Mr. Paine sees to the availability of capital is the run-up in public markets, wherein even smaller-cap companies, which he defines as $2 billion and less in market capitalization, have seen increases in their stock prices. “That certainly can put a damper on some of that (go-private) activity,” he said. The motivations for ending one’s time as a public company vary. Some smaller-cap companies are driven by a lack of investor interest, which subsequently can leave them feeling that their company is undervalued, Mr. Paine said. All the while, just like every other public corporation, they must absorb “significant costs,” he added. Professional advisers estimate that being public costs companies millions annually. That figure includes legal and accounting costs, plus the fact that management must devote some time to cultivating a relationship with shareholders and research analysts. There also are cases such as Dell’s, in which the company seeks to reposition itself and diversify its business away from the scrutiny of public shareholders, Mr. Paine added. “Transformation takes years in most cases and public investors are looking for progress every quarter,” he said. “In those instances, many CEOs and boards feel it’s in the company’s best interest to undertake that transformation outside of the public eye and the public equity investors’ need for quarterly progress.” Mr. Paine said he cannot comment on American Greetings’ motivations. Scott Fine did, though. With “virtually no analysts that cover it,” “thin trading volume,” and its small size, “there’s no reason for it (American Greetings) to be a public company,” said Mr. Fine, a professor of banking and finance at the Weatherhead School of Management at Case Western Reserve University.

A ‘seal of approval’ Initial public offerings also may be poised to increase in today’s environment, some say. IPOs in the United States reached their highest dollar value in 2012 ($41 billion) since 2007, when IPOs reached $46.8 billion, according to Thomson Reuters data. The firm counts only five IPOs in Ohio, though, since 2008. For the first time in a number of years, there’s been a strong run-up in stock valuations and

“You sort of now have the Good Housekeeping seal of approval. You’re public and by definition, you’ve made it. ... Now people look at you differently and are more accepting of you.”

“When you disclose to the public ... you’re also disclosing to your competitors.” – Jerry Kelsheimer president and CEO, Fifth Third Bank’s Northeastern Ohio affiliate

– Lou Schneeberger president and CEO, Panther Expedited Services Inc.

significant inflow of capital into the equity markets, which KeyBanc Capital Markets’ Mr. Paine expects to drive more IPOs, particularly for energy and technology companies. “Companies that are operating in those areas, one, have tremendous need to deploy capital, but they’re driving growth,” he said. “That’s the No. 1 thing investors in IPOs look for — a solid growth story.” He also expects more initial public offerings out of the health care space, and noted, too, that food IPOs have been strong. Case Western Reserve’s Mr.

Fine, who was involved in multiple initial public offerings as an investment banker at Goldman Sachs, also anticipates more go-public deals and fewer go-private deals because the equity markets are strong. When they are, there shouldn’t be as many companies undervalued by the market, which tends to be a motivation to go private, he explained. Another reason for more IPOs? Large private equity investors need liquidity, Mr. Fine said. Still, Lou Schneeberger doesn’t expect more companies to go public. Mr. Schneeberger, who has had

his hand in 10 IPOs and two go-private deals throughout his career, cites the small growth in the U.S. gross domestic product as one reason why. The company he leads, Panther Expedited Services Inc. in Seville, actually filed to go public but pulled out in late 2011 because “the market was getting soft,” said Mr. Schneeberger, president and CEO of the shipping company. In June 2012, Panther, whose private equity investors were ready to sell, sold to Arkansas Best Corp., a public company. As one of four partners who took Olympic Steel Inc. public in 1994, Mr. Schneeberger knows firsthand the benefits of doing it. “It was a good way for us to retain ownership and to also … bring cash into the company,” he said. “You sort of now have the Good Housekeeping seal of approval,” he added. “You’re public and by definition, you’ve made it. You’re the same company that you were six months ago, pretty much, but now people look at you differently and are more accepting of you … because somebody chose to buy your stock.” ■

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Investment committees need plan to address costs 401(k) offerings should be reviewed to determine if the fees are reasonable

MICHAELSWALLOW

I

ADVISER

s your 401(k) plan utilizing the lowest cost investment options? If not, does your investment committee have the proper documentation supporting the plan’s decision to offer higher cost retail mutual funds instead of lower cost institutional funds? Based on the March 21 ruling of the 9th U.S. Circuit Court of Appeals in the Tibble v. Edison case, every 401(k) plan sponsor and investment committee should ask themselves these questions when evaluating the investment options in their 401(k) plans. The court affirmed a district court opinion that a plan sponsor was imprudent for offering retail mutual funds without investigating the possibility of lower cost institutional share classes. This ruling shines a bright light

on one of the most important components of plan sponsor fiduciary responsibility, which is to ensure that fees and expenses paid by plan participants are reasonable in relation to the services and products provided. In Tibble v. Edison, the plan sponsor and fiduciaries had been sued by participants claiming their account fees were too high because the plan offered higher cost retail mutual funds when lower cost institutional funds were available. The appeals court rejected the plan sponsor’s claim that it was shielded from liability under the Employee Retirement Income Security Act, Section 404 (c), because that provision only protects fiduciaries from losses that are a “direct and necessary result” of a par-

ticipant’s or beneficiary’s action. The court ruled that plan fiduciaries can be held responsible for losses caused by the fiduciary’s breach of its duties. ERISA requires that fiduciaries act with the type of “care, skill, prudence and diligence under the circumstances not of a lay person, but of one experienced and knowledgeable with investment matters.” Selected mutual funds that charge “excessive fees” are considered to be a breach of the fiduciary duty of prudence, although the court recognized that “nothing in ERISA requires (a) fiduciary to scour the investment markets to find and offer the cheapest possible mutual fund.” The court also notes that there may be situations where a fiduciary might “have chosen funds with higher fees for any number of reasons, including potential for higher return, lower financial risk, more services offered or greater management flexibility.” In this case, however, the fiduciaries were imprudent in deciding to include retail class shares of three specific mutual funds in the

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Even if you formally benchmarked your plan two or three years ago, it may be time to again embark on a review of current investment fees, products and services. This necessary step will ensure that the plan sponsor and investment committee are meeting their fiduciary responsibilities. plan menu because they failed to investigate the possibility of institutional share class alternatives. This ruling came on the heels of the new plan sponsor fee disclosure requirements of 2012. The Department of Labor 408(b)(2) fee disclosure requirements, which called for compliance by July 1, 2012, brought fees and expenses to the forefront of the minds of every plan sponsor and investment committee. Now more than ever, plan sponsors and investment committees of 401(k) plans should be reviewing not only investment fees but also the overall costs of their plan(s) and making a determination as to the reasonableness of those costs. While survey data can provide some guidance on how your 401(k) plan’s investment fees compare

against its peers, it is a best practice to use actual competitive market data to determine if your plan’s investment fees and expenses are reasonable and appropriate. Since 401(k) marketplace dynamics are constantly changing, plans must remain competitive to keep up. Even if you formally benchmarked your plan two or three years ago, it may be time to again embark on a review of current investment fees, products and services. This necessary step will ensure that the plan sponsor and investment committee are meeting their fiduciary responsibilities while helping plan participants reach their retirement goals. Michael Swallow is a senior vice president at CBIZ Retirement Plan Services.

Gabelli-led group ups its Ferro Corp. stake Conglomeration has 16.2% of all shares outstanding, some claim board ‘failed’ By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com

A

group of investment firms connected to Mario J. Gabelli has increased its stock holdings in specialty chemical maker Ferro Corp. of Mayfield Heights, according to information filed last Tuesday, April 23, with the U.S. Securities and Gabelli Exchange Commission. In sum, the Gabelli group now holds 16.16% of all of Ferro’s shares outstanding. The group held 15.67% of the shares in its last filing on Feb. 25, and has been purchasing shares since the start of the year. Gamco Asset Management Inc. and Gabelli Funds LLC hold the largest portions of the shares, at 9.68% and 4.99%, respectively. Mr. Gabelli expressed frustration with the leadership at Ferro in an interview with Crain’s, saying he wants to see its leaders think of the shareholders when making decisions. “And they’re not doing it,” he said. Gamco, a New York-based investment advising firm, announced in the filing that the

ON THE WEB Story from: www.crainscleveland.com company intends to support the three individuals nominated for the board by the Shareholder Committee for the Future of Ferro. It has not yet decided how to divide the votes if the election for directors uses cumulative voting or if it will give its proxy to the shareholder committee, according to the filing. The committee, led by FrontFour Capital Group LLC and Quinpario Partners LLC, sent a letter to shareholders last week, asking them to support Jeffry N. Quinn, David A. Lorber and Nadim Z. Qureshi as directors and saying that the current Ferro board has “clearly failed.” The committee highlighted the turnaround experience of Mr. Quinn, Mr. Lorber and Mr. Qureshi in its letter. Mr. Gabelli gave a few examples behind Gamco’s decision, the most recent being Ferro’s lack of disclosure to shareholders about a takeover proposal from Akronbased A. Schulman Inc. until after a decision rejecting the proposal had been made. A. Schulman, a supplier of plastic resins, subsequently decided to proceed with a hostile takeover bid of $6.50 a share in cash and stock for Ferro. That offer remains on the table. Voting for the committee’s slate of candidates would create “creative tension” on the board, Mr. Gabelli said. Ferro released a letter to shareholders last week, encouraging them to vote against the committee’s proposed slate of directors. The annual shareholder meeting is scheduled for May 15. ■


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Good communication should be part of deal Mergers and acquisitions must be properly explained to employees, and all questions and concerns should be thought of quickly By CHRISSY KADLECK clbfreelancer@crain.com

W

hen Christopher M. Snider acquired the Exit Planning Institute last fall, he exercised the same sound practices he recommends to his clients. The new president and CEO began by crafting a story structured around answering the anticipated questions and concerns of the institute’s key stakeholders. He then shared that story, first with the board and then with the association’s 250 members, in a series of in-person and online meetings. He articulated his vision of the organization, which is an international membership organization for exit planning professionals, his plan to learn and listen the first 90 days and his assurance that any changes would be implemented around the six-month mark. He opened up the virtual floor to questions from members. He then issued a news release to the public. Mr. Snider will concede that his outright purchase of the member association lacked the complexities that often accompany a more traditional mergers-and-acquisition deal, but his professional opinion is that exit planning itself needs to “come out of the closet.� “One of the problems in the industry is that it’s very fragmented and there aren’t a lot of best practices. Where I think a lot of mergers and acquisitions fail is there hasn’t been enough thought into what’s going to happen after the sale,� Mr. Snider said. “Communication is one of the key areas that break down.�

Finding the best practices How a company handles its communication strategy will

depend on the type of sale, the size of the company and the degree of integration. While there isn’t a hard and fast rule that fits every scenario, advisers say there are some smart strategies on-the-block companies should employ to ensure the long-term success of their deal. “For business owners, it’s how do you preserve and protect your legacy and how do you walk into your future without your business with no regrets and no stone left unturned,� said Stacy Feiner, a clinical psychologist who is a director at Solon-based SS&G Parkland Consulting LLC. Dr. Feiner works with business owners to first identify all of the people impacted by a decision to buy or sell a business. The first tier of stakeholders includes the business owner, the potential buyer and the company’s employees — a figure that Dr. Feiner suggests multiplying by four to account for families impacted by the decision. “You are working intensely, expensively and diligently with your attorneys and your investment bankers, and you have to protect the integrity of the deal, which means you have to hold a lot of information confidentially but oftentimes that gets confused with being deceptive or secretive with employees,� she said. In an ideal corporate setting, employees should have a sense of the owner’s commitment to doing what’s in the best interest of the work force and sustainability of the company. “The business owner can communicate in a variety of ways that they have a vision for the company. This has nothing to do with an actual deal, actual buyer or actually being in the market,� she said. “When employees aren’t aware of the business owner’s overarching plan for the business, they can feel

very ambushed or taken by surprise (when a deal is announced). Engaged employees also protect the integrity of the deal.� Keven Prather, the Clevelandbased managing partner of the business private client group at Skylight Financial Group, who works with companies on pre-deal planning as many as 10 years prior to a deal, said if owners complete all the elements of a transition or exit plan, the employees are part of the value of the company. “You don’t want a mass exodus of talent because what happens then is your value is walking out the door,� he said. “The only way you avoid that is by clear and consistent communication at different times but your top level managers need to be brought into the fold once owners of the company understand how the transaction is going to occur.�

All about timing Generally companies want to avoid widespread communication to rank-and-file employees, customers, vendors, suppliers and community members until the deal is complete.

“When you’ve identified a buyer and a timeline for the transaction then your rank and file should be informed. I would meet with department heads who are probably going to be in the know, and I would do a company meeting or meet with individual departments,� Mr. Prather said. Dr. Feiner suggests working with a communications professional to craft thoughtful communications in the seller’s voice to loyal customers, investment institutions, families and employees. “The communication should be timed effectively so the people who need to know first are told first,� she said. For instance, an employee shouldn’t hear the news from a supplier. Mr. Snider said sometimes it’s nearly impossible to keep some details about the impending deal from leaking out. “You are going to tell your management team first, they will typically have to be involved in due diligence, especially if it’s a large middle market company; you are going to talk to your board of advisers; and you’re going to tell your family,� Mr. Snider said.

“We’re dealing with human beings here. If people get wind that something is going on and there is no communication, they are going to be nervous and that’s when you have problems.�

Get the story straight Emotions can run high during these transitions, especially in the case of mergers when there is duplicity and cultures to weave together. Up-front and thorough communication can help ease concerns and worries, Mr. Snider said. That’s when the aforementioned “story� development piece becomes critical. What is the story? How is that story going to be interpreted by each of the identified stakeholders? What questions will they have? What concerns will they have? “What I ask my owners to do is to write up the set of questions and then let’s then write up a press release or internal communication that will address those questions before they are even asked,� Mr. Snider said. “It’s a good exercise for the owners because it makes them be more sensitive to how they have to communicate.� ■

THERE WERE SO MANY GUIDELINES, EVEN THE GUIDELINES HAD GUIDELINES. The Small Business Lending Fund didn’t get here on its own. It came with guidelines. There were the formal guidelines. There were the informal guidelines that explained the formal guidelines. And there was a 30-day deadline. So there were emergency shareholder meetings, disclosures and non-standard proxy statements, and changes in charters and corporate structures, all to meet (you guessed it) the guidelines. In the end, we were DEOHWRVWHHURXUÀQDQFLDOVHUYLFHVFOLHQWVWKURXJKHYHU\VWHSRIWKHSURFHVV help them increase lending to small businesses and help communities grow.

Raymond James focuses on technology, data collection By LIZ SKINNER Investment News

Raymond James Financial Services Inc. plans to improve the process its advisers use to sign on customers, according to the independent broker-dealer’s president. At the opening of the firm’s national adviser conference in Dallas, Scott Curtis said the firm, which has 3,200 financial advisers managing $175 billion in assets, also will require advisers this year to add a layer of mobile security by implementing MobileIron. “The goal is to completely renovate how we collect and store data, and re-purpose basic client information to make it reusable across applications,� Mr. Curtis said. Improving the client intake process — a task that many advisers in the industry claim is too long and involved — also will incorpo-

rate allowing clients to sign documents electronically, he said. Improving how advisers use Raymond James’ technology to serve clients and encourage asset growth is the focus of many of the firm’s sessions during the four-day conference. Vin Campagnoli, head of technology strategy for Raymond James, said the brokerage has increased its technology spending by 30% since 2011. “That’s unheard of — no other firm can claim that they are up in technology spending that much over the last two years,� he said. Raymond James has had a 3% increase in the number of advisers and a 60% increase in client assets since 2008. It has offices throughout Northeast Ohio. ■ Investment News is a sister publication of Crain’s Cleveland Business.

Good thing there were guidelines.

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LARGEST INVESTMENT ADVISERS RANKED BY ASSETS UNDER MANAGEMENT LOCALLY(1)

Company Address Rank Phone/Website

Total regulatory assets under management locally (millions)(2)

Total number of local accounts

Minimum individual account (thousands)

Portfolio analysts on staff

Compensation for services

Chief investment officer Top local executive

1

CBiz Financial Solutions Inc., dba CBiz Retirement Plan Services 6050 Oak Tree Blvd. S., Suite 500, Independence 44131 (216) 447-9000/www.cbiz.com

$3,444.7

429

$1,000.0

6

Fixed fees, percentage of assets under management and commissions

Brian Dean

2

MAI Wealth Advisors LLC 1360 E. Ninth St., Suite 1100, Cleveland 44114 (216) 920-4800/www.maiwealth.com

$2,960.6

709

$500.0

11

Fee only based on assets under management or set fee for non-investment services

Gerald H. Gray

Richard J. Buoncore managing partner

3

CM Wealth Advisors Inc. 30195 Chagrin Blvd., Suite 250, Pepper Pike 44124 (216) 831-9667/www.cmwealthadvisors.com

$2,054.3

93

$2,000.0

NA

Percentage of assets under management, fixed fees

James W. Wert

James W. Wert president, CEO

4

Lincoln Financial Advisors/Sagemark Consulting 28601 Chagrin Blvd., Suite 300, Cleveland 44122 (216) 765-7400/www.lfa-sagemark.com

$2,006.8

NA

NA

NA

Flat fee, commission and/or percentage of assets under management

Tim Johnson Ben Huddle

Jeremy DiTullio managing principal

5

Rehmann Financial 29065 Clemens Road, Bldg. B, Westlake 44145 (440) 356-4520/www.rehmann.com

$1,162.0

4,667

$250.0

14

Fee or commission

Jeffrey Phillips

Joseph P. Heider regional managing principal

6

Fairport Asset Management 3636 Euclid Ave., Cleveland 44115 (216) 431-3000/www.fairportasset.com

$1,045.5

1,205

$1,000.0

4

Fee only

JT Mullen John Silvis

Kenneth Coleman Heather Ettinger managing partners

7

HPM Partners LLC 600 Superior Ave., Suite 1000, Cleveland 44114 (216) 687-0700/www.hpmpartners.com

$900.0

101

$2,000.0

6

Fee only from clients

8

Sequoia Financial Advisors LLC 121 S. Main St., Suite 300, Akron 44308 (330) 375-9480/www.sequoia-financial.com

$846.0

3,489

$0.0

5

Percentage of assets under management, fee and commission

9

Fairway Wealth Management LLC 6055 Rockside Woods Boulevard, Suite 330, Independence 44131-2317 (216) 573-7200/www.fairwaywealth.com

$783.0

120

$2,000.0

4

Fee only, based on assets and/or scope of services

10

McDonald Partners LLC 959 W. Saint Clair Ave., Cleveland 44113 (216) 912-0567/www.mcdonald-partners.com

$575.2

1,916

NA

2

Fee and commission

Bill Hegarty

11

Vantage Financial Group Inc. 6200 Rockside Road, Cleveland 44131 (216) 642-7878/www.vanfin.com

$550.0

2,500

NA

4

Fee and commission

NA

12

MGO Investment Advisors Inc. 24400 Chagrin Blvd., Suite 310, Beachwood 44122 (216) 771-4242/www.mgo-inc.com

$470.7

2,223

$15.0

4

Percentage of assets under management

Michael Bradford Michael Moskal Moskal president

13

Cornerstone Capital Advisors 1507 Boettler Road, Suite G, Uniontown 44685 (330) 896-6250/www.ccadvisors.com

$410.5

1,110

$100.0

2

Fee only

W. Fearigo Mario C. Giganti Mark principal, senior advisor

14

St. Clair Advisors LLC(3) 6120 Parkland Blvd., Suite 303, Mayfield Heights 44124 (216) 925-5670/www.saintclairadvisors.com

$407.0

50

$5,000.0

1

Fee only, fixed or based on assets under management

David W. Sommer

15

Landing Point Financial Group 36350 Detroit Road, Avon 44011-1506 (440) 934-7100/www.ameripriseadvisors.com/team/landing-point-financialgroup/

$348.5

2,192

$0.0

12

Percentage of assets under management

NA

Joe L. Flinner managing partner

16

Inverness Holdings LLC One Chagrin Highlands, Suite 440, Beachwood 44122 (216) 839-5130/www.invernesswealth.com

$312.0

352

$750.0

8

Fee and commission

Jeffrey van Fossen

Richard B. Renner principal

17

Scott Snow (financial advisors) LLC 24601 Center Ridge Road, Suite 175, Westlake 44145 (440) 871-7669/www.s2fa.com

$270.4

65

$1,000.0

2

Fee only

Scott P. Snow

Scott P. Snow managing director

18

Aurum Wealth Management Group LLC 6685 Beta Drive, Mayfield Village 44143 (440) 605-1900/www.aurumwealth.com

$228.4

106

$1,000.0

2

Fee only

Michael T. McKeown

19

Financial Management Strategies Inc. 9050 Sweet Valley Drive, Valley View 44125 (216) 642-1099/www.fmstrategies.biz

$140.4

378

$50.0

2

Fee only, percentage of assets under management

20

Paradigm Wealth Management LLC 27865 Clemens Road, Suite 1A, Westlake 44145 (440) 892-5900/www.investpwm.com

$98.2

55

$500.0

2

Percentage of assets under management

21

Willow Street Advisors LLC 198 W. Portage Trail Ext., Suite 105, Cuyahoga Falls 44223 (330) 923-3038/www.willowstreetadvisors.com

$89.2

65

$1,000.0

1

Fee only, percentage of assets under management

Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com. (1) Companies that are registered with the SEC as investment advisers but do not have full control over where their clients' money is invested are included in the Investment Advisers list. This criteria is in keeping with the standard used by our sister publication, Pensions & Investments. (2) As of the most recent ADV filed with the SEC. (3) Formerly Altus Wealth Advisors LLC.

Luke F. Baum president

A Leonard Douglas C. Nardi Irvin managing partner Thomas A. Haught

Thomas A. Haught president

R. Gaugler Mark S. Weiskind Daniel CEO, managing director Thomas McDonald president, CEO William M. McCormick CEO, president

Ron Bates president

Eric N. Wulff, Christopher D. Bart, managing directors, principals

C. Knox Charles B. Elliott Jeffrey president

Marnie Randel

Richard H. Stevens

Douglas C. Kuhlman managing partner David B. Kearns managing director, Ohio

RESEARCHED BY Deborah W. Hillyer


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Team: Revenue has grown considerably continued from PAGE 3

marketing giant IMG — found a need for a digital version of her executive search firm, TeamWork Consulting, which she started 27 years ago. TeamWork Online was the first of its kind in the sports business — an online matchmaking service for teams and potential hires — and it has been so effective its footprint is visible in almost every area of professional athletics. All 30 NBA teams use TeamWork’s service, for which employers pay annual fees to use the site’s database of job candidates and potential employees pay for help finding their dream jobs. TeamWork also counts 26 of the NFL’s 32 teams as clients, along with 24 of the 30 NHL clubs and 23 of the 30 teams in Major League Baseball. Factor in NASCAR, the PGA Tour, Major League Soccer (16 of the 19 clubs are TeamWork clients) and others — including a new addition in the Harlem Globetrotters — and the small company led by the “Godmother of Sports Management,� as one counterpart calls Mrs. Filippell, is everywhere. “When I made it, the whole point of it was I was making a replica of my executive search practice,� Mrs. Filippell said. “I know how much money they make and where they want to live. I know all that. How do I replicate it digitally? We’ve done that here. It’s been a phenomenal success.� Mrs. Filippell said TeamWork has had an annual revenue growth of 18.8% since 2001. She said the company’s revenue climbed 39% in 2012 from levels of 2011, and its first-quarter revenue this year was up 30% from the first quarter of 2012. TeamWork Online had 13,000 clients find jobs through its site in 2012, a figure that was twice as many as the 2008 total, according to Ms. Filippell. She said the company is on pace to match more than 15,000 candidates and sports teams this year. TeamWork Online chief growth officer Matt Kittle, who has been with the company for four years, said it “has been interesting to kind of be along for the ride.� Mr. Kittle said the private company doesn’t release its financials, but Mrs. Filippell said TeamWork Online’s revenues are above seven figures, and the company “has always been profitable.�

How it works TeamWork’s thousands of jobseekers enter their desired positions and salaries into the company’s database and clients are matched with professional teams with which they might be able to fill needs. Mrs. Filippell said much of her company’s growth stems from a change made in 2008. In prior years, TeamWork Online’s candidate profiles were what Mrs. Filippell called “dead end� — they weren’t continuously updated. Five years ago, TeamWork created a universal candidate application that is updated every time a candidate applies for — or lands — a job. “Most employment systems are dead end,� Mrs. Filippell said. “Those records will die in three, four months. Ours never die. It’s a very living, breathing system that is running through all this. We’re keeping track of this system. It’s

TEAMWORK’S REACH A look at the number of professional sports teams with which TeamWork Online works, along with the total number of teams in each league and the percentage that does business with the Shaker Heights company: League Clients Teams Pct. NBA 30 30 100.0 MLS 16 19 84.2 NFL 26 32 81.3 NHL 24 30 80.0 MLB 23 30 76.7 TOTAL 119 141 84.4 ■ Cleveland connections: The Browns and Cavaliers are TeamWork Online clients. The Indians are not. almost like a 24-7 virtual job fair. We have these massive employers sitting at the table, and we have this massive pool of candidates.� Mrs. Filippell said about 60% of TeamWork Online’s revenue comes from annual fees paid by its long list of professional teams. The rest stems from job candidates, partnerships with colleges and a new addition that has become quite popular — in-person networking events. TeamWork is on pace to host more than 60 networking events this year, including ones with the Cavaliers, Cincinnati Reds and Columbus Crew of Major League Soccer. Job-seekers pay for a ticket to the event, and Mrs. Filippell said teams must supply at least five “seniorlevel� executives. TeamWork drew 200 people to an event last Monday, April 22, at Fenway Park, home of the Boston Red Sox. Another moneymaker is a premium service where candidates’ web profiles can include a personal video, stories they have written and a link to their Twitter feeds. The MVP Access Program also includes career coaching from Mrs. Filippell. “One of the terrific parts of our program is you could see your entire career in sports laid out for you,� Mrs. Filippell said. “You can say this is how much money I want to make and see every single job you’ll have to do for the next 20 years in order to make that happen.�

Local teammates The Browns and Cavaliers are two of TeamWork Online’s many clients. The Browns do much of their hiring on their own, according to a team spokesman, and use TeamWork as a “supplement� to their searches. The Cavs, however, have had a long partnership with TeamWork — one that resulted in the hiring of Len Komoroski in 2003. Mr. Komoroski, CEO of the Cavs and Quicken Loans Arena, left his job as vice president of sales with the Minnesota Timberwolves in 1994 when Mrs. Filippell steered him to the Cleveland Lumberjacks, a minor league hockey team for which he became chief operating officer and a minority owner. Mr. Komoroski left Cleveland for a job with the Philadelphia Eagles in 1996, then returned when Mrs. Filippell reached out about an opening with the Cavs. “She’s responsible for both of my hires in Cleveland,� Mr. Komoroski said of Mrs. Filippell. “Over the years, she’s placed any number of execs in pro sports,� Mr.

Komoroski said. “Teamwork Online foreshadowed what the future of the industry was. I’m not sure if there is a major sport or governing body or discipline that she doesn’t have a relationship with.� Now that he is the one doing much of the hiring for the Cavs, Mr. Komoroski said TeamWork Online is “a staple of our recruiting efforts.�

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Suburban: Beacon Journal is vague about opportunity continued from PAGE 1

JASON MILLER

Home-delivery tubes for The Plain Dealer, the Elyria Chronicle-Telegram and The Lorain Morning Journal are side by side on a street in Avon.

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“We’re hashing that over right now,” said Paul B. Martin, president and CEO of Lorain County Printing and Publishing Co., which publishes the Elyria Chronicle-Telegram and The Medina Gazette. “We will try to deliver as many copies as we can in those areas,” Mr. Martin said, declining to be more specific. In a letter last Monday, April 22, to its employees, Lorain County Printing was only slightly more forthcoming, stating, “We will be working to strengthen our presence in new markets and offer differentiating services over the next few months that will strengthen our position in the market.” Editorially, the two papers’ coverage overlaps The Plain Dealer in communities such as Avon, Avon Lake and North Ridgeville in Lorain County, and in Brunswick in Medina County. The Lorain County Printing newspapers, like all the papers that serve the region outside Cuyahoga County, comprehensively cover the Cleveland pro sports teams and, because of inter-county rivalries, high school sports. Those coverage areas would make them attractive to some readers, especially if The Plain Dealer stops home delivery on Saturdays or Mondays.

Feeling territorial Two newspapers that bracket Cuyahoga County to the east and west are even further ahead in their planning than the ChronicleTelegram and Gazette. “For several months we’ve been anticipating (The Plain Dealer’s cutback) and planning for it,” said Jeff Sudbrook, president and publisher of The Morning Journal in Lorain and The News-Herald in Lake County. “Most recently at The Morning Journal we expanded our news coverage more intensely into the AvonAvon Lake area, and into Westlake, Bay Village and Rocky River; and in The News Herald (territory) as well,” reaching into Euclid and Richmond Heights, Mr. Sudbrook said. “We do expect to pick up some subscribers. Whether that’s a few hundred or a few thousand at each property is as yet to be determined,” Mr. Sudbrook said. “We should pick up some advertising dollars as well.” The two newspapers are owned by Journal Register Co., a media conglomerate with print and online news properties in 10 states. Journal Register in March emerged from Chapter 11 bankruptcy protection — its second stint in U.S. Bankruptcy Court in three years. Like Plain Dealer owner Advance Publications of New York, Journal Register properties are placing greater emphasis on their online products. The Lorain paper circulates primarily in Lorain County, though it does have some circulation in Cuyahoga County’s western suburbs. The News-Herald circulates in Lake County and in several of Cuyahoga County’s eastern suburbs, including Euclid and Richmond Heights.

The southern flank The Akron Beacon Journal could be considered The Plain Dealer’s greatest rival, because it’s the largest newspaper that rings the PD’s home territory. The Akron paper tried unsuccessfully to crack the Cleveland

“We’re hashing that over right now.” – Paul B. Martin, president and CEO, Lorain County Printing and Publishing Co., on plans to increase home delivery market after The Cleveland Press folded in 1982, and it’s not saying much about any plans to extend its reach, though it’s unlikely its owner is eager to invest in the property. Publisher Andrea Mathewson declined to be interviewed by telephone but did agree to respond to questions by email. However, her response to several questions was a brief four sentences. Boiled down, she said, “The Beacon Journal has no plans to reduce its home delivery days. We are always looking at options to enhance our coverage as we enter our 175th year of serving the community.” The Beacon Journal was sold in 2006, just before the newspaper industry began a downward spiral, by The McClatchy Co. to Canadian press mogul David Black’s Black Press Ltd. for $165 million. In 2010, Mr. Black told the Globe and Mail of Toronto, after writing down the Beacon Journal investment by $100 million, “It was not a smart thing to buy.” The Beacon Journal and The Plain Dealer — like larger daily newspapers across the country — have been struggling. The situation has created an opportunity for smaller papers, which generally have not have been hit as hard, to boost circulation and advertising by attracting die-hard newspaper readers, typically older readers, who can’t or don’t want to go out to a convenience store or news box four days a week to get a newspaper.

New Orleans’ experience The Plain Dealer’s home delivery footprint covers all of Cuyahoga County and pushes into communities on the edges of neighboring counties. The paper’s market research department describes its “Power Zone” as Cuyahoga County and the ZIP codes approximately 10 miles beyond the county’s borders. None of the smaller regional papers in Northeast Ohio intend to strike at the core of that zone. In New Orleans, however, the Baton Rouge Advocate moved quickly to fill the gap that opened in New Orleans when the Times-Picayune took a more drastic step than The Plain Dealer, its corporate sibling. In May 2012, Advance Publications announced it would halt seven-day publication of the newspaper and publish only three days a week. By September, the Advocate was launching a New Orleans edition. At the time that the Baton Rouge-based newspaper was sold in March to New Orleans businessman John Georges, the Advocate said it was selling 20,000 papers daily in New Orleans, a significant part of its 98,000 daily circulation. Mr. Georges has not announced plans for further development of the New Orleans edition. Rick Edmonds, a newspaper business analyst at the Poynter Institute, a nonprofit journalism institute based in St. Petersburg, Fla., said the Advocate’s experience in New Orleans strongly suggests that “some people get it because they really, really want to get a paper.” ■


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Alliance: Initiative helps Clinic extend brand into new markets continued from PAGE 1

Northeast Ohio. Late last year, for instance, the Clinic announced it had struck a deal with Buffalo Medical Group in western New York as its first out-of-state participant in the initiative. In addition, the Quality Alliance is expected to play a big role in the Clinic’s burgeoning relationship with Community Health Systems — the large, publicly traded hospital company in Franklin, Tenn., that inked a strategic alliance with the Clinic in March.

‘That’s free advertising’ From a local standpoint, the Quality Alliance allows the Clinic to ensure private practice docs doing business at its community hospitals are up to snuff in caring for patients by meeting certain quality metrics. In the long run, it will be the hospitals that are dinged by government payers for costly readmissions — something that could be warded off by proper primary care, said Bill Ryan, president of the Center for Health Affairs, an advocacy group for local hospitals. As for the Clinic’s out-of-state push with the Quality Alliance, Mr. Ryan

Intellectual capital gains

WHAT THEY’RE SAYING ABOUT THE ALLIANCE “We want the community to know we are part of the alliance and that we are included in this prestigious group.” – Joe Mantone, director of public relations, Buffalo Medical Group said it appears to be a logical way for the Clinic to drive patient referrals and — perhaps more importantly — to extend the Clinic’s already-strong brand into new markets. “It doesn’t matter whether you get any referrals out of it or not,” Mr. Ryan said. “People are saying they’re part of the Cleveland Clinic quality initiative, and they follow the Clinic’s standards of care. That’s free advertising.” Clinic CEO Dr. Toby Cosgrove has been vocal about his desire to bolster the Clinic’s name recognition throughout the country, noting during an interview with Crain’s following the Community Health

“It doesn’t matter whether you get any referrals out of it or not. People are saying they’re part of the Cleveland Clinic quality initiative, and they follow the Clinic’s standard of care.” – Bill Ryan, president, Center for Health Affairs Systems announcement that the partnership would be “a way for us hopefully to extend our brand.” The Buffalo Medical Group has rolled the Quality Alliance into some of its in-house promotional pieces, which run on televisions in patient waiting rooms at the group’s facilities. “We want the community to know we are part of the alliance and that we are included in this prestigious group,” said Joe Mantone, director of public relations for Buffalo Medical Group. “From what I’ve read, the Cleveland Clinic is one of the world’s most recognized health brands.”

While those participating in the Quality Alliance beyond Northeast Ohio pay to be a part of the group, Ann Huston, the Clinic’s chief strategy officer, brushed off a question about whether the alliance was a way for the Clinic to generate revenue. Instead, she said in an e-mail the Quality Alliance “shifts the fulcrum of our health system from the hospital to a care system which is needed for population health.” “We recognize that every physician practice, physician group or health care organization will not have the resources, the time, or the intellectual property to build these scalable capabilities,” Ms. Huston said. “The Quality Alliance allows us to bring these types of offerings to them wherever they are located.” Most large health care systems are migrating toward this notion of population health management to varying degrees, as commercial and government insurers are expected to move toward reimbursement systems that reward doctors and hospitals for providing quality, yet low-cost, care for large groups of people.

“I think clearly the market in the future will favor the groups that are the most efficient, and quality is going to be absolutely expected,” Dr. Elsawy said. “How efficiently you can provide those outcomes is going to be key to the success of any health care system.” Patient data from the Quality Alliance’s members also will be dumped into a secure online databank, which Dr. Elsawy said will be useful for research and evaluating the best ways to manage the health of large groups of people. “The more data points you start collecting from varied geography, you truly start to enter the realm of understanding big data in a meaningful way,” Dr. Elsawy said. Dr. John Notaro, associate medical director of Buffalo Medical Group, said gaining access to the clinical protocols and quality standards established by the Clinic and the other doctors in the alliance is invaluable. “We’ve already taken things that are pretty well recognized measures of quality for ourselves, but this enhances that,” Dr. Notaro said. “It gives us access to the intellectual capital of the alliance.” ■

TAX LIENS The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federal government. The lien is a public notice to creditors that the government has a claim against a company’s property. Liens reported here are $5,000 and higher. Dates listed are the dates the documents were filed in the Recorder’s Office.

LIENS FILED Eagle Panels LLC 3636 W. 58th St., Cleveland ID: 27-2160052 Date filed: Feb. 5, 2013 Type: Employer’s withholding Amount: $9,652 Progressive Steam Inc. 1588 E. 40th St., Cleveland ID: 34-1533090 Date filed: Feb. 28, 2013 Type: Employer’s withholding Amount: $9,213 K P S Electric Inc. 3120 Woodview Drive, Broadview Heights ID: 34-1840061 Date filed: Feb. 7, 2013 Type: Employer’s withholding Amount: $6,470 Romito Enterprises Inc. 18414-16 St. Clair Ave., Cleveland ID: 34-1898839 Date filed: Feb. 27, 2013 Type: Employer’s withholding, unemployment Amount: $6,283 Harold Pollock Co. LPA 5900 Harper Road, Suite 107, Solon ID: 34-1530164 Date filed: Feb. 27, 2013 Type: Employer’s withholding Amount: $5,630 James Secure Inc. 932 Broadway Ave., Bedford ID: 20-1889160 Date filed: Feb. 5, 2013 Type: Employer’s withholding, unemployment, failure to file complete return Amount: $5,307

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Allied International Sales Co. 18224 Fernway Road, Shaker Heights ID: 34-1613053 Date filed: Oct. 26, 2009 Date released: Feb. 5, 2013 Type: Employer’s withholding Amount: $28,919 Alpha Tool & Mold Inc. 83 Alpha Park, Highland Heights ID: 34-1258012 Date filed: Jan. 7, 2011 Date released: Feb. 5, 2013 Type: Employer’s withholding Amount: $19,604 Alpha Tool & Mold Inc. 83 Alpha Park, Highland Heights ID: 34-1258012 Date filed: Nov. 12, 2010 Date released: Feb. 28, 2013 Type: Employer’s withholding Amount: $90,106 Architectural Sheet Metals LLC 1457 E. 39 St., Cleveland ID: 20-4733935 Date filed: July 24, 2012 Date released: Feb. 5, 2013 Type: Employer’s withholding Amount: $13,906

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Architectural Sheet Metals LLC 1457 E. 39 St., Cleveland ID: 20-4733935 Date filed: March 23, 2012 Date released: Feb. 5, 2013 Type: Employer’s withholding Amount: $15,731 Architectural Sheet Metals LLC 1457 E. 39 St., Cleveland ID: 20-4733935 Date filed: Nov. 16, 2011 Date released: Feb. 5, 2013 Type: Employer’s withholding Amount: $12,546 Bejjanis Balloon Mart Inc. 100 Hayes Drive, Suite F, Brooklyn Heights ID: 34-1697010 Date filed: Feb. 24, 2004 Date released: Feb. 28, 2012 Type: Employer’s withholding, unemployment Amount: $48,064

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Incubators: Ohio says promising startups should receive money continued from PAGE 1

The ideas are meant to help the incubators turn startups into “thriving, independent job creators” within roughly three to five years, said David Zak, chief of the business services division within the Ohio Development Services Agency. The agency created the overall incubator proposal for the Third Frontier Commission, which oversees most of the state’s technology-based economic development efforts and recently took over the Edison program. It’s not uncommon for companies to remain in Edison incubators longer than five years, Mr. Zak said. “In a lot of cases there are companies that are there for a long time,” he said. The proposal hasn’t won a lot of support from the incubators. Executives from four Northeast Ohio incubators — the Akron Global Business Accelerator, the Youngstown Business Incubator, the Great Lakes Innovation & Development Enterprise (GLIDE) in Elyria, and the Braintree Business Development Center in Mansfield — said they were OK with the idea of letting other incubators apply for the Edison program’s money. The program is set to receive $7.3 million over 18 months, a slight increase over past levels. However, a few incubator officials were uneasy about the sugges-

Contact: Phone: Fax: E-mail:

tion that incubators should push harder to make sure startups “graduate” — meaning they should stop using subsidized office space and relying on incubator services — within three to five years. And none of them voiced support for the idea of giving one-third of their Edison money directly to their most promising startups in the form of grants, loans or perhaps equity investments. The Ohio Development Services Agency suggested the latter idea because startups need both mentoring and capital, said senior media strategist Katie Sabatino. But a few incubator officials said they don’t need to give their operating money to the startups they house because they already have relationships with investors and other organizations that provide capital for young companies. For instance, GLIDE works with the Innovation Fund at Lorain County Community College. The nonprofit fund gives startups grants ranging from $25,000 to $100,000. “Hopefully they’ll rethink that whole concept,” said Dennis Cocco, co-director of GLIDE. If incubators are required to give one-third of their Edison money directly to companies, they’ll need to reduce the services they provide, some incubator leaders said. For instance, at the Akron Global Busi-

Denise Donaldson (216) 522-1383 (216) 694-4264 DDonaldson@crain.com

ness Accelerator, staff would need to be cut, said CEO Anthony Margida. “It would really cut into our ability to serve our client base,” Dr. Margida said. Officials from the two Edison incubators in Cleveland — BioEnterprise Corp. and the Manufacturing Advocacy & Growth Network (MAGNET) — declined to comment on the issue.

When to leave the nest? Most companies served by Ohio’s Edison incubators already graduate in three to five years, said Bob Leach, who is both director of operations at Braintree and chairman of the Edison Technology Incubator Directors Collaborative. Some startups do take longer to leave, especially companies developing medical devices and pharmaceuticals, which have regulatory hurdles to clear before launching their products, Mr. Leach said. However, companies that could leave occasionally stick around longer. For instance, digital marketing software company Knotice employed about 75 people in Northeast Ohio at the start of the year, but it continues to rent space at the Akron incubator at belowmarket rates. Another company, Summit Data Communications, employed 38 people at the acceler-

ator in March 2012, when it was acquired by Laird PLC of London for $22 million. The wireless technology company since has moved out. The Akron accelerator didn’t push the companies to leave because it hasn’t “reached a point where any viable candidate would be denied space,” said Dr. Margida, who in January replaced Michael LeHere as the incubator’s CEO. The 50 or so companies in the incubator take up about 80% of the building, a former B.F. Goodrich manufacturing plant with more than 200,000 square feet of useable space. Plus, successful tenants not only create local jobs, but they also can serve as mentors to younger tenants, Dr. Margida said. And their rent payments provide revenue for the incubator, he added. Though some tenants pay higher rental rates than others, they all pay less than the market would charge, Dr. Margida said. So, could he start charging more mature companies a market rate? “That’s certainly an option,” Dr. Margida said. A transportation software company, Banyan Technology, has been based in the GLIDE incubator for several years, but it pays what Mr. Cocco said is a market rate. Plus, there is room for the company in the building, which is owned by Lorain County Community College. “If I was out of space and we

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State officials said they understand that businesses in some sectors grow more slowly than others, and they have no problem when established companies pay full rent in space set aside for incubator graduates. For instance, the Youngstown Business Incubator has acquired space specifically for that purpose. But established companies shouldn’t use space and resources that startups could be using, said Mr. Zak of the Ohio Development Services Agency. “If a company becomes independent, in our minds that makes room for another innovator who has another great idea,” he said. Incubator directors still have the opportunity to sway the direction of the Edison program: The Third Frontier Commission instructed the development services agency to get their input. The incubator directors said they believe they’re doing a good job, but they also know they have a duty to work constantly to improve the Edison program, said Mr. Leach, chair of the Edison directors group. “We understand that we have responsibilities to both the state and the taxpayer,” he said. ■

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were putting people in the hallway, I might help Banyan find other space,” he said.

Requests for Proposals The City of Cleveland Heights has issued Requests for Proposals for development of 5 vacant City-owned properties : Lee Rd b/t Meadowbrook & Tullamore, Euclid Heights Blvd near Lee, SW corner of Cedar & Coventry, Noble Road near Greyton & “Turkey Ridge” site on Edgehill Road. RFPs at www.clevelandheights.com/index.aspx?page=365 or contact K. O’Donnell, kodonnell@clvhts.com or 216.291.4885.

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THEINSIDER

THEWEEK APRIL 22 - 28 The big story: Ed FitzGerald is taking on a big electoral challenge in 2014 — a run for governor against incumbent John Kasich — rather than running a safer campaign for reelection as Cuyahoga County executive. The Democrat described Gov. Kasich’s three years in office as a litany of mistakes “that goes on and on.” Among those mistakes: FitzGerald the governor’s plan to broaden the scope of services covered by the sales tax, and hiding his economic development program, JobsOhio, from public scrutiny.

Call to action: In a surprise announcement, Ohio Senate president Keith Faber said his chamber of the Legislature will take “immediate action” to ban Internet cafés in the state. The Senate has been seen as dragging its feet on House Bill 7, which would put most Internet cafés out of business because it would restrict the size of the payoffs on their slots-like “sweepstakes” games. See editorial, Page 10 Positive development: IBM bought UrbanCode Inc. and said it plans to keep the 50-plus employees who work at the software company’s Euclid Avenue headquarters. IBM didn’t say how much it paid for the Cleveland company, which has doubled the size of its staff and its sales since the start of 2012. UrbanCode founder and CEO Maciej Zawadzki will stay on as an IBM executive focused on “DevOps” software, a term used to describe software used to manage the software development lifecycle.

Petro project: Chart Industries Inc. was awarded a contract valued “in excess of $45 million” to provide liquefied natural gas fueling stations, self-contained LNG station modules, storage tanks and trailers to PetroChina Hua Gang Gas Group. The equipment “supports PetroChina’s expansion of its growing LNG infrastructure in China,” according to Chart. The contract is in addition to a $40 million PetroChina order Chart announced in February. Permanent gig: Ferro Corp., the maker of specialty chemicals that is resisting a hostile takeover bid by A. Schulman Inc., removed the “interim” tag from the title of the man who has been its president and CEO since last November. Ferro’s board appointed Peter T. Thomas as president and CEO, effective immediately. Mr. Thomas, 57, had served as Ferro’s operating vice president of Polymer and Ceramic Engineered Materials. William B. Lawrence, a former TRW Inc. executive who served as acting chairman of the board since November, was named chairman. Promotion, for now: The Cleveland Clinic found an interim replacement for Chris Coburn, who is leaving for Boston. Gary Fingerhut was named interim executive director of Cleveland Clinic Innovations, the business development arm of the hospital system. Mr. Fingerhut has served as general manager of IT commercialization at Cleveland Clinic Innovations for the last two years. Mr. Coburn will remain executive director of the organization through May.

This and that:

The Cleveland Cavaliers named Mike Brown, who coached the during the LeBron James era, as head coach once again, replacing the fired Byron Scott. … Cleveland startup ReXceptor Inc. raised $1.4 million to start clinical trials on what other researchers have described as a promising Alzheimer’s drug. … Cleveland State University named Joseph B. Mazzola, a former professor at Duke and Georgetown universities, as dean of its Monte Ahuja College of Business.

REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS

Mr. Gathercole gathers up kin ■ Michael Gathercole’s longtime pursuit of opening an apartment complex for what he described as “kinship families” on the 9.5acre Fairhill Partners campus on Fairhill Road in Cleveland has come to fruition — and it couldn’t have come soon enough. “We started quietly raising money, and unfortunately we sort of launched our campaign into the teeth of the recession, which was horrendous,” said Mr. Gathercole, who served as Fairhill’s associate director for 12 years. “Funds dried up.” He said Fairhill, which bills itself as a multitenant nonprofit center, recently finished work on transforming an aging building into a 7,500-square-foot housing complex with nine apartments. Work already has started on a second complex with 13 apartments. Kinship families are described as those led by seniors who serve as guardians for their grandchildren. Those living in the village will have access to a number of social services groups housed on Fairhill’s campus. “One of the very serious needs of that population, or many of them, not all, is the difficulty of finding decent, affordable accommodations where there’s a certain element of safety and security attached,” he said. The project was the brainchild of Fairhill CEO Stephanie FallCreek. In all, the project could cost $3.5 million. It has been supported by benefactors including the Cleveland, Saint Luke’s and McGregor foundations. Known as “Mr. Kinship Village” for the last several years at Fairhill, Mr. Gathercole

said last week he planned to retire this spring. Prior to his work with Fairhill, Mr. Gathercole served 37 years in the British Diplomatic Service. — Timothy Magaw

facturing base. — Stan Bullard

A fresh job-creation opportunity crops up

■ Local nonprofits looking to make a splash online and generate more fundraising dollars because of it could get a free boost from Fathom, a digital marketing and analytics firm in Valley View. Fathom is hosting a free, all-day summit Friday, May 3, at its offices to school area nonprofits in the ways of engaging prospective donors on social media, making content go viral and boosting their presence on search engines. “Digital marketing is important for nonprofits because it will help them get found, not just locally but nationally,” said Jenni Ramminger, Fathom’s director of marketing. “Sometimes your budget is an issue, and digital marketing is one of the most costeffective ways to get your name out there.” The summit will feature a presentation by Alex Sheen, founder of the Lakewood-based nonprofit ‘because I said I would.’ The group bills itself as a social movement that “motivates others to make a positive impact on our world.” Ms. Ramminger said nonprofits of all sizes are encouraged to attend. As of last Thursday, 40 had signed up, but Ms. Ramminger said the company could accommodate as many as 120. — Timothy Magaw

■ Seventeen acres of Parma’s Stearns Farm, which dates from the 1850s, is joining the urban farming movement. Part of Stearns Farm, a site owned by the city of Parma and operated as an educational museum by the Parma Area Historical Society, will become a site next month for Cleveland Crops. The effort is a food-raising and job program operated by the Cuyahoga County Board of Developmental Disabilities and its nonprofit arm, Solutions at Work, or SAW. Parma Mayor Tim DeGeeter is excited about the addition. “This will further enhance the unique experience Stearns offers people and perhaps make it more of a destination for families,” he said. West Creek Conservancy, a citizens group devoted to preserving Parma’s green space, suggested the partnership. A team of eight to 15 people with development disabilities will work on the new Cleveland Crop site, its eighth in the county. A small barn and parking lot will be added to the farm to accommodate Cleveland Crops. The additions will join the Stearns’ old farmhouse, barn and a menagerie of farm animals. Cleveland Crop is designed to replace job opportunities lost for the developmentally disabled due to the area’s shrinking manu-

WHAT’S NEW

BEST OF THE BLOGS

COMPANY: National Safety Apparel, Cleveland

Excerpts from recent blog entries on CrainsCleveland.com.

PRODUCT: FR High Visibility Clothing

The voice of anti-America

National Safety Apparel, a maker of protective clothing for industrial safety workers, says it has overhauled its FR high-visibility line for 2013. The fabrics used to produce the shirts and sweatshirts have been upgraded “to be an even brighter, more visible shade of fluorescent yellow,” the company says. The FR line consists of ANSI (American National Standard) 107 Class 2 and 3 mesh vests, long- and short-sleeve T-shirts, hooded fleece sweatshirts and a lined hooded sweatshirt, the company says. For information, visit www.nsamfg.com.

COMPANY: Tremco Commercial Sealants & Waterproofing PRODUCT: Dynomic 100 Tremco describes the product as “a new breed of urethane sealant that expedites construction schedules and simplifies product selection.” Dymonic 100 does this by “providing exceptional movement, the capability to adhere to both damp and green concrete and the versatility for use with Tremco’s waterproofing membranes, traffic coatings and air barrier membranes,” the company says. Visit www.tremcosealants.com for more.

■ A quick summary hardly does justice to a Wall Street Journal story about Tim Kirby, an expatriate from the Cleveland suburbs who says he wants Russian citizenship and says Joseph Stalin was a better leader than has been portrayed in history books. “On radio shows on Moscow’s statecontrolled Radio Mayak and in frequent appearances on state television, Mr. Kirby is making a name for himself inside Russia as a kind of Kremlin-appointed Joe the Plumber who explains a broken America to Russian listeners,” The Journal wrote. As the Kremlin rallied support for its ban on U.S. adoptions of Russian orphans imposed late last year, Mr. Kirby, 31, “appeared on prime-time talk shows to say that one quarter of American children take pills that affect their brains, and that they are endangered by religious sects whose members oppose medical care or dance around poisonous snakes,” according to the newspaper. Mr. Kirby’s career is flowering as the Kremlin “ramps up a campaign against U.S. influence in Russia, warning that Westernpaid agents are trying to undermine the country’s stability under the guise of civic action and human rights campaigns,” The Journal said. He grew up “in a rundown suburb of Cleveland” — the story didn’t identify it — and he told The Journal that his upbringing as a white minority in his neighborhood left him “uncomfortable” in polite society and hostile to authority. He joined the Peace Corps after college, was sent to the former Soviet republic of Kazakhstan and ended up in Moscow in 2007.

Learn how to reach out and touch someone

Entrepreneurs need not apply ■ Thinking of buying a franchise? There’s a lot to think about, according to a MarketWatch.com story that featured comments from Joel Libava, a franchise adviser and owner of TheFranchiseKing.com in Cleveland. Franchising “can be a great thing as long as people are realistic. I’m always cautioning folks not to fall into the franchise industry Kool-Aid,” Mr. Libava said. The piece listed 11 mistakes for prospective franchisees to avoid. Among them: Don’t misunderstand the rules. For instance, if you’re entrepreneurial by temperament, a franchise probably is not for you. The best candidate, Mr. Libava said, is someone “who has been in corporate America for a long time and is used to rules — they tend to do a lot better than people who are entrepreneurial.”

Burgers in the ‘Burgh ■ When you get hungry on a coming trip to Pittsburgh, you’ll be able to satisfy the craving with a taste of home. The Pittsburgh Business Times reported that Michael Symon “is ready to bring his B Spot burger restaurant to Pittsburgh” in a big way. Cleveland-based Symon Restaurant Group, which last August opened a Bar Symon at the Pittsburgh International Airport, “is now scouting the region for what may eventually be four to six B Spot locations in the Pittsburgh area,” the newspaper reported. Doug Petkovic, a business partner in Symon Restaurant Group, “hopes to have the company’s first lease signed for B Spot in the next few months and debut the popular Cleveland restaurant here a few months after that,” according to the story.


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