$2.00/OCTOBER 1 - 7, 2012
VOL. 33, NO. 38
Budget cuts could send NASA reeling
“(Patients) want to see someone who will make them smile and make them feel like they care, and the military gave me those good people skills.” – Antwon Peterson (below), patient services representative, Cleveland Clinic
Contractors, key services likely would be slashed if sequestration takes effect By CHUCK SODER email@example.com
HEROIC EFFORTS Health care providers on a mission to recruit veterans, whose skill sets serve key employment needs By TIMOTHY MAGAW firstname.lastname@example.org
ntwon Peterson’s eight-year stint with the U.S. Navy exposed him to all walks of life and taught him how, as he characterized it, to “get the job done, get it done right and ask questions later.” With his days on the high seas now behind him, Mr. Peterson for the last year has put those lessons to work on the front lines of the Cleveland Clinic’s bustling emergency department, serving as the first point of contact for patients seeking immediate care. “I work in the ER, so I get all kinds of patients with different situations and different problems that need help,” Mr. Peterson said. “They want to see someone who will make them smile and make them feel like they care, and the military gave me those good people skills.” Mr. Peterson is just the type of worker local health care leaders have in mind — disciplined. As such, the Clinic and other local health care providers are making a concerted effort to recruit veterans.
See NASA Page 11
Offer for American Greetings sets up debate over fair value By MARK DODOSH email@example.com
Is the Weiss family’s offer to take American Greetings Corp. private a good deal for shareholders who aren’t descendants of the company’s founder, Jacob Sapirstein? That’s the central question a special committee of independent directors on the American Greetings’ board will consider in coming weeks.
Based on the movement of American Greetings’ stock price over the last 10 years, the proposal by the Weiss family and related parties to buy the shares they don’t already own in the nation’s No. 2 greeting card company could be seen as opportunistic timing. However, costly business challenges that are likely See OFFER Page 19
INSIDE Law firms capitalize on pipeline of work The shale industry has been a boon to stakeholders, including local law firms, which have formed shale-centered practice groups or have bolstered their oil and gas practices. But is there enough work to sustain them? PAGE 13.
See VETERANS Page 22
NASA Glenn Research Center could lose more than 10% of its budget if the federal government falls off the “fiscal cliff.” NASA Glenn would need to cut roughly $70 million from its budget during fiscal 2013 — which begins today, Oct. 1 — if the government by the end of the current calendar year fails to pass a plan to cut the federal budget deficit. That failure would trigger massive, automatic spending cuts, according to two officials with the union representing the research center’s engineers and scientists. They cited an estimate center director Ramon Lugo III gave during a recent meeting that was broadcast
to all NASA Glenn employees. Cutting $70 million from NASA Glenn’s budget — which was in the range of $650 million during fiscal 2012 — would have a “devastating” effect on the center, according to an email from Sheila Bailey, an executive with the Lewis Engineers and Scientists Association. Cuts of that magnitude would be “almost inconceivable,” said Paul Greenberg, area vice president with the union. Drs. Bailey and Greenberg both said the timing of the automatic cuts would compound the problem: The entire $70 million would need to be cut during the final three quarters of fiscal 2013. “It’s hard to even get your arms around how you would absorb
2012 Nominees see page 9 Announced
OCTOBER 1 - 7, 2012
CRAIN’S CLEVELAND BUSINESS
Steel prices fall slowly as ore cost crashes Bottom lines of area manufacturers still impacted despite marginal decline By DAN SHINGLER firstname.lastname@example.org
When the price of corn moves significantly up or down, the price of tortillas generally follows behind like a taco truck in tow. Not so with iron ore and steel. While the price of iron ore — the main raw material in steel — has dropped precipitously this year, the
decline hasn’t had the effect of lowering the price of steel used by manufacturers very much, though it’s just enough to make a difference for many who closely watch their costs. “The problem is that there’s been tremendous consolidation in the steel industry. There are just a few big steel companies left now, and they’re going to control the marketplace and the price,” said Jeff
Hepner, owner and president of Berea-based Telefast Industries, a stamping company that produces specialty bolts, nuts and other fasteners from steel rod and wire. In other words, when steel prices are falling, a few big companies in the industry can cause prices to stabilize or even to rise again by cutting their production. When they all cut production in lockstep, as is often the case, the result is that steel prices don’t go down, even if prices for iron ore do. That’s why when the price of iron ore collapsed by nearly 50% — to
“Steel, depending on the part, can be as high as 50% of the (product) cost. So if it’s a 6% decline ... it’s not huge, but it’s a factor.” – Jeff Hepner, owner and president of Telefast Industries in Berea about $90 a ton last month from about $177 in September 2011 — the price of steel only came down a fraction of that amount. For example, the price of hot-rolled coiled steel, the type used by many area stampers and other manufacturers, declined only about 5%, to $662 a ton at the end of August from $697.50 a ton a year earlier. (Steel prices for the full
month of September were not yet available at press time.) Still, for many U.S. manufacturers that have learned to make a living on small margins, any decrease in steel prices can have an amplified effect on their bottom lines. At Telefast, for instance, the cost of steel makes up between 30% and See STEEL Page 8
CROP PARED TO THE CORE Unusual weather forces apple farmers to trim pick-yourown programs, buy from other growers to sell in stores By MICHELLE PARK email@example.com
alking his family’s sixth-generation Chesterland farm, David Patterson stops before a row of McIntosh apple trees. So this is what 90% crop loss looks like. “These have not been picked yet, and you can see — there are no apples,” said Mr. Patterson, who, with his parents and brother, Bill, owns Patterson Fruit Farm. It’s a late September day — typically peak harvest time for apples — and the farm’s trees are an unforgiving sea of green. “You can see that it’s across the board,” Mr. Patterson said, stepping to his left and touching an Idared tree. “This tree here would probably have two bushels of apples, about 150 to 200 apples. It has two.” Though its pick-your-own apples program — where visitors can pick produce off the trees — arguably is the farm’s biggest draw in the fall, Patterson Fruit Farm announced last week on its Facebook page that it has cut the program short by nearly a month. See FRUIT Page 7 LAUREN RAFFERTY ILLUSTRATION
THE WEEK IN QUOTES “There is not much we can do should we get some doomsday scenario.”
“We aren’t even on the 1-yard line yet. There is enormous growth in this industry.”
— Carlos Grodsinsky, vice president of technology, Zin Technologies Inc. Page One
— Kevin D. Margolis, co-chairman of Benesch’s energy practice group and its shale oil and gas industry team. Page 13
“Social services ... and economic development operate in different galaxies.”
“There are really no very small, very inexpensive D&O (directors and officers) suits.”
— John Begala, executive director, Center for Community Solutions. Page 9
— Joseph W. Bauer, principal for Bauer Advising LLC, Ann Arbor, Mich., and former general counsel for Lubrizol Corp. Page 13
Claims manager switching ’burbs Sedgwick group leaving Solon for Seven Hills By STAN BULLARD firstname.lastname@example.org
Look for the lights to go back on at the long-empty Rock Run North office building in Seven Hills as it becomes the new home in February for about 250 employees of Sedgwick Claims Management Services Inc.’s Cambridge Group. However, the gain for Seven Hills of the Memphis-based provider of workers’ comp and insurance services comes at the loss for Solon, where the unit currently is based. Robert Johnson, a Sedgwick senior vice president and managing director for specialty operations, said the company leased 50,000 square feet
in the Rock Run North building, 5700 Lombardo Center, from Duke Realty Corp. for several reasons. A big one is that the new office will help the company attract employees from a broader swath of the region because of the central location on the Rockside Road office market. The move also will allow the company to benefit from a more efficient layout — it will occupy two floors in the new location compared to three in the current one — and to locate close to another Sedgwick office with about 70 employees in the Rock Run Center building, Mr. Johnson said. The move has garnered incentives from the state of Ohio and the city of Seven Hills. The Ohio Tax Credit Authority on July 30 approved a 50% Job Creation Tax Credit for five years for Sedg-
wick for creating 34 full-time jobs and retaining the 250 jobs in the state. The state said the company expects to generate $1.5 million annually in additional payroll with the new jobs and retain $9 million in payroll with the move. The city of Seven Hills on Aug. 20 adopted legislation that will provide a grant to Sedgwick for 50% of the municipal income tax paid by its employees for the first five years of its 10-year lease in the suburb and 25% for the last five years. James Clark, a senior vice president in Columbus for Rock Run owner Duke Realty of Indianapolis, said the lease is the largest the firm has signed in the Rockside office market in several years. “This is a good deal for us and for Rockside,” Mr. Clark said in a phone See MOVE Page 8
CRAIN’S CLEVELAND BUSINESS
OCTOBER 1 - 7, 2012
Brian D. Tucker (email@example.com) EDITOR:
Mark Dodosh (firstname.lastname@example.org) MANAGING EDITOR:
Scott Suttell (email@example.com)
oney talks. And the decision by two local foundations to each award grants of $10 million for a new building to house the School of Medicine at Case Western Reserve University speaks loudly about the importance of the health care sector to the future of Cleveland. There was a clear purpose in the Mt. Sinai Health Care Foundation and the Cleveland Foundation jointly announcing last week the largest grants in their histories. The goal was to make a statement to other potential donors that the $50 million medical school project is a big deal that deserves their support. And a big deal it is. In a city that has worked for years to build a national and even global reputation as a center for medical innovation and excellence, it’s vital that its most prominent school of medicine is a first-rate institution in all respects of the phrase. Right now, it is not — though the same can be said for many medical schools across the country housed in aging buildings. During a recent sitdown with Crain’s editorial board, Case Western Reserve president Barbara Snyder described her medical school’s faculty as “the class of the field.” However, Ms. Snyder said the physical facilities of the med school “do not match the quality of the work and the people.” Dr. Pamela Davis, dean of the School of Medicine, wasn’t as subtle. Noting that the medical school’s current space was built in the 1950s and could be an issue in future accreditation efforts, Dr. Davis said, “It sort of looks like my high school.” That’s a negative when competing for top-notch students and faculty — a reality not lost on the Mt. Sinai Health Care Foundation, which is committed to helping organizations in Greater Cleveland improve the health and well-being of the community. Mitchell Balk, the foundation’s president, said it’s his group’s belief that the School of Medicine “is the key contributor to medical education and knowledge in Northeast Ohio.” The hope, Mr. Balk said, is that Mt. Sinai’s grant will help the school “continue to play that pivotal role.” Ronn Richard, president and CEO of the Cleveland Foundation, uses even more dramatic language to describe why his organization “is delighted to stand shoulder to shoulder with Mt. Sinai” in awarding its own big grant for the medical school project. “We believe that the future of Case and the future of Cleveland are inextricably linked,” Mr. Richard said. The combined $20 million in grants provides an excellent down payment for a new building, which would arise on the site of the former Mt. Sinai Medical Center. However, the project won’t happen without the financial support of other donors. As Mr. Balk notes, hospitals “can approach grateful patients for support.” The Case Western Reserve medical school, he said, “does not have that medical consumer base from which to raise money.” It is going to take other foundations, as well as companies and individuals, to get behind this worthy and significant initiative. They’ve been provided the type of catalytic support needed to do just that.
FROM THE PUBLISHER
Anticipating the end to the bluster
byists — are intriguing. But term limits? o, about those campaign proTerm limits have been a miserable mises….. failure in Columbus, causing lawmakers Why on earth do candidates to take their eye off their duties at the feel they must make promises moment their term starts to run out so and pledges? Especially when they know, they can concentrate on winning the or perhaps suspect, that they’ll not be next position. We have representatives able to deliver. skipping over to the state senate, and vice I almost swallowed my toothbrush the versa. It’s a mess, and the only other morning as I watched a institutional memory resides in local early-morning TV news the staff and lobbyists. show. On comes some cam- BRIAN And don’t even get me startpaign ad for a state representa- TUCKER ed on the diatribe and bluster of tive I had never heard of, and the nonstop attack ads aimed at don’t recall his name even now. each presidential candidate What I do remember, however, from the other side. Watching is that the script said he “solved television is a miserable experithe state’s budget problem.” ence if you can’t fast-forward Really? All by himself? through the political spots. And then Josh Mandel, Ohio’s I’m thankful that the end is Republican treasurer and chalcloser and closer. Bring on Election Day! lenger to incumbent U.S. Sen. Sherrod Brown, unveiled a three-point reform **** program that included term limits on If you asked most Northeast Ohioans Congress. The other reforms — withholding to name our state’s largest foreign trading congressional paychecks if a budget isn’t partner, most would come up with the passed on time and dropping pensions obvious answer, since the country that for former lawmakers who become lob-
buys the lion’s share — by a wide margin — of Ohio goods sits just a few miles across Lake Erie. But once you get past Canada, which takes close to $19 billion in Ohio exports, identifying No. 2 might throw some people. Many would probably say it’s China, with its voracious appetite for modern conveniences and products. Well, China does buy a lot from the Buckeye State — $2.7 billion worth, according to the International Trade Administration. But it doesn’t surpass Mexico’s $4 billion in exports from Ohio, much of which are transportation-based products, according to government data. It appears Mexico likes the “Made in USA” label, and its citizens are filling the sparkling new Walmarts and Costcos springing up across the country. Trade between the United States and Mexico has risen by 17% since 2011, while China’s economic juggernaut has lost its steam. It shows how quickly business can change in our global economy, and how important it is to be nimble enough to ■ capitalize.
THE BIG ISSUE Household budgets have been squeezed as costs continue to rise. What indulgence will you not compromise on?
I’ve already given up cable TV. Utilizing the Internet, that I don’t want to give up. Email, bill-pay, those kinds of things are necessities for me.
Cable, because it’s the one indulgence that I can enjoy even if I put other indulgences down. I can still stay home and watch cable.
Crown Royal. That’s how you reduce stress.
Cat care, veterinary care. That’s my family. I don’t have children, so they’re my children.
➤➤ Let us know what you think. Vote in our online poll at www.CrainsCleveland.com
OCTOBER 1 - 7, 2012
CRAIN’S CLEVELAND BUSINESS
Emerging markets key to export growth Crain’s event highlights global business potential By GINGER CHRIST firstname.lastname@example.org
Going global isn’t just a catchphrase. It makes good business sense. At least that’s the word from Amy Liu, co-director and senior fellow of the Metropolitan Policy Program of the Brookings Institution. Ms. Liu, appearing last Thursday, Sept. 27, at the NEO World Trade Conference at Executive Caterers at Landerhaven, said leaders in large U.S. metro areas should encourage
local companies to become participants in the international marketplace if they want to see sustained growth. She cited data from the Organisation for Economic Co-operation and Development, which promotes worldwide economic growth, that indicated global consumption of goods is expected to rise from $21 trillion annually to $31 trillion by 2020, largely led by growth in Asia and Latin America. “We view these trends less as a threat than as a market opportunity,” Ms. Liu said. “The winners in the next economy will be those who strengthen their global assets and tap new sources of aggregate demand.”
ON THE WEB For a photo gallery of the NEO World Trade Conference, visit www.CrainsCleveland.com/ neoworld2012
The U.S. recovery has been led by companies that are exporting, she said. Exports represented 46% of GDP growth in 2001 from 2010, even though exports account for only 13% of the U.S. economy. Cleveland, which is the 28th largest metro in the country, ranks 21st in terms of the share of its GDP represented by exports. “The bottom line is if we are to grow, our firms need to look outside
the United States,” Ms. Liu said. Brian Kim, a foreign exchange strategist of research and strategy for RBS Securities Inc., said the interconnectedness of the world’s markets is leading to a relative slowdown in China. As European countries continue to struggle, the effects will be felt by their global trade partners. “While growth will come out of Asia, a lot of that will be dependent on the rest of the world,” he said. Given the struggles in Europe, Mr. Kim said he is more bullish on the U.S. dollar for the next year. He said he is encouraged to see some money flowing back into the United States as the country’s trade balance turns more in its favor. ■
a portfolio company of
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 (email@example.com) Editor: Mark Dodosh (firstname.lastname@example.org) Managing editor: Scott Suttell (email@example.com) Sections editor: Amy Ann Stoessel (firstname.lastname@example.org) Assistant editor: Joel Hammond (email@example.com) Sports Senior reporter: Stan Bullard (firstname.lastname@example.org) Real estate and construction Reporters: Jay Miller (email@example.com) Government Chuck Soder (firstname.lastname@example.org) Technology Dan Shingler (email@example.com) Energy, steel and automotive Tim Magaw (firstname.lastname@example.org) Health care and education Michelle Park (email@example.com) Finance Ginger Christ (firstname.lastname@example.org) Manufacturing, marketing and retailing Research editor: Deborah W. Hillyer (email@example.com) Cartoonist/illustrator: Rich Williams
Senior Secured Credit Facilities
First Mortgage Bonds
Senior Unsecured Credit Facility
Senior Secured Notes
Senior Secured Revolving Credit Facility
Joint Lead Arranger Sole Bookrunner
Joint Lead Arranger
Sole Lead Arranger
Marketing director: Lori Grim (firstname.lastname@example.org) Marketing/Events manager: Christian Hendricks (email@example.com) Assistant Events Manager: Jessica Snyder (firstname.lastname@example.org) Advertising sales manager: Nicole Mastrangelo (email@example.com) Senior account executive: Adam Mandell (firstname.lastname@example.org) Account executives: Dawn Donegan (email@example.com) Andy Hollander (firstname.lastname@example.org) Lindsey Nordloh (email@example.com) Office coordinator: Toni Coleman (firstname.lastname@example.org) Digital strategy and development manager: Stephen Herron (email@example.com)
a portfolio company of
Senior Unsecured Credit Facility
Senior Secured Credit Facilities
Senior Secured Credit Facilities
Sole Lead Arranger
Joint Lead Arranger Sole Bookrunner
Joint Lead Arranger Joint Bookrunner
Joint Lead Arranger
Delivering results We know that successful, long-term business relationships depend upon delivering results for our clients. At KeyBanc Capital Markets,® more than 500 professionals leverage extensive industry knowledge, equity and debt capital markets expertise, and a leading merger and acquisition advisory practice to deliver strategic solutions that help our clients capitalize on opportunities.
Web/Print production director: Craig L. Mackey (firstname.lastname@example.org) Production assistant/video editor: Steven Bennett (email@example.com) Graphic designer: Lauren M. Rafferty (firstname.lastname@example.org) Billing: Susan Jaranowski, 313-446-6024 (email@example.com) Credit: Todd Masura, 313-446-6097 (firstname.lastname@example.org)
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 Robert C. Adams: Group vice president technology, circulation, manufacturing Paul Dalpiaz: Chief Information Officer Dave Kamis: Vice president/production & manufacturing G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996)
To learn more visit key.com/dcm. Offices in Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Houston, Los Angeles, New York, San Francisco and Seattle
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, 48207-2912, or email to email@example.com, or call 877-812-1588 (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
KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/ FINRA/SIPC, and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. Key.com is a federally registered service mark of KeyCorp. ©2012 KeyCorp ADL5601
CRAIN’S CLEVELAND BUSINESS
OCTOBER 1 - 7, 2012
Auditor hopes equipment-sharing pilot can be adopted throughout the state By JAY MILLER firstname.lastname@example.org
Five governments in Lake County own sewer jets, which are pieces of equipment that are used to keep sewers flowing freely and cost about $5,000 apiece, even for small ones. But except for one sewer jet owned by the Lake County Engineer, none is used more than 37 hours a year. And the county engineer’s sewer jet is used only 210.6 hours annually — less than a month a year, according to a study by the office of state auditor Dave Yost. So, officials with Mr. Yost’s office
and with Lake County are developing a capital equipment sharing program that would be a pilot for an initiative Mr. Yost hopes to take statewide to help cities and their service departments save money. “We expect (the program) will be a template that can expand to other counties in Ohio after it has been tested in the field,” Mr. Yost said. “We won’t force it on anybody, but with the difficulties with money across the state I think we’ll have some early adopters,” he said. In August 2011, Mr. Yost’s employees began a survey of 390 pieces of service department equipment
owned by the county engineer and 23 cities, villages and townships in Lake County. The auditor’s office then calculated the percentage of available time each piece of equipment was used based on 2,000 hours annually for non-seasonal equipment, less for seasonal equipment such as leaf vacuums. The equipment-sharing concept is generating interest among officials in Lake County. “It’s a time to be creative and look at things that in the past might not have been attractive but now, out of necessity, are being implemented,” said Concord Township administrator Lee Bodnar. The two key elements of the program are a countywide database, so communities will know which of their neighbors has which equipment, and a master contract that will make equipment sharing a quick, uncomplicated process. While Mr. Yost is optimistic that communities will embrace the program quickly, he knows the greatest impact is off in the future, when equipment needs to be replaced. “Hopefully the downstream effect will be that purchasing decisions will begin to be informed (by the equipment in the database) so that countywide the number of things purchased will go down,” Mr. Yost said.
The Vactor factor Some communities already are sharing equipment, but it’s on a limited, case-by-case basis. Mr. Bodnar said several Lake County communities, including Concord, share backup fire equipment because state law requires communities to have backups for when fire equipment is out of service for maintenance or repair. He said Concord now piggybacks on Lake County’s information technology and telecom systems. David Anderson, mayor of Willoughby, said he supports the concept and called the establishment of a database “extremely important.” However, he thinks the program might make more sense for communities smaller than Willoughby, which had a population of 22,268, according to the 2012 U.S. Census Bureau. “We have these Vactor trucks (for catch basin and sewer cleaning) and they’re very expensive, but we use it every day,” he said. “But there are a lot of communities that just don’t use it every day.” The Vactor trucks recommended by the Southeast Michigan Council of Governments, a planning council for 156 communities in the Detroit area, cost between $125,000 and $150,000 to purchase. Mayor Anderson said Willoughby will continue to be involved in the equipment sharing program. ■
Volume 33, Number 38 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the third week of May and fourth week of May, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2012 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
OCTOBER 1 - 7, 2012
CRAIN’S CLEVELAND BUSINESS
LaTourette: Raise tax on gas U.S. Rep. says increase could fund infrastructure By JAY MILLER email@example.com
Bad weather has wiped out much of the apple crop at Patterson Fruit Farm, according to co-owner Bill Patterson. This year, Ohio orchards are expected to yield about a third of the apples they produced in 2009.
Fruit: Crop insurance only goes so far Continued from Page 3
Slim pickings are causing similar cancellations throughout Northeast Ohio. About an hour south of Chesterland, Kuner’s Fruit Farm in Green for only the second time since its opening in 1947 cancelled pick-your-own altogether because it lost 60% of its crop. The farm is selling the apples that did grow at its retail market and is using them to make cider, said Rosemarie Kuner, co-owner. And Heavenly Hill Farm in North Royalton announces its cancellation via voicemail. “Unfortunately, we do not have any apple picking this year due to the frost,” a woman’s voice greets callers. “But we do have fresh apples in our store … and we have lots of pumpkins, too, so stop by and visit us.”
Coming a cropper While many Northeast Ohioans cheered the abnormally warm weather last March, Ohio apple growers could smell trouble. “We actually went into bloom a month earlier than normal,” said Bill Dodd, owner of Dodd’s Hillcrest Orchards in Amherst and president of the Ohio Fruit Growers Marketing Association. As an apple tree progresses toward bloom, the temperatures its fruit can withstand decrease. So when late April delivered freezing temperatures, it wiped out a lot of crop, Mr. Dodd said. According to the U.S. Department of Agriculture’s forecast, the state of Ohio’s crop for 2012 will be down 41% from 2011. As a whole, U.S. apple production is projected to be 14% less than it was in 2011.
Farms east of Cleveland suffered the most damage and farms west of Cleveland lost generally half their crop, while orchards in Columbus actually have 80% to full crop, Mr. Dodd said. “The blooms froze and were unable to make an apple,” said Mr. Dodd, whose own Hillcrest Orchards probably lost 50% to 60% of its crop. “There’s not really anything you can do about it.” Some have tried, though: Bauman Orchards in Rittman had a crew of 10 who kept fires burning throughout the orchards overnight on three occasions this spring, said Dianna Bauman, the wife of one of the owners of the three-family operation. Like other orchards, Bauman also used frost fans to keep warm air close to the earth. Unlike other orchards, its losses this year are “minimal,” maybe 15% to 20%, Ms. Bauman said. “We’re one of the few in the area that did survive, and we are thankful,” she said. “We are getting a lot of new customers that have never been here before.”
Put it in the rearview As Ms. Bauman indicates, in some cases one orchard’s loss is another’s gain. In the first weekend that Bauman Orchards opened its 20-year-old fall festival this year, it reaped record sales, Ms. Bauman said. It also is selling apples wholesale to orchards that need apples to sell. “We got a lot of new calls from people (growers) we had never heard from before,” Ms. Bauman said. “(My husband) is trying to do the best that he can to supply the demand.”
It isn’t a surprise that apple and cider prices are up, though increased crops in other states, such as Washington, are helping to offset losses elsewhere. Even with crop loss of a magnitude it hasn’t seen in probably 40 years, Patterson Fruit Farm doesn’t anticipate a loss this year. It still has apples from other local farmers to sell, and it also offers a Family Fun Fest, complete with a corn maze, wagon rides and pick-your-own pumpkins, of which there are “tons,” Bill Patterson said. Added David Patterson, “Without that diversification, it would have been a really tough year for us.” Diversification and crop insurance help farmers mitigate such “devastating” losses, said Mark W. Seetin, director of regulatory and industry affairs for the U.S. Apple Association. “You don’t just bounce back the next year from a loss of this scope,” Mr. Seetin said. “It is really dependent on future years, what your production is, the prices you’re able to receive for what you produce.” This year’s losses likely will prompt some farms to cut expenses and delay new investments, predicted Mr. Dodd in Amherst, who said it’s hard to say whether his own farm’s pick-your-own will be abbreviated. Even those with crop insurance will feel the pinch because crop insurance covers only costs, not the revenues farmers would have made, he noted. “I’m sorry to see it, because if you’re in the apple business, you’ve had some sort of bad luck in your career,” Mr. Dodd said. “The good news is that this year will be in the rearview mirror very quickly.” ■
Retiring U.S. Rep. Steven LaTourette said last Friday, Sept. 28, that he would like to see an increase in the federal gasoline tax rather than the privatization of roads such as the Ohio Turnpike. The Bainbridge Republican, a panel member at a City Club of Cleveland forum on infrastructure, bemoaned Congress’s inability to compromise on what he said should be “a no-brainer” — a comprehensive, long-term transportation bill that keeps pace with the country’s transportation network needs. In particular, Rep. LaTourette said, Congress has not been willing to raise the federal gasoline tax, which provides the federal money for roads and other transportation projects. It has been fixed at 18.4 cents a gallon since 1994, and it needs to be raised — and perhaps indexed to inflation, he said. In June, Congress passed a two-
year bill that provided no additional money for roads and other transportation infrastructure needs. William Conway, another panel member and chairman emeritus of the board of Fairmount Minerals Ltd., said he would support a gas tax increase. He also supports tolls on bridges and roads, when appropriate. “The people who use the facilities should be paying the cost,” he said. Instead of privatizing the Ohio Turnpike and using the proceeds to improve other highways and bridges, Rep. LaTourette said the turnpike’s operation should be turned over to the Ohio Department of Transportation. For additional highway money, he suggested the state could lease rest areas on state highways to private operators. Looking more broadly, William Friedman, president and CEO of the Cleveland-Cuyahoga County Port Authority, said the region had enough roads, bridges and other infrastructure — perhaps even an overcapacity — but that much of it needs maintenance and upgrades. “Our infrastructure is not going to hold us back,” he said. “We have to maintain what we have.” ■
The Ohio Energy Challenge We have the team for that. Energy development in Ohio is on the fast track. Our legal team includes diverse specialists who have been at the forefront of the growing energy industry in our state.
Watch our recent Energy Forum Webcast
McDonald Hopkins LLC 600 Superior Avenue East, Suite 2100, Cleveland, OH 44114 • 216.348.5400
Carl J. Grassi
Shawn M. Riley
Cleveland Managing Member
Chicago • Cleveland • Columbus • Detroit • Miami • West Palm Beach mcdonaldhopkins.com
CRAINâ€™S CLEVELAND BUSINESS
Salt for Ice Control Bag and Bulk
â€˘ Halite â€˘ JiffyMelt â€˘ Calcium Chloride
Big Savings on Truckload Orders! Minimum Delivery = 1 Pallet Forklift Delivery Available
John S. Grimm, Inc. 1-800-547-1538 Authorized Dealer
Tough Economic Times Require sensible business solutions. Carey Roofing has provided sensible solutions for commercial and industrial roofing problems since 1946.
CAREY Roofing Corp.
founded in 1946 MEMBER: National Roofing Contractors Association
Steel: Price will fall if ore stays low continued from PAGE 3
50% of the total cost of Mr. Hepnerâ€™s products. So, when his cost of steel declined by just 6% over the last year, it still had an impact. â€œIt varies by part,â€? Mr. Hepner said. â€œSteel, depending on the part, can be as high as 50% of the cost. So if itâ€™s a 6% decline on 50%, it works out to be about 3% of the total cost. So 6% is significant â€” itâ€™s not huge, but itâ€™s a factor.â€? For some manufacturers, itâ€™s an even bigger factor. Cleveland-based Master Products stamps out washers and other parts for automotive suppliers and other industries. Because stamping is a fast operation with fairly low labor costs compared to say, a machine shop, steel makes up an even bigger portion of a productâ€™s final cost â€” about 62% of the average cost of the companyâ€™s parts, said owner Jeff Walters. Master Productsâ€™ steel costs are down about 8% from a year ago, so that translates into about a 5% decrease in Mr. Waltersâ€™ manufacturing costs.
Odd request Steel had been down even more,
Your business banking strategy.
Easy as... 1.
OCTOBER 1 - 7, 2012
Open a Business Apply for a New York Sign up for Solutions Checking Community Bank Business Merchant Services2 with Interest EditionÂŽ VisaÂŽ Card1
and manufacturers such as Mr. Hepner are quick to note that any single monthâ€™s price point is merely a snapshot. In June, the prices manufacturers were paying for some common types of steel were down 14% from the start of the year, but have rebounded slightly since. Manufacturers say they might be just as well off if steel prices stay stable, because todayâ€™s customers are in tune with the price of steel and how to use it to their advantage. â€œThe problem is this,â€? Mr. Walters said. â€œWhether up or down, a significant shift in the cost of steel makes news. When it goes down, our customers are eager to point it out and demandâ€? that Master Products pass through the price decline, he said. â€œBut when it goes up, they drag the price change out,â€? Mr. Walters said. Recently, Mr. Walters said he got a highly unusual request from an especially savvy customer. â€œEarlier this year we lowered prices. I was shocked when I went to the customer and they said they wanted proof. Usually this only comes up when the price is going up,â€? Mr. Walters said. Why in the world would anyone want proof of declining steel prices
when they were told the price of what they were buying was going down? â€œThey wanted to use that information against other suppliers,â€? Mr. Walters explained.
Just wait For manufacturers that hope the price of steel does drop, they might need to wait only a bit longer, said Chicago-based steel analyst Michelle Applebaum, founder of the boutique research firm Steel Market Intelligence. There can be a multiyear lag between when ore prices drop and when steel prices follow, Ms. Applebaum said. Thatâ€™s because U.S. steelmakers have long-term contracts for ore and generally do not buy off the spot market, and because many U.S. mills use scrap iron and steel rather than ore to make steel, which insulates steel prices from ore prices. But, eventually, low ore prices will work their way through the system and into the inventories of even U.S. steel companies with long-term ore contracts. â€œIf raw material costs go down sufficiently, I would be certain that some of that cost savings would get passed back to the end-users,â€? Ms. Applebaum said. â–
Move: Update part of plan continued from PAGE 3
interview last Thursday, Sept. 27. He said Duke will invest in a significant updating of the 27-year-old building and an expansion of its parking lot, although he wouldnâ€™t specify how much the work would cost. David Browning, managing director of broker CBRE Group Inc.â€™s Cleveland office, said the lease reflects the resurgent pace of office leasing in the Rockside Road office market as well as the region as a whole as the economy improves. Mr. Browningâ€™s firm represented Sedgwick in its space search.
L U X U R Y
Although the Rock Run North building will â€œwalk and talk like the Sedgwick Building,â€? Duke Realtyâ€™s Mr. Clark said, it will remain a multitenant structure. Thatâ€™s because another 10,000 square feet in the building remains available for another tenant. Peggy Weil Dorfman, Solon economic development coordinator, said Sedgwick had considered sites in Solon. She said she believes the building Sedgwick will exit at 31500 Solon Road in Solon will lease quickly. Neither Messrs. Clark nor Johnson would disclose the rent Sedgwick will pay on the structure. â–
A P A R T M E N T S
Letâ€™s do business! Stop by your local community branch today.
A sophisticated, easier lifestyle
has settled in the heart of downtown.
Credit Card is issued by First Bankcard, a division of First National Bank of Omaha, pursuant to a license from Visa U.S.A. Inc. TransFirstÂŽ is a third-party outsource provider for merchant services. Equal Opportunity Lender 1 2
1211 St. Clair Avenue NE, Cleveland, OH 44114 s WWW4HE!VENUE$ISTRICTCOM
OCTOBER 1 - 7, 2012
CRAIN’S CLEVELAND BUSINESS
Social services advocate shifts focus to economic progress Community Solutions center expands role to meet businesses’ needs By JAY MILLER firstname.lastname@example.org
The nonprofit Center for Community Solutions subtly — but significantly — is shifting its work to provide the business community with information and research, to push for better job training programs, and to prepare employers and employees for the changes mandated by the federal Affordable Care Act. The nonprofit traditionally has researched, planned and advocated for public and private health and human services programs for the poor and underprivileged in Cuyahoga County. Now it wants to expand its reach into the 16-county Northeast Ohio economic region, said John Begala, the organization’s executive director. “We ought to expect a close alignment of social service spending with economic development initiatives,” Mr. Begala said. “As things stand now, social services, including many employment programs, and economic development operate in different galaxies.” Over the years, Mr. Begala said, federal health and social service programs such as Medicaid were created or extended to cover the working poor and to make employment — even for low wages — more attractive than public assistance. “A lot of these social service programs benefit business. Ten years ago, Medicaid was the health care plan for Wal-Mart,” Mr. Begala said. “These aren’t just investments in poor folks. Increasingly they are investments in working people.”
The power of data A key part of the database is an online data center, created in collaboration with Case Western Reserve University and Cleveland State University, that was unveiled last month. It will give the community, including businesses, free access to demographic and social program information, broken down by a variety of geographic categories. Such data now is available only from costly commercial data services. This data will be expanded and tailored to help businesses find and train qualified workers. This new approach “is a big deal,” said Stuart Mendel, director of the Center for Nonprofit Policy and Practice at Cleveland State University. “Data is a starting point,” Mr. Mendel said. “You want to help people and you want social programs, but you want them to lead somewhere. And you want to be able to say, ‘At the end of these social services, here’s your job.’” The Center for Community Solutions also will change and expand its advocacy into the broader region and will increase its public policy research role as it develops its research capacity in collaboration with the local universities. It currently focuses its research on health care reform, the state budget and services for children. It hasn’t tackled a work force issue in nearly two years, but that likely will change. For example, Mr. Begala said, the employer-driven work force development program run jointly by the city of Cleveland and Cuyahoga
County has done a good job of tailoring job-training programs for specific businesses in the county. He’d like to use his organization to introduce the program to the broader Northeast Ohio region, where work force programs are not as focused on the needs of businesses. Spreading the word about programs such as this one, Mr. Begala said, can help businesses maintain and expand their work forces. He said the center still is working on figuring out how to make the information in the data base useful, especially to the business community.
Conversation catalyst Steve Millard, president of the
“These aren’t just investments in poor folks. Increasingly they are investments in working people.” – John Begala, executive director, Center for Community Solutions Council of Smaller Enterprises, a small business advocacy organization based in Cleveland, lauds the direction Mr. Begala is headed. Mr. Millard is a new member of the center’s board of directors “What John has over there is a team of really smart policy and research and data people,” Mr. Millard said.
“That’s a capability a lot of folks don’t know is available to be leveraged. “They’ve been a great catalyst for conversation on issues striking a non-partisan, objective tone with data that’s been helpful to the conversation,” Mr. Millard said. In particular, Mr. Millard said he thinks the center can offer counsel and support to employers and employees as the Affordable Care Act is phased in. He said companies will need help figuring out the new options available to them and that employees whose employers drop coverage will need similar help when they buy their own health coverage. Mr. Begala also wants to push
counties to collaborate on social services. He envisions counties joining together to contract for services such as specialized foster care. Brad Whitehead, president of the Fund for Our Economic Future, a nonprofit that is focused on building a collaborative and tightly knit regional economy in Northeast Ohio, has worked with Mr. Begala on other projects and believes the former state legislator is pointing the center in the right direction. “I’m thrilled to hear he’s working on” regional collaboration in the social services, Mr. Whitehead said. “We’re enthusiastic about and supportive of what they’re trying to do.” ■
Tuesday, October 23 @ LaCentre, Westlake PRESENTED BY
2012 Nominees Announced Network with Northeast Ohio’s financial community and honor our leading CFO’s David Adante, The Davey Tree Expert Company Robert Baker, City of Shaker Heights Hilary Beatrez, Cleveland Hearing and Speech Center Michael Biehl, Chart Industries Kathle Bodnar, Staffing Solutions Enterprises Tim Bowman, Emergency Medicine Physicians Dale Cable, United Church Insurance Board Lisa Colling, Laketran Ann Conn, A.M. McGregor Group Harry Cool, Volunteers of America of Greater Ohio Mario Danese, Visiting Nurse Association of Ohio Elizabeth Donaldson, De Nora Tech, Inc. Donald Dragony, Alex N. Sill Co. Joseph Dubois, Oswald Companies Richard Fearon, Eaton Corporation Gregg Floyd, Kent State University Brian Gorris, Stripmatic Products, Inc. Dave Hamrick, InfoCision Management Corporation John Harvan, Hospice of the Western Reserve
Kevin Herendeen, Fathom SEO John Huff, Ganeden Biotech, Inc. David Kuntz, Cleveland Metroparks Scott Levin, GOJO Industries, Inc. Matt Lyon, Alliance Staffing Solutions Thomas McGinty, PK Management, LLC Scott Morgan, Cuyahoga County Public Library Eugene Novak, Dwellworks, LLC Thomas Paskert, Millwood, Inc. Joseph Randazzo, Austen BioInnovation Institute in Akron Russell Schabel, Philpott Rubber Company David Shultz, Bellwether Enterprise Real Estate Capital, LLC James Sprague, Walthall, Drake & Wallace LLP Steve Strnisha, Cleveland International Fund Don Weidig, Area Wide Protective, Inc. Darren Wells, Goodyear Tire & Rubber Company Anne Yankow, International Transport Services Almut Zvosec, Cleveland Institute of Art
Tickets: www.CrainsCleveland.com/CFOtix or 216.771.5182 CO-PRESENTED BY
VIDEO SPONSORED BY
IN PARTNERSHIP WITH
CRAIN’S CLEVELAND BUSINESS
ON THE WEB
Story from www.crainscleveland.com
GOING PLACES JOB CHANGES
Alpha Imaging acquires Md. medical outfit Alpha Imaging LLC, a Cleveland-based distributor of medical imaging equipment, said it has acquired Reliant Medical Systems Inc. of Hanover, Md., to enhance its diagnostic imaging equipment service capabilities in Maryland, Virginia and Washington, D.C. Alpha Imaging did not say what it paid for Reliant, which services imaging equipment in the Mid-Atlantic region of the United States. “Having worked closely with Reliant in the past, we knew they would be a good fit in our plans to accelerate growth,” said Michael Perrico, CEO of Alpha Imaging, in a statement. Alpha Imaging said teaming with Reliant “provides a critical sales and service support footprint for growth in Maryland, Virginia and Washington, D.C.”
AUTOMOTIVE PENSKE CLEVELAND: Jason McFarlane to Cleveland area controller; Ray Sminchak to general manager, Mercedes Benz of Bedford; Pat Federico to general manager, Infiniti of Bedford.
COHEN & CO.: Russell Burgett and Eamon Larkin to senior accountants; Rocco Miller, Amy Cai, Marianne Colbert, Bryan Friedmann, Rachael Gorski, Kevin Kray, Theodore Mueller and Rebecca Simmons to staff accountants; Faith O’Neil to office services assistant; Melissa Skaggs to receptionist; Ryan Daniels to software developer.
KAPPUS CO.: Bill Cunningham to director of information technologies.
SS&G: Robert Lapp to associate; Deborah O’Malley to administrative assistant.
WESTERN RESERVE PARTNERS: Anthony N. Russo to analyst.
NEW HORIZONS COMPUTER LEARNING CENTERS: Robin Toth to career consultant. NORTHEAST OHIO MEDICAL UNIVERSITY: Andre Burton to director of diversity affairs.
FINANCIAL SERVICE BARNES WENDLING CPAS: Matthew D. Maker to senior manager; Michael D. DiFilippo to manager; Michelle N. Fallaro, Kathrine T. Gabel and Kristin M. Allen to seniors; Elizabeth A. Friswold to advanced staff. CEDAR BROOK FINANCIAL PARTNERS LLC: Andrew Denis to partner.
HEALTH CARE CLEVELAND CLINIC: Kelly Hancock to executive chief nursing officer. METROHEALTH: Dr. Maria Isabel Herran to director, Pediatric and Adolescent Hispanic Clinic.
INSURANCE MEDICAL MUTUAL: Carol Bushnell to vice president, underwriting and chief underwriter; Connie Beutel to manager, health promotion and wellness; Kristin Rahn to manager, customer analytics. RIGHT TRACK INSURANCE
OCTOBER 1 - 7, 2012
AGENCY LLC: William E. Davis Jr. to account executive; Natalie Antonoff to sales associate, customer service representative.
LEGAL LEGAL AID SOCIETY OF CLEVELAND: Lindsay Marchio to associate director of development.
LOGISTICS JARRETT LOGISTICS SYSTEMS INC.: Mike Frank, Rich Trivett and LeRoy Schalk to directors, business development.
MANUFACTURING TIMKEN CO.: John W. Beam to vice president, supply chain; Richard M. Boyer to vice president, manufacturing; Hans Landin to vice president, business advancement; Michael P. Morgan to controller. WALLOVER OIL CO.: Peter Vagt to director of manufacturing.
MARKETING HITCHCOCK FLEMING & ASSOCIATES INC.: Matt Scheip to project manager; Tiffany Jamison to account manager; Gina Conley and Doug Snider to project coordinators.
MARBLE INSTITUTE OF AMERICA: James Hieb to executive vice president. MUSIC SETTLEMENT: Megan Clay Constantine to director, Department of Music. PAWSIBILITIES, HUMANE SOCIETY OF GREATER AKRON: Melisa Kauffman to veterinarian.
WRL ADVERTISING: Troy Aleman to account executive.
PREMIER DEVELOPMENT PARTNERS: Pamela Bertovich to senior vice president and partner, Premier Commercial Realty; Laurie Novak to senior property manager; Julie Lynch to senior project coordinator; Jill Horvath to finance administrator.
AMERICAN HEART ASSOCIATION: Lindsay Silverstein to executive director and metro vice president, Northeast Ohio.
LEGAL AID SOCIETY OF CLEVELAND: Joseph P. Meissner, after 45 years of service.
ROSETTA: Jennifer Friedberg to managing partner, Consumer Products & Retail.
CHILDREN’S MUSEUM OF CLEVELAND: Maria Campanelli to executive director. CLEVELAND EYE BANK: Debbie May-Johnson to executive director.
MARBLE INSTITUTE OF AMERICA: Garis Distelhorst, effective Dec. 31, 2012.
Send information for Going Places to email@example.com.
OCTOBER 1 - 7, 2012
CRAIN’S CLEVELAND BUSINESS
NASA: Cuts Middleburg’s Ganley BMW headed to Westlake would spare Dealership buys site of Enterprise Rent-A-Car no program By STAN BULLARD firstname.lastname@example.org
continued from PAGE 1
that,” Dr. Greenberg said. The roughly 1,800 private contractors who work at NASA Glenn likely would bear the brunt of any cuts that might take place. By law, the 1,600 federal employees who work at the center cannot be laid off, but that rule doesn’t apply to private contractors. The contractors perform all sorts of duties at the center — engineering, maintenance, administration and logistics, among them — but they don’t hold leadership roles or perform functions considered core to NASA, said Dr. Greenberg, who also is a physicist at the center. But they are important, Dr. Greenberg said. For NASA Glenn to cut back significantly on contract services would be like living in a house that never gets maintained, he said. “The guy who delivers your newspaper, cuts your grass — gone. … You might not go out to eat. You might not eat, period,” he said. NASA Glenn’s press office directed all questions to NASA headquarters. The automatic cuts, often referred to as the sequester or sequestration, were built into the Budget Control Act of 2011 as a way to force Congress and the president to overcome their differences and find a way to cut the federal deficit by $1.2 trillion over 10 years. If they fail, automatic cuts for that amount would go into effect, starting in January. The military would absorb about half the budget cuts, and the other half would come from domestic programs. If the sequester happens, NASA as a whole would need to cut nearly $1.4 billion from its $17.8 billion budget, which amounts to a 7.8% reduction, said NASA spokesman Bob Jacobs. The federal agency would cut all its programs by roughly the same percentage, Mr. Jacobs said, adding that NASA could make minor line item adjustments without congressional approval.
Brecksville-based Ganley Automotive Group plans to move its BMW franchise to Westlake from Middleburg Heights after acquiring a nearly five-acre site with a 10,000square-foot building that it likely will demolish. Through its Ganley Real Estate affiliate, the family-owned auto dealership on Sept. 12 paid $1.74 million to acquire the property at 24960 Sperry Drive from former owner Sperry West LLC, according to Cuyahoga County land records.
The contemporary office building serves as a satellite location for Enterprise Rent-A-Car. The building was Enterprise’s regional headquarters until late 2008, when that function was moved to Strongsville. Although Ganley now owns the site, Joseph Fornal, the company’s chief financial officer, said, “We have a lot of work to do.” First, the company needs to find an acceptable replacement home for Enterprise, which is a tenant with a lease for the building, and then obtain Westlake city approvals for the project. The site is zoned appropriately as interchange service for an auto
use, although the western suburb requires auto showrooms to receive approvals as a conditional use from its planning commission and city council. “More likely than not, we will demolish the building, although we have discussed salvaging it,” Mr. Fornal said. “We want to do something as architecturally stunning as BMW deserves.” The new dealership likely would be more than twice the size of the existing building, he said, and may be as large as 30,000 square feet. The move, which Ganley hopes to complete by late 2013 or early 2014, will give the BMW dealership highway visibility the automaker desires, Mr. Fornal said. It also will put the
BMW brand in a stronger area for luxury import car sales. The Ganley BMW dealership at 6976 Pearl Road in Middleburg Heights abuts a Ganley Lincoln dealership at 6930 Pearl. Mr. Fornal said Ganley is completing a $1 million upgrade of its Lincoln dealership. The existing BMW property may become a used luxury car lot for the Lincoln dealership and additional maintenance space, but Mr. Fornal said that decision has not been made. Ned Maniscalco, a spokesman for St. Louis-based Enterprise, said the company has not decided where to relocate the satellite office now on Sperry Drive. ■
Doomsday at hand? It’s unclear what specific cuts NASA might make, but Mr. Jacobs noted that contractors would absorb any personnel reductions. He added that the cuts would hurt existing programs and delay the start of new ones. “The sequester’s bad policy all the way around,” he said. Even if sequestration doesn’t take place, NASA Glenn still might lose some financial support, because the federal government must reduce spending to avoid the automatic cuts, Dr. Greenberg said. “The general feeling seems to be that, in the near term, budgets are going to go down,” he said. A lot of people think sequestration won’t happen, said Carlos Grodsinsky, vice president of technology for Zin Technologies Inc., a Clevelandbased NASA Glenn contractor that develops hardware for NASA and for private companies. If the cuts took place, Zin’s existing long-term contracts should remain stable, but the sequester could hurt Zin’s ability to win new business, Dr. Grodsinsky said via email. All that he or anyone else can do, though, is wait to see what happens, he said. “There is not much we can do should we get some doomsday scenario,” he wrote in the email. ■
YOUR BUSINESS ISN’T JUST A JOB — IT’S A PASSION. You get to know your customers, treat them fairly, and build relationships. Don’t you deserve that same kind of treatment from your bank? With Citizens Bank, you’ll get the right solutions and products from people with the experience to know what’s right. After all, we’ve been around over 140 years, helping businesses just like yours grow. So if you want a bank that shares your passion, call us. BECAUSE WITH US, IT’S PERSONAL. $ ) & $ , * / ( 4 "7 * / ( 4 r -0 " / 4 - * / & 4 0 ' $ 3 & % * 5 r . & 3 $ ) " / 5 4 & 3 7 * $ & 4 5 3 & " 4 6 3 : . " / " ( & . & / 5 r 4 1 & $ * " -5 : ' * / " / $ * / ( r 8 & " -5 ) . " / " ( & . & / 5
CRAINâ€™S CLEVELAND BUSINESS
LANDERBROOK PLACE 5915 LANDERBROOK DRIVE MAYFIELD HTS., OHIO
Safety apparel outfitâ€™s goals heat up New markets, recent expansion foster firmâ€™s acquisition plans By GINGER CHRIST email@example.com
&/(9(/ &/(9 (/$1 $1'Âś ' 635(0,(52) 2)), ) &(3 3$5 $5. /($6 /( $6,1 ,1* * 23 2 325781,7 ,7,(6 Â‡ Â‡ Â‡ Â‡
8SWR6) 9DULRXV6XLWHV6L]HV *DUDJH3DUNLQJ6SDFHV (DV\$FFHVVWR,DQG,
:)DUOH\+HOPV&&,06,25 'LUHFW IDUOH\KHOPV#RPFOHFRP ZZZRVWHQGRUIPRUULVFRP
OCTOBER 1 - 7, 2012
Seeing teams of electrical workers climbing utility poles is a welcome sight to National Safety Apparel Inc. in Cleveland. The neon yellow and orange safety jackets worn by the utility workers are a visual reminder of the success the company has experienced in the last decade. And that success could breed acquisitions in the future. National Safety, which makes safety clothing such as those fire-resistant safety jackets, 10 years ago began selling to utility, oil and gas companies. Through that diversification, National Safety now has doubled its annual revenue from 2005 levels, said Chuck â€œChasâ€? Grossman, president and owner of National Safety, though he declined to disclose specific revenue figures. The 150-person company last October moved from a 35,000square-foot plant on West 150th
Street to a 90,000-square-foot site at 15825 Industrial Parkway in Cleveland and has hired 50 people in the last 18 months, Mr. Grossman said. â€œI was looking to make my own mark,â€? said Mr. Grossman, who in 2000 became president of the familyowned company. In 2000, the National Fire Protection Agency rolled out new safety standards requiring electrical workers to wear fire-resistant materials. In that requirement, Mr. Grossman saw a new market opportunity for his company, which for years primarily served the steel and auto industries. The new markets now represent 50% of National Safetyâ€™s business. Mr. Grossman now has his sights on a handful of small safety clothing manufacturers in the United States for potential acquisition, although he declined to reveal specifics. Acquisitions would be a new forte for National Safety, which hasnâ€™t bought any companies in the time Mr. Grossman has held the reins. However, that wasnâ€™t for lack of interest. Rather, the company was limited by the square footage at its site on West 150th, where it operated for about 30 years. â€œI had the bridle on the horse,â€? Mr.
Grossman said. â€œNow Iâ€™m going to be more aggressive with acquisitions.â€? The new building is at 75% production capacity, leaving room for expansion. And continued equipment upgrades will allow for greater output as well, Mr. Grossman said. National Safety competes against companies such as Carhartt and Vanity Fair, both of which have flame-resistant divisions. While those companies can compete on price, sometimes being as much as 20% lower than National Safety, the local companyâ€™s advantage is in operating a U.S. manufacturing plant, Mr. Grossman said. â€œWeâ€™re selling safety clothing; thereâ€™s confidence in knowing where itâ€™s coming from,â€? he said. â€œIâ€™m devoted to Made in the USA and made in Cleveland.â€? One of the companyâ€™s biggest problems is in finding sources in the United States for the material it uses because the domestic apparel industry is shrinking, Mr. Grossman said. Industry statistics bear him out. About 85% of the clothes sold in the United States are imported because of cheaper labor costs abroad, according to an Aug. 27 report on the apparel industry by First Research, a division of Hooverâ€™s. â–
GET DAILY NEWS ALERTS FROM CRAINâ€™S !
Register for free e-mail alerts and receive: â– The Morning Roundup: A collection of the dayâ€™s business news from Ohioâ€™s daily papers
items from the day â– Small Business Report: A weekly guide to small business news
SIGN UP NOW AT: CrainsCleveland.com/register
â– Breaking news alerts: When major news happens, youâ€™ll know
â– Twitter: @CrainsCleveland
â– Daily headlines: A collection of Crainâ€™s-produced news and blog
â– Facebook: Facebook.com/ CrainsCleveland
:HLQYLWH\RXWRBL LUEDFRQWHQWKXESDFNHGZLWKEXVLQHVVLQVSLUDWLRQDQG HGXFDWLRQDOUHVRXUFHVWRKHOS\RXVXFFHHGBL LUEGHYHORSVRULJLQDOFRQWHQW DURXQG VXEMHFWV WKDW ZLOO GLUHFWO\ LPSDFW \RXU JURZWK 7RSLFV OLNH OHDG JHQHUDWLRQ VWDUWXS IXQGLQJ OHDGHUVKLS WUDLQLQJ DQG VRFLDO PHGLD LPSOH PHQWDWLRQDUHMXVWDIHZZHĹ‘OOH[SORUHRQ\RXUEHKDOI
Focused content to help you succeed: UĂŠ>Ă€ÂŽiĂŒÂˆÂ˜}
MAYFRAN INTERNATIONAL, INCORPORATED (and its subsidiaries and affiliated entities)
BLUEJRHVEH\RQGFRQWHQW7KURXJKSRZHUIXORQOLQHWRROVBLU UEZLOO 3OXVB KHOS\RXFRQQHFWLQUHDOWLPHWROLNHPLQGHGSURIHVVLRQDOVDQGVKDUHLGHDV DPRQJRXUFRPPXQLW\RIH[SHUWV
BL LUELVDERXWFUHDWLQJWDQJLEOHYDOXHDQXQSDUDOOHOHGXVHUH[SHULHQFHDQG ORQJWHUPVXVWDLQDELOLW\DPRQJWKHFRPPXQLW\RIVPDOODQGPHGLXPVL]HG EXVLQHVVHVVHUYLFHGE\&2;%XVLQHVV6RFKHFNXVRXW
UĂŠ Ă€>Â˜`ĂŠ ÂľĂ•ÂˆĂŒĂž
The undersigned acted as U.S. legal counsel to Tsubakimoto Chain Co. in this transaction.
SUBSCRIBE for FREE at www.coxblue.com
Member of Lawyers Assocated Worldwide
CRAIN’S CLEVELAND BUSINESS
OCTOBER 1 - 7, 2012
16 MOMENTUM BUILDS AROUND BRAIN GAIN CONCEPT
ADDING TO THE PRACTICE PIPELINE Even as more law firms turn attention to the shale boom, most say there’s enough work to go around By CHRISSY KADLECK firstname.lastname@example.org
he emerging shale industry in Ohio — projected to bring billions of dollars of investment to the state over the next few years — has been a cash carrot enticing businesses with the promise of new jobs, developments and infrastructure improvement. This has piqued the interest of law firms around Northeast Ohio, many of which have formed shale-centered practice groups or bolstered existing oil and gas practices in recent months in an effort to position themselves as experienced counsel in the field to capture new legal work in this arena. The movement begs the questions: Is there enough work to go around for all these firms? What’s the return on investment for the marketing and personnel required for these practices? Is it too late for firms to develop practice groups targeted to the shale industry? The quick answers: Yes; it’s hard
to say; and probably not. Among the firms looking to drill for new business are Calfee, Halter & Griswold LLP; Reminger Co. LPA; Vorys, Sater, Seymour and Pease LLP; and Benesch, which all reported steady amounts of work representing landowners, producers and service companies, negotiating leases and working on regulatory and legislative issues surrounding the burgeoning industry. Rafael P. McLaughlin, a partner at Reminger, said his firm has about 10 attorneys in its oil, natural gas and utilities law practice group, which was formed in March 2012. “Our entrance into the field is really as a result of our reputation as a firm of hard-nosed litigation specialists,” he said, noting that in January the firm obtained a permanent injunction against Chesapeake Exploration to prevent it from using its client’s surface land to horizontally drill and extract minerals from beneath adjacent parcels. It is believed to be the first case of its kind in Ohio, Mr. McLaughlin said. See PRACTICE Page 15
Companies beef up insurance to protect directors, officers By MICHELLE PARK email@example.com
Lawsuits over compensation, M&A illustrate increased scrutiny
land’s largest companies have been subjected to at least one of these. “The dollars in these cases are huge,” added Mr. Bauer, the former general counsel for Lubrizol Corp. who currently is advising a large, local health care system on D&O coverage. “There are really no very small, very inexpensive D&O (directors and officers) suits.” The 2011 Directors and Officers Liability Survey by Towers Watson reveals that an increasing number of corporate directors and officers are showing more interest in the insurance their companies use to protect them against potential liti-
hile not every company’s directors and officers face the type of lawsuits that those of FirstMerit and Eaton corporations are confronting this year, more companies are acting to mitigate the risk of litigation to their directors and officers by buying more directors and officers liability insurance. “The chances of being hit with one of these suits is growing,” said Joseph W. Bauer, principal for Bauer Advising LLC, an Ann Arbor, Mich., firm that advises companies on insurance and legal fees. “In the last five or six years, most of Cleve-
gation. More than 69% of the 401 public, private and nonprofit organizations that responded reported they received an inquiry about the coverage, up from 57% in 2010. “The fact that more directors and officers are asking about their specific programs clearly shows they are concerned about the exposures they face and ensuring their personal assets are protected,” Towers Watson’s Larry Racioppo said. “Whether it is traditional securities class action litigation, M&A-related activity, derivative actions or threats from a wide range of regulatory or law enforce-
ment agencies, directors and officers — and the companies they represent — are seemingly under siege from a wide array of potential claimants.” In the case of FirstMerit, a shareholder sued the Akron bank’s board and some of its officers in July for breach of fiduciary duty and unjust enrichment, alleging it approved the “granting of excessive and unwarranted compensation … to FirstMerit’s executive officers.” Also this year, a Florida pension plan sued some of Eaton Corp.’s executive officers on behalf of all
those who purchased stock during a period of nearly three years. The suit is a securities fraud action that alleges the company’s leaders issued false and misleading statements concerning the involvement of Eaton officials in a scheme to improperly influence a Mississippi judge in the company’s trade secrets case.
Threats all around While suits alleging securities fraud are down generally this year compared to last, lawsuits arising out of mergers and acquisitions are on the rise, as are suits against the directors and officers of financial institutions. See INSURANCE Page 18
14 CRAINâ€™S CLEVELAND BUSINESS
OCTOBER 1 - 7, 2012
Employers must investigate all complaints carefully
n the workplace, complaints are inevitable. However, they can carry serious legal risk to the company â€” particularly if the investigation into the complaint is insufficient or ineffective. The employee handbook should establish internal procedures for investigating complaints, starting with an anti-discrimination/antiharassment policy and an opendoor complaint procedure that encourages employees to report discrimination and harassment. This allows employees to openly and honestly voice concerns. The internal procedures should request complaints in writing, explain the investigation process, identify who will conduct the inquiry, provide a rough timeline for the investigation and explain that no employee will be retaliated against for making a complaint or for providing information. A complaint may be made verbally or in writing. When an employee brings a verbal complaint, listen without interruption, and then request the employee document the complaint in writing. Whether the
complaint seems frivolous or appears to have merit, remain neutral. Do not respond in a manner that suggests agreement or skepticism. Regardless of whether the complaint is verbal or written, the firmâ€™s obligation to investigate is the same. First, determine whether the complaint actually is discrimination or harassment â€” in other words, whether it involves race, religion, sex, national origin, disability, age or another protected class. Employees often use the term â€œdiscriminationâ€? to mean â€œunfairâ€? rather than (in the legal sense) discriminatory. If the complaint involves discrimination or harassment, employers must take action. That means conducting a good faith investigation into the incident. Ignoring the complaint or not taking it seriously â€” even if the complaint seems trivial or meritless â€” increases the likelihood of future litigation. Every complaint should be investigated consistently and in a timely manner. The company should begin the investigation immediately. Delaying the investigation can lead to prob-
ADVISER lems, such as a perception of indifference or that discrimination does not really matter to the company. Moreover, it places the adequacy of the companyâ€™s response at issue. (Employers should conduct an investigation even if the employee says he does not want one done.) During the investigation, do not tell an employee the complaint will be kept confidential. This is usually impossible. The company has to talk with the alleged discriminator and any witnesses. When interviewing these individuals, information will be disclosed to allow them to respond to the specific allegations. That information is generally sufficient to discern
AN ADVISOR WHO OFFERS FLEXIBLE
TO FIT YOUR NEEDS AND YOUR FINANCIAL STRATEGY.
who brought the complaint. There is a difference between a discreet investigation â€” which should be done â€” and a confidential one. However, keep the details of the investigation confidential. Individuals â€” even managers â€” should not be given information on the investigation unless they are involved. The complaining employee should provide names of witnesses. Formally interview all witnesses and the alleged discriminator and obtain written statements for the file. If possible, two individuals should be present in the interviews. Do not rely on written statements alone â€” include the handwritten question and answer notes in the file. Once again, it is important that the company explain to the witnesses that the information will be kept discreet and that employees will not be retaliated against for participating. During the investigation, remind all managers that any retaliation against the complainer is illegal and will not be tolerated. Often, the accused may feel personally attacked. This is particularly problematic when the accused is a supervisor. The â€œhumanâ€? response is to defend oneself or otherwise respond. That is not permitted. On the other hand, other supervisors will simply ignore the employee and refuse to talk to him. That is problematic, too. The supervisor must be reminded not to treat that employee differently. After the investigation, determine
if discipline is warranted. Depending on the severity of the incident and other facts, including prior incidents or warnings, discipline can include counseling, a verbal or written warning, demotion, transfer, suspension, probationary period or termination. However, it may be that the investigation determines that there was insufficient proof to determine whether discrimination occurred. If that occurs, the company should remind all employees â€” particularly those involved â€” about the expected standards of conduct and be sensitive to the situation, monitoring the situation between the employees accordingly. The company may want to consider additional EEO discrimination and harassment training as well. As a final step, make sure investigation results are communicated to the employee. Let the employee know the complaint has been addressed. Encourage the employee to keep the company informed about the problem and, if it reoccurs, inform the company immediately. Finally, be sure to retain documentation. The written complaint should be placed in the employeeâ€™s personnel file. Everything concerning the investigation should be retained. If the offending employee was disciplined, that should likewise be placed in his file. â– Ms. Hathaway is an associate in Reminger Co. LPAâ€™s Cleveland office.
What do you look for in a law firm?
ĹˆH3ULPH)LUVWÂ§\HDUDGMXVWDEOHUDWHPRUWJDJHIURP0HUULOO/\QFK+RPH/RDQV70 IHDWXUHVUDWHVDVORZDV1.500%1, 1.605% APR$0HUULOO/\QFK)LQDQFLDO$GYLVRU FDQRĂ§HU\RXDFFHVVWROHQGLQJVROXWLRQVWRKHOS\RXJDLQDGGLWLRQDOOLTXLGLW\WRSD\ GRZQSULQFLSDOPRUHVWUDWHJLFDOO\RUWRXVHIRU\RXURWKHUoQDQFLDOJRDOV Jon E. Lawrence &RPSOH['LUHFWRUq*UHDWHU&OHYHODQG %UHFNVYLOOH&KDJULQ)DOOV&OHYHODQG 0HQWRU3HSSHU3LNH:HVWODNH
1.500%, 1.605% APR with a 1% origination fee. The initial annual percentage rate (APR) may vary. The interest rate adjusts monthly based on the one-month LIBOR as published in The Wall Street Journal, plus a margin of 1.25%, and may increase. Rate and margin are current as of 9/18/12. Rate and margin are subject to application of standard underwriting criteria and may change without notice. For a $600,000 purchase of a primary residence, with a 20% down payment and a $480,000 mortgage, 120 monthly interest-only payments of $600 are followed by 180 monthly amortizing payments of $2,980, assuming interest rate remains constant throughout the adjustable term of the loan. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater. When deciding whether an adjustable-rate mortgage is right for your situation, you should consider the potential risk of rising rates and payments and such factors as how long you plan to own your home. This is an interest-only mortgage that allows you to pay only the interest on the money you borrow for a certain number of years. If you pay only the amount of interest thatâ€™s due, once the interest-only period ends, you still will owe the original amount you borrowed, and your monthly payment will increaseâ€”even if interest rates stay the sameâ€”because you must pay back the principal as well as interest. You should ask what the payments on your loan will be after the end of the interest-only period. If you are considering an adjustable-rate mortgage, ask what your payments can be if interest rates increase. Visit our Web site at www.merrillhomeloans.com for more information about the risks of interest-only mortgages. Merrill Lynch Home Loansâ„˘ residential mortgage programs are offered and funded by Bank of America, N.A., 4804 Deer Lake Drive East, Jacksonville, FL 32246-6484; toll-free telephone: (800) 854-7154. Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center, New York, NY 10080, toll-free telephone: (800) 338-2814, Member, Securities Investor Protection Corporation (SIPC), does not make commitments for or fund loans. Residential mortgage programs, options and property types are not available in all states and jurisdictions and are subject to change without notice. Loans are offered on properties in all 50 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico. Additional terms, conditions, restrictions and costs may apply. Bank of America Corporation, its subsidiaries and their employees may receive compensation for its products and services. Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated, a registered broker-dealer and member SIPC, and other subsidiaries of Bank of America Corporation (â€œBACâ€?). Banking products are provided by Bank of America, N.A., and affiliated banks, members FDIC and wholly owned subsidiaries of BAC. Investment products:
Are Not FDIC Insured ÂŠ 2012 Bank of America Corporation. All rights reserved. AD-08-12-0116
Are Not Bank Guaranteed ART1Y0Y0-08-12
Strong leadership. Competing in todayâ€™s business climate can feel like youâ€™re in the jungle. To survive, you need experienced advisors with the necessary legal skills and leadership to help guide you through even the toughest business challenges. For nearly 80 years, Walter Haverfield attorneys have taken pride in providing creative solutions that allow our clients to minimize risk while maximizing their business opportunities. If this doesnâ€™t sound like your current law firm, perhaps itâ€™s time to start looking for a new one.
May Lose Value Code 439404PM-0912
Cleveland | 216.781.1212 | www.walterhav.com
OCTOBER 1 - 7, 2012
CRAIN’S CLEVELAND BUSINESS 15
Practice: Purchase, sale agreements on horizon continued from PAGE 13
“Since then, we have been getting a steady flow of work related to natural gas. It’s steady, but it’s not crushing, and by that I mean it’s not as if we went on a hiring boom,” he said, adding that no new attorneys have been hired to further the firm’s new focus. “I certainly wouldn’t call it a windfall of legal work.”
Getting in the game Kevin D. Margolis, co-chairman of Benesch’s energy practice group and its shale oil and gas industry team, said his firm has eight attorneys spending 90% of their time handling oil and gas issues. “I keep telling people we are on the half-yard line; we aren’t even on the 1-yard line yet. There is enormous growth in this industry,” said Mr. Margolis, who also is chairman of the firm’s real estate and environmental practice group. “We’re pretty confident in that we’re busy, we have work and we expect a lot more work to come. Frankly the size of the opportunity and its secondary effects is going to be so significant that having competition doesn’t really concern us much. In fact, I have a hard time thinking of one practice group at our firm that isn’t going to be impacted.” To establish itself as a thought leader in the industry, Benesch tweets news daily through its Twitter handle, @OhioShaleUpdate, and soon will launch a blog, OhioShaleUpdate.com. Both efforts are lowcost marketing tools that promote the firm’s presence in the industry. Jonathan Airey, a partner and head of Vorys’ oil- and gas-focused energy practice, said his firm has more than 20 attorneys active in the energy practice. The firm has had a vigorous oil and gas practice for more than 30 years. The firm represents a number of oil and gas operators that are active in the Utica shale and have been heavily engaged in litigation, much of it focused on landowners seeking to break their leases so they can get a bonus payment from some other operator. In addition, Vorys attorneys have been active in statewide regulatory and legislative developments relating to shale, including Senate Bill 315, oil and gas regulatory legislation that became Ohio law in June. “We have found a lot of activity and a lot of legal work in a variety of areas that have kept a number of our people very busy,” Mr. Airey said, adding that Vorys filed for and received the first unitization order, a means of combining acreage to develop underlying resources while meeting minimum spacing and acreage requirements. Andrew Thomas, an executivein-residence with the Energy Policy Center in the Maxine Goodman Levin College of Urban Affairs of Cleveland State University, said there isn’t going to be a “gold rush” of legal work with the exception of one area — title work, and that need actually is starting to slow down. “Representation of landowners and lease negotiation has certainly had a big upturn. It is really diffuse, and I think this is where a lot of lawyers are looking to get engaged pretty quickly,” said Mr. Thomas, an attorney who practiced oil and gas law in Louisiana for many years before coming to Ohio. He also is an
adjunct to the Cleveland Marshall School of Law and the College of Urban Affairs, where he teaches courses in energy law and policy.
Building on experience The next representation wave? Service companies and producers. “If I were (these law firms) I would do the same thing: I would develop a practice group that is ready when this industry takes off and it is going to take years for this practice to evolve,” he said. “It’s a matter of taking the expertise that they do have and making it more specific to the oil and gas industry
and I think that’s what a lot of firms are trying to do right now. Then we’ll see a lot of work coming to Ohio in the form of purchase and sale agreements, and joint operating agreements and other things that are common in the industry.” Mr. Thomas said it doesn’t take much investment for a law firm to retool for the oil and gas industry. “Getting experience is critical and there are two ways to do it: one way is to get a client, which can be tricky at first, and the other way is to hire somebody to come in who has that experience,” he said. Enter Don Fischbach, chair of
Calfee’s oil and gas practice, who joined the firm this spring bringing with him more than 30 years of experience in the industry and has been involved in multiple major shale plays in Oklahoma. “We just found his wealth of knowledge and experience to be a great addition for us as we looked at this industry,” said Michael Phillips, a partner at Calfee, where 16 experienced attorneys make up a multidisciplinary group dealing with a full spectrum of legal issues surrounding oil and gas exploration, drilling and post-production. “We are very happy where we are situated.”
Mr. Fischbach said there are two levels of legal competition — local and national. “The people that have worked with some of these operators may be sitting at a desk in Houston, Texas or in New York City. There is another level of competition that is Ohio-based, which offers a different skill set, a different history and background on the Ohio industry. The skill set at Calfee will compete at both levels and that is our objective.” And there’s still time for law firms to make a play for the legal work that will accompany the shale play, according to Mr. Thomas. “We are still a few years away from seeing the practice really take off,” he said. “Litigation is going to dwarf transactional work.” ■
MY BENESCH “Technology companies face unique legal issues. Thankfully, we don’t face them alone.” MIKE BRODERICK Co-founder & CEO Turning Technologies
Cleveland Columbus Indianapolis Philadelphia Shanghai
According to Inc. magazine, Turning Technologies is the fastest-growing privately held software company in the nation. They also top the Weatherhead 100 list. In less than seven years, Turning Technologies has grown to 110 employees with distribution in 84 countries, which presents some interesting legal challenges. That’s why they trust Benesch as their general counsel. Our team approach gives Turning Technologies access to legal experts with a wide array of specialties ranging from global IP protection and human resources to mergers and acquisitions.
White Plains Wilmington
To learn more about our relationship with Turning Technologies, visit beneschlaw.com/myteam
Featured attorneys (left-right): GREGG EISENBERG, ROSS J. KIRCHICK, MARK AVSEC, BRYAN SCHWARTZ, STEVE AUVIL, M. CASEY KUCHARSON, RICK TRACANNA, BRYAN JAKETIC and JOSEPH GROSS. © 2012 Benesch Friedlander Coplan & Aronoff LLP
16 CRAIN’S CLEVELAND BUSINESS
EMPLOYMENT LAW. COVERED.
OCTOBER 1 - 7, 2012
Brain Gain project builds momentum beyond legal field By KIMBERLY BONVISSUTO firstname.lastname@example.org
AT REMINGER, our employment practices defense group strives to defend your company vigilantly when legal matters arise. We routinely work with the Equal Employment Opportunity Commission and OSHA, and frequently defend common law claims as well as all areas of discrimination law in jury trials at both the state and federal court levels. RESULTS. PERIOD. It’s more than just our motto, it’s our passion. To learn more about our employment law practice, contact Co-Chair Nicholas Satullo. Pictured L to R: Co-Chairs Nicholas Satullo & Joseph Borchelt; Stephanie Hathaway; Practice Group Leaders Andrew Dorman and Roy Hulme
Results. Period. Reminger.com - 216.687.1311 Akron | Cincinnati | Cleveland | Columbus | Sandusky | Toledo | Youngstown | Ft. Mitchell | Lexington | Louisville | Indianapolis
We’re here to help you manage your consumer & commercial debt recovery For more than 80 years, Weltman, Weinberg & Reis Co., LPA has built its reputation by helping our clients manage their debt and real estate default recovery in offering an integrated approach to creditors’ rights representation. Dedicated to helping your business grow and prosper, we leverage our experience in Bankruptcy, Commercial and Consumer Collections, Litigation & Defense, and Real Estate Default matters.
BANKRUPTCY . COMMERCIAL COLLECTIONS . CONSUMER COLLECTIONS . LITIGATION & DEFENSE . REAL ESTATE DEFAULT
Alan H. Weinberg Managing Partner email@example.com 216-685-1100
hen he learned he was going to take over as president of the Cleveland Metropolitan Bar Association in June 2013, Jonathan Leiken decided he wanted to do something special to capture the energy of the legal community. Mr. Leiken, a partner at Leiken Jones Day’s Cleveland law firm, gathered a number of young attorneys and summer associates in a conference room and explained what a critical driver the legal community is to everything in town — the economy, culture, the social scene. The group began brainstorming ways to build on that energy. “We repeatedly came back to brain-gaining — the concept that Cleveland has an incredibly bright future, tied together by our love of the town, excitement about great assets and downtown,” Mr. Leiken said. “Then we said this does not just apply to lawyers, it applies to everyone. We came up with the concept of a Brain Gain Cleveland Project for people anywhere.” As they brought the idea up to clients and colleagues in the legal and business communities, the excitement grew, said Mr. Leiken, who described the project as a “movement” to grow Cleveland. One of the first to buy into the concept was Dan Gilbert, who owns large stakes in the Cleveland Cavaliers, Horseshoe Casino and Quicken Loans. He taped a welcome video for the group’s home page, www.braingaincleveland.com. Its website, launched in March, is at about 350 “scouts” — a term referring to its members — with a goal of reaching 1,000 by the end of the year. The concept of scouts is a play on the phenomenon of “I love Cleveland” speeches, which Mr. Leiken said can be overheard everywhere from cocktail parties to barbecues. Everyone’s speech is a little different depending on their interests — amazing restaurants, outdoor spaces, opportunities and family living offerings. According to the site, membership is free and scout involvement can range from simply joining the group’s email list to telling a Cleveland story on the website or writing articles, posting photos and creating events to support brain gain in Cleveland. “What they’re doing is spreading the word; telling the story of the town and adding to the energy,” Mr. Leiken said. “It mapped well with our concept of being a scout — someone who grows the team, is a cheerleader, attracts and retains talent, and builds something.”
Spreading the love The group is focusing on growing its numbers through partnerships with cultural institutions, including
the Cleveland Museum of Art, the Great Lakes Theatre, Cain Park Neighborhood Association, Greater Cleveland Partnership and business organizations. Indeed, Mr. Leiken said the theme of all of his work in the coming year will be Brain Gain Cleveland. “My goal is to marry my work as bar president with this project and continue to explode the number of scouts to many, many thousands,” he said. Mike Hagesfeld, a web developer with Cleveland web design firm Aztek, took on the challenge of creating the Brain Gain website pro bono as a way to “spread the love.” “If we can keep that snowball of positive energy rolling, it could really make Cleveland a magnet for top talent in numerous fields, as word gets out about the major advantages Cleveland has to offer,” Mr. Hagesfeld said. “I feel like the project could be a major driver behind that effort.” Aanand Mehta was a summer associate with Mr. Leiken at Jones Day and came in on the ground floor of the Brain Gain project. He attended Northwestern University for his undergraduate degree, then moved on to the University of Pennsylvania Law School in Philadelphia. His experience with Brain Gain played a major role in his decision to move back to Cleveland. He will join Jones Day in late October. Mr. Mehta said Cleveland accepted his parents after they immigrated to the United States, and his parents have never stopped being grateful. “Making Cleveland better is a team effort, and you see that with organizations like BGCP, Global Cleveland, the Greater Cleveland Partnership, Team NEO, BioEnterprise and others,” he said.
Using it as a draw Mr. Mehta now is working with Debra Mayers Hollander, a childhood friend of Mr. Leiken, on outreach and marketing to encourage arts centers, ethnic organizations and Cleveland business development organizations to create a page on the Brain Gain website. “I came to Cleveland to help keep the city moving forward and this is my first opportunity. I want to continue promoting Cleveland the way my parents have,” Mr. Mehta said, adding that he’s working on a project to funnel information from Brain Gain organizations to college students who hail from the Cleveland area. “We hope to set up Skype interviews between these students and Cleveland employers so we can reach the students before any other employers from other cities can.” As deputy director of scouting, Ms. Hollander described Brain Gain as an “online Cleveland booster club.” “People always tell you do what you love,” Ms. Hollander said. “I love talking about Cleveland. This is a no-brainer.” ■
OCTOBER 1 - 7, 2012
CRAIN’S CLEVELAND BUSINESS 17
THEINTERVIEW Carter E. Strang president, Cleveland Metropolitan Bar Association By AMY ANN STOESSEL firstname.lastname@example.org
Carter E. Strang has hopes of reaching a whole new population in his role as Cleveland Metropolitan Bar Association president — and, surprisingly, it’s not a bunch of lawyers that make up his target audience. Mr. Strang, a partner at Tucker Ellis LLP in Cleveland, has been serving in the bar’s Strang top spot since June, and since then he’s been implementing plans to engage more Northeast Ohioans with the organization. “This idea of looking beyond what had been normal boundaries,” he said. “We now need to look at things differently and more broadly.” To that end, the Louis Stokes Scholars Program and the Citizens Legal Academy both are aimed at groups not largely served by the bar association. The Stokes Scholars program, launched this summer, makes available to college students eight-week paid summer legal internships at Cleveland law firms, courts and legal nonprofits. To be eligible, students must be graduates of the Cleveland Metropolitan or the East Cleveland Municipal school districts. Meanwhile, the Citizens Legal
Academy aims to appeal to an even broader group, presenting educational forums on topics ranging from election law to immigration. “We’ve always been a big player in the community, but we need to be a bigger player,” said Mr. Strang, who also has in the works a medical-legal summit planned for April 2013.
Once a teacher, always a teacher The former educator has drawn from his past in creating his key bar initiatives, with both the Stokes Scholars program and the Citizens Legal Academy striving to fill knowledge and experience gaps. “It sprang in large part from having been a teacher,” he said. “Citizen education is critical to the success of a democracy.” The first session of the Citizens Legal Academy was held last month, focusing on election law. Panelists at the free forum included Jane Platten, director of the Cuyahoga County Board of Elections, and it was moderated by Cuyahoga County Common Pleas Judge John J. Russo, who co-chairs the program with Carole Rendon, first assistant U.S. attorney for the Northern District of Ohio.
EXPERIENCED LEGAL ADVICE IN THE AREAS OF FINANCIAL DISTRESS, RESTRUCTURING AND BANKRUPTCY. Economic challenges require thoughtful counseling and responsive representation. Ice Miller attorneys provide guidance through bankruptcy, receivership and other insolvency proceedings, and in corporate trust defaults and restructurings. Our broad experience provides the platform to better serve clients’ needs in times of ﬁnancial distress. For more information, contact Colette Gibbons or Rob Stefancin at (216) 621-6501. Chicago ∙ Cleveland ∙ Columbus ∙ DuPage County, Ill. ∙ Indianapolis ∙ Washington, D.C. www.icemiller.com
See STRANG Page 18
1405 East Sixth Street, Cleveland, OH 44114 | calfee.com
18 CRAINâ€™S CLEVELAND BUSINESS
OCTOBER 1 - 7, 2012
Strang continued from PAGE 17
The next program â€” slated for 8:30 a.m. to 12:30 p.m. on Oct. 11 at Montefiore, Beachwood â€” will focus on investor and consumer fraud. â€œThe more educated people are the more engaged they will be,â€? Ms. Rendon said. For 18-year-old Brandon Brown, a third-year student at Oberlin College, the other of Mr. Strangâ€™s main initiatives â€” the Stokes Scholars program â€” meant a chance to roll up his sleeves this summer at Tucker Ellis. â€œI felt like a lot was done to prepare me for law school,â€? he said. â€œIt kind of gave me a goal of where I want to be.â€? Mr. Brown was one of 18 students selected to work at the regionâ€™s law firms, courts and legal nonprofits. He hopes to attend law school and return to Cleveland to practice. â€œI really think that Cleveland is a city that needs people to stay and help it grow,â€? he said. Itâ€™s a sentiment that fits in directly with Mr. Strangâ€™s hopes for the Stokes Scholars initiative, for which $30,000 was raised to help fund the court and nonprofit internships.
While the bar association long has been active at the high school level with its 3Rs program, the bar association leader wanted a vehicle to attract students back to the region, provide for continued mentorship and add to the professionâ€™s diversity.
New challenges One challenge in leading a bar association, of course, is to continue to be relevant to members, Mr. Strang said. And while heâ€™s extending many of his efforts beyond the immediate legal sector, Mr. Strang also is focusing on member issues such as law school debt, insurance programs and work-life balance. A program called Club CMBA has been created to bring together members interested in various hobbies, such as books and cycling. Growing revenue, membership and the profession also are top of mind for the 6,000-member organization, which was formed in March 2008 by the consolidation of the Cleveland and Cuyahoga County bar associations, â€œWe never spoke as lawyers with one voice,â€? he said. â€œThankfully, weâ€™ve now merged into one, and itâ€™s made a huge difference.â€? â–
Insurance: Private companies also buying continued from PAGE 13
The Federal Deposit Insurance Corp. as of Sept. 11 had authorized director and officer lawsuits naming 266 former directors and officers of failed banks. That number compares with 264 authorized defendants during all of last year, and far eclipses the 98 in 2010 and the 11 in 2009. Surely a motivating factor is that the FDIC has three years after a bank is closed to file tort claims, and many institutions failed in 2009 and 2010. Shareholder lawsuits over executive compensation are increasing, too, as in FirstMeritâ€™s case, as are those related to the Foreign Corrupt Practices Act, said Joe Rodgers, a principal in the Cleveland office of Squire Sanders who represents officers and directors in shareholder litigation. â€œItâ€™s requiring companies to look more closely at their D&O (insurance) policies to make sure that they are sufficiently protected,â€? Mr. Rodgers said. â€œThe one-size-fits-all policy is no longer being used.â€? Companies generally buy the D&O policies, which will cover the costs of defense as well as damages
WE ARE ROETZEL.
and settlements. The growth in interest is clear at The Fedeli Group, which over the past five years has enjoyed an 80% increase in its D&O premiums. Thatâ€™s greater growth than the company has seen in other property and casualty lines, according to Edward M. Kraine, senior vice president and chief insurance officer for the Independence insurance brokerage. The increase is fueled by existing clients purchasing the insurance when they hadnâ€™t before, existing clients increasing their premiums and new business, Mr. Kraine said. â€œAlmost all the time now, they (prospective directors and officers) are asking that question,â€? he said. The Fedeli Group sells insurance mostly to private companies, and that, there, is different, too: Whereas directors and officers liability insurance used to be isolated largely to public companies, todayâ€™s buyers include a growing number of private companies. Thatâ€™s because itâ€™s become apparent that itâ€™s not just stockholders who pose the threat of litigation; lenders to a company also can in cases where they might argue that directors and officers didnâ€™t prudently grow a business or keep its ratios in line, Mr. Kraine said. Plus, at some private companies, stock has been passed down over the years, resulting in an increased number of stockholders who potentially may sue the directors and officers, Mr. Kraine said.
Market in motion Increased coverage also has been driven by the price compression within the insurance industry, said Andrew Mehrhoff, vice president for executive solutions for
Britton Gallagher, a Cleveland insurance brokerage that sells D&O insurance nationwide. When the competition between insurance companies creates a market in which someone can pay a tad more for millions more in coverage, many customers accept, Mr. Mehrhoff said. Rates are rising now, though, Mr. Mehrhoff noted, particularly for those companies that have higher risk factors, such as mergers and acquisitions activity. â€œInsurance carriers are saying theyâ€™re getting more suits and that theyâ€™re becoming more and more expensive to defend,â€? Mr. Mehrhoff said. â€œThe carriers need to protect their profitability, so theyâ€™re raising their rates. Weâ€™ve also seen other carriers saying, â€˜Iâ€™m not going to write this anymore,â€™ and getting out of the (D&O) business.â€? Mr. Bauer and others expect the number of suits against directors and officers to continue to increase as the nature of the suits expands into new and different matters. â€œAll of the new laws, including the Dodd-Frank law, present opportunities to fail, opportunities to make mistakes, and when they (companies) do, there will be a lawyer waiting to sue them,â€? Mr. Bauer said. â€œI expect that there will be more and more of the insurance purchased,â€? he added. â€œIt will be more expensive because it will be of higher quality in terms of not providing loopholes. I expect that officers and directors will insist on the elimination of loopholes.â€? Two newer areas for which companies, directors and officers already are seeking coverage are cyber security and data privacy, Mr. Rodgers noted. â–
WHO TO WATCH Weâ€™re looking to profile some of the regionâ€™s legal up-and-comers in â€œWho to Watch: Law,â€? a special section slated for publication Nov. 26. If you think you know who will be among those leading the Northeast
Ohio legal sector of the future, drop an email to Amy Ann Stoessel, email@example.com, or call 216-771-5155. Please send in your suggestions by Oct. 22.
(SFBUUIJOHTBSFIBQQFOJOHJOPVS$MFWFMBOEPĂśDF8FIBWFCFFOOBNFEPOFPGUIF .JEXFTUT5PQ-BX'JSNTCZUIFNational Law JournalBOEIBWFCFFOBXBSEFEUIF$PSQPSBUF *OUFSOBUJPOBM(MPCBM"XBSEBTUIF#VTJOFTT-JUJHBUJPO'JSNPGUIF:FBSJO0IJPCZ Corporate INTL Magazine8FBSFBNational Law Journal i/-+wMBXmSNBOEBi(P5P5PQ wMBXmSN8FBSF0IJP4VQFS-BXZFST #FTU-BXZFST -FBEJOH-BXZFST 5PQ-BXZFSTBOE 3JTJOH4UBSTTFSWJOHDMJFOUTCPUIOBUJPOBMMZBOEJOUFSOBUJPOBMMZ8FBSF3PFU[FM BOEHSFBU UIJOHTBSFIBQQFOJOHIFSF
ralaw.com/cleveland / & 8 : 0 3 , t $ ) * $ " ( 0 t C L E V E L A N D t 5 0 - & % 0 t " , 3 0 / t $ 0 - 6 . # 6 4 t $ * / $ * / / "5 * 8" 4 ) * / ( 50 / % $ t 5" - - " ) " 4 4 & & t 0 3 - " / % 0 t ' 0 3 5 . : & 3 4 t / " 1 - & 4 t ' 0 3 5 - "6 % & 3 %" - &
Largest national staffing firm headquartered in North East Ohio Nesco Resource is the one of the fastest growing Staffing Services Firms in the nation, with headquarters right here in the Cleveland Area. In 2012, Nesco Resource was one of only 2 large staffing firms in the country to win â€œBest of Staffingâ€? recognition from both our clients and talent. Experience the Nesco difference, call one of our 7 NE Ohio offices today!
OCTOBER 1 - 7, 2012
CRAIN’S CLEVELAND BUSINESS
Offer: Investments come at a cost, but may pay off continued from PAGE 1
to put pressure on American Greetings’ bottom line — and hence its stock price — for the next few years could help the offer find favor with the financial advisors who will assist the special committee in its work of determining its fairness. The offer presented last Tuesday, Sept. 25, to the American Greetings board to acquire the company’s Class A and Class B stock for $17.18 a share is a deal for anyone who bought the stock in recent months. It’s a nearly 16% premium over the company’s closing stock price of $14.85 the previous day, and is 33% higher than its price at the start of 2012, when it closed Jan. 2 at $12.90. Still, the offer is 14.5% below the company’s book value of $20.10 a share as of May 25, the end of its fiscal first quarter. And the offer is under the price at which the stock of American Greetings traded for the better part of the last decade. From late-May 2003 through mid-June 2008, the stock of American Greetings was above the offering price of CEO Zev Weiss, president and chief operating officer Jeffrey Weiss and related parties. And for most of that period, the stock traded in a range of $20 to $25, with it approaching $29 at times. As with the stocks of almost every publicly traded company, the recession that set in during the fall of 2008 beat down the stock of American Greetings, with its shares sinking to $3.40 by March 2009. But, also like most other stocks, shares of American Greetings would rebound in the months that followed, with its price back above $18 a share by late September that year. And, for the next two years, it would stay above that price.
Lawyers rattle their sabers In announcing the Weiss family’s proposal last Wednesday, Sept. 26, American Greetings said it did not anticipate issuing further public statements about the offer or about the activities of the special committee until either it enters into a definitive agreement or the committee determines that the transaction will not proceed. It did not take long, though, for others to weigh in about the offer. Just one hour after American Greetings’ announcement, securities law firm Tripp Levy PLLC issued a news release saying it was “inves-
tigating” the proposed acquisition of American Greetings by the company’s management. Tripp Levy said the investigation concerned whether the Weiss family and the American Greetings board “are breaching their fiduciary duties by not engaging in a full and fair independent auction to ensure that shareholders will receive the highest price possible for their shares, while not allowing the Weiss family to acquire the company for themselves at the lowest price possible.” The New York law firm Harwood Feffer LLP would make a similar pronouncement a couple hours later, with others following suit over the next couple days. The Weiss family, in a Sept. 24 letter to the American Greetings board in which it makes its proposal to take the company private, presented a different view. “We believe that $17.18 per share is a compelling price and that American Greetings public shareholders will find this proposal attractive,” the letter states. It said the offer “provides the public stockholders of the company with liquidity and certain value in a highly volatile period in the equity markets.” The letter could have added that the offer comes amid uncertainty about the future of paper greeting cards in a digital world and about the ultimate impact of a decision in May by American Greetings to bail out one of its largest customers. And it could have noted that a lengthy and expensive effort to modernize the company’s information technology systems will be cutting into its bottom line for at least the next five years without the guarantee of a big payoff.
about 400 Clinton Cards stores as it sought to keep open a prime retail distribution channel for its products in the United Kingdom. How well the U.K. stores will do under new ownership is uncertain. However, multiple charges against earnings related to the company’s efforts to salvage Clinton Cards largely were to blame for a 78% drop in American Greetings’ net income for its fiscal first quarter from its earnings in the year-earlier period. American Greetings has called little attention to the drag on earnings that its investment in updating its IT systems has been. The goal is to streamline operations and so make the company more efficient, thus saving tens of millions of dollars in cost. But it is shelling out tons of money to achieve that objective. In its first-quarter earnings report filed July 5 with the Securities and Exchange Commission, American Greetings said it spent $25 million in fiscal 2012 on IT investments and doled out another $9 million in just the first quarter of the current fiscal year. And those investments are far from over. “In addition, over roughly the next five or six years, we currently expect to spend at least an aggregate of $150 million on these information technology systems, the majority of which we expect will be capital expenditures,” American Greetings said in the filing. “We believe these investments are important to our business, help us drive further efficiencies and add new capabilities; however, there can be no assurance that we will not spend more or less than $150 million over the life of the project, or that we will achieve the
associated efficiencies or any cost savings.”
The great unknown There also can be no assurance about what the road ahead will be for what American Greetings calls “social expression products.” Like companies in the newspaper field, American Greetings and its big rival Hallmark have worked hard to adapt to changing consumer habits brought on by the Internet, social media and digital technology. It isn’t an inexpensive process. For example, American Greetings said it spent about $15 million in fiscal 2012 on what it called “incremental marketing expenses” primarily related to efforts to promote its recently developed website Cardstore.com, which allows consumers to buy paper
greeting cards on the Internet and then have the physical cards delivered directly to the recipient. That expenditure doesn’t reflect the cost of developing Cardstore.com in the first place. All the hurdles don’t seem to matter to Zev and Jeffrey Weiss and members of their family. Through their offer to take American Greetings private, the people who have been closest to the company for the longest period of time are expressing the belief that the business young Polish immigrant Jacob Sapirstein started in Cleveland in 1905 by selling penny postcards to drugstores and novelty shops will be around for quite a while. If nothing else, they are getting the company’s second century off to an interesting start. ■
Bottom-line bashers American Greetings already has seen its results dinged by its May 9 decision to acquire for $56.6 million the senior secured debt of struggling Clinton Cards, one of the largest specialty retailers of greeting cards in the United Kingdom. Clinton Cards then was placed into “administration,” a procedure similar to Chapter 11 bankruptcy in the United States. By controlling the debt, American Greetings was able to protect its interest in Clinton Cards, which had been an important international customer for 40 years. In early June, American Greetings would acquire
Turns out the distance between middle management and upper management is one degree.
CWRU med school nabs additional funding Case Western ON THE WEB Story from community as a Reserve University www.CrainsCleveland.com. whole,” Dr. Eppig secured an additional said in a state$1.5 million for the construction of ment. “We are proud to help proa 160,000-square-foot, $50 million vide the modern space this stellar building for its lauded medical academic program deserves.” school on the site of the nowCWRU plans to break ground on defunct Mt. Sinai Medical Center on the project by 2016. East 105th Street in Cleveland. “Mike and Ruth have stepped up The latest gift from CWRU alumnus as the first individual supporters of Dr. Michael D. Eppig and his wife, our long overdue building project,” Ruth, follows a history-making comsaid Dr. Pamela Davis, the medical mitment announced last week by school’s dean, in a statement. the Cleveland Foundation and the “Mike’s experience as an alumnus Mt. Sinai Health Care Foundation, of our school and subsequent sucwhich each pledged $10 million to cessful career as an orthopaedic the effort — the largest grants in spine surgeon bring special meaning each of the foundations’ histories. to their support,” she said. “They are “As Clevelanders, we see how literally passing on the gift of bestimportant the School of Medicine is in-class education to future generato the local medical sector and tions of physicians and researchers.”
Executive MBA Open House Thursday, Oct. 11, 2012 12:00 p.m. – 3:15 p.m. Register at: weatherhead.case.edu/emba or call 216.368.6411.
CRAINâ€™S CLEVELAND BUSINESS
OCTOBER 1 - 7, 2012
LARGEST SUMMIT COUNTY EMPLOYERS RANKED BY FULL-TIME EQUIVALENT LOCAL EMPLOYEES
Company Address Phone/Web site
FTE employees Summit County June 30, 2012
Total number of employees in Ohio
Type of business
Top local executive Title
Summa Health System 525 E. Market St., Akron 44304 (330) 375-3000/www.summahealth.org
Integrated health care delivery system encompassing eight hospitals, multiple foundations and a health plan
Thomas J. Strauss president, CEO
Akron General Health System 400 Wabash Ave., Akron 44307 (330) 344-6000/www.akrongeneral.org
Integrated health care delivery system
Thomas L. "Tim" Stover president, CEO
Summit County 175 S. Main St., Akron 44308 (330) 643-2500/www.co.summit.oh.us
Russell M. Pry county executive
Akron Public Schools 70 N. Broadway, Akron 44308 (330) 761-1661/www.akronschools.com
Public school district
David W. James superintendent
Akron Children's Hospital One Perkins Square, Akron 44308 (330) 543-1000/www.akronchildrens.org
Pediatric health system
William H. Considine president, CEO
Goodyear Tire & Rubber Co. 1144 E. Market St., Akron 44316 (330) 796-2121/www.goodyear.com
Richard J. Kramer chairman, president, CEO
University of Akron 302 Buchtel Common, Akron 44325 (330) 972-7111/www.uakron.edu
Luis M. Proenza president
FirstEnergy Corp. 76 S. Main St., Akron 44308 (800) 736-3402/www.firstenergycorp.com
Electric utility holding company
Anthony J. Alexander president, CEO
Sterling Jewelers Inc.(1) 375 Ghent Road, Akron 44333 (330) 668-5000/www.sterlingjewelers.com
Mark Light president, CEO
Babcock & Wilcox Co. 20 S. Van Buren Ave. and 91 Stirling Ave., Barberton 44203 (330) 753-4511/www.babcock.com
Engineering, manufacturing and construction services for nuclear, renewable, fossil power and industrial customers
J. Randall Data, president, COO, Babcock & Wilcox Power Generation Group Inc.
Diebold Inc. 5995 Mayfair Road, North Canton 44720 (330) 490-4000/www.diebold.com
Integrated self-service delivery systems and services
Thomas W. Swidarski president, CEO
City of Akron 166 S. High St., Akron 44308 (330) 375-2330/www.akronohio.gov
Donald L. Plusquellic mayor
Giant Eagle Inc. 5300 Richmond Road, Bedford Heights 44146 (216) 292-7000/www.gianteagle.com
Grocery store chain
Bill Artman vice president, Cleveland operating division
InfoCision Management Corp. 325 Springside Drive, Akron 44333 (330) 668-1400/www.infocision.com
Inbound and outbound call center provider
Carl Albright president, CEO
State of Ohio 30 E. Broad St., Columbus 43215 (614) 466-2000/www.ohio.gov
John R. Kasich governor
Jo-Ann Stores Inc. 5555 Darrow Road, Hudson 44236 (330) 656-2600/www.joann.com
Fabric and craft retailer
Travis Smith CEO, president
Fred W. Albrecht Grocery Co. 2700 Gilchrist Road, Akron 44305 (330) 733-2263/www.acmestores.com
Retail grocery and pharmacy stores
Steve Albrecht president
Allstate Insurance Co.(1) 75 Executive Parkway, Hudson 44237 (330) 656-6000/www.allstate.com
Financial services and insurance
Rashmi Tripathi assistant vice president
U.S. Postal Service 2200 Orange Ave., Cleveland 44101 (800) 275-8777/www.usps.com
U.S. postal service
Todd Hawkins district manager, Northern Ohio District
Bridgestone Americas Inc.(1) 10 E. Firestone Blvd, Akron 44317 (330) 379-7000/www.bridgestoneamericas.com
Hank Hara, chief technology officer, vp, Bridgestone Americas Tire Operations
AssuraMed 1810 Summit Commerce Park, Twinsburg 44087 (330) 963-6996/www.assuramed.com
Mail order provider of specialty medical supplies
Michael B. Petras Jr. CEO
Group Management Services Inc. 3296 Columbia Road, Suite 101, Richfield 44286 (330) 659-0100/www.groupmgmt.com
Professional employer organization
Michael Kahoe president
Lockheed Martin Corp. 1210 Massillon Road, Akron 44315 (330) 796-2800/www.lockheedmartin.com
Flight simulators, weapon systems, laser and sensor systems, tethered aerostats, high-altitude airship, precision machining
Colleen Arthur, general manager, Akron; director, Integrated Defense Technologies market segment
Newell Rubbermaid 3200 Gilchrist Road, Mogadore 44260 (330) 784-7141/www.newellrubbermaid.com
Broadous Global marketer of consumer and commercial products JB director, Ohio Operations
U.S. Office of Personnel Management 1900 E St., NW, Washington 20415 (202) 606-1800/www.opm.gov
C. Frank Figliuzzi chair, Cleveland Federal Executive Board
Time Warner Cable 530 S. Main St., Suite 1751, Akron 44311 (330) 572-4020/www.timewarnercable.com
Time Warner Cable is all about connecting people and businesses with information, entertainment and each other
John H. Higgins Jr. area vice president of operations
Hudson City School District 2400 Hudson-Aurora Road, Hudson 44236 (330) 653-1200/www.hudson.edu
Public school system
Steven L. Farnsworth superintendent
County of Summit Development Disabilities Board 89 E. Howe Road, Tallmadge 44278 (330) 634-8000/www.summitdd.org
Provides services to individuals with disabilities and their families in Summit County
Thomas L. Armstrong superintendent
Dominion East Ohio 1201 E. 55th St., Cleveland 44103 (800) 362-7557/www.dom.com
Natural gas distribution
Anne E. Bomar senior vice president, general manager
FedEx Custom Critical Inc. 1475 Boettler Road, Uniontown 44685 (800) 762-3787/www.customcritical.fedex.com
Expedited and emergency transportation
Virginia Albanese president, CEO
Stow-Munroe Falls City School District 4350 Allen Road, Stow 44224 (330) 689-5445/www.smfschools.org
Public school district
Russell D. Jones superintendent
OCTOBER 1 - 7, 2012
CRAINâ€™S CLEVELAND BUSINESS
Company Address Phone/Web site
FTE employees Summit County June 30, 2012
Total number of employees in Ohio
Meggitt Aircraft Braking Systems Corp. 1204 Massillon Road, Akron 44306 (330) 796-4400/www.aircraftbraking.com
Huntington National Bank 200 Public Square, Cleveland 44114 (800) 480-2265/www.huntington.com
Barberton City Schools 479 Norton Ave., Barberton 44203 (330) 753-1025/www.barbertonschools.org
Rockwell Automation Inc. 1 Allen-Bradley Drive, Mayfield Heights 44124 (440) 646-5000/www.rockwellautomation.com
Pepsi Beverages Co. 1999 Enterprise Parkway, Twinsburg 44087 (330) 963-5300/NA
Top local executive Title
Type of business Manufacturer of aircraft wheels, brakes and brake control systems
J.J. Williams, sr. vp and general manager, global operations; Luke Durudogan, president
Daniel P. Walsh Jr. president, Greater Cleveland region
Public school district
Patricia Cleary superintendent
Global provider of industrial automation control and information solutions
Steven A. Eisenbrown senior vice president, architecture and software
Manufacturer, seller and distributor of PepsiCo beverages
Dan Hungerman vice president
City of Cuyahoga Falls 2310 Second St., Cuyahoga Falls 44221 (330) 971-8000/www.cityofcf.com
Don L. Robart mayor
UPS 4300 E. 68th St., Cleveland 44105 (216) 641-3027/www.ups.com
Dwayne Meeks president, UPS Great Lakes District
National Interstate Insurance Co. 3250 Interstate Drive, Richfield 44286 (330) 659-8900/www.natl.com
Specialty property and casualty insurance company
David W. Michelson president, CEO
Oriana House Inc. P.O. Box 1501, Akron 44309-1501 (330) 535-8116/www.orianahouse.org
Nonprofit ageny providing community corrections, chemical dependency treatment, and re-entry services
James J. Lawrence president, CEO
Alcoa 1600 Harvard Ave., Cleveland 44105 (216) 641-3600/www.alcoa.com
Aluminum forgings for aerospace, automotive and commercial transportation markets
Eric Roegner, president, Alcoa Forgings and Extrusions and Defense; Tim Myers, president, Alcoa Wheel and Transportation Products
JPMorgan Chase & Co. 1300 E. Ninth St., Cleveland 44114 (877) 302-4273 /www.chase.com
James R. Geuther, regional president and head, commercial banking business, NE Ohio
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. (1) Employee number is from the Akron Beacon Journal, "Summa still top employer; manufacturing a bright spot in job market", Feb. 11, 2012.
RESEARCHED BY Deborah W. Hillyer
CLASS OF 2012
Mark Abood t Nicole M. BelltStephan Bibian, Ph.D. Aparna Bole, MD t Christopher A. Chapman tMichelle Comerford Maura David MareshtChad DaviestStephanie Dorsey James P. Dougherty t Megann EberharttMarshall Emerson III
RISING BUSINESS STARS
Want to subscription to Crainâ€™s Cleveland Business?
Regan Fitzpatrick tFrank L. Gallucci III tAlex Gertsburg, Esq. Gerald Hetrick t.BUUIFX,)MBWJOt5FE)PGGNBO Jed Hunter t Michael T. Jeans tColette M. JonestJerel Klue Eric and Hallie Bram Kogelschatzr%BWF-B[PS Majeed G. MakhlouftMary S. MaritatBill Mathews Vladimir Novakovict"NZ1BVTDIFtJason Radcliffe Ilya Romanovt(SFUDIFO-4DIVMFStDalithia C. Smith Danny Eric Spitz t5PN4USBJOtJennifer Stullt,FO4VSBUU Rocco WhalentBrad Wiandt t#SZBO1;BCFMM
To sign up call toll-free at 1-877-824-9373 or on-line @ CrainsCleveland.com Click on â€œSubscribe Now.â€?
Monday, November 19, 5:30pm - 8:30pm @ Executive Caterers at Landerhaven, Mayfield Heights Event & Ticket Information: www.crainscleveland.com/40u40 Questions? Contact Jessica D. Snyder at firstname.lastname@example.org or 216/771-5388
CRAIN’S CLEVELAND BUSINESS
OCTOBER 1 - 7, 2012
Veterans: Health system coalition addresses recruitment continued from PAGE 1
And with combat operations in Iraq concluded and the planned winddown of military operations in Afghanistan over the next few years, health care leaders expect to augment their growing ranks with returning veterans more so than ever. So far this year, the Clinic, for instance, has hired 227 vets. “You have to realize the military has been in the process of training people for hundreds of years, not only in technical abilities but leadership capabilities,” said Cleveland Clinic CEO Dr. Toby Cosgrove, himself a decorated veteran who served as surgeon in the U.S. Air Force during the Vietnam War. “I want to take advantage of both,” Dr. Cosgrove said.
Experienced heroes The Clinic’s military roots run deep, as three of its founding physicians worked together in France during World War I. About four years ago, the Clinic was one of the first health systems to sign a memorandum of understanding with
Contact: Phone: Fax: E-mail:
Toni Coleman (216) 522-1383 (216) 694-4264 email@example.com
the military to show its commitment to hiring veterans. “When we signed it, however, we didn’t have an infrastructure in place to actively recruit veterans,” said Gayle Agahi, the Clinic’s director of external partnerships and talent management. “We just assumed they would show up, but it didn’t happen that way.” In an effort to lure those with military experience toward health care careers, the Clinic launched earlier this year a program dubbed the “Hero Experience,” which includes a tool on its website that allows veterans to match their military job codes with civilian job titles. Also, the Clinic is educating its managers about how to interview veterans and about how their skills might apply to health care. “Sometimes people might have preconceptions about soldiers, and we’re trying to break down those kinds of barriers,” said Ms. Agahi, noting that the Clinic also launched a support group for veterans employed with the health system. Last fall, the Clinic approached
“You have to realize the military has been in the process of training people for hundreds of years.” – Dr. Toby Cosgrove, CEO, Cleveland Clinic the city of Cleveland’s and Cuyahoga County’s Workforce Investment Board and its work force development agency, the Employment Connection, to develop a multiday workshop designed to ease the transition from the military to civilian careers specifically in health care. The workshop also helps veterans hone their interviewing and résumé-writing skills. It’s a program through which Mr. Peterson found his job as a patient services representative, where he greets patients in the emergency room, inputs their information into the Clinic’s computer system and informs the medical staff of their arrival. “I don’t think anyone can do it,” Mr. Peterson said about his career at the Clinic. “It takes a lot of patience and a lot of understanding. That fits me perfectly. I like a challenge.”
Match game While the nationwide employment outlook is lukewarm at best, hiring in the health care field is expected to continue its upward swing as baby boomers continue to age. Health care careers in the country made up nearly 20% of the 1.6 million jobs created last year, according to the U.S. Bureau of Labor Statistics. Still, local health care organizations have expressed concern over finding qualified workers to fill the slots they have, which led to the formation of the Northeast Ohio Health Science & Innovation Coalition about six years ago. The coalition, which is a collaborative effort among five of the region’s health systems, over the last two years has honed in on returning vets as way to fill those work force gaps. For example, the locally based coalition has a recruiter on
its payroll stationed at Fort Sam Houston, a U.S. Army post in San Antonio, Texas. “There’s a huge pool of veterans out there whose skills should transfer into health care, and there’s a lot of health care jobs open, said Judith Murphy, vice president for human resources at Southwest General Health Center in Middleburg Heights and the coalition’s board president. “You have people out there who are a perfect match or near perfect match for these positions, and we need the talent,” she said. Part of what makes veterans such an attractive hire is their ability to work in teams and, perhaps more importantly, adapt to change, according to Jessica Loudin, a human resources representative at Summa Health System who works on veteran recruitment efforts. As the health care field continues to evolve, Ms. Loudin said, that flexibility is vital. “They get a lot of that through the military,” she said. “Health care is changing, so that’s definitely a quality we look for.” ■
Copy Deadline: Wednesdays @ 2:00 p.m. All Ads Pre-Paid: Check or Credit Card
Real Estate Auction October 31
Real Estate Auction Oct. 24 • 11:00 AM On-Site
701 W. Lakeside Ave. Unit 1306 CLEVELAND OH 44113
3824 SF. of metropolitan living conveniently located minutes from downtown and a short walk to Lake Erie. Private entries, walls of windows and patios graced by mature trees and lush landscaping. All floors accessible by stairs or in-suite elevator. Stanley H. Rosen, Broker, Buddy Barton, Auctioneer, Agent
877-BID-ROSEN • (877) 243-7673 OR (216) 990-1831 www.bidrosen.com • www.buddyBartonauctions.com
2 Acres - Zoned GI
10510 Lakeshore Blvd. Unit 2
OCTOBER 21ST • 1 PM
ABSOLUTE AUCTION TRI-LEVEL LUXURY LIVING IN BRATENHAL
d Pearl Roa
Cleveland Penthouse Condominium
The Pinnacle Condominium - a lavish, full-amenity residential glass tower located in the Historic Warehouse District
See Web Site for Details:
For Terms of Sale Call:
Dave Bambeck 330-260-0192
Bambeck Auctioneers Inc.
Bambeck Auctioneers Inc. www.bambeck.com
List your Industrial, commercial or Retail Space Here! Crain’s Cleveland Business’ classifieds will help you fill that space.
Contact Toni Coleman at 216.522-1383 OFFICE SPACE
OFFICE SPACE FOR LEASE FREE 2 MONTHS RENT!! Immediately Available. 2,500sqft. To 4,500sq ft. or 10,000sq ft. entire floor. Furnished and reasonable I-271 and I-77 in Richfield.
Bob or Aldo 216-398-4000 or Bob cell at 216-299-1142
BY OWNER: $990,000 (216) 496-5678 Gates-Mills-luxury-home-for-sale.com
REALTORS: Now is a great time to promote your Luxury Properties to high-end prospects AND receive reduced rates on your advertising. Call 216.522.1383 for more details.
OCTOBER 1 - 7, 2012
CRAIN’S CLEVELAND BUSINESS
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
SEPTEMBER 24 - 30
Beck beckons, and she finally says yes
The big story: The descendents of American
■ For the first time in her 22-year career, well-known bankruptcy attorney Jean Robertson won’t be headed to a law firm office when she goes to work today, Oct. 1. Ms. Robertson has left Calfee, Halter & Griswold LLP, where she led the insolvency practice group prior to her departure, to go in-house as general counsel for Beck Aluminum, a company based in Mayfield Heights that she has advised on a variety of ■ Lake Erie College in Painesville matters for more than a decade. may be getting a leg up on its com“This is allowing me to continue petition with its announcement to be a lawyer, but only have one last week of a tuition freeze for the client, instead of having to serve 2013-2014 academic year. Robertson dozens at a time,” she said. Such announcements — both This summer wasn’t the first from private and public colleges — time Beck Aluminum executives asked Ms. typically occur after the first of the year, and Robertson to work for the company, a large usually not until spring. Lake Erie’s announcesupplier of aluminum in ingot form. They’d ment comes just less than a month from the done so a few years ago, Ms. Robertson said, start of this fall’s classes, which kicked off but she’d declined. Aug. 27. This time around, the answer was differ“We want the students we have to know ent, and no résumé, application or interview that we care about them and that it’s not just was required, she said. about the bottom line,” said Ruta Greiner, “She’s, in effect, been interviewing with director of public relations and creative us for 14 years,” said Bryan Beck, vice presservices for the college. “We’re trying to be ident of Beck Aluminum. “Some lawyers good stewards of their money.” have more of a business acumen than Ms. Greiner downplayed the notion that others, and she definitely has that.” the college’s decision to announce the The company wanted inside counsel in freeze this early was a way to gain an edge part because of the increasing complexity on its competitors. He said it’s a courtesy to it’s confronting as it imports metal from students and their families so they can budmore companies and ships metal to more get accordingly. companies, Mr. Beck said. This fall, Lake Erie enrolled 1,202 students Ms. Robertson looks forward to serving — a slight uptick from last year’s 1,165,
Greetings Corp.’s founder, Jacob Sapirstein, want to return the business to its private company roots. American Greetings’ board received a non-binding proposal from members of the Weiss family to take the company private. CEO Zev Weiss, president and chief operating officer Jeffrey Weiss and other members of the Weiss family and related parties offered to acquire all the Class A and Class B common shares of American Greetings not currently owned by them for $17.18 a share. That price is a nearly 16% premium over the company’s closing stock price of $14.85 the day before the offer was made. See analysis, Page One.
Synta-lating deal: RPM International Inc. acquired Synta Inc., a Georgia-based producer and marketer of exterior wood deck and concrete restoration systems. The Medina-based maker of coatings and sealants purchased Synta through its Rust-Oleum Group, a manufacturer of protective paints and coatings. Synta is expected to have annual sales of more than $40 million in the first year.
They’re not playing it safe: Safeguard Properties LLC, a provider of property preservation services and reporting on foreclosed properties for banks and mortgage companies, received state tax credit approvals to help add a total of 300 jobs in Brooklyn Heights, Mentor and Valley View. Safeguard expects to create 250 full-time positions in Cuyahoga County that would add nearly $8 million to its annual payroll. It plans to add 50 full-time employees and $1.5 million in annual payroll in Mentor.
An early freeze hits Lake Erie
Fine tuning: Classical music station WCLV-FM, 104.9, will begin operating as a noncommercial radio station starting Jan. 1. With the transition, WCLV said, it is following commercial classical music radio stations in New York City, Boston and Seattle that have converted to a noncommercial format. WCLV is affiliated with ideastream, which serves as the umbrella organization for public broadcasting stations WVIZ-TV, Channel 25, and WCPN-FM, 90.3.
Bright idea: Oberlin College launched the
THE COMPANY: Osborn, Cleveland THE PRODUCT: Flexsweep Broom Connector
public phase of a $250 million fundraising campaign that has brought in more than $143 million to date. The campaign, dubbed “Oberlin Illuminate,” is the largest effort in the private college’s history and is on pace to conclude in 2016. It’s slated to fund scholarships, arts initiatives, wellness programs and other initiatives.
Head of the class: Charter schools operator Breakthrough Schools in Cleveland was awarded a two-year, $3.3 million grant from the U.S. Department of Education’s Teacher Incentive Fund. The fund provides money to schools to design and implement performance-based compensation systems. Thirty-five organizations across the country, including only four charter school organizations, received a fund award. This and that: The Cleveland Indians fired manager Manny Acta and replaced him on an interim basis with Sandy Alomar Jr. The team said Mr. Alomar will be a candidate for the manager job next year. … The United Way of Greater Cleveland said its board of directors voted to add sexual orientation to its equal opportunity and diversity policy — a move that puts its financial support to the Boy Scouts of America Greater Cleveland Council in jeopardy. The local Boy Scouts received $97,251 in United Way money this year in addition to donor-directed contributions.
not just as a legal adviser, but as a business adviser to the company. “I really just can’t wait to … become a part of their decision-making process and really walk the walk that my clients get to walk every day,” she said. “I finally get to know what it’s like to make these decisions on a real-time basis. Now, I’m going to be right in the heart of it.” — Michelle Park
Now it’s not so lonely at the top ■ An organization that seeks to facilitate networking and the sharing of best practices among female board members now seeks to do it here. The global network, Women Corporate Directors, launched a Cleveland chapter in mid-September and is in the process of welcoming more than a dozen local members, said Bonnie Gwin, the new chapter’s co-chair. “We all thought there are some fantastic women here on boards, we should start a chapter and bring those women together,” said Ms. Gwin, vice chairman and managing director of the North America Board of Directors Practice for Heidrick & Struggles, a Chicago-based global executive search firm that, with accounting firm KPMG, founded Women Corporate Directors. “It’s really about bringing women together in a trusted community to brainstorm, to think about global issues together, to think about ways to help each other in their board responsibilities, and also, to together advance the idea of having more women on boards,” Ms. Gwin said. Women Corporate Directors counts more than 45 chapters and more than 1,600 members. Its membership is generally limited to women who serve on public company and large private company boards, Ms. Gwin said. For more information, visit www.womencorporatedirectors.com. — Michelle Park
BEST OF THE BLOGS Excerpts from recent blog entries on CrainsCleveland.com.
The steel-cut oats you eat in Vegas can stay in Vegas
Osborn says its Flexsweep broom connectors are made of advanced technology polymer to flex on impact and absorb repetitive shock. The Flexsweep-equipped brooms are “ideal for rugged use, providing extended brush life and improved performance,” the company says. “By adding the Flexsweep connectors on Osborn brand brooms, we’re able to reduce the impact the users have to their wrists, arms, shoulders and backs,” says Jeff Naymik, marketing manager at Osborn. “When other brooms break, these durable brooms flex. The long brush life … of these brooms provides a better value to Osborn customers.” Osborn brooms come in a range of fills that include natural horsehair, multiple types of styrene, tampico, tampico/wire mix and natural palmyra, according to the company. All Osborn brooms are available in coarse, medium and fine sweeping grades with kilndried, lacquered hardwood blocks in lengths ranging from 14 to 36 inches. Founded in 1887, Osborn now has operations in 15 countries and serves customers in more than 120 countries. For information, visit www.Osborn.com.
according to Crain’s research. Tuition, excluding assorted fees, at Lake Erie is $25,976 a year. — Timothy Magaw
■ The Cleveland Clinic is playing a role in an experiment into whether a hotel room can make you healthier. “The MGM Grand Hotel & Casino in Las Vegas thinks it can,” The Wall Street Journal reported. As part of a major renovation, the 5,044-room hotel is launching 41 “Stay Well” rooms and suites this month “that contain features it says will improve sleep, reduce allergens and promote healthy eating,” according to The Journal. The rooms will cost about $30 more per night than a typical room. The Clinic is a partner in the project. Among the features of the Stay Well rooms: antimicrobial coating on door knobs and furniture, sophisticated air filtration systems, carbon water filters and healthy room service/minibar. “A special room-service menu will offer dishes designed by the Cleveland Clinic including organic steel-cut oatmeal and a tofu vegetarian sandwich,” The Journal noted. “The minibar will contain raw almonds and coconut water, along with the usual alcohol and soda.” Guests also will receive a voucher to access three six-week online programs covering sleep, stress and healthy eating from the Clinic.
Be glad you didn’t have to count all those ads ■ The Sherrod Brown vs. Josh Mandel race
for the Senate is remarkable in a lot of ways, not least of which is the staggering amount of advertising it has generated — mostly on the Republican side. Businessweek.com noted that from July 2011 through Sept. 17, “there were 38,382 television ads aired in the race, according to data from New York-based Kantar Media’s CMAG, which tracks advertising.” The website reported that Mr. Mandel, a Republican who is Ohio’s treasurer, aired the most ads, 7,238, “followed by 6,855 from Crossroads GPS, the nonprofit group founded with help from Republican strategist Karl Rove, and 6,472 from the U.S. Chamber of Commerce.” Sen. Brown, a Democrat, aired 5,633 spots. Of the outside groups airing commercials, nine backing Mandel aired 79.4% of the ads in the race.
We’ve come a long way in the last 56 years ■ Fortune.com each week posts a story from its archives. With the magazine just releasing the 2012 edition of its annual Most Powerful Women list — which includes KeyCorp CEO Beth Mooney at No. 49, one spot ahead of Oprah! — Fortune.com reran a story from 1956 that looked at the progress women were making in the workplace, as well as major obstacles. As you might expect, some of the views expressed then sound mighty uncomfortable today. Take this comment from Dwight Joyce, then president of Glidden Co. in Cleveland. “We’ve never had girls who wanted to go to the top,” he told Fortune more than a half-century ago. “They either work until they get married or work a while afterward until they have babies. Most women I’ve seen are not fitted by nature for top executive jobs. I don’t believe they’re tough enough.”