Prime-time golf duel only latest sports marketing splash for Quicken Loans, PAGE 3
FEBRUARY 22-28, 2016
Alleged scams hit foreign house buyers Records: Flipping distressed Detroit homes a lure By Robert Snell email@example.com
Overseas investors have cooled on buying distressed homes in Detroit after a pair of alleged scams targeting thousands of properties. The alleged scams involved homes purchased for as little as $500, in many cases through Wayne County tax auctions, according to property and federal court records. The properties then were flipped, in one case for as much as $15,000, to investors duped into buying what they believed were bank-foreclosed homes for more than fair market value, court records say. The alleged scams left scores of abandoned homes across Detroit, devastated struggling neighbor-
Map of trouble Online: An interactive map of the homes involved in a federal case alleging that out-of-town investors were taken in by a real estate scam. crainsdetroit.com/scams
hoods and compounded blight problems, officials said. Both alleged scams have drawn the attention of federal investigators. Crain’s has learned that the FBI is investigating Dearborn-based Metro Property Group LLC, the largest single buyer of distressed homes at the county’s tax auctions in recent years, according to a search warrant unsealed in federal court in late December. “Things have cooled,” said Darin McLeskey, managing partner of Detroit-based Denovo Real Estate , who is helping foreign buyers salvage investments in Detroit homes. “A lot of buyers are going down in flames, asking for help.” There is data suggesting weakening interest among foreign investors. Cash purchases, seen as an indication that buyers are acquiring property as an investment, fell to 45 percent in the second quarter of 2015 in metro Detroit, down from a high of 74 percent in the fourth quarter of 2011, according to the real estate database firm Zillow. The percentage of overseas investors searching online for Detroit properties fell to 5.7 percent of all searches in January from 10.1 percent in February 2014, according to property website Trulia. The rate is the lowest in four years. The decline comes amid a rise in property scams targeting overseas investors, particularly those from Europe, Wayne County Register of Deeds Bernard Youngblood said. He created the nation’s first SEE SCAM, PAGE 20
How one of Michigan’s banking leaders made a big deal, chased a big dream … and raced into bankruptcy Breaking news, Jan. 12, 2016: Attorneys for Jack Krasula, prominent businessman and WJR radio show host, ask an Oakland Circuit Court judge to find legendary banker Jerry Campbell in contempt of court over a $4.8 million debt, claiming he has been hiding assets. That same day, Campbell, a former longtime friend and business partner of Krasula’s — in a very successful Florida bank and in a stunningly disastrous horse racing track in Huron Township — files for bankruptcy protection in Florida. By Tom Henderson firstname.lastname@example.org
It was 1969, at the beginning of a storied career in banking, and Jerry Campbell was something of a boy wonder. He and his partners had just bought the Owosso Sav ings Bank. It was a tiny community bank with just $40 million in assets, but, nonetheless, he was a bank president at 29. Campbell, who had grown up on a farm near Allegan in West Michigan, had had an unlikely career path by then. There had been nothing to hint at a bank presidency to come. Campbell’s career path ultimately led him to run three banks, try his hand at horse breeding and racing — including the construction of the now-razed Pinnacle racetrack — and wind FILE PHOTOS
Jerry Campbell (above) built three banks © Entire contents copyright 2016 by Crain Communications Inc. All rights reserved.
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from scratch or nearly so, but had a lot of expensive trouble in his horse-racing ventures, including Pinnacle Race Course in Wayne County.
Editor’s note: This story was compiled from interviews, court records and published reports. Jerry Campbell didn’t return calls to HomeBancorp and his cellphone. Lisa Campbell didn’t respond to email requests. Jack Krasula didn’t return phone calls asking for comment.
up in a litigious dispute with his biggest partner, Jack Krasula. Campbell got a bachelor’s degree in liberal arts in 1962 from Central Michigan University and MBAs from Wayne State University and the University of Michigan. He spent the first two years of his career at MichCon Gas Co. and then taught business classes for five years at WSU, in investments, banking and finance.
One of Campbell’s students was head of the personnel department at the Bank of the Common wealth and offered him a job. For two years, Campbell worked full time at the university and at the bank before deciding to focus on finance. Campbell expanded Owosso Savings Bank into a bank-holding company with $1.2 billion in assets before selling it to Grand Rapids-based Old Kent Bank in 1983. In 1986, after raising $3 million from investors, he started all over again, launching a small community bank in Owosso called Republic Bancorp Inc. that opened on April Fool’s Day. Investors bought into its model of quickly opening mortgage offices in a wide footprint and exSEE CAMPBELL, PAGE 18
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BRIEFS House approves $30 million for Flint water crisis aid
HopCat, Short’s to sell statewide; Big Hart to brew
State and federal officials acted to send more help to Flint to deal with its lead-contamination crisis, as the Michigan House approved $30 million last week to help pay residents’ water bills and Gov. Rick Snyder announced a $2 million grant to help the city replace some of its pipes, The Associated Press reported. The federal government is giving $500,000 to two health centers that are treating and testing Flint residents exposed to the lead-tainted water. That aid comes as a new congressional report by the nonpartisan Congressional Research Service said the Environmental Protection Agency waited too long to take enforcement action after learning of elevated lead levels in Flint’s tap water. The EPA said it urged a quicker state and local response. Meanwhile, 10 regional financial institutions rallied to give nearly $600,000 to the Flint Child Health & Development Fund , and the Meridian Winter Blast festival in Detroit announced it raised more than $50,000 for the fund.
Grand Rapids-based bar and restaurant operator BarFly Ventures LLC has partnered with contract brewery Brew Detroit LLC to market and distribute HopCat-branded beer. According to MiBiz, Brew Detroit will produce HopCat’s Beer Right Meow American India Pale Ale for statewide distribution through Kalamazoo-based Imperial Beverage to retailers and bars and restaurants. In more brewery news, Bellairebased Short’s Brewing will offer three mainstay beers, a rotating seasonal selection and two ciders when it expands out of state by beginning bottle distribution in Illinois by March, MLive.com reported. Short’s, which had pitched the “Michigan Only, Michigan Forever” slogan, said in a social media posting that it was extending its reach because of competition and a desire not to sell out to investors or another brewery. Meanwhile, West Michigan’s Oceana County is getting its first microbrewery. Big Hart Brewing Co. was set to open last weekend in
Hart near popular tourist stop Silver Lake Sand Dunes.
MICH-CELLANEOUS 䡲 Six years after it was last in use, the former Steelcase pyramid near Grand Rapids is again busy as its new owner, Switch , begins a $400 million build-out of its Supernap Michigan Data Center . More than 70 workers from 25 West Michigan companies are working at the former Steelcase Corporate Development Center in Gaines Township, a Switch spokesman told MLive.com. He said the initial construction budget remains $400 million, but likely will exceed $1 billion in an effort to open on schedule this year. 䡲 Kalamazooo-based medical technology company Stryker Corp. is buying Physio-Control International Inc. of Redmond, Wash., for $1.28 billion, AP reported. Physio-Control develops, makes and markets monitors/defibrillators and cardiopulmonary resuscitation-assist devices. 䡲 A 70-year-old Port Huron business is closing next month due to a pension dispute with the Teamsters Central States Pension Fund, said the Port Huron Times Herald. Port Huron Building Supply is being sued in federal court in Illinois over its alleged failure to contribute enough money to the union. A company official said the business has 14 employees. 䡲 Plans are moving forward to turn a former small auto parts plant in southern Michigan into a culi-
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nary, recreation and tourist destination to include restaurants, a farmers market, ice cream shop, microbrewery, skating rink and a bakery. Daniel Ross, owner and developer of Old Irish Mill in Brooklyn, told the Jackson Citizen Patriot that he hopes to have the project complete in 2017. The development could cost up to $8 million. 䡲 A plan is moving forward to tear down the Park Place Hotel ’s domed banquet hall and pool building in downtown Traverse City as part of a broader development project. The approval last week by the Traverse City Historic Districts Commission removed a key hurdle to the proposal that includes plans to build a new convention center, said a Traverse City Record-Eagle report. 䡲 An $11.2 million effort to eliminate blighted homes in Saginaw ended in December after two years of work, MLive.com reported. Officials said the federally funded project was a success, resulting in the demolition of 862 vacant homes in Saginaw and along the city borders. 䡲 The Ludington-based SS Badger, a passenger ship that hauled rail cars across Lake Michigan from the 1950s until 1990, has been des-
INSIDE THIS ISSUE BANKRUPTCIES . . . . . . . . . . . . . . . . . 17 CALENDAR . . . . . . . . . . . . . . . . . . . . . . . 16 CLASSIFIED ADS . . . . . . . . . . . . . . . . 17 DEALS & DETAILS . . . . . . . . . . . . . . . 14 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 6 OTHER VOICES . . . . . . . . . . . . . . . . . . . 6 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 16 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 22 WEEK ON THE WEB . . . . . . . . . . . . . . 22
COMPANY INDEX: SEE PAGE 21 ignated a national historic landmark by the U.S. Department of the Interior , AP reported. The Badger is now a car and passenger ferry that travels between Ludington and Manitowoc, Wis. 䡲 The Ontario Hockey League suspended Flint Firebirds owner Rolf Nilsen after the major junior team, formerly the Plymouth Whalers, fired its coaching staff for the second time this season, AP reported. Head coach and General Manager John Gruden and assistant coach Dave Karpa were fired last week; they were dismissed in November but reinstated after players protested. 䡲
Correction 䡲 The story “State seeks to eliminate tax credit for auto insurers” on Page 3 of the Feb. 8 issue should have said that an insurance tax credit being claimed by auto insurers in Michigan equates to a 20 percent reduction in insurance tax revenue.
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United Way trims focus for funding Agency to cut grantees list, target lead program areas By Sherri Welch email@example.com
An undetermined number of United Way for Southeastern Michigan grantees will lose their funding in the coming year, as the Detroit-based agency moves more resources behind three lead program areas. Those areas — child hunger, early childhood education and readiness, and college/career readiness — have the best chance for success and provide an opportunity for United Way to simplify for supporters the messaging around its work, said President and CEO Herman Gray, M.D. Gray joined United Way last fall after holding leadership positions at Detroit Medical Center and DMC Children’s Hospital of Herman Gray: Michigan. United Way to focus United Way notified its on basic needs. Wayne, Oakland and Macomb county grantees of the impending changes over the past few weeks and its plan to continue to focus more broadly on basic needs, financial stability and educational preparedness. It’s now identifying which of roughly 50-60 programs will lose funding and what part of the revenue freed up by those cuts will shift to its three lead program areas. It plans to begin notifying affected nonprofits through one-on-one conversations toward the end of March, Gray said. In making funding decisions, there’s no dollar target or percentage of existing programs set to be cut at this time, he said. Gray noted that he and senior leaders at United Way are developing criteria to guide funding
Golf exhibition the newest club in Quicken’s sports marketing bag day before U.S. Open week begins at Oakmont Country Club in suburban Pittsburgh. The match in Detroit would air live on A push to have champion pro golfers Rory McIlroy and the Golf Channel and CBS. Rickie Fowler square off under the lights at Detroit Golf Club Celebrities Justin Timberlake and Mark Wahlberg are exlater this year is the latest high-profile sports marketing ini- pected to be paired with McIlroy and Fowler for the exhibition, Detroit ABC affiliate WXYZ-Channel 7 tiative from Quicken Loans Inc. The Detroit-based mortgage lender led by reported last week. Above: Rory McIlroy (front) real estate magnate and sports team owner Quicken, which is the primary sponsor walks on the first fairway with Dan Gilbert has devoted up to 30 percent of its of 2015 Players Championship winner Rickie Fowler at a tournament enormous annual marketing spending to Fowler, isn’t saying much about the exhilast month.They may soon sports since 2011. bition other than it’s still in talks to create square off under the lights in a Quicken has branding deals with the PGA the event. night match at Detroit Golf Tour , motorsports, several pro sports teams, “We’re always looking for new ways to Club, which Quicken Loans is college sports, and earlier this month aired its do exciting things,” Farner said. “And if it’s working to make happen. first Super Bowl commercial. in Detroit, that’s even better. We’re still “We’re always looking for the interesting working through that to see if something angle or different way we could approach it,” Quicken Loans might happen.” President and CMO Jay Farner said in an interview with Sports-based marketing accounts for between 15 percent Crain’s. “We’re wide open to stuff.” and 30 percent of Quicken’s annual marketing spending The proposed golf match, first reported by The Associated since 2011, he said. The company’s internal metrics show a SEE QUICKEN, PAGE 17 Press, is tentatively scheduled to be played June 7, the TuesBy Bill Shea firstname.lastname@example.org
SEE UNITED WAY, PAGE 21
PHOTO BY MARTIN DOKOUPIL/ASSOCIATED PRESS
Cyber Range to open doors to biz wanting to learn to stop hackers By Chad Halcom email@example.com
JenniferTisdale: Businesses set to start using Cyber Range soon.
The Michigan Cyber Range , a test program to hone security software and train new specialists in cyberdefense, opens its doors to the local business community next month in Sterling Heights. The range — a collaboration among the Michigan Economic Devel opment Corp., several local and federal government agencies, universities, the Michigan National Guard and
the state Department of Technology, Management and Budget — has operated mainly as a tool to educate and certify cybersecurity professionals since it launched in 2012, its coordinators said. But the Velocity Collaboration Center in Sterling Heights will house the first location that’s accessible for general business use. It will offer companies training space, host live exercises that can simulate data hacks and test de-
fensive responses, and assist in software testing. Construction on the Sterling Heights hub of the Cyber Range began about nine months ago and is on pace to wrap up this week or next, in time for a grand opening at Velocity on March 18. “As a program, we’ve run some exercises for professional development, but so far a business has not yet really used it. There are some that are scheduled now to start,”
said Jennifer Tisdale, cyber programs manager for defense and automotive offices at MEDC. “This is going to be a process to help us perfect the environment at first and get the companies using the tools that would give them the most accurate visualization of what’s going on in their network during testing.” Tisdale said 15 area businesses and government representatives
MUST READS OF THE WEEK Entrepreneurial climate eases
Van Conway out
Dentists hungry for CT scans
State’s environment is still improving, but gains are flattening out, Page 8
Co-founder of Conway MacKenzie sues firm after ouster, Page 4
Industry pushes to eliminate Certificate of Need requirement for class of imaging devices, Page 7
SEE CYBER, PAGE 21
Risky business Insurance firms spread a safety net from online hackers. Also, tips on how to lower cyber risk, Pages 9-11
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Conway MacKenzie co-founder sues after being ousted as CEO By Dustin Walsh firstname.lastname@example.org
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“I don’t need the money, so I’m going to stack the deck here. They’ve inspired the wrong guy.” Van Conway of his agreement with the firm, but did not provide details. “We’re hopeful he acknowledges his responsibilities, but it’s America,” MacKenzie said. Conway recently leased the fourth floor at 401 S. Old Woodward Ave. in Birmingham — one floor above Conway Mackenzie — for his new company. He declined to discuss whether others from his former firm will join him in his new venture, but said a few “heavy hitters” will be hired shortly. The rift between Van Conway and Conway MacKenzie began in October when Conway had double kneereplacement surgery, which resulted in cardiac complications, the lawsuit says. Three days after Conway’s surgery, while he remained in the hospital, the board of directors called an unscheduled meeting to discuss a permanent change in the company’s management structure, the suit says. Citing the meeting minutes, the suit states MacKenzie was increasingly frustrated by the way the firm was currently managed and he “would like to see the frustration removed.” The board then voted for MacKenzie to serve as interim CEO in Conway’s absence, according to the filing. The suit alleges the move as a material breach of the firm’s shareholder agreement, which calls for Conway and Mackenzie to remain on the board as founding shareholders. The suit also alleges Conway MacKenzie did not pay Conway a bonus from its budgeted $14 million in bonus and equity distributions for the year. Conway claims in the suit he is owed a bonus ranging from $400,000 to $700,000. The suit also alleges the firm cut his salary by 60 percent as well, which, coupled with a bonus nonpayment, totals an
80 percent cut in compensation. The board later voted to remove Conway from its board of directors, which the suit claims wasn’t communicated to Conway or the firm’s non-board shareholders until Feb. 8. Conway responded with an email to the company’s shareholders concerning the actions, which MacKenzie classified as a resignation, the suit alleges. MacKenzie said the board did work with Conway to resolve the matter privately. “This is most unfortunate, but it’s a reality that disagreements occur in business,” MacKenzie said. “This is complicated and (the decision) didn’t happen without serious thought, deliberation and proper conduct.” Conway and MacKenzie cofounded the firm in 1987, which focuses on turnaround advisory and financial consulting, and expanded the firm to more than 100 professionals in Atlanta; Houston; New York; Chicago; Dallas; Birmingham, Ala.; and Dayton, Ohio. The firm gained local attention during the Great Recession for working on the turnaround of several automotive companies and, more recently, Detroit’s Chapter 9 bankruptcy. “This firm has great core values and will withstand this, but it is unfortunate that we’re confronted with this inconvenience,” MacKenzie said. “The long history of this firm, and the history between Van and I, transcends all of this.” As of Friday morning, Conway MacKenzie or its shareholders had yet to respond to Conway’s legal complaint or file a countersuit. “The real question is whether I can do it again, to build a successful firm. The beauty of the future is that we’re going to find out,” Conway said. 䡲
Know a 20-something? Award nominations due soon
– BRAD KANCIGOR, ASSOCIATE GC
Van Conway, a well-known Southeast Michigan business adviser, is suing the firm he co-founded after its board of directors removed him from his position as chairman, CEO and president. The suit, filed in Oakland County Circuit Court on Feb. 17, alleges the board of the Birmingham-based firm, Conway MacKenzie Inc. , removed Conway as CEO while he was on medical leave and cut his compensation by roughly 80 percent in an attempt to transition control to co-founder Don MacKenzie. The suit is also against certain board members of the firm, including MacKenzie, Joseph Geraghty, Gregory Charleston, John Young and Jeffrey Zappone. “The claims he’s alleged are completely without merit,” MacKenzie said. “The firm will vigorously defense itself from Don MacKenzie: this frivolous lit- Conway’s claims igation, and a “without merit.” counterclaim will likely be filed.” In the meantime, Conway said he is starting his own firm, Conway and Partners LLC, to compete against his former company, but potential legal hurdles remain as Conway Mackenzie claims his ability to work in the field is limited by a contract agreement, the suit states. “There’s always a change of guard, and we definitely had dead wood. Who is dead wood is up for interpretation,” Conway said in an interview with Crain’s. “We didn’t come to terms after they removed me because they never intended to settle and now they are nervous. I’m not going to breach any obligations. But for 42 years I’ve done one thing. I don’t have hobbies; I don’t need the money, so I’m going to stack the deck here. They’ve inspired the wrong guy.” MacKenzie said he’s hopeful Conway will adhere to the conduct
It’s that time of year — time to nominate a 20-something professional who is making his or her mark in metro Detroit. This program recognizes the hard work of local rising stars while also giving them the opportunity to further propel their careers. Employers, take note: This is your chance to boast about internal talent. Candidates for Crain’s 20 in their 20s include up-and-comers making waves within a company, men and women who have shown success or
originality as entrepreneurs, or those who have made an impact in civic or community leadership roles. Winners will be profiled in Crain’s.
Nominees must be 29 or younger before June 1. Nominations are due Feb. 29. To fill out the form, visit crainsdetroit.com/nominate. Read about last year’s 20 in their 20s class at crainsdetroit.com/20. Questions? Contact Crain’s Assistant Managing Editor Kristin Bull at email@example.com or (313) 446-1608, or Special Projects Coordinator Keenan Covington at firstname.lastname@example.org or (313) 446-0417. 䡲
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CRAIN’S DETROIT BUSINESS
OPINION Homebuyers’ losses teach costly lesson A
s with most investments, a healthy dose of the “buyer beware” mantra is always in order. Example: Exuberance over Detroit’s “bargain” residential real estate led to some foreign investors losing money. As Robert Snell’s exclusive report on Page 1 shows, the buyers allegedly were duped into investing in house-flipping schemes involving thousands of Detroit residential properties. The FBI is investigating one local firm and has indicted 16 people in a second case. It undoubtedly sounded, to some property buyers, like a surefire investment. Homes purchased, in many cases, through the Wayne County tax auctions for as little as $500, were allegedly flipped to investors for $15,000 and positioned as bank-owned homes that could be resold for a profit. Pay $15,000 for a property, flip it for double the money or more, right? Wrong. The alleged scams ultimately left scores of abandoned homes across Detroit. One of the reasons for the wave of alleged scams was foreign investors buying properties site unseen. Another possible complicating factor: Batch transactions, many at the county level. Massive online auctions bundling many properties together are an efficient way to work through property backlogs. But it also can lead to skipped steps when it comes to buyer due diligence, properly verified appraisals, and other checks and balances built into the residential sales process — as we all learned in the national mortgage meltdown a few years ago. Many foreign investors who lost money say they regret never visiting Detroit or failing to conduct more research. Just like most things in life, taking shortcuts usually ends with a bad result. There is money to be made in Detroit’s residential and commercial markets — and there are many case studies to be found to prove it.
Program could fill home funding gaps Detroit does have residential bargains for buyers who want to occupy the home, not rent or flip it. But the problem has been buyers who haven’t been able to secure mortgages that give them enough money to also spend fixing up the home. A program announced last week aims to help fill more of these financing gaps. The new $40 million fund offers a second mortgage buyers can tap to help fix up neglected homes. The new initiative is the result of more than a year of work by banks and Mayor Mike Duggan’s office. The renewed bank interest is a positive sign along with market metrics; with this new tool, the more than 500 mortgages that were approved in Detroit last year will grow.
We must not neglect infrastructure repairs s America observes National
A Engineers Week, Feb. 21-27,
there is no better time to focus on the thin, brown horizontal line in Southeast Michigan that demarks our critical infrastructure at street level and beneath. For years, we have been warned by the American Society of Civil Engineers and others that our existing infrastructure is crumbling above and below us. Recent tragic events here in Michigan signal that our state’s infrastructure — roads, bridges, drinking water systems, wastewater/sewerage systems, gas and other utility distribution systems — is in need of serious attention. We are reaping the results of a failure to act. Now that our state’s infrastructure is in the spotlight, we need to seize the opportunity to do something about it. At a recent Detroit Economic Club “Big Four” event at Cobo Center, Detroit Mayor Mike Duggan and county executives Mark Hackel, L. Brooks Patterson
OTHER VOICES Joe Neussendorfer Neussendorfer is a member of the American Society of Civil Engineers, the Engineering Society of Detroit and the Detroit Economic Club. and Warren Evans, when asked what was one of their primary concerns moving forward, responded, “the state of our infrastructure.” Gov. Rick Snyder, in his recent State of the State address, called for the formation of a commission to make recommendations to solve our state’s infrastructure challenge. I submit that Southeast Michigan, through the Southeast Michigan Council of Governments
or a Big Four initiative, should create a similar action group to assess our infrastructure. Now is the perfect time because SEMCOG and the Metropolitan Affairs Coalition have been working on a new report to develop an economic strategy for the region. The draft’s strategy stresses that our region “maximize infrastructure investments, where appropriate, make efficient use of resources for better coordinating different types of infrastructure projects. Engage in collaborative efforts and seek innovation in financing, building, operating and maintaining infrastructure systems. …” I recently overheard Dan Gilbert, in speaking about all of the new construction coming to Detroit over the next few years, say that Detroit’s skyline will be “going vertical,” and we will be seeing all sorts of construction cranes. I say we must also pay attention to the critical infrastructure beneath Detroit and think horizontal and underground. 䡲
Remember lawmakers’ role in housing crash Editor: Regarding Mary Kramer’s column (“‘The Big Short’ sheds light on 2008 meltdown,” Feb. 8, Page 11): If the movie only covers Wall Street and the big banks, then the movie is telling only half the story. If there was no political party and federal government involvement, there would have been no crash. The legislation was the Community Reinvestment Act, first passed by President Carter and then redone by President Clinton in 1993. The CRA of 1993 greatly strengthened the subprime mortgage and greatly increased the power of the federal government to push the subprime with mortgage companies and banks. The CRA threw out common sense of requiring 20 percent and 10 percent down and credit checks of the potential borrowers. The movie should have shown the passing of the legislation, and then the actions of the Justice and Treasury departments to strongarm the mortgage companies and the banks. The killer was tying the subprime mortgage to the prime interest rate.
Send your letters: Crain’s Detroit
Business will consider for publication all signed letters to the editor that do not defame individuals or organizations. Letters may be edited for length and clarity. Email: email@example.com
The subprime borrowers were just able to make the payments as long as the prime interest rate was kept low. The parties forgot to warn the Federal Reserve about the problem of raising the prime interest rate and the massive number of subprime mortgages, which existed at the end of 2006. The Federal Reserve started to raise interest rates in January 2007. In response, subprime mortgages started to default, which snowballed to the crash of September 2008. Neil Karl Livonia
Don’t trade people for machines Editor: I read the article “Will robots zap
the job market?” (Feb. 8, Page 3) with great disappointment at what passes for executive management in America today. The haste to reduce workforces to bare-bones levels is very shortsighted and something time will prove looked better on paper. My experience has been that most people, including the millennials who were predicted to be eager adopters of this strategy, loathe the impersonal automation that’s become all too common. It delivers a message that you’re not important enough to speak to in person. The businesses that refuse to treat their clients as commodities will come out on top. The article then makes the apples-to-oranges comparison between services and manufacturing. Robots cranking out parts and how to plan our finances are not the same thing, folks! If we keep displacing people with automation, there won’t be anyone earning wages to buy the products and services. Just because we can do something, doesn’t mean we should do it. James Aiello Grosse Pointe Woods
TALK ON THE WEB Re: Republicans propose $770M Detroit schools rescue plan Under emergency management, four state-appointed EMs drove deficits above $300 million annually while watching enrollment plummet and schools fall apart. Detroit’s district was in or near the black until 2008, and has since been in serious deficits every single year under emergency management. And now
Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity.
Re: Michigan would privatize mental health funding, services
school board from stepping in for more than 10 years.
As social worker of 30 years, I have had the experience of watching public schools be bought out by a myriad of private businesses and corporate managers, only to watch them close in a couple years . Not enough profit and not enough knowledge of how schools are run.
J Ben S
the state has the gall to suggest con tinuing to run the schools it has deci mated and is preventing an elected
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Dentists push to cut dental CT scanners from CON regulation By Jay Greene firstname.lastname@example.org
Health insurers and business groups are lining up to oppose a bill supported by the Michigan Dental Association and introduced this month by Sen. Rick Jones, R-Grand Ledge, that would eliminate certificate-of-need regulation for a type of dental CT scan. Dentists say they want the 10-yearold CON rules eliminated for dental cone beam computed tomography to reduce dental practice costs, expand access to the imaging devices, and address patient convenience and quality. Mark Johnston, dental association president, said cone beam imaging technology has advanced, becoming safer with less radiation exposure and is now a standard of care for surgical implants and a growing list of other oral procedures. Jones’ Senate Bill 741 is in the health policy committee. Michigan and Rhode Island are the only states that regulate dental CT scanners. Connecticut eliminated such regulation in 2012. “Cone beam-style X-rays give a very clear, 3-D picture of the tooth, vessels and nerves before surgery,” Jones said. “This should lead to much less pain by the patient. Dentists should have more access to it.” Jones said he believes the CON permitting process takes too long, is too costly for dentists and drives up costs for patients. “The application fee typically costs $3,000, and another $5,000 for attorney’s fees. Then you have to wait nine months for approval,” Jones said. Despite the CON barrier, dental cone beam CT scanners, which average about $100,000, have increased 335 percent in Michigan to 74 in 2014 from 17 in 2010, according to the state Department of Health and Human Services. Patient scans have increased 341 percent, to more than 25,990 from 5,900, during that same period. In Southeast Michigan, cone beam scanners have increased to 35 facilities with 12,750 scans in 2014, up dramatically from three facilities and 302 scans in 2012, HHS said. Spillane & Reynolds Orthodontics of Novi performed the most with 2,400 in 2014, the state said. “To say that access (to cone beam technology) is somehow hindered is ludicrous,” said Bret Jackson, executive director of the Economic Alliance for Michigan, a coalition of business and union groups that oppose the change. Jackson said legislating CON elimination is the wrong approach, and CON rule changes should be handled through the Certificate-ofNeed Commission. One week before Jones introduced SB 741, the CON Commission ordered a workgroup to study cone beam CT regulations. Bill Sullivan, director of government and insurance affairs with the dental association, said dentists can’t wait on the CON Commission to study the issue because it has consistently rejected changes in cone beam regulation for years. Marc Keshishian, M.D., chairman of the CON Commission, said
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Cone beam imaging technology has become part of many oral procedures. the dental association this year asked the commission to change the standard without workgroup review. He said the commission then decided to review the standards in light of new science and develop-
ments in cone-beam technology. Keshishian said the workgroup is expected to be appointed within two months and take up to three more months to submit a report. “All high-tech equipment needs to be regulated. Payers have a difficult time paying for health care costs if you have extra infrastructure,” said Keshishian, who also is medical director with Blue Care Network. In 2013, a CON Commission committee studied CT regulations and recommended against changing cone beam rules, said Sharon Brooks, who chaired the committee and is professor emeritus with the
University of Michigan School of Dentistry.
“We tried to get the dental scanner out from CON,” said Brooks, a private practitioner in Ann Arbor. “The radiologists were OK with it. It primarily was the hospital administrators, the insurance people and the Economic Alliance who opposed it.” Except for routine bite-wing Xrays, which typically are used to detect tooth decay and gum disease, Brooks said the cone beam is replacing standard dental X-rays. “More people who have missing teeth get implants in place. The 3-D scanner evaluates where the nerve canal is with impacted teeth,” she
said. “The technology is improving and radiation doses are going down. It is the same as standard orthodontic X-rays.” Health insurers oppose eliminating cone beam CON permitting. A spokesman for the Michigan Health and Hospital Association said the group has no official position yet but generally supports CON. Insurer Delta Dental of Michigan said it opposes legislation that would remove dental CT from regulation because of the role CON plays in controlling health care costs. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene
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Report: Startups cool a bit By Marti Benedetti firstname.lastname@example.org
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Michigan’s rapid entrepreneurial growth rate in the past five years is waning slightly but remains ahead of other Midwestern states, according to the Michigan Entrepreneurship Score Card released Monday by MiQuest. “Michigan had a huge takeoff after the Great Recession, and it can’t keep that pace forever,” said consultant Graham Toft, president of GrowthEco nomics Inc. and author of the report. He added that this year’s data shows Ohio is nipping at Michigan’s entrepreneurial heels. “You have some competition to your south.” Diane Durance, MiQuest president, agreed that the entrepreneurship pace is slower because gains starting in 2009 were huge. The Score Card analyzes data from 2004 to 2014. MiQuest is a Lansing-based nonprofit serving entrepreneurs. Durance said entrepreneurism is a bit down because talented professionals are getting job offers from the booming auto industry, making them less inclined to start businesses. A look at the report’s primary entrepreneurial metrics — climate, change and vitality — reflects the slowdown (See box below). Michigan ranked in the top 10 states nationally in metrics including five-year business survival (ninth), university R&D performance (sixth), high-tech manufacturing employment (first) and business taxes (fifth). Ned Staebler, Wayne State Univer sity ’s vice president for economic development, and president and CEO of TechTown, said he thinks the state may be better off now than when the study was completed. “We have more than a dozen venture capital firms that are very active. In 1999, there were two or three,” he said. The report is sponsored by Clark Hill PLC , Crain’s Detroit Business, Consumers Energy , DTE Energy Foun d a t i o n , MiBiz , M i c h i g a n A s s o c i a t i o n o f State Universities , Michigan Municipal League, Michigan State Housing Development Authority and the Small Business Association of Michigan. 䡲
Michigan’s rankings Where Michigan ranks among the 50 states in the three main measurements in the Small Business Association of Michigan’s annual Entrepreneurship Score Card. The report reflects 2014 data. (Change in rank from 2004 in parentheses): Entrepreneurial climate: 23rd (+7) Entrepreneurial change: 12th (+32)
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Entrepreneurial vitality: 35th (+4) Note: Entrepreneurial climate measures general business conditions, change measures improvement relative to other states, and vitality measures relative level of entrepreneurial activity.
SPECIAL REPORT: BUSINESS How to minimize cyber risk Passwords should be “long and strong,” according to the National Cyber Security Alliance. This
means, despite the inconvenience, using creative mixtures of uppercase and lowercase letters, numerals and symbols. Be certain that passwords do not include personal information about an employee. For example, the name of the street she may live on. Require that employees change passwords according to a predetermined schedule, and that they are securely stored offline.
Train employees to recognize links contained in emails, attachments or online ads and how to properly delete them. Make certain that staff know how to effectively use email spam filters.
Emphasize to employees the importance of backing up their work and its role in protecting the company’s intellectual property. But don’t retain personal data on clients or employees that is no longer needed; it can cause unnecessary risk.
Encourage staff to remain ever watchful and to alert IT teams if something out of the ordinary appears on their computer or in their email. And, obviously, if a suspicious or unfamiliar individual is physically spotted near the company’s workstations or servers. Source: National Cyber Security Alliance, local insurance brokers
Cyber insurance offers companies a safety net from online hackers By Paul Vachon Special to Crain’s Detroit Business
Most businesses and people are inextricably connected to the digital world, from desktop PCs and the servers they link with to tablets, smartphones, smartwatches and a litany of other gadgets. And don’t forget today’s high-tech cars. One characteristic all these devices share is connectivity, their link to the outside world. All this integration comes at a price: the threat of data breaches by nefarious hackers. Since digital technology is so new — and its capabilities so amazing — the vulnerability to attack at the corporate level may not be so evident. But, as technical experts and local insurance experts attest, the risk is all too real, making effective preparedness a necessity, not a luxury. The business threat is best managed by reviewing the level of specialty insurance needed — and
weighing whether more than traditional business security IT systems and protocols are needed. The right answers will depend on the industry served, client data stored and other theft risks, which will vary by business.
The state of cyberattacks Intrusions into a company’s network can take on several forms. “The hackers today are both more creative and more technologically sophisticated,” said Jim Giszczak, member at McDonald Hopkins , a business law firm with offices in Bloomfield Hills. “One common technique they employ is something called ‘spear phishing.’ This happens when a hacker penetrates a company’s system and sends a fraudulent email to an unsuspecting employee, asking for sensitive information. Assuming the request is legitimate, the employee complies, compromising the information.” That
data can be later used to assist in future attacks. And once a hacker invades a system, they often have the opportunity to steal more information than they originally intended. “A bad guy may be after a company’s trade secrets, but since many systems don’t segregate their departments’ information, he might also get personal data on employees,” Giszczak said. An example occurred in February 2015 when Indianapolis-based Anthem Inc., a large, for-profit health insurer, suffered a cyberattack affecting its entire organization, compromising both general company data and medical information of some 80 million members. Despite having security protocols in place, the company described the attack as very sophisticated. It was unable to determine the precise origin of the attack. Experts continue to advocate for companies to SEE ONLINE, PAGE 10
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SPECIAL REPORT: BUSINESS INSURANCE
“Buying cyber insurance is unlike purchasing a general liability policy.” David Derigiotis,seniorvice president ofFarmington Hills-based Burns & Wilcox
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use aggressive measures to prevent hacking on the front end, such as system encryption, redundant firewalls and cryptic passwords. But as Brian Lapidus, a managing director at New York-based Kroll Inc. explained, implementing these measures is like aiming at a moving target. “I think organizations are getting better with their protection,” Lapidus said. “But at the same time, the criminals are getting better and better with their methods, so it’s a vicious circle.” Lapidus is managing director of identity theft and breach notification; Kroll performs risk analysis as well as cybersecurity, incident response and consumer remediation.
Liability: Coverage gaps Further complicating matters is the issue of liability. In the absence of any insurance coverage, Lapidus said, each company is on its own. “Forty-eight states have their own breach notification laws,” he said. “So when data is compromised, the location of the employees involved will determine how a company must respond. Each state’s laws are different, but all list specific rules by how affected parties are notified and what remedy the company will provide.” Lapidus cited an example of a situation where his company’s services were needed. A client financial institution suffered the theft of 15 laptop computers that contained customer financial data. Kroll used investigators to locate the laptops and assess the damage. It then informed the client of the resulting customer notification and remediation requirements. Given these potentially steep financial consequences, a new frontier in the insurance industry is emerging. While evolving and proactive security measures should always be the first line of defense, growing awareness of the risks has given rise to cyber insurance products. Although major incidents, such as those involving big retailers such as Target and Home Depot , have involved considerable liability on the companies’ part, recent court precedent has provided liability relief for retailers. A 2015 U.S. District Court ruling in Suffolk County, N.Y., dismissed a suit filed by a customer of Michaels Stores, the arts and crafts retailer. The plaintiff, in what eventually became a class-action suit, was one of several thousand customers whose credit card information was stolen in December 2013 due to malware that had infected the store’s point-of-sale system. Two fraudulent purchases were subsequently made, both of which were later detected and removed from the customer’s account. In dismissing the case, the court rejected the plaintiff’s claim of pain and suf-
Report: Cyberattacks cause collateral damage Last year was the year of collateral damage with respect to cyber risks, with attacks touching people “who never dreamed they might be involved in a security breach,” said Hewlett-Packard Co. in a report issued Wednesday. The Palo Alto, Calif.-based information technology firm said in its “Cyber Risk Report 2016” that the U.S. Office of Personnel Management and extramarital affairs website Ashley Madison were among those hit by cyber breaches in 2015. “Data compromise is no longer just about getting payment card information. It’s about getting the information capable of changing someone’s life forever,” said the report. Other key themes last year: 䡲 “Overreaching regulations push research underground.” Too often, said the report, legislation “incurs unwanted consequences to go along with the intended result.” 䡲 “Moving from point fixes to broad impact solutions,” which “strains the resources of both the vendor developing the patch and the customer deploying the patch.” 䡲 “Political pressures attempt to decouple privacy and security efforts.” Many lawmakers in the U.S., the United Kingdom and elsewhere “claimed that security was only possible if fundamental rights of privacy and due process (were) abridged,” says the report. 䡲 The industry’s failure to learn anything about patching in 2015. “While vendors continue to produce security remediation, it does little good if they are not installed by the end user,” the report says. 䡲 Attackers have shifted their efforts to directly target applications. “They see this as the easiest route to accessing sensitive enterprise data and are doing everything they can to exploit it,” says the report. 䡲 The “monetization” of malicious software, which “has led to an increase in ATM-related malware, banking Trojans and malware.” Business Insurance
fering stemming from having to closely monitor her credit in the months following the incident. Court rulings like this therefore tend to argue against the need for cyber insurance aimed at consumers, since an individual’s losses can usually be remediated by the retailer involved.
New products Business-to-business cyber insurance, by contrast, is concerned with much more complex scenarios, but is very much an industry in its infancy. Until very recently, there were no statistical models that underwriters could use to assess risk and develop policies. This changed in January when Lloyd’s of London released a set of “core data requirements,” which accomplish two things, according to Mary Jane Grandinetti, managing editor of Business Insurance. “The Lloyd’s model codifies precisely the specific cyber damages that need to be addressed in this type of coverage. It also sets standardized methods of assessing potential risks and developing appropriate levels of coverage.” This key development will undoubtedly lead to more providers entering the field. But the ever-increasing complexity of this emerging field can prove overwhelming to the business owner. David Derigiotis, senior vice president of Farmington Hillsbased Burns & Wilcox , cites this as one reason why hiring an expert specialized broker or agent is important. “Buying cyber insurance is unlike purchasing a general liability poli-
cy,” he said. Business owners “really need an expert you can lean on who appreciates and understands the complexity of your specific situation.” Too many people don’t understand all the details of these policies — the available coverage, the optional enhancements and a number of other features, he said. When an agent doesn’t understand it, the client will have too much uncertainty to make a purchase. And they may put it off and put their company at risk. Right now, cyber insurance is a $2.5 billion per year industry. “If everyone involved — retail agents, wholesale brokers and carriers — better understood these policies, that volume could be double or triple what it currently is,” he said. Derigiotis attributes this knowledge deficit to the fact that the worlds of high technology and insurance have traditionally had little in common. Until now.
At-risk industries Derigiotis stresses that the fields currently in greatest need for cyber coverage are those that deal with highly sensitive or confidential information, such as financial services or health care. In addition to customer liability, data breaches in these industries can trigger fines imposed for regulatory or HIPAA (Health Insurance Portability and Accountability Act) violations. Cyber policies are also being written to cover companies from losses caused by cyberterrorism, such as business interruption when SEE NEXT PAGE
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SPECIAL REPORT: BUSINESS INSURANCE
Property insurance industry assesses new high-tech tools By Matthew Lerner Business Insurance
Technology will continue to be a major force in the property insurance space as several new tools make their way to the market. At the recent Property/Casualty Insurance Joint Industry Forum in New York City, a panel of industry executives said 2015 may be remembered as the first year that technology issues dominated the insurance industry discourse. Technology also seems poised to make a splash in 2016 . One new tool at Aon Risk Solutions, for example, is the company’s Property Laser program, which Aon introduced at the end of last year with the aim of improving clients’ risk profiles and lowering their costs of risk. “Property Laser looks at all aspects of a property program, from values and brokerage to engineering and claims processes,” said Anne Parkin, a director with Aon Risk So-
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a website is disabled, or extortion. An example of cyber extortion: When a company’s entire system is “held hostage” by an outside party unwilling to release it until a ransom is paid. Derigiotis and other experts argue that in the future all businesses will eventually need some type of cyber coverage. The coming of the Internet of Things — the connection of virtually all digital devices so that they may work together seamlessly to drive more efficiency — will open exciting new possibilities, but also a multitude of new opportunities for the bad guys. Reducing risk also comes by way
lutions’ property risk consulting practice in Detroit. The analysis, which focuses primarily on property valuations as well as primary and secondary characteristics for natural catastrophe modeling, produces a report showing where property program improvements are needed in an easy-to-read format, she said. Other tech-based tools from national companies highlighted at the forum: 䡲 Willis Towers Watson PLC Global Peril Diagnostic gives clients a global view of exposures across their entire portfolio by peril, including earthquakes, river floods and storm surges. The diagnostic produces an overall perils score to allow benchmarking to obtain a better picture of the overall risk. 䡲 At AIR Worldwide, risk managers can use its Touchstone system “to access a global suite of catastrophe risk models,” said Andy Kao, San
Francisco-based director of catastrophe risk engineering services at the catastrophe modeler. Clients also can take advantage of site-specific engineering consulting and outsourced modeling services to help quantify their exposure . 䡲 Risk Management Solutions Inc . later this year plans to roll out RMS One, its suite of open, real-time exposure and risk management applications. An area of increasing interest in portfolio management is imagery, as greater use of satellites and drones melds with social media to maximize input of real-time information, said David Pedersen, senior vice president of business development at CoreLogic Inc. in Indianapolis. “The imagery is becoming more granular,” said Pedersen, thereby generating more accurate data. Business Insurance is a sibling publication of Crain’s Detroit Business.
of continuously refining and strengthening security protocols. And beyond insurance products, there also are specialty vendors, technical experts, when it comes to blocking out the ever-increasing sophistication of cyber hackers. Ash Devata, vice president of products at Ann Arbor based Duo Security , explains his company’s “two-factor authentication” protocol as an extra layer of security against hackers. “Ninety-five percent of all cyber breaches involve compromised sign-in credentials,” Devata said. “With our system, two independent channels are utilized to assure someone attempting to log on is who they say they are.”
“As an example, after a user’s password is entered, a private message is sent to their cellphone asking if she or he is in fact attempting to access the system. Their affirmative response proves that they are, and access is granted.” Duo’s Platform Edition takes this protection to the next level. “Platform assesses the characteristics of the wireless devices used by all of an organization’s employees. If it determines that some have outdated software and are thus more vulnerable, it recommends corrective actions be taken so the security of this separate channel is preserved.” Yet another innovative (and amazingly low-tech) security-enhancing move is to put the organization on what Lapidus calls a “data diet.” He advises clients to delete old information that will never be legitimately needed. “If you’re holding on to data from 30 years ago — customer Social Security numbers, dates of birth and the like, holding onto that serves no realistic business purpose and poses a significant liability risk,” Lapidus said. “Get rid of it.” 䡲
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CRAIN'S LIST: LARGEST MICHIGAN BUSINESS INSURANCE COMPANIES Ranked by 2015 revenue Rank
Company Address Phone; website
Revenue ($000,000) 2015
Revenue ($000,000) 2014
Premium volume ($000,000) 2015
Employees 2016 Michigan/ Total U.S.
Worldwide employees 2016
Frankenmuth Insurance 1 Mutual Ave., Frankenmuth 48787-0001 (989) 652-6121; www.fmins.com
John Benson chairman and CEO
Acrisure LLC 5664 Prairie Creek Drive, SE, Caledonia 49316 (800) 748-0351; www.acrisure.com
Gregory Williams CEO
Meadowbrook Inc. 26255 American Drive, Southfield 48034-6112 (248) 358-1100; www.meadowbrook.com
Robert Cubbin president and CEO
Aon Corp. 3000 Town Center, Suite 3000, Southfield 48075 (248) 936-5200; www.aon.com
Carol Williams resident managing director, CEO, Aon Risk Solutions
Brown & Brown of Detroit 35735 Mound Road, Sterling Heights 48310 (586) 977-6300; www.bbdetroit.com
Todd Piersol, executive vice president; Angela Garner, president; Paul Glantz and Doug Shepson, administration
Marsh One Towne Square, Suite 100, Southfield 48076 (248) 945-5600; www.marsh.com
Nina Maggart Southfield office head
LSG Insurance Partners 2600 S. Telegraph Road, Suite 100, Bloomfield Hills 48302 (248) 332-3100; www.lsgip.com
Bryan Hirn area president, benefits and HR consulting; Ryan Isaacs, area president, property and casualty consulting Jay Schreibman president and CEO
Arthur J. Gallagher & Co. 30150 Telegraph Road, Suite 408, Bingham Farms 48025 (248) 203-0626; www.ajg.com
Marsh & McLennan Agency LLC - Michigan 3331 W. Big Beaver Road, Suite 200, Troy 48084 (248) 822-8000 and (734) 525-2463; www.mma-mi.com
Thomas McGraw CEO, Michigan
Valenti, Trobec, Chandler Inc. 1175 W. Long Lake Road, Troy 48098 (248) 828-3377; www.vtcins.com
Alan Chandler, president and CEO; Terry Griffin, COO and Robert Trobec, CFO/ executive vice president
Kapnick Insurance Group 769 Chicago Road, Troy 48083 (248) 352-4455; www.kapnick.com
Jim Kapnick CEO
Hylant Group 24 Frank Lloyd Wright Drive, Suite J4100, Ann Arbor 48105 (734) 741-0044; www.hylant.com
Patrick McDaniel president, Detroit office
Michigan Financial Cos. Inc. 28411 Northwestern Highway, Suite 1300, Southfield 48034 (248) 663-4700; www.michiganfinancial.com
Nick Valenti president and CEO
Daly Merritt Insurance 100 Maple, Wyandotte 48192 (734) 283-1400; www.dalymerritt.com
Martin Daly president and CEO
A. E. Mourad Agency Inc. 28277 Dequindre Road, Madison Heights 48071 (248) 336-1600; www.aemourad.com
Tim Mourad, president; Peter Mourad and Steve Mourad, vice presidents
Ralph C. Wilson Agency Inc. 26026 Telegraph Road, Suite 100, Southfield 48086 (800) 638-1174; www.rcwa.net
Stefano Vannelli president, CEO and owner
Oswald Cos. 39572 Woodward Ave., Suite 201, Bloomfield Hills 48304 (248) 433-1466; oswaldcompanies.com
Donald Engle executive vice president, branch manager
Korotkin Insurance Group 26877 Northwestern Highway, Suite 400, Southfield 48033 (248) 352-5140; www.korotkin.com
Kenneth Korotkin president
The Huttenlocher Group 1007 W. Huron, Waterford Township 48328 (248) 681-2100; www.hgway.com
David Huttenlocher CEO
Laurie Sall & Associates LLC 5435 Corporate Drive, Suite 205, Troy 48098-2624 (248) 641-2755; www.lauriesall.com
Laurie Sall president
J.S. Clark Agency Inc. 25900 W. 11 Mile Road, Suite 210, Southfield 48034 (248) 355-9600; www.jsclarkagency.com
Joel Clark president and CEO
The Timberland Group 1707 W. Big Beaver Road, Troy 48084 (248) 633-7000; www.timberlandgroup.com
Joseph King president
This list is an approximate compilation of the largest such agencies in Michigan. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the companies. Companies with headquarters elsewhere are listed with the address and top executive of their main Michigan office. NA = not available. LIST RESEARCHED BY SONYA D. HILL
Acquisitions drive record growth of insurance brokerage Acrisure Caledonia-based business insurance brokerage Acrisure LLC more than doubled its sales revenue last year due to a recordbreaking number of acquisitions by the company. The business insurance firm made 59 agency acquisitions last year, compared with 23 in 2014. Dave Tuit, Acrisure’s CFO, attributed the
company’s acquisition success to its business model. About 60 percent of its deals are sourced from existing insurance agency partners. “We find successful agencies, buy them and they become an agency partner,” Tuit said. “The agency continues to run independently and grow, but we give them our corporate support.
“We take a lot of pride in the way we act as a partner. There is little disruption to their agency, as promised,” he added. “We’re an attractive model to independent agencies.” Sales revenue jumped to $423 million last year compared to $206 million in 2014 — a 105 percent increase. Acrisure has 279 employees in six cities in Michigan and a total of 2,009 in 24 states. Be-
sides Caledonia, offices in Michigan include sites in Grand Rapids, Kalamazoo, East Lansing, Traverse City and Marquette. Tuit would not speculate on growth for this year, but said he expects “a healthy pace of adding new agency partners.” The insurance brokerage was founded by Greg Williams and Ricky Norris in 2005. Marti Benedetti
C R A I N ’ S D E T R O I T B U S I N E S S // F E B R U A R Y 2 2 , 2 0 1 6
BEFORE MAKING BIG COVERAGE CHANGES, RETHINK.
DEALS & DETAILS CONTRACTS The Dream Network (Dream TV), New York, an African-American television network, has signed a deal with WHPR (TV 33), Highland Park, to launch on Comcast channel 91 and digital channel 33.4. Website: thedream-network.com. Franklin Consulting Co. LLC, an affiliate of Franklin Property Corp., Birmingham, with Hotel Investment Services Inc., Troy, was awarded the contract to market the Yarrow Golf and Conference Resort, Augusta, Mich. Websites: his-corp.com, franklinpropertycorp.com. Aqaba Technologies Inc., Sterling Heights, an Internet marketing and certified Google partner agency, has been retained by the Michigan Rheumatism Society, East Lansing, to redesign the organization’s official website. Websites: aqabatech.com, mrheumatism.org.
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ZipLogix LLC, Fraser, a real estate technology company, has a Web services agreement with Roostify, San Francisco, a provider of automated mortgage technology. Customers can submit a full loan package in minutes, and loan officers can conduct closing activities electronically. Websites: ziplogix.com, roostify.com. Crypton Home Fabrics by Crypton Inc., Bloomfield Hills, announced
that its performance fabrics are available at the retail chain Pottery Barn, a division of Williams-Sonoma Inc., San Francisco. Crypton Home Performance Everydaylinen, a new designer fabric, will be available on any of Pottery Barn’s upholstered furniture collections. Websites: crypton.com, potterybarn.com. Qualitech, Bingham Farms, a tech-
nology integrator and software reseller, was selected by Sterling Attorneys at Law PC, Bloomfield Hills, and the Gold Law Firm PLLC, Bloomfield Hills, to provide new Intel Xeon file servers, Microsoft software and installation and implementation services. Website: qualitech.net.
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Franklin Consulting Co. LLC, an affiliate of Franklin Property Corp., Birmingham, was awarded the construction management contract with Hunter Pasteur Homes LLC, Farmington Hills, for land development improvements for a 52-unit singlefamily residential development, Stoneleigh West, Lyon Township, the third phase to the existing Stoneleigh development. Franklin was also awarded the entitlement contract for the fourth phase. Websites: franklinpropertycorp.com, visithphomes.com.
DTE Energy Co., Detroit, announced a five-year service agreement with Duke Energy Renewable Services, part of Duke Energy Renewables, Charlotte, N. C. Duke will operate and maintain DTE’s seven wind parks totaling 400 megawatts. The wind projects consist of 247 turbines in Gratiot, Saline and Huron counties. Websites: dteenergy.com, duke-energy.com. Rubicon Genomics Inc., Ann Arbor, announced a distribution agreement with Beckman Coulter Inc., Life Sciences Division, Brea, Calif., for its ThruPlex Plasma-Seq Kits. Websites: rubicongenomics.com, beckmancoulter.com. Toggled, Troy, a developer and pro-
ducer of lighting technology and a subsidiary of Altair Engineering Inc., has added Mega Lighting, the LED lighting subsidiary of Yankon Group Co. Ltd., Zhejiang, China, to its licensing program. Website: toggled.com. SISU Mouthguard, manufactured by Akervall Technologies Inc., Saline, has been named the official mouthguard of USA Field Hockey Association, Colorado Springs, Colo., the national governing body for field hockey. Websites: sisu guard.com, usafieldhockey.com. Gentherm Inc., Northville, developer of thermal management technologies, has been awarded a five-year contract with a major automotive manufacturer for its new battery thermal management system for batteries used in hybrid and electrified vehicles. Website: gentherm.com. GKN Driveline, Auburn Hills, part of GKN plc, announced its new light-
weight VL3 constant velocity joint (CV Joint) system, which enables rear-wheel-drive platforms to save more than 4kg of weight, has been selected by BMW AG to launch on its 7 Series. Website: gkn.com. 1701 Express Inc., Detroit, a Citgo gas station and convenience store, has signed an agreement with U-Haul International Inc., Phoenix, Ariz., and is now offering U-Haul trucks, trailers, towing equipment, and support items. Telephone: (313) 924-0494. Website: uhaul.com/Locations/ Truck-Rentals-near-Detroit-MI48211/045158. InfuSystem Holdings Inc., Madison Heights, a national provider of infusion pumps and related services for the health care industry, has implemented InfuSystem Express software, which includes the company’s electronic medical record connectivity software, at the Ellis Fis-
chel Cancer Center at the University of Missouri Hospital & Clinics, Colum-
bia, Mo. Websites: infusystem.com, muhealth.org/locations/ ellisfischelcancercenter.
EXPANSIONS Bassett & Bassett Inc., Detroit, a
public relations firm, has an Asia Pacific operations office in Pune, India, and Middle East office in Beirut, Lebanon. Website: bassettbassett.com. Cooper-Standard Holdings Inc., the parent company of Cooper-Standard Automotive Inc., Novi, opened a facility in Chongquing, China, that will manufacture fluid transfer systems, fuel and brake delivery systems and sealing systems for automotive customers. The company also opened a facility in Huai’an, Jiangsu province, China, a joint venture between Cooper-Standard and INOAC Corp., Japan, which will manufacture fluid transfer systems products and establishes a manufacturing hub. Website: cooperstandard.com. PGK Services Inc., Troy, a staffing solutions company, has opened a new office at the Center for Innovation and Entrepreneurship at Cleary University, 3678 Cleary Drive, Howell. Website: pgkservices.net. DTE Energy Co., Detroit, has completed three new solar projects: the Greenwood Energy Center, Avoca; Brownstown Township Solar Array on Pennsylvania Road, Brownstown Township; and the Romulus Solar Array on Citrin Drive, Romulus. Website: dte.com. Domino’s Pizza Inc., Ann Arbor, opened its 1,000th store in India. The Jubilant FoodWorks franchise store is at Unity One Mall, Janakpuri, Delhi. Website: dominos.com. DeRonne True Value Hardware, Eastpointe, has opened a store at 28700 Harper Ave., St. Clair Shores. Telephone: (586) 779-1940. Website: deronnehardware.com. UHY LLP, Sterling Heights, a certified public accounting firm, has added Hassouneh Auditing Firm, Hebron, to the UHY global accountancy network. The firm is in the process of adopting the UHY branding. Website: uhy.com. Kramer Restaurant Group opened the Daily Dinette, a 24-hour restaurant,
at 280 W. Nine Mile Road, Ferndale. Telephone: (248) 268-4783. Website: thedailydinette.com. Intellectual Property Associates Net work GmbH, Munich, Germany, a
provider of outsourced intellectual property services, opened its U.S. office at 900 Wilshire Drive, Troy. Telephone: (248) 817-2811. Website: http://ipan.metk.de. Tom and Chee Worldwide LLC, Cincinnati, opened a Tom+Chee restaurant at 307 E. Big Beaver Road, Troy. Website: tomandchee.com.
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MOVES Yemen Café has moved from 8731
Joseph Campau St., Hamtramck, to 8740 Joseph Campau, Hamtramck. Telephone: (313) 871-4349.
Now mandatory: A strong digital defense
ADAPT Technology LLC, Rochester
Hills, an engineering services provider, is selling and implementing 8tree Inspection Systems, a new product by 8tree LLC, Daisendorf, Germany, to the automotive and aerospace industries. The system instantly inspects for dents/protrusions on show surface panels, as well as inspecting fasteners/rivets for proper installation at assembly. Websites: adapttechteam.com, 8-tree.com.
The average cyber attack takes nearly 50 days — and costs close to $2 million — to resolve. Letting your guard down is not an option. Rely on Rehmann’s cyber security consultants to help fend off digital assaults that disrupt your business and bruise your bottom line. Contact me today to learn more.
NEW SERVICES Oak Electric Service Inc., Waterford Township, an electrical contractor, has a new heating, cooling and plumbing division, Oak HCP, providing heating and cooling installation and service for furnaces, air conditioners, boilers and hot water heaters. Telephone: (248) 623-4900. Website: oakelectric.com. Advantage One Federal Credit Union, Brownstown Township, has added commercial loans to its loan products and services. Telephone: (734) 676-7000. Website: aofcu.com. Flagstar Bancorp Inc., Troy, has
JESSICA DORE, CISA Principal 989.797.8391
SOURCE: Ponemon Institute’s 2015 Cost of Cyber Crime Study: United States.
rehmann.com rehmann.com | 866.799.9580
launched a national homebuilder lending platform to support the expansion and diversification of the company’s commercial lending business and boost its commercial banking presence nationally. Website: flagstar.com.
Electronic Payments, Data Privacy and Security Law Experience
STARTUPS Azoury Financial LLC has been estab-
lished by Steve Azoury, a financial consultant, at 3150 Livernois Road, Suite 145, Troy. Telephone: (248) 375-2853. Website: azouryandassociates.com.
In Your Corner.
Yuzu Sushi Co., a sushi restaurant, opened at 32832 Woodward Ave., Royal Oak. Telephone: (248) 5565444. Website: yuzusushico.com. I Heart Dogs Rescue and Animal Haven,
has opened at 22415 Groesbeck Highway, Warren. Telephone: (586) 200-5977. Website: iheartdogs.org.
Data Security and Information law, privacy policies, breach notification requirements.
Electronic payments, mobile payments, electronic fund transfers, stored value cards.
Clementine Live Answering Service, a new national telephone answering service offering 24/7 live answering to medical professionals, property management, home services and others, has opened at 19992 Kelly Road, Harper Woods. Telephone: (888) 398-CLEM. Website: clementineanswers.com.
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Contact Jill Miller at firstname.lastname@example.org
Kalamazoo Ŷ Grand Haven
C R A I N ’ S D E T R O I T B U S I N E S S // F E B R U A R Y 2 2 , 2 0 1 6
CALENDAR WEDNESDAY FEB. 24
Detroit Policy Conference. 7:30 a.m.-4
p.m. Detroit Regional Chamber. Keynote remarks by David Maraniss, Pulitzer Prize-winning journalist. MotorCity Casino Hotel, Detroit. $209 chamber members, $285 nonmembers. Contact: Janelle Arbuckle, (313) 596-0340; email: email@example.com.
conference includes education and resources for women entrepreneurs. JoAnne Purtan is emcee. Keynote speaker is Bridget Tubbs Carlon, CEO, AppleTree Learning Cen ters. Walsh College. $45; $25 students. Contact: Cindy Rush, phone: (248) 823-1238; email: firstname.lastname@example.org; website: walshcollege.edu/EYOU.
Entrepreneur-You: The Conference.
12th annual MHCC Public Policy & Economic Forum Breakfast. 7:30-10 a.m. March 7. Michigan Hispanic Chamber of
8:30 a.m.-3 p.m. Inforum. Fifth annual women’s entrepreneurship
Commerce. “Strengthening America: Hispanic Opportunity and Im-
pact” to feature speakers Detroit Mayor Mike Duggan and U.S. Sen. Debbie Stabenow, D-Mich. Moderated by Javier Palomarez, president and CEO, U.S. Hispanic Chamber of Commerce. MGM Grand, Detroit. $100. Contact: Barb Lange, phone: (248) 792-2763; email: email@example.com; website: mhcc.org. Government Forecast Breakfast. 99:30 a.m. March 7. Birmingham Bloomfield Chamber of Commerce. Speaker: U.S. Sen. Gary Peters., D-Mich. The Townsend Hotel, Birmingham. $50, $40 members, $290 corporate table of eight. Contact: Birmingham Bloomfield Chamber of Commerce, phone: (248) 644-1700; email: firstname.lastname@example.org.
DEC Presents Trevor Fetter. 11:30 a.m.-1:30 p.m. March 14. Detroit Economic Club. Fetter, chairman and CEO of Tenet Healthcare, will speak. Westin Book Cadillac, Detroit. $45 DEC members, $55 guests of members, $75 nonmembers. Website: econclub.org.
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PEOPLE: SPOTLIGHT Army Tacom commander to leave post in Warren The first female commander at the U.S. Army Tacom Life Cycle Management Command in Warren could soon conclude her assignment in the post, after the Army named her successor last week. Maj. Gen. Gwen Bingham
will be replaced as commanding general at Tacom by Maj. Gen.
More Calendar items can be found at crainsdetroit.com/events.
Clark LeMasters Jr.,
deputy chief of staff for logistics and operations for the Army Materiel Command at Redstone Arsenal in Al-
Jeffrey S. Belen,
VP of Legal and Finance,
Fund Development Officer, Northeast Guidance Center
FINANCE Marc Labadie, Partner, CR Myers & Associates Marc Labadie was welcomed to the Society of Financial Service Professionals' "Top Leaders 40 and Under" for his accomplishments and advancing credentials, and the Million Dollar Round Table's "Top of the Table" for his production and client service. Marc began his financial services career in 2000 at Brown & Brown of Detroit, and is one of the youngest professionals in the country to hold both the Chartered Life Underwriter (CLU) and Retirement Income Certified Professional (RICP) designations.
TECHNOLOGY Jeff Schultz, Vice President, National Business Development, QStride, Inc. Schultz, after almost a decade with global IT leader Genpact, will be responsible for national business development activities including client recruitment, operations, sales and business relations management. Schultz is a graduate of Central Michigan University where he studied business administration and was a member of the Men's Varsity Soccer program. He is a "Friend" of the Michigan Ballet Theater and enjoys spending time with his wife and daughter.
Sharon Common is Northeast Guidance Center's new Fund Development Officer, bringing with her 15 years of development and foundation experience. She will work with the Board of Directors, staff and neighborhood organizations to build relationships, and focus on community commitments that support integrated health programs for children, adults and families. NEGC provides integrated healthcare to eligible Wayne, Macomb and Oakland County residents, emphasizing emotional and physical well being.
Melissa Freel, Chief Operating Officer, Northeast Guidance Center Melissa Freeljoins Northeast Guidance Center's executive team as Chief Executive Officer,previously serving as executive director for Wayne CHAP. She has spent morethan 20 years designing, implementing and leading services for vulnerablepopulations. “Melissa’s leadershipin Detroit and in state-level policy positions is a perfect fit for NEGC,” saidSherry McRill, president & ceo. NEGC iscommitted to community-based services that promote total wellness for children,adults and families.
KIG formally Korotkin Insurance Group announces Jeffrey Belen has achieved an equity partnership effective 1/1/16. In addition to servicing his customers Jeffrey also handles the agencies legal and financial matters.
Emily Korotkin, VP of Carrier Relations, KIG Korotkin Insurance Group KIG Formally Korotkin Insurance Group announces Emily has achieved an equity partnership effective 1/1/16. In addition to servicing her customers Emily also oversees and manages the agencies insurance carrier relationships.
Matt Warsh, VP of Technology, KIG Korotkin Insurance Group KIG Formally Korotkin Insurance Group announces Matt has achieved an equity partnership effective 1/1/16. In addition to servicing his customers Matt also manages the agencies technology and automation initiatives.
ACCOLADES Warner Norcross & Judd LLP was recently recognized by PulteGroup, Inc. as its 2015 Law Firm of the Year. One of America’s largest homebuilding companies, Pulte recognized the law firm at its Legal Summit and highlighted the work of:
Crain’s has moved its complete list of appointments and promotions to www.crainsdetroit.com/peopleonthemove.
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KIG Korotkin Insurance Group
· Mary Jo Larson, client service manager for Pulte who oversees a Warner Norcross team of seven attorneys and staff focused on employee benefits issues for the 4,000-employee company · Lisa Zimmer, who helped with special projects · Jennifer Watkins, who assisted with compensation and EB issues · Norbert Kugele and April Goff, who focused on health care reform and other welfare issues
abama, the Army said. No effective date was given; the last two changes of command at Tacom were in June of 2012 and 2014. Bingham, 56, came to Tacom in mid-2014 after serving as commanding general of White Sands Missile Range in New Mexico since 2012. LeMasters, 53, has been deputy chief of staff at Redstone since August 2014. Maj.Gen.Clark LeMasters Jr.
Metro Times names Blitchok editor-in-chief Detroit alt-weekly Metro Times has named Dustin Blitchok editor-in-chief, effective Feb. 25. Blitchok, 26, has been communications director for Oakland County Treasurer Andy Meisner and before that was a reporter for The Oakland Press. Blitchok replaces Valerie Vande Panne, who was hired in April 2014 and left her role a year ago. Vince Grzegorek, editor-inchief at Euclid Media Group LLC sister paper Cleveland Scene, had been interim editor.
Real estate attorney Howe begins private practice Attorney J. Patrick Howe has launched a private practice, Birmingham-based JPHowe PLLC, after working on downtown Detroit real estate and restaurant deals for Royal Oak-based Howard & Howard Attorneys PLLC. The new firm specializes in liquor licensing, land acquisition, land use and zoning variances. Howe, 36, said he also has formed a student housing development business, Purpose Built Properties LLC. Before starting at Howard & Howard in 2011, Howe was attorney/partner at Carlin, Edwards, Brown & Howe PLLC and an attorney with Plunkett Cooney PC. 䡲
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QUICKEN FROM PAGE 3
return on investment that justifies such spending, Farner added. Quicken spent $157 million on U.S. measured-media in the first nine months of 2015, the most recent numbers available from New York City-based data firm Kantar Media. For all of 2014, Quicken spent $361 million in measured and unmeasured ad spending, according to Advertising Age. Quicken was the 10th fastestgrowing marketing spender in 2014, up 31 percent over the year before, Ad Age reported last year. The lender isn’t discussing its current spending specifics, but it’s known it wrote a big check to advertise in Super Bowl 50 on Feb. 7. It bought a 60-second spot to tout its Rocket Mortgage, which promises consumers the ability to get mortgage approval in as little as 8 minutes on their mobile device or computer. The product was introduced in November, and Quicken thought the timing with the Super Bowl made sense. “The Super Bowl was staring us right in the face,” Farner said. Gilbert approved the Super Bowl buy, he added. The game was seen nationally by an average of 111.9 million viewers, giving it the third-best American TV audience in history, CBS said. National commercial airtime during this year’s Super Bowl sold for $4.6 million to more than $5 million, Advertising Age reported. Buyers typically get discounts for multiple buys, and often the deals include digital and social media elements. Quicken’s Super Bowl spot showcased the risk in financial services advertising: There was backlash, mostly on Twitter, that Rocket Mortgage could lead to a subprime crisis like the one that fueled the last recession — a criticism the lender has faced for several years. Quicken’s social media team responded with assurances that its mortgage practice follows all government guidelines. Quicken believes sports branding is the key to its target customers. “When you start looking at the client segment we want to focus on, sports jumps out,” Farner said. Quicken is targeting adults ages 25-55 who are technologically savvy in their daily lives. “When they choose to take out time to watch programming, they watch sports,” Farner said. People typically refinance or buy a home every five to seven years, Farner said. “We view ourselves in somewhat of a unique situation from a service or product perspective. We’re dealing with a mortgage,” he said. “You have to be front-of-mind when they make that decision.” Hence Quicken’s heavy spending on marketing to get itself ingrained in people’s minds for mortgage consideration. “If we’re not part of their consideration set, we may not get
“We view ourselves in somewhat of a unique situation from a service or product perspective.”
MARKET PLACE LEGAL NOTICES
Jay Farner,Quicken Loans
that at-bat,” Farner said. Quicken’s strategy also includes getting noticed by media and those who get public attention by talking about marketing. Stories (including this one) are free exposure. “What are you going to do that’s going to rise to the top of the list from a reporter’s perspective — different, interesting, creative, that creates discussion in communications, public relations, and social media?” Farner said. The golf exhibition certainly has drawn local attention. Quicken has heavily invested in the sport for years. In March 2014, it replaced AT&T as title sponsor of the PGA Tour’s Quicken Loans National invitational tournament that has been played at courses around Washington, D.C. This year’s event, hosted and organized by the Tiger Woods Foundation , is at Congressional Country Club in Bethesda, Md. Quicken is the official mortgage sponsor of the PGA Tour and senior Champions Tour. While upping its golf marketing, Quicken has reduced its motorsports involvement. “We wanted to stay in NASCAR but also give ourselves the flexibility to try some new things,” Farner said. Last year, Quicken dropped sponsorship of Michigan Interna tional Speedway ’s June NASCAR race, but it remains a sponsor with Hendrick Motorsports on a limited race schedule. Quicken is the primary sponsor of the Charlotte, N.C.-based racing team’s No. 5 Chevrolet SS driven by Kasey Kahne for three 2016 NASCAR Sprint Cup Series races. Quicken previously sponsored Ryan Newman and his No. 31 Chevrolet with North Carolinabased Richard Childress Racing for two years. Before that, Quicken sponsored Newman when he drove for another North Carolinabased team, Stewart-Haas Racing . Those were full-season deals. Quicken has a presence in other sports, too. In September 2013, Quicken inked a deal with the Detroit Lions to turn 62 seats in one section of the southwest corner of Ford Field into the “Quicken Loans Dream Seat” of black leather recliners embroidered with the company’s logo. Large high-definition LCD televisions are mounted in front of each seat. Quicken has exclusive access, distribution and branding for those seats under what amounts to a five-year lease, the team said. The seats are expected to be used for employees and clients of Quicken and its sibling companies owned by Gilbert.
As part of the deal, Quicken became the team’s official mortgage lender, and it sponsors a club lounge for suite or club-level ticket holders and has branding throughout the stadium. It also has deals with the Detroit Red Wings and the Detroit Belle Isle Grand Prix. Quicken also is investing in collegiate sports marketing. In January, it announced sweepstakes at 26 colleges, including the University of Michigan and Michigan State University. Participants will have a chance to win tickets for the 2016-17 season. Quicken has used college basketball for marketing. In 2011, it was the title sponsor of the “Carrier Classic” between MSU and the University of North Carolina played on the flight deck of the U.S. Navy aircraft carrier USS Carl Vinson. In 2014, Quicken was co-sponsor (along with Berkshire Hath away ’s Warren Buffett and Yahoo Inc. ) of an NCAA men’s basketball tournament bracket contest that would pay $1 billion to anyone who correctly predicted the winner of every game. (No one did.) Sports marketing insiders have been impressed with Quicken’s efforts. “They’re definitely going for the wow factor, which is smart,” said Mike Dietz, president of Dietz Sports & Entertainment in Farmington Hills, which helps companies with sponsorships. Quicken’s contests also are a strategic tool, said Dietz, who has done prep basketball marketing work co-sponsored by Quicken. “Collecting fan data and leads seems to be an important part of their sports marketing strategy,” he said. “Having fans register to win high-value prizes allows Quicken Loans to capture fan information.” The mortgage company also gets free brand recognition from Gilbert’s ownership of the C l e v e l a n d C a v a l i e r s . He bought the NBA club in 2005 as head of an investment group for $375 million, and the deal included a naming rights provision that rebranded Gund Arena as Quicken Loans Arena. 䡲 Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19
BANKRUPTCIES The following business filed for protection in U.S. Bankruptcy Court in Detroit Feb. 12-18 . Under Chapter 11, a company files for reorganization. St. Jude Nursing Center Inc. , 721 Elmwood, Troy, voluntary Chapter 11. Assets and liabilities not available.
PUBLIC NOTICE All Citizens are advised that the Detroit Transportation Corporation (DTC) has prepared an application for State of Michigan financial assistance for fiscal year 2017 as required under Act 51 of the Public Acts of 1951, as amended, and for federal assistance as required under the federal transit laws, as amended. The DTC is requesting estimated total capital funding through the following sources: Section 5307 for DTC Infrastructure and Equipment Upgrades $500,000; Section 5337 DTC Infrastructure and Equipment Upgrades, $1,375,000; Section 5310 DTC Infrastructure and Equipment Upgrades, $440,625 and (MI) Act 51 Operating Assistance, $5,100,000. Notice of these federal funds has been previously published in the Transportation Improvement Plan prepared by SEMCOG. The DTC ensures that the level and quality of transportation service is provided without regard to race, color, or national origin in accordance with Title VI of the Civil Rights Act of 1964. For more information regarding our Title VI obligations or to file a complaint, please contact the DTC at the address listed below. The proposed application is on file at the DTC and may be reviewed from Monday, February 1, through Friday, March 4, 2016 between the hours of 9 a.m. and 4:30 p.m. Written comments or requests regarding the application and/or written requests for a public hearing to review the application must be received by Wednesday, March 9, 2016. If a hearing is requested, notice of the scheduled date, time and location will be provided at least 10 days in advance. Submittals should be sent to Mr. Oliver Lindsay, Grant Manager, Detroit Transportation Corporation, 535 Griswold Street, Suite 400, Detroit, MI 48226 or 313-224-2160. Barring any changes made in response to the written comments, this document will become final.
BUSINESS OPPORTUNITIES LAUNDROMAT - DOWNTOWN DETROIT - $225K TIME SHARE CONDO - NEW YORK, NY - $10K LAND CONTRACT & FINANCE OPTIONS AVAIL. CALL LANAY FOR DETAILS ~ 313-964-6884
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ENGINEERING Hitachi Automotive Systems Americas, Inc. has a Sr. Engineer available in Farmington Hills, MI: Plan, implement and conduct activities for multiple projects to ensure goals or objectives are accomplished within a prescribed time frame by performing any combination of technical, program management or mentoring activities. Mail resume to: Hitachi Automotive Systems Americas, Inc. Attn: T. Menning, 34500 Grand River Ave., Farmington Hills, MI 48335. Must ref job code HR2015-04 to be considered
Current partners seeking an owner/ operator to buy into and run an upscale coffee shop in S.W. Oakland Co. Great staff in place now with positive cash flow. Serious inquiries only:
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WOODHAVEN CONDOS $625,000 6 Leased Units in a 65 Unit Community. Building More. Great for Downriver Company
EASTERN MICHIGAN UNIVERSITY Executive Director Government & Community Relations Eastern Michigan University, a metropolitan University serving over 22,000 students, seeks an experienced government and community relations leader to serve as Executive Director, Government & Community Relations. This position serves as the lead Government and Community Relations Official to ensure Eastern Michigan University is represented in all aspects of government and community relations. This position also develops and maintains an effective federal, state and local legislative network for the advancement of University and community initiatives and priorities. To learn more about the job and to apply online go to: http://www.emich.edu/jobs.
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“I like thoroughbreds better. It’s s
CAMPBELL FROM PAGE 1
panding its full-service branch network across Southeast Michigan and into Ohio. In five years, the bank raised $75 million in capital. Campbell described himself then as a contrarian, and would brag about what he considered his bank’s “contrarian nature.” Indeed. Republic was headquartered in a big, stately house on a treeshrouded lot on the outskirts of downtown Owosso. A landmark in that city, it had once been the home of an affluent local dentist with the last name of Smith. After he died, it went through a handful of owners, and by the time Republic was launched, had been a four-unit site for males on welfare. Republic bought the house and 4 acres of land for $90,000. As Campbell told a reporter in 1994: “Four kitchens, four bathrooms. It wasn’t pretty. It smelled a little. But a little paint, a little imagination and a lot of wallpaper ... .” Why such an unlikely building? “I’ve lived in this town and I like it here,” he said. “We wanted to have a bank here. We wanted to have something that was distinct, that had a good image.” Eight years after the bank’s founding, Republic’s headquarters branch still had no drive-thru access. It didn’t even have an ATM. “Everything we’ve done has been contrarian and unconventional,” he said. In the 1990s, as other banks branched into wealth management and trust services, selling mutual funds and lobbying to sell insurance, Republic stayed focused on mortgages. By 1994, the bank had expanded into 16 states, but it had full banking branches only in Michigan and Ohio. It had mortgage offices in the other states and had become one of the 30 largest loan originators in the U.S. “We take somebody with a little white house and green shutters, a nice little garage attached, and we allow them to borrow for 15 or 30 years cheaper than a Triple-A corporation. That’s our whole business,” Campbell said at the time. Analysts urged the bank to diversify, and they kept telling Campbell it would be easier to pay more attention to the bank if he’d move the headquarters to Ann Arbor. Eventually, he decided it was all right to say the bank was co-headquartered in Owosso and Ann Arbor. By the time the bank was sold in 2006, it was calling itself an Ann Arbor bank. By then, Campbell had long been a star on the Michigan banking scene. “He was a great marketer. He understood the customer, and he was a dealmaker,” said David Provost, CEO and president of Talmer Bancorp Inc.
Bank dealmaking “Republic made a lot of money off the last mortgage cycle, but … I think they saw the next couple of years were going to be tough” — Terry McEvoy, an equity analyst for Oppenheimer and Co. Inc., on the sale
of Ann Arbor-based Republic Bancorp to Flint-based Citizens Banking Corp. on June 27, 2006 It only took a year to show that McEvoy nailed that one. And that Jerry Campbell was the smartest banker in Michigan or the luckiest. Or both. At the time of the deal, the Great Recession was a tsunami yet to be detected, and the Republic deal was praised as a merger of equals, of banks with market capitalizations of $1 billion each that would combine the commercial lending expertise of Citizens with the residential mortgage expertise of Republic. Early in June 2007, William Hartman, Citizens’ CEO, told Crain’s the acquisition was going to be a springboard to dramatically grow his bank’s footprint in the Midwest. “The merger with Republic positions us to be better acquirers. More capable acquirers,” he said. Later that month, though, on June 27, 2007 — exactly one year after the acquisition of Republic was announced — Citizens stunned the market by announcing it had reviewed $750 million of Republic’s loans, would take a charge for loan losses of $30 million to $35 million, and downgraded the rating of 180 loans worth $145 million. It instantly became clear that Campbell had sold Republic at the absolute top of the market, at a time when no one could have imagined that a movie about a collapse of a housing market would one day get nominated for an Academy Award. It wasn’t just mortgage loans that went bad in the Republic portfolio. There were millions in commercial loans tied to housing. “Citizens had to write off all of Republic’s construction loans on big houses out in Novi that never got finished,” said McEvoy, now an analyst with Little Rock, Ark.-based Stephens Inc.
Those losses were the tip of the iceberg. Numbers once inconceivable became painfully routine — Citizens recorded net losses of $405 million in 2008, $534 million in 2009 and $314.6 million in 2010. What happened — loans gone bad in a hurry — happened to everyone. Twelve community banks in Southeast Michigan would be shut down by state and federal regulators. At the time the Republic sale was announced, Citizens traded at $27.03 a share, and the deal valued Republic shares at $13.86. By May 2011, Citizens Republic’s market cap had fallen from $2 billion to $340 million, and its share price had fallen below $1. The merger succession plan called for Campbell to be chairman of the combined entity; for Dana Cluckey, Republic’s president, to be president and COO; and for William Hartman to remain CEO and to replace Campbell as chairman in 2008. That was the plan, anyway.
Sunnier climes “Our pipeline is the biggest it’s ever been. It shows no signs of slowing up. Someday, it will. And there
THE NEWS HERALD
A demolition crew takes down remnants of the failed Pinnacle Race Course last month. Sterling Heights-based Roncelli Inc., which was the construction manager when Pinnacle was built, got the demolition contract, too will be life after that.” — Jerry Campbell, speaking of the mortgage business in 1994 What William Hartman didn’t know when the succession plan was announced was that the wheels were in motion for none of it to happen. The mortgage market had crashed, and Jerry Campbell and Dana Cluckey were about to prove there would be a life after. In April 2007, just as Citizens was delving into the Republic loans, the first branch of the Community National Bank of the South opened in Orlando, Fla., soon after Campbell; Cluckey; Jack Krasula, who was the owner of the Southfield executive-search firm of Trustinus LLC; and a handful of partners from Southeast Michigan, raised $49 million to launch a Tampa, Fla.-based bank-holding company, CNBS Financial Group Inc., later renamed HomeBancorp Inc. The private placement to raise that money included some prominent Detroit-area investors. (Mary Kramer, the publisher of Crain’s, bought 7,500 shares of stock, which she retains.) Larger investors who became board members included Bob Liggett, then owner of Warren-based Big Boy Restaurants; Kathleen McCann, then senior vice president of Detroit-based Soave Enterprises LLC and now CEO of Romulus-based United Road Services Inc.; William Rands III, and Art Van Elslander, founder of Warren-based Art Van Furniture Inc. All but Liggett have subsequently left the HomeBanc board. Campbell stayed on as chairman of Citizens Republic until April 2008. Cluckey left Citizens at the end of 2007. According to filings, Campbell got $1.78 million when Citizens acquired Republic and an additional $671,000 in severance pay. By the end of 2007, Campbell had also sold 254,206 shares of Republic stock. “We plan to open 50 branches in the next five years, which is aggressive even by Florida standards,” said Campbell, chairman, president and CEO of the bank-holding company. “I’ll be transitioning myself to the Florida venture. I’ll be back and
forth, but I’ll be spending 80 percent of my time there. The bank is my No. 1 future endeavor.” Campbell might soon wish it had been his only endeavor. David Sowerby, chief market strategist in the Bloomfield Hills office of Loomis Sayles & Co. LP, said Campbell chafed at the blame aimed at him by Hartman and wanted to prove he could again build a successful bank from scratch, and to do it with key members of his Republic team. Nearly nine years after the opening of the first branch in Orlando, Cluckey is vice chairman of the HomeBanc board; Debra Hanses Novakoski, head of HR at Republic, is an executive VP at HomeBanc; Jeffrey Saunders, the CFO at Republic, is CFO; and Stuart Forsyth, regional president for commercial lending at Republic, is chief lending officer. “Campbell was regarded as a true entrepreneur in his Republic days, and you have to give him credit for replicating Republic again,” said Sowerby. Campbell’s venture has thrived, even if growth has been slower than envisioned. The company has 14 branches with assets approaching $1 billion. Republic annually made the lists of best places to work in Michigan; last year American Banker named HomeBanc as the secondbest bank to work for in the U.S., and it has the highest rating of five stars from BauerFinancial Inc., a Fort Lauderdale, Fla., rating service. Meanwhile, Hartman’s growth strategy for Citizens Republic was abandoned as the bank hemorrhaged red. On Jan. 22, 2009, the bank reported it lost $405 million in 2008. On Jan. 23, it announced that Hartman was retiring, effective in eight days. “My retirement has been planned and is voluntary and is something I’ve been thinking about. I’ve been looking for the right time to step aside,” Hartman told Crain’s with a straight face when asked if he had been forced by the board to retire.
Racing after a dream “I know Jerry always dreamed of winning the Kentucky Derby.” — David Sowerby
Jerry Campbell’s grandfather and father both owned standardbred horses — the trotters and pacers who are the stars of county fairs around the state, the working-class cousins of the bigger, faster thoroughbreds. For 75 years between them, the Campbells served as the racing secretaries at the Allegan County fairs. “I like thoroughbreds better. It’s something about the speed,” Campbell said in a profile in the Nov 18, 2006, issue of The BloodHorse magazine. “So about 40 years ago, when I earned enough money, I bought my first broodmare and bred her. I started a home-grown program and have been doing it ever since.” Campbell Stables LLC was in Grass Lake, near Jackson. At the time of the Blood-Horse article, it had about 90 horses. “I have the privilege every morning of getting up and looking out in all directions and all you see are horse paddocks,” said Campbell. Campbell’s best horse was Post It, a 2-year-old filly he bought in 1994. She won five races in 14 starts and won $200,710 in her career. In 1998, after Ladbroke Detroit Race Course in Livonia announced it was shutting down as Michigan’s only thoroughbred racetrack, Campbell bought Muskegon Race Course and converted it from a standardbred track to a thoroughbred track named Great Lakes Downs. “It wasn’t our goal to open a track. We really opened a track just to preserve thoroughbred racing in Michigan,” he said. The next year, he married Lisa, who was his horses’ trainer. “I trained his horses for at least 12-15 years prior to getting married,” Lisa told Blood-Horse. “He tells everybody he married me to save money … but I always say, ‘You found out how much I liked you because I wasn’t charging you full rate, was I?’ ” Great Lakes Downs struggled with attendance and betting volumes in its first year of 1999. A year after it opened, Toronto-based Magna Entertainment Corp. bought
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’s something about the speed.” Jerry Campbell the track, with the Campbells taking stock in Magna and Jerry serving as Magna’s CEO for six months in 2000. “It sort of got away from us,” Campbell told Blood-Horse about what it had been like running a racetrack. “I had never run a track. … Wven well-versed in how purse pools were created, and how the track got paid and how the horsemen got paid, and where the risks and opportunities were.” Campbell likened owning a racetrack to owning a boat or a plane. “Your two happiest days are the day when you buy it and the day when you sell it,” he said. In 2006, after its racing career was over, the Campbells bought Fire Blitz, a horse with what might have been the best bloodlines in Michigan, from Stronach Stables in Kentucky, stables owned by Magna’s founder, Frank Stronach. Fire Blitz had impeccable lineage. He was sired by Storm Cat, whose stud fee at his peak was $500,000. Storm Cat, in turn, was sired by a son of the legendary Northern Dancer, and his dam was sired by the even more legendary Secretariat, arguably the best racehorse of all time.
A Pinnacle that wasn’t “Entrepreneurs either have the knack for getting out at the right time, or they blow up big time.”— bank analyst Terry McEvoy Or in Jerry Campbell’s case, both. Having resigned from the Citizens Republic board in April 2008, Campbell was now a Florida banker, but through Campbell Stables, he remained a Michigan entrepreneur, one who was sure he could save the state’s thoroughbred industry. Ladbroke DRC in Livonia had closed in 1998, Saginaw Harness Raceway closed in 2005, and Great Lakes Downs was struggling. In 2007, there was $14.7 billion wagered on thoroughbred races in the U.S., just $2 million in Michigan. Before he resigned from Citizens, Campbell began the process of building what he envisioned as the Churchill Downs of the Midwest, a $142 million racetrack on 320 acres at Pennsylvania and Vining roads in Huron Township, a mile southwest of Detroit Metropolitan Airport. Magna Entertainment had applied in 2002 to build a track on the site. But in August 2007, Magna said that, plagued by losses, it had dropped plans for the track. It had been awarded a license in 2005 but told the state it was relinquishing it. Moreover, Magna said it would shut down Great Lakes Downs when the season ended in November. In September 2007, Crain’s broke the news Campbell wanted to fill Magna’s void. In October, Campbell confirmed he was in talks with Wayne County to buy or lease the same land for a track that would be called Pinnacle Race Course. Fittingly named, if all came to fruition. Lisa was president and Jerry was chairman and CEO of a company called Post It Stables Inc. It would build and operate the project, which
would include 200,000 square feet of retail and a 60,000-square-foot clubhouse with 20 private suites and boxes looking down on an outer dirt track of a mile and an eighth in length and an inner turf track of a mile. The complex, to be built in stages, would include a picnic area, eight or nine restaurants, a movie theater, a 12,000-square-foot corporate pavilion, space for educational and equestrian events, 30 barns with 1,200 horse stalls, and quarters for 100 grooms. The plan was to spend $23 million on construction in 2008 and $50 million in 2009, and Pinnacle was approved for 63 days of racing in 2008. On April 3, 2008, the Wayne County Board of Commissioners approved the sale of the land to Post It Stables for $1. The deal required the creation of at least 1,100 jobs by 2014; failing that, Campbell would have to pay the county $50,000 an acre. On April 4, there was a ceremonial groundbreaking. On July 18, on schedule, the racetrack opened, attracting a crowd of about 9,500.
11 days before the press release from the governor’s office, Claire McKenna, corporate counsel for the MEDC, warned in an email that Post It Stables had not filed its 2008 annual report with the Michigan De partment of Labor and Economic Growth.
“They are supposed to report to us that they are in ‘good standing,’ which they probably aren’t if they are late on their filing,” she wrote. And the previous May, before the track even opened, McInerney, despite his rosy forecasts to the media
were restored to the schedule. In August, news broke that Pinnacle hadn’t paid a total of $1.46 million in property taxes for 2009 and 2010. Because the land for the racetrack had previously been owned by the county, it hadn’t been on the tax rolls. After it was sold to Post It Stables, county and township officials had forgot to put it back on the rolls and hadn’t sent out bills. News also broke that the track was $150,000 in arrears on its contract for township police protection, and that township-provided water service had been cut off to Pinnacle for a while in the winter because of an unpaid bill. DTE Energy had also briefly cut off electricity to the track over unpaid bills. On May 5, 2011, Pinnacle, which had been searching in vain for minority investors, announced that despite being approved for 84 days of live racing for the upcoming season, it had surrendered its racing license to the state.
Tragedy and bankruptcy
On Feb. 21, 2012, a barn fire killed 27 horses Conflicts of at Campbell Stables, inopinion at MEDC cluding Fire Blitz, the 13On Sept. 15, 2008, Crain’s year-old horse with the reported that Pinnacle said great bloodlines. The fire, it had surpassed the daily which was ruled an acciwagering average needed to Jerry Campbell was featured on the cover of Florida Banking dent, rose 100 feet into earn a profit despite a sharp magazine in March of 2012. the sky. It took 25-30 firedropoff in daily attendance. fighters from surround“From a financial standpoint, we’re about the track’s future, had painted ing communities to put it out. ahead of where we thought we would a much less optimistic picture in The Campbells, despite the loss of be,” said track President Michael correspondence to county officials. the track and the horses, hadn’t soured McInerney. McInerney wrote he didn’t expect on thoroughbreds. On March 7, 2014, On Sept. 23, Gov. Jennifer the track to break even until 2014 and a press release announced the formaGranholm’s office issued a press re- even then would only “achieve very tion of a Florida company called Team Equest LLC, with Lisa Campbell serving lease saying that the Michigan Economic small returns on our investment.” Development Corp. had approved a In April 2009, as the track was as chairman of the board and Jerry as state tax credit valued at $982,000 over preparing to launch its second sea- a member of the board. The aim was to attract new owners 10 years, a new tax credit for compa- son, Lisa Campbell said trouble getnies that serve as tourist attractions. ting bank loans had halted plans to to racing, in part by offering fractional In addition, the company was build the clubhouse and 4,000-seat ownership of horses. The news release said that Team Equest would approved for a state brownfield grandstand. credit of $5.3 million. The brown“It’s a tough time, and banks don’t focus on the purchase, conditioning field credit reversed earlier opposi- want to lend out money on gam- and racing of horses at major tracks in tion from the MEDC that said the bling opportunities,” she said, Florida, Kentucky and the East Coast. “I have been in the horse ownercredit was intended only for urban adding that her husband and Jack areas, a decision questioned by Krasula had invested most of the $29 ship and racing business for many county executives and Granholm. million already spent on the track. years, and we have had our share of In all, the track was approved for up “At some point, you run out of cash- success,” Lisa Campbell said in the to $48 million in credits over 30 years. flow money. Jerry and Jack keep dig- release. “I am ready to step up my involvement to a higher level in the Wayne County, meanwhile, made ging deeper in their pockets.” $26.6 million in sewer and other infraIf the Campbells thought cash flow sales ring and at the track. I also structure improvements near the site. was a problem then, they were about want to share this experience with What wouldn’t be known for more to be blindsided by the state govern- others of like interests and passion than two years is that despite MEDC ment. After approving millions in tax so that it can be fun, as well as ecoapproval for the credits, there were credits for the track the previous fall, nomically rewarding.” On Jan. 15 this year, Crain’sreported already serious doubts by MEDC and approving 82 racing days for the staffers about Pinnacle’s viability. 2009 season, on June 2, the racing that Jerry Campbell had filed for volOn Oct. 10, 2010, Tom Gantert, a commission dropped a bombshell: untary Chapter 11 bankruptcy proteccapital correspondent for Michigan Because of commission budget cuts tion in Florida. Campbell, who has a salary of Capital Confidential, a daily news ordered by Granholm, Pinnacle’s racabout $290,000, said he owed about site for the conservative Mackinac ing schedule was being cut in half. Center for Public Policy, wrote a story The state required commission $9 million, including $4.8 million to based on 500 pages of documents officials to be at tracks on race days, Krasula, whose Post Note LLC had ache obtained through a Freedom of and by cutting Pinnacle’s schedule, quired a $5 million construction loan from Bloomfield Hills-based Information Act request. it would save $154,000 in costs. He wrote that on Sept. 12, 2008, Later in June, all but eight days PrivateBank.
That acquisition came after the bank filed suit over the loan, made early in 2009 to Campbell and Krasula. After he bought the note, Krasula became Campbell’s biggest creditor and, according to Oakland court records, reached an agreement with Campbell in August 2011 to settle the debt for $6 million in monthly installments. Campbell paid about $1.2 million, but has been in default since the agreement increased his payments last September to $29,531 a month. “I have no further material assets that can be liquidated for (Krasula’s) benefit,” Campbell said in an affidavit in September. “I may receive certain bonuses and/or additional equity interests in the future, at which time I may have additional funds available to pay towards the judgment.” Krasula’s attorneys responded in a motion filed on Jan. 12, the same day Campbell asked for bankruptcy protection: “Campbell is doubling down on his longtime strategy, which is to ignore Post Note, ignore the judgment, ignore this court and hope there are no consequences. … He has no respect for this court’s orders, and no intention of abiding by them.” How bad had things gotten between the former colleagues? They were arguing over how much money Campbell should be able to give his wife from his federal tax return. The filing said that Campbell had reneged on a promise to give Krasula 65 percent of his 2014 federal tax return. Krasula’s attorneys castigated Campbell for claiming that under Florida law he could evenly split his return with his wife, even though he had signed the check in Michigan and deposited it in a credit union — not a bank — in Michigan. Included in the filing was part of a transcript from a deposition with Lisa Campbell. “Where is that cash (from the refund) today?” “My half is at home.” “So, Jerry splits the refund into two pieces?” “We signed it, deposited it and then I pulled my half out.” “And then what happened to the other half?” “I don’t know what Jerry’s done with the other half.”
The dream comes crashing down “When you fly into Metro Airport from the southwest, if you’re sitting on the left side of the plane, you fly right over the racetrack, and it’s a constant reminder of a deal gone bad.” — David Provost No more. On Jan. 25, the main pavilion at Pinnacle was torn apart by excavating equipment. The track was being leveled and its pieces carted off, a field of graded dirt to be left as the only reminder of what the MEDC said was going to take Wayne County into the global economy. Sterling Heights-based Roncelli Inc. , which was the construction manager when Pinnacle was built, got the demolition contract, too. 䡲 Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2
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SCAM FROM PAGE 1
property fraud task force a decade ago. The task force has resulted in several convictions and returned more than $500,000 to victims last year, he said. “We can’t stop” scams, Youngblood said. “When people hear you can make 200 percent on your dollar, I think people are motivated by that and, perhaps, a little bit of greed.” And ignorance: Many foreign investors who lost money say they regret never visiting Detroit or not conducting more research. The alleged scams date to 2009 and involved homes throughout the city and in nearly every neighborhood as the Great Recession sent foreclosure totals in Detroit soaring and depressed already-low housing values.
The pitch In December 2009, a tan Hollywood actor named Joseph Arsenault teamed with 15 colleagues in a scheme to buy thousands of homes in Southeast Michigan, according to federal prosecutors. The team was based in New York and Florida, where members allegedly worked out of telemarketing call centers. The telemarketers bought homes, in some cases through the Wayne County tax auctions for $500 and pitched investors what were described as underwater, bank-owned homes, according to court records. The pitch lured more than 290 people in 46 states and Canada, who bought the homes for between $7,500 and $15,000. TelemarketJoseph ing operators Arsenault: From made it appear Hollywood to that the homes housing. were flipped to hedge funds and foreign buyers for a profit, prosecutors allege. Instead, the homes were transferred to shell companies controlled by the telemarketers. There were no profits, and victims lost more than $20 million in what has been labeled one of the most significant telemarketing scams in metro Detroit history, prosecutors said. Many victims were left with virtually worthless property saddled with back taxes, liens and blight notices, prosecutors said. One investor lost almost $1 million. Arsenault and others used homes in struggling neighborhoods like “Monopoly game board pieces that they could sell for quick money,” prosecutors wrote in a court filing. “As a result, communities have been destroyed as abandoned homes add to the blight and danger for the neighbors who remain.” Arsenault participated by posing as a foreigner named Kenneth Frue who was interested in buying the investors’ homes, prosecutors said. The housing scam was the latest
PHOTOS BY MIKE LEWIS II
These homes in northwest and southwest Detroit were sold to investors who lost more than $20 million in an international telemarketing scheme. in a life of cons for Arsenault, 57, according to associates and court records. Nicknamed “Joey Ace,” Arsenault is a former Hollywood bit player who made cameos in the 1997 comedy “Orgazmo” and a handful of other films. “He’s always been a conniver, always,” his brother Christopher Arsenault told Crain’s. “His whole life has been questionable.” Growing up in the 1970s in New York in the Long Island suburb of Port Washington, the brothers would collect old newspapers and drop them off at a recycling center for cash. Before the brothers arrived at the recycling center, Joseph Arsenault would dunk the papers in water so they weighed more, and fetched more money, his brother said. Joseph Arsenault worked in Manhattan in the 1980s as a stock broker before moving to Los Angeles in the early 1990s. Arsenault was not a serious actor, his brother said. “I think it was more about getting women,” Christopher Arsenault said. Rose Mary Judy worked for Arsenault at a Florida commodities firm and a fitness company that sold the AbSolo workout machine. She recalled Arsenault as a flashy dresser who drove a black Mercedes-Benz convertible and told anyone who would listen about his acting career, she said. He stocked his office with copies of the films and handed them out to employees, she said. “He was very charismatic, very outgoing personality in the way he talked and carried himself,” Judy, 53, said. “He’s very smart. I don’t know if ‘megalomaniac’ is a good word, but somebody called him that a long time ago.” Arsenault ran into trouble in Florida. In August 2009, Arsenault was ordered to pay a $415,000 penalty to the U.S. Commodity Futures Trading Commission after his firm Ster ling Trading Group Inc. was accused of engaging in speculative trading of illegal, foreign, currency futures. He also was barred from “directly or indirectly cheating or defrauding or attempting to cheat or defraud other persons.” Four months later, however, in December 2009, the alleged scheme involving Detroit homes was up and running, according to federal
court records. The alleged conspiracy involved Arsenault and several companies, including Chase REO Group, Hartwell Mortgage Group and U.S. Mortgage Specialists. One of the investors allegedly solicited by Arsenault’s group was William Addy, 70, a “semi-retired” insurance broker from Colorado Springs, Colo. Addy says he was urged to invest in bank-foreclosed homes that were appraised at about $30,000 but could be purchased for about $4,000, he said. “The pitch was there were buyers in China and other places that were interested in investing and didn’t mind holding onto the homes until the economy picked up again,” Addy told Crain’s. “They showed me beautiful homes.” Addy cashed out his retirement account and borrowed money on a credit card so he could invest about $120,000 in approximately 13 homes, most on the city’s west side. All were purchased in January 2011. The homes were transferred to shell companies controlled by the telemarketers and left to rot, prosecutors said. Addy said he called the FBI in 2012 after he never received income from his investment. “I started doing more research and ran some of the addresses. One was an alley, there was nothing on it,” Addy said. “Quite a few of the homes were in pretty bad shape.” Through March 2014, the alleged conspiracy targeted about 300 victims who lost more than $20 million. In all, the alleged scam involved more than 2,000 homes, according to prosecutors. For Addy, the ensuing years have been filled with foreclosure, the end of his semi-retirement and a bitter feeling about Detroit. “Nothing personal against the city,” Addy said, “but this just reinforced the fact that struggling areas are not good areas to do business in.” Arsenault was indicted in November 2014 alongside 15 others in connection with the alleged conspiracy. He was captured in Thailand in March 2015 and returned to the U.S. He is being held at a federal prison in Milan and faces up to 20 years in prison and a $250,000 fine if convicted of wire fraud and conspiracy to commit mail and wire fraud. His lawyer Dennis Johnston said
Arsenault solicited only about nine investors and was paid $410,000 during the alleged conspiracy. Johnston expects to reach a plea deal with prosecutors, according to a filing. “He is a classic sociopath and has no remorse about who he hurt,” said brother Christopher Arsenault, who accuses his brother of stealing the AbSolo invention. “He belongs in prison and should never get out. He hurt a lot of people.” On Dec. 8, the same day Arsenault’s co-defendant, Florida resident Joseph Haden, was sentenced to more than four years in federal prison for his role in the alleged conspiracy and ordered to pay victims more than $17.8 million, FBI special agents in Detroit quietly started investigating a separate case involving the largest buyer of singlefamily homes in Detroit from 20102013. On that day, agents executed a search warrant for the contents of email accounts belonging to four officials with Metro Property Group LLC, according to an unsealed search warrant obtained by Crain’s. On Dec. 16, the FBI received from Google a blue Toshiba hard drive containing records for email accounts belonging to Metro CEO Sameer Beydoun of Dearborn and company officials Ali Beydoun, David Makki and Kathy Messics. The focus of the FBI investigation is unclear, but the seizure came three months after a federal judge ordered Metro and three other firms to pay $625,000 to a group of overseas investors. The investors accused Metro and others of orchestrating a multimillion-dollar scheme that defrauded foreign investors in Detroit real estate. Metro purchased thousands of foreclosed homes — largely uninhabitable — for $500 to $5,000. Along with others, Metro profited by duping investors into buying the homes for as much as $50,000, according to court records. Metro and others fraudulently marketed the homes as refurbished and rented, failed to manage the properties and billed the investors for phony repairs and management expenses, according to the lawsuit. Ali Beydoun, the company’s former sales director, was unaware that the FBI seized his email account. Beydoun said he left Metro two years ago and the company is defunct.
“If anything, it was poorly run, but there was no fraud whatsoever that I was aware of,” he said. “I was just an employee, and I always did business ethically.” Sameer Beydoun, Makki and Messics did not return messages from Crain’s seeking comment. Hong Kong banker Nelly Roquefort paid $49,500 to a Metro affiliate for a colonial on the city’s west side in May 2012. Months earlier, the Dearborn affiliate had purchased the home from the Wayne County tax auction for $6,901. Roquefort, 36, stopped receiving rent payments last year. When rent was paid, it never covered alleged repair bills, Roquefort said. After contacting a real estate agent to dispose of the property, Roquefort discovered the home was stripped and rendered almost unsellable. Roquefort unloaded the home for $20,000 in July. “Definitely not going to invest in Detroit ever again, like a lot of foreign investors, I suspect,” Roquefort Steve Graysmark: wrote in an “Very stupid email. purchase” cost him Steve about $130,000. Graysmark, a retired London police officer, says he lost about $130,000 after buying six homes from Metro, lured by the prospect of profiting from Detroit’s rebirth. Graysmark, 55, said he is preparing a lawsuit along with nine other investors. “It was a very stupid purchase,” he wrote in an email to Crain’s. “I did get someone to look at the properties before I bought them but they looked at them and said they were OK. However, they were not.” “I would never invest in Detroit again and wouldn’t accept any property even if it was a gift. This has adversely affected the recovery of Detroit, and it’s a shame.” The alleged scams have dampened but not killed interest in Detroit. “There’s a little bit of buying from foreign investors, but I’m also seeing people who are priced out of markets like New York and Miami,” McLeskey said. “As the scams have come into the limelight, the messages now is ‘buyer beware.’ ” 䡲 Robert Snell: (313) 446-1654 Twitter: @robertsnellnews
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“If they are funding those fewer programs on a bigger scale, I think that’s a good thing. ... It allows you to do more things ... and serve more people.” HeatherRae,president and CEO,Common Ground
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priorities around the agencies most closely aligned with its focus areas and exhibiting high levels of excellence. United Way will look for ways it can help nonprofits that lose funding, Gray said, such as providing technical assistance for grant writing or data collection. The funding shifts will require “hard-nosed decision-making that could be subject to gnashing of teeth and criticism,” he said. “But we will forge ahead, because we have to make more progress.” “We need to invest more heavily ... in the programs we believe have the most likelihood of success ... fit within (our) wheelhouse ... are more easily explained to the public and easier to raise money for, attract volunteers to and advocate for,” he said. The more quickly United Way makes decisions about which agencies will lose funding, the better, said Heather Rae, president and CEO of Bloomfield Hillsbased Common Ground , which is operating on an annual budget of just over $9 million and received a $63,000 grant this year from United Way to support its youth shelter in Royal Oak. “Any of the programs that are winding down need that time to be able to transfer people to other services” or to find new funding for them, she said. Rae said she hopes that Common Ground won’t be among those to lose funding. “But ... if they are funding those fewer programs on a
CYBER FROM PAGE 3
plan to conduct private and secure testing on the Cyber Range hub at Velocity next month, but declined to elaborate. The local hub will focus heavily on the defense, homeland security and advanced manufacturing industries, she said, and the state hopes to have three or more other centers soon that could focus on other industries: health care, finance, aerospace and even energy. The Michigan Cyber Range is a private cloud network built on architecture supplied and operated by Merit Network Inc., an Ann Arborbased nonprofit owned by 12 of Michigan’s public four-year universities. Proposed by Gov. Rick Snyder in 2011, the program of-
bigger scale, I think that’s a good thing. ... It allows you to do more things ... and serve more people.” United Way plans to continue to fund other programs that fall under the three core areas of basic needs, financial stability and educational preparedness as part of the community impact model it shifted to eight years ago. And it will continue to fund and operate ancillary, supportive programs such as the 211 health and human services hotline, Gray said. While the three lead program areas are more straightforward than some of the complex programs United Way is funding, “the means for identifying success may be a little harder to understand,” Gray said. There’s not been a high level of analysis done with all of the data United Way is collecting, he said. To help on that front, United Way has contracted its former research director, Kurt Metzger, who founded Data Driven Detroit, to create “a bestin-class data unit” that can analyze data it collects to communicate impact, Gray said.
The finances United Way has not yet posted its full audited financials for fiscal 2015 ended June 30 on its website, but in a snapshot provided in its annual report for last year, it listed $57.1
fers cybersecurity training and certification as well as product testing and research space on industrial control systems security. Merit Network and the state opened the first Cyber Range hub at Eastern Michigan University in late
2012. Since then other hubs have opened at Selfridge Air National Guard Base in Har-
rison Township, the 110th Airlift Wing in Battle Larry Herriman: Camp Creek, Hackers are Ferris switching focus to Grayling, smaller companies. State University, Northern Michigan University and General Dynamics Land Systems’ Maneuver Collaboration
Center in Sterling Heights, said Joe Adams, vice president of research
INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: 21 Aon Risk Solutions .............................................111 Merit Network....................................................2 Burns & Wilcox ..................................................110 Metro Property Group.........................................11 21 Common Ground ...............................................2 Michigan Dental Association ............................77 4 3 Conway and Partners.........................................4 Michigan Cyber Range........................................3 4 3 Conway MacKenzie ............................................4 Michigan Economic Development ...................3 8 Denovo Real Estate .............................................11 MiQuest................................................................8 3 Detroit Lions.......................................................117 Quicken Loans .....................................................3 3 Duo Security .......................................................111 United Way for Southeastern Michigan..........3 21 3 Macomb-OU INCubator ...................................2 Velocity Collaboration Center ..........................3 9 McDonald Hopkins .............................................9
million in total revenue and an equal amount in expenses. Its audited financials for fiscal 2014 reported total revenue of $53.4 million, compared to total revenue of $42.9 million a year earlier and $44.1 million in 2012. Net revenue from its annual campaign increased to $28.3 million in 2014 from $24.3 million the year before and $23.8 million in 2013. United Way ended 2014 with an excess of $7.5 million, following losses of $2.1 million in fiscal 2013 and $751,590 in 2012. Crain’s Detroit Business Publisher Mary Kramer is a member of United Way’s board.
Leading efforts Going forward, United Way’s lead early childhood program will build on earlier efforts and focus even more on getting children ready for kindergarten, Gray said. A second lead program focused on child hunger/food instability will build on the “Meet Up and Eat Up” summer food program United Way launched in the region several years ago, with a target of assuring that children can access three meals a day, 365 days a year, he said. The third lead program, which will focus on college and career readiness, is an evolution of the turnaround work United Way has
“This is right within Merit’s mission to build a community and a workforce.” Joe Adams, vice president of research and executive director of the Michigan CyberRange forMerit Network
and executive director of the Michigan Cyber Range for Merit Network. But previous hubs have been limited-access areas available to students and instructors, or to military base personnel, or by direct invitation. The Velocity hub is the first that would be open to any company wanting to use it, particularly small businesses or first-time federal contractors wanting to prove their security defenses against simulated hacks, said Adams and Larry Herriman, interim executive director at Macomb-OU INCubator, a business accelerator program housed at Velocity. “Hackers have generally been moving away from attacking larger corporations, because they have countermeasures in place, to smaller companies like their suppliers or service vendors that might have some of the same data,” Herriman said. “And that’s the pressure we’re on right now, to get some of these de-
been leading in 15 area high schools with $27 million in funding from the General Motors Foundation that runs through June 30. As Crain’s reported in June 2013, United Way made some headway in improving graduation rates through things such as improving absenteeism rates and addressing behavioral issues. And high college and community college acceptance rates were up. “On the other hand, those things don’t improve your ACT work all that much,” Gray said, noting the work was expensive, with no correlation between the amount invested in each school and the improvement in graduation rates, and had inherent obstacles such as transient students and shifting priorities with principal turnover. United Way will continue to work in certain high schools in the region and with local graduates as it shifts to a focus on college and career readiness, said Christopher Perry, chief marketing and corporate development officer. The focus will be less on graduation rates and more on creating pathways to careers and college by providing assistance in choosing and applying for college, apprenticeship or training programs, among other things, he said. 䡲 Sherri Welch: (313) 446-1694 Twitter: @SherriWelch
fense capabilities into those hands.” The previous hubs, which have been more education-focused, have trained hundreds of Michigan professionals in cyberdefense since the Eastern Michigan opening in 2012, Adams said. The Velocity range could be a kind of template or prototype model for more industry-focused hubs that Merit Network hopes to open later, elsewhere in the state. “We have people in that area who are looking for that kind of training, but also right around the corner within Velocity there are plenty of startups who can make use of this,” he said. “This is right within Merit’s mission to build a community and a workforce, and it’s part of what we are, to help small businesses and school districts and (others).” Funding to build and equip the Velocity hub of the Cyber Range came from MEDC, Macomb County, the city of Sterling Heights and the New Economy Initiative, Herriman and Tisdale said. Future hubs could be built and equipped using funds from a nearly $6 million U.S. Department of Defense grant to the Macomb/St. Clair Workforce Development Board late last year, for a new workforce retraining program managed by the Workforce Intelligence Network for Southeast Michigan.䡲 Chad Halcom: (313) 446-6796 Twitter: @chadhalcom
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C R A I N ’ S D E T R O I T B U S I N E S S // F E B R U A R Y 2 2 , 2 0 1 6
ON THE WEB FEB. 13-19
DiChiera to retire Detroit Digits A numbers-focused look at last week’s headlines: from Michigan Opera Theatre $2.6B , founder and The price is paying to
artistic director of Michigan Opera Theatre, plans to retire at the end of the 2016-17 season, the Detroit-based nonprofit announced. DiChiera will become artistic director emeritus, to advise MOT’s recently established resident artist program.
COMPANY NEWS 䡲 Maine-based outdoor retailer L.L. Bean plans to open its first Michigan store this summer at The Mall at Partridge Creek in Clinton Township. L.L. Bean will occupy 14,000 square feet in the mall’s center court. 䡲 Troy-based Emagine Entertainment Inc. expects to extend its movie theater footprint outside Michigan for the first time late this year, after obtaining a contract to acquire a former grocery store in Frankfort, Ill. The ninetheater chain also plans to expand its Emagine Macomb facility by summer. 䡲 California-based Internet giant Google Inc. has been scouting Detroit suburbs for locations of at least 30,000 square feet for R&D space related to autonomous vehicles, sources said. 䡲 Auburn Hills supplier TI Automotive LLC acquired Ligonier, Ind.-based powertrain supplier Millennium Industries Corp. Terms were not disclosed. 䡲 Lockheed Martin Corp. withdrew its legal challenge to a $6.7 billion contract awarded to Oshkosh Defense LLC by U.S. Army Tacom Life Cycle Management Command in Warren for the Joint Light
䡲 Music Hall Center for the Performing Arts said it has met its im-
mediate goal to raise $1.7 million in cash, which will enable it to meet its near-term debt obligations and stave off possible closure of its historic Detroit venue. 䡲 The Detroit City Football Club said its campaign to fund renovations of its future home, Keyworth Stadium in Hamtramck, raised $741,250 in 109 days, meaning the semipro club has functionally reached its goal for work expected to be done in time for the start of the season in May. 䡲 A variety of banks and philanthropic organizations have offered to help nonprofit Reclaim Detroit after its Highland Park warehouse was destroyed by fire this month.
䡲 Fujikura Automotive America
has moved its North American headquarters to Farmington Hills from Novi, Automotive News reported. FAA is a subsidiary of Tokyo-based Fujikura Ltd.
acquire Ann Arbor-based Truven Health Analytics. Truven provides cloud-based data management and analytics to more than 8,500 health care clients. The deal is expected to be completed later this year.
The number of multifamily residential units Peter Cummings plans to add in the New Center area of Detroit. The developer is touting a $50 million plan to bring 230 apartments into a new development at a 1.4-acre surface lot in the area.
The value of a fund unveiled by Detroit Mayor Mike Duggan to help 1,000 buyers obtain mortgages in Detroit to bridge property appraisal gaps. The Detroit Home Mortgage program, the first of its kind nationwide, stems from a publicprivate partnership that includes five banks, community foundations, nonprofits and the state.
䡲 Farmington Hills-based Level One Bancorp Inc. opened its first Detroit branch, in the Julian Madison Building at 1420 Washington Blvd. 䡲 Nearly a year and a half after it originally planned to open, Sweet Lorraine’s Fabulous Mac n’ Brewz is set to open in Detroit’s
Midtown this week at Cass and West Warren avenues in the former Marwil Bookstore site. 䡲 Hazel Park-based Mabel Gray was named one of 26 semifinalists for the James Beard Foundation’s Best New Restaurant award. The New York City foundation named Garrett Lipar of Marais in Grosse Pointe a semifinalist as a Rising Star Chef of the Year, and Andy Hollyday of Selden Standard in Detroit and Nick Janutol of Forest in Birmingham as semifinalists for Best Chef of the Great Lakes region. 䡲 The Grosse Pointe Farmsbased Ralph C. Wilson Jr. Foundation has made a $2.5 million grant to the Pro Football Hall of Fame in Canton, Ohio. 䡲 General Motors Co. product development chief Mark Reuss is joining the board of trustees at The Henry Ford in Dearborn for a three-year term. 䡲 Beda Bolzenius will leave as president of Johnson Controls Inc.’s automotive business by March 31, Automotive News reported. The automotive business at Milwaukee-based JCI is set to be spun off into the new Adient by October.
JCI’s automotive interiors business is based in Plymouth Township. WilburRoss Jr.
(right) chats with Crain’s reporter
OTHER NEWS 䡲 Cobo Square, a new flexible downtown outdoor space that will include a large terrace overlooking the Detroit River, is set to open this spring — the final piece of Cobo Center’s five-year, $279 million renovation plan. The reuse of the center’s old arena will house art fairs, biergartens and other community events. 䡲 Two affordable housing developments in Southfield are getting a $19.8 million overhaul, as McDonnell Tower Apartments and the tower and townhomes at River Park Place are being upgraded. 䡲 The city of Rochester approved the building of a 34,000square-foot mixed-use development at 804 N. Main St. for one-bedroom luxury apartments and condominiums. Designhaus Architecture in Rochester handled design on the project for new owner and developer Erich Becker. 䡲 Jonathon Triest, founder of Detroit-based Ludlow Ventures LLC, is raising a second venture capital fund of up to $55 million, according to a filing with the U.S. Securities and Exchange Commission. He has already raised
$25 million for the fund, named Ludlow Ventures Detroit I LP. 䡲 Public housing authorities in Michigan are getting $31 million — with a high of $8.5 million going to Detroit — from the U.S. Department of Housing and Urban Development through the agency’s
Capital Fund Program. 䡲 A plan newly proposed by Republicans in the Michigan House to rescue the struggling Detroit Public Schools includes implementing an A-to-F school letter grading system, merit pay, restricting employees’ collective bargaining rights and moving new hires into a 401(k) retirement plan, AP reported. 䡲 Little Caesars pizza chain founders Mike and Marian Ilitch will be inducted into the International Franchise Association’s Hall of Fame later this year. 䡲 A special election was set for Aug. 2 to fill the state 28th District House seat vacated when Rep. Derek Miller resigned to become Macomb County treasurer. 䡲 Gov. Rick Snyder replaced the director of Michigan’s Veterans Affairs Agency after an audit uncovered problems at a state-run Grand Rapids nursing home for veterans. Jeff Barnes, who led the agency since its creation in 2013, resigned at Snyder’s request, AP reported.
OBITUARIES 䡲 John J. Riccardo, who was president, chairman and CEO of Chrysler in the 1970s, died Feb. 13. He was 91. 䡲 你
at the Big Deals event. AARON ECKELS
Ross chats about career at Crain’s Big Deals event ttendees at Crain’s annual Big Deals event at The Roostertail last week got to hear the wit and wisdom of Wilbur Ross Jr., the night’s headliner, who launched his New York-based W.L. Ross & Co. LLC in 2000 with $440 million under management and has grown it to about $9 billion. His conversation was billed as a fireside chat with Crain’s reporter Dustin Walsh. “All we’re missing is the fireside,” quipped Ross, in a room sided with glass on three sides, overlooking ice all the way across the river to Belle Isle. His Michigan investments included Troy-based Talmer Bancorp Inc. and International Automotive Components Group in Southfield, which he formed in 2005 in a joint venture with Lear Corp. to buy its interior trim business. “Lear paid us to take over the assets,” he said. “You always have trepidations when you are doing a deal, but I felt better they were paying me money. … Eventually, I bought 15 companies. Unfortunately, I had to pay for most of them.” Walsh asked Ross what he would do differently in his career if he had a chance. “Grow old more carefully,” said the 78-year-old Ross, who still plays tennis regularly. Were there any bad deals whose memory keeps him up at night? “The only thing I get out of bed at night for is to go to the bathroom,” he said.
Ilitch business school offers naming deals Can’t spring for the likely $4 million or more per year that goes into a naming-rights deal for the new Detroit Red Wings arena opening in September 2017? Well, the Mike Ilitch School of Business up the street just might have a deal for you. The Wayne State University business school hopes to complete additional naming-rights deals with businesses and individuals in the next four months or so for facilities within its new building in The District Detroit — and some proposals have been fairly creative, business school Dean Robert Forsythe said. So far the university has reached at least two verbal agreements to help cover the balance of an esti-
mated $50 million project cost for a new four-story, 120,000-square-foot building. In October, the Ilitch family and Wayne State announced a $40 million donation for the new school — $35 million in initial funding and a $5 million endowment. One naming-rights deal under discussion will likely have a multimillion-dollar value, with a corporate sponsor, Forsythe said. Another, for about $150,000, would be an individual naming deal for a single classroom overlooking Woodward Avenue on the new building’s eastern face — with a condition that the sponsor’s family be able to use the facility every year on Thanksgiving Day to overlook the America’s Thanksgiving Parade, held by The Parade Co. Even if those deals are finalized, Forsythe said, the school has a long way to go to cover the likely $50 million project cost for the new building at Woodward and Temple Street. Other naming opportunities range from $5 million for a twostory atrium in the center of the U-shaped building and $3 million for an auditorium to $10,000 for a “sticky space” or student seating and lounging area, or $25,000 for a group meeting room.
Domino’s pushes buttons for pizza orders A pizza button on every gadget may not be far off. Ann Arbor-based Domino’s Pizza Inc. last week added pizza-ordering on the Apple Watch to its arsenal of high-tech options. Those also include ordering via Ford Sync in their car or through Amazon’s voice-activated Echo gizmo. Most of the ordering capabilities rely on a saved profile Domino’s calls “Easy Order,” which amounts to hitting a button to tell your local Domino’s, “Send me the usual.” Gimmicky? Sure. But the saved profiles offer ease of ordering that Domino’s credits for some of the sales growth it has seen in recent years. Online orders accounted for 45 percent of sales in 2014, and that share has no doubt risen since. 䡲
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Crain's Detroit Business is the premier business publication for Southeast Michigan. This is the issue published Feb. 22, 2016. You can find...
Published on Feb 21, 2016
Crain's Detroit Business is the premier business publication for Southeast Michigan. This is the issue published Feb. 22, 2016. You can find...