Crain's Detroit Business, March 21, 2016 issue by Crain's Detroit Business

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A plethora of reclaimed wood makes Detroit a gold mine of materials for artists, craftspeople, PAGE 17

MARCH 21-27, 2016

NAFTA fears rise again in primary By Dustin Walsh dwalsh@crain.com

The state presidential primary showed that Michigan’s working class hasn’t lost its leeriness of free trade in the 22 years since President Bill Clinton signed the North American Free Trade Agreement. And as the presidential Where election season heats up, so they has the angst against potential ill effects of globalization stand and free trade, such as job Candidates’ displacement, as this region positions on tries to re-establish itself as a trade, Page 21 manufacturing power. Those worries were a winning issue for candidates Bernie Sanders and Donald Trump, both free-trade critics, in Michigan. But are the worries legitimate? Even local economists and experts don’t agree on whether free trade and increased imports and exports have been good or bad overall for Michigan’s economy and residents. But they do agree on this: The fear is real, and it’s had a real impact on politics. “Free trade has now become the boogeyman of populist sentiment,” said Don Grimes, economist and senior research associate of the Institute for Research on Labor, Employment and the Economy at the University of Michigan. “The people are mad over free trade, and there’s been an increase in anxiety.” Grimes said free trade has raised the standards of living locally and nationally, increased

MICHAEL LEWIS II

Burst pipes erupt into legal woes By Kirk Pinho kpinho@crain.com

It was a brutally cold day — Jan. 7, 2014, during the depths of that winter’s polar vortex, with wind chills dropping to 40 degrees below zero — when taxed water pipes in the Roberts Riverwalk Hotel along the Detroit River began to expand. The pressure mounted. Pipes burst. So Michael Roberts, the property’s owner since 2010, called Signal Restora tion Services LLC , the property repair company with offices nationwide.

Roberts Riverwalk Hotel faces insurance settlement dispute That much isn’t in dispute. But just how much Signal Restoration is owed for its work is; the broken pipes are emblematic of a number of challenges now facing the site — and Roberts — involving creditors, lenders, and lawsuits. If you ask Signal and the Detroit Eco -

nomic Development Corp. , a mortgage holder on the property, the entities are owed more than $1.3 million. Ask Roberts, and he says he owes far less than that because Signal performed work that was “unnecessary, redundant or excessive,” according to his formal response to a lawsuit in Wayne County Cir cuit Court. “The only thing they were asked to do is fix a few pipes, plumbing repairs, that’s it,” Roberts said last week. SEE HOTEL, PAGE 22

SEE NAFTA, PAGE 21

“It’s a tragedy he was so successful.” FormerYpsilanti MayorCheryl Farmer,who battled James Olsafsky overan adult bookstore

Court fights, changing trends dethrone one-time peep show prince By Robert Snell rsnell@crain.com

This Hazel Park shop is one of dozens of adult bookstores tied to Plymouth Township’s James Olsafsky.

The peep show prince of metro Detroit’s empire is crumbling following costly legal fights, a government crackdown and the flood of free Internet pornography, which have drained millions from the lifestyle of a little-known entrepreneur.

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Court records and interviews portray Plymouth Township resident James Olsafsky as a publicityshy porn titan clinging to a shrinking corner of the U.S. adult entertainment industry. In recent years, Olsafsky had ties to a network of about 40 adult bookstores and distribution companies stretching from the West Coast to Rhode Island and including five in metro Detroit named either Intimate

Ideas or Front Page.

Olsafsky, who once reaped a profit of about $3 million a year from the chain, recently lost a stake in 19 stores across the South following a fight with partners. The full scope of Olsafsky’s current and former business holdings is unclear, however, because his financial interests are a maze of limited liability companies and some ventures held in relatives’ names. Cracks in Olsafsky’s empire, how-

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ever, are revealed in a series of state and federal court filings — including a November federal lawsuit filed by a peep-show repairman — that offer insight into the life and career of a controversial figure. The filings show a businessman saddled with a multimillion-dollar court judgment amid a fundamental shift to online pornography in the 30 years since Olsafsky, now 67, SEE PEEP, PAGE 24

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MICHIGAN

BRIEFS Snyder takes hits in Flint water hearing in D.C. Gov. Rick Snyder last week blamed career bureaucrats in Washington and his own state for the Flint water contamination crisis, while the head of the federal Environmental Protection Agency faulted him and other Michigan officials. At a contentious congressional hearing Thursday, the Republican governor repeatedly apologized for his role in the crisis, which occurred when state officials switched Flint’s water supply to the Flint River two years ago to save money, The Associated Press reported. EPA Administrator Gina McCarthy faulted state officials, noting that the impoverished city was under state management when its water supply was switched in April 2014. State officials did not require that the river water be treated for corrosion, and lead from aging pipes and fixtures leached into Flint homes and businesses. The nearly four-hour hearing produced no major revelations, although Snyder for the first time ac-

knowledged that a state law, which allows state-appointed officials to take control of troubled municipalities, failed in Flint. Several Democrats on the House Oversight and Government Reform Committee called for Snyder to resign; Utah Rep. Jason Chaffetz, the oversight panel’s chairman, and other Republicans said McCarthy should step down. Snyder told lawmakers that officials at the Michigan Department of Environmental Quality repeatedly assured him that water being piped in from the Flint River was safe, when in reality it had dangerous levels of lead. Darnell Earley, Flint’s former emergency manager, said at the hearing that he was overwhelmed by challenges facing the city and relied on experts from the MDEQ and EPA to advise him.

Michigan’s Adventure marks 60th season with new fare Michigan’s Adventure is returning to its roots. To commemorate the Muskegon County park’s 60th anniversary, West Michigan’s largest tourism attraction will be opening a petting farm this season, MLive.com

reported. The new Funland Farm is intended to bring back memories of the park’s Deer Park Funland origins. The park also plans to interact with fans on social media. Special throwback Thursdays will be featured on its Facebook page showcasing images from the park’s history and encouraging guests to share memories on Instagram. Michigan’s Adventure opens for the season Memorial Day Weekend. It is owned and operated by Sandusky, Ohio-based Cedar Fair Entertainment Co., which runs 15 amusement and water parks and five hotels.

MICH-CELLANEOUS 䡲 The Food and Drug Administration expanded approval of a drug from Pfizer, which has a manufacturing facility in Kalamazoo,to treat a small subset of lung cancer patients with a rare mutation, AP reported. The agency said Xalkori capsules are now approved for patients with the ROS-1 gene mutation, who make up about 1 percent of U.S. patients with non-small cell lung cancer, the most common form of the disease. The twice-aday drug is part of a new generation of medications that fight disease by targeting specific genes found in certain patients. 䡲 A master plan for the Jackson County Fairgrounds calls for a new event center, removal of a harness racing track and other improve-

ments that could cost more than $26 million. The Jackson Citizen Patriot reports the recommendations are from SmithGroupJJR.The plan includes construction of a 25,000- to 30,000-square-foot, $7.5 million event center on the Grand River; more than $1.3 million in utilities and infrastructure upgrades; and adding new barns, a horse arena and livestock facilities for about $7.5 million. 䡲 A property development company plans to spend $10 million to transform a former foundry building just east of downtown Kalamazoo into a campus-like office space with on-site dining, the Kalamazoo Gazette reported. Kalamazoo-based developer Treystar plans to convert the 78,000-square-foot building for office and other uses and says the project will attract 100 jobs. 䡲 After a debut season that saw nearly 200 rides throughout downtown Bay City, the Sunrise Pedal Trolley is kicking off its sophomore season with big plans for expansion, the Bay City Times reported. Ashley Anderson, owner of Bay City’s pedal trolley, had 24 tours booked as of last week, and after the state ap-

Warranty disputes, recalls, intellectual property theft, government investigations... there’s a lot at stake in the auto supply industry. So much, in fact, that our automotive attorneys represent ONLY suppliers, helping to steer more than 200 automotive suppliers safely through some serious hairpin turns. Contact either co-chair of our Automotive Industry Group about preparing for the curves ahead.

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COMPANY INDEX: SEE PAGE 25 proved the consumption of beer and wine while pedaling, she’s hoping to break the 200-trip mark for the year. She’s considering bringing another trolley to Bay City, and is in talks about expanding her business into Frankenmuth and Midland. 䡲 Byron Township grocer SpartanNash tapped Chris Meyers as its new CFO, effective April 11, the Grand Rapids Press reported. At Naperville, Ill.-based KeHE Distributors, Meyers was CFO of North America’s second-largest natural and organic wholesaler. 䡲

䡲 A story on Page 8 of the March 14 issue should have said Cedric Turnbore, who was recently promoted to director of operations by Cobo Center management company SMG, is a 26-year veteran of the hospitality industry rather than SMG. He has been with SMG, holding management positions at Cobo, for the past six years.

Keeping automotive suppliers ahead of the curve

tmanganello@wnj.com +1.248.784.5007

BANKRUPTCIES . . . . . . . . . . . . . . . . . . 7 DEALS & DETAILS . . . . . . . . . . . . . . . 18 CALENDAR . . . . . . . . . . . . . . . . . . . . . . . 18 CLASSIFIED ADS . . . . . . . . . . . . . . . . 21 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 6 OTHER VOICES . . . . . . . . . . . . . . . . . . . 6 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 20 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 26 WEEK ON THE WEB . . . . . . . . . . . . . . 26

Correction

Read AheadOfTheCurve.wnj.com, the deﬁnitive law blog for navigating the automotive supply chain.

Thomas Manganello

INSIDE THIS ISSUE

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PURE CONFUSION? Revamp of state travel website aims to put tourists on right road By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — In the midst of launching new TV ads encouraging Michigan tourists to try Michigan craft beer or restaurants that specialize in farm-totable meals, the state is falling short with some basic functionality of the trip-planning feature of its official travel website. Namely, vacationers who want to use Michi gan.org as a detailed planning tool can’t accurately gauge distances between attractions or relate to area accommodations. “I am trying to determine distances from (The) Henry Ford and Greenfield Village to a campground,” wrote one prospective tourist. “I could not tell where these attractions were in relation to any of the campgrounds that displayed.” “Sometimes the interactive maps are harder to navigate,” wrote another. “I needed something that showed area-to-area or city-to-city and how close they were (with the goal of planning to do things in two locations if they were close enough to each other,

given limited time).” This is a problem for state tourism promoters. After years of false starts and trying to resolve problems on Michigan.org with patches and tweaks, Travel Michigan, the state’s tourism division, plans a full redesign of what is believed to be a decade-old website before the end of the year. Improving navigation and content will be priorities. The Michigan Strategic Fund board last month awarded a $390,000 contract to Sarasota, Fla.-based Miles Media LLP for the website project. The company plans to incorporate more photos and videos, personalized content, social media and trip-planning tools as part of a site that is responsive to both desktop and mobile users. Today, “it’s just not a very usable, intuitive site,” said Dave Lorenz, Travel Michigan’s vice president, adding that many people instead seek out regional convention and visitors bureau websites to find the information SEE TRAVEL, PAGE 22

A Pure Michigan moment: the sun rising over Traverse City’s West Grand Traverse Bay. ALISON GOSS/TRAVEL MICHIGAN

PACE paves path to energy efficiency Creative financing method less known, underused By Jay Greene jgreene@crain.com

Powers Distributing Inc. in Orion Township

has saved an average of $2,000 per month on electricity by installing a rooftop solar panel array and investing in LED lighting and other energy-efficient technologies, said Gary Thompson, COO of Powers. Powers also tapped into an underused financing mechanism to fund renewable energy and efficiency projects — the Property Assessed Clean Energy program, or PACE. “PACE is designed so that the energy savings generate the funds to make the bank payments, which the township collects through our property taxes,” Thompson said. “It is cash flow positive and encourages people to make sustainable improvements.” Thompson said PACE has allowed Powers Distributing to extend its bank payments over 20 years, reducing monthly payments and giving the beer distributor greater cash flow to fund other projects. For example, Powers Distributing is considering whether to add up to 25,000 additional square feet of solar panels to a second building sometime in the future, he said. As the price of electricity goes up and companies look to reduce their carbon footprint for public health reasons, a growing number are looking into projects like solar and wind energy or energy-efficiency technologies. From 2013 to 2015, Powers added more than 16,000 square feet of solar panels to its SEE PACE, PAGE 23

MUST READS OF THE WEEK

New fast-casual restaurants to offer ‘chicken with attitude’ Atomic Chicken landing in New Center, Clawson By Sherri Welch swelch@crain.com

Hospital turnaround? Family investors seek to buy Doctors Hospital out of bankruptcy; old name of Pontiac General goes back on building, Page 9

Newspaper talks With no talks set until the end of the month, News and Free Press journalists are expected to be without a contract for the first time since 1995 strike, Page 8

A trio with deep local restaurant pedigrees plans to launch a fast-casual fried chicken startup this spring with not one but two locations — the first in Clawson in April and the second in Detroit’s New Center area later this spring. Atomic Chicken will offer customers “chef-driven” varieties of fried chicken and waffles, fried chicken sandwiches and smothered chicken over biscuits. Teaming up on the new restaurant are Scott Moloney, owner of Treat Dreams in Ferndale and Woodpile BBQ Shack in Clawson; Matt Baldridge, former chef at the Rattlesnake Club and Cliff Bell’s and executive chef at the former Seldom Blues; and Café Muse chef and owner Greg Reyner, who also plans to open Geiger Eat

Shop in Detroit’s West Village during the fourth quarter of this year. The trio is investing and financing about $500,000 to get the two Atomic Chicken restaurants off the ground. The restaurants are expected to create about 50 jobs, combined. The fried chicken will come in a number of varieties, ranging from buttermilk and “smokin’ hot” to panko-crusted Japanese. Some options will include sriracha or ginger soy glazes. They’ll be dished up with sides including smashed sweet potatoes with Michigan maple and cardamom, black-eyed peas with bacon, gorgonzola mac and cheese, sweet vinegar slaw and cinnamon apples. For dessert, patrons will be able to choose from homemade puddings in butterscotch, banana vanilla and Faygo Rock ’n Rye. Independent of one another, Baldridge and Reyner had each been considering a chicken and waffles concept. And both were

looking to put their new restaurants in former chicken joints. Baldridge had been eyeing the former Faym-Us Chicken and Seafood restaurant on South Main Street north of 14 Mile Road in Clawson. Reyner was looking to lease a for-

mer Popeyes Louisiana Kitchen location in Detroit’s New Center at Woodward and Milwaukee avenues, one block off the last M-1 Rail stop, for his chicken and waffles restaurant. The two separately mentioned SEE CHICKEN, PAGE 25

JANNA COUMOUNDOUROS, LILACPOP STUDIO

The fiberglass chicken will remain atop the old Faym-Us Chicken and Seafood in Clawson as it becomes one of two Atomic Chicken locations.

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Detroit-based MSX International has acquired Australia-based Sewells Group , creating what the companies say will be the largest global provider of business process and training services to automotive dealerships. Terms of the deal, which closed last week, were not released. Sewells, which operates in the Asia-Pacific, Middle East and Asian markets, will operate as a subsidiary of MSX, retaining its 500 employees. It will add $50 million in revenue to MSXâ&#x20AC;&#x2122;s $600 million in annual revenue, MSX CEO Fred Minturn said. As a result of the deal, MSX will have 6,000 employees and operations in 80 countries. Automakers are looking to contract with suppliers that can serve their needs worldwide, Minturn said. â&#x20AC;&#x153;Together with our strong operations in North America and Europe, Sewells Group provides us with diversified and truly international opportunities to enhance value creation for our combined customer base,â&#x20AC;? he said. Currently, MSX operates in the U.S., United Kingdom, Eastern Europe, France, Germany, Brazil, United Arab Emirates, Australia and China. The addition of Sewells will increase its presence in the Asia-Pacific, Africa and Middle East regions and its business with automakers there, including Ford Motor Co., Gen eral Motors Co. and Volkswagen AG , Minturn said. Sewells, which Minturn said has a strong management team, has been in those regions a lot longer and is very mature there, he said. Together, MSX and Sewells will offer complementary services for customers, Minturn said. Automakers contract MSX to improve automotive dealer performance through business process outsourcing and training in the service and parts areas. Sewells also offers business management and operational efficiency services, but its dealership training is in sales and marketing. And it provides business intelligence data analytics to help dealerships better run their business, Minturn said, noting thatâ&#x20AC;&#x2122;s an area MSX has been wanting to enter. The two companies will now have cross-selling opportunities with customers, he said. Automakers â&#x20AC;&#x153;are always looking to minimize the number of suppliers they have to deal with,â&#x20AC;? Minturn said. â&#x20AC;&#x153;This gives them one-stop shopping for all of their retail network needs.â&#x20AC;? äĄ˛ Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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Industrial, Stevens buildings sell to JV By Kirk Pinho kpinho@crain.com

A pair of downtown affordable senior housing buildings will remain that way even after being acquired by a joint venture between Detroit-based developer The Rox bury Group and Invest Detroit. Totaling 165 units, the deal to buy the Industrial State Bank Building and the Stevens Building north and south of Grand River Avenue on Washington Boulevard closed Thursday, according to the buyers. Previously owned by Gilbert “Buzz” Silverman, the early 20th century buildings are expected to undergo about $10 million in improvements to individual units, common areas and building systems, said David Di Rita, principal of Roxbury. There are 127 units in the Industrial building, which stands 22 stories at the northeast corner of Washington and Grand River and was designed by architect Louis Kamper, who designed the Book-Cadillac Hotel, the Book Tower and Broderick Tower. It is expected to be renamed the Louis Kamper Building. The Stevens Building is the smaller and older of the pair, standing six stories on the southeast corner of Washington and Grand River. It was built in the 1900s and has 38 units. There are no plans to rename it. The two buildings, which sold for an undisclosed price, are nearly fully occupied. Stacy Fox, fellow principal of Roxbury, said that although the deal wasn’t in her company’s “strike zone” — these are the first buildings entirely for affordable housing owned by Roxbury — they “felt this is an important complement to what we are doing in the west district.” “We knew and felt that if we didn’t step in and get these properties under control, they could well go the way other Section 8 properties have gone, which is market rate,” she said. “It was important to maintain them for their intended use. I really believe in that mission and really look forward to raising the quality of life for these residents by upgrading these properties.” They were put up for sale about a year ago. According to the buyers, aside from the Industrial and Stevens buildings, there are only two other downtown Section 8 buildings: the Himelhoch Building, next to Roxbury’s David Whitney Building redevelopment and across Woodward from the Broderick Tower, and the 114unit Washington Boulevard Apart ments, owned by Silverman next to the Westin Book-Cadillac Hotel. Fox said an offer was made on the Washington Boulevard apartments, but that property “fell out of the deal.” “Given the scarcity of available properties in the area and rising property values and rents, it is critically important that these remaining affordable properties be protected and improved,” David Blaszkiewicz, president and CEO of gap-financing provider Invest Detroit, said in a statement. Keeping the buildings as affordable housing aligns well with Mayor

Mike Duggan’s goal of having at least 20 percent of the new multifamily housing units in the city being reserved for low-income renters. “This is a signature project, and we are looking forward to the opportunity to work with the new stewards of these properties,” Arthur Jemison, the city’s director of housing and revitalization, said in a statement. Southfield-based Fourmidable Group , which owns and manages the Himelhoch Building, will manage the Industrial and Stevens buildings. Fourmidable will also be property manager for Roxbury’s $24

million The Griswold apartment development, which is under construction for 80 new units on top of an existing 10-story building at Washington and Michigan Avenue. Invest Detroit is also a financer of that project and provided financing on the $94.5 million David Whitney redevelopment project. Renovations to the Industrial and Stevens buildings, which were converted into Section 8 housing in the early 1980s, are expected to be financed at least in part with federal low-income housing tax credits. 䡲 Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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The Industrial State Bank Building (left) and the Stevens Building, which serve as senior housing in Detroit, were acquired by a joint venture last week.

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CRAIN’S

Nonprofits would benefit from OPINION more volunteer biz leadership DETROIT BUSINESS

Trade isn’t job loss culprit, technology is onald Trump has made free trade the fall guy in this year’s presidential election. Tapping the angst and financial insecurity of voters has catapulted him to the head of the Republican pack. But if you want to blame job losses on something or somebody, pick technology. “The biggest contributor to job losses is productivity growth, not trade,” University of Michigan economist Don Grimes tells Crain’s Dustin Walsh in his Page 1 report. “Without free trade, you’d have a few more jobs, but only temporarily. Trade is not a negligible contributor to job losses, but plays a much smaller role than productivity.” By productivity, economists mean things like the number of auto parts produced per worker, or the number of projects completed in a set time frame by a given work team. Think about your job today — and think about how it was done a decade ago. From the plant floor to even small businesses with fewer than 10 employees, the speed of business has accelerated because of computers, software, robotics and other tech and productivity improvements. As Trump knows, it’s easier to blame politics and policies than to look at the issues more thoughtfully.

D.C. smackdown just rhetoric The Flint water blame game moved to Washington, D.C., last week, and nobody looked good — not the headline-seeking inquisitors on the House Oversight Committee, nor EPA Administrator Gina McCarthy. And especially not Michigan Gov. Rick Snyder. Those calling for Snyder’s resignation are grandstanding; since October, the governor has been acting quickly to help fix the mess. If he were to resign, a lieutenant governor would succeed him, and the remediation work might slow down. Snyder told lawmakers that officials at the Michigan Department of Environmental Quality repeatedly assured him water being piped in from the Flint River was safe. In reality, the corrosive water from the river caused lead to leach from pipes and into the city’s water system. It’s a complex situation. The city bears responsibility for the quality of the water main lines, and because of the city’s actions, protective mineral coatings in the pipes were washed away, leading to the contamination. Yet leaders at the state and federal levels bear responsibility for enforcing water quality rules. There is plenty of blame to go around, but the latest hearings in Washington left us with two comments: 䡲 First, we are incredulous that Snyder hasn’t removed all the key players in his Cabinet who did not elevate the Flint issues more quickly. The names are made clear in the voluminous emails Snyder has released. 䡲 Second, how dare the congressional watchdogs belabor this crisis and then go on “spring break” without enacting legislation that would provide emergency funding to the very people they were ostensibly serving by having the public smackdown last week? Instead of political rhetoric, how about some assistance? 䡲

ne of metro Detroit’s most 2015 — 37 percent vs. 32.8 percent important corporate donors statewide. recently have been moving in There is no doubt that a return to interesting new directions. pre-recession corporate giving levAccording to Crain’s, Delta will els would be extremely beneficial to more than double the amount it many organizations. A return to an gives back to communities worldolder style of corporate volunteer wide in the coming year and plans involvement, however, might be to contribute 1 percent of its previ- OTHER VOICES: even more helpful. Specifically, a ous-year net income to charitable Michael Montgomery return to more senior business organizations in its target markets leaders playing active volunteer and hub cities. The DTE Energy Michael Montgomery is a principal in leadership roles at nonprofits, inFoundation made $15 million in Montgomery Consulting, a Huntington cluding serving on boards and leadgrants during 2015, the most in its Woods-based fundraising and nonprof- ing fundraising campaigns. That history and a 25 percent increase it management consulting firm. model for corporate involvement over 2014. General Motors realigned served metro Detroit well for a very its foundation and corporate giving — a significant proportion of local long time, and some organizations efforts to provide “sharper geo- nonprofits have not been meeting still benefit from senior executive graphical focus and sustained sup- their fundraising goals in recent volunteers. port for its charitable and commu- years. Such involvement, however, is nity activities.” Since 2014, our firm has periodi- now the exception. It was not alIf other companies follow Delta cally surveyed a sample of Michigan ways that way. When I staffed the and DTE and substantially increase nonprofit organization leaders. In initial phase of Focus: Hope’s first their giving, many organizations our most recent survey: campaign in 1997-2000, the cam䡲 18.78 percent of total 2015 giv- paign team included owner-operaacross the U.S. would benefit. According to the most recent edi- ing to the organizations we sur- tors of large enterprises, then-CEOs tion of Giving USA, corporate giving veyed came from corporations, in of the Detroit 3 and the heads of as percentage of pretax profits was contrast to 5 percent of total nation- major banks, utilities and tier-one just 0.7 percent in 2014, the lowest wide giving coming from corpora- auto suppliers. Not surprisingly, level since 1974. At the same time, tions, according to the most recent that team was nearly unstoppable. GM’s concern with sustainable sup- edition of Giving USA. Since then, however, very seldom 䡲 32.8 percent of our statewide have that many high-level business port might sensitize other companies to this critical issue facing respondents reported that their or- leaders united for any cause, let many American nonprofits. ganizations had not met their 2015 alone help a nonprofit launch its Changes like those, however, might goal. first major campaign. 䡲 Metro Detroit respondents be particularly helpful to metro DeAs a result, many very good troit organizations. First, Detroit is a were even more likely to report that groups now languish without volmajor Delta hub and headquarters their groups had not made goal in unteer leadership of sufficient for the other stature to really companies. push their causes Second, Michi- “A return to pre-recession corporate forward. Hopegan nonprofits giving levels would be extremely fully, a return to are generally higher levels of more depend- beneficial to many organizations. A corporate giving ent on corporate return to an older style of corporate will re-interest giving than nonsenior busivolunteer involvement might be even more profits in other ness leaders to areas. Third, our more helpful.” again play active organizations volunteer roles at need the money Michael Montgomery,principal,Montgomery Consulting nonprofits. 䡲

TALK ON THE WEB Re: Detroit workforce agency chief to lead schools foundation What an outstanding choice to lead the Detroit Public Schools Foundation. Congratulations to decision makers responsible for this appointment. Donna M. Dauphinais

Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity. troit . Pull the plug, file the bank-

ruptcy and wipe the slate clean. This is not a statewide issue. William J

Re: Earley testifies he was ‘grossly misled’ about Flint Was Earley grossly misled in the Detroit Public School system too? Seems like whatever he touches gets messed up. Educator57

Re: Michigan House approves $48.7 million for Detroit schools Once more, the out-state taxpayer is being called upon to bail out De-

Re: MEDC discloses details on bids to redesign travel website This is outrageous and unaccept able . There were several Michiganbased companies that were less expensive than the Florida firm they hired. What message are they trying to send? Rose McInerney

This borders on unbelievable that the most visible effort to promote

Michigan would go to an out ofstate company. Doesn’t anyone at MEDC see the irony in that? John

Re: Willow Run driverless car project gets CEO, directors With all the open land available in this state, why would they rip down the historic Willow Run Assembly Plant just to build a test track? What a destructive waste. Justin Sutton

Re: Bed converts to wheelchair, puts nurses, docs in driver’s seat I loved reading about this new technology, especially since I am deep into helping identify and provide in-home caregivers for my aging father (also a mechanical engineer!). JT49

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Willow Run car testing site gears up with CEO,board By Dustin Walsh dwalsh@crain.com

A CEO has been hired and a nonprofit organization and board of directors formed to handle the $80 million development of the Willow Run autonomous car testing site. The American Center for Mobility , located at the former General Motors Co. Willow Run Powertrain Plant in Ypsilanti Township, will be headed by John Maddox, who will serve as CEO. Maddox previously served as the assistant director of University of Michigan Mobility Transformation Center and its own test site, Mcity. He will retain a partial appointment at John Maddox: UM, the organiExpects center to zation said in a open by early 2018. news release. Board members for the center include Doug Rothwell, president and CEO of the Business Leaders for Michigan ; Paul Krutko, president and CEO of Ann Arbor Spark ; Jon Kinsey, assistance vice president for research at UM; and Huei Peng, director of UM’s Mobility Transformation Center. The center, announced by Gov. Rick Snyder during his Jan. 19 State of the State address, is expected to become a national testing and product development site for selfdriving and connected cars. The 335-acre site, where Ford Motor Co. made B-24 bombers during World War II, is owned by Revi -

vation and potentially a curved tunnel, Maddox said. Vehicles will be able to travel at speeds up to 80 mph. It will also feature a large configurable intersection and areas to simulate urban, suburban and commercial area (a mall or freight center) as well as an off-road section for possible military vehicle use, he said. “MDOT is our partner here, so we’re relying heavily on them to bring clients something very realistic,” Maddox said. The organization also plans to

work with the Society of Automotive Engineers to establish voluntary standards for the testing of autonomous vehicles with hopes that the National Highway Traffic Safety Administration will look to the center for guidance. “Our prime mission of creating and accelerating those standards will naturally fit with what NHTSA wants to do in the future,” Maddox said. “If the tech is as valuable as we think it is for mobility, safety and energy, we want to expedite those standards.”

In May, Ann Arbor Spark was awarded a nearly $250,000 grant to develop a plan for the center at Willow Run. The grant was awarded as part of a program by the U.S. Department of Commerce. The plan is to expand on the efforts by UM, which opened its $6.5 million Mcity connected and autonomous vehicle testing grounds in Ann Arbor last year. “We see an opportunity to really advance what Mcity has started and take that work to a much larger level,” Steve Arwood, CEO of the MEDC, told Crain’s in

February. “It’s an out-of-the-box idea, and it’s very compelling when you look at where we believe the industry is going.” Before joining UM, Maddox served as the associate administrator for vehicle safety research at NHTSA. Before that, he was a compliance officer at Volkswagen AG. He earned a bachelor’s degree from the University of Maryland and a master’s from the University of Detroit Mercy. 䡲 Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

talizing Auto Communities Environ mental Response Trust . The

nonprofit is working to take ownership of the property with the expectation of opening in early 2018, Maddox said. The state of Michigan is expected to provide $20 million in funding toward the project, which is a joint initiative between the Michigan De p a r t m e n t o f T r a n s p o r t a t i o n , Michigan Economic Development Corp. , Business Leaders for Michigan, UM and Ann Arbor Spark. Maddox said the organization is working to secure the remaining $60 million for the build-out of the center; the design is nearly completed. The center will feature a 2.5-mile loop that will serve as a simulated highway with ramps, bridges, merge lanes, signs, changes in ele-

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Detroit newspaper labor pacts expire, but no strike expected By Bill Shea bshea@crain.com

Journalists at Detroit’s daily newspapers are operating without employment contracts for the first time since the devastating 1995 strike. The collective bargaining agreements for the Detroit Free Press and The Detroit News expired Saturday — though nobody expects another strike. The Newspaper Guild of Detroit Local 34022, representing the newsrooms of both newspapers along with those of the Observer & Eccentric papers, said four bargaining sessions with management and lawyers for Gannett Co. Inc. have failed to result in a new deal. The union said management told negotiators that an extension of the current deal wasn’t necessary, and pledged to operate under terms of the contract. Local union leaders are displeased with that arrangement, especially because the most recent contract was extended into March to give Gannett more time to ready itself for talks. “We find it to be a petty move on their part,” said John Gallagher, president of the local newspapers guild and a Free Press business reporter. Without extending the contract,

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the guild is without protections such as arbitration for disputes, he said. Gannett and Free Press management declined to talk, making it impossible to independently verify the union’s claims. “We do not comment on any potential or ongoing negotiations,” said Aaron Velthoven, Michigan.com’s spokesman and vice president for marketing. Michigan.com is the public-facing name used by the Detroit Media Partnership, which manages the shared business functions of the newspapers under a joint operating agreement. Virginia-based Gannett, owner of the Free Press, owns 95 percent of the partnership, while News owner Digital First Media has the rest. They maintain separate newsrooms. The guild and management jointly agreed to negotiate new contracts for the Free Press and The News along with the Gannett-owned suburban O&E papers for the first time. The talks represent 232 unionized newsroom personnel. Wages are the key issue, according to union officials. Under past contracts, newsroom staff has taken up to a 6.5 percent pay cut because of Gannett’s financial problems in Detroit. Staff also has

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taken unpaid furloughs. The last contract, signed in 2013, included 1 percent raises that only some received. “We want to restore those past cuts now that we’re doing better,” Gallagher said. This time, Gannett isn’t claiming the newspapers are losing money, Gallagher said. And because it isn’t asking for wage reductions, the company isn’t making its financials available for the union to examine. Crain’s has been told in the past by officials familiar with the finances that the newspaper partnership in Detroit was losing money through 2014. A series of staff reductions, wage and benefit cutbacks, reductions in home delivery, and other measures by Gannett in recent years have been aimed at cutting costs, but it’s not known if the newspapers are currently profitable. Gannett is offering merit pay rather than across-the-board raises, Gallagher said. The union opposes that and said management told guild negotiators that it doesn’t actually have an on-paper plan for merit raises. According to a bargaining bulletin issued by the guild to its members, 61 percent of staff has received a single merit raise, or none, over the past three years. The union has noted that Gannett has been spending cash in recent months: Last year, it authorized a $150 million stock buyback, and it currently is buying the Milwaukee-based Journal Media Group for $280 million. Gannett last year spun off its more lucrative digital and broadcast operations into a new company. Gannett retained 90-plus newspapers. The day before the company split in July 2015, shares of Gannett (NYSE: GCI) were trading at $38. The split saw the new company’s shares open trading at $14 a share, and they’ve stayed in that range since. Gannett’s 2015 annual report shows that the company had $146 million in net income on $2.9 billion in total operating revenue. Those are declines from $211 million in 2014 income on $3.1 billion in revenue. Union leaders said there are no plans for work stoppages or a strike — the memory of the strike from 1995-97 that devastated both the union and the newspapers is still fresh to veteran journalists. “I don’t think anybody’s talking a strike. That was a painful period for the company and guild,” Gallagher said. Outside observers agree there is no appetite for a work stoppage. “Everyone in the industry understands how vulnerable the print media is,” said Henry Baskin, founder and principal of Birmingham-based The Baskin Law Firm PC that does media work. The last newspaper strike left an indelible mark on both labor and management, he said. “No one profited from that strike. It was ill-conceived from both sides,” Baskin said. The next bargaining sessions are scheduled for March 31 and April 1. 䡲

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SPECIAL REPORT: HEALTH CARE JAY GREENE Senior Reporter jgreene@crain.com Twitter: @jayBgreene

24-year-old leads efforts at hospital anyam Sharma, who will be 25 next month, is leading his family’s effort to turn around the newly renamed Pontiac General Hospital from a cumulative $73 million-plus loss the past seven years to financial success. “We hope to turn a $1.5 million profit this year. It will be the first profit in 15 years,” said Sharma, who was recruited by his parents in early 2015 from PricewaterhouseCooper’s mergers and acquisitions unit to run the family business, Infrahealth Group of Cos. “I took a significant pay cut,” said Sharma, who graduated from the University of Texas in Austin in 2011 with degrees in economics, mathematics and business administration. He has interned at several larger companies, including Berkshire Hathaway and Capital One. Sharma’s parents are Priyam, who holds a master’s degree in computer science from Florida State University, and Sanjay, who has a doctorate in computer science from the University of Illinois at Urbana-Champaign. “Dad moved to Austin to work for Dell Computers and later they started Infrahealth in our basement. It has a patented product for insurance verification and eligibility for hospitals and physicians,” Sanyam said. “I grew up in an entrepreneurial family, and the family business now has 400 employees, mostly in India, and serves clients across the U.S.” While his parents plan to purchase a house in Oakland County, Sanyam said he will continue to rent and oversee the hospital operations until it begins to generate positive cash flows. “There aren’t a lot of things to do around here for a person my age,” Sanyam said, adding that he is still in charge of Austinbased Infrahealth. “I want to grow this business and branch out into other areas,” he said. 䡲

A new sign went up at Pontiac General Hospital last week, as owners focus on a turnaround. PHOTO BY KIRK PINHO

RECOVERY ROOM Reorganization plan aims to pull Pontiac General out of bankruptcy By Jay Greene jgreene@crain.com

Doctors Hospital of Michigan is still open for business and expected to emerge from bankruptcy under new ownership — and it’s newly renamed to an old name: Pontiac General Hospital. “We never closed,” said CEO John Ponczocha, “but some people thought so because of the bankruptcy.” Unable to turn a profit and piling up red ink that totaled more than $73 million from 2009 to 2014, a small group of physicianowners of the hospital, legally known as Oakland Physicians Med ical Center LLC, led by board chairman and psychiatrist Yatinder Singhal, M.D., last July filed for bankruptcy protection under

Chapter 11. The bankruptcy case is still underway with more than 700 creditors seeking millions in dollars of unpaid bills against the former physician-owners, according to Bloomfield Hills-based Simon PLC. Unsecured creditors are expected to recover $1.6 million over four years out of the $13.2 million they claimed, court records show. But last month, U.S. Bankruptcy Court Judge Walter Shapero approved a reorganization plan by Sant Partners LLC over two competing groups, Save the Hospital Group and Allied Global Consulting. Founded last summer by Sanyam Sharma, who is executive vice president of Infrahealth Group, an Austin, Texas-based health care administrative services firm, Sant

LARRY PEPLIN

Sanyam Sharma (center) is leading the effort to revive Pontiac General Hospital, with key help from his parents, Sanjay (left) and Priyam.

Partners was created for the sole purpose of making a 35 percent investment in the hospital and helping turn it around. An undisclosed amount of seed funding for Sant Partners came from Sanyam’s parents, Sanjay and Priyam, who own and operate Infrahealth and St. Martinus Universi ty , a medical school on the island of Curaçao. “We heard about the hospital through (a consultant) last March,” said Sanyam, Sant’s managing director and founder. “We ap-

proached them about placing medical students (from St. Martinus) for clerkships. They called back in July and asked for help. They needed us to take a minority stake and our consulting services.” Sanjay Sharma, now the hospital’s chief information officer and president of the medical school, came to Pontiac first to evaluate the hospital’s information technology services. He discovered major problems with the revenue cycle software that had led to a backlog SEE PONTIAC, PAGE 10

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PONTIAC FROM PAGE 9

of about $24 million in uncollectible bills. “We have significantly improved our systems and have an 80 percent collection rate (of current bills),” Sanjay said. “We will collect about $4 million this year in commercial insurance payments.” Sanyam said Infrahealth invested $1.5 million to keep the hospital open. But “it wasn’t long before the hospital filed for bankruptcy. That made everything more complicated,” he said. At that point, Sanyam said, the Sharma family decided to go all in, buy the hospital and propose a reorganization plan. “We have Infrahealth and the medical school,” said Sanyam of the family’s investments. “But if we want to really increase our revenue and business, we needed to buy a provider. That’s why we identified this project.” Under the court-approved reorganization plan, Sant would take over the hospital by essentially writing off its earlier $1.5 million loan

and assuming the hospital’s liabilities and $13 million in debt. Officially, the Sharmas won’t take ownership until the closing in midApril. Currently, Sant is considered by the court as the debtor-in-possession, or DIP, lender and consultant. But under the new leadership team, which includes bankruptcy trustee Basil Simon, patient-care advocate Aldo Martinez, Ponczocha and the Sharma family, Pontiac General Hospital is slowly being reborn. “Sant Partners has expertise and will be able to return the hospital to profitability by instituting good management practices and by expanding its medical staff,” said Todd Sable, a partner with Detroit-based Honigman Miller Schwartz and Cohn , who is representing Sant. Priyam Sharma, who will become one of the hospital’s four board members with son Sanyam after the closing, said the family has held several town hall meetings for employees and the community. The two other board members will be physicians Jawad Shah and Surindar Jolly. Shah, a neurosurgeon who has taken out an $8 mil-

lion line of credit and plans to invest $375,000 in the hospital, is its chief medical officer. Jolly is a neurologist and investor with up to $500,000 committed. “We have met with 90 percent of the employees personally, from the boiler room to the kitchen,” Priyam said. “I am impressed by the passion of the people who work here and live in the neighJohn Ponczocha: borhood.” Priyam said Pontiac hospital employees have never closed, CEO expressed consays. cern there could be further layoffs. The hospital workforce has shrunk over the past decade to about 240 workers from more than 800. “We are a family business and don’t want to make layoffs like in the past,” Priyam said. “We have been shifting people around based on their skills. We stress customer service and quality.” In his Feb. 2 decision, Shapero

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cited possible mismanagement, underutilized and noncompetitive facilities for the hospital’s financial troubles. Pontiac General is licensed for 306 beds, but only about 30 of the licensed beds are staffed in a medicalsurgical unit that ranges occupancy from 25 percent to 50 percent. It also operates a 30-bed adult psychiatric unit that averages more than a 90 percent occupancy rate. Its main sources of revenue, said Ponczocha, are the adult psychiatric unit, the medical-surgical unit, a primary care health center managed by Oakland Integrated Health care Network, an 18-resident family medicine program sponsored by the hospital, outpatient surgery and a 24-hour urgent-care center. But those revenue sources did not come close to bringing the hospital out of the red. “Over time and for various reasons, including claimed mismanagement, it came to pass that debtor’s facilities and medical services became substantially underutilized and noncompetitive, its finances became severely distressed, and its books and records in disorder,” wrote Shapero. For example, in 2014 the former Doctors’ Hospital lost $12.7 million on net patient revenue of $12.6 million, according to Louisville, Ky.based Cost Report Data . From 2009 to 2013, the hospital lost more than $73 million. Sources told Crain’s that multiple factors led to financial losses. They included competition from two larger, multi-system owned hospitals and a poor economy in the Pontiac area. Other problems included a shift away from inpatient care to outpatient services that reduced revenue, lack of medical staff recruiting and an erosion of the physician base that led to fewer patients and a dysfunctional board-management relationship over multiple administrations. “The previous owners kept shutting down services to cut expenses,” Sanyam said. “Over time, that af-

fected medical-surgical volume, radiology, cardiology and general surgery. There were fewer patients left to admit, and the losses were predictable.” Flint-based McLaren Healthcare Corp. was one of the original investors when the hospital initially emerged from bankruptcy in 2008. For nearly three years, McLaren’s management tried to improve operations, nearly breaking even in 2009 with a $1 million loss. But McLaren, unable to reach agreement with the board on a longterm financial strategy, sold its 35 percent investment in early 2011 for $3 million, taking a $2 million loss. Yusuf Hai, managing director of business advisory services with CIG Capital Advisors in Southfield, said exterior economic forces and lack of synergy caused the hospital to fail over the years. “You had doctors on the board who tried to do everything — manage and practice medicine — and it didn’t work out great,” Hai said. Hai said the Sharma family has a good opportunity to turn around the hospital if they put in place the right service mix to fill a primary care and specialty market niche. “If the (Sant) group does a good job, someone will come and pick them up” and acquire the hospital, Hai said. Sanyam said his family has no plans to sell the hospital. “We have gotten offers, but nothing we will take at the moment,” he said. “We plan to grow the company and hold onto it at this point.” Chad Grant, CEO of McLaren Oakland in Pontiac, said the new Pontiac General could succeed if it focuses on primary care. “Health care is a very competitive environment with all the pressures on organizations,” Grant said. “It is very difficult to be successful without appropriate scale.” Grant said he has met with the Sharma family and understands they want to expand inpatient medical-surgical services. “It will be difficult because services are movSEE NEXT PAGE

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ing more into the outpatient area,” he said. Like Pontiac General, Grant said, McLaren Oakland also offers the community adult behavioral health services.“Behavioral health is an unmet need in Pontiac, but reimbursement is not attractive,” he said. “We provide behavioral health services with a geriatric inpatient unit for ages 50 and above.” Grant said McLaren Oakland makes a little money on its 27-bed unit that averages 20 patients per day. “It isn’t a huge revenue generator,” he said. Overall, Pontiac’s economy is growing stronger with several larger employers expanding workforces and that should help all hospitals, Grant said. “We have significantly improved our financial performance” over the last several years, said Grant, noting that of the hospital’s 150 staffed beds, its average census is about 100 patients, or 67 percent. “Our partnership with Karmanos (Cancer Institute) has brought us admissions, and our new ER center in Clarkston has also brought us inpatient volume,” said Grant, noting that insurance expansion under the Affordable Care Act has helped improve cash flow by reducing charity care. But one of the problems Pontiac

General is facing is various paybacks owed to Medicare and Medicaid programs, Sanyam said. “Medicare says we owe them $6.7 million. They are recouping 100 percent (of our billing and graduate medical education program),” he said. “If there are no changes, we will pay it off in two years.” But Sanyam said the hospital has presented Medicare with a five-year payment plan, which, if approved, will free up cash for operations. “It would be a substantial improvement” in revenue to the hospital, said Simon, the bankruptcy trustee who is a partner at Simon Stella and Zingas PC in Detroit. “We hope some money will get released.” The Michigan Medicaid program also has been recovering overpayments. “We owed them $3 million and still owe $500,000,” Sanyam said. “We are working with (state officials) to (forgive) that debt.” Simon, who calls himself the “lame-duck trustee,” meets weekly with Ponczocha and others to approve bills and review revenue and expenses. “Cash flow is improving and things are gradually getting better,” said Simon, who noted that the Sharmas, as DIP lender, must supplement hospital revenue to keep the hospital solvent while under bankruptcy protection. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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SPECIAL REPORT: HEALTH CARE

Med school ties aid Pontiac hospital’s turnaround By Jay Greene jgreene@crain.com

One of the key advantages cited by Sant Partners LLC in its court-approved bankruptcy reorganization plan for Pontiac General Hospital is its medical education relationship with St. Martinus University , a medical school on the Caribbean island of Curacao. The Sharma family, which includes Sanjay, Priyam and Sanyam, purchased the license of shuttered St. Martinus in 2010. They renovated it and opened it in 2011. Sanjay is president of the medical school. St. Martinus now enrolls 500 students, with the first class graduating this summer, said Sanyam Sharma, Sant’s founder and managing director. His parents are Sant’s financial backers and also own the medical school. “We have 200 students who could come now,” Sanyam said. “We will start with 10 a month at first, and by the end of the year we will have up to 50 students in family practice, psychiatry, surgery, pain management and radiology” rotations. Because medical schools pay hospitals to train their students in clerkships, Sanyam said the medical school will provide reliable cash flow. For example, the court-approved

Pontiac General’s health history Founded in the early 1900s as the first hospital in Oakland County, Pontiac General Hospital originally was owned by the city of Pontiac as

a safety net provider. It was sold in 1993 and became North Oakland Medical Centers. After never earning a profit, North Oakland filed for bankruptcy in 2008. It was purchased by a group of 42 physician investors and Flint-based McLaren Health Care Corp. and renamed Doctors’ Hospital of Michigan. But after nearly three years of unprofitability in 2011, McLaren sold its 35 percent interest back to the doctor investors. From 2009 to 2014, Doctors’ Hospital lost more than $73 million. A $2 million judgment against the hospital and accreditation problems led to the physician investors filing Chapter 11 bankruptcy in July. In early February, Sant Partners LLC, headed by Sanyam Sharma and financially backed by his parents, Sanjay and Priyam, who own Austin, Texas-based Infrahealth Group and St. Martinus University medical school, had its bankruptcy reorganization plan approved for the hospital. Jay Greene

reorganization plan estimates $20,000-per-month revenue in July, increasing to $40,000 per month in 2017 and $80,000 per month in 2018. Another boost to the hospital later this year will be when the 30bed inpatient psychiatric unit expands by 10 beds, said hospital CEO John Ponczocha. “We will start construction this summer on the ($500,000) psych unit expansion on the fourth floor,”

Ponczocha said. “Our unit is nearly always full, and sometimes we have to turn away people.” Generating lease revenue and inpatient referrals for the hospital is the Family Medicine Clinic , which is owned by Oakland Integrated Health Network , a seven-clinic federally qualified health center. Since 2012, patient volume has been steadily growing, said OIHN’s CEO, Debbie Brinson.

“Last year we saw more than 6,500 patients, and our growth has been 6 percent to 8 percent a year,” she said. “People know we are here and come back.” Brinson said the hospital’s family medicine residency program works well with the health center’s staff in offering patients a mix of primary, mental and dental health care services. The three-year agreement with OIHN expired last December, but Sanyam said the two partners have a month-to-month agreement until they agree to a long-term contract after the closing. Pontiac is considered the only medically underserved area in Oakland County. Last year, Oakland County officials made it clear how important it is to continue the family medicine residency program with OIHN for the Pontiac community. “Eighty percent of the patients at the family medicine residency program and the Family Medicine Center receive Medicaid or Medicare benefits, allowing more individuals to have access to quality health care,” said Oakland County in a statement. Sanyam said Pontiac General also plans to expand services through joint ventures in inpatient surgery,

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neurosurgery, orthopedics and a 24hour outpatient pharmacy. Ongoing services include outpatient surgery, endoscopy, pain management, 24-hour urgent care, radiology and a reference laboratory. The hospital’s reorganization plan also calls for 18 surgical residents to be rotated with Crittenton Hospital Medical Center. “They are coming back, maybe in two years. We need to build our surgery department first,” Sanyam said. In 2011, Crittenton Hospital loaned $4 million to the former Doctors’ Hospital of Michigan in a complicated arrangement that included the transfer of the 18 surgical residents. As a secured creditor under the reorganization plan, Crittenton will receive $100,000 cash at closing and agree to accept a total of $650,000 over three years at a 3 percent interest rate.

From bad to good? After Ponczocha recovered from back surgery and returned to the hospital in late June, he learned the The Joint Commission had issued a preliminary denial the week before on the hospital’s accreditation. “They found 67 deficiencies, and the CMS (Centers for Medicare and Medicaid Services ) issued six violations on the hospital’s conditions of participation in Medicare,” he said. The violations covered a range of service areas, including governance, leadership, infection control, medication management, fire and life safety, and environment of care, he said. “My whole effort for six months was to correct everything,” he said. “Any potential plan would have failed without accreditation.” But on Dec. 8, the Joint Commission made another surprise visit, and on Dec. 10 the hospital received full accreditation, he said. “There was a real challenge in keeping the hospital open and stable. The threat of closure was always there,” he said. Every day, said Ponczocha, he felt like he was Monty Hall on the old “Let’s Make a Deal” television show. “Vendors called and asked for $3,000 payment. I asked if they could take $1,000.” Ponczocha, a veteran hospital executive who has worked in the Trinity Health and Henry Ford systems, said he is cautiously optimistic that Pontiac General has a future. “Given where we were on July 8 (bankruptcy filing), I feel real positive about it,” he said. “I am optimistic about growing surgery volume, adding medical staff and increasing admissions. We have the potential to get much busier here.” By the end of the year, Sanyam said, the hospital is projected to turn a $1.5 million profit. “It will be the first profit in 15 years,” Sanyam said. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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CRAIN'S LIST: LARGEST PHYSICIAN ORGANIZATIONS

$ $

$ Rank ) "

# ! * +

$ - , - ! & ! $ ! $ ( ( % % $ '

United Physicians Inc. 30600 Telegraph Road, Suite 4000, Bingham Farms 48025 (248) 593-0100; www.updoctors.com

Michael Williams, president and CEO; Deborah Tasich Withrow, EVP and COO

2,386 NA

IPA

Wayne State University Physician Group 1560 E. Maple Road, Troy 48083 (877) 978-3627; www.wsupgdocs.org

Lisa Keane president and COO

2,303 B NA

147,033 B 731,385 B

Group practice

The Physician Alliance LLC 20952 12 Mile Road, Suite 130, St. Clair Shores 48081 (586) 498-3555; www.thephysicianalliance.org

Michael Madden president and CEO

2,246 2,146

IPA

McLaren Physician Partners 2701 Cambridge Court, Suite 200, Auburn Hills 48326 (248) 484-4928; www.McLarenpp.org

Gary Wentzloff president and CEO

2,041 NA

PHO

David Spahlinger University of Michigan Faculty Group Practice 4101 Medical Science Building I, Ann Arbor 48109-0624 senior associate dean for clinical (800) 211-8181; medicine.umich.edu/medschool/ affairs patient-care/um-physiciansfgp Charles Kelly Henry Ford Physician Network C president and CEO 1 Ford Place, Detroit 48202 (313) 874-1466; henryfordphysiciannetwork.com Ewa Matuszewski MedNetOne Health Solutions CEO 4986 N. Adams Road, Suite D, Rochester 48306-1416 (248) 475-4701; www.mednetone.com Consortium of Independent Physician Associations Paul MacLellan CEO 101 N. Main St., Suite 430, Ann Arbor 48104 (734) 302-2128; www.medicaladvantagegroup.com William Isenstein Oakwood ACO LLC executive director 15500 Lundy Parkway, Dearborn 48126 and COO (313) 586-5872; oakwoodaco.org

2,014 NA

52,272 2,234,769

Group practice

1,910 1,679

40,000 3

IPA

Henry Ford Health System, others. Includes 1,179 employed physicians in the Henry Ford Medical Group.

1,200 NA

IPA

Crittenton Hospital and Medical Center, Henry Ford Health System, Beaumont Health, Mercy Memorial Monroe, McLaren Health System, St. John Providence Health System, Detroit Medical Center

1,100 1,100

IPA

ProMedica Bixby Hospital, ProMedica Herrick Hospital, ProMedica Toledo Hospital, Hillsdale Community Health Center, Port Huron Hospital, St. Joseph Mercy Hospital, Henry Ford Health System, St. Mary Mercy Hospital

1,045 NA

119,000 18

PHO

Beaumont Health-Dearborn, Beaumont Health-Taylor, Beaumont HealthTrenton, Beaumont Health-Wayne, Beaumont Health-Royal Oak, Beaumont Health-Troy, Beaumont Health- Grosse Pointe, Beaumont HealthFarmington Hills St. Mary, Henry Ford Main, Henry Ford Wyandotte, St. Joseph Mercy, Detroit Medical Center, Garden City, Beaumont Health and hospitals designated by health plans with which UOP physicians are contracted

3 4 5 6 7 8 9

Beaumont Health, Beaumont Health-Farmington Hills, Children's Hospital of Michigan, Crittenton Hospital and affiliates, Detroit Medical Center hospitals, Pontiac General Hospital, Garden City Hospital, Henry Ford Health System, Karmanos Cancer Center, McLaren Health Care Corp., Oakland Regional Hospitals, Select Specialty Hospitals, St. John Providence Health System, St. Joseph Mercy Health System, St. Mary Mercy Hospital of Livonia, Triumph Hospital of Detroit, UM Hospital, others Beaumont Health, Children's Hospital of Michigan, Crittenton Hospital Medical Center, Detroit Receiving Hospital, DMC Surgery Hospital, Pontiac General Hospital, Garden City Hospital, Harper University Hospital, Henry Ford Health System, Huron Valley-Sinai Hospital, Hutzel Women's Hospital, Karmanos Cancer Center, McLaren-Macomb, McLaren-Oakland, Rehabilitation Institute of Michigan, Select Specialty Hospital, Sinai-Grace Hospital, St. Joseph Mercy Health System, St. Mary Mercy-Livonia, St. John Providence Health System, Triumph Hospital Detroit, UM Health System, Vibra Hospital of SE Detroit, others St. John Hospital and Medical Center, Providence Hospital, Providence Park Hospital, St. John Macomb-Oakland Hospital, St. John River District Hospital, Children's Hospital of Michigan, Detroit Receiving Hospital, Beaumont Health, Henry Ford Health System, McLaren-Macomb, Harper Hospital, Henry Ford Health System, Karmanos Cancer Institute McLaren Health Care Corp., Karmanos Cancer Center

University of Michigan Health System

United Outstanding Physicians LLC 18800 Hubbard Drive, Suite 200, Dearborn 48126 (313) 240-9867; www.uopdocs.com

Yasser Hammoud medical director and CEO

930 890

130,000 18

IPA

Nazmul Haque chairman

650 NA

PHO

Detroit Medical Center

DMC PHO LLC 28411 Northwestern Highway, Suite 750, Southfield 48034 (248) 262-7369; www.dmcpho.com

544 529

PHO

Henry Ford Macomb Hospital-Clinton Township

Olympia Medical Services PLLC 33300 Five Mile Road, Suite 210, Livonia 48154 (313) 357-1215; www.olympiadocs.com

Jerome Finkel, medical director; Dirk DeLange, executive director Randall Bickle president and CEO

Greater Macomb PHO 43411 Garfield, Suite A, Clinton Township 48038 (586) 263-2620; greatermacombpho.com

500 NA

IPA

Beaumont Hospital-Farmington Hills, Garden City, St. Mary-Livonia, Providence Park, St. Joseph-Ann Arbor

489 NA

NA 11

IPA

Hurley Medical Center, McLaren, Genesys

Huron Valley Physicians Association PC 2002 Hogback Road, Suite 3, Ann Arbor 48105 (734) 973-0137; www.hvpa.com

Asif Ishaque, president; Mike Grodus, Sr. PO consultant Jeff Sanfield president

Professional Medical Corp. 2425 S. Linden Road, Suite D, Flint 48532 (517) 336-1400; www.pmcpo.com

463 416

40,000 4

IPA

St. Joseph Mercy Health System, Chelsea Community Hospital and Livingston

Rodger Prong, executive director; Nathan Chase, president William Fileti president and CEO

450 410

89,600 15

IPA

Oakland Physicians Network Services 2360 Orchard Lake Road, Sylvan Lake 48320 (248) 682-0088; www.opns.org

St. Joseph Mercy Hospital Oakland, Huron Valley-Sinai DMC, Beaumont Royal Oak, Crittenton, McLaren, Henry Ford, Providence

448 448

NA 694

73,520 13

Group practice

Jerome Frankel medical director

430 405

156,161 13

IPA

Oakland Southfield Physicians PC 29200 Northwestern Highway, Suite 325, Southfield 48034 (248) 357-4048; www.ospdocs.com

Jeffrey Margolis president

364 NA

Group practice

Michigan Healthcare Professionals PC 30000 Northwestern Highway, Farmington Hills 48334-3292 (248) 851-3300; www.mhpdoctor.com

Accountable Healthcare Alliance 8338 Allen Road, Suite 104, Allen Park 48101 (517) 336-1400

Robert Jackson president and medical director

264 264

20,000 9

IPA

IHA Health Services Corp. 24 Frank Lloyd Wright Drive, Lobby J2000, Ann Arbor 48105 (734) 747-6766; www.ihacares.com

St. Joseph Mercy Health System, University of Michigan Health System

Beaumont Hospital-Dearborn, Beaumont Hospital-Farmington Hills, Beaumont Hospital-Trenton, Children's Hospital of Michigan, Crittenton Hospital and Medical Center, Henry Ford Health System, Huron ValleySinai Hospital, McLaren Oakland, Sinai-Grace Hospital, St. John Providence Health System, St. Joseph Mercy Health System, St. Mary Mercy Hospital Livonia Beaumont Health, Beaumont Hospital-Farmington Hills, Crittenton Hospital, Detroit Medical Center hospitals, Garden City Hospital, Henry Ford Hospital West Bloomfield, Huron Valley-Sinai Hospital, McLaren Macomb, McLaren Oakland, McLaren Lapeer, Pontiac General Hospital, Port Huron Hospital, St. John Providence Health System, St. Joseph Mercy Oakland, St. Mary Mercy Hospital Henry Ford Wyandotte Hospital, St. Mary Mercy-Livonia, Beaumont Health, St. Joseph Health System, U of M Health System, Mercy Hospital Port Huron

This list of physician organizations encompasses physician hospital organizations and independent practice associations and is an approximate compilation of the largest such groups in Wayne, Oakland, Macomb, Washtenaw and Livingston counties. IPA = Independent practice association. PHO = Physician hospital organization. ACO = Accountable care organization. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the organizations. NA = not available.

B Crain's estimate. Wayne State University Physician Group declined to provide data because of reorganization efforts. C On March 14, the boards of Detroit-based Henry Ford Health System and Jackson-based Allegiance Health signed the final agreement to merge. LIST RESEARCHED BY SONYA D. HILL

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SPECIAL REPORT: AUTO LAW DUSTIN WALSH Senior reporter dwalsh@crain.com Twitter: @DustinPWalsh

Word change puts auto execs’ heads on the dotted line enior executives from Volkswagen AG late last year blamed “rogue engineers” for its device that falsified U.S. emissions results. The top brass at General Motors Co. pleaded ignorance of its ignition switch defect linked to 124 deaths. The federal government plans to end the up-in-arms approach by automakers, and their suppliers, by improving reporting to the

National Highway Traffic Safety Administration. Buried in the 1,300

pages of the Fixing America’s Surface Transportation Act, signed by President Obama last year, the changing of one word is striking fear in automotive executives. The FAST Act simply strikes the word ‘‘may’’ and inserts ‘‘shall” into the procedure that now requires a senior official responsible for safety in a company to sign his or her name to information related to a safety defect reported to NHTSA. In effect, that signature certifies that the senior official has reviewed the report, has knowledge of the defect and that the report is completely factual. Before, the safety reporting rules did not require a signature. “All the major issues we’ve seen in the past few years, you didn’t see one executive step forward and put their head on the line,” said Jennifer Dukarski, an associate attorney at Butzel Long PC in Ann Arbor. “Now a senior official has to be competent and confident, trusting of their engineers that provided details, to put their name on that line. “Given the great public scrutiny over recent recalls, they may have to fall on their sword if something goes wrong. I wouldn’t want my name on that document.” That signature pins culpability onto that official and, theoretically, will eliminate executives hiding behind unawareness, Dukarski said. She said automakers and suppliers need to assess policies and procedures to identify reporting requirements and ensure those responsibilities are taken seriously. The signee will likely be the first person contacted by NHTSA or the U.S. Department of Justice in the event of an investigation. “This is more responsibility than many of those (senior officials) ever bargained for in some cases,” Dukarski said. “This puts a new level of scrutiny on their work, and it’s going to be a challenge to take a more critical and thorough view of reporting.” The new rule is expected to be rolled out by the end of the year, Dukarski said. 䡲

Tech drives change Joint development agreements growing; careful crafting a must By Doug Henze Special to Crain’s Detroit Business

With the Motor City’s ties with Silicon Valley growing, the use of joint development agreements is on the rise. Local legal experts say the contracts smooth ownership issues, but the fast pace of tech innovation and the litigious nature of its largest players are leading to a culture clash, often making the agreements difficult to hash out. JDAs, which allow partners to pool their know-how to create technology neither company could produce alone, have been around the industry for years. But these new players have caused a sharp increase in the practice, said Greg DeGrazia, partner and intellectual property attorney for Warner, Norcross and Judd LLP in Southfield.

“(The use of JDAs) is increasing exponentially,” DeGrazia said. “I probably have seven or eight going right now. I think it’s the future of Detroit — getting these things done.” While the confidential nature of the agreements makes it difficult to get a handle on how much the JDA total has increased in recent years, attorneys who draft them agree the number is on the rise. DeGrazia estimates he did only one or two of the agreements a year in the recent past, although that was partly due to the economic downturn. Karl Hochkammer, partner and head of the information and technology transactions practice at Detroit-based Honigman Miller Schwartz and Cohn LLP, said increased auto-

motive technology is responsible for the increased use. “The biggest difference is the content in automobiles — the infotainment stuff, the autonomous cars — that’s driving a lot of it,” Hochkammer said. JDAs offer a number of advantages for partners that sign on to them. Partnerships spread development costs and increase the delivery speed of the new product. “There’s a branding issue in being first to market,” DeGrazia said. “They all want to be out there and act like they’re the first to market with this technology.” Agreements with partners within the traditional auto supply chain can save time and smooth development, especially where patents exist. Advantages are magnified

when auto companies dive into areas where engineers have little experience — such as new software. “You get to the market quicker than trying to build your own department of programmers or buying a software company,” DeGrazia said. DeGrazia gives the example of Ford Motor Co. and Google Inc. , which are reportedly considering partnering to build an autonomous car. “Ford doesn’t have the software expertise and Google is feeling like, ‘We’re not an automaker,’ ” DeGrazia said. “That’s a winwin situation if that ever goes anywhere.” JDAs are a simpler way for companies to cooperate than setting up a joint venture, SEE JDAs, PAGE 16

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JDAs FROM PAGE 15

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which involves shareholders and the U.S. Securities and Exchange Commis sion, DeGrazia said.

While product development partnerships provide benefits, they also can bring friction. Carefully crafted JDAs can help ease those challenges. One issue is how to divide ownership of “foreground” technology — the product the parties developed together — while separating it from the “background” technology each company brought to the table. “You’re opening up your knowhow to your partner,” said Tom Appledorn, a partner at Honigman. “Unless they’re a trusted partner, you risk exposing your secret sauce.” DeGrazia said protecting intellectual property rights and assuring confidentiality are the two most important things JDAs accomplish. “We’ve had many, many fights in the auto industry, because the (automakers) always want to claim ownership,” DeGrazia said. When partners are from different nations, JDAs help sort out whose laws govern and which company owns the technology in a region. “One company may own it in North America and another company may own it in Asia,” he said. With tech companies joining forces with auto companies on projects, attorneys drafting JDAs are running into new challenges. Companies that have never worked together before have to beware of a culture clash. “Silicon Valley tends to move very fast, and they’re fine with making mistakes,” Hochkammer said. “That is something the traditional automotive manufacturers have not been comfortable with.” Companies such as Microsoft and Google manage intellectual property differently than automakers, DeGrazia said. “They’re very aggressive with their intellectual property, he said. “Google, Microsoft and Apple have something like 10 times the number of patent infringement lawsuits” than the automakers. Dealing with huge tech companies presents a different dynamic for auto companies, which are used to dictating most of the terms of an agreement to their suppliers. “I don’t think (tech companies) view themselves as being subservient to Ford,” DeGrazia said. In some cases, automakers will end up working with much smaller startups, which are able to move quickly with new technology, said Marc Malooley, a partner at intellectual property law firm Brooks Kush man in Southfield. But automakers won’t necessarily have the upper hand there, either, he said. “In some cases, it doesn’t matter if the company is bigger or smaller, because they have a technology the automakers can’t replicate in house or get elsewhere,” he said. But the trade-off can be a stronger partnership, Malooley said. “(Now), the relationship is not so one-sided,” he said. 䡲

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Old homes build new businesses Material from Detroit’s housing demolitions finds new life as guitars, furniture, eyewear By Marti Benedetti mbenedetti@crain.com

ecause Detroit leads the nation in housing demolition, the city is swimming in used wood and glass. What that means is a nearly limitless supply of material for artists and those restoring historic property. Wood from inside walls, baseboards, exterior siding, porches, hardwood floors, paneling, and window frames of blighted houses has caught the fancy of many who see value and beauty in reusing it. Old windows, many with centuryold glass and hardware, also are being tapped to replace the windows of old structures. The number of Detroit-area artists using reclaimed or salvaged wood and glass to make everything from sunglass frames to bar tops to guitars is expanding, and many are making a living out of their craft. Reclaimed wood expert Craig Varterian, executive director of nonprofit Reclaim Detroit , a major salvaged wood supplier and deconstruction training center formerly in Highland Park, said used wood can be had for roughly the same price as new lumber. But it takes skilled manpower to carefully remove it, transport it and prepare it so it can be fashioned into useful objects. Rare, high-end used wood can command a higher price. He said, before a fire recently destroyed Reclaim Detroit’s warehouse, that business was brisk. “There’s an uptick in what we are doing this year. There is lots of activity in deconstruction and reuse.” Reclaim Detroit is a primary supplier of reclaimed wood to Detroit area artists and artists in surrounding states. Varterian said the warehouse contained almost $500,000 in salvaged wood, mill shop equipment, finished goods, field equipment and vehicles when it burned to the ground in a fire in early February. Its temporary home is in a building owned by the Henry Ford Health System on Detroit’s northwest side. Although no agreement has been finalized, discussions continue to redevelop a city-owned former recreation center as Reclaim Detroit’s new home. It is on Piquette Avenue and would cost $2 million to $3 million to redevelop, said planned developer Ed Siegel. Varterian said using “urban wood” to make things is not just a Detroit trend, it is a “Rust Belt trend.” He has clients in Gary and South Bend, Ind.; Cleveland; and Chicago. This winter, blighted houses in Detroit are coming down at a rate of 20 to 120 a week, said Brian Farkas,

LARRY PEPLIN

Amy Swift of Building Hugger in Detroit (above) restores windows and doors from old buildings using pieces of reclaimed wood. Below left, a table made from repurposed wood from Tree-Purposed Detroit. Below right, a guitar from Woodward Guitar Co.

TREE-PURPOSED DETROIT

Detroit Building Authority director of special projects. “We took down 58 in a week. In the summer, the goal is 150 a week. We want to keep our contractors (busy).” The city uses 13 or so demolition companies. Farkas said, as of now, 40,000 more blighted houses need to be demolished. That is a dramatic decrease from last year, when the authority was saying 70,000 needed to come down. This is because as blighted houses are torn down, neighboring houses become more valuable. They are being bought through the Detroit Land Bank, repaired and made habitable again. “Neighborhoods are coming back online,” he said. Demolition is done primarily in neighborhoods that have an abundance of occupied houses. Blocks with one or two houses are a lesser priority unless they contain a house that poses a danger. Ninety-five percent of the houses are not emergency demolitions, Farkas added. The Detroit Building Authority works in tandem with the contrac-

tors, such as Reclaim Detroit, responsible for tearing out reusable materials from the houses. The goal is to avoid parts of the house with lead paint and asbestos, but often asbestos inspectors and abatement specialists need to be called in to handle hazardous materials. “We encourage those relationships formed at the contractor level,” Farkas said. “The more we work together, the more synergy that can develop and the more material that can be captured and diverted from the landfills.” Detroit area artists turning used wood into salable items has created a healthy demand for old-growth wood. Here are a handful of artists, most of whom have been using Reclaim Detroit as their wood supplier. They were asked where they will get wood while Reclaim Detroit is rebuilding its inventory: 䡲 Building Hugger, Detroit: Founded in 2012, Amy Swift and her team specialize in restoring windows and

WOODWARD GUITAR CO.

doors of old buildings. They use reclaimed wood to replace damaged or missing wood pieces and salvaged window components such as pulleys, weights and locks. Both the wood and window components were lost in the Reclaim Detroit fire, but Swift is not worried. “We luckily have a stockpile of wood that should last us a few months,” she said. “Detroit has an endless supply of this material,” Varterian said. 䡲 Homes Eyewear, Detroit: Owner Achille Bianchi has been making sunglasses with wood frames from deconstructed Detroit houses since 2012. He uses a 65-step process to refine the wood. 䡲 LeadHead Glass, Ferndale: Chad Ackley and Derek Smiertka use reclaimed wood and glass from Reclaim Detroit to fashion handcrafted wood and glass terrariums. 䡲 Mutual Adoration, Detroit: Clare Fox and Wayne Maki started making custom furniture and picture frames from old-growth wood in 2013. The couple obtains salvaged

wood through a network of contractors and property owners who want parts of their houses deconstructed. On occasion, they remove the wood themselves. “People are happy for it to go to good use,” Fox said. Their biggest seller is picture frames. “It’s our bread and butter,” she added. The company is profitable: Mutual Adoration’s sales in 2014 were $60,000. Revenue jumped to $140,000 in 2015, and the company already had $70,000 in sales after the first month of this year. 䡲 Tree-Purposed Detroit, Livonia: In a different twist, this company, started by Evan and Kari Burger in 2012, is a sawmill and custom workshop that uses dead and unwanted trees to make natural edge table and bar tops. “What we do with the trees we can’t salvage is grind them up for wood chips that we use for power,” Kari said. One of their projects was the woodworking for the bar top and stool tops at Johnny Noodle King , a restaurant in Southwest Detroit. 䡲 Workshop Detroit: Co-owners James Willer, original founder of Reclaim Detroit, and Kevin Borsay use old-growth structural pine (the wood wall studs behind the plaster) to make high-end custom tables and benches. To give each piece a sense of history, it stamps the street address of the abandoned home the material came from. Workshop Detroit, started in 2013, sources its wood from Architectural Salvage Warehouse of Detroit. Its showroom is in the Fisher building, and its work space is a couple blocks down on Baltimore Avenue. 䡲 Woodward Guitar Co., Wixom: This company belongs to Livingston County Sheriff Department Detective Curt Novara, who makes 12 to 15 hand-carved guitars a year with 100-year-old Douglas fir and other woods such as maple. “Reclaim Detroit had some maple off of a house on Trumbull near the old stadium that I’m using,” he said. Using reclaimed wood for his guitars that retail for $2,000 sets his product apart. “People like the vintage sound of the old guitars. Well, my guitars made of old wood have that same vintage sound.” Last time Novara went to Reclaim Detroit, he bought enough wood to last for at least nine months. “So when I run out, they should be up and running again.” 䡲 Zimnicki Guitars, Allen Park: Gary Zimnicki has been building acoustic guitars made of spruce, maple, rosewood and mahogany for more than 30 years. But four years ago, he started making a small percentage of his guitars from reclaimed wood. His source has been Reclaim Detroit, where he digs through stacks to find maple floor boards for the backs and sides and Douglas fir or black walnut for the top of the guitar. “I have plenty of stock now,” he said. The cost for one of his guitars with either new or reclaimed wood is $4,500 to $6,500. 䡲

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DEALS & DETAILS ACQUISITIONS & MERGERS Continental Automotive Systems Inc., Auburn Hills, a unit of Continental AG, Lindau, Germany, the high resolution 3-D flash lidar business from Advanced Scientific Concepts Inc., Santa Barbara, Calif. This technology will enhance the company’s Advanced Driver Assistance Systems product. Websites: continental-corporation.com, advancedscientificconcepts.com. Benlee Inc., Romulus, a roll-off

trailer company, has acquired the assets of Huge Haul Inc., Big Bend, Wis., a lugger truck and trailer company. Websites: benlee.com, hugehaul.com.

EXPANSIONS Munch’s Supply Co. Inc., New Lenox, Ill., a heating, ventilation and air conditioning distributor operating in Chicago and northwest Indiana, has opened locations at 30000 Stephenson Highway, Unit C, Madison Heights and 5805 Weller Court, Suite C, Wyoming. Website: munchmichigan.com. ASTI Environmental, Brighton, has

opened an office for its real estate incentives and Brownfield redevelopment group at 28 W. Adams Ave., Suite 1001, Detroit. Website: asti-env.com.

NEW SERVICES Business Leaders for Michigan, De-

troit, the state’s business roundtable, has rolled out a new website featuring research and data about Michigan’s competitiveness, information about BLM’s strategies and priorities, along with news and action items. Website: businessleadersformichigan.com.

CONTRACTS Burroughs Inc., Plymouth, a provider

of network check scanning technology, announced that Burroughs SmartSource Micro Elite scanner is now certified with Ranger for Macintosh software by Silver Bullet Technology Inc., Pensacola, Fla., a provider of check scanner interfaces and scanner emulation software. Website: burroughs.com.

Deals & Details guidelines. Email cdbdepartments@crain.com. Use any Deals & Details item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.

CALENDAR THURSDAY MARCH 24

Investigative Journalism in the Age of BuzzFeed. 5:30-8 p.m. Association

for Women in Communications and Detroit Press Club. A professional development program with a panel of reporters: Tresa Baldas, the federal courts reporter for the Detroit Free Press; Chad Livengood, political reporter for The Detroit News Lansing Bureau; and Chastity Pratt, urban affairs reporter, Bridge Magazine. Robin Luce Herrmann, general counsel to the Michigan Press Association, will moderate. Automotive Industry Action Group, Southfield. $25 members, $35 nonmembers, $15 students. Contact: (248) 643-6590; email: info@womcomdetroit.org 2016 Great Lakes Business Intelligence & Big Data Summit. 8 a.m.-5 p.m.

WIT Inc. Program will feature case studies, interactive demos, opportunities to meet with top providers and network. The Somerset Inn Hotel, Troy. $159. Contact: Amanda Mansour, phone: (248) 6415900 ext 244; email: amansour@witinc.com; website: greatlakesbisummit.com. Taste of Leadership Oakland. 4:30-7 p.m. Leadership Oakland. This event promotes networking and connection opportunities. Oakland

County Executive L. Brooks Patterson is the honorary event chairman. San Marino Club, Troy. $32; $250 for a table of eight. Contact: Nancy Maurer, (248) 952-6880 ext.2; email: nmaurer@leadershipoakland.com.

UPCOMING EVENTS The Future of Talent in Michigan. 8-9:30 a.m. March 31. Troy Chamber of

Commerce. The state’s workforce environment will be discussed by a panel of industry experts: Stephanie Comai, director, Michigan Talent Investment Agency; Jocelyn Lincoln, vice president, recruitment operations, Americas Region, Kelly Services Inc.; and Jennifer Llewellyn, manager, Oakland County Workforce Development, with moderator Jennette Smith, editor, Crain’s Detroit Business. Kingsley Inn, Bloomfield Hills. $25 Troy Chamber members, $35 future members. Phone: (248) 641-8151; email: troychamber.com/events. DEC Presents Peter Karmanos. 11:30 a.m.-1:30 p.m. April 14. Detroit Eco-

nomic Club. Karmanos is principal owner and CEO of the Carolina Hurricanes, and chairman/co-founder of MadDog Technology. Townsend Hotel, Birmingham. $45 DEC members, $55 guests of DEC members, $75 nonmembers. Phone: (313) 9638547; email: info@econclub.org.

Women’s Power Breakfast. 7-9 a.m. April 21. Gleaners Community Food

Bank. Brings together more than 600 of the area’s most powerful women. Co-chairwomen are Faye Nelson, vice president public affairs, president, DTE Energy Foundation; Andra Rush, chairman and CEO, Rush Trucking Corp.; Nancy Schlichting, CEO, Henry Ford Health Systems. Eastern Market Shed 3, Detroit. $120 individual; $1,000 table. Contact: Suzette Hohendorf, phone: (313) 923-3535; email: wpb@gcfb.org. Fuel: Detroit. 9 a.m.-5 p.m. April 21. Fuel Leadership. Speakers include Mark Kelly, commander of Space Shuttle Endeavour’s final mission; authors Marcus Buckingham and Mitch Albom; Jacques Panis, president, Shinola; Martha Stewart; Sarah Kay, founder, co-director, Project Voice; others. Sound Board, Detroit. $495 general; $895 VIP. Contact: Jordan Broad, phone: (248) 206-7065; email: Jordan@FuelLeadership.com.

Calendar guidelines. Visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

Girl Scouts of Southeastern Michigan wishes to recognize the 23 women and 6 men that have been nominated for the 2016 “Tough Cookie” Recognitions. They are truly an inspiration to the next generation of leaders.

2016 Honorees

MAGGIE ALLESEE RECOGNITION FOR COMMUNITY SERVICE Honors a woman who has contributed many years of service to the community through personal giving, contributing of her time and offering inspiration to others. Francine E. Pegues NANCY L. PHILIPPART RECOGNITION FOR LEADERSHIP Honors a woman with a proven record of exceptional leadership ability in her professional career and who has demonstrated a commitment to encourage others to take on leadership roles. Anne Doyle “MAN ENOUGH TO BE A GIRL SCOUT” Honors men who have contributed many years of service encouraging and mentoring women’s leadership. They have a desire to create a future ﬁlled with smart and powerful women leaders and have put this passion in to action. John A. Evans Peter M. Keating Gerald W. McCarty II

Brad Simmons Larry E. Steward Dan Varner

“ONE TOUGH COOKIE” RECOGNITION Honors female leaders, mentors and advocates whose leadership and/or community service have positively impacted the workplace and the community. Raquel Garcia Andersen Lori Blaker JoAnn Chávez Prosecutor Jessica R. Cooper Hon. Linda Davis Sandra Epps Bonnie Fahoome Lynne Goodman Sharon L. Harris Suzanne Heath Laura Hughes

Karen Thorn Kaley Mary Kerwin Councilwoman Raquel Castañeda-López Hon. Donna Robinson Milhouse Rep. Candice Miller Margot Parr Laurie K. Prochazka Treger Strasberg Holly Osterholm Swanson Maggie Varney

Our 2016 honorees will be recognized at the annual Cookie Gala on March 30, 2016 at the DTE Energy Headquarters in Detroit.

Cookie Gala Presenting Sponsor

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Detroit chamber begins TV push ahead of RTA plan By Bill Shea bshea@crain.com

The Detroit Regional Chamber is taking to the airwaves in support of the Regional Transit Authority for Southeast Michigan ’s forthcoming ballot proposal that will ask voters to approve a mass transit tax. The chamber has planned a series of television commercials highlighting the lack of effective regional mass transit and how that is a drain on the local economy. “There will be an ongoing information and educational campaign through the summer — all designed to show that Southeast Michigan has one of the worst regional public transit systems in the country and the different aspects of this very real problem facing employers having access to talent and hiring new employees, workers getting to jobs, and seniors and people with disabilities being stranded or with too few options,” Jim Martinez, the chamber’s director of communications, said via email. The first 30-second spot started airing Tuesday on targeted cable networks, the chamber said. The campaign is being paid for by the Detroit Regional Chamber Foundation with support from the Troybased Kresge Foundation. Specific fi-

Deadline nears to enter Cool Places contest Crain’s is still taking applications for its biennial Cool Places to Work in Michigan awards. The competition has two parts: one questionnaire for employers, another for employees. The combined, weighted results of the two will determine who qualifies for Cool Places designation. Best Companies Group of Harrisburg, Pa., supplies all participating companies — regardless of whether they win the Cool Places recognition — with an employee feedback report based on responses to a 72-question survey. The report can help company executives identify strengths and weaknesses in their company culture and practices. To be considered for Cool Places to Work in Michigan, companies must register by April 8. Once registered, companies will be invited to participate in the surveys. Businesses and nonprofits can apply. Applicants must have a minimum of 15 employees working in Michigan and have been in business at least one year, among other criteria. Companies pay a fee based on company size to Best Companies to cover survey costs. The cost ranges from $610 to $895 for online surveying, and $765 to $1,660 for paper surveying. Contact Crain’s Assistant Managing Editor Kristin Bull at (313) 4461608 or kbull@crain.com with any questions regarding the nomination process. 䡲

PHOTO BY DETROIT REGIONAL CHAMBER

The Detroit Regional Chamber says its series of television commercials highlights the lack of effective regional mass transit and how that is a drain on the local economy. nancial details were not disclosed. The RTA in May plans to introduce its regional mass transit plan that will include a November ballot proposal seeking a tax to fund the project across Wayne, Macomb, Oakland and Washtenaw counties. The TV commercials are officially the work of A Coalition for Transit , run by the Detroit office of Lansingbased public relations and nonpartisan political consulting firm Tr uscott Rossman LLC. The commercials don’t specifically endorse the RTA’s to-be-unveiled tax proposal. The plan reportedly is expected to be about a 1-mill property tax increase, which equates to $100 on each $100,000 of a home’s taxable value. “We’re focused exclusively now on a public information and education campaign to highlight the problems facing Southeast Michigan’s regional public transit system,” Martinez said. “A strong, connected regional transit system has been a longstanding priority for the Detroit Regional Chamber and our members to compete effectively across the country and ensure future economic growth and vibrant communities.” The spots were created by Buffa-

lo, N.Y.-based Joe Slade White & Co., named for a noted longtime Democratic strategist who worked on Mike Duggan’s successful write-in campaign for mayor of Detroit. The RTA was created in 2012, after 40 years of failed attempts to do so, with the intent of creating a regional transportation plan and network for the metro area. Michael Ford, the RTA’s CEO, has said the organization’s board is expected to approve the ballot proMichael Ford: RTA posal in July. Ford and other CEO has said the officials board is expected RTA spent to OK a ballot pro- have about a year posal in July. hosting meetings with the public and business, political and civic leaders to get opinions about transit needs and to educate the public about mass transit plans. The RTA has a stated goal of getting a dedicated tax issue on the 2016 ballot to fund what will be laid out in a master plan, which is expected to be a bus rapid transit system. Under a bus rapid transit (BRT) system, buses operate much like a

rail line, with specialized train-like wheeled vehicles with dedicated lanes, priority traffic signaling and higher speeds. They likely would run along Woodward, Gratiot and Michigan avenues. The tax would be the local funding required to access matching federal funding to build and operate a BRT system. The RTA would have to apply for such funding from the federal government, and the process is vigorously competitive and often lengthy. The Southeast Michigan Council of Governments regional planning agency, which deals with federal funding for transit projects, has been handling the BRT study for the RTA as the organization ramped up. If the plan, tax and federal capital funding are approved, the line could be underway by 2018 or 2019, SEMCOG has said. BRT lines are less expensive to build than train lines. Woodward would be the initial line, as recommended in a report commissioned by SEMCOG and re-

leased in fall 2014. It would have 26 stops, take about an hour to travel the entire length and run in a separate median lane with passenger stations. Some downtown stations could be shared with the city’s new M-1 Rail streetcar system under construction. SEMCOG developed the basic BRT plan because it determined that transit improvements must be made along the 27 miles of Woodward — one of the region’s main transit routes since the pre-colonial era — to bolster mobility and access to jobs, connect people with destinations along the corridor, and to fuel economic development along the route. The RTA also is responsible for coordinating mass transit operations and funding across the four counties, including cooperation among established transit agencies such as the Detroit Department of Transportation and SMART bus systems. 䡲 Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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Colorado company to buy Ann Arbor physicians group By Jay Greene jgreene@crain.com

One of the biggest emergency medical groups in Michigan has signed an agreement to be acquired by Greenwood Village, Colo.-based Envision Healthcare Holdings Inc. for about $120 million, according to Envision. Ann Arbor-based Emergency Physicians Medical Group employs more than 500 physicians and other providers; staffs 37 health care facilities in Michigan, Illinois, Indiana, Ohio and Iowa; and manages nearly 1 million patient encounters each year in hospital emergency departments and urgent care centers. Founded in 1976, EPMG contracts with 22 health care facilities in Michigan and several hospitals in Southeast Michigan, including Henry Ford Wyan dotte Hospital and at least eight facilities owned by St. Joseph Mercy Health System. It also operates community paramedicine programs and provides telemedicine services in urgent care and post-acute care operations.

EPMG is expected to contribute annualized net revenue of about $140 million, Envision said. The deal is expected to close in about 30 days. “(We are) celebrating 40 years of delivering innovative and compassionate care, and we found ourselves considering opportunities to further evolve so we are well positioned to best serve our patients for the next 40 years,” Christopher R.H. Newton, M.D., CEO and managing partner of EPMG, said in a statement. Envision owns multiple physician-related services that contract with consumers, hospitals, health care systems, health plans, and local, state and national government entities, officials said. It owns American Medical Re sponse Inc., an ambulance company; EmCare Holdings Inc. , which manages emergency, anesthesiology, radiology, hospitalist and surgery physician services; and Evolution Health LLC, a care coordination services company. 䡲 Jay Greene: (313)446-0325 Twitter: @jaybgreene

Accounting firm president McKervey dies at age 61 By Tom Henderson thenderson@crain.com

Kevin McKervey, president of Southfield-based accounting and consulting firm Clayton & McKervey PC, died March 13 at age 61. A cause of death was not disclosed. McKervey is survived by his wife, Patty, and two children, Michael and Jennifer. Kevin McKervey: He joined the Instrumental in firm in 1990 and Southfield firm’s served as presigrowth. dent since 2012, following the retirement of Don Clayton. He had led the international practice at Clayton & McKervey for years and was instrumental in the growth of the firm. “Kevin and I were business partners for nearly 25 years,” Clayton, who remained chairman of the firm, said in a news release. “During this time, I came to know him as a trusted friend, a confidant, a visionary and a wellrespected businessman and

professional. “I admired his strong leadership style and his courage to step outside the box. As a leader, when it came time to make the call, the team always knew they could count on Kevin to be fair. He was a unique individual and will be sorely missed.” Last June, McKervey appointed his successor, Rob Dutkiewicz, who assumed the role of president on Monday. “Kevin personified professionalism and caring,” Dutkiewicz said. “He was a mentor to many and a friend to all. Everyone at Clayton & McKervey will miss his words of wisdom and guidance. Our thoughts and prayers go out to his family.” Condolence cards may be sent to the McKervey family in care of the Clayton & McKervey office at 2000 Town Center, Suite 1800, Southfield, MI 48075. Donations in McKervey’s name may be made to the B o y s

PEOPLE: SPOTLIGHT Holt named Greenpath president and CEO Kristen Holt, former COO of Detroit-based United Way for Southeastern Michigan, was named president and CEO of Farmington Hills-based Greenpath Debt Solutions Inc., effective April 11. Holt’s predecessor, Jane McNamara, filed a

Kristen Holt

week in Oakland County Circuit Court. McNamara departed last June after the Greenpath board allegedly declined to renew her contract, and COO Donna McNeill has since led the company.

Price to retire as DPS Foundation president Glenda Price, president of the Detroit Public Schools Foundation

since 2012, will retire March 25. Pamela Moore, presi-

& Girls Club of Oakland & Macomb C o u n t i e s , the M e t h o d i s t C h i l d r e n ’ s H o m e S o c i e t y and B e n e f i t 4 K i d s . 䡲

dent and CEO of the Detroit Employment Solutions Corp.

Tom Henderson: 313-446-0337 Twitter: @TomHenderson2

ADVERTISING SECTION

wrongful termination lawsuit against the credit counseling nonprofit last

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CONSULTING

Jennifer L. Dale and Thomas Tilton Director of Program Expansion & Business Development,

Kristine Scheer, Director of Development & Engagement, Cambridge Consulting Group Scheer will focus on working with current and prospective clients to build strategic, comprehensive benefit and insurance plans, reflective of the firm's unique and dynamic needs. Before joining Cambridge, she spent more than 15 years as an independent consultant. Prior to her consulting work, she served as group insurance underwriter at Prudential Insurance Company. Scheer speaks and writes frequently about the Affordable Care Act, benefits program alignment and the exchange marketplace.

Crain’s has moved its complete list of appointments and promotions to www.crainsdetroit.com/peopleonth emove. Guaranteed placement in print and online can be purchased at this website.

Director of Program Operations New Center Community Services Jennifer L. Dale joins New Center Community Services as Director of Program Expansion & Business Development. She has spent more than 20 years leading fund & business development operations as well as community relations, marketing, communications & partnerships. At NCCS she is responsible for identifying, evaluating, analyzing, developing & implementing new opportunities & partnerships. Jennifer is a Leadership Detroit XXXII graduate & was named 40 under 40 by Crain's Detroit Business in 2009. Tony Watkins is now the Director of Program Operations at New Center Community Services, he was previously the Clinical Manager for the Medication Clinics at NCCS. He has been a clinician manager within non-profit and private mental health settings within the Detroit-Wayne County area for 15 years. Tony is a former Law Enforcement Officer with the United States Air Force. Tony earned graduate degrees in Professional Counseling and Social Work with a certificate in Child Play Therapy.

For more information or questions regarding advertising in this section, please call Lynn Calcaterra at (313) 446-6086 or email: lcalcaterra@crain.com

Michigan Colleges Foundation.

Moore was director of the Detroit Workforce Development Department for nearly two years prior to heading DESC. The nonprofit DESC has named COO Jose Reyes as interim CEO.

Crittenton names Dimond Margaret Dimond was named president of Crittenton Hospital Medical Center, replacing acting president Terry Hamilton, who took leadership of the hospital after Ascension Health Michigan

completed the acquisition last year of the formerly independent hosMargaret Dimond pital based in Rochester Hills. Dimond, recruited away from Detroit-based Barbara Ann Karmanos Cancer Institute, begins her new duties May 1. 䡲

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NAFTA

Where they stand

FROM PAGE 1

Democrats

the buying power of U.S. citizens and ensured economic growth. â&#x20AC;&#x153;The basic theory of economics: International trade raises everyoneâ&#x20AC;&#x2122;s standing of living around the world,â&#x20AC;? Grimes said. â&#x20AC;&#x153;Over the last 20 years, the most significant gains may be for the Chinese or Indians who have gained more than the U.S., but the theory holds up.â&#x20AC;? Economic theory says job losses are offset by lower prices gained from increased competition and lower operating costs. Through trade, we get cheaper televisions while focusing on highervalue specialties, Grimes said, such as automotive R&D and software. â&#x20AC;&#x153;Many people that lose their jobs donâ&#x20AC;&#x2122;t think this way, but itâ&#x20AC;&#x2122;s better for their kids,â&#x20AC;? he said. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re absolutely better off through free trade and economic growth through productivity.â&#x20AC;? Michiganâ&#x20AC;&#x2122;s gross domestic product has grown to $417.3 billion in 2014 from $385.3 billion in 2000, only seeing a stumble during the Great Recession. But itâ&#x20AC;&#x2122;s nearly impossible for somebody who has lost a real job to swallow economic theory. While opening up trade creates a larger, more competitive industry at cheaper costs for everyone, manufacturing activity is concentrated in areas like the Midwest and Michigan, said Sean McAlinden, chief economist for the Ann Arbor-based Center for Automotive Research. â&#x20AC;&#x153;NAFTA was a disaster for Michigan â&#x20AC;&#x201D; there are no positives com-

â&#x2013; Bernie Sanders: Wants to reverse NAFTA and other free trade agreements. â&#x2013; Hillary Clinton: Has remained neutral on free trade. Republicans

â&#x2013; Donald Trump: States heâ&#x20AC;&#x2122;ll either scrap NAFTA or renegotiate. â&#x2013; Ted Cruz: Wants to tax imports and recently has been vocal about the negative impacts of free trade but hasnâ&#x20AC;&#x2122;t taken a stand against it. â&#x2013; John Kasich: Has been vocal on his support of NAFTA and voted for it, but if elected would fight harder to enforce provisions to keep jobs in the U.S.

pared to other states,â&#x20AC;? McAlinden said. â&#x20AC;&#x153;The benefits to trade are unevenly distributed. ... Costs in some regions like Michigan are so high in the short run that even benefits in the long run do not make up for them.â&#x20AC;? In 1999, five years after NAFTA was enacted, Michiganâ&#x20AC;&#x2122;s automotive manufacturing employment was 320,600, compared with just 175,600 in December 2015. The Great Recession claimed many of these jobs, but as McAlinden points out, the decline was occurring before the recession. The state lost 132,400 manufacturing jobs between 1999 and 2007, according to Bureau of Labor Statistics data. â&#x20AC;&#x153;Much of the employment loss is due to trade, some to loss of market

share, and some to increased productivity â&#x20AC;&#x201D; in that order,â&#x20AC;? McAlinden said. â&#x20AC;&#x153;Much of Delphi and Visteon moved to Mexico after the spinoffs in 2000. (Free trade) didnâ&#x20AC;&#x2122;t save General Motors, and now assembly is moving to Mexico.â&#x20AC;? GM plans to invest $5 billion into doubling its capacity in Mexico by 2018. Ford is following suit with the build-out of a new plant south of the border, and FCA US LLC is moving certain assembly to Mexico as well. Livonia-based Alpha USA, a family-owned manufacturer of engineered fasteners for the automotive industry, created a joint venture in Mexico last year as a direct result of shifting jobs due to NAFTA, said David Lawrence, vice president and chief administrative officer. â&#x20AC;&#x153;Our customers have moved their production to Mexico and have required us to support those operations or lose the work,â&#x20AC;? Lawrence said. â&#x20AC;&#x153;We created a JV, but weâ&#x20AC;&#x2122;d prefer to have done that as a business strategy for growth and not having to do it because of trade practices that are causing us to do work in other countries.â&#x20AC;? But the largest contributor to the manufacturing job losses in Southeast Michigan remains a debate among economists and researchers. Grimes, for instance, believes free trade plays only a minor role in the regionâ&#x20AC;&#x2122;s manufacturing decline. â&#x20AC;&#x153;The biggest contributor to job losses is productivity growth, not trade,â&#x20AC;? Grimes said. â&#x20AC;&#x153;Without free trade, youâ&#x20AC;&#x2122;d have a few more jobs, but only temporarily. Trade is not a negligible contributor to job losses,

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but plays a much smaller role.â&#x20AC;? U.S. manufacturing productivity, or how efficiently production inputs, such as labor and capital, are being used to produce a given level of output, parts and cars, shot up sharply during the 1990s, growing at an annual average of 4.1 percent between 1990 and 2000. Manufacturers achieve increased productivity by doing more with less, using automation and efficiencies to create more product with fewer workers. Grimes argues that Michigan in the Detroit 3â&#x20AC;&#x2122;s heyday here operated in a bubble economy under greaterthan-average wages in a specialized industry far longer than expected and enjoyed far more during that period. â&#x20AC;&#x153;Michigan enjoyed a monopoly in auto production for decades, just as others had monopolies on steel or the Internet,â&#x20AC;? Grimes said. â&#x20AC;&#x153;The competition and deregulation, among other factors such as trade, put the squeeze on those industries, and theyâ&#x20AC;&#x2122;ve had to transform. One way is to put downward pressure on wages.â&#x20AC;? â&#x20AC;&#x153;Auto plants are making more vehicles with many fewer people than in 2000,â&#x20AC;? Grimes said. â&#x20AC;&#x153;They are producing more with less, and thereâ&#x20AC;&#x2122;s no indication thatâ&#x20AC;&#x2122;s going to stop. We donâ&#x20AC;&#x2122;t want it to stop.â&#x20AC;? But to McAlinden, Lawrence and Marick Masters, director of Labor@Wayne and professor of business at Wayne State University , the negative impacts of free trade need to be countered. Masters said the U.S. needs to incentivize manufacturing to remain

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HOTEL FROM PAGE 1

But Signal says it did much more work than that, at the request of Roberts or his representative: $575,753 worth of it was never paid for, according to a construction lien foreclosure lawsuit filed in December. Liens for unpaid work are not uncommon in real estate, with payment disputes often arising between contractors and property owners . But it’s not just the Signal Restoration lawsuit that some experts are saying is a sign of a bumpy road ahead for the hotel. The EDC, which issued Roberts a $700,000 first-position mortgage in February 2011 and is named as a defendant in the lawsuit, alleges that it, also, has not been paid on its loan. It’s not the first time debt issues have arisen over the site. There was a nearly $81,000 unpaid tax bill on which a lien was filed in November 2013 and resolved in January 2014, according to county records. (Roberts said in an email “there may have been a mistake with the payment” and that “it was corrected once we learned of it.”)

TRAVEL FROM PAGE 3

they want. “The last thing we want to do is frustrate people when they come to the website and force them off,” Lorenz said. “That’s just wasting a lot of money and a lot of time. The website is an incredibly valuable tool — when it is delivered properly.”

‘Better maps’ and more That’s not happening regularly, according to open-ended website feedback provided to Crain’s by the Michigan Economic Development Corp. The research is conducted by Ann Arborbased ForeSee, which measures customer experience and website usability for clients in such industries as retail, health care, consumer products, government and travel. Visitors encountered broken links, incomplete events calendars, overly broad search results and, one user said, “a lot of useless info to sift through.” Variations of the suggestion “better maps” came up repeatedly. The challenge for Travel Michigan is to create a website that can respond to the needs of a diverse audi-

Roberts, 67, says he is confident about the site, formerly known as the Omni Hotel in the Stroh River Place development, and that the legal issues will be resolved. “It’s all going to resolve with most of (the creditors) being satisfied financially, and me being satisfied financially, and that’s that,” he said. In the end, experts said, the hotel at 1000 River Place could end up sold to new owners to repay creditors — if a judge rules in their favor — or its legal owner, Roberts Hotels Detroit LLC , a Missouri entity registered to Roberts, could file for bankruptcy.

Arrived in Detroit Shortly after CNN published an August 2009 report trumpeting the Roberts brothers’ business success, Michael Roberts came to Detroit. And there was a lot of hope surrounding his arrival. “People were excited,” said Mike O’Callaghan, executive vice president of the Detroit Metro Convention & Visitors Bureau . “They said they were investing in the property and were going to restore it to a pretty decent hotel.” Roberts and his brother, Steven

YO U

— who is not named or implicated in the Signal Restoration lawsuit or EDC counterclaim — had amassed a business empire that included TV and radio stations, real estate developments, hotels and other holdings in the Roberts Cos. Its value: $1 billion, the CNN report said. Since then, however, much of it has new ownership: media stations have been sold or shut down; and hotels and other real estate have been sold off to new owners, sometimes in the middle of construction. Jeff Kaiser, managing director in the St. Louis office of CBRE Inc., said his company was retained to sell a number of Roberts’ downtown real estate holdings in that city. “The only new high-rise residential building in downtown St. Louis in forever, 50 years or so, they started it and then didn’t finish it,” he said. That project, formerly named the Roberts Tower, is now the 25-story Tower at OPOP after the unfinished project was purchased in October 2012 in a $16.5 million portfolio deal. Roberts said the 2008 recession prompted “a strategic discussion” to sell off some assets. “We still own strip shopping centers, radio, various other loft mixed-

use buildings and other properties,” he said, declining to disclose the current value of his holdings, or the revenue or profit of the Roberts Riverwalk Hotel last year.

EDC forecloses But in 2011, the EDC saw Roberts as a solid bet to redevelop the Omni Hotel. Roberts, after all, had a strong career in real estate and even politics (he was a member of the St. Louis Board of Aldermen from 1977 to 1985 and was a candidate for St. Louis mayor in 1989). He served on committees and advisory councils for the Federal Communications Commission and the U.S. Department of Commerce, according to his online biography on the website of the Detroit RiverFront Conservancy website. Roberts is on the board. But, according to documents filed in circuit court, two extensions of the EDC’s no-interest, no-payment period were granted on the hotel’s mortgage on Feb. 29, 2012, and a year and a half later on Aug. 22, 2013, with those terms expiring Jan. 1, 2014. The loan’s maturity date remained Feb. 1 of this year. The EDC says in court documents that it is owed nearly $745,000 on the loan, including in-

O MPL S A OYEES A RE

ence of residents who are familiar with the state and out-of-state visitors who are exploring it, said Tim Smith, president and CEO of Detroitbased creative firm Skidmore Studio. “You have the user first in mind” with any successful website, Smith said. That is followed by a clean, simple design; navigation that anticipates what a user will be looking for and making those items easy to find; and, in Michigan’s case, better integration of the popular Pure Michigan campaign. “Other than the Pure Michigan iconography and the brand mark, it makes some attempts at doing that with typography, but it doesn’t carry the brand,” Smith said. Ironically, emphasis on the state’s $33 million Pure Michigan marketing campaign has kept the state from investing in its travel website: “Because we’ve been putting our resources into other marketing efforts,” Lorenz said, “we haven’t kept up with the time and changed with the new technology.” He said he doesn’t remember when the tourism website last was redesigned, but for years it has been subject to so many small, back-end adjustments that future technical fixes aren’t possible.

Travel Michigan has tried to jumpstart the project at least twice before. The request for proposals that produced the Miles Media contract was the third such request in more than a year.

Keeping the biz home? Miles Media won the current website contract over 21 other companies that submitted bids, including 12 based in Michigan. At least two others have done work for the state — MRM/McCann, based in Birmingham, whose sister advertising firm McCann Erickson is the agency of record for Travel Michigan and produces the Pure Michigan ads, and Lansing-based Gravity Works Design LLC, which redesigned the official state government site, Michigan.gov. Critics say the state should have found a Michigan-based company to do Michigan marketing work, though Lorenz said the decision was based on the recommendation of a committee that evaluates proposals based on both price and value. The committee, which included marketing staff and industry professionals, considered only bid amounts of finalists — a process

O T N

Lorenz called standard in the industry, to avoid biases or favoritism when choosing a vendor. Smith said Skidmore Studio saw the state’s request for bids and opted not to submit one, saying the process can cost a bidding firm at least $100,000 to prepare a proposal and the chances of landing a government contract are slim. Regardless, Smith said, the choice of vendor is hard to defend. “We really do need to invest in the state, but they don’t see that their own actions contradict that very message,” he said. “They’re not investing in Michigan firms, even though Michigan firms bid on it.”

Field experience Roger Miles, founder and CEO of Miles Media, bought the company in the 1990s. It had its start as a producer of travel brochures and pamphlets, the kind often found in hotel lobbies. Today, 90 percent of its work is digital, said Doug Luciani, Miles Media’s communications and branding vice president. The company employs about 200 people and has more than $50 million in annual net revenue, Luciani

terest. Within three weeks of Signal Restoration filing its Dec. 7 lawsuit against Roberts in Wayne County Circuit Court, the EDC called in the $700,000 loan. Now it wants its money back, too.

Insurance disputes Another looming question: What happened to $800,000 in insurance payments? That’s a question Signal Restoration has about insurance claim payments allegedly made to Roberts by New Jersey-based Chubb Group of Insurance Cos.

In its lawsuit, Signal says there was a “direct pay” clause in its contract with Roberts Hotels Detroit LLC, which is the Missouri ownership entity. That clause stipulates that Roberts “agreed to authorize and direct its insurance carrier to include Signal’s name on all insurance drafts for all insurance work” at the hotel, the lawsuit says. But Chubb included Signal on just one payment — one check for $7,200 — before it is alleged that it was “directed by RHD (Roberts Hotels Detroit) and Roberts to cease any further payments to Signal,” according to the lawsuit. The lawsuit also alleges Roberts Hotels Detroit and/or its representa-

E L I

said. That figure is projected to grow by 10 percent in the next year. Miles works exclusively with the tourism industry. Clients include more than a dozen state tourism departments, along with regional visitors bureaus, international travel agencies, resorts and airports. It has not worked directly with Michigan before, said Luciani, who added that he has seen Pure Michigan ads. However, the company has worked on behalf of the state through Brand USA, a public-private organization that works with the tourism industry and the federal government to market the U.S. as a vacation destination to international travelers. “The current website is not only dated in design and content, but performs only modestly in seasons outside of summer,” the company wrote in its proposal. “The site is backwards-looking in its key capabilities and features around content, personalization, measurement, monetization and social media integration.” Miles Media will hire Brightonbased digital marketing agency TwoSix Digital as a subcontractor, though the scope of work and subcontract value have not yet been

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tives “has used, or intends to use, the insurance proceeds for other improper purposes.” Roberts denies that in court filings. He says much of the money was spent repairing Signal’s work, which he said was unauthorized. Signal is being represented by Birmingham-based law firm Kostopoulos Rodriguez PLLC. Dino Kostopoulos, managing partner of Kostopoulos Rodriguez, denied in a statement that Signal did work outside of what was requested. “All of the emergency work performed by Signal on the Riverwalk Hotel was authorized by the owner or owner’s representatives,” he said. And a third financial dispute at stake: A $2 million second-position mortgage issued by Blackstar Finan cial LLC, another Missouri entity. Signal claims in its lawsuit that the mortgage, issued in January 2012 with a maturity date of February 2020, “may be a sham and given for no value.” Legal and mortgage experts said there are uncommon elements to the mortgage, documents for which were apparently written by Roberts’ daughter, Jeanne R. Johnson, and the issuing entity for which is registered to her husband, Jay

Christian Johnson. Less than a year after it was registered with the county, the mortgage term was amended. The current term is 40 years, with it maturing on Feb. 1, 2052, according to documents filed with Wayne County. “It is highly suspicious that a legitimate, arms-length lender would extend a commercial mortgage term an additional 32 years, and do so without any expressed additional consideration,” said Kenneth Neuman, managing partner of the Neu man Anderson Grieco McKenney PC

law firm in Birmingham. But Roberts says the mortgage is legitimate. “It’s a bona fide mortgage that sits on the property,” Roberts said. “I negotiate very good terms — I was able to borrow $700,000 with no interest and no payments.” He also says the default on the first EDC mortgage is a misunderstanding. He says it was automatically put into default when the Signal lawsuit was filed, and that he had been in discussions with previous executives with the DEGC about continuing the no-interest, no-payment terms of the loan. “We were never informed in writ-

ing or by phone that the loan was due,” he said. “The only time I saw anything was at the point they sent us a letter a few months ago that we were in default and that we owed interest for a year. Boom. It was like a cliff.” The EDC said in a statement that the loan was made through its Casino Development Revolving Loan Program, which makes loans primarily to small businesses in the central business district, the east riverfront and some areas of the Woodward corridor. “Since being named as a defendant in Signal’s lawsuit, the EDC has taken, and will continue to take, appropriate steps to protect its collateral position,” it said. The EDC is being represented by Detroit-based law firm Kotz Sangster Wysocki PC. Messages left last week with Lawrence Walker, the Detroit-based attorney representing both Roberts and Blackstar Financial, went unreturned.

A troubled location? Developed nearly 30 years ago as the River Place Inn as part of the 25acre Stroh River Place project, the Roberts Hotel sits on land formerly owned by Parke-Davis & Co., the for-

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mer Detroit-based pharmaceutical company. The initial development of the hotel perhaps was an answer to a problem that didn’t exist, said Ron Wilson, CEO of Troy-based Hotel In vestment Services Inc. Shortly after it opened, he came to the hotel when it was still owned by the Stroh family and performing poorly. “The hotel, as beautiful as it was, was not the type of hotel you would have built at that time, in that location,” Wilson said. Occupancy rates were 50 percent or less. It got to the point where he recommended that the Stroh family close the hotel. It was, eventually, mothballed from 1992-1994. Crain’s reported that the hotel reopened in May 1994 by Grand Her itage Hotels . A few years later, in 1998, it was purchased by what was then Omni Hotels Corp. of Irving, Texas, in an estimated $6 million deal. Roberts then purchased the hotel from Omni in November 2010. So what’s in store for the site? Roberts denies rumors that he has been quietly attempting to sell it, although the hotel could end up on the market to satisfy the EDC or Signal Restoration debts, depending

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PACE FROM PAGE 3

recycling center, purchased LED lights and began working toward becoming a zero-landfill business. Its annual electric bill dropped to $139,000 from $205,000. Michigan Solar Solutions of Commerce Township and Dembs Roth Construction Co. of Plymouth worked on the Powers project. PACE is one of two programs in Michigan that help businesses and home owners finance energy-efficiency and renewable-energy projects. The other program, geared more for smaller businesses, schools, municipalities and residential home owners, is called Michigan Saves. “We back the loans in case people default, up to $30,000, at rates less than 5 percent with longer terms,” said Mary Templeton of Michigan Saves in Lansing. “We work with contractors who talk with owners about financing options.” Like PACE, Michigan Saves works closely with DTE Energy Co., Consumers Energy Co. and other utilities to develop energy-efficiency programs and incentives, Templeton said.

Over the past four years, Michigan Saves has helped 403 customers with $12.8 million in mostly energy-efficiency projects, Templeton said. Under PACE, which has been approved in 32 states, including Michigan in 2010, property owners can receive long-term loans for energy upgrades at fixed interest rates by working with municipalities to repay the loans through their property tax bills. Michigan’s Lean and Green PACE program is being promoted by Andrew Levin, the son of U.S. Rep. Sander Levin, and president of Levin Energy Partners LLC. Levin is the former deputy director and acting director of the Michigan Department of Energy, Labor and Economic Growth in the Gov. Jennifer Granholm administration. In Michigan, PACE has been somewhat limited because it’s a new and requires local governmental taxing bodies to approve the program for businesses in their jurisdiction, said Robert Mattler, managing director in Michigan of PACE Equity LLC, a national PACE development and finance company. “Many banks are not that familiar yet with this alternative financing mechanism, and local jurisdic-

how court proceedings develop. Matt Lester, founder and CEO of Bloomfield Township-based Princeton Enterprises LLC, which has bought or is under contract to buy a pair of nearby properties — the Talon Centre office building and the 301-unit Stroh River Place apartments — said the hotel could use some work. “The bones of the building seem very solid to the naked eye, and the grounds have tremendous potential, but let’s be honest, it needs help.” The best use for the site may be apartments or condominiums, he said. “A successful hotel is perhaps possible, but I don’t believe the Roberts hotel is in an ideal location for hospitality, particularly in light of the current hotel development and future planned development in the CBD.” Roberts, though, remains optimistic about the future of the hotel and resolution of the litigation. “These businesses don’t make money for five or six years. It takes a while,” he said.“To be in Detroit on top of that, which is a great city but has its challenges, we are just trying to do the right thing. 䡲 Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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decided. Dave Serino, TwoSix Digital’s founder and strategist, said his company is a small consulting firm that would not have bid on the project itself. TwoSix Digital and Miles Media have collaborated on projects dating back 10 years, Serino said, including marketing work in Louisiana and New Zealand. Serino’s background is in the tourism industry. He said he helped develop a website for the Ann Arbor regional convention and visitors bureau in the mid1990s as its marketing director and later worked on an early email marketing program for the state. TwoSix Digital was founded in January 2014. It offers clients help with strategy and digital and social media platforms. “We are going to be the local experts” on the website project, Serino said. “Miles has all the tools, all the expertise and the development end, and we’re bringing our local relationships and our local expertise.” 䡲

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tions usually prefer to have a developer or building owner show their interest for such financing before opting in,” Mattler said. Improvements that qualify for financing include upgraded heating and cooling systems, LED lighting, savings on water usage, solar panels, wind turbines, and basic upgrades to windows and doors. Last year, Levin persuaded Bloomfield Township to approve PACE for its businesses, said Leo Savoie, township supervisor. “Detroit Skating Club asked us to participate, and our feeling is if we can set up a program that doesn’t cost the township money and helps commercial owners, why not do it?” Savoie said. The Detroit Skating Club is planning a $1 million investment in the next couple of years to upgrade its arena and parking lot lighting systems to LED lighting, said Jerod Swallow, managing director of the nonprofit arena in Bloomfield Hills. “We are always trying to improve the building and keep costs down for our members,” Swallow said. Swallow said the project — which also includes a 150-square-foot

rooftop solar panel — is hoped to be completed by the end of 2018 and help cut electricity costs of $20,000 per month by 30 percent. ABM Industries Inc. is advising the arena. “Our electricity savings will pay for the project and free up cash for other projects,” he said. “It’s really a great program.” Levin has been able to persuade more than 18 counties in Michigan to approve PACE. So far, in Southeast Michigan, Levin has persuaded Wayne, Macomb and Washtenaw counties to participate along with eight municipalities in other counties, including Southfield and Troy. Kenneth Randazzo, DTE’s manager of energy optimization and energy partnership, said PACE and Michigan Saves are financing options for customers. Last year, DTE processed more than 8,000 applications for business customers but had only about 100 who went through the programs. “Some may have gotten financing from their own bank,” Randazzo said. “It is underutilized.” 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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witness after Sturman was charged in 1987, testifying that Sturman hid FROM PAGE 1 money in Swiss bank accounts and that Olsafsky was ordered to destroy took control of a distribution net- documents. The trial ended with work from an infamous, pioneering Sturman convicted and sentenced pornographer. to 10 years in prison — where he Now, rivals have absorbed revenue would die in 1997. that once went in Olsafsky’s pocket. “I think everybody went on their “Pornography is free now,” said merry way,” Rosfelder said. “ApparentTom Nardone, whose ly, Jim learned well and Troy-based PriveCo Inc. was a smart enough guy sells adult products to parlay what became online. “That business his into something very has really disappeared, lucrative.” especially with the adOlsafsky’s shops sold vent of the Internet. pornographic movies, There’s only a few still magazines and offered around.” coin-operated peep Years ago, Olsafsky show booths where was awash in cash. He customers could prihad so much money vately watch videothat he bought a $60,000 taped porn. MARK KOTILA/SYLVIA KOLASKI timeshare in Mexico The stores soon ran and never visited. So Artists’ illustration of into trouble — trouble much cash that his $3 James Olsafsky, who ran an that later helped Olsafmillion, 19-acre Malibu extensive network of adult sky limit Michigan’s estate overlooking the bookstores. obscenity laws. Pacific Ocean had its In October 1991, poown name — Villa Vista lice officers launched an Oceano — and celebrity boarders. undercover operation and raided Mariah Carey leased it, and alternative stores in Waterford Township, Pontiac rock band Stone Temple Pilots record- and Hazel Park. Officers seized explicit ed the album “Shangri-La Dee Da” magazines and videotapes and traced there, according to a 2007 Los Angeles the products to Olsafsky’s warehouse Times article. Olsafsky had so much in Livonia, where they found magacash he gave an ex-wife $20,000 a zines and videotapes. week in alimony just to go away. Olsafsky fought back. All thanks to peep show booths In 1993, he won when the Michi and adult bookstores, a relic of metro gan Appeals Court ruled the state’s civil obscenity law was overbroad Detroit’s economic underbelly. “That man represents millions of and unenforceable. Olsafsky’s empire soon grew and unsatisfied lives. It’s a tragedy he was so successful,” said former Ypsilanti his lifestyle reflected riches generatMayor Cheryl Farmer, who battled ed by the XXX trade. He bought a $60,000 timeshare in Olsafsky years ago while trying to Los Cabos, Mexico, around 1990 — close his adult bookstore. Olsafsky wouldn’t comment to then never visited it, according to Crain’s about his career or recent court records. In 1997, he bought Villa Vista troubles. “He’s had a fascinating career, but Oceano. The gated estate features a with that came a lot of pain,” wife 7,000-square-foot Mediterranean Linda Olsafsky told Crain’s. “He is villa with a pool, tennis court, gym, arboretum and horse stables, acburned out.” The porn career of James Olsafsky cording to a real estate listing. By then, Olsafsky made enough dates to at least 1971. That’s when he was living near Cleveland, working money to buy a Villa Vista Oceano as a bookkeeper for Reuben Stur- every year. He owned a stake in 22 adult man, who was considered the world’s largest distributor of pornog- bookstores, two wholesale companies and real estate, according to raphy in the 1980s. Sturman owned a far-flung em- court records. In 1998, he earned pire, including 13 businesses in more than $2.7 million. Olsafsky’s success surprised RosMichigan, which generated millions. Officially, Olsafsky was bookkeeper felder, the former IRS agent who for about 20 bookstores from 1971 to spent two decades investigating 1984. Unofficially, he was ordered to Sturman’s business practices and destroy records subpoenaed by a fed- Olsafsky’s role. “(Olsafsky) was basically an ineral grand jury, according to Olsafsky’s significant part of a very big operatestimony in a federal court case. By the mid-1980s, with the feds tion,” Rosfelder said. “He was just in closing in on a tax evasion indict- the right place at the right time and ment against Sturman, Olsafsky took kept the ball rolling.” Olsafsky had enough money to over the Cleveland porn king’s Michigan distribution network, according afford a costly divorce. In August to the 2003 book Reefer Madness: Sex, 1998, Olsafsky filed for divorce from Drugs, and Cheap Labor in the Amer- Georginna Olsafsky after 20 years of ican Black Market by investigative marriage. She got $20,000 a week. He got the peep show booths. journalist Eric Schlosser. Temporarily. “We basically watched while (Sturman) tried to spin off the busiLegal battles ness enterprises to various manHis network of bookstores largely agers and trusted people,” Internal Revenue Service investigator Richard escaped the wrath of Oakland Rosfelder told Crain’s. “His expecta- County’s prosecutor in the 1980s, tion was they would continue to said L. Brooks Patterson, now Oakfunnel money back to him.” land county executive. Olsafsky was a key government He remembered Olsafsky and his

PEEP

bookstores, particularly the Waterford Township location on West Huron Street. “We raided it a couple times because underage people were walking out with some pretty hardcore magazines,” Patterson said. “It was nothing that created any public outcry for law enforcement.” The most damaging fight for Olsafsky came in Washtenaw County. Farmer, the former Ypsilanti mayor, heard complaints from residents around March 2000 about alleged illegal activity at the Michigan Avenue Books and News adult bookstore in the heart of the city’s business district, in which Olsafsky had a financial stake. She pushed for an undercover investigation. Nothing happened until the bookstore hung a “Help Wanted” sign in the window. “An officer answered it,” Farmer told Crain’s. The investigation was productive. “It looked like they were keeping double books, and there was prostitution activity in the basement,” Farmer said. “There was some undercover video, I do remember,” Washtenaw County Prosecutor Brian Mackie said. The investigation expanded, Farmer said, after police started probing other stores tied to Olsafsky in Michigan. Investigators executed 26 search warrants across Michigan and Ohio, seized thousands of documents and $545,000 in cash, according to court records. In a settlement, the Ypsilanti store was closed and the land transferred to the city. As part of the global settlement that resolved additional civil cases, peep show operations were shut down at 16 other Olsafsky-related stores by February 2001. The deal was costly. The Michigan peep show booths posted 70 percent profit margins and generated $1.49 million in revenue in 1998. In all, the investigation led to three stores closing and cost Olsafsky more than $3.9 million in revenue, according to a court filing. Olsafsky’s income kept falling in 2000, tumbling more than 61 percent to $1,054,019. Most of that money — $823,000 — went to his ex-wife. A year later, his income slid to $666,980. In a court filing, Olsafsky blamed the drop on a loss of market share to competitors in certain areas and “a loss of market share to Internet providers.” Guys like Internet entrepreneur Nardone of PriveCo, who helped fuel the drastic swing in the adult bookstore business.

Hardcore competition Nardone witnessed its impact on mom-and-pop porn shops, particularly in metro Detroit. In 1998, the year Olsafsky filed for divorce, Nardone launched what would become PriveCo. The reputation of peep show booths and adult bookstores helped inspire him. “The reason I started my company is, basically, the embarrassment of having to go into those places,” Nardone said. “The seediest one I went SEE NEXT PAGE

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CRAIN’S DETROIT BUSINESS www.crainsdetroit.com Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Director, Digital Strategy, Audience Development Nancy Hanus, (313) 446-1621 or nhanus@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Managing Editor/Custom and Special Projects Daniel Duggan, (313) 446-0414 or dduggan@crain.com Assistant Managing Editor Kristin Bull, (313) 446-1608 or kbull@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Senior Editor Gary Piatek, (313) 446-0357 or gpiatek@crain.com Research and Data Editor Sonya Hill,(313) 446-0402 orshill@crain.com Editorial Support (313) 446-0419; YahNica Crawford, (313) 446-0329 Newsroom (313) 446-0329, FAX (313) 446-1687 , TIP LINE (313) 446-6766

REPORTERS Jay Greene, senior reporter Covers health care, insurance, energy, utilities and the environment. (313) 446-0325 or jgreene@crain.com Chad Halcom Covers litigation, the defense industry and education. (313) 446-6796 or chalcom@crain.com Tom Henderson Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho Covers real estate, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Robert Snell, reporter Covers city of Detroit and regional politics. (313) 446-1654 or rsnell@crain.com Lindsay VanHulle, Lansing reporter. (517) 6572204 or lvanhulle@crain.com Dustin Walsh, senior reporter Covers the business of law, auto suppliers, manufacturing and steel. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com

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FROM PREVIOUS PAGE

into 17 years ago on Eight Mile had a peep show. I’ll never forget it. Someone yelled, ‘We need a cleanup in Booth 3!’ I couldn’t get out of there fast enough.” By 2003, Olsafsky’s empire was down to 17 adult bookstores, the wholesale businesses and real estate. “This decline has been brought about through adverse governmental action and changing market conditions, by external factors outside the control of (Olsafsky),” his lawyer wrote in a court filing. Olsafsky didn’t see the value of the Internet, Nardone said. “I’m the reason this guy is hurting,” he said. “My $4 million in sales a year came out of his pocket.” While rivals like Nardone innovated, Olsafsky tried to combat the drop in income and changing market conditions by expanding his empire. Starting in 2009, Olsafsky and a partner bought a chain of stores in Georgia and other southern states, according to court filings In September 2011, Olsafsky and a partner bought six bookstores — three in California, two in Colorado and one in Washington. Olsafsky has remarried and lives quietly in the background of a controversial industry. “When I met him, I asked him what he did for a living. He said ‘I’m in the adult bookstore industry.’ I said ‘let me ask you two questions: is there anything to do with children or hurting women?’ He said ‘absolutely not.’ “Then I said ‘I don’t really care,’ ” his wife added. “As long as you’re legitimate and pay your taxes, I don’t care.” The exact scope of Olsafsky’s empire is unclear. But in 2012 he had an interest in more than 32 adult bookstores — some with colorful names like Love Shack or Inserection — in Ohio, Louisiana, Alabama, Florida, Georgia, Tennessee and Rhode Island. The six Michigan bookstores, meanwhile, are in Chesterfield Township, Roseville, Waterford Township, Taylor, Mt. Pleasant and at the corner of Eight Mile and Dequindre roads in Hazel Park— where every Tuesday is “Dude’s Day,” and designated items are on sale to male customers. The expansion preceded years of legal battles, including a fight with partners Olsafsky accused of squeezing him out of the company. Partner Linda Dedvukaj of Rochester Hills sued Olsafsky in November 2013, alleging he was using

their limited liability company for his own benefit and failing to make payments. The Oakland County lawsuit was dismissed in 2014 after Dedvukaj was given access to the company’s bank accounts. Olsafsky, in return, sued Dedvukaj and her husband, Ded, alleging they seized control of three companies through fraud and after he was unable to meet a demand for $72,000. The couple’s lawyer accused Olsafsky of fraudulent actions before the case was dismissed in April 2014. The couple’s lawyer declined to talk about Olsafsky or the case and refused to make her clients available for an interview. Court files, however, indicate the fight ended with Olsafsky giving up his ownership in 19 southern stores. “My husband’s biggest error was trusting the wrong people and giving too much,” Linda Olsafsky said. In 2013, Olsafsky was sued by several companies that supplied adult entertainment videos, clothes, sex toys and costumes. They said they weren’t getting paid. In July, Olsafsky was ordered to pay $1.6 million, according to federal court records. In November, one of Olsafsky’s former companies, Gulf Coast Visu als Management Co. LLC, was sued for breach of contract in federal court in Detroit by peep show booth repair firm XXX International Amuse ments Inc. The lawsuit alleged a service contract was canceled and equipment damaged, according to court records. A Gulf Coast lawyer has denied the allegations in a court filing. Meanwhile, collecting the $1.6 million judgment could be a daunting task, said Abraham Singer, the suppliers’ lawyer. “I don’t know why he didn’t pay. I think somewhere he has the money,” Singer said. “The challenge is going to be finding it. He always prepared for the day that he kind of had to hide from reality.” Olsafsky isn’t hiding in the Malibu mansion. The ex-wife got the estate in the divorce. These days, Olsafsky is living in a $678,000 home in a Plymouth Township subdivision. “He’s retired,” Linda Olsafsky said. “He doesn’t want to do this anymore. It’s not profitable.” 䡲 Robert Snell: (313) 446-1632 Twitter: @robertsnellnews

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: American Center for Mobility............................7 Atomic Chicken ...................................................3 Brooks Kushman PC .........................................16 Building Hugger..................................................17 Butzel Long PC ..................................................23 CIG Capital Advisors.........................................10 Clayton & McKervey ........................................20 Detroit Building Authority................................17 Detroit Economic Development Corp. .............1 Detroit Free Press...............................................8 Detroit Media Partnership ................................8 Detroit News .......................................................8 Detroit Regional Chamber ...............................19 Emergency Physicians Medical Group..........20 Homes Eyewear .................................................17 Honigman Miller Schwartz and Cohn LLP ..10, 15 Invest Detroit ......................................................5 LeadHead Glass .................................................17 McLaren Healthcare .........................................10 McLaren Oakland. .............................................10

MSX International ..............................................4 Mutual Adoration ..............................................17 Newspaper Guild of Detroit Local 34022 .......8 Oakland Physicians Medical Center ................9 Pontiac General Hospital .............................9, 12 Powers Distributing............................................3 Property Assessed Clean Energy......................3 Reclaim Detroit ..................................................17 Regional Transit Authority for SE Michigan ..19 Roberts Riverwalk Hotel.....................................1 Roxbury Group.....................................................5 Signal Restoration Services...............................1 Simon Stella and Zingas....................................11 Travel Michigan....................................................3 Tree-Purposed Detroit......................................17 TwoSix Digital....................................................22 Warner Norcross & Judd LLP...........................15 Woodward Guitar ..............................................17 Workshop Detroit..............................................17 Zimnicki Guitar...................................................17

CHICKEN FROM PAGE 3

their plans to their mutual friend Moloney, who thought they sounded very similar. So he introduced them, and the trio hatched Atomic Chicken, their so-called “chicken with an attitude.” The restaurant’s menu has morphed into not only chicken and waffles, but a chef-driven, artisanal chicken place with a healthy component and a lot more thought and prep going into the food, Reyner said. “We want to do a fast-casual concept … where you’re getting a high-quality product at an affordable price (and) where when you only have a half-hour for lunch you can get in and get out.” Fast-casual restaurants offer counter service and usually offer seating, said Rachel Royster, senior coordinator, editorial content at Chicago food research and consulting firm Technomic Inc., in an email. They feature higher-quality food and better ambiance than fast food restaurants, with check averages generally ranging from $9.50 to $12. Prime examples include Chipotle Mexican Grill Inc. and Panera Bread Co. Atomic Chicken’s first location, set to open early next month in Clawson, hits those marks, Royster said, even though it will be a carryout-only restaurant initially, given its setup. The owners purchased the former Faym-Us Chicken building,

25 with its vintage fiberglass chicken perched on the roof, for an undisclosed amount. And yes, the chicken is staying, they said. The New Center location in Detroit, leased from the building owner who also owns Roby Shoes on the same block, will have a more elaborate design and seating for about 40. The restaurant was a fully functioning Popeyes up until last spring, and all of the equipment is still there, Moloney said. “The neighborhood we’re going into is not going to be the same neighborhood it will be in 2017; we want to reflect that,” Reyner said.

Chicken everywhere Atomic Chicken is the second fast-casual chicken restaurant setting up in Detroit’s Midtown area. As Crain’s reported in January, local chef Zack Sklar is bringing a spicy Memphis classic to Midtown with the opening of a Gus’s World Famous Fried Chicken franchise at Third Street at West Alexandrine Street. “What Zack is doing with his place and what we have envisioned are totally different,” Baldridge said. “His is more of a classic, Southern fried, where ours is going to be more culinary, chef-driven.” Even outside Midtown, chicken and waffles are putting down deeper roots in Detroit. Kuzzo’s Chicken & Waffles on northwest Detroit’s Avenue of Fashion has seen lines out the door in its first year in business. 䡲

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WEEK

ON THE WEB MARCH 12-18

Art Van to build Canton Twp. store across from Ikea

Detroit Digits

The new ranking of Wayne State University Law School out of 149 law schools nationwide, according to the latest U.S. News & World Report Best Law Schools list. WSU climbed eight spots since last year, from 105th to 97th, passing

rt Van Furniture plans to

construct an 80,000square-foot, two-story showroom in Canton Township, directly across from Ikea. The new site will be the first new Art Van store the company has built in Michigan in 13 years, a spokeswoman said. The Warren-based company has purchased the 3.61acre property at 41601 Ford Road.

COMPANY NEWS 䡲 Aichi, Japan-based Omron Automotive Electronics Co. Ltd., which

has sales and marketing offices in Novi, was expected to plead guilty in Detroit and pay a $4.55 million fine for rigging bids on the prices of power window switches on the Honda Civic. 䡲 Plans moved forward for Jackson-based Allegiance Health to join Detroit-based Henry Ford Health System as part of a new affiliation agreement, AP reported. The health systems said their boards had approved a definitive agreement and the deal should close in April. 䡲 Detroit-based Huron Capital Partners LLC added Beavercreek, Ohio-based Dan German Orthodontics to its dental platform company, Spring & Sprout Dental Holdings Inc.

䡲 Romulus-based roll-off trailer company Benlee Inc. acquired the assets of Big Bend Wis.-based Huge Haul Inc. in an all-cash transaction. Terms were not disclosed. Huge Haul manufactures roll-off hoists and load luggers for waste management trucks. 䡲 Herman Gray, president and CEO of the Detroit-based United Way for Southeastern Michigan, was in Washington, D.C., Friday at a White House forum to speak on the agency’s use of Social Innovation Fund support. 䡲 Royal Oak-based Axle Brewing Co. plans to open a taproom and beer garden in Ferndale this Labor Day weekend to serve as its “public face.” Final site plans will be presented to the Ferndale Planning Commission in April. 䡲 New York-based In Our Backyard opened an office in Detroit’s New Center area. The nonprofit combines online fundraising with community organizing to support citizen leaders in small projects. 䡲 An activist investor, New York-based Moab Capital Partners LLC, called for the firing of Perceptron Inc. Chairman and interim CEO Rick Marz, among sweeping management changes, as the Plymouth metrology equipment supplier struggles with profitability. 䡲 The Palace of Auburn Hills has invested in technology that lets fans find the shortest line for con-

A numbers-focused look at last week’s headlines:

Michigan State University College of Law, which fell from No. 94 to 100. The University of Michigan Law School is tied for eighth.

250,000

The approximate weight in pounds of the first steel roof truss installed on the new Detroit Red Wings arena. Olympia Entertainment of Michigan has announced that so far 3,500 pieces of structural steel and 130 pieces of precast concrete have been placed, 27,000 cubic yards of foundation concrete have been poured and 70 foundation piers have been drilled.

3.25

The proposed percent increase in water rates Detroit residents may experience, which would be the lowest increase in a decade. City water officials said they minimized rate increases by lowering overall contract costs and improving collections from delinquent customers.

cessions or bathrooms. Integrated now within the Detroit Pistons’ official app is proprietary technology from Detroit-based WaitTime. 䡲 Grey Ghost, a new meat-centered restaurant and cocktail bar, has found a home in Midtown Detroit in a newly announced space to open this summer at 47 E. Watson St. — the former home of Ye Olde Butcher Shoppe. 䡲 Dan Gilbert’s Bedrock Real Estate Services LLC has purchased the 1900 Saint Antoine building for an undisclosed price. It is expected to be fully occupied by this summer with a soon-to-be-announced tenant. 䡲 The Troy-based Kresge Foundation is awarding $1.5 million in Kresge Innovative Projects: Detroit grants to 21 nonprofits for projects or planning efforts to improve city neighborhoods. 䡲 FoodandWine.com put Ann Arbor’s Zingerman’s atop its list of 22 best American delis, calling it “a full-on mini-empire … epitomized by a glorious selection of sandwiches and Jewish comfort foods.”

OTHER NEWS 䡲 The Michigan House approved $48.7 million in supplemental aid for the struggling Detroit Public Schools system after the

district’s state-appointed manager warned teachers might not be paid after April 8, AP reported. 䡲 The U.S. Coast Guard approved a permit for the location and plans for a twin of the Ambassador Bridge between Detroit and Windsor. The agency completed a review and evaluation of the Detroit International Bridge Co.’s application for the proposed commuter bridge. Canadian officials still must give approval. 䡲 The Detroit-Windsor Tunnel will be closed some nights from August through December while the tube’s ceiling is replaced, the tunnel’s management announced. 䡲 Forty neighborhood parks and playgrounds in Detroit will be renovated over the next two years under an $11.7 million plan Mayor Mike Duggan announced at Simmons Playground, one of the parks getting improvements. 䡲 A $15 million redevelopment of the vacated Save-A-Lot store in Ferndale is expected to bring 90 new apartments to the north side of Nine Mile Road downtown. Construction on the building is expected to begin this summer.

䡲 Medical Marijuana Caregiver Centers in Detroit soon will have

to fork over nearly $4,000 annually to the city for fees associated with a business license and an inspection. The Detroit City Council authorized the fees; previously, medical marijuana dispensaries were not required to pay fees. 䡲 Sterling Heights-based General Dynamics Land Systems lost a bid protest before the U.S. Government Accountability Office on a potential $1.2 billion amphibious vehicle contract, after preproduction awards from the U.S. Marine Corps Systems Command went to two rival bidders. 䡲 The University of MichiganDearborn will be the first university

nationwide to offer students professional credentials from the New York-based Interactive Advertising Bureau, through a new collaboration with the agency’s education foundation that launches next year. Meanwhile, the Metropolitan State University of Denver

announced it will begin offering bachelor’s degrees in a variety of musical disciplines through the Detroit Institute of Music Education.

䡲 Three state universities —

Michigan State University at No. 8, Ferris State University at No. 16 and Lawrence Technological University at

No. 17— made the Princeton Review’s 2016 list of top 25 undergraduate programs in game design. MSU ranked 10th among the top graduate programs.

OBITUARIES 䡲 Robert B. Aikens, founder and chairman of Birmingham-based commercial real estate development and management firm Robert B. Aikens & Associates, died March 2. He was 86. 䡲

RUMBLINGS Van Conway battles his former firm over name an Conway, currently locked in litigation with his former company, Birminghambased Conway MacKenzie Inc., after his removal as chairman and CEO, wants the advisory firm to remove his name from its operations. In an amended complaint, filed in Oakland County Circuit Court last week, Conway’s legal team asked the judge to order the company to remove all references to Conway from its website, marketing materials Van Conway: and the like. Says name belongs “Many firms to him, not his keep the name former company. of a former founder, usually because they are dead. I’m still here, and I think I deserve my name back,” Conway said. “I doubt they’ll want to remove it from their door because it could affect their recognition nationally.” In an emailed statement to Crain’s, the firm said, “The name belongs to the firm, as it always has. It has no intention of changing its name.” The complaint also calls for the firm to rescind any alleged agreement preventing Conway from operating his new company, Van Conway and Partners LLC.

A familiar path for former Greenpath president? Jane McNamara may have a precedent in company history to rely upon if she wants to contend in court that Farmington Hills-based Greenpath Inc. owes her more than $850,000 for firing her as president and CEO. Eighteen years ago, Greenpath’s board of directors declined to renew a three-year contract to McNamara’s estranged husband, Albert Horner — who was then the CEO. Instead, the board compensation committee reached a deal naming then-COO McNamara his successor, and gave Horner a threeyear, $760,000 “transition package” to leave the company, Crain’s reported in 1998. At the time, Horner earned $185,007 in reported compensation as CEO, according to an IRS form 990 for the nonprofit in 1996, while McNamara as COO earned $142,597. Times have changed. McNamara had total compensation of $478,993 in 2012 and $636,307 in 2013, according to the most recent IRS 990 forms available on Guidestar.org, while Director of Operations Russell Halsey had $224,573 in 2013 compensation. No COO is listed as such, but no other executive reported for Greenpath on the IRS forms earned more

than $270,000 that year. McNamara contends in a newly filed lawsuit against Greenpath at Oakland County Circuit Court that her last five-year contract, for 2011 through 2015, entitled her to two years of base pay ($441,636) if she was terminated without cause. The company board chairwoman informed McNamara in early 2015 the board wouldn’t renew her contract and was “going in a different direction,” after McNamara raised legal questions about the new contract, according to the lawsuit. Greenpath General Counsel Eric Lisbitt told Crain’s last week the company does not comment on pending litigation.

Snyder to speak at Pancakes & Politics Gov. Rick Snyder will follow his congressional testimony about the Flint water contamination crisis by speaking at the Pancakes & Politics event April 11 at the Detroit Athletic Club. The 7:30 a.m. event, organized by the Michigan Chronicle, comes as Snyder copes with questions about his administration’s handling of the Flint water crisis. Snyder has repeatedly apologized since state officials switched Flint’s water supply to the Flint River in 2014 in a cost-saving move. Federal and state investigations are ongoing, but no one has been charged with a crime. Snyder testified during a contentious congressional hearing March 17 and blamed career bureaucrats in Washington and Michigan for the crisis.

Small-business group expands in SE Michigan The Grand Rapids-based Economic Development Foundation has announced it is expanding to Southeast Michigan with the appointment of Beth Ann Arroyo as the senior loan officer in charge of the market for the foundation. The foundation is a certified development corporation that helps match banks with small businesses seeking U.S. Small Business Administration loans. Specifically, the corporation is certified to handle SBA 504 loans used for equipment and commercial real estate purchases. CDCs fund the SBA-guaranteed portion of the loan. Arroyo recently served as vice president of business banking at PNC Bank. The foundation plans to open a permanent office this summer, possibly in Troy. When it is open, business owners will be able to walk in for free consultations on loans. 䡲

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