real estate development forest city takes di˜ cult

Beach CliffBeach CliffA s o c i a l m ag a z i n e f o r t h e re s i d e n ts o f B e ac h C l i f f | Fe b rua ry 2 0 1 6

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A PHILLY NATIVE AND A CLEVELANDER DECIDE TO MAKE ROCKY RIVER THEIR HOME. Get to know the Weinberger family better on pages 32-33.

VOL. 37, NO. 50 DECEMBER 12 - 18, 2016

Entire contents © 2016 by Crain Communications Inc.

CLEVELAND BUSINESS

Source LunchAndrew Brickman discusses real estate, Tinseltown. Page 20

Docket’s futureSpecialty court isn’t dead yet. Page 7

Business of LifePublications’ news is a big deal in a few local neighborhoods. 9

About a year after University Hospi-tals opened the region’s second Level 1 adult trauma center, the initial e� ects on both UH and MetroHealth — previ-ously the only such trauma location — have been greater than expected.

UH was surprised by how many patients it saw, while MetroHealth took a greater hit to its � nances than expected.

� e true test of the success of hav-

ing two Level 1 centers will be mea-suring outcomes. Data for that won’t be available until early next year.

“My concern — and this needs to be seen — is what is the trauma mor-tality rate?” MetroHealth president and CEO Dr. Akram Boutros said. “What’s happened to it in our region. Did it get better? � at’s what the promise was.”

For a Level 1 designation, UH’s trau-ma center needs to see a minimum of 1,200 patients, which the system was con� dent it could reach, said Dr. Mi-chael R. Anderson, UH chief medical o� cer. But he said they were pleasant-

ly surprised that the center, which opened Dec. 1, 2015, will far surpass that, having admitted nearly 1,500 pa-tients through October.

MetroHealth saw a 27% drop in trauma activations, which Boutros said translated to a $35 million loss in revenue, much higher than the $20 million it predicted. But he is quick to note that the system has grown in other ways so the loss won’t hurt the organization. � ough it’s not without its issues, the system can handle the loss, he said.

“We as a hospital can deal with the dollars — clearly we can,” Boutros

said, referencing MetroHealth’s re-cently announced plan to replace its aging patient towers with a new hos-pital and move forward with its cam-pus transformation on its own credit.

� e trauma numbers have reached a plateau and have been stable for the past six months, Boutros said.

In January through October of this year, MetroHealth had 4,188 trauma activations — meaning people it saw and discharged from the emergency department, or admitted — com-pared to 5,737 for the same time span in 2015.

HEALTH CARE

By LYDIA COUTRÉ

[email protected]@LydiaCoutre

While most Northeast Ohio com-panies are meeting their commit-ments under financial incentive agreements with state and local agencies, a handful are failing to achieve the capital investment or job creation goals they agreed to, according to recently released re-ports.

Government economic develop-ment agencies annually review the performance of their grantees and may reduce or rescind a tax credit or raise the interest rate on a loan if a company falls short of its commit-ments.

� e most comprehensive report is one issued late last month by the of-� ce of Mike DeWine, the Ohio attor-ney general. � at report, the “2016 Report to the General Assembly on Compliance with State Awards for Economic Development,” reviewed 329 awards made by the Ohio Devel-opment Services Agency (ODSA) and found that companies were meeting their commitments in 84.8% of the awards.

� at report found that 11 North-east Ohio companies receiving in-centive agreements were not meet-ing the goals of those agreements.

For example, AlSher Titania LLC, a Cleveland maker of titanium pig-ments, received a $150,000 infra-structure grant from ODSA in 2011.

In accepting the grant, the com-pany committed to hiring 201 peo-ple.

According to the attorney gener-al’s report, the company created only one job. As a result, the state agency is seeking the return of the grant, called a “clawback” in the economic development world. � e report notes that the repayment is due Dec. 15.

Liken Ratner family consideration of giving up its minority shareholder con-trol of Forest City Realty Trust to a yards-wide crack erupting across dozens of � oors on the outside of Terminal Tower.

� at is how epic undertakings are at Forest City Realty Trust as the Ratner family agreed Tuesday, Dec. 6, to ask shareholders to collapse the dual-share structure the Ratners and other found-

ing families the Millers and Shafrans have used to control the company since it went public in 1961. Moreover, the national mega-developer of today is descended from a 96-year-old local company that is older than the iconic symbol of the city which, at least for now, holds its headquarters.

Although Scopia Capital Manage-ment LP of New York, which holds 17.9 million shares, some 7% of the company’s shares outstanding, took the push publicly to update the company’s governance to one share, one vote in August, it’s been a sore

point with investors for at least � ve years. It was an issue even before 2015 when Michael Bilerman, Citi REIT analyst, asked at the compa-ny’s annual REIT conference about the dual share structure and called it “a distraction” from the rest of the company’s story. And in the end, the founding families acceded to the weight of Wall Street. � e Class B shares held by members of the founding families have 10 votes for each director compared to one for each Class A shareholder.

DEVELOPMENT

‘Clawback’ is sought on several tax credits

Impact has been signifi cant since UH added Level 1 unit

REAL ESTATE

Forest City takes di� cult, necessary step

By JAY MILLER

[email protected]@millerjh

By STAN BULLARD

[email protected]@CrainRltywriter

Forest City leadership after Charles RatnerWho will take over when longtime head Charles Ratner retires? We chart the succession plan. Page 23

UH and Metro feel e� ects of trauma center

Middle Market reportAssistance funds aid workers during trying times. Page 15

Adviser, Tax Tips Page 16

Third Federal really buys into the act of giving back. Page 18

SEE RATNER , PAGE 22

SEE TAX , PAGE 22SEE TRAUMA , PAGE 21

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Dr. Johnie Rose, assistant profes-sor at Case Western Reserve Univer-sity, believes the technology he’s de-veloped could help people save the lives of thousands of children around the world — once he can get it into their hands.

“Right now, we’re in a holding pat-tern because there’s not the �nanc-ing to do those trials,” said Rose, who’s also the director of the Preven-tive Medicine Residency at CWRU and University Hospitals Cleveland Medical Center.

So for the past few months, UH has turned to the community in its �rst attempt at crowdfunding to support research.

�ough the e�ort has been under-way since September, the team just recently renewed its push with a more targeted e�ort to raise dollars to support Rose’s device, which indi-viduals with little or no clinical train-ing could use to rehydrate sick chil-dren.

If the crowdfunding is successful, UH plans to roll out the strategy more broadly to support other researchers and investigators, said Marla Schmidt, a grant and contract spe-cialist for UH.

In her primary role, she handles agreements with pharmaceutical companies and industry-funded clinical trials, but she does see some investigator-initiated studies like Rose’s.

�ese researchers have great ideas they want to develop, she said, but they spend a lot of time writing grants and searching for funds.

She’d see them get small funds and pots of money, and began thinking of alternative means to help them

through the long process of grant-writing that could delay their work.

People turn to crowdfunding for independent movie projects, music careers or charitable e�orts. Why not research?

Rose initially got his idea while re-searching vaccination programs for Rotavirus, a diarrhea-causing patho-gen.

“It occurred to me that you’re vac-cinating a very large number of peo-ple to prevent death in a small num-ber of people who really get serious Rotavirus,” he said.

�at’s not to say the vaccines ar-en’t worth it, Rose said. He just want-ed to �nd a solution to the subset of the sickest children who ultimately die from a virus that doesn’t have to be fatal. Children in the United States

get it at the same rate as those in the developing world, but kids here have access to health care to get an IV to rehydrate.

An increase in oral rehydration solution in the world’s poorest set-tings has helped to decrease diar-rhea-related mortality in children under 5 from 4.6 million deaths in 1980 to 760,000 now, according to 2013 data from the World Health Or-ganization.

�e subset of the sickest children for various reasons aren’t helped by oral rehydration, but need parenteral or non-oral hydration, such as an IV. �e problem with that, of course, be-comes �nding someone who can place an IV — especially in very re-mote locations.

Rose turned to subcutaneous re-hydration, which means giving �uids through the skin.

�rough that, the individuals ad-ministering it can’t give �uids as fast, but they don’t have to hit a vein. �erefore, they don’t need to be a highly trained medical professional in order to help rehydrate these sick children.

Besides, a lot of people don’t need a large amount of �uids really quick-ly. �ey just need to get �uids to re-lieve and sustain them.

“So the idea then became, well, can we go a step further and make this something that’s extremely easy to use for people who are very mini-mally trained, if at all,” Rose said.

He has developed a small device that will come with easy-to-use in-structions and pictures. An individ-ual can place the device on the ab-domen or back of a child and simply press the release. It will si-multaneously pinch up the skin and stick in a needle to begin deliv-ering fluids.

�e prototype is developed and should be receiving a patent within a

couple of weeks, Rose expects. But it still needs clinical trials, further mar-ket research and a commercial part-ner.

“We’re trying to identify the cor-rect commercial partner, because there’s some different applications besides the Third World,” said Ste-phen Behm, UH’s director of tech-nology management. “We’re trying to identify and get a better under-standing of the markets to identi-fy.”

�at could include �rst respond-ers, military, the elderly or even for use within hospitals.

�ere are a lot of situations with both kids and adults in the develop-ing or developed world in which the need for an IV requires a higher level of and more expensive care, Rose said. �is device could help address that.

For some of the domestic applica-tions, the device would probably have more features, such as anes-thetic on the adhesive. But the most basic design of the device for the de-veloping world would cost just $10 to $15 to make.

If crowdfunding brought in about $50,000, Rose could start on some of the trials. Behm estimates they’d need a couple hundred thousand to get it to market.

In the �rst few months, the cam-paign hasn’t raised much, Schmidt admits. But they’re learning. �ey’re working to revamp the e�ort with more social media approaches and a more targeted strategy.

Schmidt said she doesn’t yet know what this could mean for getting oth-er devices to market.

“We just are kind of �guring it out as we go along,” she said. “We’re hop-ing it will be a great success. ... We really feel like it could be very suc-cessful as long as we get the right strategy.”

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UH uses crowdfunding for hydration deviceBy LYDIA COUTRÉ

[email protected]@LydiaCoutre

1. The device is placed on the back or abdomen and a silicone-like material (A) covering the base is adhered to the skin with an adhesive.

A

B

2. When the wings are pinched together, the devices pinches the skin and sticks the patient with a needle (B) to be able to begin administering fluids.

People in need of non-oral hydration currently are given an IV, which requires a trained medical professional. An individual with little to no medical training would be able to use this device and help rehydrate children or adults.

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It may feel counterintuitive for do-mestic industry to lobby against gov-ernment tari�s on imported goods.

But that’s exactly what’s happen-ing now in the trade case on carbon and alloy steel cut-to length plate from a variety of countries. It’s not that the Precision Metalforming As-sociation and the National Tooling and Machining Association are an-ti-tari�. �ey just want what they re-fer to as “tool steel” to be exempt from this particular case.

Tool steel, they say, is highly spe-cialized and low volume, and U.S. producers don’t make enough to meet their needs. A tari� would just make the steel and, in turn, the tool-ing more expensive, which could harm the companies making it.

If that is indeed the case — though the number of tool and die makers in the U.S. has fallen — there are still a lot of employees who would stand to be a�ected, especially in Northeast Ohio. As of May 2015, the last avail-able data from the U.S. Bureau of La-bor Statistics, there were almost 75,000 tool and die makers in the country. Ohio has the second-high-est number of tool and die makers employed, falling only behind Michi-gan, and the Cleveland-Elyria region is the third-highest-ranked metro-politan area in terms of employment for these workers.

�e U.S. Department of Commerce has made a�rmative preliminary de-terminations in most of the anti-dumping (when a company is selling a product at less than fair value) and countervailing (when it’s receiving �nancial assistance from a foreign government) portions of the case.

On the countervailing side, the commerce department preliminary determined China was subsidizing these products, while Korea was not. Commerce preliminarily determined companies from Austria, Belgium, China, France, Germany, Italy, Ja-pan, Korea, Taiwan, Brazil, South Af-rica and Turkey were all dumping goods in the U.S.

Final determinations from both the commerce department and the International Trade Commission, which determines whether there is injury to U.S. industry, for most are expected in 2017, with dates for the �nal determinations starting in Janu-ary and running through May, ac-cording to the commerce depart-ment. (�e department was expected to make �nal determinations in the cases against Brazil, South Africa and Turkey at the end of November, ac-cording to a fact sheet. �e commis-sion was expected to rule on those countries in January.)

�e cases were brought by Arcelor-Mittal USA LLC, Nucor Corp. and SSAB Enterprises LLC. ArcelorMittal, which has a substantial plant in Cleveland, testi�ed at the Interna-tional Trade Commission’s �nal

hearing on this case on Nov. 30. Dan-iel Mull, executive vice president for sales and marketing of ArcelorMittal USA, spoke to the broader need for these tari�s.

“While my company, and other U.S. producers, manufacture tool steel, X-70 and other specialized types of plate products, please recog-nize that the bulk of subject imports are not these specialized products,” Mull said in the testimony as written. “ArcelorMittal USA faces intense competition every day in the U.S. market from all of the subject coun-tries in basic types of cut plate, like carbon structural steel plate. We also face intense import competition in

some of the lower-volume special-ized grades, where we used to be able to count on better pro�ts. We have been losing sales to lower-priced subject imports across all types of cut plate.”

Bob Insetta, director of specialty plate for ArcelorMittal USA, said in the testimony the company makes almost every type of cut-to-length plate the market needs, including tool steel, and that they’re all “part of a broad continuum of the same prod-uct.”

Plenty to go around?

But the Precision Metalforming Association of Independence and the National Tooling and Machining As-sociation of Cleveland don’t seem to believe it’s enough.

William Gaskin, president of the Precision Metalforming Association, said tool steel is getting caught up in this case because it has a similar chemistry to the other metals in-volved.

“But tool steel is not being dumped in the U.S. in the same way,” Gaskin said.

In fact, he said, there’s a shortage of tool steel in the U.S. Since it’s a low-volume product, domestic pro-ducers aren’t making a lot of it, and the industry needs imports to sup-plement their supply.

Tool steel is already expensive, said Dave Tilstone, president of the National Tooling and Machining As-sociation, and increased costs are only going to get passed along to the tool and die makers. And because it’s not a commodity, it’s not easy to sub-stitute one material for another. �e steel in this case is speci�cally used for dies and molds, he said.

In a letter to the trade commission, the two associations ask it to contin-ue to treat tool steel and the tool steel industry as separate from steel at large — as it has for more than 35 years, the letter contends.

It goes on to note that tool steel’s composition gives it “high wear resis-tance, toughness, and hot/red hard-ness” and “relatively low ductility and weldability” compared to other steel plates, which is necessary for its end use of cutting and shaping other metals. And it’s already more expen-sive than the other kinds of plate steel.

�e tooling industry knows that when the cost of raw materials go up, it makes U.S.-made tooling and dies less competitive, Gaskin said. A lot of tooling is already being imported, and he fears that this could lead to more imports.

Gaskin said this trade case is an ex-ample of how trade laws, while use-ful, can cast too wide a net. �e cur-rent implementation doesn’t allow small segments of business to be pro-tected in these extensive cases.

“We’re the drive-by shooting,” he said.

Gaskin isn’t optimistic that the groups’ e�orts to stop a tari� on tool steel will be successful. If it’s not, Til-stone said companies’ pro�tability would be signi�cantly a�ected, and that some of the smaller ones would close altogether. �ose companies don’t have a lot of room for price in-creases, he said.

Steve Peplin, CEO of metal stamp-ing company Talan Products Inc. in Cleveland, said these tari�s could in-crease the cost of doing business in the U.S. beyond just the tool and die makers. While he’s not in the busi-ness of making tooling, he has to buy it for jobs. And if the cost of the tools increases, he said he has less of a chance of getting the job. �at’s be-cause the tool cost is the �rst factor in determining a customer’s startup cost, and more expensive tooling makes domestic production less competitive, Peplin said. And, if the tari�s raise the cost of imported tool steel, but not the cost of imported tooling, it could make foreign pro-ducers of tooling more competitive overall.

�ese kinds of tari�s could lead to some pain in the near-term, but there needs to be a level playing �eld, said Joe Tenebria Sr., president and owner of Myers Precision Grinding Inc. in Cleveland. Myers Precision serves a wide variety of industries and makes products ranging from tooling to fas-teners to medical parts, so it doesn’t use much tool steel.

Tenebria Sr. doesn’t want to see his peer companies harmed, but these kinds of measures could have been helpful decades ago when the U.S. was making more tool steel, he said. He expects to see more tari�s imple-mented with the transition to a Re-publican president.

“Protectionism isn’t the best, but there needs to be some kind of blend,” Tenebria said.

NEO groups are strongly against tool steel tari�By RACHEL ABBEY McCAFFERTY

rmca�[email protected]@ramcca�erty

A tari� would just make the steel and, in turn, the tooling more expensive, which could harm the companies making it.


We mourn the loss of our esteemedcolleague and friend, Irvin A.

Leonard, devoted family man, humanitarianand revered business leader.

Irv was a man of faith, wisdom and conviction;a student of history and a philosopher, whotaught others to live by simple principles: “dothe right thing” and “don’t be afraid to fail.”He was a fierce advocate for equality, accept-ance, and support for people in need andthese were the core of his philanthropicendeavors. These included his role as PastPresident and Trustee for Life of the JewishEducation Center of Cleveland, ExecutiveCommittee of the Greater Cleveland Chapterof the American Red Cross, and service tonumerous civic and community organizationsin Cleveland.

Irv was an accomplished lawyer, business-man and entrepreneur. He earned his B.A.from the University of Pittsburgh, Phi BetaKappa, magna cum laude and Juris Doctorfrom New York University. Irv’s distin-guished legal career included Law Clerk tothe Judge, United States District Court[southern District], New York, New York anda distinguished 38-year career at Jones, Day,Reavis & Pogue, Cleveland. Irv’s practiceexpertise included all aspects of corporateand business law, representation of nonprofit

hospital systems and major league sportsfranchises . Moreover, I rv achievedadditional kudos as Jones Day’s ChiefFinancial Partner, chairing the Firm’sInvestment Committee, and leading theinvestment policies and strategies for man-agement of the Firm’s sizeable benefit andcontribution plan assets, all with consistentoutperformance of most others. Irv joinedEmigrant Bank in 2008 and served as SeniorAdvisor of Emigrant Bank and a Director ofthe New York Private Trust Company.In addition, Irv co-founded HPM Partnersand served as Managing Member, member ofthe Investment Committee and Partner in theCleveland office. He was a consummatemanager, negotiator, leader, and advisorand his legacy will also live on in the manycolleagues he nurtured and mentoredthroughout his career.

We remember the intelligence, the warmth,his infectious laugh and the humorist, whoshared his clever eye for the ironies ofpolitics and human behavior.

We remember the loving husband, father andgrandfather and extend our condolences andappreciation for sharing Irv with us. IRVIN A. LEONARD

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A new company in Akron wants to bring 3D printing to the region in a big way.

Literally. Additive Engineering Solutions

has been operating as a consulting �rm since August 2015 but is getting ready to switch gears to production with the addition of a Big Area Addi-tive Manufacturing machine from Cincinnati Inc. �e machine is prob-ably best known for printing a driv-able car at the International Manu-facturing Technology Show back in 2014, said Austin Schmidt, partner and president of Additive Engineer-ing Solutions.

It’s much larger, and faster, than any 3D printers on the market, Schmidt said. And since most of the BAAM machines on the market ar-en’t easily accessible to companies, Schmidt said he saw an opportunity for a contract manufacturer. �e fo-cus at Additive Engineering Solu-tions will be 3D printing tools and molds for di�erent industries, said Andrew Bader, one of the partners who’s overseeing business develop-ment.

Additive Engineering Solutions re-ally got its start in the summer of 2015, when Schmidt and Bader met at a young professionals event. Schmidt was still working in additive

manufacturing at Caterpillar, and Bader invited him to do a presenta-tion at OGS Industries, his family’s Akron-based metal stamping and fabrication company. OGS immedi-ately found an application for 3D printing in its shop, and Bader thought similar companies in the re-gion could use the same kind of in-formation. �e two �led the paper-work to start Additive Engineering Solutions as a consulting business in August 2015. But when Schmidt learned about the BAAM printer, the two decided to look into it.

�at wasn’t always the goal for Ad-ditive Engineering Solutions. In fact, when the company got started, the goal was explicitly “to not buy a printer,” Schmidt said. Additive man-ufacturing is a competitive market, he said, and it’s di�cult to stand out. But the opportunity to have “�rst mover advantage” was very attrac-tive, Bader said.

�e two pitched the idea to Tom, Bader’s uncle, and John, his father, who are, along with Bader and Schmidt, partners in the business. After Schmidt, Bader and his uncle visited Cincinnati Inc., the manufac-turer of the machine, and Oak Ridge National Laboratory, which devel-oped the technology, in May, the de-cision was basically made.

�e company placed the order for the machine in early July. In Septem-ber, Schmidt began working at Addi-tive Engineering Solutions full-time and started setting up the company’s

supply chain, customers and jobs. Additive Engineering Solutions’

BAAM machine is the 11th one the company has sold, and the �rst at a service bureau, said Rick Ne�, BAAM sales manager for Cincinnati Inc. �e others are in universities, labs or large companies, he said, with the latter using the machines for their own purposes.

Ne� said typical 3D printers can print parts that �t in a shoebox. BAAM can print parts that are 5 1/2 feet wide, 13 feet long and 6 feet tall.

And having one of their machines

at a company like Additive Engineer-ing Solutions will be a good thing for Cincinnati, Ne� said. �e company gets “lots and lots of people” calling it to print parts, he said, a service it will perform but not its main purpose.

�at interest demonstrated a need to Bader.

“We kind of had these pre-estab-lished sales pipelines,” he said.

Bader said there are already a few jobs lined up, though the company declined to name any speci�c cus-tomers. Additive Engineering Solu-tions has also been busy setting up its new facility at 990 Evans Ave. in Ak-ron, which it is renting from OGS. To-tal startup costs, including the BAAM machine and supporting equipment like a 5-axis CNC router, are about $1.5 million, Schmidt said.

Additive Engineering Solutions is a spino� of OGS, but the new company is using the more established one for functions like human resources and

facility maintenance, Bader said. �at’s allowing Additive Engineering Solutions to run very lean. O�cially, the only employee outside of Bader (who is also still working at OGS) and Schmidt is senior process engineer Clark Patterson. Tom Bader is serving as chief �nancial o�cer when need-ed.

�e BAAM machine is expected to arrive near the end of December. Schmidt and Patterson have been traveling to Cincinnati Inc. and Oak Ridge National Laboratory to make sure they’re comfortable running the machine.

“Our goal is when it drops, we’re ready to go,” Schmidt said.

Tim Fahey, vice president of in-dustry and innovation at Team NEO, said Additive Engineering Solutions’ addition of the BAAM machine will give the company a “unique ability,” as 3D printed parts are usually limit-ed in size. It also adds another addi-tive manufacturing capability to Northeast Ohio and enhances the region’s reputation as a 3D printing hub.

Richard Lonardo, advanced man-ufacturing program manager at the Youngstown Business Incubator, said the company’s focus on large-format tooling in particular will give it a unique asset. �ere’s a lot of tool manufacturing in the state, and peo-ple are looking for ways to make those tools faster and more complex.

“We think they’re going to be a big hit,” Lonardo said.

Huge 3D printer is big get for Akron firmAdditive Engineering Solutions is switching gears by buying machine that can print large partsBy RACHEL ABBEY McCAFFERTY

rmcca�[email protected]@ramcca�erty

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� e relatively young bene� ts con-sulting practice of Risk International Services Inc., one of the largest risk management consulting businesses in the country, has found its footing in the Fairlawn-based company’s business model.

And with auspicious plans for Risk International Bene� ts Advisors to double its own revenues in the com-ing year alone, particularly by lever-aging some untapped opportunities in the private equity sector — and some business in its native Northeast Ohio — the greater Risk International umbrella is well-poised to see a con-tinuation of its already consistently strong performance.

Eric Krieg, a former senior vice president at Oswald Cos., established the business commonly known inter-nally as RIBA in 2014.

While executives wouldn’t dis-close actual revenues, Krieg said that as RIBA closes out its � agship three-year plan, the business is exceeding its revenue targets by 75%, well out-performing initial expectations.

� e goal to double revenues in 2017, and again in 2019, partly comes from that energy carrying through into the coming years.

“(� ose projections) come from the momentum of a growing busi-ness and the ability to take all the seeds that have been planted and see them come to fruition,” Krieg said.

RIBA currently comprises seven people, but Krieg expects to add four more people in 2017 as the business expands.

Risk International itself has grown about 300% in the past � ve years, a period that has seen Dave O’Brien join in 2012 as chairman with the goal of growing the brand. A couple years after O’Brien joined, the com-pany made its � rst two acquisitions

of risk management businesses, which helped lift overall revenues and support companywide growth as the business bolstered its two inter-national o� ces.

About 35% of Risk International’s overall growth this past year came from RIBA, Krieg said.

Private equity has been a major source of business for the overall Risk International operation — and the consulting industry in general — as � rms look to consulting businesses of its sort to cut costs of portfolio compa-nies without adding headcount.

Having an independent structure has been quite useful in establishing business early on, Krieg said, and seems to be helping their services reso-nate in the marketplace. Private equity has helped source some work as well.

Nonetheless, Krieg expects private equity will play an even greater role in their model moving forward, likely sourcing at least half the work in RI-BA’s mix. � is is partly because of what’s happening in the private equity market right now, which has been drawing increased investor interest as returns remain strong. As dry powder builds and more dollars chase fewer deals, Krieg anticipates a growing ap-petite for bene� ts consulting work.

“� e deals are becoming more competitive,” Krieg said.

“You have these compass sourcing groups that are charged with looking at how they can improve the � nancial operations of the business. With that, whether through sourcing groups or overall interest within the deal teams bringing better outcomes to major spends,” bene� ts will be a high prior-ity for most employers, Krieg said. He likened their work to that of forensic accountants digging through balance sheets looking for fat to trim.

Hiring consultants like RIBA is no new strategy in the for-pro� t invest-ment sector.

What’s emboldening RIBA’s out-look more is the fact that this three-year-old company hasn’t connected with as many � rms as it would like.

Risk International is a large U.S. business with global connectivity through its o� ces in England and Vietnam. Yet, surprisingly, Krieg said the Northeast Ohio native business currently has no relationships with private equity � rms in this region.

� at’s why there’s a major focus for the business to capitalize on un-tapped opportunities in this region, which has quite a strong private pres-ence of its own.

“Our business has grown signi� -cantly outside this area. Many of the large � rms we are doing business with are in places like Washington D.C., New York City and Boston,” Krieg said. “We are going to make more e� ort to market ourselves in both Ohio and Northeast Ohio in 2017.”

Northeast Ohio, private equity key to growth plansRisk International Benefi ts Advisors’ ambitious goals include doubling revenues in 2017, and again in 2019By JEREMY NOBILE

[email protected]@JeremyNobile

“We are going to make more e� ort to market ourselves in both Ohio and Northeast Ohio in 2017.” — Eric Krieg, RIBA founder

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Cuyahoga County’s commercial docket may be dead, but it won’t lie down.

Nearly two years have passed since Cuyahoga County Common Pleas Court judges disbanded the com-mercial docket, yet it remains un-clear whether the tool universally appreciated by commercial litigators, and their business clients, could be restored in some form.

More developments could come in early 2017, though.

�e review process is in the hands of the Ohio Supreme Court, which oversees the state’s specialty courts. Any changes would a�ect how the court operates in any Ohio common pleas court that wants one.

�e fate of the docket in Cleveland has been in question since it was eliminated in January 2015.

�e most recent developments transpired over the summer, when the Ohio Supreme Court, which oversees the state’s specialty dockets, requested public commentary on some proposed rule changes, many of which were posited by a team of Cleveland attorneys and judges.

Some of those proposals include changes in how judges are selected. Other give more discretion to local judges on how and what commercial cases are assigned to the specialty court, which is designed to expedite complex business-to-business cases such as liquidations, trade-secret dis-putes, noncompete contracts and shareholder disagreements.

A tool like that makes the court and the region it serves seem more

business-friendly by giving those cases priority.

A special docket also would help build experience for sitting judges and foster more predictability for at-torneys working cases.

In general, judges seem to want more autonomy over how the docket operates, including the selection of judges. Attorneys, meanwhile, just want what they saw as a useful tool back at their disposal.

�e high court highlighted some of the proposed changes when it re-quested public commentary.

One key proposed amendment would give local judges more discre-tion over what actually constitutes an appropriate commercial case.

Another would shift the responsi-bility of appointing sitting judges at each common pleas court from the chief justice to the general division common pleas court judges.

�at's signi�cant considering the motivation for dissolving the docket in Cleveland came in January 2015 with the rejection of Judge Cassandra Collier-Williams from the specialty court by the Supreme Court’s Com-mercial Docket Subcommittee, whose chairman said Collier-Wil-liams was not quali�ed for the posi-tion — a move that seemed to mi� Cleveland judges.

Phillip Ciano, principal at Ciano & Goldwasser and a leader of that local team, said he’s heard of no updates from the Supreme Court since com-mentary on the changes was solicited this summer.

However, a spokesman for the Su-preme Court told Crain’s last week the issue will be revisited after two new justices o�cially join the court in the new year.

�at was welcomed news to Ciano.

Local commercial docket could have life By JEREMY NOBILE


“It’s not surprising that the pro-cess, which is quasi-legislative, is go-ing to take its due course to run,” Cia-no said. “But I’m encouraged to know that at least it will be reviewed when the new term starts in January.”

He added that the subcommittee he leads is “ready and willing to pro-vide whatever support and feedback we can provide to see if there’s a form

of the commercial docket, or com-mercial track as we suggested, that could be reinstated in Cuyahoga County.”

�ose who commented on the proposed changes generally sup-ported the bulk of them, including members of the Lucas County Com-mon Pleas Court, which is one of the courts that participated in a pilot program for the docket (like Cuyahoga County) and continues to operate a commercial docket today.

“�e proposal to allow the local court to make the selection of the commercial docket judges is the big-gest, and most welcomed, change to the rules,” wrote Lucas County ad-ministrative judge Gary Cook. “�e judges on the local court are in a bet-ter position to assess the qualities and abilities of the judges to take on the challenge of the commercial docket.”

Members of the Cincinnati law �rm Keating Muething & Klekamp PLL, for example, wrote to oppose a change in how judges on a docket are considered that would limit candi-dates to judges with at least three consecutive years of service on a general division court in the past six

years, which would “unnecessarily (limit) a large pool of potentially quali�ed candidates,” they argued.

Paul Harris, co-chair of the busi-ness litigation practice group at Ul-mer & Berne LLP, was among the many who voiced personal support for the changes, conveying a senti-ment that attorneys simply want to see the docket restored in some form.

“My understanding is that the new proposed rules are meant, at least in part, to address some of the concerns that led to the suspension of the commercial docket in Cuyahoga County,” he wrote. “ … I’ve heard fa-vorable opinions of and experiences with the commercial docket in Cuyahoga County, and I was person-ally disappointed to see it go.”

Ciano said it’s hard to say whether fewer cases have actually been �led since the local docket dissolved.

“And I wouldn’t say it’s more di�-cult to practice without more pre-dictability of a commercial docket,” he said. “But I would say that having a commercial docket makes for a more predictable and e�ective litiga-tion process for businesses. �at’s the primary reason we’d like to see it back in some form or fashion.”

Attorneys are encouraged the Ohio Supreme Court is reviewing the specialty court’s process“The judges on the local court are in a better position to assess the qualities and abilities of the judges to take on the challenge of the commercial docket.” — Lucas County administrative judge Gary Cook


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�e head of Cleveland-based Cli�s Natural Resources Inc. was preparing for a “worst-case scenario” next year. Instead, he got Donald Trump.

Cli�s, the world’s best-performing raw materials producer this year, will probably generate “a lot” of cash, with which it will pay down debt, CEO Lourenco Goncalves said. He assigned President-elect Trump’s fo-cus on infrastructure building and a crackdown on unfair trade as reasons his company and the steel industry are poised for more good times.

Shares of the company almost quadrupled this year through early November amid signs of improving demand and successful U.S. trade cases against steel imports, which helped boost domestic steel prices. With Trump pledging to spend $1 trillion on infrastructure and to fur-ther clamp down on trade cases against countries including China, the shares have surged an additional 69% since the election.

“If Mr. Trump implements a por-tion — he doesn’t need to implement everything — of what he is promis-ing, not only will the country be a lot better after these things are imple-mented, but businesses like Cli�s and all steel mills in the United States will bene�t very much,” Goncalves said in an interview �ursday, Dec. 8.

�e stock fell 0.2% to $10.37 in New York on �ursday. Shares have surged 556% this year, the best per-formance on the Bloomberg World Iron/Steel Index of 75 companies and the 455-member Bloomberg World Basic Materials Index.

Cli�s is also the biggest gainer among major mining and metal

companies in the bond market this year, with a return of 153%. �at’s al-most �ve times the average gain. �e yield on its notes due 2040, which be-gan the year at about 35%, is now down to 8.4%.

Domestic steel producers, which are Cli�s’ customers, have bene�ted over the past year from anti-dumping and countervailing duties that have

curtailed shipments from China and other countries. Goncalves said the Obama administration’s e�orts on imports cases resulted in a “very well-rounded situation.”

“Everything that came since Mr. Trump became president-elect is all good, and adds to what we had be-fore,” Goncalves said. “So, even though I was not planning for that, I was planning for what I believe at this point was a worst-case scenario. So Trump is the best-case scenario.”

Iron ore delivered to Qingdao China is up 87% this year, surprising analysts who repeatedly forecast a pullback amid the expectation of rising global supply and dwindling demand in Chi-na, the world’s biggest consumer.

“�e commodities desks of the big �nancial institutions have been beat-ing the drum that iron ore prices would go down, would collapse, would go down to numbers that are totally crazy,” Goncalves said.

He said where prices go from here all depends on the three biggest iron ore producers — Rio Tinto Group, BHP Billiton Ltd. and Vale SA. He said the market is watching whether Rio and Vale stick to plans to step back from the industry’s decade-long strat-egy to keep pumping ever-expanding supply onto the global market.

Paying down debt will continue to be the most important use of pro-ceeds of any cash that they generate, Goncalves said. He said he has no plans to raise equity at this point be-cause he doesn’t want to dilute the shares.

“We are going to generate a lot of pro�ts. We are going to generate a lot of jobs,” Goncalves said. “And we are going to generate a much better in-frastructure that is very, very much needed in this country.”

Cli�s CEO says Trump will keep the good times rollingBLOOMBERG

“If Mr. Trump implements a portion of what he is promising ... businesses like Cli�s and all steel mills in the United States will benefit very much.”

— Lourenco Goncalves, Cli�s CEO

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Since the Arena Football League season concluded with the Philadel-phia Soul winning their second championship on Aug. 26, the 29-year-old indoor football circuit has had �ve of its eight teams fold op-erations or move to a rival league.

�e AFL — which includes the Cleveland Gladiators and had 14 teams as recently as 2014 — rebounded some with the addition of two franchises, Baltimore and Washington, that are backed by billionaire Ted Leonsis. But if no other teams are added before the start of the 2017 season in April, the AFL’s current �ve-club setup would be its lowest franchise count since 1989, when the league dropped from six to �ve teams for its third season.

Franchise turnover is nothing new for the topsy-turvy league, which skipped the 2009 season after �ling for bankruptcy.

�e changes this time are by de-sign, however, AFL commissioner Scott Butera told Crain’s.

“We and the better owners always wanted this to be a really well-run, excellent sports league,” said Butera, who became the league’s seventh commissioner in September 2014. “We had a number of owners, and obviously we’re fortunate in Cleve-land to have a really strong one (in Dan Gilbert), who can make that happen and share that vision. And we had others that didn’t.”

�e vision, Butera said, is to have a

league built around experienced, wealthy owners whose AFL team can play in an arena in which another major sports team already resides. �e Gladiators, who were purchased by Gilbert in 2012, are the league’s model franchise.

In October — when the AFL’s fu-ture was in question because of the departures of the Jacksonville Sharks (who joined the �edging National Arena League) and Arizona Rattlers (now part of the Indoor Football League), and the shutdowns of the Orlando Predators, Portland Steel and Los Angeles Kiss — a Cavs source told Crain’s that it was “business as usual” for the Gladiators. �e organi-zation hasn’t said much of anything

on the topic since, though it does re-main committed to the AFL.

Butera, the CEO of Foxwoods Resort Casino in Connecticut prior to his AFL appointment, is gambling that the league can survive with fewer owners, provided they �t the Gilbert-Leonsis model. And yes, the league will play a �ve-team season if it’s determined that is best for the long haul.

“If we just had to go with what we have, we’d be OK with that,” Butera said. “We are completely out of the mode of what do we have to do to be OK tomorrow? We don’t want to sit here and say we have to add two teams to have a better process in 2017. We’re going to get the right people, no matter how long it takes.”

‘A huge problem’

Robert Licopoli — who ran the North American Football League, a 100-plus-team semipro circuit, from 1999 to 2008 — said he was part of a group that twice looked into buying the Orlando Predators. But that was before Butera’s arrival, a time in which Licopoli said the “state of the league was so bad.”

�e biggest problems Licopoli, now the founder and CEO of New York-based 360 Sports Agency, and his partners had with the AFL’s setup were the hefty league dues, high fa-cility rental fees and a structure in which “owners start in a deep �nan-cial hole from Day 1.” When the Jack-sonville Sharks folded in October, owner Je� Bouchy complained about “constantly growing league expenses and the lack of league revenue,” which he said “led to crippling oper-ational costs.”

Under the AFL’s single-entity mod-el, when owners don’t or can’t pay their bills, the costs are passed on to the remaining owners.

“�at’s a huge problem,” Butera said. “You gotta support the league. If somebody bails on you, you gotta pick up the tab. �at’s a hard pill to swallow.”

All of which is why the AFL com-missioner believes the addition of Leonsis is vital. �e founder of the Baltimore and Washington franchis-es owns the NBA’s Washington Wiz-ards, the NHL’s Washington Capitals, the WNBA’s Washington Mystics and the Verizon Center. Leonsis’ Monu-mental Sports & Entertainment also

has a subscription-based network that will broadcast his AFL teams’ games.

Finding more owners with similar clout and assets — i.e., arenas and management teams already in place — will be key, and likely di�cult.

“�is league has su�ered in the past from starts and stops,” Butera said. “We’d get an owner, and the next year he’s done. �at doesn’t help the league. You can’t develop your league that way. We need people 100% committed to the long term. We don’t want them to fail.”

�e Gladiators ranked third in the AFL with an average attendance of 11,046 for their eight home games in 2016. With three consecutive years in the top three in attendance, Cleve-land is a rare AFL success story.

�e Gladiators are proceeding as they would under normal condi-tions, with three-game holiday packages available on the fran-chise’s website.

Butera said the AFL is “working fu-riously” toward its goal of having “12 to 16 teams in the next few years.”

But quality will always come be-fore quantity, the commissioner stressed.

“We essentially turned around years and years of mismanagement,” Butera said. “Major restructurings take a great deal of time. A lot of dam-age was done that had to be un-wound. We thought it was important to keep the product showing well while we �xed the other issues. We always had excellent football. We just have not had excellent manage-ment.”

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Collaboration and communication were the overarching themes of the third annual [M]Power Manufacturing Assembly, held Oct. 19 at the John S. Knight Center in Akron.

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Five-team Arena league says it’s in good placeBy KEVIN KLEPS

[email protected]@KevinKleps

The Cleveland Gladiators averaged 11,046 fans for their eight home games in 2016. (Contributed photo)


Admittedly, most of the crystal balls used to prognosticate the 2016 election are sadly in need of repair or replacement. So attempts to dust o� those crystal balls to peer into the future, as it relates to the next few years, have an analogous chance of ac-curacy. So what signs should entrepreneurs and innovators be looking for with the change in administrations?

�e �ve areas that will have the greatest impact are as fol-lows:

Taxes

It appears that attempts will be made to simplify the tax code. �is could include reductions in the numbers of individual tax brackets; the lowering of rates across all brackets; increases in standard deductions; lowering of the corporate tax rate to 15%; and a 10% rate on repatriation of foreign pro�ts with the goal of bringing corporate “headquarters” back to the United States.

�is lowering of taxes has the challenge of increasing the fed-eral de�cit, unless cuts in expenses can be found and/or there's an increase in tax collections from more sources, like repatriat-ed corporations and increases in wealth.

For the entrepreneur, will these tax breaks and simpli�cation of the tax code allow for individuals and corporations to invest more money on innovation or with entrepreneurs? Will tax breaks continue for investors? And what, if anything, will hap-pen to the capital gains tax? �e theory remains that a lower capital gains tax promotes investment. Further, if more money is available, will that encourage more investment?

Immigration

Immigrants have contributed signi�cantly to the knowl-edge-based economy.

Many immigrants also are entrepreneurs; what is more en-trepreneurial than taking the risk to leaving your home and re-settle in a new country?

Will a new immigration plan have exceptions for high-skilled immigration? Will that new plan have any provisions for immi-grants who invest in the United States and can help grow the economy? What impact could new immigration legislation have on the importing of innovation that has helped to stimu-late the U.S. economy? What e�ect could it have on investment from international sources into U.S. entrepreneurs?

A�ordable Care Act

�e repeal of the A�ordable Care Act had been at the fore-front of the campaign. If it is repealed (or changed), what re-places it?

Donald Trump, during the campaign, called for a more free-market system. How will this impact businesses and their employees?

Further, for those in biomedical innovations, will that add money to health systems, or restrict it even more? �is could encourage or discourage the adoption of new innovations and new products. If fewer people have access to health insurance, will that mean less revenue for the health care organizations and thus a further tightening of their budgets, and what e�ect

Personal View

Five areas for entrepreneurs to evaluate post-election

CLEVELAND BUSINESSCLEVELAND BUSINESS

Publisher and Editor: Elizabeth McIntyre ([email protected])

Managing Editor: Scott Suttell ([email protected])

Sections editor: Timothy Magaw ([email protected])

Contact Crain’s : (216) 522-1383

Editorial

Opinion

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing [email protected]. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.Sound o�: Send a Personal View for the opinion page to [email protected]. Please include a telephone number for verification purposes.

At last, MetroHealth recently announced more details of its ambitious and long-talked-about plan to overhaul its deterio-rating main campus o� West 25th Street in Cleveland. In short, system o�cials say the $855 million overhaul calls for a new nine-story hospital that will o�er numerous opportunities for added e�ciency and improved outcomes.

From what we’ve seen of the plans so far coupled with Metro-Health’s recent track record building stunning new outpatient health centers, Cuyahoga County taxpayers have all the reason to be thrilled about the future of the hospital system they’ve subsidized, albeit marginally in relation to its overall budget, for so many years.

What’s most impressive at this stage, however, isn’t the ren-derings of the buildings poised to rise, but MetroHealth’s deci-sion to �nance the entire project on its own credit. �e move to go to the bond market, o�cials say, provides MetroHealth an opportunity to be more cost e�ective and faster than if it had sought out other sources of funding.

It’s worth noting this is the same health system that �ve years ago laid o� several hundred employees just to climb out of the red and even recently has faced �nancial pressures due to Uni-versity Hospitals’ e�orts to capture some of the region’s lucra-tive trauma business. We expect the bond market will be recep-tive to MetroHealth’s plans, given the system’s impressive �nancial turnaround over the last �ve years under the leader-ship of CEO Dr. Akram Boutros.

�at said, the project certainly carries risk. One is the $855 million price tag. By comparison, the Cleveland Clinic’s Sydell and Arnold Miller Family Pavilion and Glickman Tower — a project that opened in 2008 and transformed the main campus’ entry point for many patients — cost just north of $500 million. University Hospitals’ state-of-the-art Ahuja Medical Center and Seidman Cancer Center cost $298 million and $260 million, re-spectively.

MetroHealth’s project dwarfs all of those. After all, this is a complete rebuild of the health system’s core infrastructure. �e

new hospital is expected to go live in 2022.It’s no secret that a major reason for MetroHealth’s �nancial

turnaround was the Medicaid expansion made possible �rst through an experimental waiver program and ultimately the A�ordable Care Act. And while Medicaid hardly covers the cost of care, it brought in new revenue to o�set the millions dollars worth of charity care the hospital system provided.

But with Donald Trump in the Oval O�ce and a Republican Congress gnawing to undo the ACA, the uncertainty blanketing the health care industry is as su�ocating as ever. Still, in a meet-ing with Crain’s editors, Boutros wasn’t fazed by the prospect of an ACA pullback and vowed to press forward with the project.

Given these challenges and the sheer size of the project, it’d be easy to characterize Boutros as naive when it comes to his vision of reinventing MetroHealth. This too, after all, is an enterprise that before his arrival couldn’t keep its books straight and its administrators from piquing the interest of the FBI.

However, Boutros has proven to be a leader who can be trust-ed by county taxpayers. He stresses that he isn’t using this proj-ect as a resume builder. And frankly, he told us that he plans to see the project to completion and one day retire from Metro-Health.

Over the last few years, MetroHealth hasn’t given us any reason to doubt the direction in which it’s headed. Its new outpatient health centers, particularly the one in Middleburg Heights, and its transformation of former HealthSpot urgent care centers into Metro emergency departments have shown the system can expand its mission and reach on time and cost e�ectively.

This $855 buildout is the final piece of the transformation-al journey MetroHealth has undertaken during Boutros’ ten-ure. This part of the journey most certainly will have its twists and turns. But if the health system can pull it off, Cuyahoga County and the health of its residents will be bet-ter off.

Metro’s big bite

By TOM SUDOW

SEE SUDOW, PAGE 12


Re: Democrats opposing Trump

The Democrat vermin have no teeth now. The Republicans have the Harry Reid nuclear option now!The election of Donald Trump wasn't just a victory for a political party; this is a revolution. We have the power to wipe out all the evil the Democrats have done since Woodrow Wilson. These Democrat vermin can't stop us. — John Jett

Sherrod Brown, you are now irrelevant! Thank Harry Reid and his nuclear option!You have earned it. You are an obstructionist to liberty serving as a progressive communist in the Obama Democratic Party of jihad deplorables. — 216265

The liberals (progressives) hate the wealthy and successful people in general. It's possibly why they lost the election. The American people are tired of the do-nothing politicians like Sen. Sherrod Brown.He hopes Trump will fail, even at the expense of the country. Shameful. — Allan Wood

Re: Fake news

It is refreshing to see news editors tackling this topic, as Crain's publisher/editor Elizabeth McIntyre did in her Dec. 5 column.Fake media and biased spinning on actual stories frustrates me, because instead of getting closer to resolutions, there are just more angles to look at until it spirals so far out of control that no one can tackle the original issue.Education needs to include subjective and objective thinking classes again instead of just standardized testing on school subjects. It is great if students can ace classes, but if they can't form an opinion on what is in the world around them, they are not being fully educated. — Wendy Fitos

Actually, education of individuals is not enough.That's not how basic social influence works, and social media users like the man who runs the disinformation site DenverGuardian.com know that. So do the other young men like him operating out of their bedrooms in Eastern Europe, and so do Putin and his surrogates.We are all naturally susceptible to believing only information that confirms our belief systems. These “entrepreneurs” understand that people with a particular worldview are susceptible to these kinds of stories and prey on them. Media and government will have to do more than educate our population.We know that lies repeated over and over again seep into our beliefs, even for those of us who know they are lies. We as a society need to find ways to make it unprofitable for these people to engage in their businesses. — Lisa P. Ganyier

I agree that educating our youth is important in separating electronic fact from fiction, but am concerned by the clearly liberal bias of our educators.Will they be truly focusing on “facts” or will it be facts through a liberal lens? One only needs to look at Plain Dealer headlines and New York Timesstories to see that the line between reporting and editorializing have been banished from the front pages. — James Wert

Re: Ohio as a fuel cell leader

Hydrogen fuel cells make more sense than both solar and wind, especially considering that hydrogen is the most common element in the universe where there is endless supply.If all the money wasted by the federal government on solar and electric powered cars had been spent in a smart way, the U.S. could already have a nationwide distribution system in place for less money. Electric cars still pollute, since they get their power from existing power plants that mostly burn fossil fuels emitting carbon dioxide. — Walt Oshinsky

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Personal View

President-elect is trumpeting growth, but can he deliver?

Lost in the blusterous personal attacks and for-eign policy and immigration rhetoric of the 2016 presidential election is a fairly familiar economic plan touted to create 25 million jobs in the next de-cade.

President-elect Donald Trump’s economic plan is quintessential supply-side economics built on the expectation that tax cuts and deregulation stimulate production that creates employment with the in-come used for consumption needed to perpetuate the virtuous cycle.

Trump’s plan includes stalwarts like tax cuts for households and �rms as part of broader tax reform, deregulation, infrastructure spending, cuts to dis-cretionary spending, renegotiating trade deals, and tax relief intended to encourage repatriation of for-eign earnings.

Trump predicts that economic growth will double and create 25 million jobs. Opponents claim the tax cuts will contribute to a larger national debt.

�eoretically and intuitively, what Trump claims is possible. Growth rates have been anemic, so dou-bling growth is not prohibitive, and the administra-

tion can count up 25 million jobs many ways.With a Republican-controlled House and Senate

and Trump presumably beholden to few interest groups, I hope to witness one of the few laborato-ry-type experiments of economic policy. �e fate of supply-side advocates and the ideology may hang in the balance.

Doubling growth is the more intriguing claim. Growth has stalled in recent decades, with some ar-guing that the immensity of the U.S. economy neces-sarily limits faster growth.

If Congress enacts the plan quickly, and Trump makes it clear that the government is no longer the trough from which �rms feed, we may see an alloca-tion of resources away from lobbying seeking privi-lege and toward innovation and production.

Investment in research and development leads to new products, services and technology that defuse through the economy fairly quickly, generating growth and the accompanying employment.

Welcoming repatriated pro�ts, estimated at more than $2 trillion, represents an enormous source of capital to expand production and fund research and development. Lower business taxes represent an

By DAVID McCLOUGH

SEE MCCLOUGH, PAGE 12


Trump predicts that economic growth will double and create 25 million jobs. Opponents claim the tax cuts will contribute to a larger national debt. Theoretically and intuitively, what Trump claims is possible.

meaningful entitlement reform. Unfortunately, there is no one in Congress who is not beholden to some special interest that will fight reform at all cost. Entitlement re-form likely demands that all lose in order to win, which is a tough sell to the American electorate, but then again maybe this electorate is dif-ferent?

Second, the United States is in a state of perpetual war that reported-ly adds more than $1 billion each day to the national debt. While a to-tal withdraw of troops from around the world is nearly impossible and irresponsible, a Trump administra-tion may be well-suited to insist that bene�ciaries incur a greater propor-tion of the burden.

Recall that the collapse of the So-viet Union was, in part, due to Mos-cow’s inability to subsidize the inef-�ciencies inherent in the system while �ghting Afghan warlords for a decade. Sound familiar?

What Trump proposes is possible, but neither the president-elect nor the U.S. government or military will have anywhere near the control over political events at home or abroad that is needed to usher a successful implementation of the entire eco-nomic plan.

We will have to wait to see what happens.

McClough is an associate professor of economics at Ohio Northern University.

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will that have on the adoption of new products? Would new legislation in-clude wellness and remote digital health care? If yes, this could open up opportunities for innovation?

Trade

�e trade issue reverberated in the Midwest and may have been a cata-lyst for the election result.

How will restrictions on trade im-pact U.S. products in the global mar-ketplace? And how will it restrict high-quality innovation from entering this country? Could there be a back-lash against U.S. companies trying to achieve a global market? Could a new trade policy restrict innovation from entering the United States? What im-pact could it have on collaboration between U.S. entrepreneurs and their counterparts around the globe?

Regulation

�e new administration has made a point during the campaign of suggest-ing the streamlining of federal regula-tions on business.

�is could open up opportunities for innovations, and it makes bringing innovation to the market simpler and less costly, depending on what areas the regulation reform is targeted. It will be important to track these changes and to understand how they impact, if at all, your business.

Being a few weeks removed from the election leaves us with many questions that during the next months

and years will begin to be answered. As entrepreneurs and innovators,

it is incumbent to stay on top of these issues and to understand how change a�ects your business. Addi-tionally, staying agile will be an im-portant quality to have as you work to understand and adapt to change. A change in administration brings uncertain and opportunity — two words that true entrepreneurs thrive on.

Sudow is the director of the Burton D. Morgan Center for Entrepreneurial Studies at Ashland University and an adviser to eHealth Ventures and to SCI, a Chinese investment group.

incentive for firms that retain more of the reward associated with in-vestment of all kinds. Lower per-sonal income taxes create dispos-able income to buy goods and services. The increase in economic

activity creates more employment opportunities that fuel expansion of the process. Ideally or idealisti-cally, the expansion of the economy will generate more tax revenue de-spite lower marginal tax rates, which can contribute to a budget surplus that reduces the national debt.

What Trump proposes is possi-ble, but so is communism, on pa-

per. Reality — and politics — tend to interfere.

�e principle threats to economic success are almost entirely political.

First, the Affordable Care Act along with entitlements will contin-ue to demand the lion’s share of the federal budget. Deficit reduction can only occur with entitlement re-form. The president-elect will have to work with Congress to affect

SUDOWCONTINUED FROM PAGE 10

MCCLOUGHCONTINUED FROM PAGE 11

What signs should entrepreneurs and innovators be looking for with the change in administrations?The five areas that will have the greatest impact are as follows: n Taxes n Immigrationn A�ordable Care Actn Traden Regulation


Rare M&A participant Parker Han-ni�n Corp. is striking while the iron’s hot.

�e May�eld Heights-based man-ufacturer of motion-control tech-nology announced Dec. 1 that it’s acquiring Franklin, Tenn.-based Clarcor Inc., which makes air and liquid �ltration products used in ev-erything from bus engines to oil drills as well as at manufacturing plants. At a total value of $4.3 billion, including net debt, this is by far 99-year-old Parker Hanni�n’s larg-est acquisition.

Despite its own $19 billion market cap, Parker Hanni�n has stuck with

mostly tiny deals over the past de-cade. But back in October during the company’s �rst-quarter earnings call, CEO �omas Williams hinted that something was brewing.

“What historically the last couple of years has slowed us down as far as converting more acquisitions has been the price/valuation gap,” he said. “And what we’re seeing now — and I would hope over the next cou-ple of years we’ll continue to see this even more — is I think sellers’ expec-tations coming closer to reality.”

�is is evident in Clarcor’s share price and valuation over the past two years. Clarcor had sold o� to as low as $44.29 a share in January, giving it an enterprise value equal to 10 times trailing 12-month EBITDA (earnings

before interest, taxes, depreciation and amortization). �at was way down from more than $65 a share, or 15 times EBITDA, in late 2014.

While Clarcor had bounced back in recent months, Parker Hanni�n’s $83-a-share o�er still looks pretty good. It’s a decent 24% premium to Clarcor’s average closing price over the past 20 days, but also 42% higher than its average price this year.

�e all-cash transaction also val-ues Clarcor at 18 times trailing 12-month EBITDA, notably higher than a couple other recent deals for U.S. industrial manufacturers of sim-ilar size. Berkshire Hathaway Inc.’s $37 billion acquisition of Precision Castparts valued the aerospace-com-ponents maker at about 14 times

EBITDA, while Rockwell Collins Inc.’s $8.3 billion o�er for B/E Aerospace Inc. implies a similar multiple.

However, unlike some other deals that came about in the M&A boom of the past couple years, Parker Hanni-�n’s bid price looks to be sound and strategically, it’s a sensible move.

Parker Hanni�n says Clarcor com-plements its own �ltration o�erings and bolsters its presence in a “grow-ing and resilient business.” Pollution control and air puri�cation seem like industrial needs that probably aren’t going away. �e company projects annual cost savings of about $140 million starting from three years after the deal closes and the businesses consolidate their supply chains.

Parker Hanni�n also has been

generating a ton of cash and its $1.1 billion of net debt as of the latest quarter was less than its trailing 12-month EBITDA.

Since the post-election rally in in-dustrial stocks in particular, Parker Hanni�n shares have blown past an-alysts’ estimates. It also recently gave updated sales and earnings guidance for the year that was better than ex-pected. And on Dec. 1, following the deal announcement, Parker Hanni-�n traded at a record high.

Its careful growth planning and balance sheet discipline is turning this longtime Northeast Ohio manu-facturer into a new investor favorite. In a time of otherwise rash M&A de-cision-making, Parker Hanni�n stands out.

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Beer drinkers’ love of holiday brews, a market pioneered locally by Great Lakes Brewing Co. in 1992 with its Christmas Ale, is in its full glory this month as consumers happily clear shelves of their favorite winter beers.

But as they enjoy such o�erings as the 12 Dogs of Christmas and Festi-vus Holiday Ale, consumers may vaguely remember their annoyance as “seasonal creep” brought some fall brews to stores as early as August.

With the holiday sales window so small and the craft beer market so lu-crative — 2015 saw a 12.8% increase in production nationally — is it smart for companies to roll out seasonals early to take advantage of consumer interest? But if they do, by the time December rolls around, have the beers passed their peak?

“Last year, I think there was a prob-lem with … overproduction, intro-ducing seasonal too early and left-overs,” said Bart Watson, chief economist with the Brewers Associa-tion. “We have seen an adjustment this year to avoid those problems. Brewers are talking more to their dis-tributors and paying attention to the numbers.”

Northeast Ohio brewers did, in-deed, feel pressure to provide the holiday beers early, but some only pushed the schedules up slightly. Others, including Great Lakes Brew-ery and Market Brewery, did not move up production of their holiday o�erings at all.

�e temptation to roll out earlier is understandable. Nationally, the craft beer market’s sales were $22.3 billion in 2015. On average, seasonals ac-count for about 20% of all craft beers in Ohio, Watson said.

“We’ve seen season creep in nearly every aspect of retail, but season

creep in beer is very much missing the point,” said Sam McNulty, co-founder of Market Garden Brew-ery and Bier Markt, among others.

Market Garden produces Franklin Caste Pumpkin Spiced Ale and Festi-vus Holiday Ale in fall and near the holidays.

“When pumpkin ales are out in June, it really misses the mark on true seasonality of ingredients,” McNulty said. “Fresh craft beer always tastes best, and if a pumpkin ale hits retail shelves in the middle of summer and is still around in the fall, it is not go-ing to be fresh.”

Market Garden introduced this year’s seasonals on the same sched-ule as 2015: September for its Frank-lin Caste Pumpkin Spiced Ale and October for its Festivus Holiday Ale.

“Happily, we’re faced with the good problem of not having enough capacity to keep up with demand for our seasonal beers,” McNulty said. “In fact, at some point this week (week of Dec. 5), we’re going to run out of Festivus Holiday Ale despite having brewed what we thought would take us through the holidays and into late January.”

�e over�owing craft beer market has forced brewers to be strategic about seasonals, which have seen some market saturation and some-

what of a sales growth slowdown the past two years, according to the Brewers Association.

“We (worked) with distributors to see their projected numbers for (hol-iday) brews, as well as our projected numbers,” said John Najeway, co-owner of the �irsty Dog Brewing Co., where seasonals represent 30% of its production. “�is year, we went with less than the distributor’s num-bers and more than our number — somewhere in the middle.”

Najeway said the brewery, which makes the 12 Dogs of Christmas Ale, doesn’t want a holiday glut.

“�e good and bad news is that we

are now pretty much sold out,” he said. “We’ve gotten some new orders and we cannot �ll them.”

Great Lakes, which distributes its beers in 13 states and brews more than 160,000 barrels annually, uses a similar strategy in that it works with distributors to forecast demand.

“�e goal is to meet consumer de-mand without having a seasonal lin-gering in the market beyond its time,” said Bill Boor, Great Lakes’ CEO, who added that there is pressure to come out early to grab premium placement in stores and on tap handles. “Find-ing the sweet spot can be tricky, but ultimately our decision on how much

to produce is informed by past sales, industry trends and consumer con�-dence.”

But Great Lakes o�cials aren’t worried about having Christmas Ale on shelves past Christmas.

“We’re more concerned with mak-ing sure beer within the freshness date printed on the side of the bottle is being sold above anything else,” said Boor, who added that some batches have dates going well into February.

Matt Cole, co-owner of Fat Head’s Brewery and Saloon, agreed that the pressure to “be the �rst” and stand out from the other seasonal brews can be intense.

“We would rather be short than long,” said Cole, who estimates that seasonals comprise about 25% of Fat Head’s current production of 28,000 barrels a year.

Fat Head’s, too, consulted with its distributors and studied last year’s sales to decide the timing and quan-tity of its holiday releases. �e release date of its Holly Jolly Spiced Ale was at the start of November, and if all goes as planned, the brewery expects to be sold out by January.

“�eir sales really help our third- and fourth-quarter earnings,” he said. “It forces us to be strategic, without sacri�cing our core beers (production).”

Great Lakes stands by its historical release schedule.

“We have our �rst pour tradition at the pub, which we typically celebrate in late October, then release Christ-mas Ale in our markets within a week or so,” Boor said.

He added, “It’s tempting to chase the sales, particularly when we know others are competing with us ... but we stayed the course this year. Christ-mas Ale, after, is all about tradition.”

Local brewers ensure holiday gifts aren’t returnedThe Dish: Susan Condon Love

Seasonal beers account for 30% of the Thirsty Dog Brewing Company’s production. (Contributed photo)

Susan Condon Love is a freelance writer who was an editor and writer at The Plain Dealer,

The Las Vegas Review-Journal, the Savannah (Ga.) Morning News and The Annapolis Capital.


FocusFocusFocus

When it comes to hardship, Hyland Software employee Nick Holmes’ family has endured its share.

Holmes, a professional development specialist with the Westlake-based company known for its OnBase prod-uct, has two young sons diagnosed with autism spectrum disorder, requiring ex-pensive services and therapy not cov-ered by Hyland’s insurance. A clinically proven treatment for his 7-year-old son, Andrew, costs upwards of $30,000 out-of-pocket annually.

� anks to an employee-funded emergency assistance program cre-ated by Hyland, Holmes was able to defray part of the cost for the pricey therapy, getting Andrew ten weeks of much-needed treatment that would have been � nancially unsustainable otherwise.

“My son is doing so much better,” said Holmes, 31. “He used to be ag-gressive at school, and this therapy has really helped him.”

Holmes’ story is not uncommon as more companies nationwide use em-ployee assistance funds to ease some of the burden of those undergoing emergencies. � e Emergency Assis-

tance Foundation, or EAF, which helps corporations in creating crisis grants for employees, onboards six to eight new companies each month. � e EAF has fostered 52 funds for 167 companies worldwide, covering about 1 million workers, with anoth-er 600,000 scheduled to plug into the system in January.

“� ese funds are hugely increasing in popularity,” said Doug Stockham, the foundation’s executive vice presi-dent. “Four or � ve years ago they were big with large companies, but after Hurricane Sandy and other di-sasters, more companies wanted to jump on the bandwagon.”

An emergency response

While there are numerous employ-ee hardship programs, most are de-signed as nonpro� t entities that re-ceive contributions and disburse grants to impacted sta� members. Contributions are tax deductible, and employees are not subject to a tax hit on the money they acquire. Typically, a fund’s co� ers are � lled by the em-ployees themselves, Stockham said. Once established, programs respond to emergencies of all types, from tor-nadoes to unforeseen sicknesses that cause unusual medical expenses.

By DOUGLAS J. GUTH

[email protected]

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plan for reductions in tax rates. Other tax reform plans from Republican legislators, such as House Speaker Paul Ryan, have also called for a sim-pli�cation of tax rates, including an overall reduction in the highest rates.

�e second reason to consider a charitable contribution this year is that the itemized deduction for charitable contributions may be re-duced or eliminated next year. Trump’s proposal includes limiting itemized deductions to $200,000 for married couples �ling joint returns. Currently, the cap on chartable con-tributions is 50% of adjusted gross income for contributions to most charities, and 30% of adjusted gross income for contributions to private foundations. A taxpayer with an ad-justed gross income of $1 million would therefore be able to contrib-ute $500,000 to most charities this year, but (under the proposed plan) would be limited to $200,000 for all deductions including charitable contributions, interest, medical ex-penses and taxes. �e limits under the Trump proposal would therefore signi�cantly impair the ability of high-income taxpayers to take ad-vantage of the tax savings that in-centivize charitable giving.

Another part of Trump’s proposal would limit a very effective tax planning technique: contributing appreciated property (usually stock) to charitable organizations. Although subject to myriad rules, securities with long-term unreal-ized gains may be donated to chari-ty without paying capital gains tax on the unrealized gain. In addition,

the taxpayer can generally take the fair market value of the securities as a charitable deduction. So a contri-bution of stock with a basis of $10 and a value of $1,000 can give you a $1,000 charitable contribution de-duction without having to recog-nize the $990 gain. This very bene-ficial rule has been the target of tax reform advocates over the years. While short on details, Trump’s tax plan includes a proposal to limit the benefit of this planning tech-nique for contributions made to a private foundation.

While many taxpayers might be re-luctant to make a signi�cant contri-bution this year and reduce or elimi-nate contributions in later years, one solution is a contribution to a do-nor-advised fund. A donor-advised fund is a separate account or fund that is maintained by a public chari-ty. Often described as a “charitable savings account,” a donor-advised fund allows a taxpayer to contribute cash or appreciated assets in the cur-rent year to receive a tax bene�t in that year and then advise the fund on grants to be made to speci�c chari-ties in later years.

As with any tax strategy, it is im-portant to consult with quali�ed pro-fessionals and consider the impact of the strategy on other aspects of your tax planning. �is could be an inter-esting opportunity for many charita-bly-inclined taxpayers because the Trump and the Ryan proposals both provide income tax rate decreases and restrictions on the ability to take a deduction for charitable contribu-tions in future years.

It is di�cult to predict whether and when the proposed changes will occur, but in light of these proposals, taxpayers who give to charity, partic-ularly those who are considering substantial charitable contributions, should factor the possibility of these changes into their planning for con-tributions in 2016.


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This isn’t going to end well.

Standard year-end tax advice along the lines of “be sure to make your charitable contributions be-fore year-end” has been a staple of basic tax planning for decades. Giv-en the results of the presidential election and proposals for tax re-forms from other legislators, this advice may be particularly appro-priate this year.

�e �rst reason why a charitable contribution in 2016 may provide a bigger bene�t than in future years is the possibility of a reduction in over-all tax rates. Unlike a tax credit, which is a dollar-for-dollar reduction of the amount of tax owed regardless of a taxpayer’s marginal tax rate, a tax de-duction, such as a charitable deduc-tion, reduces taxable income. �e value of the bene�t of a deduction therefore depends on the taxpayer’s tax bracket.

For example, for a taxpayer in the 25% tax bracket, a $1,000 tax deduc-tion reduces taxes by $250. But if a taxpayer is in the 35% tax bracket, the same $1,000 tax deduction would re-duce taxes by $350. �e value of a de-duction therefore decreases as tax rates decrease.

Under President-elect Donald Trump’s tax plan, the highest individ-ual tax rate would be reduced from 39.6% to 33%, a reduction of almost 17%. If this reduction comes to pass, the bene�t of a charitable contribu-tion will be decreased by this same percentage for those in the top tax bracket. Trump’s plan is not the only

Tax benefits to charitable giving could change in coming years

Tax Tips: Carl Grassi

Carl Grassi is chairman of McDonald Hopkins LLC.

As a potential buyer of a target company in an M&A transaction, it can sometimes be easy to “over promise” on a timeline to closing in your indication of interest or letter of intent, especially in an auction pro-cess with possibly many bidders. You want the deal, and you are willing to move quickly in order to secure ex-clusivity.

However, moving too quickly in conducting due diligence and nego-tiating the transaction documents could result in granular due diligence points being overlooked or glossed over or provisions in the purchase agreement being accepted “out of hand” with little to no negotiation. M&A transactions can and should move swiftly and e�ciently, but do not let the haste to sign the purchase agreement result in you getting burned following closing. �e follow-ing describes four unexpected ways you might feel the heat after closing the transaction to acquire your tar-get.

Retroactive insurance premium adjustments

In a stock deal, the buyer takes the target with all of its liabilities, subject to claims based on breaches of repre-sentations made by the seller and line item indemnities. �ere is the potential for retroactive insurance premium adjustments with respect to periods during which you did not

own the business. If this is a real pos-sibility, consider negotiating with the seller for a representation or a line item indemnity to cover it. Keep in mind that representations are highly likely to be subject to survival peri-ods as well as baskets and caps, so a line item indemnity may be the pre-ferred method to deal with this type of potential loss.

Scrapes

You will no doubt accept some sort of basket on your ability to recover for breaches of representations and warranties. You should consider reading out or “scraping” the materi-ality quali�ers from the seller’s repre-sentations and warranties for indem-ni�cation purposes so your ability to recover is not subject to two

Four unexpected ways you might feel the heat after closing an M&A deal

Adviser: Brendan J. McCarthy

Brendan J. McCarthy is a Cleve-land-based partner in Thompson Hine’s Corporate

Transactions & Securities practice group. He focuses his practice on mergers and acquisitions and commercial transactions.

SEE ADVISER, PAGE 18


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Hyland partnered with EAF on “Hylanders for Hylanders,” a work-er-paid endeavor launched in April that provides �nancial relief to col-leagues in need.

Full-time employees who meet program criteria apply on an internal website, with requests reviewed by EAF o�cials. Eligible events the fund covers include results from military actions and funeral expenses for a family member.

“�e goal is to approve 100% of grants,” said Lisa Jackman, Hyland’s team lead of employee engagement.

About 250 Hyland workers donate to the e�ort via payroll deductions, money bolstered by outside dollars and seed funding from the �rm’s ex-ecutive team. Individual grants can-not exceed $5,000.

“People feel like they’re caring for their fellow employees in need when they wouldn’t have been able to pre-viously,” Jackman said.

Holmes, who works out of Hyland’s Lincoln, Neb., o�ce, paid $8,000 to provide his son with a shortened ver-sion of the costly behavior analysis treatment. Using positive reinforce-ment to improve behaviors of those diagnosed with autism, the 10 weeks of therapy cost $13,000 prior to Holmes applying for the fund.

“Without this I don’t know what we would have done,” Holmes said. “�rough the program I’m making a deal with my fellow Hylanders: Even if I don’t know you, I want to help if I can. I’m just thankful to work for a company able to help out my family and make our quality of life better.”

Cleveland Clinic’s employee hard-ship program is fully funded by the hospital system, o�ering relief for im-

mediate needs like tardy utility ser-vice bills or a stolen car. Launched in 2009 in response to an unstable economy, the fund was initially real-ized as a one-time campaign, giving $491,000 in assistance to more than 700 company “caregivers.”

�e venture returned on an annual basis in 2011 for all sta� regardless of length of service or employment status, said Christine Bessmer, a total rewards bene�t administrator at the Clinic.

Awards top out at $300 in response to any number of scenarios: For ex-ample, when an employee had a vehi-cle stolen on Clinic property, that in-dividual received assistance after producing a police report document-ing the theft. Another caregiver missed work to care for a sick loved one, a situation already covered by the Family and Medical Leave Act. At the insistence of the caregiver’s depart-ment, the employee garnered addi-tional aid from the fund.

Roughly 6,000 Clinic employees have used the fund since its incep-tion. While peak usage was in 2011, workers are currently able to reach out to the program through a part-nering employee assistance service.

“Although the economy has im-proved over the last few years, there’s still a lot going on for our caregivers at a personal level,” Bessmer said.

Employee hardship funds are ex-pensive to run — the average compa-ny spends $600,000 to $700,000 on grant applications alone — but bene-�ts like reducing worker turnover and increasing a workplace’s familial atmosphere outweigh the costs, said Stockham of EAF.

“When a company starts a fund, are they doing it to help employees in need or to make themselves look better?” Stockham said. “It’s not just about checking a box. Tell your employees why they should donate, and have the program grow and be successful.”

In �e Art of War, the military strategist Sun Tzu wrote that, “If you know your enemy and know yourself, you need not fear the result of a hun-dred battles.” From his role as hobby-ist hunter, gridiron star, or marketer, Julius Dorsey’s life seems to be com-prised of many battles, those often won with the right knowledge. At least that’s how he may see it.

At 64, Dorsey is one of Cleveland’s top competitive strategists with his own �rm, Dorsey & Co., which has an impeccable resume — from consult-ing KeyBank to Case Western Re-serve University — and a pinpoint methodology that revolves mostly, for his clients, around a carefully wrought takedown of competitors via a bullet-point list of maneuvers, from budgeting to research.

�is is not just drafting a mission statement or taking out space on a billboard. No, Dorsey said, “you must think of this as warfare.”

Fresh out of college at Michigan State University, where he was quar-terback for the Spartans, Dorsey was drafted by the star ad �rms of 1970s-era Chicago, including J. Wal-ter �ompson. But it was after work-ing for Burell, where Dorsey was de-veloping strategy for McDonald’s expanding the black consumer mar-ket when the precocious marketer’s career began to really pick up.

In 1976, he was recruited by Mc-Donald’s advertising department and moved enthusiastically to its headquarters in Oak Brook, Ill. It’s there, over roughly eight years, that Dorsey would help create, market and sell some of the fast food chain’s most iconic products— the McRib, Egg McMu�n, Filet-O-Fish — with the help of, on average, about a doz-en market researchers. He took on nearly hundreds of commercials, made McDonald’s USDA-friendly, and one time saved the Chicken McNugget from near extinction.

Roy Bergold, who spent 32 years in

McDonald’s ad department, re-membered Dors-ey’s hire when the company it-self was chang-ing, as Bergold said, “beyond just that of a cheeseburger.”

“If you were good, you got a raise. Bad, you were �red,” he said. “A bright guy like Ju-lius, back in 1976? He was young, but he was smart. And that’s exactly what McDonald’s was looking for.”

Dorsey’s genius couldn’t have ar-rived at the Golden Arches at a more bustling time in fast food history. Just as Bergold, Dorsey and crew were �guring out how to sell their new Mc-Mu�n, Americans were beginning to spend upward of $7 billion dollars on fast food annually. Fast food was be-ginning to shape social trends en masse — and breakfast had yet to catch on.

It’s around this fact where the team persuaded then-McDonald’s head Ed Ramsey to create a full-out break-fast menu, open at 6:30 a.m. instead of 11 a.m., as to subtly create an alter-native to the slowly fading American diner, or as Dorsey saw them, anoth-er potential competitor.

Yet, they weren’t alone in the mar-ket. Hence, the so-called Breakfast Wars of the 1980s, when the top ad reps at McDonald’s, like Dorsey, were competing against other fast fooders like Burger King and Wen-dy’s. It’s where one’s competitive strategy is weighing the outcome of millions of dollars.

In the early 1980s, Wendy’s began to create the roots of their own break-fast campaign. In 1982, Dorsey and his team examined closely each of the test markets that, for example, Wendy’s was using to try out what would be their contender (mostly their omelet), and see how it ap-peased franchisees.

Noticing that Dave �omas, Wen-dy’s CEO, was testing breakfast solely in its Columbus headquarters, Dors-

Fast food breakfast war? Julius Dorsey was lovin’ itBy MARK OPREA

[email protected]

HELPCONTINUED FROM PAGE 15

ey pulled what may have been his greatest trick to date: deceiving tes-ters into believing that Wendy’s breakfast had national potential. An early-on ad, with a doo-wop quartet of cartoon eggs singing “Wendy’s! Only you!” showed promise for Mc-Donald’s rival. But Dorsey’s strategy worked. Wendy’s was doomed before yolks even touched grill.

“We thought that if we fooled Wen-dy’s into thinking that their breakfast is a smash hit, when they roll it out to other markets, we could crush them,” Dorsey said. “Instead of cutting mar-keting back, we heavied it up. We went way ahead what we’d been do-ing. And their product never took hold. �ey had to try and �ght through all this advertising.”

Dorsey was right. In 1985, �omas release a statement to the public, mentioning that after a year of testing and consumer surveys, Wendy’s wouldn’t then be joining the break-fast wars. Why? “A service problem.”

Nowadays, at Dorsey’s own �rm, he works alongside 56 consultants with universities, banks and even �nds inventors the sure path to pat-enting — all with a highly re�ned Dorsey-esque view on competition One that deals with, as he said, a “se-ries of factors that give businesses the upper advantage,” and leaving others “confused, and in a state of limbo.”

“I think I just like to compete,” he said, laughing. “Although I can’t play football anymore, I suppose that’s sort of my job now. But in reality the quarterback is not the player who makes the play work. No, it’s actually the e�ort of the whole team.”

Dorsey


MIDDLE MARKET

threshold limitations: the level of materiality included in the represen-tation or warranty itself and the ver-sion of the basket you accepted. As a buyer, you’ll want to “scrape” materi-ality quali�ers for both the determi-nation of whether there has been a breach and the calculation of the amount of losses resulting from the breach. Otherwise, you might not re-cover as often or as much as you might expect to from the seller.

Sandbagging

Your ability to recover for breaches of representations made by the seller that you knew about or, perhaps more accurately, that can be proven you knew about prior to closing often de-pends on the law the parties choose to govern the purchase agreement. Not surprisingly, the parties often choose to be silent on the issue of sandbag-ging in the purchase agreement, thereby subjecting the buyer’s ability to recover from the seller to the make-up of a breach of contract claim under state law, and, in particular, whether reliance is a component of such a claim. Some jurisdictions view it from a “contract” perspective — the parties negotiated the representations, and the seller must stand behind them. Others require the buyer to demon-strate that it relied on the representa-tions. And some take a hybrid ap-proach. As a buyer, whether you can

recover for breaches you knew about may boil down to the governing law, so do your due diligence when it is be-ing selected.

Control of third-party claims

�e customers of the business are an immensely important part of why you are making the acquisition. If a customer makes a claim or �les a lawsuit against the business you ac-quired with respect to the pre-closing period, you may very well have a claim against the seller for indemni-�cation under the purchase agree-ment. As is often the case, the seller retains the ability to assume control of the defense of third-party claims, putting the seller in the position of negotiating or litigating with what may be one of your best customers.

�e seller is motivated to minimize its exposure to you under the pur-chase agreement and is not neces-sarily concerned with the ongoing business relationship. �erefore, you should consider carving out certain third-party claims, such as claims by major customers, from provisions in the purchase agreement related to assuming control of the defense of third-party claims.

�ese are just a few of the many ways your transaction can go side-ways following the closing. Keep them in mind as you hurtle through the due diligence and negotiation phases of the transaction toward the signing of the purchase agreement — otherwise, you might �nd yourself burned.

ADVISERCONTINUED FROM PAGE 16

Many corporate foundations focus attention to their local school systems, but the charitable arm of Cleveland’s �ird Federal Savings & Loan is set-ting a standard for others to follow.

It’s certainly a sign of the midsize bank’s commitment to its native Slavic Village, where the institution was founded by president and CEO Marc Stefanski’s grandparents in the late-1930s.

�e bank has been quite active in the restoration of Slavic Village over the years through loans and grants supporting real estate development in one of Cleveland’s poorest neigh-borhoods — and a community dev-astated by the last housing crisis. �e $12.6 billion asset bank’s own head-quarters, a $30 million campus built on the site of the original building, is a testament to that all its own.

But the �ird Federal Foundation was established to invest in people and programs, particularly those promot-ing childhood literacy, in a wider e�ort to �ght systemic issues contributing to neighborhood blight and poverty.

�e starting capital establishing the foundation came from proceeds of an initial public o�ering by TFS Fi-nancial Corp., �ird Federal’s parent company, in 2006. A combined $5 million in cash and $50 million in TFS stock from that brought the foundation to reality in 2007.

“�e idea of the foundation was to invest in human capital because if you’re going to invest in a communi-ty, you can’t do it through just bricks and mortar,” said Kurt Karakul, exec-utive director of the �ird Federal

Foundation. “You have to do it through education and through peo-ple. And that’s our mission.”

Nearly $24 million in grants have been made through the foundation in the past decade. Karakul says an average of about $3.5 million is given away through it nearly every year (some of it goes toward programs in communities where the bank does business in Florida).

But about $1.5 million annually has been supporting one of the foun-dation’s most innovative programs: its Broadway P-16 initiative (refer-encing pre-birth through college ed-ucation, or 16 years), a public-private partnership with the Cleveland Met-ropolitan School District designed to take a birth-to-career vision for pro-moting success in young people.

A major tenet of that program is the promotion of literacy. Karakul, who sits on the nonpro�t Literacy

Cooperative of Greater Cleveland, said 47% of adults in the region read at a 7th grade level or less. �at’s a “literacy emergency” he said.

“�at’s like half of the working pop-ulation who don’t have skills to do the jobs that are required right now,” he said. “If you’re in manufacturing, you operated a computer that operates three or four machines. If you have a 7th grade reading level, you simply can’t operate that computer.”

Besides helping children pass their third-grade reading exams, promot-ing education should help �ll local jobs. People will earn more. And an educated population should see a decrease in crime.

“�at’s why we’re trying to make a long-term impact on education,” Karakul said. “It’s critical to keeping the economy competitive. We have thousands of jobs in this region that we can’t �ll because people don’t

have the skills to do it.” One of many innovative programs

spun out of the foundation involves �e MetroHealth System’s Broadway Health Center.

Well visits at the o�ce — which of-ten lead to a shortened school day for kids and their siblings as working parents shuttle their kids to appoint-ment — were a target for reading pro-grams. With support from the foun-dation and other partners, like ideastream, the lobby of that o�ce has been converted into a reading room. During average 40-minute waits, volunteers cart in books and o�er to read to kids while talking with parents about neighborhood reading programs and the importance of reading within the family.

“In an urban community, it can be hard to engage the parents because they’re working all the time. �ey’re busy,” Karakul said. “�is was one

way for us to engage them. And it seems to be working pretty well.”

Derrick Fulton, executive director of nonpro�t University Settlement, a neighborhood center that provides social services to residents in the Broadway-Slavic Village neighbor-hood, applauded the e�orts of the bank and its Foundation, saying they set an example for others to follow.

“A lot of employees come from suburbs like these and in work in our communities. I think we need more commitment like this,” Fulton said. “�ey didn’t even have to build their headquarters here. We need to rein-vest in the city and not leave it be-hind. �at’s what they’re doing.”

�e foundation is serving as a con-nector of other organizations to bring those programs to reality, too. And while there’s been movement in recent years with more groups joining forces, it’s that role which helps serve as a cat-alyst to neighborhood revitalization.

With the foundation marking its 10-year anniversary next year, the goal is to continue much of the same work the group has been engaged with and, it’s hoped, those e�orts will lead to long-term impact in the community.

After all, it’s an area this bank is clear-ly devoted to seeing thrive. Stefanski’s grandfather, in fact, was a teamster who would put homes on Fleet Avenue on stilts and hand dig the basements to drop them on a new foundation.

But investing in the local commu-nity is also simply the right thing to do, Stefanski said.

“We don’t always measure things in terms of return. We don’t exist just for the sake of being pro�table,” he said. “It’s like breathing air. We, as humans, breathe air, but it’s not our sole purpose in life to breathe air. �ere’s more to it.”

Giving back is part of Third Federal’s missionBy JEREMY NOBILE


Third Federal CEO Marc Stefanski and his children get ready to serve Christmas Eve meals to residents of Slavic Village. (Contributed photo)


Jason Pattee feels like he knows the people who live in Rocky River’s Beach Cli� One neighborhood. Even though he lives in Avon.

How? � ree years ago, he founded the Beach Cli� Beacon — a glossy monthly magazine that focuses 100% on the residents of Beach Cli� One.

So he has spent the past three years reading about their kids, their vacations, their pets and their homes. � us, he gets it when readers tell him that the magazine helps them build relationships with their neighbors.

“I hear stories all the time of resi-dents, they’re walking their dogs out in the neighbor-hood and they see someone and say ‘Oh, I saw you on the front of the Beacon,’ ” said Pattee, who runs the publication with the help of Christine Bowen, a part-time editor who lives in the neighborhood.

Over the past six years, Pat-tee and other entrepreneurs a� liated with N2 Publishing have launched a total of 22

neighborhood magazines in this re-gion. � e North Carolina-based com-pany helps independent publishers produce more than a thousand simi-lar magazines nationwide.

� ere is signi� cant demand for these types of publications from both advertisers and readers, said Pattee, who in February 2015 launched a second magazine called Straight to the Pointe in Avon Lake’s Legacy Pointe neighborhood.

Flip through one of his magazines and you’ll see ads on roughly every other page. Ads for plumbers, hair sa-lons, home remodeling companies and local stores — companies interest-ed in reaching people in nearby, a� u-ent neighborhoods, said Pattee, who also serves as N2’s sales director for the state of Michigan.

As for readers, the magazines give them a window into the lives of their neighbors. Most stories are written about residents, by residents. A typi-cal issue might include a feature on a family who just moved to the neigh-borhood, a Q&A with a high-achiev-ing student athlete and a story about a resident giving their time to a char-ity. � e magazines also organize neighborhood events, which often are hosted by sponsors.

� e magazines and events help readers get to know their neighbors on a deeper level, according to both Pattee and Brian Schuller, who pub-lishes three N2 magazines: East Hud-son Living, North Hudson Living and

Monticello Living, which focuses on the Monticello neighborhood in North Canton.

As an example, Schuller described a feature story about a man whose family recently moved to Hudson from China.

“After we ran a story about what it’s like living in China versus what it’s like living in Hudson, Ohio, people now come up to him and engage him in conversation. � ey feel like they have a sense of ... who he is,” Schuller said.

Jerry Emich Jr. said he has readers “who have � led away every single publication.”

In January 2011, Emich launched the � rst local N2

magazine, Living, which has focused on Copley’s Kingsbury Trace neigh-borhood. He also has published For-est Living in Rich� eld’s Glencairn Forest neighborhood since July 2014.

Notice that the neighborhoods have speci� c names. � e best com-munities for N2 publications tend to be recognizable, which makes it easi-er to get the attention of advertisers, he noted.

It also helps if a neighborhood has a welcoming home owners association, Pattee noted. He added that the resi-dents of Beach Cli� and Legacy Pointe have been extremely welcoming.

“People in both neighborhoods have been trying to recruit me for years,” he said with a laugh.

Business of Life

Neighborhood news: Social magazines help readers get to know the people down the street

A mix of pictures from the Beach Cli� Beacon, East Hudson Living and Living (from Kingsbury Trace in Copley). (Barb Stitzer Photography, top and bottom right, and contributed photos)

livinglivinglivinglivinglivingDecember 2016livingA Social Magazine Exclusively for the Residents of Kingsbury Trace

the � rst local N2

Beach CliffBeach CliffBeach CliffA s o c i a l m ag a z i n e f o r t h e re s i d e n ts o f B e ac h C l i f f | J U LY 2 0 1 6

Beach CliffBEACON Beach CliffBeach CliffA s o c i a l m ag a z i n e f o r t h e re s i d e n ts o f B e ac h C l i f f | A P R I L 2 0 1 6

Beach CliffBEACON

By CHUCK SODER

[email protected]@ChuckSoder


With edgy, modern designs, Andrew Brickman of Cleveland-based Brickhaus Partners has put a distinctive, risky imprint on the region’s for-sale residential market. Brickman has built and is pursuing a total of $100 million in real estate projects on sites ranging from Cleveland Heights and Little Italy to western suburbs ringing the Rocky River valley. However, there’s another side to Brickman: the insatiable world traveler. He just got back from a 10-day trip with his two brothers originally designed to reach the base camp of Mt. Everest. Since one brother was delayed, they changed their plans to hike through four mountains of the Annapurna circuit in Nepal. “We had three Sherpas. We saw no other Western tourists,” Brickman said. “We ate rice and lentils the entire time, which is what the locals eat. We are so spoiled here in America compared to other parts of the world.” All told, Brickman has visited 49 countries to “see new places, experience new cultures and learn new ideas.” This year he’s also been to Prague, Abu Dhabi. Why consider Mt. Everest? He’d seen it on an earlier trip to a Buddhist monastery in Bhutan. — Stan Bullard

Source Lunch

You’re listed as executive producer on four independent films. How did that happen?I’m friends with author Scott Lax and got to know a lot of talented people while living in Los Angeles with a girlfriend who wanted to be an actress. When I see a script I like, I get behind it and help raise money. The films include “Kings of Summer,” and, most recently, “My Blind Brother,” which had theatrical release in 21 cities. I was surprised it didn’t do better.

Make any money in the movies?You don’t do it expecting to get rich. I’ve been lucky to be successful in my business. I like film and I like to support new talent. If you buy an Andy Warhol painting, you know what you have. Finding a new artist is much more interesting.

Why did you move into home building from o�ce leasing?I still do real estate (o�ce) consulting with existing clients. I wanted to do housing styles that will keep the best and the brightest in Cleveland and attract them here, especially in the city and inner-ring suburbs. They’re walkable, have more character and you have more impact. Plus, at the time, no one was doing it. Now a lot of people are.

What’s the hardest thing about developing real estate in Northeast Ohio?Existing suburban homes are so inexpensive here. You can find a house for $75 a square foot. In Washington, D.C., it costs $1,000 a square foot. Construction here costs

what it does everywhere else, but it’s hard to get the price to support quality. We push it all the time.

What do you think of President-elect Donald Trump?Well, I didn’t support him. But he’s going to be our president. I hope he can bring our country together. I’m sick of all the divisiveness. He’s also a real estate developer, so maybe he’ll be good for the development business.

Where did you grow up?I lived in Warrensville Heights until I was 7. Then we moved to Shaker Heights.

Where did you go to college and what did you study?I studied environmental design at the University of Colorado’s architecture program. However, I received a BS in finance.

You had to learn residential development somewhere. Where was that?I worked with (real estate developer and owner) Ken Simon on converting

two o�ce buildings to apartments downtown that became 1020 Huron and The Osborne. I don’t have an ownership interest in either one, but I learned a lot. Ken was a great mentor for me.

What’s next on the project front? Is there anything we’ve not covered?I’m about to do a townhouse development in Beachwood I’ve been working on for three years. I’m also trying to do a lakefront development in Rocky River. I own two houses across the street from The Normandy. It’s designed as single-story living, which is what aging baby boomers want. It’s four stories tall but only looks like it’s two stories tall from Lake Road. There will be 30 units of 1,500 to 3,000 square feet. They’ll start at $500,000. There are two dilapidated houses on it that are going down. I need support from four council people to get the zoning for it. There’s some opposition. But if it doesn’t pass, I won’t quit. I’ll keep talking to people until I find a way to do it.

Where do you live now?I live in Hunting Valley. I rent a house. I want to live at the project in Rocky River. All the units will have views of Lake Erie.

How do you spend your free time besides traveling?I love to read. I’m reading a couple business books. One is "Good to Great." I’m also reading "The Snow Leopard." I also do power yoga. I don’t have the knees anymore for basketball and tennis.

Lunch SpotLockkeeper's 8001 Rockside RoadValley View216-524-9404

The mealBoth had mixed greens called Frank’s Salad and diet Cokes. One had tomato-basil-artichoke soup and chicken scallopini. The other: seared yellow-fin tuna.

The vibeIt was a happy lunch crowd. One table topped o� their meal with champagne. Next to the Ohio & Erie Canalway, the sophisticated interior has photos and tasteful paintings toasting the canal era.

The bill$78.34 with tip

Five Things:SINGER JIM BRICKMAN? He’s my cousin. I get asked that question five times a month.

FIRST JOB, AND FIRST REAL ESTATE JOB?Right out of college I worked, or maybe I interned, with the Council of Smaller Enterprises. I’d majored in architecture and real estate but wanted to know what di�erent businesses are like. That showed me. I started my brokerage career with King Group in Beachwood.

WANT TO DO A DOWNTOWN CLEVELAND DEAL?I’m always looking for opportunities. We’ve demolished 30 homes to start One Seventeen in Ohio City on the west end of Hope Memorial Bridge.

WHAT’S YOUR FAVORITE MUSIC IN THE CAR?I talk on the phone in the car.

DO ANY PROJECTS OUTSIDE NORTHEAST OHIO? I have some things in Florida and Kiela Villas in Mexico. I looked for something in Tulum because it’s the most beautiful beach in the world.

BUSINESS OF LIFE

Andrew BrickmanREAL ESTATE

“Existing suburban homes are so inexpensive here. You can find a house for $75 a square foot. In Washington, D.C., it costs $1,000 a square foot.”


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to develop real estate � nancing solutions to support their ongoing capital needs, including construction and redevelopment loans and other growth-oriented transactions. Rea has more than 28 years of banking experience in Northeast Ohio, including the last � ve years as a Senior Vice President of Commercial Real Estate for FirstMerit Bank in Akron.

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PROFESSIONAL SERVICES

Pallavi VermaSenior Managing Director

U.S. MidwestAccenture

Pallavi Verma, senior managing director-U.S. Midwest, will lead Accenture’s business in 12 states: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin. Based in Chicago, she will focus on bringing innovation to clients, attracting top talent and strengthening the company’s impact in its local communities.

NONPROFITS

Eric PelanderOhioGuidestone Board Chair

OhioGuidestone

Eric Pelander has been unanimously voted as board chair of OhioGuidestone, a 152-year-old nonpro� t headquartered in Berea that serves 27,000 people in nine Ohio counties. Mr. Pelander, who has served on the 35-member Board for several years, is founder and managing director at Waterstone Management Group, LLC. Mr. Pelander holds a Master’s degree in Business Administration from Harvard University and a Bachelor’s degree in Business Administration from the College of William and Mary.

Jerome W. CookPartner

Benesch

Jerome Cook is a partner in Benesch’s Litigation Practice Group. He has signi� cant experience

resolving client disputes involving residential and commercial real estate and construction matters. He has over 10 years of experience in the specialized representation of natural gas pipeline utilities including right of way protection, eminent domain right of acquisition, FERC certi� cate holder represen-tation and relocation reimbursement litigation.

Addisah SherwoodAssociate

Benesch

Addisah focuses her practice on all aspects of the acquisition, � nancing, development, leasing,

management, exchange, and disposition of commercial, industrial and residential properties. She also counsels clients on real estate investment transactions and entity formation.

Farnaz Ansari BernaVice President, Marketing and Sales

Insurance Board

Farnaz joins the IB after a long career at PNC Bank where she was

VP, Wealth Management Relationship Strategist. In her new role, Farnaz will enhance the IB’s relation-ships with its distribution partners to further growth. She sits on the Cleveland Metropolitan Bar Foundation’s board of trustees, and is a member of Lorain County Bar Association’s Ethics & Grievance Committee as well as Vice Chair of the Community Foundation of Lorain County. Farnaz is a graduate of Kent State University.

INSURANCE

Michael L. SnyderPartner and Chair, Energy Practice Group

Benesch

Michael L. Snyder is a partner in Benesch’s Litigation Practice, Chair

of Benesch’s Energy Practice and a member of Benesch’s Executive Committee. He has signi� cant experience in product liability cases and manages multi-state product liability cases (including wrongful death cases), as lead counsel for multiple clients. Michael also serves as lead counsel for a number of companies involved in various aspects of shale exploration, drilling and extraction.

LAWNathan L. WeidemannOf Counsel

Benesch

Nathan is of counsel in Benesch’s Commercial Finance & Banking Practice Group. He represents

� nancial institutions, funds, public traded and privately held companies, non-pro� t and government organizations, and individuals in connection with � nance, real estate, and general business transactions.

LAW

Steven T. GoldenAssociate

Benesch

Steve is an associate in Benesch’s Corporate & Securities Practice Group. He has a wide range of

corporate and business experience, including mergers and acquisitions, debt and equity issuances, business formations, stockholder arrangements and fairness opinions. He has counseled clients on U.S. and cross-border transactions involving a variety of deal structures. He has also counseled clients on matters relating to corporate governance and securities compliance.

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Also within those months, UH ad-mitted 1,450 patients with a trauma diagnosis and treated and discharged or transferred 604 patients with a trauma diagnosis.

� e American College of Surgeons will visit UH in February to review its � rst year and determine whether the center will become a fully designated Level 1 adult trauma center. � is would be an addition to its Level 1 Pediatric Trauma Center, which ad-mitted 669 patients from January through October this year.

� ough the designation is an import-ant milestone for UH and would shift the adult trauma center from provision-al to full status, it doesn’t change capa-bility or operations, Anderson said.

UH’s announcement in May 2015 that it planned to open its own Level 1 trauma center stirred communi-ty-wide debate. � e plan was em-braced by public o� cials, particularly those on the East Side who felt there had been a void in the area for such care since the Cleveland Clinic shut-tered Huron Hospital in East Cleve-land. Opponents, including Metro-Health and the Northern Ohio Trauma System, argued that the move was � -nancially driven and that a competing center could negatively a� ect care.

� e Northern Ohio Trauma Sys-tem, or NOTS, is a regional trauma network that brings together various entities involved in trauma work — be it at Level 1, 2 or 3 centers — to share data and protocols and review outcomes and processes.

As of now, UH is not a member, which Anderson said was a sore spot for many.

� ere have been some meetings to outline a new regional trauma orga-nization, Anderson said. He declined to provide detail other than to say, “I think as 2017 begins we’re going to have some pretty good news.”

Edward Eckart, assistant director of public safety for the city of Cleve-land and member of the NOTS Advi-sory board, would like to see UH at the NOTS table, which he said is a necessity in order for the group to reach its full potential. For EMS work, the addition of a second Level 1 cen-ter has meant revamping protocols to accommodate the decision-making process that now takes place on a scene to choose the appropriate hos-pital, said Eckart, who oversees EMS and � re for the city.

� ey’ve also had to make some op-erational adjustments, he said. Previ-ously, when an ambulance was trans-porting a patient to MetroHealth from

the East Side, it would be out of ser-vice and another would have to cover the area where it had been stationed.

When UH came online, it lessened the out-of-service times for EMS. � ere wasn’t much of an e� ect on re-sponse time, Eckart said, because trauma accounts for only a couple thousand of the roughly 75,000 peo-ple transported in a year.

If UH were to become a member of NOTS, he said the shared data would help give a full picture of what the East Side Level 1 trauma center has meant.

“It’s a big piece of the pie that’s missing from the overall picture of trauma within Northeast Ohio,” Eck-art said. “It would be nice to see this loop � nally closed so that we’re all functioning under the same guide-lines, same protocols.”

Eckart commends the hospitals for their collaboration in the past several

years in overall health care delivery in the community. � e most recent visible e� ort being coordinating preparation for the Republican Na-tional Convention over the summer.

Anderson said the ultimate measure of the success of two Level 1 trauma centers will be improved outcomes.

“� at same collaborative spirit that we felt preparing for and then being a part of the RNC, how do we continue to move that forward?” said Ander-son, who is leaving UH at the end of the year to become president of the University of California San Francis-co Benio� Children’s Hospital. “How do people get rapid access to trauma care? How does that trauma care continue to decrease mortality? Quite frankly, how do we continue to improve trauma prevention?”

If trauma outcomes are positive, then great, Boutros said. But if not, “We’ve gotta � x it, because that’s lives.”

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This data resource is the culmination of Crain’s year-round efforts to gather details on businesses in Northeast Ohio.

Leon Polott, president of AlSher Titania and its Cleveland-based par-ent, 5iTech LLC, said his company’s growths plans have stalled because it has been hit hard by the dip in the oil and gas industry. “�e clawback is just a bump in the road,” he said of the loss of the state grant money.

�at kind of swing and a miss is unusual. But it’s not uncommon for a company to achieve 90% of its target, or, for that matter to exceed the goal by 10% or more. So agencies give companies some leeway before can-celing a tax credit or seeking a return of a grant.

“It’s not an exact science,” said Peggy Weil Dorfman, Solon’s eco-nomic development manager.

ODSA director David Goodman, told Crain’s compliance with the goals set in �nancial incentive agreements is improving and the at-torney general’s reporting, which began in 2011, backs that up. In 2011, the compliance rate was 59.1% and has been rising annually to this year’s 84.8%.

Typically, a company is consid-ered to be falling short if it creates less than 75% of the jobs promised or the investment made. Depending on the speci�cs of how a company is falling short, ODSA or another agen-cy may reduce a six-year tax credit to perhaps three years or raise a loan interest rate one or two percentage points.

Good Jobs First, a nonpro�t watch-dog group based in Washington, D.C., that is generally critical of gov-ernment incentive programs and the way incentives are monitored, be-lieves Ohio’s current disclosure prac-tices do not provide su�ciently de-tailed information, “but are useful tools nonetheless. Ohio’s economic development spending is substantial but more transparent than in most

states,” according to the organiza-tion’s Accountable USA report.

ODSA, Goodman said, does not expect to reach 100% compliance. “We realize we’re taking risks when we invest state dollars in job creation and the capital investment plans of these companies,” he said. “But we’re doing a better job of identifying good investments.”

Goodman credited JobsOhio, the state business attraction nonpro�t, and its network of regional economic development agencies with provid-ing ODSA good projects to invest in. He also said that while some compa-nies didn’t deliver on their job cre-ation promises, overall, businesses in ODSA programs in 2015 actually added 119% of the jobs agreed to in their incentive agreements.

Staying in line

JobsOhio began o�ering incen-tives in 2014 and made its �rst pass at evaluating its programs in its recently released “2015 Metric Evaluation.” JobsOhio found that the 31 compa-nies whose incentive programs were evaluated created 558 jobs and �xed asset investments of $117 million. In both cases, those achievements ex-ceeded the original commitments the companies made, creating 117% of the jobs expected and 133% of the capital investment.

But JobsOhio, a private nonpro�t corporation that bene�ts from the pro�ts of the state’s liquor monopoly, does not disclose details about its in-ternal operations, so its evaluation report does not identify how individ-ual companies performed.

�e economic development agen-cies of Northeast Ohio cities and counties have a longer history of monitoring �nancial incentives. In fact, all agencies contacted reported 100% “substantial compliance” with �nancial incentive goals. �at means that while some goals may not be ful-ly achieved because of changes in the business climate or the conditions in

a particular industry, only partial clawbacks or changes in agreement terms were sought, not a cancellation of the incentive.

In a presentation late last month to Cleveland City Council, Mayor Frank Jackson’s economic development di-rector Tracey Nichols reported that 12 of 19 loans reviewed were in com-pliance and the seven that were not in full compliance were considered making signi�cant enough progress to justify not canceling all or part of the �nancing extended.

One loan, to Arbor Park Place LLC, was continued even though it had created only 63% of the anticipated jobs. �e developer made 100% of the agreed-upon �nancial invest-ment and keeping the Arbor Park Place shopping center open, which is anchored by a Dave’s supermarket, is considered an important neighbor-hood asset.

Similarly, all 125 awards reviewed by 16 Cuyahoga communities, Sum-mit County and the city of Akron were determined to be compliant with the terms of their awards.

One exception is Solon, which in September rescinded job creation grants to two companies, Techtron Systems and Valtronic Technologies, after they failed to meet job or payroll creations goals for three consecutive years.

“Most of the companies we work with are generally compliant,” said Dorfman. “We try to accommodate the fact that things can change and we try to give companies some lee-way.”

Solon expects a company to meet 75% of its goal. If it misses that target in a single year, the tax credit will be lost for that year, but it would be rein-stated for the following year. Meeting 85% of the goal would mean a reduc-tion in the credit. But if the goal is missed for three consecutive years, the credit is withdrawn.

Executives from Techtron and Val-tronic did not return email requests for comment by press time.

TAXCONTINUED FROM PAGE 1

�e families manage the Class B shares as a group through RMS Ltd., a partnership that holds and admin-isters Class B stock contributed to it by members of the founding fami-lies whose initials form RMS. Grap-pling with governance �nally moved to the fore after a multitude of di�-cult moves since 2011. Exiting the land development business, selling its cash-rich military housing busi-ness and this year’s dramatic con-version to a real estate investment trust have not adequately boosted the �rm’s languishing share price with respect to the value of its prop-erty holdings.

While the �rm has some things left to do to improve its currency with Wall Street, the proposed pact to re-place the founding families Class B shares with 1.31 shares of Class A shares is likely the biggest, or bitter-est, step to take.

The market responds

�e stock market certainly liked the idea: Forest City stock climbed almost 9% between the opening price of $19.80 a share Tuesday, Dec. 6, when the pact was proposed and the close at $21.18 on �ursday, Dec. 8.

Paul Adornato, senior REIT ana-lyst at BMO Capital Markets in New York City, said in a phone in-terview he had thought the stock would tank after the announce-ment in October by the indepen-dent directors that RMS could not strike a deal. Instead, it fell after Forest City announced Nov. 3 in its third-quarter financial results it was taking a $300 million impair-ment charge on its Pacific Park de-velopment in Brooklyn, a joint venture with The Greenland Group of China.

“Investors had, in my mind,” Ador-

nato said, “become very fed up with all the impairments. In my surmis-ing, that is when the family called their advisers and said they would look closer at the proposal.” Even so, the gain in Forest City stock after the proposed pact went public allowed it to regain ground to where it was be-fore the third-quarter �nancial re-sults were released.

Although Scopia management, Forest City’s third-largest investor, jointly announced with the company support for the proposed plan, an-other long-term, major investor in Forest City played a behind-the-scenes role in the events. Moreover, the change in Forest City holdings by �ird Avenue Management, a multi-billion-dollar investment fund, epit-omize Forest City’s woes with inves-tors.

On Oct. 4, 2011, �ird Avenue sug-gested in an SEC �ling that Forest City consider a long list of steps to improve operations and consider un-folding the dual share structure — at the time, almost 20 million shares of Forest City stock, or 13.3% of the shares. Now �ird Avenue is Forest City’s 12th-largest shareholder, ac-cording to its most recent SEC �ling on Sept. 30, with 5 million shares. Moreover, �ird Avenue sold 371,000 shares in the prior quarter, the �ling said.

A �ird Avenue Management me-dia contact, Dan Gagnier, said its management declined to comment on its sentiment about the company accepting its long-ago dual share idea.

However, in an Oct. 30 report to investors, Third Avenue said it likes Forest City and two other property companies, Brookfield Asset Management of Toronto and Vornado Realty Trust of New York, because they have substantial holdings in major cities that can benefit from growing urbanization and the rising popularity of city apartments.

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POST-EVENT COVERAGE • CRAINSCLEVELAND.COM/FAST52-2016

Here to stay

Even with the proposed changes, RMS will still play a big role at Forest City if shareholders approve the plan to give holders of Class B shares 1.31 shares of Class A shares. Between those and an-other 7.4 million Class A shares it al-ready holds, RMS would own 30 million shares of Forest City, or 11% of the stock. RMS would be the second-largest share-holder, only behind mutual fund power-house Vanguard, based on current SEC �lings. In other words, it would be a ma-jor shareholder rather than a minority shareholder with voting control.

Moreover, under the agreement, Brian Ratner and Deborah Ratner Sal-zberg or other RMS appointees would remain board members through 2020 as long as RMS continues to hold a certain percentage of shares. Both are adult children of longtime former CEO Albert Ratner, now co-chairman emeritus. �ey run major out-of-town operations for Forest City in markets the company plans to continue focus-ing on. Brian Ratner runs Forest City’s Dallas o�ce and Salzberg its Wash-ington, D.C., o�ce.

�e proposed agreement also calls for James Ratner to become executive chairman. He replaces former CEO Charles Ratner as chairman after he re-tires at the end of this month. Charles Ratner’s director’s seat will be one of two held by new independent directors.

�at shift also �ts CEO David LaRue’s streamlined reorganization of the company. �e move would leave Ronald Ratner as head of its develop-ment unit, a post originally shared with James Ratner. Board member Bruce Ratner will also step down from the board by year-end, though he will continue working at its New York op-

eration, the largest concentration of Forest City properties.

Agreeing to give up the dual share structure is perhaps more signi�cant for the company than another big move, the naming �ve years ago of LaRue as the �rst non-Ratner to serve as CEO.

Charles Schulman, president of Beachwood-based Carlyle Manage-ment real estate �rm, grew up know-ing the Ratners because his father did business with Forest City, including heading the company that sold Ter-minal Tower to Forest City. He sees the founding families relaxing their grip on the company as a major move.

“It’s a courageous move on their part,” Schulman said in an interview Dec. 8. “It changes the way they (family members) are perceived around town.”

Schulman is certain the proposed change is yet another long-planned, much-studied move by RMS. “�ey’re not the kind of operators who ever jumped into anything,” Schulman said.

Until, in this case, when they were pushed after many other draconian steps failed to produce results.

Previously, LaRue and Robert O’Brien, chief �nancial o�cer, had said on conference calls the company would consider the dual-share struc-ture after steps to improve its books and operations if the stock did not rise.

BMO’s Adornato estimates the company should be worth $31.40 a share if its underlying real estate port-folio is properly valued. �at is a long way from the current share price.

“�is opens up the situation so that investors, both current and future, can take a better look at Forest City opera-tions,” Adornato said. “We don’t have to focus on this very big negative.”

In the news release announcing the agreements, Charles Ratner, Forest

City chairman, stressed the decision advances the company’s evolution.

“After carefully reviewing the com-pany’s options to further enhance val-ue for shareholders, we determined that now is the right time to collapse the dual-class structure,” Charles Rat-ner said Dec. 7. “Today’s announce-ment will strengthen the Company’s corporate governance pro�le by align-ing voting rights with the economic in-terests of all our shareholders. We are pleased to have reached an agreement and are con�dent that Forest City is well-positioned for the future.”

If adopted, the change also signals the end of the unique family atmo-sphere that surfaced at Forest City’s annual meetings.

When Charles Ratner began his 16-year tenure as president and CEO in 1995, Sam Miller, now co-chair-man emeritus, remembered taking his nephew on a trip to downtown Cleveland as a lad dressed by his mother “in a sailor suit.”

�e change also will turn the page on a generation that took Forest City from a big regional developer to a na-tional one. �e spirit of the change also follows the company’s sale of its most high-pro�le property here, with K&D Group of Willoughby buying Terminal Tower and a�liates of Cavaliers owner Dan Gilbert buying �e Avenue.

�e late Max Ratner, at an annual meeting of stockholders in the 1980s, remarked on the company’s growth by recalling how as a boy he helped unload lumber from rail cars for the family’s new garage-building busi-ness. And the company since went from garages to a lumber yard with a chain of do-it-yourself stores and, �-nally, to solely real estate, but with properties spanning the nation.

Charles Ratner, Forest City chairman of the board, former CEO

At year’s end, will retire and leave the board after 50 years with the company. Credited with launching multiple measures to modernize Forest City operations.

James Ratner, executive vice president of development

Will be appointed to the board as executive chairman. When that occurs, he will relinquish management responsibilities at the company as executive vice president of development. He has been with the company for 40 years.

Brian Ratner, Forest City executive vice president, heads its Texas o�ce

He is a 20-year veteran of the company and board member since 2001. He is one of three Ratner family members able to continue to hold board seats if the share pact is approved.

Deborah Ratner Salzberg, president of Forest City Washington, D.C.

A former justice department attorney, she has worked at Forest City since 1985 and has been a board member since 1995.

David LaRue, CEO and president

Has worked at the company since 1986. He became a director when he was named CEO in 2011.

Ron Ratner, executive vice president of development

Will become the executive vice president in charge of Forest City’s development unit when James Ratner, who shares the same job, leaves management. Ron Ratner has been a director since 1985.

Almost all in the Ratner family

real estate development forest city takes di˜ cult

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