29 April 2013

Fun plus hard work equals success for Quicken Loans


Story originally appeared on USA Today.

Quicken's residential mortgage business outshines its more buttoned-down competitors.

DETROIT -- Nerf gunfights and costume contests are generally not encouraged inside major mortgage banking companies. But at Quicken Loans' headquarters in downtown Detroit, high jinks and horseplay figure prominently in a corporate culture that is upending the industry's more buttoned-down players.

The latest statistics show the value of the firm's mortgage loans soaring to $70 billion last year from $12 billion in 2008. Quicken, which operates online with no brick-and-mortar storefronts, now ranks as the nation's third-largest residential mortgage lender, closing in on No. 2 JP Morgan Chase, based on 2012 fourth-quarter figures. In a highly fragmented industry, Quicken now writes nearly 5% of all residential mortgages in the U.S., and is still growing.

Record-low interest rates have helped, spurring a refinancing boom that has boosted profits. And despite a few charges of overly aggressive sales techniques and some questionable loans, analysts credit Quicken with prospering today because it mostly stayed away from the worst sort of mortgage practices that punctuated the nation's housing meltdown.

Perhaps most important to Quicken's growth was its ability to grab market share from lenders badly bruised by the 2007-08 housing market collapse.

"Dan Gilbert has been smartly seeing an opportunity and filling a void left in the industry," Paul Moulo, managing editor at Inside Mortgage Finance Publications, said last week. "While they were napping, so to speak, Quicken ate their lunch."

The benefits of this meteoric rise flow not just to billionaire founder and chairman Dan Gilbert and his partners in the privately held Quicken, but also to Quicken's headquarters in the city of Detroit. With Quicken the flagship of Gilbert's business, sports, casino and real estate empire, profits from mortgage lending underwrite his investments downtown, where he owns 17 buildings and controls others through leases, as well as his purchase this month of Greektown Casino-Hotel.

Gilbert's vision for a downtown revival featuring Parisian-like sidewalk caf├ęs and other amenities would be unimaginable without profits from Quicken's 10,000 employees and their mortgage expertise. Gilbert's aides estimate his downtown investments exceed $100 million and likely will grow.

Relaxed environment

Gilbert, 51, received a real estate license and law degree early in life, but he was always more interested in running his own company. He started Rock Mortgage in 1985 with his brother and a friend.

By 1993, when now-CEO Bill Emerson joined as a loan officer, Rock was still a traditional paper-based lender in suburban Bingham Farms. Employees wore suits and ties.

It was a different environment and business model than today's Quicken, which sprawls through several of Gilbert's buildings downtown. The atmosphere is high-energy, the dress is casual and the decor colorful as youthful mortgage bankers compete on loan volume and mini-basketball hoops.

The company's loan process has been paperless for years. The transition began in early 1998, when Gilbert wrote a memo urging staff to explore an online format. The company eventually closed its 30 or so storefronts.

In May of that year, Gilbert took Rock public. Software maker Intuit bought the company in 1999 for more than $500 million and changed its name to Quicken Loans to match its popular software product. The two firms never quite meshed, and Gilbert and his partners bought it back in 2002 as a private company for a fraction of the earlier sale price, retaining the Quicken brand on a perpetual lease.

By going all-online, Quicken could digitally track every step — from taking the initial call from a potential customer to ordering closing documents. Quicken shrunk the mortgage approval time down to about 30 days from three to six months — a major selling point for marketing and advertising. Today at Quicken's headquarters, teams of data analysts sit in "mission control," tracking thousands of loan applications on banks of oversized computer screens.

"The only way that works is with technology," Emerson said. "The only way that works is if you've got a paperless system, so you can literally have 25 people touching the same loan at the same time doing different functions."

'Engineered to amaze'

When the national housing market collapsed, Gilbert, Emerson and other Quicken executives decided to ramp up efforts to grab mortgage lending market share. They launched the "Engineered to Amaze" marketing campaign and started hiring at a time when competitors were still laying off.

"(Other) lenders had pulled back," said Kenneth Fears, senior economist with the National Association of Realtors. "They weren't expecting this boom — they weren't expecting rates to go lower, so they were trying to cut costs. Well, they cut a lot of staff. And these aren't the kind of (employees) you can pull off the street and train right away."

Moulo, the managing editor at the financial services publication, recalled his own visit to Quicken's website earlier this year when he considered refinancing a home loan. He filled out the online questionnaire, and — bang! — his phone rang about 15 seconds later. It was a Quicken salesperson. "That's how aggressive they are," he said.

Shayla Miller, 24, an elementary school teacher from Bartlesville, Okla., turned to Quicken when she and her husband bought their first house. Miller's parents had used Quicken earlier and referred her. "I like that they were available all the time to me," she recalled last week. "I can always call after 5 (p.m.). I can always call on Saturday."

It took 27 days from her and her husband's offer on the house to closing on the mortgage, she said.

Such feedback from consumers has helped Quicken win the coveted J.D. Power award for quality three years running.

Pressure and rewards

For employees who adapt to Quicken's high-energy culture, where the mantra is "Every client, every time, no exceptions, no excuses," rewards can be high. Quicken is routinely atop local and national Best Places to Work lists.

For those who don't thrive, work can seem a high-pressure chamber where leaders extol workers to sell, sell, sell.

In recent years, some former employees filed lawsuits seeking unpaid overtime. The claims turn on a facet of federal law requiring overtime for salespeople but not "mortgage bankers" who function as broader financial advisers, as Quicken defines its sales staff.

In early 2011, a federal jury found in Quicken's favor. CEO Emerson felt so vindicated, he framed and mounted a blowup of the case document on his office wall.

Quicken also has been accused occasionally of engaging in overly aggressive and improper sales tactics. That includes a lawsuit in West Virginia brought by Lourie Brown, a nurse who made just more than $14 an hour. She said she was sold a 30-year, $144,800 adjustable rate mortgage in 2006 with a $107,000 balloon payment. Brown defaulted on the loan less than a year later.

The total amount due on the 30-year loan would have been $550,000, despite her house's fair market value determined by the court to be about $46,000, according to court records and attorneys involved with the case.

A state circuit court found Quicken committed fraud and violated various provisions of the state's Consumer Credit and Protection Act and awarded nearly $2.8 million in punitive damages and attorney fees. In late 2012, the West Virginia Supreme Court largely upheld the decision but sent the case back to the lower circuit court for it to explain how it arrived at the award and the amount. The case remains in the lower court awaiting further action.

In a statement Friday, Quicken said, "We fully expect the circuit court's continued review of the case to find that the irrational award to this plaintiff is out of line with any near reasonable review of the facts and the law surrounding this case."

Despite such incidents, several industry analysts contacted by the Free Press said Quicken largely steered clear of the types of business practices that contributed to the subprime loan market meltdown that drove some banks and other lenders out of business. "They were smart enough in their previous lives to stay out of hard-core subprime," Moulo said. "So that allowed them to live to play another day."

Emerson said last week that Quicken has never written inappropriate loans: "Our industry forgot what responsible lending was, and fortunately for us, we didn't," he said. "A good chunk of the reason we're still here is that we didn't do that stuff."

Building for the future

The looming question for Quicken: What happens as historically low interest rates inch up? That could curtail the refinancing boom, a major part of Quicken's current business success.

Emerson said Quicken has enough partnerships and strategies to generate strong revenue. Among other steps, Quicken has partnered for the past 18 months with investment firm Charles Schwab to offer cross-branded mortgages.

Quicken also has started servicing mortgages, handling the payments and paperwork during the life of the loan for fees. In late March, Quicken purchased about $34 billion in mortgage servicing rights from Ally Bank. The purchase will boost Quicken's servicing portfolio to about $120 billion, Emerson said. The pool of loans can be mined for refinancing opportunities.

Shah Tehrany, managing director with Franklin First Financial, a mortgage company based in Melville, N.Y., said he believes Quicken will continue to thrive even as the market pivots.

"Dan Gilbert is a smart guy," he said. "It will be interesting to see how he maneuvers the company if the industry shifts, but I think they'll do just fine. They have a good brand, and they're spending money in the right spots."

24 April 2013

Editorial: Gov. Snyder's auto insurance reform offers little savings to drivers


Story originally appeared on Freep.

Michigan needs insurance reform badly: Statewide, rates are among the highest in the nation, and in Detroit, where as many as 50% of drivers are believed to be without insurance, rates are outrageous.

But Gov. Rick Snyder’s proposition to change Micigan’s no-fault insurance system can’t really be called reform.

Snyder’s proposal, announced Thursday, would save each Michigan driver $125 a year. That’s $10 a month. And in exchange for these paltry savings, Snyder would dismantle a safety net that is the best in the nation.

Snyder is proposing changes to a unique component of Michigan auto insurance: personal injury protection. In our state, insurers cover claims for auto-related injuries up to $500,000; costs exceeding $500,000 are paid — with no cap — by the Michigan Catastrophic Claims Association. Drivers fund the MCCA with a $175 annual fee, set to increase to $186 on July 1.

The MCCA has said its system is unsustainable and has justified its rate increases by saying the system can’t afford to pay the claims made. Yet it has refused to publicly release financial information to prove its assertions. A group called the Coalition Protecting Auto No-Fault has sued the MCCA to make that information public; a judge ordered the MCCA to release the records, but the association is appealing that decision.

Snyder’s plan would phase out the association, replacing it with a nonprofit, and would cap benefits at $1 million. Further costs would be paid by Medicaid, which is facing its own shortfall; that budget hole would be filled by an insurance premium and the extension of a 1% tax on some medical insurance claims. The governor says that even with the changes he’s proposing, Michigan’s system is still the most generous in the nation.

But Snyder offers no evidence to suggest that this reform would result in any significant reduction in costs for Michigan drivers.

And there is evidence aplenty to suggest that eliminating unlimited care for catastrophic injuries could have a devastating impact on Michiganders.

A 2011 study by Public Sector Consultants — coincidentally, the firm once helmed by Bill Rustem, Snyder’s director of strategy — found that 94% of personal-injury claims were less than $50,000. The average cost of the .5% of claims exceeding $400,000, the study found, was $1.4 million.

Capping benefits at $1 million would affect a small number of people. But those dollars could mean the difference between a lifetime of invalidism and rehabilitation and a return to functionality.

Moreover, the data that would justify such changes haven’t been made public.

That’s where this needs to start.

If the MCCA is unsustainable, if that system truly needs reform, if Snyder’s proposed changes could bring the cost of auto insurance down by more than $10 a month, show us the numbers.

Then we’ll talk.

Metro Detroit job sprawl worst in U.S.; many jobs beyond reach of poor


Story originally appeared on Freep.

If it seems like it’s taking longer than ever to get to your job in metro Detroit, there’s a good reason.

A new study finds that metro Detroit is the nation’s most sprawled job market, with 77% of jobs located at least 10 miles from the downtown core.

Combined with an earlier Brookings Institution study on access to public transit, a portrait emerges of a metro area where many jobs are beyond the reach of low-income residents who lack transportation options and often live inside the city.

Besides potentially adding to commute times, a decentralized job market adds to pollution levels.

The Brookings Institution released its new report today showing that only 7.3% of metro Detroit’s roughly 1.4 million jobs lie within three miles of the city’s central business district. Another 15% lie within a 3-to-10-mile band from the downtown core.

The 77% of jobs that are found from 10 miles to 35 miles out are the highest percentage of decentralized jobs in any of the nation’s top 100 metro areas.

The earlier study found that only 22% of jobs in metro Detroit were within even a 90-minute ride on public transit. That ranked metro Detroit 73rd out of 100 top metro areas in the ability of residents to get to work via bus or light rail.

“One of the issues we’re constantly hearing about is there may be jobs out there, but people can’t get to them. The fact that we’re so sprawled out does make it extremely difficult,” said Megan Owens, director of the nonprofit group Transportation Riders United, which lobbies for more public transit options in metro Detroit.

Elizabeth Kneebone, one of the authors of the new Brookings study, said the problem of access to work in metro Detroit limits the ability of poor people to move up the economic ladder.

“If they can’t use transit to get where the job opportunities are and they don’t have a reliable car, that can make it that much harder for them to connect with the kinds of opportunities to improve their economic condition,” she said.

Besides limiting economic opportunity for low-income residents, a sprawled-out job market leads to environmental damage, Kneebone said. “That means more traffic, congestion, a bigger carbon footprint.”

The data in the newest Brookings study came from the 2010 Census, so it did not capture the recent influx of jobs downtown as Quicken Loans, Blue Cross Blue Shield of Michigan and other employers shifted jobs from the suburbs to the city. But even the estimated 10,000 new jobs downtown over the past two years would not have changed Detroit’s ranking significently.

With nearly 1.4 million jobs in the region, a shift of 10,000 from the suburbs to downtown would amount to less than 1% of the total.

Among specific findings in the Brookings study:

  • Between 2007 and 2010, the years of the Great Recession and its aftermath, 97 of the nation’s 100 largest metro areas lost employment within 35 miles of downtown. Metro Detroit lost 25% of its jobs during that period because of the recession.
  • Jobs sprawl continues nationwide. Of the top 100 metro areas, 91 ended the decade with a lower share of jobs within three miles of downtown than in 2000.
  • In general, the more jobs a metro area has, the more decentralized those jobs tend to be.
  • Beyond employment size, political fragmentation — the number of jurisdictions within a region — plays a big role in where jobs are found. Jobs tend to locate farther from the city center in places like metro Detroit that have more political units, possibly because employers are taking advantage of competition among communities for lower tax rates.
  • Cities that adopted urban growth boundaries to hem in suburban sprawl, like Honolulu and Salt Lake City, tend to see jobs more concentrated near the urban core.

State warns workers of potential layoffs as massive federal cuts trickle down


Story originally appeared on Freep.

LANSING -- Much has been reported about federal employees, including up to 8,000 defense industry workers, whose jobs are likely to be affected -- perhaps even lost -- because of the federal sequester.

But the impact of the deep, across-the-board spending cuts mandated by the sequester is beginning to trickle down to state employees, too.

To prepare for the inevitable cuts in federal money coming in to Michigan, estimated to be up to $150 million, state officials are developing plans on how to cut their budgets, including potential layoffs of state employees.

The Office of the State Employer sent notices earlier this month to all department and agency directors, and the unions representing state employees, letting them know that layoffs may be a consequence of the $85-billion in federal budget cuts.

"Plans are being developed to quickly bring spending in line with anticipated revenues ... which may include indefinite layoff of employees due to lack of funds, reduction in spending authorization," the letter to unions said. "These plans may also include temporary layoffs due to unanticipated loss of funding."

The layoffs, if they happen, would begin sometime after April 8, the letter said.

The state is required to send such notices to union leadership 30 days before any layoff occurs. No layoff letters will be sent to individual employees until the departments develop their plans by the end of this month, said Lauren Leeds of the state Department of Technology, Management and Budget.

Employees are required to get at least 14 days' notice of an impending layoff.

"As required by the contracts with the unions, we had to notify them that layoffs may occur, but it may not necessarily happen," Leeds said. "It's all still up in the air. Information is coming in very slowly from the federal government."

Some departments could be hit harder than others. Federal dollars represent 65% of the Department of Community Health's budget. The Department of Transportation gets about $1 billion a year from Washington. And a big chunk of the Department of Human Services' budget comes from the federal coffers.

"But we don't know yet which, if any, employees will get layoff notices," said Kurt Weiss, spokesman for Gov. Rick Snyder.

Phil Patrick, executive vice president for Service Employees International Union Local 517M, which represents about 4,000 state employees, said the letter is a bit unsettling. But he also said he realizes it was an obligation of the state to provide notice to the unions.

"Obviously, they have to look at all their operating costs," he said. "But we hope it won't affect many employees."

18 April 2013

McDonald's settles suit over non-halal chicken


Story originally appeared on USA Today.

DETROIT — A judge on Wednesday finalized a $700,000 settlement between McDonald's Corp. and members of Michigan's Muslim community over claims a suburban Detroit restaurant falsely advertised its food as prepared according to Islamic law.

Ahmed Ahmed, the Dearborn Heights man who represents plaintiffs in the class-action suit, claims he bought a chicken sandwich in September 2011 at the restaurant but found it wasn't halal. Islam forbids consumption of pork, and God's name must be invoked before an animal providing meat for consumption is slaughtered.

The McDonald's restaurant chain and one of its franchise owners agreed in January to the tentative settlement that would be shared by Ahmed, as well as a Muslim-run Detroit health clinic, the Arab American National Museum in Dearborn and lawyers.

The two sides met Wednesday for final approval before Wayne County Circuit Judge Kathleen Macdonald, who has overseen the case and refereed objections by outside groups since a preliminary deal was announced in January. The settlement was originally set to be finalized March 1, but Macdonald extended the public comment period after pressure from Dearborn lawyer Majed Moughni, who criticized the class-action settlement on Facebook and was temporarily barred from communicating publicly about the case.

Ahmed's portion of the settlement is considered an "incentive award" and represents his work on the case, his attorneys say.

"As a firm, we've borne the burden of litigating this case for over 19 months, and have paid a steep price in time and money to do so," Kassem Dakhlallah, an attorney whose firm represents Ahmed and the class, told The Associated Press in an email. "We are happy that we are able to finalize this case and get the settlement funds paid to the Huda Clinic to be used for medical care for the community, and to the Arab American National Museum to be used to allow our young ones to continue their educations after high school."

Macdonald said she was "proud to preside over" the long case and resolution reached by both sides.

The lawsuit technically covered anyone who bought the halal-advertised products between September 2005 and January from the restaurant and another McDonald's in the city with a different owner. The other location wasn't a defendant or a focus of the investigation.

Dakhlallah has said he was approached by Ahmed, and they conducted an investigation. A letter sent to McDonald's and the restaurant franchisee, Finley's Management, by Dakhlallah's firm said Ahmed had "confirmed from a source familiar with the inventory" that the restaurant had sold non-halal food "on many occasions."

In the settlement notice, Finley's Management said it "has a carefully designed system for preparing and serving halal such that halal chicken products are labeled, stored, refrigerated, and cooked in halal-only areas." The company added it trains its employees on preparing halal food and "requires strict adherence to the process."

McDonald's attorney Thomas McNeill said the investigations and negotiations proved that if a problem arose, "it was isolated and rare."

Dakhlallah said giving money to the charities is the best outcome, since most people wouldn't have kept their receipts, making "identifying class members who have valid claims nearly impossible."

Moughni argues that Dakhlallah and his colleagues could have made greater attempts to find those who were harmed and, failing that, identified more relevant organizations, such as Dearborn's public schools. He said the clinic is several miles away from the restaurant and the museum has nothing to do with halal food.

Macdonald disagreed, calling the charities "appropriate recipients," but Moughni said he's considering an appeal.

"We think it's wrong," he said. "It's unfair for the class members."

There are only two McDonald's in the United States that sell halal products and both are in Dearborn, which has one of the nation's largest Arab and Muslim communities. Overall, the Detroit area is home to about 150,000 Muslims of many ethnicities.

16 April 2013

Federal cuts won't mean layoffs for Michigan's state employees, Snyder says


Story originally appeared on the Detroit News.

Detroit -- Gov. Rick Snyder's administration said Monday no state employees would be laid off as a result of federal budget cuts, but the sequester will result in reductions of $150.5 million in government programs and grants this year and in 2014.

The cuts are entirely directed at federally funded programs in Michigan, and the Snyder administration had no say which programs received reductions, said Kurt Weiss, spokesman for the state budget office.

Programs hit by the sequestration range from job training and food assistance for seniors to K-12 education programs, loans for municipal wastewater treatment plant improvements and grants for trails along the Great Lakes.

To ensure there would be no layoffs, though, state agencies cut travel, supplies and administrative expenses and froze an unspecified number of vacant positions usually funded with federal tax dollars, Weiss said.

The Snyder administration chose not to replace the lost federal funds with state money and said school districts would have to adjust their budgets to account for the drop-off in funding for the 2013 and 2014 fiscal years.

"We've said from the start that Michigan would not be replacing lost federal dollars with state dollars due to sequestration and that still holds true," Snyder said Monday in a statement.

For the current fiscal year, which ends Sept. 30, $59.2 million in cuts are spread across 13 state agencies. In the 2014 fiscal year, $91.3 million cuts will be absorbed by the education, economic development and State Police departments.

The reductions result from the $85.4 billion in automatic federal budget cuts that took effect March 1 because Congress and President Barack Obama couldn't reach a compromise agreement to replace a 2011 budget deal they struck to raise the national debt limit.

Perhaps the hardest hit by the sequester will be 21,000 children living with relatives who will lose a $137 clothing allowance in August to buy clothes for the upcoming school year. Some children in the program are living with relatives because of parental abuse or neglect and many are low income, said Gilda Jacobs, president and CEO of the Michigan League for Public Policy.

"When kids go back to the school, just getting a new pair of shoes is pretty important ... and that doesn't mean their relatives are in the position to be able to help those kids," Jacobs said.

The $60 million in cuts will hit after-school programs, special education services, Title I programs for disadvantaged students, career and technical education programs and grants for quality teachers.

The Republican governor's approach to allowing the education cuts to take effect drew criticism from Democrats who say Snyder and the Republican-controlled Legislature are already shortchanging public education.

"He's been doing this for the last two years -- enough," state Rep. Rashida Tlaib, D-Detroit, said of cuts to schools. "I think he needs to look in a different direction instead of going directly to our classrooms."

Some departments found ways to tap unused funds to make up for the loss in federal money or put off expenses hit by the sequester until next year, according to records released Monday to The Detroit News.

The Department of Environmental Quality said it would tap the state's Environmental Pollution Prevention Fund to avert staff losses this year.

But if federal funding for the hazardous waste management isn't resolved for the 2014 fiscal year, "there will be layoffs in addition to releasing the Senior Environmental Engineers that are on contract," according to a DEQ sequestration report.

The DEQ also said it is losing $4.4 million in funds available for municipalities to borrow for water and wastewater treatment plant improvements.

"This could result in the inability for municipalities to complete projects or will force them to look elsewhere for financing that will typically result in higher project costs and longer delays," according to a DEQ memo.

The Department of Community Health said it could offset a $9.9 million cut to the women, infants and children food aid program using unspent funds from 2012 and savings from a change in the grant formula.

Rep. Joe Haveman, chairman of the House Appropriations Committee, said Snyder's approach was fiscally prudent given the "tight" budget lawmakers face.

"There's no way we can start replacing everything with state funds," said Haveman, R-Holland. "There's just not enough money to do that kind of thing."

15 April 2013

Mich. sea cadets send SOS in wake of federal budget cuts



Story originally appeared on the Detroit News.

Harrison Township — As a member of the Great Lakes Division of the Navy Sea Cadets, Jon Allen spent thousands of hours during his childhood working aboard the group's training vessel Pride of Michigan. With the cadets, he had the chance to experience things most youngsters never will.

"I learned to drive the 80 foot long Navy ship at age 13, a year before I learned how to drive a car," said Allen, 20, who rose through the ranks and became the ship's Chief Petty Officer. "That's not something that you normally get to do."

Allen is now in his third year at the Milwaukee School of Engineering working toward a career in civil engineering, a subject that he first became interested in because of his time on the ship.

"Just being on board and getting that hands-on experience, that made a difference," said Allen. "The ship is definitely the biggest asset the program has."

But as a result of federal budget cutbacks, the program that has helped hundreds of youngsters find career paths could be left without the funds to stay afloat.

It's part of the trickle-down effect of the $1.2 trillion sequestration. The Great Lakes cadet program currently relies on $40,000 to $50,000 in annual funding from the U.S. Navy, which provides money to sea cadet divisions throughout the country.But this year, says Lt. Commander Luke Clyburn, the money never came.

"We put in a request like we do every year," said Clyburn, who has led the cadets for 40 years. "They said they wouldn't be giving out the money this year."

Although the program receives donations from various organizations, the immediate absence of the majority of funds has left these cadets in the lurch. Representatives from both the Naval Sea Cadet Corps and the Office of the Chief of Naval Operations did not return requests for comment.

Parents are concerned

More than 30 youths between ages 11 and 17 work on the ship, used in the 1970s by the Navy for training midshipmen, throughout the year. It's one of three Navy vessels being used by such cadet groups.

The cadets use Pride of Michigan for everything from practicing ceremonies and repairing engines to diving shipwrecks and conducting research in the Great Lakes, said Clyburn. The goal is to prepare the young men and women for roles in the Navy, the U.S. Coast Guard, the Merchant Marines and for professions in engineering and marine biology. There is no military commitment for cadets in the program.

Because the program is funded by other sources, parents pay only $350for their child to join the cadets, which in many cases wouldn't even cover the cost of scuba diving certification.

Currently, the cadets are preparing the ship for dry dock repairs and inspections. But once they get it back in the water, the group's organizers and parents are concerned they may not have the money to keep up the programs and maintain the ship.

"I don't even want to think about it. It would be devastating," said Amie MacDonaldof Madison Heights, whose son Billy, 14, is in his second year with the cadets. "Their future would look a lot different. I would hope that it would be all positive, but you don't know."

Funding for the program has come from many sources throughout the years, but over the past decade, it's been primarily federal funds distributed to the Navy for recruiting and research, said Clyburn. He says being forced to find funding closer to home could actually strengthen the program in the long run. But he's concerned about maintaining it for the short term.

"It's going to be tough to keep up with everything we've been able to provide these years," said Clyburn.

Fundraisers, lobbying planned

Having the practical experience on a ship helped Commerce Township resident Dennis Moore's son Kyle earn a spot in the U.S. Naval Academy Summer Seminar, a prestigious program for high school students interested in attending the academy in Annapolis, Md.

Attending the academy has been a lifelong dream for the 17-year-old junior at Lakeland High School in White Lake Township, and the camp could help make that possible.

"When you submit the application for the summer seminar, they look for what they call demonstrating interest," said the Dennis Moore. "Being in the sea cadets program was a way of demonstrating that interest."

Another cadet, Nicholas Ratinau, 17, of West Bloomfield, is preparing to begin school at the Webb Institute of Naval Architecture in New York in the fall to study engineering.

"The more I got involved with the cadets and the more I learned about it, the more I got to like it," said Ratinau, who has been a cadet for five years and is the lead petty officer on the ship. "I wouldn't have taken this path if the cadet program wasn't available."

To make sure the program will be around for years to come, parents and volunteers are working to put together fundraisers, lobby businesses and organizations for donations and gather items for an auction.

On Saturday, they found out the cadets would be taking part in the Celebrate the Lake" festival on June 8.

"We're going to do anything we can do to make this program continue. I promised my son," said MacDonald.

One of the newest cadet recruits, 13-year-old Gage Dyer, hopes the program can continue because he feels it will help him accomplish his career goal of becoming a marine biologist.

"To learn scuba diving at 13, that on a resume alone would show them this is what I want to do," said the Milford teen who says he already knows he wants to attend Texas A&M for college. "I'm hoping I can continue in the program until I graduate. This is what I want to do and there's a great opportunity here."

Napoleon: Wayne Co. jail project a 'mess


Story originally appeared on the Detroit News.

Detroit — Hyped as a state-of-the-art money saver, a new Wayne County jail instead is an over-budget "mess" whose plans are changing daily more than a year into construction, Sheriff Benny Napoleon says.

The $300 million facility was slated to open in September 2014, but no money has been budgeted for furniture, technology or fixtures, Napoleon said.

It'll be so small — about 2,000 beds — that county officials likely will have to keep open a Hamtramck jail that was expected to close, reducing an anticipated $20 million in savings.

"It's very, very bad," said Napoleon, whose three county jails average 2,200 daily inmates. "If it's not going to be large enough to hold the prisoners we now have, what was the point of it? … It's not going to be the jail we intended to build."

Aides to Executive Robert Ficano acknowledged the project is at least two months behind schedule and faces budget problems, but they blame some of the issues on Napoleon, who is running for Detroit mayor.

Plans once included five private bathrooms for his top aides, a 300-square-foot terrace patio and 51 computer tablets that cost $2,400 apiece for guards, said June Lee, Ficano's chief of staff.

Those plans were dumped — and Napoleon is sore, Lee said.

"When they are adding change orders and defending portions of the project that include private executive bathrooms, it doesn't help," he said. "(Ficano) has taken the lead in making this project work. (Napoleon) is standing by and letting the CEO do all the hard work."

The plans went awry when commissioners privately told Ficano last fall they wouldn't borrow another $65 million to increase the jail to 2,300 beds and fund other improvements. Since then, a committee has met to revise the scope of the jail in downtown Detroit — changing materials and debating whether to build a full-service kitchen and laundry.

The jail is the biggest building project of Ficano's tenure — and it's been dogged with controversy, accusations of favoritism and questions about oversight. The FBI is investigating the project as part of its probe into county corruption.

The plan's two prime movers, former Ficano aides Azzam Elder and Turkia Mullin, are under investigation by the FBI and are no longer with the county. The project manager, former Mullin aide Anthony Parlovecchio, was fired in December 2011 over concerns about a contract that would pay him nearly $2 million. He's now suing the county.

"This isn't about a patio or computer tablets. This is about them screwing up," Napoleon said. "They knew they screwed up and now they are trying to cover their tracks. They know it was Azzam and Turkia who screwed up but they're afraid to say it because of lawsuits."

Some commissioners complain they were misled about the true cost of the project.

"It's not a good way to do business," said vice chairwoman Alisha Bell, D-Detroit. "Why would you not have a total amount of the project before you came to us? The sell to us was this was going to close three jails and open one facility that is updated and state-of-the-art. If those savings aren't realized now, the question is: How are we going to pay down the debt?"

The commission is relying on the "rumor mill" for information, Bell said. It gave up its oversight to the Wayne County Building Authority with a 2010 resolution.

Sheriff's officials also have little say, said Jeriel Heard, chief of jails. Napoleon aides are on a committee overseeing changes to construction but are "bystanders to the discussions," he said.

"The CEO is going to build a building and hand the keys to the sheriff," Heard said. "And the sheriff will have to live with the construction and quality of the facility."

Lee argued that it's "an effort to cover someone's backside." He said Napoleon has chosen not to attend weekly meetings about the project, sending a representative while Ficano attends.

Goals at risk

When officials broke ground in September 2011, the county issued a press release touting the jail across the street from the Frank Murphy Hall of Justice on St. Antoine as a high-tech money saver.

It would close three county jails, build 2,192 beds, makevideo conferencing available to inmates for visitation, and save money on transportation costs. The project was supposed to save $20 million per year, enough to pay the debt and have about $3 million left over.

Now, many of those goals are in jeopardy.

The Hamtramck facility probably will remain open to house federal and county inmates. The jail is now 2,000 beds but could be even less. Video visitations may be scrapped, but the jail will have technology for video arraignments. Planned staff reductions of 127 guards may be revised, as well as savings from reduced transportation costs.

Overall savings estimates are being recalculated, although officials still expect the facility will save money, Lee said.

"The project has challenges and we are working through them," Lee said.

Lee said the project will include money for furniture and other accessories, but it would come from a separate fund whose costs he couldn't cite Friday. Lee said Napoleon staffers wanted the best of everything.

"We're not trying to build the Taj Majal," Lee said.

Napoleon said he and his staffers spent years researching the best practices of jails nationwide to design the facility that is now being revised on the fly.

Riddled with controversy

The snag is the latest in a project that was beset with controversy from the start.

Commissioners have complained they were pressured to approve bonds for the project in late 2010 to take advantage of a federal program that offered low interest rates on bonds. They approved the jail despite warnings from their staff.

"It is still unclear how this project would benefit Wayne County from a financial perspective," a commission analyst wrote in a 2011 report.

Ficano's former deputy executive, Charlie J. Williams, made $420,000 in brokerage fees in 2011 from Greektown Casino for selling a parking lot to the county for $14 million for the jail.

Mullin, who was then the county's economic development director, signed off on the deal. Two weeks after it was completed, Williams was a member of a Wayne County Airport Authority team that nominated her to become CEO of Detroit Metropolitan Airport. She was fired amid the FBI probe.

The general contractor, Walbridge, was selected over objections from contractors who complained the process favored the Detroit company. Walbridge CEO John Rakolta Jr. served on the board of a nonprofit led by Mullin that paid her a $75,000 bonus atop her $200,000 salary with the county. The nonprofit and its business members are named in FBI subpoenas to the county.

After the county approved the deal, Detroit officials backed away from verbal commitments to house about 200 inmates at the facility for about $30 million.

"The lesson here is poor planning brings poor results," Napoleon said.

09 April 2013

Tom Walsh: For Michigan to succeed, Detroit and Grand Rapids must work together


Story originally appeared on Freep.

GRAND RAPIDS -- If ever a place was the embodiment of Rudyard Kipling's poetic assertion that "East is East and West is West and never the twain shall meet," it was Michigan for many a decade, right?

Not anymore.

In a post-recession Michigan, business leaders from Grand Rapids and Detroit realize they must cooperate like never before to survive and grow. Together, they're providing money to fledgling start-ups, helping each other with sister initiatives to recruit and retain young talent, infusing respective city cores with new development and retail, and recognizing they are stronger if East and West are both thriving.

This developing east-west harmony is crucial to the state's economic future, said Chris Rizik, CEO of the $100-million Renaissance Venture Capital Fund created by Business Leaders for Michigan.

"We can no longer be looking at Michigan as silos," he said. "When we've got Detroit seemingly not in sync with Grand Rapids, we look like a smaller, less cohesive state, and we look less attractive to companies looking to be here and to talent looking to be here."

Consider these recent developments:


  • Dan Gilbert, the Quicken Loans billionaire based in Detroit, and Rick DeVos of the founding family of Amway in Grand Rapids, are investors in both Chalkfly and GreenLancer, young Michigan start-up companies selling school supplies and green engineering services, respectively.
  • Forbes magazine now lists both Grand Rapids and Detroit among 15 American cities with "emerging downtowns," thanks to a burst of investment, entrepreneurship and an influx of young professionals in the city cores. Yes, that's the same Forbes magazine that recently dubbed Detroit the nation's "most miserable city."
  • Corporate CEO groups in west Michigan and Detroit are backing aggressive initiatives to recruit and retain more top talent. Talent2025, a coalition of more than 70 CEOs from 13 west Michigan counties, aims to double the region's post-secondary education rate, from 32% to 64% by 2025. In Detroit, a group of employers is striving to hire 10,000 or more interns to work in the city core this summer.
  • Grand Rapids will host the 2013 national conference of CEOs for Cities, a group of urban business and civic leaders, beginning Sept. 29 during the city's fifth annual ArtPrize international art competition.
  • Varnum, a Grand Rapids law firm, is providing $1 million in free legal services over five years to new businesses in Michigan. Varnum lawyers are working with start-up firms at both the Start Garden seed fund in Grand Rapids and the Gilbert-backed Detroit Venture Partners in the M@dison Building.


For much of the 20th Century, Michigan was a highly polarized place -- culturally, economically and politically -- as Republicans from the burghs around Grand Rapids and Holland could barely hide their disdain for dysfunctional Democratic Detroit, and vice versa.

The economic upheaval beginning with the dot-com bust of 2000 and exacerbated by the financial crisis of 2008-09, however, was a sobering experience for the state.

Bailouts of General Motors and Chrysler got more national attention, but the office furniture companies of west Michigan -- Steelcase, Haworth and Herman Miller -- were also hammered by the pullback in corporate investment. As Michigan's jobless rate soared past 14%, no one in the state was immune.

While the auto industry's restructuring was overseen by the federal government and bankruptcy judges, west Michigan's business community had an epiphany of its own.

No longer could patriarchal families that had built large employers such as Amway, Meijer and Haworth -- and pumped lots of philanthropic money into the arts, hospitals and other civic projects -- keep the region humming without help. The entrepreneurial spirit of the area needed re-stoking, new industries needed to arise, and the region's largest city, Grand Rapids, needed to be reinvigorated.

An odd alliance has emerged to make those things happen.

Craft beer brewers and purveyors -- such as Founders, Hopcat and Grand Rapids Brewing -- have given the city a certain cachet, abetted by the B.O.B. (Big Old Building) and a collection of 22 other bars, restaurants and entertainment spots in the region run by entrepreneur Greg Gilmore.

Four major companies in unrelated industries -- Amway (vitamins, soaps), Steelcase (office furniture), Wolverine World Wide (shoes) and Meijer (grocery, retail) -- joined forces in 2010 to launch the GRid70 design hub in a renovated downtown Grand Rapids building. Creative teams from each company work in open collaborative spaces strewn with colorful products and design ideas.

Wolverine, a Rockford-based firm of 8,200 employees whose footwear brands include Merrell, Hush Puppies, Keds, Saucony and Chaco, has 40 designers in GRid70 and 600 more at headquarters 15 miles away.

"Product cycles are shortening, merchants want something new on the shelves every three to six months, and we need to develop young millennial talent," said Jim Zwiers, a Wolverine senior vice president. A stimulating work space is part of the answer: "It's less about what the title or salary is," Zwiers said, "than, 'Who am I going to work for?' and, 'What am I going to learn?' "

Buzz on the street in Grand Rapids is that another GRid70-style collaborative may open downtown soon.

As an instigator of entrepreneurial activity, Rick DeVos, grandson of Amway cofounder Richard DeVos and son of former GOP gubernatorial candidate Dick DeVos, has emerged as a key force in Grand Rapids, just as Gilbert has in Detroit.

DeVos has launched an entrepreneurial boot camp called Momentum, monthly 5X5 Nights to pitch ideas for cash, and Start Garden, a $15-million seed fund that selects two ideas each week for $5,000 investments and will invest more in new entities that demonstrate growth potential. Start Garden will invest in its 100th idea this month.

In an interview last week, DeVos said similar beliefs drive both his Start Garden of small bets and the collaboration of giant global companies like Steelcase and Amway at GRid70.

"It all comes out of the growing awareness across the region that there's huge value unlocked when you bring people into proximity. It's very much an ecosystem. You need the organisms able to interact with each other," he said.

And like Quicken's Gilbert, who moved his mortgage company from Livonia to downtown Detroit in 2010, DeVos said he believes renewing the core of the region's major city is crucial.

"We were very intentional with Start Garden about having a physical space downtown," he said, "because we think it's important to be in the center of things, to be very visible and very permeable from the street."

DeVos said much the same thing as a 24-year-old in 2006, when he launched his first entrepreneurial venture, a social networking site for movie enthusiasts called Spout.com, in an old downtown Grand Rapids building.

Spout didn't pan out as a big money-maker -- DeVos sold it in 2010 -- but he said lessons learned from Spout paid off in conceiving ArtPrize, which has exploded into a huge event, involving more than 160 venues and attracting 400,000 visitors to Grand Rapids last year.

Sandy Baruah, president and CEO of the Detroit Regional Chamber, has visited Grand Rapids three times in the past year and said he's impressed with its transformation. "It was led by the private sector. They didn't rely on government for the plan, but the public sector came in behind to support. That's starting to happen now in Detroit," Baruah said.

Gilbert and several of his top executives also toured some downtown projects in Grand Rapids last year.

Conversely, DeVos said he and his colleagues keep track of the action in downtown Detroit. "Absolutely," he said, "we're trying to make sure they're aware of things coming through our pipeline on our side of the state and they're doing the same."

Rizik, the Renaissance VC Fund manager, said west Michigan and metro Detroit each have distinct strengths and gaps, and can thus help each other.

"Grand Rapids has, I think , a cultural advantage over Detroit in that the big employers there have been entrepreneurial family businesses into the second and third generation," he said, while the auto companies and other larger Detroit businesses went public, becoming more institutional and bureaucratic.

"On the flip side," Rizik said, "southeast Michigan has been way ahead of Grand Rapids from the standpoint of venture capital, particularly in the Ann Arbor area, and Grand Rapids is now working to try to catch up in that."

What's clear now is that smart people from both East and West realize that the twain must meet if Michigan's economy is to grow again.

"It's almost a generational thing," Rizik said. "You're seeing the younger people in both communities completely wiping out those lines that have stood between the two sides of the state in the past."

Tom Walsh: For Michigan to succeed, Detroit and Grand Rapids must work together


Story originally appeared on Freep.

GRAND RAPIDS -- If ever a place was the embodiment of Rudyard Kipling's poetic assertion that "East is East and West is West and never the twain shall meet," it was Michigan for many a decade, right?

Not anymore.

In a post-recession Michigan, business leaders from Grand Rapids and Detroit realize they must cooperate like never before to survive and grow. Together, they're providing money to fledgling start-ups, helping each other with sister initiatives to recruit and retain young talent, infusing respective city cores with new development and retail, and recognizing they are stronger if East and West are both thriving.

This developing east-west harmony is crucial to the state's economic future, said Chris Rizik, CEO of the $100-million Renaissance Venture Capital Fund created by Business Leaders for Michigan.

"We can no longer be looking at Michigan as silos," he said. "When we've got Detroit seemingly not in sync with Grand Rapids, we look like a smaller, less cohesive state, and we look less attractive to companies looking to be here and to talent looking to be here."

Consider these recent developments:

* Dan Gilbert, the Quicken Loans billionaire based in Detroit, and Rick DeVos of the founding family of Amway in Grand Rapids, are investors in both Chalkfly and GreenLancer, young Michigan start-up companies selling school supplies and green engineering services, respectively.

* Forbes magazine now lists both Grand Rapids and Detroit among 15 American cities with "emerging downtowns," thanks to a burst of investment, entrepreneurship and an influx of young professionals in the city cores. Yes, that's the same Forbes magazine that recently dubbed Detroit the nation's "most miserable city."

* Corporate CEO groups in west Michigan and Detroit are backing aggressive initiatives to recruit and retain more top talent. Talent2025, a coalition of more than 70 CEOs from 13 west Michigan counties, aims to double the region's post-secondary education rate, from 32% to 64% by 2025. In Detroit, a group of employers is striving to hire 10,000 or more interns to work in the city core this summer.

* Grand Rapids will host the 2013 national conference of CEOs for Cities, a group of urban business and civic leaders, beginning Sept. 29 during the city's fifth annual ArtPrize international art competition.

* Varnum, a Grand Rapids law firm, is providing $1 million in free legal services over five years to new businesses in Michigan. Varnum lawyers are working with start-up firms at both the Start Garden seed fund in Grand Rapids and the Gilbert-backed Detroit Venture Partners in the M@dison Building.

For much of the 20th Century, Michigan was a highly polarized place -- culturally, economically and politically -- as Republicans from the burghs around Grand Rapids and Holland could barely hide their disdain for dysfunctional Democratic Detroit, and vice versa.

The economic upheaval beginning with the dot-com bust of 2000 and exacerbated by the financial crisis of 2008-09, however, was a sobering experience for the state.

Bailouts of General Motors and Chrysler got more national attention, but the office furniture companies of west Michigan -- Steelcase, Haworth and Herman Miller -- were also hammered by the pullback in corporate investment. As Michigan's jobless rate soared past 14%, no one in the state was immune.

While the auto industry's restructuring was overseen by the federal government and bankruptcy judges, west Michigan's business community had an epiphany of its own.

No longer could patriarchal families that had built large employers such as Amway, Meijer and Haworth -- and pumped lots of philanthropic money into the arts, hospitals and other civic projects -- keep the region humming without help. The entrepreneurial spirit of the area needed re-stoking, new industries needed to arise, and the region's largest city, Grand Rapids, needed to be reinvigorated.

An odd alliance has emerged to make those things happen.

Craft beer brewers and purveyors -- such as Founders, Hopcat and Grand Rapids Brewing -- have given the city a certain cachet, abetted by the B.O.B. (Big Old Building) and a collection of 22 other bars, restaurants and entertainment spots in the region run by entrepreneur Greg Gilmore.

Four major companies in unrelated industries -- Amway (vitamins, soaps), Steelcase (office furniture), Wolverine World Wide (shoes) and Meijer (grocery, retail) -- joined forces in 2010 to launch the GRid70 design hub in a renovated downtown Grand Rapids building. Creative teams from each company work in open collaborative spaces strewn with colorful products and design ideas.

Wolverine, a Rockford-based firm of 8,200 employees whose footwear brands include Merrell, Hush Puppies, Keds, Saucony and Chaco, has 40 designers in GRid70 and 600 more at headquarters 15 miles away.

"Product cycles are shortening, merchants want something new on the shelves every three to six months, and we need to develop young millennial talent," said Jim Zwiers, a Wolverine senior vice president. A stimulating work space is part of the answer: "It's less about what the title or salary is," Zwiers said, "than, 'Who am I going to work for?' and, 'What am I going to learn?' "

Buzz on the street in Grand Rapids is that another GRid70-style collaborative may open downtown soon.

As an instigator of entrepreneurial activity, Rick DeVos, grandson of Amway cofounder Richard DeVos and son of former GOP gubernatorial candidate Dick DeVos, has emerged as a key force in Grand Rapids, just as Gilbert has in Detroit.

DeVos has launched an entrepreneurial boot camp called Momentum, monthly 5X5 Nights to pitch ideas for cash, and Start Garden, a $15-million seed fund that selects two ideas each week for $5,000 investments and will invest more in new entities that demonstrate growth potential. Start Garden will invest in its 100th idea this month.

In an interview last week, DeVos said similar beliefs drive both his Start Garden of small bets and the collaboration of giant global companies like Steelcase and Amway at GRid70.

"It all comes out of the growing awareness across the region that there's huge value unlocked when you bring people into proximity. It's very much an ecosystem. You need the organisms able to interact with each other," he said.

And like Quicken's Gilbert, who moved his mortgage company from Livonia to downtown Detroit in 2010, DeVos said he believes renewing the core of the region's major city is crucial.

"We were very intentional with Start Garden about having a physical space downtown," he said, "because we think it's important to be in the center of things, to be very visible and very permeable from the street."

DeVos said much the same thing as a 24-year-old in 2006, when he launched his first entrepreneurial venture, a social networking site for movie enthusiasts called Spout.com, in an old downtown Grand Rapids building.

Spout didn't pan out as a big money-maker -- DeVos sold it in 2010 -- but he said lessons learned from Spout paid off in conceiving ArtPrize, which has exploded into a huge event, involving more than 160 venues and attracting 400,000 visitors to Grand Rapids last year.

Sandy Baruah, president and CEO of the Detroit Regional Chamber, has visited Grand Rapids three times in the past year and said he's impressed with its transformation. "It was led by the private sector. They didn't rely on government for the plan, but the public sector came in behind to support. That's starting to happen now in Detroit," Baruah said.

Gilbert and several of his top executives also toured some downtown projects in Grand Rapids last year.

Conversely, DeVos said he and his colleagues keep track of the action in downtown Detroit. "Absolutely," he said, "we're trying to make sure they're aware of things coming through our pipeline on our side of the state and they're doing the same."

Rizik, the Renaissance VC Fund manager, said west Michigan and metro Detroit each have distinct strengths and gaps, and can thus help each other.

"Grand Rapids has, I think , a cultural advantage over Detroit in that the big employers there have been entrepreneurial family businesses into the second and third generation," he said, while the auto companies and other larger Detroit businesses went public, becoming more institutional and bureaucratic.

"On the flip side," Rizik said, "southeast Michigan has been way ahead of Grand Rapids from the standpoint of venture capital, particularly in the Ann Arbor area, and Grand Rapids is now working to try to catch up in that."

What's clear now is that smart people from both East and West realize that the twain must meet if Michigan's economy is to grow again.

"It's almost a generational thing," Rizik said. "You're seeing the younger people in both communities completely wiping out those lines that have stood between the two sides of the state in the past."

Matty Moroun's company sues U.S. leaders, Canada to stop competing span


Story originally appeared on Freep.

WASHINGTON -- The owner of the Ambassador Bridge has filed a lawsuit against a number of federal officials -- the U.S. secretaries of state, transportation and homeland security among them -- and the Canadian government as the company tries to block the building of a rival Detroit River bridge, and force approval for its own second span to Windsor.

The new complaint, now quietly winding its way through federal court in Washington, D.C., was filed in February but was dated Nov. 9, just three days after last year's referendum in which Michigan voters rejected a constitutional amendment that would have required a statewide and local vote before the state spent any money on a new international bridge or tunnel to Canada.

In the lawsuit, the Detroit International Bridge Co., the family business controlled by Manuel (Matty) Moroun that owns the 84-year-old Ambassador Bridge, claims a "perpetual and exclusive franchise right" to operate the crossing free of competition from another span. It says the proposed New International Trade Crossing would "destroy" the value of its franchise, and argues that the process by which the State Department would approve a deal between Michigan and Canada to build the rival bridge is unconstitutional.

"No one's ever argued it. It's never really come up," said Hamish Hume, a lawyer at Boies, Schiller & Flexner in Washington, which represents the bridge company. His argument: A 1972 act giving the State Department authority to approve international bridges is unconstitutional because Congress never spelled out, as Hume says it needed to, what principle to use in making its decisions.

A decision on the presidential permit needed to move forward on the NITC bridge could be announced at any time by Secretary of State John Kerry, but the bridge company already is seeking an injunction against such a permit. It will be weeks, however, before all the various agencies named in the complaint -- which was added to a lawsuit involving the Coast Guard filed three years ago -- respond to the court.

Most of those involved declined to talk at length about the lawsuit, though Gary Doer, Canada's ambassador to the U.S., said he is "confident of both the merits and the legality of the (NITC) bridge."

Ken Silfven, spokesman for Gov. Rick Snyder, said the complaint "is nothing that we didn't anticipate."

"We expected these delay tactics based on their track record," he said. "After all is said and done, though, the bridge will be built."

The bridge company is looking for a judgment that its franchise rights are "exclusive of all contiguous and injurious competition in the form of any other bridge between Detroit and Windsor" and to stop other agencies, including those coming under Transportation Secretary Ray LaHood and Homeland Security Secretary Janet Napolitano, from putting up obstacles or otherwise delaying approvals for a second Ambassador Bridge span.

As of last week, State Department personnel said officials were still working on the NITC application, noting some 15,000 comments had been received on it. The lawsuit, they said, had no bearing on the timing of a decision.

Government lawyers declined to talk about the complaint, but made clear in court filings their position that the process for issuing a presidential permit -- a responsibility granted to the executive branch by Congress in 1972 -- meets constitutional muster. In filings, they called the bridge company's arguments "futile."

Hume said if the State Department were to issue a permit to the NITC, the bridge company would look to a judge to block it under the points raised in the complaint.

"It's pretty obvious they (the bridge company) are throwing whatever they can at the wall and hope something sticks," said Andrew Finn, an expert on Canada and border policy at the Woodrow Wilson International Center for Scholars in Washington.

But Finn didn't completely reject what he called "the closer question" of a lawsuit against the State Department should it approve a presidential permit for the new rival bridge. Besides the constitutional question, the argument would be that while Congress gave the president authority to approve international crossings in 1972, the creation of the Ambassador Bridge predates that, with legislation passed by both Congress and the Canadian parliament in 1921.

The bridge company also has taken the position that those acts were tantamount to a treaty and created a franchise that can't be destroyed without superseding acts by both legislatures, despite the fact that dozens of presidential permits have been issued over the years.

"I think what they're saying is, we're special and this is the one place you can't do it," Finn said. He didn't find the argument convincing, but said it's always possible a judge could disagree.

Certainly, the case has settled into a more esoteric part of the law. Few experts could be found with experience in litigating such a question regarding an international crossing and Hume acknowledged there have been few bridge permits granted in cases like this for agreements between a state and a foreign power, which he argues are prohibited.

In the 1980s, the owner of a bridge in Presidio, Texas, failed in his attempt to get the Supreme Court to block a neighboring bridge from being built, though some of the claims raised were different than those here.

The Canadian government has offered to pay Michigan's $550-million share of the $2.1-billion overall cost of the NITC bridge, but the complaint said there is no economic justification for the new bridge.

The bridge company argues in the complaint that 75% of its truck traffic and 40% of its passenger traffic could be diverted to the new bridge, reflecting "a long-standing desire on the part of the Canadian government to eliminate private ownership of the Detroit-Windsor bridge crossing."

Also in February, state Rep. Fred Durhal, D-Detroit, filed a lawsuit in Ingham County against Snyder, claiming the governor can't enter into an agreement with Canada without legislative approval.

08 April 2013

Farmington Hills lawyer to help businesses, unions navigate right-to-work laws



Story originally appeared on Freep.

LANSING -- As the state implements Michigan's controversial right-to-work laws, Travis Calderwood is the man tasked with communicating how the new policies will affect business owners, labor leaders and workers statewide.

Calderwood, 34, of Farmington Hills was hired in February to fill an opening that the state advertised as a "freedom to work" specialist, a term used by proponents of the laws, which ban mandatory union dues as a condition of employment.

But when it comes to Calderwood's specific job, the description belies the true purpose of his role in state government, he said.

Calderwood said he doesn't advocate for one side or the other in the divisive debate.

"I'm advocating for people to follow the law," Calderwood said. "Regardless of what the law is, I've made many an oath to uphold it."

Since starting his job seven weeks ago, Calderwood said he has fielded inquiries from a variety of people who will be directly affected by the right-to-work laws.

Business owners, union leaders and workers want know how the laws affect their individual circumstances. Detailed explanations often are required.

The right-to-work laws affect labor contracts put into place on or after March 28, so most workers or businesses won't see the impact for several years.

"My role is to provide education and information to make sure there's no misconception about the laws," he said.

Calderwood said he also has had to debunk concerns that right-to-work could affect other labor laws, such as collective bargaining or exclusivity in union representation.

In December, when the Legislature passed right-to-work amid massive protests at the Capitol that drew national attention, Calderwood was practicing law for Collins & Blaha in Farmington Hills.

His work there included representing local school districts on labor issues, he said.

As everything unfolded in Lansing, Calderwood said he was watching with a keen interest in how the actions by the Legislature and Gov. Rick Snyder would affect his clients.

"This is a very critical point in Michigan," Calderwood said. "I wanted to make sure that I could be part of it and bring that fairness and equity to it."

He said he was fully aware that the position would be under public scrutiny.

"The role of the Bureau of (Employment) Relations is, we're a neutral administrative body. We're not here to pick sides," he said.

Calderwood will make $92,000 a year for the position in the bureau, which is based in Detroit's Cadillac Place.

Director Ruthanne Okun said Calderwood was selected out of 50 applicants.

She said his "wonderful background, good demeanor" and understanding of what the job required made him stand out.

"He was the best candidate to fairly implement this law," Okun said.

Calderwood, a Michigan native, received his bachelor's degree from Hillsdale College and his law degree from the Ave Maria School of Law in Ann Arbor.

During law school, Calderwood had an internship as a clerk in the Michigan Court of Appeals, serving under Brian Zahra, who now is a Michigan Supreme Court justice.

When lawmakers passed the right-to-work laws, they also appropriated $2 million to the Michigan Department of Licensing and Regulatory Affairs to help implement them. All of that money was funneled to the Bureau of Employment Relations.

It will help pay for Calderwood's salary through September as well as mailings, informational posters and any travel that Calderwood needs to do for his job, Okun said.

The funding for implementing right-to-work has been one of the sticking points in the political battle over the laws.

Republicans said the appropriations were necessary and routine, but Democrats and other critics alleged the funding was included in the laws just to circumvent one way opponents could seek to overturn them.

Under the Michigan Constitution, legislation that includes an appropriation cannot be subject to repeal through a public referendum.

01 April 2013

Old iron gas pipes are leaking across Michigan; replacement is slow, can be deadly


Crisscrossing Michigan are more than 3,100 miles of old wrought- and cast-iron natural-gas pipelines -- the type federal regulators consider the most at risk of corrosion, cracking and catastrophic rupturing. The state's two largest utilities have replaced less than 15% of these pipelines -- 542 miles -- in the past decade.

Only four other states have more old iron gas mains than Michigan. These pipelines don't just increase the chances of a leak -- they're already leaking.

And the process of replacing them can lead to deadly results. On Feb. 27, as a Consumers Energy work crew replaced pipelines dating to 1929 in a Royal Oak neighborhood, a natural-gas explosion occurred, killing a man, leveling his house and damaging 30 other homes nearby. Consumers later fired an unspecified number of employees for "failure to follow established policies and procedures." Investigations by the utility, the Michigan Public Service Commission (PSC) and the Royal Oak Fire Department continue.

Consumers Energy and DTE Gas, formerly known as MichCon, provide natural gas to 88% of Michigan homes and businesses. The PSC, which regulates the state's utilities, has pressed both to accelerate the replacement of aging pipelines.

The utilities cite the massive costs involved and the accompanying rate hikes consumers might face as the reason for the slow pace, but critics say state and federal regulators need to be more aggressive about ensuring public safety after recent deadly explosions involving old pipes nationwide.

"This aging infrastructure needs to come out of the ground as fast as possible," said Carl Weimer, executive director of the Pipeline Safety Trust, a Bellingham, Wash.-based nonprofit promoting fuel-transportation safety. "They need to do the analysis of where the worst of it is and get the stuff out."

* Related: At $1 million a mile, cost and labor often delay replacement of old pipe

* Graphic: Michigan's 3,153 miles of risky pipeline

* Related: State has just 6 inspectors for 56,000 miles of pipe

Story originally appeared on Freep.

DTE Energy, which provides natural gas to 1.2 million customers in Michigan, has more wrought- and cast-iron pipeline in its system than all but one other utility in the U.S.: New Jersey's Public Service Electric & Gas.

In 2010, the PSC expressed "great concern" about DTE's "ability to provide safe and reliable service" because of its significant amount of aging pipelines and lack of action to replace them. A report noted that DTE Gas had 23.8 gas leaks per 100 miles of main in 2008 -- more than 10 times the 2.3 leaks experienced by Consumers Energy, the state's largest gas utility, with 1.7 million customers.

DTE also had more repairs for leaks from corrosion on its pipelines than Consumers did. In 2010, Consumers had 0.47 such repairs per 100 miles of steel or cast-iron mains. DTE had more than 34 times that -- 17.1 repairs per 100 miles of main, the PSC said.

The danger from aging pipelines made from materials now considered substandard has long been known. The National Transportation Safety Board called for replacement of cast-iron gas mains as far back as 1973.

"Local utilities and state regulators just haven't done much to get them out of the ground," Weimer said.

Slow to change

While declining to explain why more wasn't done to replace aging gas pipelines in the past, DTE Gas' senior vice president of gas operations, Bob Richard, said the problem is being rectified now.

"We've hired 100 people to work 100% on pipeline safety in our distribution system over the last two years," he said.

In 2010, the PSC directed DTE to develop a detailed plan for main replacement, including a long-term plan to significantly reduce the amount of cast-iron mains in its system. But the plan commissioners approved in September 2011 called for remediating about 30 miles of risky pipeline each year over 10 years. That's a total of only 300 miles of the utility's nearly 4,000 miles of unprotected pipeline, which is mostly made up of old cast iron but also includes steel lines without protective coatings or treatments.

Richard said DTE replaced 60 miles of old unprotected gas mains last year and plans to replace another 70 miles this year. But even at an average of 60 miles of pipeline replaced per year, it would take the utility more than 42 years to replace all of its cast-iron pipelines, putting most more than a century in the ground.

Consumers has about 626 miles of cast- and wrought-iron pipeline in its gas system, or about 2.4% of the utility's total distribution system. It has replaced 21% of its wrought- and cast-iron mains since 2004. But Consumers has also come under criticism.

In testimony before commissioners in February 2012, David Chislea, the PSC's manager of gas operations, criticized Consumers' declining progress on pipeline replacement. After utility officials touted a new program in 2010 to replace 25 miles of additional cast-iron pipeline each year, the amount of pipeline Consumers actually replaced decreased from 12 miles in 2010 to 10 miles in 2011, Chislea said.

"If Consumers was committed to this accelerated replacement program, staff would have expected to see some increases in cast-iron replacement in 2011 beyond historic levels, but this was not the case," Chislea told commissioners. A similar drop-off was reported in the utility's replacement of unprotected steel pipelines, he said.

Last year, Consumers replaced 12 miles of cast iron and almost 31 miles of uncoated steel pipeline, company officials said.

The utility's vice president of rates and regulation, Ronn Rasmussen, asked the PSC last month to approve a rate increase allowing the utility to invest up to $70 million more each year over 25 years to replace aging infrastructure. The plan would lead to "the elimination of virtually all of the existing cast-iron main" in Consumers' distribution system, he said.

DTE replaced just 1% of its wrought- and cast-iron gas pipelines from 2009 to 2011, compared to Consumers' 3.6% and a national average of replacement over that period of 5.3%, according to data kept by the federal Pipeline and Hazardous Materials Safety Administration, which regulates pipelines nationwide.

PHMSA, a division of the U.S. Department of Transportation, has wrought- and cast-iron pipeline data going back a decade on 34 states. Michigan ranks 25th among those states in its rate of progress in replacing such pipes from 2004 to last year.

Wrought- and cast-iron pipes are particularly high-risk because of their increased likelihood of corroding or cracking after decades in the ground. Unprotected steel pipes are also considered substandard today. Today's gas-distribution pipes are made of advanced plastics or specially coated steel. Steel pipes are now further protected through a cathodic process that runs an electric current through the pipe and reduces the risk of corrosion.

A deadly threat

A large crack in an 83-year-old, cast-iron gas main caused a Feb. 9, 2011, gas explosion in Allentown, Pa., that killed five and damaged nearly 50 homes. A Pennsylvania Public Utility Commission investigation found a work order to replace the pipeline from December 1979 that wasn't acted upon. The commission in January fined operator UGI Utilities $500,000 and ordered it to replace all of its cast-iron mains within 14 years and its bare steel pipelines within 30 years.

A "substandard and poorly welded" section of 30-inch gas transmission pipeline installed in 1956 was blamed by the National Transportation Safety Board for a leak that caused a Sept. 9, 2010, gas explosion in San Bruno, Calif., that killed eight, injured dozens more and destroyed a neighborhood in the resulting fire. The NTSB found that operator Pacific Gas & Electric's pipeline integrity management was inadequate, as were state and federal utility regulators for failure to notice the insufficient pipeline monitoring.

Weimer said the additional scrutiny after those disasters still hasn't led to getting dangerous pipes out of the ground quickly enough.

Too often, Weimer said, utilities and regulators drag out investigations into natural-gas explosions, releasing findings after public attention has waned. The Michigan Public Service Commission still considers as under investigation a natural-gas explosion at a furniture store in Wayne that killed two employees and injured the store's owner in December 2010.

"To most local governments and citizens, pipelines are out of sight, out of mind -- until something happens like in Royal Oak," he said of the explosion there. "We wish that attention could be focused and sustained in a way that led state utility commissions and Congress to change things in a meaningful way."

More Details: Getting tougher on pipelines

In the wake of three major pipeline disasters within two years -- deadly natural gas explosions in San Bruno, Calif., and Allentown, Pa., as well as a large oil spill after a pipeline failure near Battle Creek -- Congress passed toughened pipeline regulations that President Barack Obama signed into law in January 2012.

The provisions include increased civil penalties on oil, natural gas or hazardous liquid pipeline facility operators for failure to comply with regulations and safety standards. Penalties increased from $100,000 to $200,000 for an individual violation, and from up to $1 million to $2?million for a series.

The bill also called for the secretary of the National Transportation Safety Board, the secretary of transportation and other federal government officials to conduct studies related to a variety of pipeline safety issues and report back to Congress within two years.

Bill prevents Michigan governments from requiring employers to provide paid sick leave


Story originally appeared on Freep.

LANSING -- Michigan cities could not require employers to provide paid sick leave under a bill approved Thursday by a Senate committee.

In a 4-1 vote, the Senate Reforms, Restructuring and Reinventing Committee advanced a bill to ban local governments from requiring employers to provide paid or unpaid leave not required by state or federal law.

A similar bill was earlier approved by a House committee. Each will now be considered by the full Senate and House, respectively.

The bill is backed by business groups, such as the Michigan Chamber of Commerce, who say such employment matters should be regulated at the state or federal level to prevent a patchwork of laws across a state.

It's opposed by some labor groups and Mothering Justice, a group based in the Detroit area that seeks to empower moms and influence public policy on their behalf.

Danielle Atkinson, a founding director of the group, said providing paid sick leave is a public health issue, which locals should be able to regulate to prevent people in the food service industry from going to work sick. Many working moms also need paid leave so they can stay home and take care of their sick children, she said.

No local government is actively considering such an ordinance, but Mothering Justice would like to approach local units and encourage them to pass such ordinances, she said.

A poll the group commissioned suggests 60% of Michigan residents support allowing workers to earn paid sick days. But respondents weren't asked whether they favor allowing local governments to require such benefits.

Justin Winslow, vice president of government affairs for the Michigan Restaurant Association, told the committee that ordinances requiring extra employee leave have passed in cities such as San Francisco and Seattle and put restaurants there at a competitive disadvantage.

Six states, most recently Indiana, have passed bills to prevent such local ordinances, he said.

"Employers can provide these options ... to all their employees as they see fit," said Sen. Patrick Colbeck, R-Canton.

The Michigan Municipal League opposes the legislation because it violates local control, spokesman Matt Bach said.

Sen. Coleman Young II, D-Detroit, said the bill is "horrible" and "unnecessary."

Retail fraud is more than just shoplifting -- and now it's a felony


Story originally appeared on Freep.

Veteran cops recall when most shoplifters were loners who quietly pilfered a few bucks of trinkets after being struck -- conventional wisdom said -- by lapses in self-restraint.

Therapists gave the act a classy name: kleptomania.

But now, law enforcement agents are seeing more sophisticated thefts that they are calling organized retail fraud.

Aimed at this sophisticated style of shoplifting, a new state law goes into effect Sunday with stiffer penalties against organized retail crime.

• Related: Detroit couple face fraud charges in Meijer gift card sprees

The law turns what has been a misdemeanor with light jail sentences into a five-year felony. Among the elements that turn ordinary shoplifting into organized retail crime are a dozen circumstances, from deactivating store security devices to conspiring with accomplices and receiving stolen store goods. Virtually anything stolen for the purpose of resale falls under the act.

"This is a completely different type of perpetrator, doing this strictly for profit, and a lot of times operating in very organized groups of two, three or more individuals," said Sgt. Andy Breidenich of the Troy Police Department.

At places like Troy's Somerset Collection and Oakland Mall, investigators say these fraud artists sometimes act alone but more often assign accomplices to be decoys and getaway drivers. Some conspire with store clerks and dash from stores only with items they can readily sell -- designer clothes, cologne, liquor, jewelry and electronics.

"The recession isn't driving this. Criminals do because it pays," said Breidenich, founder of a network that links retail-fraud investigators from Detroit to Saginaw.

The prevalence of shoplifting has risen nationwide at annual rates of 3%-4% for the last five years, forcing the average American household to pay an estimated $500 yearly to cover the losses, said Richard Mellor, vice president for loss prevention with the National Retail Federation in Washington, D.C.

Michigan is one of about 15 states to have passed special laws to deal with organized shoplifters, Mellor said.

"We're advocating this type of legislation around the country. We're actually trying to get a federal law like this passed, because many of these people cross state lines with this merchandise," he said.

"The ordinary shoplifter, the amateur who's out there but not part of a group that's brazen, they get deterred much more easily. And the retailers are very good at dealing with those people," Mellor said.

But the perpetrators of organized theft are much harder to stop, he said.

"Sometimes they take a whole rack of clothing, or a whole shelf of the same product, and out the door it goes," he said.

Troy police offered an example of how the new law will differ when it comes to penalties for shoplifters.

A 40-year-old Clinton Township man stole a shopping cart full of Red Bull energy drinks from a Kroger store in December. The man, who has a lengthy criminal history, planned to sell the drinks to party stores. Charged under Michigan's existing Retail Fraud II statute (second degree), the maximum penalty the man faced was 93 days in jail. Under the new law, he could have received five years in prison.

The new laws render obsolete Michigan's traditional penalty brackets, which date to 1931. The lightest sentences went to those guilty of third-degree retail fraud, punishable by up to 93 days in jail for stealing anything worth up to $200. Now, police said, if someone steals a low-value item but does so with elements of the organized retail crime statute, that defendant could face a prison term and a fine of $5,000.

The sponsor of the new law is state Rep. Joe Graves, R-Argentine Township. Graves said he was moved to propose the law by his wife, Denise Graves.

"My wife's spent 26 years as a manager for Meijer, and she told me a lot of stories" about the growing problem of merchandise theft, he said.

"We all pay for this fraud."

Lions legend Lem Barney sues DMC for alleged harassment, age discrimination


Story originally appeared on Freep.

Detroit Lions legend Lem Barney filed a lawsuit this morning against the Detroit Medical Center and a supervisor there, saying he was harassed and eventually fired from his position as the director of Physician Relations and Recruitment because of his age.

The lawsuit, filed in Wayne County Circuit Court, also claims DMC violated the Family and Medical Leave Act. Barney had just returned to work after several weeks off, recuperating from back surgery, when he was terminated Feb. 21.

DMC officials reviewed the suit this morning but declined comment.

Barney, 67, a Pro Football Hall of Famer who played for the Lions in 1967-78, was recruited by DMC for the public relations spot at DMC’s Sinai Grace Hospital in 2006. According to the lawsuit, beginning in 2009, a supervisor, Sherri Killebrew, showed “instant dislike” of Barney and began urging him to leave his job.

“Shouldn’t you start thinking about retiring,” the lawsuit quotes Killebrew telling Barney. “You’re in your 60s and you made a lot of money as a football player …why don’t you just retire already.” Barney says in the suit that he explained that his pension was extremely small and that he did not plan to retire until age 70.

His DMC pay was eventually cut from $80,000 to $60,000 and then to $30,000. Barney said his position was reduced to a “clerical job,” where he was assigned to hand out parking passes for families with patients undergoing surgery.

The harassment continued, the suit claims. Sometimes patients and their families would recognize him and ask for an autograph. When Barney, known for never turning down a fan, provided autographs, he was reprimanded by Killebrew, according to the suit.

“You aren’t here to sign autographs,” she told him, according to the suit. Killebrew prohibited Barney from signing autographs, which left him “devastated,” the suit says, alleging “the defendant’s only motivation was to demean Barney."

Supervisors told him that he was being fired because he had been rude to a family member, a claim he denies in the lawsuit. The suit seeks in excess of $25,000 and calls the DMC’s actions an “egregious textbook discrimination on the basis of age.”

In an e-mail to the Free Press this morning, Barney of Commerce Township said, “I despise the thought of litigation and did not want to sue DMC, but they left me with no choice. I repeatedly told my supervisor I needed to keep working, but she thought I should retire to my fat NFL pension. Of course, if I had a fat NFL pension, I would have, but I needed to work.”

Livonia attorney James Acho, in an e-mail to the Free Press, said, “The last two years of Lem’s employment, he was demeaned the way nobody should be, much less a Detroit icon who has spent nearly 50 years in this city treating people the right way and spreading goodwill. DMC should be ashamed of how he was treated.”