For whose benefit?
The ongoing legal feud between the Securities and Exchange Commission-chosen and court-appointed Stanford receiver, Ralph Janvey, and almost every other involved entity is unprecedented in the history of alleged Ponzi schemes.
It began with the Feb. 17 raid of Stanford Financial Group offices, a freeze on all investor accounts and allegations made by federal officials. In the months since, Janvey has clashed with investors, advisers, attorneys and the SEC over his authority and actions.
Robert Allen Stanford, the company’s sole owner, wants his funds unfrozen to pay for legal counsel. Investors want released funds unrelated to the Certificate of Deposits. Advisers want access to their accounts and freedom from the accusations they knew of the possible fraud. But no one is getting what they want.
In recent weeks, Janvey has attempted to disgorge investors of interest obtained from the CDs over the last five years as well as any principal they invested and cashed out over the same time period. In the most recent suit, Janvey said “the money the investors received was not their money, was not a return on their investment and was not generated by any of [Stanford International Bank’s] (far right) other business ventures.”
Still, the suits filed by Janvey threw investors into a frenzy because they’d already felt victimized. It meant possibly giving back something they might have already spent. And because the clawbacks would be used to disburse funds to all investors—an action they claim is unfair because it means taking from 20% of investors to distribute to 100%.
The SEC disagreed about Janvey’s “equity is equality” attempt, saying “such claims would create further hardship on a small pool of victims” without really doing much good. Even though Janvey went after some foreign investors in his lawsuits, there are thousands he can’t touch for jurisdictional reasons or otherwise.
So when the SEC filed an emergency motion to limit Janvey’s authority, investors, attorneys and advisers held their collective breath. Slapping down Janvey’s far-reaching moves could have meant positive results for people trying to protect what little they have left.
The decision by U.S. District Judge David C. Godbey to limit only Janvey’s claims against principal left many questions unanswered. Could the receiver claw back against net losers? Could he demand the return of interest payments that have already been spent if there is no alternate liquid source of cash? Could he take from only a small percentage of investors and distribute those funds to all international investors?
Godbey has yet to make those items clear, but the SEC [and some attorneys] are still speaking out.?J. Kevin Edmundson, assistant director of the SEC’s regional office in Fort Worth, Texas, expects the court to protect investors who are net losers. Asked if he believed Janvey would be vindicated in those specific clawbacks, Edmundson says, “We do not. We don’t believe the law supports claims against net losers.”
Then again, the SEC also said it didn’t believe the law supports clawbacks against innocent investors. Godbey didn’t entirely take their side on that issue.
Ultimately, the battle has a long way to go. Janvey plans to appeal Godbey’s decision to the Fifth Circuit Court of Appeals. If he does, court-appointed Stanford examiner John Little and the SEC inevitably will be involved.
Which makes only one thing certain in the weeks to come: establishing new precedent. The lawyers will be working more, filing more and researching more. That means more money will be spent in the legal battle—leaving less and less cash for investors.—Olivia Watkins
A historic battle
This story has been updated since originally published.
The first skirmish in the battle over the proposed Capitol Lofts apartment building ended quietly when developer David Slaughter decided not to pursue a zoning change that would have allowed 115 units on the north edge of Spanish Town. Critics said the most recent 74-unit proposal was still out of scale with the rest of the neighborhood. But the idea that seven houses along North 7th and State Capitol Drive would be bulldozed to make room for the project has been the most contentious aspect of the project in recent weeks.
As Spanish Town is a designated historic district, the Historic Preservation Commission must approve the demolitions and the project itself. The HPC was scheduled to review the project Aug. 12; however, on Aug. 7, Slaughter announced he would “briefly delay my presentation” until “further agreements may be reached.”
“I am committed to working closely with the community to discuss the issues of this very unique site,” Slaughter says.
City-parish planning commission staffers recommended approving Slaughter’s demolition request, saying deteriorating wood, missing roof components, asbestos siding and other issues amounted to “severe health and safety issues.” Slaughter has a standing offer to donate the houses to anyone who wants to move and preserve them, although he says some may not be structurally sound enough to move. Preservationists argue most older homes in Baton Rouge have many of the same issues, and say tearing down or removing the houses defeats the purpose of the historic district.
“We cannot allow seven contributing structures to be demolished and lost forever,” says Mark Upton, chairman of the Foundation for Historical Louisiana.
There’s also the question of the appropriateness of the development itself. Derrell Cohoon, a Spanish Town resident and Downtown Development District board member, says Capitol Lofts “is out of compliance with both the spirit and the intent of the historic district guidelines enacted by the Metro Council.”
However, the development as proposed is fully in compliance with the property’s A4 zoning. Andres Duany, who led the first phase of the Plan Baton Rouge downtown master plan, said a building of up to 115,000 square feet could be accommodated on the site while preserving the “critical” houses. So which houses are critical?
“That’s something that the Historic Preservation Commission determines,” says Rachel DiResto, vice president with the Center for Planning Excellence. “Are they critical to the historic district guidelines?”
If the historic commission eventually rules against him, Slaughter can appeal to the Metro Council.—David Jacobs
Pay up, man
Crossed wires, new permitting processes and a resolved ethics investigation might cause Pittsburgh at least $1 million as Lamar Advertising Company seeks damages for its half-completed LED sign the city doesn’t want.
The 19-foot-by-58-foot electronic billboard, which is currently displayed outside of the Grant Transportation Center, was approved by the city in December 2007. After a shakeup of Pittsburgh’s development office resulted in at least one resignation and a series of ethics violations, a stop-work order was issued for the sign in April. Lamar says it is seeking damages because the sign was a custom order, which means parts cannot be reused in other projects.
“Lamar acted on that permit in good faith and should be vindicated,” says Stan Geier, Lamar’s vice president and general manager, in an e-mail. “Financially, if you order the building of a house and then stop the contractor before it’s finished, you still need to pay him for his time and materials.”
The appeal has been filed with the Pennsylvania Commonwealth Court and is likely to add 6-12 months to any resolution, Geier says. In the meantime, Lamar will attempt to reuse components from the half-finished sign in other projects, which would mitigate some of the expenses the company wants to recoup from the Steel City.—Emma James
Offer it, and they will come
Would-be participants have been coming out of the woodwork to participate in the Cash for Clunkers program. While the extra business is good, some Baton Rouge auto dealers are worried that without some reimbursement from the federal government, they will have to limit their participation.
Dealers report a 20% to 40% increase in profit margins for July, but the boost is offset by the $3,500 to $4,500 dealers have to front to prospective customers for their vehicles. Since sales were slow before the program, fewer dealers have the cash necessary to continue participating in the program, says Bob Israel, president of the Louisiana Auto Dealers Association.
Despite the dealers’ frustrations, the program has been very successful in getting vehicles with low gas mileage and high emissions off the road as well as providing a much-needed boost to auto dealers, Israel says.—E.J.
ExecutiveSpotlight
Kathleen Kurtz Gordon
Executive director
American Institute of Architects Baton Rouge
Hometown: Zachary
Kathleen Kurtz Gordon isn’t afraid of much, even some of the crazy hobbies of her two teenage boys—like off-roading or four-wheeling. And as the executive director of the American Institute of Architects in Baton Rouge, she hopes the city won’t be afraid of anything, either. Her greatest fear is “that we will continue to talk about new ideas, but be unwilling to follow through.” In the meantime, you can find her after 5 p.m. wherever her children are. Baseball games. Soccer games. And even in a mud-splattered pickup truck.
To read Gordon’s full Q&A, click here.
BookReview
The Cost of Bad Behavior
Author: Christine Pearson and Christine Porath
Publisher: Portfolio
Year: 2009
Pages: 240
One of your co-workers is a big dummy.
When he started, everybody thought he’d be a superstar. His references were unusually glowing, and he was a real go-getter. But then he slipped up a few times and was reprimanded at a company meeting. Word spread pretty quickly.
Now nobody even bothers to invite him to meetings. It’s no use. The superstar is a super slacker.
He might be the victim of incivility, and that could be very expensive for your business. In the new book, Cost of Bad Behavior by Christine Pearson and Christine Porath, you’ll see how attitude and old-fashioned rudeness can sink a business from the inside out.
Sure, you’ve been publicly reprimanded or ignored at work. You didn’t like it, and you’re not alone: in a 2005 survey, 95% percent of U.S. employees reported being the victim of incivility at work.
Incivility, it seems, is an epidemic. And like a nasty virus, it spreads through your organization quickly and can affect the bottom line.
Using interviews, case studies and real [shocking] events, Pearson and Porath show that plain old rudeness isn’t so plain anymore, and that being nasty can have repercussions. Aside from the jaw-dropping examples they cite and the statistics they present—both of which will make you cringe—what’s probably most helpful for businesspeople is the section on determining monetary loss resulting from incivility.
When bad words fly out of your mouth at work, money flies out of your wallet. If you notice too much snarkiness at work, or if you believe you and your co-workers could do better in the nice department, pick up this book and read the Cost of Bad Behavior together as a team.—Terri Schlichenmeyer
FastForward
Over the hump
Merchants around the Perkins Road overpass were warily looking at plans to replace the aging bridge when Business Report wrote, “Just can’t get over you” on June 2, 2008.
While everyone agreed the 72-year-old overpass was in dire need of rehabilitation, businesses were unsure about what sort of effect closing a busy section of Perkins Road would have on them. At the time, the repairs were scheduled to begin in December or January, meaning the overpass would have been closed for the St. Patrick’s Day parade—an event that attracts thousands to the bars and restaurants in the area.
Dave Remmetter, owner of Chelsea’s Café, and parade organizers asked that the work be postponed until after St. Patrick’s to give the businesses one last big blowout. The merchants were granted their wish: City-parish officials postponed the start of the project. Several days after the March 14 parade, the overpass was shut down for a $2 million repair project that had been discussed for about a decade.
The closing has caused some pains. “There are some regular customers I haven’t seen since the bridge closed,” says Cliff Boulden, manager of Bet-R grocery store, which is just west of the overpass. Boulden noticed a dropoff in sales in the past month, but he wasn’t sure if that was a result of the closing or the weak economy. “You need as much help as you can with the way things are going in the economy,” he says.
Remmetter says his business was off 25% to 30% while the overpass was closed. Chelsea’s faced a triple whammy during the construction: one of the direct routes was cut off, a temporary fence was put up that hid the bar and eliminated parking, and Remmetter temporarily lost his liquor license during a well-publicized dispute with state Alcohol and Tobacco Control office. Remmetter is thankful the work wrapped up a few weeks ahead of schedule and ready for a busy fall. “We’re looking forward to being back to normal,” he says.—Timothy Boone
NonprofitSpotlight
Baton Rouge Area Alcohol & Drug Center
Total assets: $110,218
Expenses: $590,801
2009 Board members:
Ricky Bearden
Howard Carter
Ian Frederick
Jack Green
Joseph Juban
Lynn Kollars
George Kostuch
Charlotte Landry
Ben Lightfoot
Black McGehee
John F.W. McGurk
John Miremont
Jim Poche
Molly Quinn
Paul Rosenthal
Michael Smith
Allison Stiel
G. Allen Walsh
Revenue and support: $532,381
Highest-paid executives: Joseph S. Munson, Executive director, $33,485
Key projects: Providing 24-hour inpatient, nonmedical detoxification services to voluntary patients over the age of 18. Currently planning a facility expansion (left) to double bed capacity to 48? patients.
FortNight August 12 – 25
August 12 – On this day in 1868? – The first Louisiana State Lottery Company was licensed. Though it only operated for 25 years, it was later revived in the form of the Louisiana Lottery Corporation in 1991 after a re-emergence of state lotteries across the country.
August 14 – More than 40 companies will compete in the Capital Area United Way’s 22nd annual Jambalaya Cookoff from 9:30 a.m. to 1 p.m. at the River Center. Dow Chemical Company, which is sponsoring the event, will serve jambalaya to the Erwinville Community Center and Port Allen Food Pantry. Plate lunches also can be purchased from the event. Visit unitedwayevents.com for more information.
August 15 – On this day in 1988 – The Republican National Convention was held in New Orleans. Several Baton Rouge companies, including Liquid Ventures, are now sponsoring the 2010 Southern Republican Leadership Conference to be held April 8-11 in New Orleans. The “Build the Base. Rock the Country.” event will feature speakers like Gov. Bobby Jindal, former Alaska Gov. Sarah Palin, Fox News’ Sean Hannity, former Arkansas Gov. Mike Huckabee and California Gov. Arnold Schwarzenegger at the New Orleans Hilton Riverside. Early registration starts Aug. 31.
August 19 – A three-day conference for the Association of African American Museums will be held at the Hilton Baton Rouge Capitol Center. “A Call to Home: Reimaging Our Institutions” will feature seminars on historic preservation, professional development and even an Old South Baton Rouge presentation at the Louisiana State Museum. To attend the conference or for more information, visit blackmuseums.org.
August 22 – The eighth annual Women in Business workshop event will be held at the Ione Burden Conference Center on Essen Lane. Sponsored by the Stephenson Entrepreneurship Institute at LSU’s E.J. Ourso College of Business, course topics include legal issues, writing business plans and work-life balance. Participants can register for the event at sei.lsu.edu.
August 23 – On this day in 2002 – A federal appeals court upholds the racketeering and fraud convictions of former Gov. Edwin Edwards. Edwards’ daughter, Anna, recently spoke out on the toll a public trial and conviction takes on the accused’s family members in light of the recent trial of former New Orleans Congressman William Jefferson.
BusinessOfPolitics
Second life
Venture capitalists quietly cheered when President Barack Obama signed into law last month a temporary extension for the Small Business Innovation Research program, which disburses $2 billion annually to bolster venture-backed companies. Before the August recess, the House and Senate couldn’t come to terms on what type of businesses should have access to the program.
Small Business and Entrepreneurship Committee Chair Mary Landrieu says the policy lifeline will temporarily safeguard cutting-edge technologies and high-paying jobs. “While this two-month extension was essential, and is good news, it is critical that the SBIR and Small Business Technology Transfer programs be more permanently reauthorized,” she says. “We have been working hard with the House of Representatives to reach a fair compromise that will reauthorize and strengthen the SBIR and STTR programs and that will guarantee that these programs remain for truly small businesses.”
State secretary might run as Republican
As natural resources secretary under former Gov. Kathleen Blanco, a Democrat, and current Gov. Bobby Jindal, a Republican, Scott Angelle of Breaux Bridge has been a rising star in state government for his aggressive approach to policymaking and—in part—his breezy Cajun persona. But when Angelle was asked to serve as Jindal’s legislative liaison earlier this year, even as a Democrat, rave reviews from lawmakers poured in for what appeared to be a bipartisan strategy.
That supposedly led business interests in Acadiana to urge Angelle to run for the 3rd Congressional District, which current Congressman Charlie Melancon, D-Napoleonville, said he might vacate in order to make a run next year against U.S. Sen. David Vitter, R-Metairie. When asked during the Legislature’s regular session, Angelle brushed off the idea. He sounds more open to it these days, albeit still on the fence.
“In due time I’ll give it the appropriate consideration,” Angelle now says. “I’ve received a lot of encouragement, and I’m flattered to be on any short list. And I think as secretary and after working with Gov. Jindal, I’ve demonstrated my dedication to public service. I also believe this experience qualifies me to be considered.”
Yet Angelle, the former St. Martin Parish president, might not run as a Democrat if you believe the recent rumors stirring around Acadiana, and he doesn’t mind addressing them directly. “Several longtime friends have suggested it over the years and again more recently,” Angelle says. “It is something that I would consider, like [former president] Ronald Reagan, [former governor] Mike Foster and [former Lafourche Parish Congressman] Billy Tauzin.”—Jeremy Alford
Return to sender
Facing staggering financial losses, the Postal Service is looking at closing as many as 1,000 offices across the country, including six in Baton Rouge. Postal officials sent a list of nearly 700 potential candidates to the independent Postal Regulatory Commission for review. Local branches named as potential closure targets are Audubon Station [Government Street], the location in the State Capitol, Commerce Park [Perkins Road], Cortana [Cortana Place], Gateway Finance [Muriel Avenue near Sherwood Forest Boulevard] and the location in the LSU Union.
The post office has been struggling with a sharp decline in mail volume as people and businesses switch to e-mail both for personal contact and bill paying. The agency is facing a nearly $7 billion potential loss this fiscal year despite a 2-cent increase in the price of stamps in May, cuts in staff and removal of collection boxes. No changes are expected before the end of the current fiscal year on Sept. 30.—T.B.
End of the [pipe]line
A sampling of some Louisiana chemical plants indicates they likely will cut 700 to 1,200 workers over the next year, Louisiana Chemical Association President Dan Borné says. That would represent a workforce reduction of 3% to 5%, which tracks a national cutback of nearly 5%.
Borné says production is down nearly 18% in the Gulf Coast region and 11% nationally. Some major capital projects are coming to an end, and the pipeline of new projects is nearly empty, meaning several thousand contractors in south Louisiana could be out of work soon. He also says most indicators show the economy bottoming out in the third quarter of this year, but economists predict a relatively weak and slow recovery. The housing market appears to be stabilizing, which is good news for the chemical industry since it produces many of the materials that go into homes.—D.J.
OnTheBeat
Feeling better: A statewide survey by Capital One of 500 companies found that 43% say their financial position has improved in the past year. Eighteen percent of small businesses say their finances are worse than a year ago, while 17% of large businesses say things have gotten worse in the past year. One-third of large companies say they plan to increase spending on business development, up from 20% that planned to make investments in the first quarter.
Teeing off: LSU and North Carolina have reportedly reached a tentative agreement to open the 2010 football season at the Chick-fil-A College Kickoff. The game would be played Sept. 4 in Atlanta’s Georgia Dome. The teams have scheduling issues to resolve before the game is official—LSU is scheduled to play Tulane on that date in the Superdome.
Constructing jobs: Baton Rouge had the fourth biggest increase in new construction jobs over the past year, according to a report released by the Associated General Contractors of America. The Capital Region added 2,100 construction jobs from June 2008, a 5.2% increase. Baton Rouge was one of 19 metro areas not to see a loss of construction jobs over the past year; Shreveport-Bossier City, which was unchanged at 9,100 workers, was one of the others.
Going nuclear: A consortium comprised of the Shaw Group and Westinghouse Electric Company has been awarded a contract to provide maintenance and engineering to three South Carolina nuclear power plants. Details of the contract with South Carolina Electric & Gas Company were not released.
Plus 500: Baton Rouge is one of about a dozen cities that added jobs in June compared to a year ago, according to figures for 372 metro areas. There were 500 more people working in Baton Rouge when compared to June 2008, reports the Bureau of Labor Statistics, bringing the total to 375,800. No other Louisiana cities added jobs; Lake Charles, which had 92,800 workers, suffered the biggest decrease, 2.8%.
A smaller bundle: Cox Communications, which has merged its Baton Rouge/Lafayette and New Orleans operations, has let go less than 2% of its Louisiana workforce as a result of the consolidation. The cable, phone and Internet provider has about 1,700 employees in the state, so less than 34 workers were affected.
Next exit: Louisiana has received $9.5 million in transportation infrastructure funds, including money for the Interstate 10-Pecue Lane interchange—the biggest local project to be included for funding in the Transportation, Housing and Urban Development appropriations bill.
Go: Bids for Green Light Plan road projects continue to come in below initial estimates, according to the plan’s quarterly report. Through June 30, plan officials report a cumulative savings of nearly $11.1 million compared to estimated construction costs. Greater competition among bidders has been a major factor in driving down costs.
America at home
For the second time in the past few months, a Louisiana-based furniture store chain has moved into an empty location at the Mall of Louisiana. American Factory Direct Furniture is now open in the space that had been occupied by Circuit City. This is the third store for American Factory, which has locations in Mandeville and Long Beach, Miss.
American Factory, which opened in 1937, was formerly the New Orleans-based Comeaux Furniture. The Circuit City store, which opened about a year ago, had been vacant since the electronics chain went out of business in January. Lafayette-based Home Furniture recently opened up a location at the mall, in the old Linens ‘N Things building.
When few are good…
Baton Rouge ranked 158th on a newly released survey of foreclosure rates for 203 U.S. cities. During the first half of the year, there were 1,237 homes with foreclosure fillings in the Capital Region, or 0.39% of the homes in the area, says RealtyTrac. That’s far below the national average of foreclosure filings for 1.19% of U.S. housing units. RealtyTrac noted that foreclosure filings in Baton Rouge increased by 67% from the first half of 2008, but cautioned that the change may be due to changes or improvements in data collection.
New Orleans was ranked 119th, with one foreclosure filing per 167 housing units, Shreveport-Bossier City was 168th with one filing per 344 households, Lafayette was 191st, with one filing per 659 housing units and Houma-Thibodaux was 196th with one filing per 1,119 housing units. Las Vegas had the highest foreclosure rate; nearly 7.5% of homes in Sin City had a filing against them in the first half of the year.
Fielding The Grove
Richard Carmouche (right) has scheduled a weeklong series of meetings for the week of Aug. 17 to help develop plans for The Grove, a high-density mixed-use project scheduled for Mall of Louisiana Boulevard and Interstate 10. The meetings will give potential stakeholders, such as hotel, office, restaurant and multi-family housing operators, a chance to have an input on the project.
Steve Oubre, the Lafayette landscape architect who has drawn up plans for many TNDs, will take the comments and use them to design The Grove. “At the end of the week, we hope to come up with a plan that’s doable and buildable,” Carmouche says.
Carmouche got the idea for the series of meetings after the charettes he held for his Settlement for Willow Grove TND several years ago. But this time, the meetings are set up to kick-start the development by setting up things like the commercial interests want. “We hope to generate some sales out of this,” he says.—Timothy Boone
Luxury retirement
Retired Army Lt. Gen. Russel Honoré, who coordinated military relief efforts after Hurricane Katrina, is returning to Baton Rouge. Honoré, who grew up in Pointe Coupee Parish and graduated from Southern University, and wife Beverly purchased a new home in University Club for $866,000 from builder David Daresnbourg. The Memorial Tower Drive home features five bedrooms and five-and-a-half bathrooms.
Honoré won acclaim for restoring order to New Orleans after Katrina. Since retiring from the Army last year, he’s written a book and become a consultant and lecturer.—T.B.
