Waiting to exhale
The days and months since Feb. 17 have been tortuous for many former Stanford Group Company investors. When the Securities and Exchange Commission stormed the parent company’s offices in Houston, the dominoes began to fall—some of them landing on innocent investors. Throughout south Louisiana, former ExxonMobil workers, schoolteachers, high-profile real-estate moguls and restaurateurs were brought to the brink of financial existence.
But a recent ruling by the 5th U.S. Circuit Court of Appeals in New Orleans has taken much of the pressure off investors. The court ruled that whatever interest or principal investors were able to make or take out before the SEC shut down the alleged $7 million Ponzi scheme run by Robert Allen Stanford was theirs to keep.
In short, no more clawbacks. No more grappling with court-appointed receiver Ralph Janvey over money that investors used as their retirement income or to build sleek downtown office buildings.
Phil Preis, a Baton Rouge attorney who represents some Stanford investors, calls the news “about as good as we could get.”
The court’s ruling is an important turning point in the biggest financial collapse that south Louisiana has seen. For months, investors waited to see what would happen. Instead of restitution, Janvey pointed at what money they had received and called it “ill-gotten gains”—profits from a wide-reaching fraud based on certificates of deposit with an unusually high return.
Janvey sued investors to get their profits back. That included any interest off which investors lived, any cash they allocated to purchase a house or invest in a different security; all of it was subject to the receiver’s lawsuits.
The decision has allowed a collective sigh of relief to pass through the region. Whatever investments or funds that were frozen because of the lawsuits have now been released. Many investors can once again pay their mortgages, their utilities, personal bills and put food on their tables.
“We are delighted that the 5th Circuit, while it acknowledged the Stanford Ponzi scheme, has also made it clear that innocent victims should not be damaged further,” says Jean Anne Mayhall, co-founder of the Louisiana Stanford Victims Group.
But the ruling doesn’t mean all investors are feeling relief. Those investors who had not taken out any interest on the CDs—either from rolling the interest back into the investment or had just bought in before the collapse—remain without restitution. Mayhall says “half of our job is done.”
For those investors not impacted by the decision, there are two opportunities left. First, they can wait to receive what might be pennies on the dollar for their original investments. Second, they can fight, like many have been doing, for coverage from the Securities Investor Protection Corps.
SIPC has said on numerous occasions that Stanford investors don’t qualify for coverage. The argument is that SIPC only covers failed brokerage accounts. In this case, it was the actual securities [the CDs] that failed—not the brokerage accounts.
So Stanford investors have turned to political action in pursuit of restitution. After months of lobbying their representatives, the LSVG has secured the support of the Louisiana legislative delegation. Even the SEC is pushing for a solution to be found. “While the insurance is not enough to make those victims whole,” Mayhall says, “it just might help them have a piece of the retirement savings they have worked so long and hard for.”—Olivia Watkins
Homeward bound
The Baton Rouge Area Chamber predicts job growth next year, although the group’s data is based on a loose survey of local business leaders. The forecast, however, jibes with economist Loren Scott’s expectation for 2010.
The prospect of companies drawing workers from outside Louisiana is exciting for real estate and construction firms hopeful that the growth will feed their markets. That could include existing or new housing, or custom builds and renovations.
“If you had asked me this last year, we were so looking for 2008 to come to a close,” says Sandy Daly, president of the Greater Baton Rouge Association of Realtors and a broker for C.J. Brown’s Sherwood Forest office. “We were looking to get it behind us. We are very optimistic for 2010.”
The recent renewal of an $8,000 first-time homebuyers tax credit and an expanded $6,500 credit for current owners is a big boost, Daly says, noting that 45% of her firm’s business is with first-timers. On the other hand, she says news that median prices have dropped nationally and in Louisiana doesn’t tell the whole story about the market.
“It does not include new construction,” she says of a reported 2.3% drop in U.S. median prices for the third quarter, compared with the same period last year. “You had a lot of upper-priced properties being custom built that never went through the MLS [Multiple Listing Service] and never got registered as a sale. You really have to know what apples they’re comparing to apples.”
BRAC expects to see a regional gain of 3,000 to 6,300 jobs, and Scott predicts an increase of 4,000 jobs in 2010 and even more the following year.
Associated Builders and Contractors expects a rough year for commercial building, with all nonresidential sectors—except health care and power—set to decline; the group says manufacturing will dip 19%. Yet ABC announced in November that residential construction employment is forecast to rise 6.2% next year.
Joseph Didier, president and owner of Didier Home Builders, says he is seeing unusual interest in building in Ascension Parish in terms of the custom homes in which he specializes.
“It is on an uptick,” he says. “The new bond measure for schools is going to do nothing but enhance housing growth. Dutchtown, Prairieville, Gonzales are really going to sort of explode.”
For more on the BRAC survey, click here.—Todd R. Brown
ExecutiveSpotlight
Diane Allen
President
Diane Allen & Associates Advertising/Public Relations, Inc.
Hometown: Colonial Heights, Va.
On the green, her only opponent is herself. Diane Allen, president of Diane Allen & Associates Advertising/Public Relations, takes to the golf course when she needs a break from it all. “The emotional refreshment provided by hitting a few holes of golf will often make it easier to think through those difficult situations,” she says, “possibly even discovering a solution after spending some time away from the matter.” There are no clients, no employees [not that she doesn’t love both], no bills and no traffic with which to deal. It’s just her and her clubs—and maybe a few friends. Either way, it’s her green heaven.
Want to read the rest of Allen’s Q&A? Click here.
SavingGreen
Off the grid
Officials in Ascension Parish hope the sun will be the salvation of the Smoke Bend-Port Barrow neighborhood in Donaldsonville, at least when it comes to streetlights.
The wedge-shaped area west of Bayou Lafourche, north of the railroad tracks and south of the Mississippi River can’t support its road-lighting bill because 321 of the 721 homes there are exempt from property millages.
To help make up the difference, the parish plans to install solar-powered lights or energy-efficient LED streetlights through a stimulus grant of $406,000.
“It’s an attempt for us to take an innovative approach,” says Cedric Grant, chief administrative officer for the parish. “The goal here is to use a reduced-energy fixture that helps the lighting district to better meet its utility obligation.”
Of Lighting District No. 4’s 170 street lamps, 32 use high-pressure sodium bulbs that are rated E1 for energy efficiency—meaning they cut energy consumption by 10%. Still, the electricity budget for the service has run several thousand dollars in the red the past couple of years and is set to continue throughout 2009.
Early research showed the grant, which needs to be expended in about 20 months, would cover 70 to 80 lights at a cost of roughly $5,000 per lamp, Grant says. He plans to find a consultant by the end of the year to engineer the project in early 2010 and put it out to bid by midyear, ideally at a lower per-light cost.
Although solar lights would be mostly self-sufficient during about 12 hours of operation, he says a small fraction of their juice still would come from Entergy. “You are off the grid at certain parts of the time when you’ve built up capacity,” he says.
Councilman Oliver Joseph, who represents the Donaldsonville neighborhood, recently succeeded in a campaign for a parcel fee that will help pay off the power bill for the streetlights for a decade. Yet he says he is “looking forward to turning that district into a green district and saving a lot of money in the long haul. It would be one of the first in the state.”—T.R.B.
FastForward
Quoting Edwards
Edwin Edwards’ name has appeared in tabloids and on news Web sites more than usual over the past few weeks. But that’s not too surprising considering the legacy he created in and out of the governor’s office.
When Business Report featured Edwards on the cover of the Jan. 23, 1996, issue, “Au revoir” told the story of Edwards’ supposed exit from politics after 40 years in the limelight and the muck. Edwards’ quotes were memorable, to say the least.
There was, of course, the classic statement from John Maginnis’ The Last Hayride, in which Edwards said being “caught in bed with either a dead girl or a live boy” would be damaging enough to hurt his chances of reelection to a third term. Or there were his thoughts on his legacy in Gambit: “I hope that it will be the express and ardent concern that I’ve had for the disadvantaged, the senior citizens, the poor, the working class.”
But his legacy hasn’t exactly played out as he wanted over the last decade and a half. Edwards, now 82 years old, sits in a low-security federal prison in Oakdale, but his name still comes up every now and again.
In late October, his ties to former San Francisco 49ers owner Eddie DeBartolo resurfaced when it was reported that DeBartolo—who was convicted of felony charges after he didn’t report that Edwards had extorted him in order to land a casino license—was interested in buying the Tampa Bay Buccaneers.
And then there’s the Emory University student newspaper, which used Edwards’ quote about the dead girl and live boy to explain what it would take for former vice-presidential hopeful Sarah Palin to unseat President Barack Obama in 2012.
A new biography, Edwards, by Leo Honeycutt—due early this month—should shed some light on the politician.
“He’s spent his entire life putting up a wall, showing only the parts of himself he wished people to see and locking away the things he didn’t,” Honeycutt recently told 225 magazine. “It usually took the first hour for him to stop telling me his version of the truth and start telling the truth.”—O.W.
BusinessOfPolitics
What’s for dinner?
Chiefly because of a proposed emissions-cutting bill that proponents argue could slow global warming, Louisiana’s chemical industry already is exploring ways to capture and transport carbon dioxide. Depending on which way the political wind blows, the practice of sequestering CO2 could become a profitable and environmentally friendly venture for some plants.
That’s because the so-called cap-and-trade system being debated by Congress would establish new emission standards for coal-powered plants, manufacturers and chemical facilities. Each entity would receive an emissions allowance that would be based on tradable credits. In theory, a coal plant in the northern United States that exceeds its emission limit could buy—for cash—credits from a south Louisiana chemical plant that has cut its carbon-dioxide output or is capturing it.
Dan Borné, president of the Louisiana Chemical Association, says his membership is “all over the map” on supporting President Barack Obama’s energy proposal. He says some members view it as a “carbon tax that would increase the cost of business.”
Still, petrochemical companies in Louisiana likely would be paid by coal producers and others to capture carbon dioxide under the proposed legislation, which would create jobs for industrial manufacturers on the local level, Borné says. “There are a lot of different ways to connect the dots, and that’s why some manufacturers are for it,” he says. “You’re either at the table or on the menu. And our membership wants to be at the table.”
Blueprint for education
Blueprint Louisiana, a business-backed, good-government group, is becoming more involved with the Louisiana Postsecondary Education Review Commission. House Speaker Jim Tucker, an Algiers Republican, formed the commission to ease higher education into the coming budget crisis.
Specifically, Blueprint has offered five recommendations to address the two fundamental problems of low graduation rates, and an underdeveloped community and technical college system:
Fully implementing the performance-based funding formula for higher education; Raising university admission standards; Establishing “Centers of Excellence” within the Louisiana Community and Technical College System; Providing our higher-education systems greater freedom to raise the revenue they need to maintain and improve educational quality; and Removing all chronically failing postsecondary schools from the control of their respective governance systems.
“Our ideas are from the viewpoint of the customers of higher education—students who want to better themselves, parents who often foot a large portion of the financial bill, and businesses that need educated and qualified employees,” Blueprint Louisiana Chairman Bill Fenstermaker says.—Jeremy Alford
Patience is a virtue
Woman’s Hospital might be ready to restart construction on its stalled medical campus by the first quarter of 2010 if cost-cutting options come in on target and bond markets remain steady, President/CEO Teri Fontenot told a group at the LSU Executive Education’s “Breakfast to Business” in November. Woman’s Hospital asked contractors to resubmit pricing for the project, which was stopped at the beginning of the year because of the tight credit market, after removing 35,000 square feet of expansion space and considering the much lower price of construction costs.
Factoring in the changes, Fontenot says the hospital hopes to cut $45 million from the original $350 million project when the estimates come in. The hospital is prepared to wait should the costs come in over budget or if financing for the entire project cannot be obtained. “We’re being patient,” she says. “We’re prepared to sit on this for another year if we have to.” If plans for the new hospital, medical office building and support facility at Airline Highway and Pecue Lane on the site of the former Briarwood Golf Course move forward, construction will take between 24 and 26 months.—Emma James
Popular country
People living in 45 states and from as far away as Germany have looked at buying tickets for the first Bayou Country Superfest, says the producer of the Memorial Day weekend event. “I’ve never seen anything like this, interest coming from so broad and wide,” says Quint Davis, producer and director of the festival, which will be held in Tiger Stadium. Davis didn’t say how many tickets had been sold, but says the event could possibly sell out. Taylor Swift and Kenny Chesney, two of the biggest stars in country music, will headline the festival; other performers include top-selling acts such as Brooks & Dunn, Keith Urban, Jason Aldean and Kellie Pickler. Unlike Davis’ other festivals, New Orleans Jazz & Heritage Festival and Essence Festival, there will be reserved seating for Bayou Country Superfest. Davis says they’re looking at adding more attractions to the festival, which will be held May 29-30, 2010, including a fan fest and a second stage outside the stadium featuring regional performers.—Timothy Boone
OnTheBeat
Downward trend: Louisiana’s total exports declined 29% to $29.3 billion in value over the first three quarters of 2009 while total U.S. exports dropped by 23.8%, according to a report issued by the World Trade Center of New Orleans. This follows up to 2008’s record-breaking year, with exports from Louisiana reaching nearly $42 billion. However, the decrease was the mark of a global recession and low agricultural and oil prices.
Bill of health: Louisiana had its best showing in an annual report that ranks the health of all 50 states, coming in 47th. The America’s Health Ranking Report, which was released by United Health Foundation, says the state is hurt by a high prevalence of obesity [49th nationally] and smoking [41st]. While the number of Louisiana residents who smoke dropped from 29.1% in 1990 to 20.4% in 2009, the number of obese people jumped from 16.6% to 28.9% in the same period.
Losing streak: Louisiana’s 13 riverboat casinos, Harrah’s Entertainment’s downtown New Orleans casino and the three racetrack casinos won $193.3 million from players in October, according to State Police. That’s down from $207.7 million in October 2008—the month after the national economic meltdown began. Baton Rouge’s two riverboat casinos won $15.9 million in October, a 17.2% slide from the $19.2 million in October 2008.
Big, bad banks: Rusty Cloutier, the president and CEO of MidSouth Bank, has written a self-published book detailing how big banks led to the current economic downturn. Big Bad Banks points blame at government bank regulators and the institutions themselves. In recent months, Cloutier has become an advocate for community banks, testifying before Congress and being profiled by New York Times Magazine.
Happy patients: A new report found that Baton Rouge residents gave the highest marks for their hospital care. According to the Hospital Pulse Report: Patient Perspectives on American Health Care, 93.5% of people say they were satisfied with the quality of hospital care they received. The results, compiled by Press Ganey, which provides customer feedback from hospitals, were based on nearly 3 million patient surveys.
Instrumental: Texas Instruments donated $100,000 to Southern University’s College of Engineering after senior vice president Art George gave students career advice. The donation will go to the electrical engineering program to fund scholarships and laboratories, and to support a TI course the company founded at the university last year. George is an alumnus of the Southern engineering program.
Game still on: Electronic Arts will cut its work force by 17% as it tries to align its business with a transforming video-game industry. The company, which opened a testing center at LSU last year, announced the layoffs of 1,500 people just hours after it said it is paying at least $275 million to buy Playfish Inc., a maker of social online games. An EA spokesman says the Baton Rouge testing center could actually grow as the company looks at moving some operations to areas with lower costs of living.
Lofty goals
The proposed Capitol Lofts apartment complex, which ignited a firestorm of controversy in historic Spanish Town, is dead—at least for the time being. Developer David Slaughter, who signed last summer a purchase agreement with property owner Richard Preis to buy 1.2 acres for the project, including seven houses that would have to be torn down, says he pulled out of the deal because of resistance from the Historic Spanish Town Civic Association.
Preis says the issue had to do with a difficulty in obtaining financing, something Slaughter denies. Slaughter says the guidelines the civic association and the city’s Historic Preservation Commission wanted him to follow would not have allowed him to reach an acceptable profit level.
David Brown, a member of the Spanish Town Civic Association board, says he’s not surprised the plans fell through. Slaughter was having trouble making the numbers work out in terms of building a quality development with affordable rents that fit into the neighborhood, Brown says. “He went through four or five generations of the project.”
Brown says he’s not sure if this is a victory for the civic association. Preis has said he will decide early next year whether to keep the rental properties, sell them or partner with another developer. “We’re going to be working with Richard Preis, and we’ve never been terribly comfortable with that,” Brown says.
In the meantime, the commission will look at strengthening the existing guidelines for the historic district to prevent issues like Capitol Lofts from occurring, with the goal of having them in place by the spring. “We don’t want to make guidelines overly strict,” he says. “But we want to have a better defense.”
The idea is to develop zoning that encourages single-family residences. “We’re acutely aware that there’s a need for quality, affordable residential housing,” Brown says. “But we have an interest in preserving historic structures.”—T.B.
Vacancies
Baton Rouge commercial agents concur—the recession and road construction are the biggest obstacles in the path of commercial leasing and sales in the Capital Region. After years of expanding retail, more vacant storefronts are starting to appear around town, including on high-profile commercial corridors. The recession has placed commercial real estate in limbo, says Justin Langlois, a commercial agent with Sealy & Falgoust. “Nobody wants to make the deal,” he says. “It’s fun to look at the space and talk about the space, but when it comes down to [signing] a lease or a letter of intent, relatively few people are willing to do it.”
Mark Hebert of Kurz & Hebert Commercial Real Estate says the recession is the main reason for a slowdown in commercial leasing, but road construction certainly doesn’t help. When entry in and out of an area is limited, that chills the interest of the parties looking at the space, especially if the construction is slated to be ongoing. But road construction also shows larger potential customers that Baton Rouge is putting its best foot forward, he says. “We’re correcting things that were done 20 to 40 years ago that have been needed a long time,” Hebert says. “But it is a burden on tenants, and it’s definitely a double whammy as far as the recession goes.”—E.J.
