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updated 2:54 PM CDT, Jul 28, 2018

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GOP "mainstream" leaders seek to energize new generation to recreate past successes

The grand old men of Washington State's Grand Old Party, who brought about the closest thing to a Republican Golden Era in their state back in the '60s, are seeking to help attract and energize a new generation of young people to what they tout as the GOP "mainstream."

 

Their vehicle for renewal is Action for Washington, created in 1968 by Sam Reed and Chris Bayley, then a couple of young newcomers to the Republican political scene, and recreated several years ago by Reed, who retired this year after three terms as Secretary of State.

 

sam reed
Sam Reed

The organization had its first fund-raising breakfast last week in Bellevue and a group of those young people who have been attracted as "mainstream" (meaning politically moderate) messengers for the future was in evidence, along with Reed, Action for Washington President Alex Hays and Republican party icons Dan Evans and Slade Gorton.

 

All are aware that the image being created by Republicans nationally on a number of social issues is making it a more daunting task to create a Republican revival in states like Washington, which has grown increasingly "blue" in the past couple of decades.

 

That's particularly felt by Republican moderates coming off a gubernatorial election in which the positions of the party nationally may have been the biggest contributor to the defeat of GOP gubernatorial candidate Rob McKenna.

 

"Clearly what is happening nationally is hurting us," Reed conceded. "But the Northwest, both Washington and Oregon, has traditionally been a place where a different breed of Republicans has operated. And we need to renew that image, and begin to find a way to have an impact nationally."

 

The graduates of the Action for Washington program are seen as a starting point. The young men and women, many recruited from college campuses, are enrolled in a leadership conference that provides weekly exposure for three to four months of discussion in areas like public policy, public relations and other issues that Hays sees leading them, once they're "alumni," to "vitalize the center-right" with their future involvements.

 

In a sense, the past-and-present leaders envisioning renewal may hope there's a flip side to George Santayana's oft quoted (usually inaccurately) admonition about "those who cannot remember the past are condemned to repeat it." The reverse would be that those who remember the past may be able to help repeat it.

 

In fact, the events that unfolded in the decade of the '60s that Reed, Evans and Gorton helped bring about may offer lessons for today, and tomorrow. Those include pushback by Republican moderates against the party's more high-visibility conservative wing, legislative coalitions that both Reed and Hays refer to as the ultimate example of political bipartisanship, and possible looming rifts among Democrats, potentially reminiscent of the divisions of the late '60s and early '70s.

 

All of those were part of the historical background for what happened in Washington in the '60s that believers in a renewed GOP mainstream would like to recreate.

 

It was in 1963, when an over-reach by Seattle-area Democrats on the issue of public vs. private power drove angry conservative Spokane Democrats who were believers in protecting Spokane-based and investor-owned Washington Water Power Co. into a coalition with Republicans.

 

The result was Spokane Democratic Rep. Bill (Big Daddy) Day became speaker and Republican Dan Evans became majority leader, setting the stage for his victory a year later in the gubernatorial race in which he ousted Al Rosellini. Young Seattle city councilman A. Ludlow Kramer, a Republican, rode along to victory in the race for Secretary of State, both bucking a Democratic landslide nationally.

 

It was their victory, and the emergence of young newcomers like Reed, then fresh out of graduate school at WSU where he was president of the campus young republicans, and Bayley, just back from Harvard and destined to be King County prosecutor, that helped push back the growing role of conservatives in Washington State. In those days, the conservative wing of the party, which helped propel Sen. Barry Goldwater to the GOP presidential nomination, was under the banner of the John Birch Society.

 

Meanwhile, Democrats were being torn by internal struggle over the Vietnam War, with the party's liberal wing in this state so angered that they actively sought to defeat Henry M. Jackson, one of the nation's most powerful and respected Democrats and an avowed Hawk, in the 1970 election.

 

Part of what helped moderate Republicans to electoral success in the '60s and early '70s, and would be their hope for the future, was what Hays chuckles in referring to as "Washington's rich tradition of ticket splitting," the key to Evans' and Kramer's victories despite the Democratic sweep nationally. That was also true in '68 when Gorton was elected state attorney general and in a series of elections in which Republicans claimed the majority in the state House of Representatives, without the need for a coalition.

 

Hays, 43, notes that in his "younger years," before he became active in the state Republican organization and with Mainstream Republicans of Washington and president of Action for Washington, he "helped a few of my conservative Democrat friends in their campaigns."

 

Reed laments that Mainstream Republicans get far less visibility for their stands on issues, such as in favor of Gay rights, pro-choice and pro- immigration reform, than the views of party conservatives, including the Tea Party types.

 

Reed is particularly proud of recalling that it was while helping guide the original Action for Washington as executive director of the governor's Urban Affairs Council, that he recruited Art Fletcher, a black self-help advocate and member of the Pasco City Council, to be the GOP candidate for lieutenant governor.

 

Although Fletcher lost to incumbent John Cherberg, he was the first and so far only African-American to be the nominee of either party for a major statewide office.

 

Both Hays and Reed view the coalition that came about in the State Senate this year when two Democrats, including one-timeRepublican Rodney Toms, driven from the party by battles with conservatives, joined with Republicans to create a majority as "the ultimate example of bipartisan cooperation."

 

Reed notes that "it's interesting that in both 1963 and this year that a lot of people were skeptical that the coalitions would hold together, but they proved they could work together when the pressure was on."

 

As to seeing another divisive battle among factions in the Democratic party, Reed and Hays think the growing budgetary impact of public pensions and retirement practices will eventually be seen as a challenge to key liberal causes such as environmental inititives and programs for children and the poor.

 

"There's no way to maintain support for all the Democratic interest groups with current budget realities, and that will begin to create real divisions in the ranks," said Reed.

 

How well the old guard's experience with the past helps them recreate something similar for the future will be evidenced as 2014 political campaigns in this state take shape.

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Pettit unveils strategy for future of family owned Merrill Gardens as senior-living industry leader

William (Bill) Pettit, president and COO of Merrill Gardens since he helped launch the company 20 years ago, has kept the family owned business at the leading edge of growth and change in the senior-living industry. Now he has put together a deal that he figures will position the company for growth under new leadership for the next 20 years.

 

Pettit, once a rising young star in banking before forsaking that industry to help the R.D. Merrill Co. strategize diversifying from its timber-industry roots, last week announced the deal by which Merrill Gardens will sell more than half of its properties for $183 million to provide for major investments in the future.

Bill Pettit
Bill Pettit

 

Seattle-based Merrill Gardens is selling its equity stake in 38 senior-living projects for $173 million to Health Care REIT, with which Merrill Gardens had put together an $817 million partnership three years ago that Pettit described, at the time, as "the leading edge of a trend" for senior-living companies. Proof of the accuracy of his prediction came as other senior-living companies soon followed the model of te REIT-relationship.

 

In essence, the Akron-based Health Care REIT is now buying out the 20 percent of the partnership that Merrill Gardens retained in the 2010 deal and is inking an agreement with Ermitus Senior Living, also Seattle based, to manage the portfolio.

 

Merrill Gardens will receive an additional $10 million from Emeritus as a management termination fee and will retain 26 communities and proceed with what's described by Tana Gall, whom Pettit lured to Merrill Gardens recently from LeisureCare, still another Seattle-based regional retirement-living company, as "big reinvestment plans."

 

Of those 26, the REIT will continue a relationship with 10, and another 10 are slated to come on line as new communities that will benefit from the "reinvestment" plans.

 

Part of the lure for Gall was assuming Pettit's title as Merrill Gardens' president, although the 64-year-old Pettit retains the title of president of R.D. Merrill Co.

 

Pettit went to work for the Merrill Family in 1992 after a series of banking successes that included becoming head of strategic planning for Seafirst Bank at age 31 in 1980 and becoming chief financial officer in 1985 at the age of 36 before joining problem-plagued E. F. Hutton in New York, only to see the 1987 crash "seal its fate."

 

So he returned to the Puget Sound area as president of Pacific First Financial and two years later helped guide its takeover.

 

He was invited to join the R.D. Merrill Co. to help what he deferentially refers to as "the family" as the third generation of the business founded in the 1890s by Richard Dwight Merrill as an environmentally friendly timber operation determine its future.

 

In the end, the Merrill family decided to have fourth-generation Charles Wright III, chairman since then, take over and chart the future.

 

Pettit recalls that Wright felt the timber heritage was important, but not the direction he wished to take with the company so, with Pettit's assistance, moved to diversify. In 1993, the company acquired its first independent and assisted living facility in Seattle and Pettit became president and COO of both the company and its senior-living business.

 

Over the following 17 years, leading up to the 2010 deal with Health Care REIT, Merrill Gardens grew to become one of the largest and most respected senior living companies in the country, operating 56 senior housing communities in 10 western and southern states. It won Family Business of the Year honors in Washington State four times.

 

"The performance of senior housing has provided one of the best real estate investments of the past decade," Pettit says, but adds that "in reality we never made much money on operations, pretty much a breakeven business model there."

 

But with last week's deal, he expects Merrill Gardens to have the opportunity, over the next 24 months, "to re-engineer and add new-technology tools to the process'' in a manner that will enhance efficiency and thus bring more bottomline profits, including for the new communities coming on line, and thus growth opportunities.

 

Pettit says he has no plans to retire soon, adding "I expect to be working for the family for another five or six years."

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Unusual partnerships behind national conference on academic efforts to aid at-risk small businesses

A first-ever national gathering of representatives from business schools around the country that have programs to help businesses in "under-served communities" gain a better chance to succeed and create jobs will take place in Seattle next month, the result of an unusual collaboration of a prominent business school and a global financial firm.

 

The July 10-12 Conference on Business Development in Under-Served Communities, which will draw leaders from 20 universities that have programs aimed at engaging students with businesses in low- and moderate-income communities, is the culmination of a 13-year vision of Michael Verchot, the man responsible for the event.

 

Phyllis Campbell
Phyllis Campbell

Verchot, director of the Business and Economic Development Center (BEDC) since its 1995 founding at University of Washington's Foster School of Business, hopes the conference will serve to dramatically expand the number of schools supporting programs for businesses in under-served communities.

 

In the two years since he first met with Phyllis Campbell, the respected Seattle-area banking leader who is vice chairman of the Northwest region for JPMorgan Chase, she and other executives of Chase have not only come to share the vision, but have enhanced, with time, counsel, and dollars, the opportunity for the vision to become reality.

 

Next month's gathering will also serve as the springboard for a fund-raising initiative, also supported by Campbell and Chase, to create an endowment for the BEDC to become a national center to guide collaboration and information sharing on "best practices" among business schools with such programs. 

Michael Verchot
Michael Verchot

 

While "under-served communities" might be assumed as synonymous with minority businesses, Verchot says that's not necessarily accurate, adding that urban under-served communities might usually be minority communities, but that non-urban areas might merely be economically challenged. He uses the example of some communities, like Forks, that have been impacted by timber-industry changes.

 

"By under-served we mean two things: communities where the median household income is 80 percent or less of the regional median household income, and racial,ethnic, gender communities where businesses under perform the national average," Verchot said.

Verchot, one of the earliest architects of academic emphasis on minority business programs, including an annual Minority Business Awards banquet that remains the only such statewide event in the nation, says that he has wanted, since 2000, to build such a national network to aid businesses in under-served communities.

 

The BEDC will soon to be renamed the Center for Consulting and Business Development and a $10 million fund-raising effort launched to advance Verchot's vision, a goal for which $2 million has already been raised.

 

The fact that it took a helping hand from some key players to bring about the conference and set the stage for the next step in Verchot's vision may be appropriate counterpoint for the assistance he hopes his center will help bring about for challenged businesses.

 

The first meeting with Campbell two years ago was arranged by Neil McReynolds, longtime Seattle business leader and a UW alum and founding co-chair of the BEDC, whom Verchot credits with "being instrumental in every stage of our development since our founding."

 

And Campbell, CEO of the Seattle Foundation and prior to that Washington president of U.S. Bank when she was tapped by JP Morgan Chase CEO Jamie Dimon to guide the bank's Northwest business, credits Cree Zischke, Chase executive for Global Philanthropy, whose region includes both Washington and Arizona, with being "instrumental in understanding the national scalability of the model."

 

Verchot and McReynolds wanted advice from Campbell on how to fashion an endowment to build upon the BEDC's work in Washington State.

 

"But we didn't have the horsepower, in terms of staff, nationwide relationships, vision for what this conference could lead to and funding, until we began working with Chase," Verchot said.

 

The funding Verchot refers to is a $600,000 grant to BEDC to put on the conference, through which Verchot and Chase hope to establish around the country academic centers that will work with small businesses in under-served communities. Support from Zischke and the bank has already helped launch centers on the BEDC model at Washington State University and at Arizona State University and University of Arizona.

 

"The endowment he was talking about raising for the center wasn't very much so Cree and I told him to raise the bar and think bigger," recalls Campbell, who explained that the $600,000 for the conference is a multiple-year commitment, part of $1.2 million that the Chase Foundation has put behind bringing about Verchot's vision of a national center.

 

 "Our philosophy is always aligned toward philanthropic pillars and one is how do we work with very small businesses, especially minority businesses, that we want to help ensure get a leg up," added Campbell.

 

Bill Bradford, who is a former dean of the school of business at UW, will provide a report at the conference on a study he was commissioned by the Kauffman Foundation to produce on what research has been done on minority business over the past decade.

 

"The goal was to find out what we know about programs that may have beneficially impacted minority owned business and determine whether we still have the same issues facing minority business that we did in the last century, or have we improved over the past 13 years," Bradford said.

 

Other unusual initiatives by BEDC are also making their way into programs of other schools, including the innovative Business Assistance Program that links student teams with Rotary Business Mentors and alumni advisors to work with local businesses, a program McReynolds spearheaded with Seattle Rotary as past president of the organization.

 

McReynolds, who also teaches at the business school, calls it "a win-win situation" that not only gives needed help to small businesses but "gives students fresh from the classroom great practical experience" helping small businesses deal with the callenges they face.

 

The BEDC has now involved other Rotary Clubs, with Bellevue Rotary working with students at Bellevue College and the Vancouver Rotary with WSU-Vancouver students.

 

Of the Minority Business Awards program, Verchot notes it's "a way of highlighting success and creating role models for other entrepreneurs and our students of color. These companies don't necessarily need help from us so we use them as examples for others to follow."

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Jim Weber has guided Brooks Sports from role of also ran to near the top of running-shoes world

Brooks Sports is about to enter its second century on the crest of a growth wave that CEO Jim Weber has guided by turning the company from "an also-ran, price-point brand" to a leading performance premium brand in what he refers to as a unique "class to mass to class" repositioning.

 

Weber, who was brought in as CEO in 2001 to turn around a troubled athletic-shoe company, took Brooks from a $60 million company to a running-shoes-only business that did $400 million last year and is now positioned, as number one among shoes sold by specialty running shops. And it's typically in the top three shoes worn by runners in major races across the U.S. and Europe.

 

Jim Weber
Jim Weber

The 53-year-old Weber, whose pre-Brooks background includes 12 years in consumer products with Pillsbury, Coleman and Sims Sports and a couple of years in investment banking, is now a finalist in

 

When Brooks moves late this year to a new Seattle headquarters in the funky Fremont District across the street from runners-dominated Burke-Gilman Trail, the 80,000-square-foot facility will house Brooks first-ever retail concept store.

 

Brooks has been a shoe company from its founding in Philadelphia in 1914, first as a maker of bathing shoes but soon moving into athletic shoes that were worn by football and baseball players in the '20s and '30s.

 

It continued as a mostly off-the-radar family-owned athletic shoe company for decades, before sinking into bankruptcy in the late 1970s and being bought by a series of owners who moved its home office first to Grand Rapids, MI, then to Bothell, northeast of Seattle.

 

The company experienced a business uptick in the '90s when Norwegian entrepreneurs Kjell Rokke and Bjorn Gilstein owned the company and brought in local CEO Helen Rockey. But the company got into financial trouble after Rokke and Gilstein sold Brooks to an investment-banking firm and Weber, who had been on the board for two years, was coaxed into taking the Brooks reins.

 

Russell Corp, acquired Brooks in 2004 and two years later, Berkshire Hathaway acquired Russell, down in the bowels of whose holdings was Brooks, which has since acquired a higher visibility in the Warren Buffet business empire.

 

"In running, we've taken an inclusive celebrate-running image, a 'run happy umbrella' that really creates a focus for us as a fitness company," Weber said. "In 12 years we've gone from 1 percent of the running-shoes market to third place."

 

"And we've done by what I think is a unique class-to-mass-to-class transition," he noted. "Brooks was a class running shoe that then was positioned to be a price-point brand and now is repositioned as basically the highest-priced premium running shoe."

 

As evidence of that, he points, in a Nordstrom-like explanation, to the average prices of the three tops running shoes as of early this year. Brooks' average price was $100.30, Asics' $91.20 and Nike $70.50

 

According to Leisure Trends, Brooks is Number One in the specialty running shoe channel in this country, with a market share of 29 percent, and number three overall. Weber notes, "the company is usually number two behind Asics in terms of which shoes runners are wearing at the 20 races we perform around the world."

 

"Shoes matter for competitive runners and we're one of the two top shoes in races, behind Asics," he added.

 

Weber says that while the focus on running "makes us a niche player, it's a niche we think can bring us to a $1.5 billion company. We're on track to reach half a billion this year."

 

I asked Weber if it seems a bit unusual for the head of a $400 million, century-old company, even having grown the business by 700 percent over the past decade, to be considered an entrepreneur. He replied:"What is an entrepreneur? Someone who brings unique solutions to problems that no one else has solved for a company."

 

In fact, Weber's comment about entrepreneurs could apply to several of the finalists in this year's Northwest EoY event who either guide large companies or have been around for an extended time. Those include bank CEOs Mark Mason of HomeStreet and Greg Seibly of Sterling, both of whom guided major turnarounds of their institutions, Expedia head Dana Khosrowshaki and four of the directors of Madrona Venture Group, the 18-year-old Seattle-based venture capital firm.

 

: Tom Alberg, Paul Goodrich, Gerald Grinstein and William Ruckelshaus are the Madrona directors up for honoring with Grinstein and Ruckelshaus once having served as the leaders of major national public companies.

 

When I asked Dan smith, managing partner of the Seattle office of Ernst & Young, which is in its 26th year with the EoY event in the Northwest, what defines an entrepreneur, he said "You have to stand back with an open pair of eyes and ask who is really making a difference. Who is taking companies to that next level?"

 

 

"They may not be starting a business, but the turnaround is almost like starting a business and takes the same entrepreneurial skills," he said. 

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Leslie Helm's book explores identity, culture conflicts in Japan-based family business

Leslie Helm, editor of Seattle Business magazine, has come to have almost a second calling as an on-the-road speaker to discuss his book, Yokohama Yankee, that explores his two identities, part American and part Japanese, and the impact the clash of those cultures has had on him and his family.

 

Helm was born and raised in Yokohama, where his German-born great grandfather came in 1869 to create what became a family-owned business that for much of the last century was the largest stevedoring company in Japan. His book chronicles the three generations of leadership of Helm Brothers and the constant conflict of cultural identity that faced him, his U.S.-born father and his grandfather, who was born in Japan but had American citizenship.

 

In recent weeks, Helm has had several speaking appearances in Seattle, as well as book signings, and a talk before the Japan-America Society of Southern California. Now he's preparing to head off to Japan in early June for two talks in Yokohama and, on June 10, the Foreign Correspondents Club in Tokyo.

Leslie Helm
Leslie Helm

 

 

The Foreign Correspondents Club appearance will likely bring back memories because Helm was one himself, working first as Tokyocorrespondent for Business Week in the mid-80s and in the '90s for the Los Angeles Times. It's likely his birth and upbringing in Japan before he headed to the U.S. for his higher education at U Cal Berkeley and Columbia might have made the idea of his being a "foreign" correspondent in Tokyo a bit amusing.

 

And his talk in Japan may also stir memories of what he recalls in the book, with obvious amusement, as the "frequent invitations to speak on Japanese television as Business Week's Tokyo correspondent. I was 26 and I would smugly discuss foreign affairs as if I were some pundit rather than just a curiosity-a white-faced journalist who happened to speak Japanese." His blond hair and fair complexion belie the fact he's one quarter Japanese.

 

The nature of the book, by a skilled writer weaving historical events, family successes and challenges and identity conflicts over more than 120 years leading up to his and his wife's decision to adopt Japanese children, is an intriguing look at what it's like to face cultural challenges in Japan.

 

It was about six weeks after attending his father's funeral in California in 1992, where he found himself gripped by the mix of anger and awe he had for his father, that Helm and his wife , having discovered they could not have biological children, decided to adopt two Japanese children, a girl and a boy.

 

Helm says he was "trying to go beyond a Japanese niche" in writing the book. "There are other aspects," he said. "It's a business study, a look at family business, and has some universal things like father-son relationship and adoption issues."

 

 As is frequently the case, there was serendipity in his great grandfather Julius's arrival in Japan. Having come to the U.S. from his native Germany, where he had been a trainer in the Prussian army, he headed for San Francisco to catch a boat to China. He missed that boat, but caught the next one to Yokohama.

 

 

 

With his Prussian army background, he first got a job as a War Lord advisor, Helm recalls, but soon perceived a business opportunity and in 1869 started a stevedoring business, inviting his brothers from Germany to join him in what soon became Helm Brothers.

 

"An astute businessman, he went public in 1899 and used the capital to buy up competitors," Helm said. "Eventually he had built the largest stevedoring company of its kind in Japan." And it's been suggested over the years that the family played a large part in building Yokohama into an international city

 

The ebb and flow of the company thereafter, through two wars and a massive earthquake, is compellingly chronicled, leading to the 1953 date when his father, Donald, only 90 days back from the U.S., was thrust into the role of head of the company. He was only 27, with no previous business experience, when his father decided suddenly to retire and move to Piedmont, CA, leaving his son to find his own way as the Helm at the helm.

 

What followed is detailed in what may make Helm's story far better fodder for a study on the challenges of maintaining a multi-generation family business then merely a look at the cultural challenges of being a successful foreign-owned business in Japan.

 

Over the next nearly 20 years, Donald Helm's challenges with the company saw him leave in anger to start a competitor, then be lured back by his relatives, for whom he conducted a precise accounting to determine the actual value of the company to pin down what it was worth to each.

 

"By 1973 there were just too many relatives who were shareholders to hold the company under family ownership, so what ensued that year was maybe the first hostile takeover in Japan as a Hong Kong company that had bought the shares of several family members forced the sale," Helm said.

 

Helm, who has been editor of Seattle Business magazine for four years after serving in the same role with the defunct Washington CEO magazine, has begun to accumulate accolades in addition to speaking invitations. He got a "starred" review in the June issue of Library Journal that circulates to 100,000 librarians. He told me the starred review is given to a relatively small selection of books each month.

 

And the book, now in its second printing, has been reviewed in Publisher's Weekly, the main journal for bookstores.

 

"I love that the Seattle Public Library bought 12 copies of my book and still has a queue of 79 people waiting to read it," Helm enthused.

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Long wait for SEC's crowd-funding rules stirs legislature to consider state-level measures

It's now been a year since Congress, with a bipartisan display remarkable for this politically dysfunctional era, passed the JOBS Act that was touted as a breakthrough for funding entrepreneurial start-ups and thus eventually creating jobs.

 

Well, the entrepreneurs are still waiting for the rules that would let them proceed to launch businesses by using internet websites to gather small amounts of money from large numbers of people online.

 

 The rules are to be written by the Securities and Exchange Commission where, despite repeated pressure from some members of Congress who really care about the issue rather than merely having voted for a JOBS bill in an election year, there's been no action.

 

But some states, including Washington, have decided they're tired of waiting and are seeking to proceed on their own. In fact, two bills that would allow Washington entrepreneurs to raise up to $1 million a year from Washington residents on the Internet have been filed in the state House of Representatives, one of the measure described as "democratizing venture capital."
  
And sponsors of the measures filed in this state say they are needed regardless of what kind of rules the SEC finally brings forth. The key sponsor of one of the bills, Rep. Cyrus Habib, D-Bellevue, frankly makes clear details of his bill (HB2023) are being worked on to groom the measure for serious consideration in the 2014 session.
Rep. cyrus habib
Rep. Cyrus Habib

 

The measure Congress passed last May was officially called the Jumpstart Our Business Startups (JOBS) Act by the clever bill drafters who attach can't-oppose names and acronyms to legislation to help ensure that balky lawmakers will find it difficult to vote against. Few lawmakers wanted to vote against JOBS in an election year.

 

Despite the congressionally mandated 180-day timeframe to the SEC, whose then-chair had large misgivings about the legislation, that time passed, as did a promised end-of-year date. Now the SEC has a new chairman, Mary Jo White, who has promised Congress she will make issuing the rules a priority.

 

If there's any doubt that there's a queuing up of entrepreneurs and those who would be involved in crowd funding, consider that the LinkedIn group "CrowdSourcing and CrowdFunding" has over 19,000 members.

 

Both supporters, who view the legislation as a major breakthrough for funding startups, and critics, who are convinced it's a funding disaster in the making, are awaiting the opportunity to be proven right once the rules allow the process to begin.

Tom simpson

Tom Simpson,

angel supporter

 

Tom Simpson, the long-time venture capitalist who now runs the Spokane Angel Alliance, thinks if the rules are "effectively drafted and supported, we would see large amounts of liquid capital flowing into emerging companies, in amounts even greater than during the pre-Sarbanes-Oxley, IPO glory days."

 

"Current regulations are chocking our nation's entrepreneurial fuel tanks," he added.

 

Bill Payne, generally regarded as the Dean of Angel Investors because of the role he plays in providing guidance to angel groups both in this country and internationally, sees a possibility that the regulations to be issues by the SEC "will be so restrictive that crowd funding will be viewed as not worth the effort."  

 

Bill Payne

   Bill Payne,

not a fan

 

Payne, who summers in Montana and winters in the Las Vegas area and who has launched four angel-investor groups around the West, has been a critic of the crowd-funding legislation from the outlet and says "I am less excited about crowd funding now than I was when it was passed."

 

"My guess is that entrepreneurs' advisors have suggested they seek angel capital instead of crowd funding," added Payne, who told me for a column I did a year ago that he viewed crowd funding "as a trainwreck waiting to happen" because he felt "a lot of investors will get scammed."

 

An issue that may further delay SEC action, and provide an added challenge for the internet masses to begin buying shares in companies via the Internet, is the potential sales tax liability in a crowd-funding project.

 

The U.S. Senate this week approved giving the 45 states that currently charge sales taxes the right to require large online retailers to collect tax on purchases made by their residents. The legislation must still clear the House, but political observers give it a good chance for passage and while it would only apply to online sellers that have sales of at least $1 million in states where they don't have physical operations, the SEC may decide to wait final determination on the bill.

 

Habib's bill would impose an excise tax of somewhere between 3 and 5 percent on investors, which Habib explains as necessary to cover costs the state would incur in things like more consumer protection for investors and added costs for state oversight of the crowd-funding activity.

  

"We can't go to the legislature in this financial environment ask for legislation to try something new and not cover the fiscal impact," habib added.

  

Rep. Frank Morris, D-Mount Vernon, who filed the other Washington state bill (HB2054)also a Democrat, said the state proposal is important regardless of SEC rules.

Rep. Frank Morris
Rep. Frank Morris

 

"The federal crowdfunding law, even once rules are in place, is going to require companies to work through an intermediary and is likely to have compliance costs that are cost-prohibitive for many start-ups," Morris said.

 

"The intent of the state legislation is to facilitate crowdfunding for Washington investors in Washington companies, with regulation that is protective of consumers, but less cost-prohibitive."

  

Bill Beatty, Securities Administrator for the state Department of Financial Institutions, points out that any offerings under state legislation would be "intrastate only, that is, limited to Washington Companies offering to Washington investors," adding such legislation at the state level doesn't require SEC approval.

 

Meanwhile, interest on the part of entrepreneurs and businesses that hope to be a part of the process continues to grow.

 

A business called Crowdfund Productions LLC is putting on Pro and Contra Conferences around the West, including one last week and Denver.

 

 

A Pro and Contra Conference is schedule for Seattle in September, by which time the SEC rules may be out, opening the door for a lot more pros and cons to be aimed by entrepreneurs and support groups.

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Builders' long-time CEO Anderson, who planned to retire at year end, told it's time to go now

When Sam Anderson accepted the job as CEO of the Master Buildings of King and Snohomish Counties 16 years ago, his key assignment was to change the image builders had with the community and the legislature of being confrontational and obstructionist.

 

So over the following decade and a half, Anderson turned the MBA into a respected organization that supported housing as well as environmental concerns, became a philanthropically visible entity and a political force, both locally and at the state level.

 

Anderson announced a few months ago that he would be retiring at the end of 2013, but in a dramatic turn of events Monday, the leadership of the organization that Anderson built into the nation's largest and most respected homebuilders organization told him they wanted to "make a change" now.

 

Anderson said he was advised by the five-member leadership group that includes the current and past president that his contract was being bought out and that, as he put it, "I was told it was time to move on."

 

Chief operating officer Rick Miller was named to serve as acting CEO while the association looks for a replacement for Anderson, which the leadership said would happen by the end of the year.

 

The only formal explanation for the action, which one longtime member said reflected underlying issues some members had with Anderson, was that the executive group felt it was time to make a change.

 

The formal release announcing Anderson's departure made a point of praising what he had achieved during his tenture as CEO.

 

"They told me they were giving me a good severance package and I told them, 'this is not about finances, it's about dignity, respect and appreciation.'"

 

So in a single meeting with the departing CEO, the organization's leadership may have made it more challenging for a new CEO who will have to overcome any community ill-will left by the manner of Anderson's departure.

 

The developments Monday followed an interview I had with Anderson last week that was designed to put in perspective his decade and a half with the organization whose image he remade in a way that has brought respect to the MBA. There was no sense at that interview that Anderson expected his departure to be imminent.

 

"When they hired me, they said, 'we are a black hat group; make us a white hat group," Anderson recalls of when he arrived to assume the role as head of the two-county builders group after a decade as general counsel and director of public policy for the National Ski Areas Association.

 

"Why should we be thought of as a black hat group since, as home builders, we provide a basic human need," Anderson recalls thinking.

 

Asked, during the interview last week at the homebuilders headquarters in Bellevue, what he views as his single biggest accomplishment, Anderson replied without hesitation: "Helping the organization become a highly respected corporate citizen."

 

In the years prior to Anderson's arrival, the negative image of the homebuilders' association was due largely to the fact that the image of the local group was tainted by the image of the statewide Building Industry Association of Washington (BIAW), which . found pleasure in an take-no-prisoners approach to dealing with governmental entities and lawmakers.

 

My first interview with Anderson was soon after his arrival in the late '90s and he made the point he was ready to do battle with the BIAW to make it clear to all that his organization's views were in no way represented by the statewide group, even exploring the possibility to dropping BIAW membership.

 

"I came with a sword in hand to conquer," Anderson said with a smile during our interview a few days ago.

 

"BIAW reflected horribly on our industry," he says now. "They were so far to the right that it was easy to make us look moderate," but he emphasizes that the relations between the state group and his association are now excellent.

 

In battling to create a new image for the group in the early years after his arrival, he positioned MBA as a homebuilders association that would work across party lines for the benefit of housing.

 

One of his first "white hat" steps was to create a Built Green focus for the builders in 2000, one of the earliest focuses on environmental concerns by any organization and led to national awards, and broad community recognition.

 

Then he conceived Master Builders Care Foundation that has allowed the organization to gain respect from an array of nonprofits and elected officials across the region.

 

An irony of Anderson's departure was that, in anticipation of transitioning the organization to new leadership in a changing environment, he oversaw implementation of a new governance structure, reducing the size of the board and streamlining the activities of the executive committee.

 

I asked Anderson in the week-ago interview what kind of person his successor would need to be.

 

"The new person will need to be the face of the MBA, one who will help to solve community problems and be considered by everyone to be a positive player," he replied, noting that he didn't expect to be part of the selection process.

 

It was the executive committee, in its first meeting under the new structure, that decided Anderson wouldn't even be around to meet his successor, whenever that person is selected.

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Nation-leading prostate-cancer research center in Seattle launches major private-funding effort

The Institute for Prostate Cancer Research (IPCR) has been largely unknown in its Seattle-area home despite the fact it's recognized nationally as being at the leading edge of efforts to solve the mysteries of prostate cancer. But this is the year when a concerted fund-raising initiative may dramatically boost the visibility of the Institute, and thus attract the private funding to enhance its ability to impact prostate cancer.

 

The 30-scientist collaborative effort by University of Washington Medical Center (UWMC) and Fred Hutchinson Cancer Research Center has made Seattle the nexus for prostate cancer research and care. And it could well be the place where a cure for the disease, if and when that comes about, is discovered.

 

If that sounds like a credibility stretch, in view of the lack of local awareness for the Institute, consider that dozens of peers nationally as well as pharmaceutical firms are beating a path to the door of the Institute seeking cooperation and partnerships.

  
Paul Lange
Dr. Paul Lange
  

 

Dr. Paul Lange, the UWMC surgeon and researcher who guided creation of the Institute and has helped oversee the nearly unique initiatives that have attracted national peer attention, says unabashedly: "Everyone in the world knows we're one of the best, except Seattle."

 

Evidence of that as fact rather than hyperbole may be that Dr. Peter Nelson, Oncologist at "The Hutch" who chairs the Institute's scientific steering committee, was wooed last fall by John's Hopkins, which described him as "the best in the nation," to head prostate cancer research there. But Nelson preferred to remain at The Hutch and be involved with the Institute's research.

 

Peter Nelson
Dr. Peter Nelson

   

 

A key Institute innovation that has attracted the attention of researchers not just nationally but internationally is called "rapid autopsy," a process in which cancer tissue that has metastasized is removed from the body of a deceased prostate victim with the same speed and precision as organs are removed for transplant.

 

The roughly 100 such autopsies that Lange's team has performed since the process was pioneered at IPCR, and which are conducted at only one other institution in the county, allow harvested cancer cells to be implanted in mice. Lange says about 15 percent of the implants take, becoming what are referred to thereafter as "tumor avatars," and producing thousands of samples.

 

Lange says "the cancer tissue has been very pivotal for many IPCR discoveries" and notes that the tissue has been shared with 50 other institutions to advance their own research, with the only requirement that they share the results of their research.

 

And now a group of prominent business and community leaders, most of them men who are prostate-cancer survivors, is mapping the first fund-raising initiative for the Institute. The group, called the Community Leaders Council, got their first report this week on the early results of efforts during the "quiet period" leading up to a key public event in December, a report that indicated the first $3 million of a $20.6 million goal has been pledged.

 

I asked Lange how he'd respond to those who wonder about the heavy focus on this private funding initiative when UWMC is among the top four or five institutions in terms of federal grants and funding.

 

"Government funding only supports a fraction of resources needed for constructing and maintaining a team such as ours," he replied. "For example much of the equipment, support of pilot projects, almost all of the substantial monies needed to develop the avatars, all of the funding for the rapid autopsy project was funded by private monies."

 

"All of the major prostate cancer groups, such as Harvard,Memorial Sloan-Kettering Cancer Center, John's Hopkins, University of Michigan have raised significantly more than we have because of the volume of private money. We cannot remain one of the top centers without more support."

 

The major December event for the fund-raising effort's coming-out party is the breakfast created by Steve Fleischmann, after his own prostatectomy 10 years ago, as the nation's first fund-raising event for prostate-cancer research, That first breakfast raised more than $700,000. It's now a biennial breakfast that has grown to attract hundreds of survivors and supporters.

 

Only prostate-cancer survivors are permitted to be table captains, so, as Fleischmann, founder and chairman of Fleischmann Office Interiors, jokes to associates and friends who ask to be table captains: "this is one event you don't want to be a table captain for."

 

Steve Hooper, founder of Bellevue-based early stage venture fund Ignition Partners and chair of the Council, says "the breakfasts let us expose the whole notion of prostate cancer to broader awareness."

 

"Men need to get to know their PSA as well as they know their golf score," says Hooper, who like Fleischmann was diagnosed with prostate cancer at age 47. Lange was surgeon for both Hooper and Fleischmann, as well as many of the other members of the Council.

 

Ironically, Lange's own prostate-cancer surgery was performed by Dr. William Ellis, whom Lange mentored and who became chief of staff of UW Medical Center, and is one of the most sought-after prostate-cancer surgeons at UWMC.

 

The five-year fund-raising effort has been named Act Smart and is broken into six components, each with a description, philanthropic support needed to carry out and a budget summary.

 

John Rudolf, president of Glacier Peak Capital and a member of the council, notes that prostate cancer "doesn't have an identifying pink ribbon to mark survivors and supporters, but people are starting to share their experiences as survivors and talk about the importance testing. There's a lot more open discussion about the disease."

 

Asked how close researchers are to finding a cure for prostate cancer, Lange, 72, replies with a chuckle: "I'm pretty sure it'll happen while I'm still cheering from the stands rather than after I'm pushing up daisies."

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Economic development interests bullish on growing financial-services sector

There's a growing conviction among economic-development groups in the Seattle area and Washington State that targeting the financial-services sector could bring dramatic and relatively quick returns for the local and state economy.

 

With the third annual Financial Services Summit taking shape for this summer, California's finance industry is clearly in the sights of many of those who are leading the charge and touting the fact that Washington State has neither a corporate nor a personal income tax.

 

The Economic Development Council of Seattle and King County has a list of industry clusters representing the key pillars of the region's economy and thus the key focuses for growth. Financial services is the newest industry on the list

and is attracting perhaps the most interest.

 

Jeff Marcell
Jeff Marcell

The fact that California didn't just shoot itself in the foot, but in the head, when it imposed a surcharge on the wealthy has raised the benefits bar on a concerted marketing effort aimed at financial firms. Several hedge funds have already moved from the Bay Area to Seattle and that surcharge is seen as the "moving" force.

 

 

The EDC, which has returned to the name it had for more than 30 years prior to being rebranded as EnterpriseSeattle early last decade, held the first summit on that industry sector in May 2011. That gathering dealt with the value of targeting financial firms and showed that Washington State ranks fifth in the nation as a hub for the financial-services industry. The six subsectors the study identified within the financial services cluster include things like banking, accounting, credit and lending.

 

 

Scott Jarvis
Scott Jarvis

 

But the excitement about potential rapid growth is focused on the financial-services subsector. And California's finance industry is the most prominent target for many, though there's a bit of "in-bad-taste" reluctance to talk about specifically targeting California's businesses.

 

David Allen, McKinstry Co. executive vice president and chair of the EDC, agrees the financial-services sector could well provide the quickest and most lucrative returns, if the state's benefits are marketed well.

 

 

Karl Ege, a Seattle attorney at Perkins Coie who served for a time as vice chair of Russell Investments and is heading the Regulatory Task Force, is unabashed about touting the state's tax benefits.

 

 

 

"Why shouldn't we go after 21st Century high-paying jobs for educated people?' Ege asked in an e-mail exchange with me. "Financial services encourages a bigger business base, creates good jobs and their money comes from assets they manage around the world. And really this state's advantage, for high-margin businesses, is that we have no income tax."

 

 

 

Washington is one of only seven states without a business or corporate income tax and the only others in the West are Nevada and Alaska.

 

In addition, the service sector (law, accounting and financial activity) is exempted from the state sales tax, though the 1995 Legislature punished the service-sector businesses for battling against imposition of the sales tax by hammering those businesses with the highest business & occupation tax rate. The B&O tax rate for service firms is 1.8 percent of gross revenue, three times higher than the next highest industry and almost seven times higher than the lowest B&O rate.

 

Jeff Marcell, president and CEO of the EDC, says "one reason we feel it's so important to target this industry is that it yields unbelievable results for the community in terms of fantastic wages and international connections."

 

"Thanks to technology, more and more financial services companies are enjoying the freedom to base operations where it best suits their needs," Marcell added. "And Seattle/King County is increasingly becoming a hub of major financial players who want their headquarters far from the negativity conjured up by Wall Street."

 

I asked Scott Jarvis, recently reappointed by Gov. Jay Inslee as director of thestate's Department of Financial Institutions, if he viewed the financial-services sector as potentially the biggest reward among the target sectors.

 

"I don't know how to define 'the biggest reward,' but I certainly agree that the logistics of a move by one of those firms are relatively simple and the ability to be up and running, literally over a weekend, takes much uncertainly and 'down time' out of the decision to relocate," he replied.

 

And Jarvis is significantly involved in shaping the strategy for financial-services firms, including working with Ege's group to modernize Washington's trust laws, an effort which he explains is "to make them more relevant, modern and attractive to business."

  

 

"Currently, our trust laws are in the same chapter as our banking laws and have not been significantly amended in many years, Jarvis added. "We plan to work during the

 

interim with interested parties to separate out the trust law elements while at the same time ensuring that the elements needed for effective consumer protection remain and are modernized to address current and even future improper practices."

 

"Scott Jarvis been amazing," Marcell replied when I asked about the involvement of the state agency involved with overseeing financial institutions. "It's striking to see a regulator work so collaboratively about growing the industry cluster. He's an ace up our sleeves when we are competing for business."

  

 

 

"DFI has worked hard to foster a regulatory environment that is attractive and responsive to, and supportive of, financial entities while aggressively protecting consumers from improper or illegal behaviors," Jarvis replied when I asked about his department's involvement. "Those two activities are not mutually exclusive. Reduced to its essentials, we assist the good guys who want to play by the rules and go after the bad guys."

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Five years and 260 columns later, "Flynn's Harp" marks important milestone for its author

Hard for me to believe it's been five years ago this month since, with some apprehension, I launched this column and sent it off unsolicited to about 500 unsuspecting contacts in my email database, hoping those original recipients wouldn't tag me as SPAM. They didn't, so 260 weekly columns have now flowed out and another 900 folks have let me add their names.

 

It was in April of 2008, almost exactly two years after my retirement from the Business Journal, where as publisher I wrote weekly columns or editorials, that I realized I missed writing and communicating. So I explored with friends the idea of doing a column and distributing it via e-mail or Internet blog, but what to call the column?

 

That was resolved pretty quickly as I shared a glass of wine and discussed the idea with a Spokane friend who almost instantly said: "You need to call it 'Flynn's Harp.'"

 

"The harp is a beautiful Irish instrument," she enthused. "And the name will allow your Irish to come out, whether just explaining ideas or 'harping' about things that bother you."

 

I had already been reflecting on the fact that election year 2008 was the 40th anniversary of the tumultuous 1968 presidential campaign that I had been fortunate enough, as a young political writer for UPI, to be immersed in. It was the '68 in which four Washington citizens had prominent roles, starting with then Gov. Dan Evans, who keynoted the Republican National Convention.

 

So I debuted "The Harp" with four successive columns, following Evans' with one on Jim Whittaker, the Everest conqueror who was a key figure in Sen. Robert Kennedy's ill-fated presidential campaign. Next was Egil Krogh, a young Seattle attorney who would become Richard Nixon's White House counsel, then Kitty Kelly, a friend from Spokane whose role as press assistant for Sen. Eugene McCarthy's quixotic presidential-race would launch her career as a controversial biographer.

 

Unfortunately, the four columns, which led to my moderating panels with Evans, Whittaker and Krogh before a couple of business groups, are lost somewhere beyond the Cloud. But a portion of the reflection on that campaign is contained in one I did a year ago (Flynn's Harp: Some positives in long political campaigns).

 

Finding the original material to bring readers information they didn't already have has been satisfying. But even more so have been the responses, some moving, some laudatory, some critical, from many of the now-1,400 or so who receive the column each Wednesday evening.

 

I'm sometimes asked by people who are being exposed to the column for the first time, What do you write about?" to which I respond: "I write about whatever strikes my interest."

 

I once called my son, Michael, to ask "Do you think it would seem strange if I wrote about Gonzaga football?" and he replied: "Since people don't pay you for it, write about whatever you want." So I did (Flynn's Harp: When football was king at Gonzaga).

 

The column that perhaps most tugged at my heartstrings was one I did first in 2010 after learning about it from my friend, Spokane magazine editor Blythe Thimsen. It's the until-then untold story of the unusual North Pole Fantasy Flight that Alaska Airlines creates for disadvantaged kids in the Spokane area (Flynn's Harp: Alaska fantasy flight to the North Pole).

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The love affair of a man and his car is a timeless story and recurring theme. So the column that resulted from memories of my youthful romance with a '55 T-Bird ranks atop my favorites.

 

It began: "As summer gives way to autumn, longings for the long ago can creep into the days for the sentimental among us and so it is that I sometimes find myself revisiting the days of youth when, somewhere between girlfriends, I fell in love with a '55 Thunderbird." (Flynn's Harp: a youthful love affair with a '55 T-Bird).

 

My family was much aware of the role the T-Bird had in my memories so on a birthday sometime in the late '90s, my son gave me a copy of Marc Cohn's "Silver Thunderbird." I played the tape constantly on a business trip until I knew the words and could sing along as I drove.

 

I closed the column with the admission that "growing older had brought the slow realization that the longing that stirred occasionally wasn't just about a car, it was also about a time. "I could own a T-Bird again, but I couldn't drive it back. My wife and family understood that a long time ago."

 

The T-Bird column sparked several responses from readers who'd had one. But the most memorable was from Joe Galloway, a long-ago UPI colleague who was likely the best correspondent of the Vietnam War and whose book, "We Were Soldiers Once..and Young," later became a movie. He's kind enough to let my weekly email in, and after this one, he emailed back:

 

"Ah Mike. I somehow knew we were blood brothers. My second car in this life was, yep, a 1955 white Thunderbird with soft and hard tops. I was just 19, working my first newspaper job at the Victoria TX advocate... not long after that I was hired by UPI for the Kansas City bureau and I loaded the T-Bird up with all my earthly possessions in the trunk and passenger seat and headed north. It was Jan. 1961 and the No. 1 song blaring on the radio was Wilburt Harrison's Goin' To Kansas City! I howled right along with him.Those were the days, my friend, we thought they'd never end......"

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Galloway, in fact, has been quoted in several pieces I've done on wars and veterans of wars, columns that have always been the most satisfying because of their focus. AndThe column on Galloway reflecting on what was, in reality, the decisive battle of the Vietnam war, five years before the American people were told the war was unwinnable, stands out for me.

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The column that sparked perhaps the most touching responses was one I did on my mom, reflecting five years after her death in 2004 on the fact she was a "boys' mom" through and through (Flynn's Harp: Reflecting on column on boys' mom five years on). She impacted a lot of young men, including her three sons, in Spokane's St. Aloysius neighborhood where she helped guide them all on the road to manhood.

 

I wrote: "She was pretty hard-nosed about teaching us to be the best we could be. Thus, on occasions in my early years, when I'd come home crying from being struck or harassed by neighborhood kids, she'd march me back to the scene and force me to have a proper fistfight with the offending kid. I can't remember ever losing one of those mom-spurred fistfights."

 

I noted that "Even from the perspective of more than six decades, I still view that 'battlefield education' by my mother as a remarkable, perhaps even unique, chapter in my early development. And many who have heard the story have remarked cryptically: 'That explains a lot, Flynn.'"

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With the idea of perhaps doing a book at some point on "Memorable Notes from Flynn's Harp." I've divided the now-260 columns into groups of topics, including personal, sports, politics, interesting people.

 

And a topic that has become one of my more informative is angel investing (search Flynn's Harp: Angel Investing, and a group of columns comes up). Part of the satisfaction is that writing on that topic has allowed me to get to know "angel" leaders from Montana to California and write about things important to entrepreneurs that never get much general media coverage because angels don't go seeking coverage.

 

 

 

The weekly columns have perhaps been of more value to me in the doing than to the business and media people and elected officials who permit me into their mailbox each Wednesday evening. So to those of you who frequently, or even occasionally, open the email to view the column: "See" you next Wednesday. 

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Retirement not on Fahey's radar as First Sound Bank turnaround opens growth opportunities

After a frustrating failure to save Frontier Bank, veteran banker Patrick Fahey's relief at his successful turnaround of Seattle-based First Sound Bank has him focused on "having some fun now" running the newly healthy bank rather than retiring for the fourth time.

 

Fahey, whose career running banks began in 1981 when he was named president and chief operating officer of what was then Spokane-based Old National Bank, completed his 15-month-long turnaround effort at First Sound by paying back its TARP debt to the Fed last month.

pat fahey
Pat Fahey

 

Fahey had been a consultant to First Sound, after the Fed fouled up an infusion of capital that would have saved Everett-based Frontier Financial Corp. Then the First Sound board asked him in January 2012 to take over as CEO, the third time a bank board had tapped him to un-retire.

  

When he took over, First Sound was, as he describes it now, "one of the most troubled banks in the state," viewed by the Fed as "significantly undercapitalized." It was under a Fed cloud, required to raise at least $7 million as a condition of paying off its outstanding TARP shares and making a healthy exit from Fed oversight.

 

"It's pretty tough to be in the position we were in," Fahey recalled in an interview looking back to the time he stepped
in, and forward to what comes now. "People seeking loans don't want to anticipate the FDIC as a partner in their loan."

 

But as a result of Fahey's turnaround efforts, including quest for capital, the bank last month closed an offering that raised nearly $8 million, from which it paid the Treasury Department $3.7 million for its $7.4 million in outstanding Tarp shares, a 50 per cent discount. It thus extinguished all its warrants and unpaid dividends.

 

Fahey says the raise and satisfying the Fed with the TARP payback have turned First Sound into "one of the healthier banks in the state" and its funding infusion means its capital ratios will now exceed the regulatory definition of a "well-capitalized" bank.

 

Those who know Fahey and his history of relative retirement as board member of various banks, only to be summonedback to full-time involvement with what inevitably were troubled banks, have assumed successful turnaround would guide him back to retirement.

 

So I asked Fahey the inevitable retirement question, having followed him since he left U.S. Bank in 1987 to launch Pacific Northwest Bank.

 

"Actually the fun begins now," he replied. "We've now literally tripled our legal lending limits so we can make larger loans. This gives us a cushion against shock waves in the economy and decreases the risk for the bank.

 

"Our new business won't necessarily come by upside in the economy, it will come by taking business from the larger banks and we'll do that by being more responsive to small businesses, who need an answer now, even if it's a 'no,'" Fahey said.

 

"But it will still be a great opportunity to participate in the recovery by providing financing to businesses that need to grow," he added.

 

The success with First Sound, although Fahey emphasizes the next step is profitability, is a welcome outcome for Fahey after the frustration of Frontier's seizure by the Fed and sale to Union Bank.

 

A board member at Frontier, he was asked in 2008 to assume the position of CEO at what was, at the time, the largest bank based in Washington (Washington Mutual having already been seized and tossed to Chase). He brought the turnaround effort to the point of a planned private-equity infusion of $430 million that had been committed, pending Federal Reserve approval.

 

But the Fed dithered and the private-equity people decided they could do better elsewhere and rescinded the offer, forcing the closure of Frontier and the acquisition a couple of days later by Union Bank in a regulatory-assisted transaction in 2010.

 

The Frontier experience didn't sit well with Fahey, who had built Pacific Northwest Bank into the largest commercial bank headquartered in the Northwest (that was a few years prior to WAMU's growth spiral up and its death spiral down.

 

He sold PNWB to Intrawest and went on the board of theOak Harbor-based bank, only to be summoned from the relative retirement of board work to take over as CEO and turn Intrawest around, which he did as he put the PNWB name on Intrawest and then guided it into an acquisition by Wells Fargo.

 

Wells Fargo kept Fahey on board to build its business-banking role, which he did as chairman of Washington Regional Banking at Wells, a position from which he retired in 2004 and was soon asked to join the board of Frontier. That was basically retirement again, but not for long, as he called me in 2008 to say "I flunked retirement again."

 

So what's the outlook now for lending, as Fahey sees it?

 

"I still think there is the possibility of a boom and bust cycle in apartment construction," he said. "I would think that banks doing that kind of lending would prudently tighten equity and secondary repayment source requirements. Just drive through Ballard."

 

And he remains a critic of the impact the regulatory environment is having on lending.

 

"The Dodd-Frank legislation and resultant regulation and bureaucracy make it very difficult for a small bank to risk making residential mortgage loans, and ultimately passes the cost of compliance with these regulations on to the consumer," Fahey said.

 

 

" Many of the regulations implementing Dodd-Frank have yet to be written despite thousands of pages that are already out," he added.

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Booth Gardner spurred creation of nation's first comprehensive treatment center for Parkinson's

It was in Booth Gardner's post-political career, after Parkinson's Disease had begun to take its inevitable toll on him, that he teamed with another former Washington governor whose own brother had the disease to help create the nation's first comprehensive treatment center for Parkinson's.

 

Gardner's many contributions, from his leadership as two-term governor to his high-visibility support of the Death with Dignity Initiative, are being recalled in the wake of his death last week that ended his long struggle with Parkinson's.

 

But those who benefitted from the name, horsepower and personal leadership he brought to creation of the Booth Gardner Parkinson's Care Center at Evergreen Hospital may well regard that as perhaps his most important contribution.

 

This column is focused on the signal impact Gardner had in what amounted to an important victory for him in his struggle with the neurological disorder that leads to progressive difficulties with movement and coordination, and eventually cost him his life.

 

Gardner was part of the remarkable intersection of individuals impacted by Parkinson's who came together in 2000 as a fledgling initiative took shape to create a specialized treatment center for Parkinson's Disease in the Seattle area.

 

Craig Howard, whose step-mother had Parkinson's, recalls that as he and Bill Bell, whose mother also had the disease, began working with Evergreen to create a special treatment center for Parkinson's, they learned about Gardner being similarly afflicted.

 

It was Bell, nephew of former Gov. Dan Evans and his wife, Nancy, who had originally envisioned a Parkinson's treatment center after enduring the frustration of the fact "specialists were few and far between and scattered around the country" as he sought help for his mother.

 

"The idea of creating a multi-disciplinary clinic, where patients could be treated in a more holistic way, by a team, led by specialist seemed to resonate with people," said Bell, who approached Howard about joining in the effort.

 

Bell and Howard had already enlisted Evans, whose brother had the disease, and his wife, Nancy, as initial board members of the then-new Northwest Parkinson's Foundation, when Evans suggested to Howard "contact Booth Gardner because he also has Parkinson's"

 

"During the visit, after I tracked him down at his office in the Norton Building, it was obvious that he was being grossly under-treated for his symptoms and he agreed to make an appointment with the only specialist in town at the time," Howard recalls.

 

"Three weeks later, Booth called and asked why nobody knew there were actual neurologists that are fellowship trained in Parkinson's," Howard said. "He was back woodworking, playing with the grandchildren and feeling back in the game."

  

"He commented on the fact that with all the resources available to him, he still hadn't known there were specialists," Howard added. "His concern was for all those diagnosed that didn't have the resources he had and wouldn't learn that

that there's an opportunity to feel better. He asked how he could help. I asked if we could use his name for the new Center. He said, 'That would be great because everyone else just asks for money.'"

Booth at 25th
Booth Gardner being interviewed at Business Journal 25th Anniversary party, with Mike Lowry, another former governor

In addition to lending his name to the new Center, Gardner became the first board chair for the Northwest Parkinson's Foundation and was a constant advocate for specialized care and PD awareness.

 

Gardner and Evans, despite both being former governors, hadn't known each other very well, but soon became fast friends with their shared focus on the Parkinson's care cause.

 

Nancy Evans once joked to me, "If the phone rings at 7:30 a.m., we know it's either one of the kids or Booth."

 

It was because of my wife, Betsy's, Parkinson's that we came to know Gardner and, whenever we met at a Parkinson's event, he always came up and gave Betsy a hug and he and I would visit about how he was feeling.

 

His legendary sense of humor extended even to his disease as, when he was interviewed at the Puget Sound Business Journal's 25th anniversary event, he quipped: "I told my doctor I wanted to live to see 70. So now that I've made that, I called him and said, 'okay, I want to see 80.'"

 

"As founders, each of those board members seeded the organization generously," Howard said. "NWPF and Evergreen pushed the Center into the black in just over 24 months, but most importantly showed other hospitals in the region they needed specialized movement-disorders care."

 

"Puget Sound is now one of the best places to live well with Parkinson's, with at least eight specialized physicians where there were none before," Howard added.

 

"The Booth Gardner Center, as the first in the country focused solely on treatment, proved to be the model for the nation," Howard said. "And this area remains the epicenter of Parkinson's treatment."

 

Summing up Gardner's contribution, Howard described him as "an alchemist of human potential" in energizing people to produce their best. "Booth had a magical effect based on the possibilities."

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Prominent Latino friends target healthy slice of growing U.S. mezcal market

A retired Seattle baseball hero and two successful entrepreneur friends, all of Latino heritage, are embarked on an effort to bring Mexico's most popular mezcal spirit to successful penetration of the U.S., and possibly other parts of the world where the cousin of tequila might find a market.

 

It was five years ago that Mike Sotelo, a Seattle businessman with deep roots in the Latino communities around the state, formed La Plaza International LLC with exclusive U.S. and world rights to El Zacatecano and sought out Gene Juarez and Edgar Martinez as partners.

 

Gene
Gene Juarez

Juarez, who grew up poor in the Yakima Valley but went on to establish the Northwest's best-known chain of hair salons that still bears his name, and Martinez, whose career with the Seattle Mariners likely destines him for baseball's Hall of Fame, quickly decided to come aboard.

 

So did Greg Brown, managing director of the Caprock Group, a wealth management firm, whom Sotelo sought out as a partner who brought both money and financial expertise to the business.

"Mike brought in a money guy, a marketer and a celebrity," says Spencer Kunath, whom Sotelo and Juarez brought aboard as the key executive to oversee the business operations and growth of the company.

 

Mike Sotelo
Mike Sotelo

Juarez and Martinez, who have already had substantial financial success in their professional lives, seem less intent on making a fortune in the mezcal business than they do on raising the fortunes of the 400 or so residents of Huitzila, where El Zacatecano has been made for almost 100 years. The spirit gets its name from Zacatecas, the state in which the town is located.

 

Mezcal is the older but less-known brother of tequila. But sales of the two in the U.S. in recent years suggest Mezcal, which was actually created by the conquistadors whose experimenting with the maguey plant to find a fermented mash resulted in the first mezcal, is overtaking tequila, the national liquor of Mexico.

 

Edgar
Edgar Martinez
Although mezcal's share of the agave spirits market (tequila and mezcal) is only 5 percent, sales of mezcal are growing four times as rapidly as tequila sales and have a compound annual growth rate of 42 percent over the past three years, according to figures from the U.S. International trade Commission.

 

El Zacatecano is fermented from the Highland Weber Blue Agave plants that stretch beyond Huitzila and have been harvested for almost 100 years by the family with which Sotelo and his team have an agreement.

 

The El Zacatecano distillery is the largest employer in
Huitzila , which lies in the foothills of the Sierra Madre mountains, about 10 miles northeast of Jalisco state but 141 kilometers, or two and a half hours, by rough road and Mexico 23, to Guadalajara.

 

In an interview, the three principals agreed that their objective is to "support the organic and sustainable economic development of Huitzila by focusing on employment growth. We want people to have good quality and regular jobs to support their families," said Juarez.

 

I asked the three if tourism might become a residual benefit for Huitzila in the event they are as successful developing the brand as they hope.

 

"Not with 75 miles of dirt road to get to the town," Sotelo replied.

 

In addition, Kunath noted the name of the product is about to change.

 

"We are migrating our brand over from El Zacatecano to ZAC," he said. "The bottles currently say El Zacatecano but that will be changing next month. It is a slow process. We don't want to do it instantly as we could risk losing loyal customers."

 

Asked to explain the reason for the change, Kunath quipped: "We want our customers who are downing their third shot to still be able to pronounce the name of their mezcal."

 

This isn't the first business venture for Sotelo and Juarez. Sotelo was the founder-organizer of Plaza Bank, with the goal of creating a lender whose focus would be on "enhancing the opportunity for Latino entrepreneurs in the state to find funding."

 

A year after its founding in 2007, the bank, on which Juarez served as a board member, ran into the economic storm that impacted a host of small banks in Washington and across the country.

 

Kunath says the effort to expand current ZAC distribution on the West Coast will soon expand to Texas, Arizona and Nevada, He adds that they are "close to securing distribution in Korea, Japan and the Emirates Group in the Middle East and North Africa. We have tantalizing opportunities in front of us."
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Legislation would get tough on illegal use of disabled parking permits

Proposed legislation that would set the stage for imposing tough new penalties on those who "steal" city parking spots by illegally using parking permits issued to disabled drivers is increasingly likely to be approved by the 2013 Legislature.

 

The bill, HB1946, would create a "work group" composed of representatives of the State Department of Health, local governments and disabled-citizen advocacy groups to produce a strategy designed to curb the "tremendous amount of abuse" of the disabled- parking placards.

 

 

Disabled citizens are entitled to park at not only parking spaces reserved for the handicapped, but also in city-operated paid-parking spaces without charge. Seattle officials estimated, for a column I did on this topic two years ago, that 40 percent of downtown and First Hill parking spaces are occupied by vehicles displaying handicapped-parking placards.

 

Seattle City Councilman Tim Burgess, now a mayoral candidate, told me for that 2011 column that the city's police department and state transportation people "estimate that as many as 50 percent of the placards are being illegally used," representing 20 percent of the parking spots in the downtown area.

 

The measure before the 2013 Legislature made it out of the House Transportation Committee last Friday and now awaits referral to the full House for a vote and, if approved by the representatives, will then go to the State Senate.

 

Toby Olson, executive secretary of the Governor's Committee on Disability Issues and Employment, says the filing of the bill, sponsored by Olympia's two house members, both Democrats, followed nearly a year of meetings with Seattle officials. The goal was to find solutions to reduce the abuse of disability parking placards while strengthening enforcement for violations.

 

Once approved by both houses and signed by the governor, the bill would immediately require handicapped parking placards to prominently display an expiration date. Using an expired permit would result in a $250 fine.

 

The second phase of the bill would establish the work group, whose goal would be to add more far-reaching provisions. That group would begin meeting in August and deliver its final strategic plan to the 2014 Legislature.

 

"There is no shortage of ideas for the work group to consider," says Olson "But there are consequences to some of the ideas. They'll need to come up with ideas that are actually workable and take cognizance of state budget constraints."

 

The bill makes some specific recommendations to the work group and an interesting one is to explore the extent to which medical professionals, who must certify the disability of those seeking a permit card and auto placard, are aiding the abuse.

 

The bill would require that the strategic plan include "oversight measures" to ensure that parking placards and special license plates for the disabled are being properly issued.

 

The strategic plan would provide for a random review by a volunteer panel of medical professionals of placard issuance and possible sanctions against medical professionals for repeated improper issuance of disabled parking placards

 

The Seattle Police Department says that many physicians distribute parking placards "for reasons that may not comply with state criteria" and a key suggestion is adding the name of the issuing physician on each placard.

 

A Seattle resident who ran across my previous column on the Internet sent me an email some months ago saying he did a test with his own doctor following knee surgery from which he explained he was "now walking without discomfort."

 

"I asked my doctor if I could get one of those permits for disability parking. She smiled wryly and said 'well..hmmmm...I suppose you qualify'. WHAT! I can walk without trouble and it is that easy to get a permit for phantom knee pain that was corrected months ago?"

 

Of course, blaming the disabled-parking abuses mostly on doctors would be unfair in an environment where use of other people's permits or using the placards of those who are now deceased is suspected of being rampant, driven in part probably from the ever-increasing cost of parking.

 

And while the City of Seattle is looking to the legislature to devise ways to address the abuse, which also brings lost revenue for the cities, some tools are already available.

 

One is the use of trained volunteers authorized to issue citations for infractions, which was approved by previous legislation in this state some years ago.

 

In cities elsewhere in the country, trained volunteers are authorized to issue citations for infractions. The Seattle Commission for People With Disabilities, in a report
 on the problem a year ago, suggested the volunteers could record the license plate numbers of cars displaying expired placards, or operated by drivers who didn't appear to be disabled.

 

Some Seattle officials expressed concern that such use of volunteers might lead to confrontations with offending parkers.

 

To which I suggested to one such concerned official that use of volunteers who were large as well as intimidating in appearance would likely take care of the concern.

 

For sure the representatives of the disabled and the city agree increased enforcement and imposition of harsher penalties are essential, particularly for those caught using a placard issued to someone who has since died.

 

 

The issue of stealing handicapped-parking spots, which is of course what cheaters are doing since they are depriving cities of revenue in addition to depriving handicapped drivers of parking places, deserves the attention it's apparently finally going to get from the Legislature.

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Business use of independent contractors coming under fire in legislative proposal

A legislative proposal that is the outgrowth of state and federal agencies targeting what they perceive as a growing abuse by business of misclassifying workers as independent contractors is stirring the concern of businesses who view the bill as an excessive reaction.

 

In fact, one Seattle-area attorney long involved in independent-contractor legal issues, says an attitude "inhospitable to the independent-contractor business model" has become evident at both the state and federal levels.

 

Employing independent contractors has long been an essential practice in some industries, as with newspapers' use of freelance writers or real estate firms and their independent agents. But the pressures on business during the economic downturn from which some are still just emerging has made the strategy of using independent contractors rather than hiring employees more common, and with that has come some abuse.

 

State and federal agencies, upset by what they view as millions in lost tax revenue, aided by labor leaders' targeting House Bill 1414 as one of their top priorities this legislative session, have tagged misclassification abuses as part of the "underground economy."

 

Calling it part of the "underground economy," which is generally defined as money-making activities, frequently illegal, that aren't reported to the government, is itself viewed by business interests as part of the overreach by proponents. .

 

There are several things about the bill, titled "The Employee Fair Classification Act," that business views as a reach too far by those proponents. The first is that the bill would establish the premise that "an employer-employee relationship is presumed to exist" for anyone who performs service for pay." What follows is a series of exemptions to that blanket assumption.

 

Some besides business may find it a cause for concern that the measure would create a new provision making it a crime to retaliate against those who complain to authorities about a misclassification by the employer, with an assumption of guilt. The measure would make violations of the retaliation provision a gross misdemeanor and, in a Napoleonic-law twist, assume the business is guilty of the crime unless it can prove its innocence.

 

Kris Tefft
Kris Tefft

Kris Tefft, chief legal counsel for the Association of Washington Business, has led the effort to lobby lawmakers and alert businesses about the bill's problems. He says his priority in seeking to raise concerns about the bill "is to convince legislators that this is too much of a regulation step to impose on legitimate businesses."

 

The bill has made it out of one committee and has until Friday to be cleared by the finance committee for an eventual vote in the House, where passage would be likely since this bill is a top labor priority this session and the House is controlled by Democrats. A companion bill filed in the more moderate Senate has languished in committee so business is hoping that means the measure won't clear the Legislature this session.

 

In fact, Tefft's goal is to keep the measure from even reaching a vote in the House.

 

"While it is a top labor priority, it has drawn fire from a broad and deep coalition of various industry groups who are all working on keeping the bill from the House floor," he said. The goal is to "get legislators to go back to the drawing board in terms of addressing identifiable problems with the 'underground economy.'"

 

Nigel
Nigel Aviles

Nigel Avilez, an attorney on Mercer Island who has been involved with the legal issues surrounding independent contractors since before it became a hot issue, suggests government has created "a climate that is intolerant of independent contract misclassifications."

 

Avilez, whose Mercer Law specializes in independent-contractor and worker-classification law, describes the current attitude of both state and federal agencies as "inhospitable to the independent-contractor business model."  

 

The bill, despite its potential major impact on businesses, is only now starting to gain some visibility outside the legislative halls and raising the eyebrows of business owners as they learn of it..

 

None of the opponents of the measure deny that some businesses, particularly many whose fortunes have suffered a serious downturn in the recent financial turmoil, have become scofflaws, basically trying to be creative in worker relations, and thus creating a problem for legitimate businesses.

 

And that, according to Avilez, has created "an inflexibility" on the part of agencies toward working with businesses who have merely made a mistake in classification of independent contractors, rather than being guilty of cheating. "Some agencies feel people are cheating the system so they don't want to cut any slack for any business."

 

Avilez did a public-records request and searched the documents to conclude "there is an apparent coordination between the U.S. Department of Labor and state agencies."

 

"For example, between 2010 and 2012, public records show that the Washington Employment Security Department (ESD) audited close to 140 nail salons, and assessed substantial taxes in many of those," Avilez said. "The quantity of these audits was far and above most other industry audits, clearly suggesting that the nail industry was being targeted by ESD."

 

Five hair salons were found to owe taxes of more than $20,000, not including penalties, with three dozen hit with taxes of $5,000 or more, plus penalties.

 

 

As an indication of the historic role of independent contractors for some industries, Tefft noted that "a lot of industries are coming forward with bills that would exempt them from the provisions of the bill should it become law."

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Sound Publishing, as major owner of newspapers in region, gaining attention

Sound Publishing Inc., as the U.S. subsidiary of what has become the largest-circulation newspaper company in Western Canada, has itself quietly grown into the largest publisher of newspapers in Washington State. But Sound, with headquarters in both Bellevue and Poulsbo, is suddenly attracting attention.

 

Since the first of the year, Sound and its parent Black Press Ltd. have purchased the Seattle area operations of two high-visibility national companies, buying the Seattle Weekly from the Village Voice in January and the daily Everett Herald from the Washington Post Co. a few weeks later. The Herald deal is expected to close next month.

 

Attention those two deals have generated with the general public may be in the form of "who are these people," since Sound is known mostly to readers by the names of its local newspapers scattered across Western Washington, while for major media, the attention may be more like curiosity.

 

At a time when the print media is viewed as a dying industry, Sound and its Victoria, B.C.-based parent have focused on print and grown dramatically, publishing clusters of community weeklies. Each newspaper fulfills the company's mantra of local, local, local. And most are distributed as free newspapers to households and retail outlets in their communities.

 

CEO David Holmes Black began his newspaper-ownership career in 1975 with a small weekly in eastern British Columbia and has grown it to a 170-newspaper empire, founding Sound Publishing in 1987.

 

Sound is an independent operation in that while the final check for purchase of a property comes from the parent, the selection, negotiations and due diligence on an acquisition are carried out by the local executive leadership, which then incorporates the new acquisition into its operations.

 

In addition to his dramatic expansion as a buyer of small newspapers, Black has come to make a practice of occasionally buying newspapers from well-known but financially struggling national print-media players, as with The Weekly and The Herald.

Gloria Fletcher

Gloria Fletcher,

Sound President

 

Now Black has also "acquired" one of the most successful executives of major media companies to be president of Sound Publishing. Gloria Fletcher assumed her post at Sound last April with a resume that included major executive roles at two of the nation's most prominent publishing groups.

 

In addition to the Black Press flag replacing the Village Voice and Washington Post banners in Seattle and Everett, Black has taken over newspapers from McClatchy Newspapers, The Gannett Co. in Honolulu (making Black the major media factor in Hawaii), and Lee Enterprises. And he is personally one of a group of investors in the San Francisco Examiner, once the property of Hearst Corp.

 

When Fletcher assumed her post as president at Sound, whose publications have total circulation in Western Washington of just under 900,000, there was little visibility surrounding her arrival. That would be in keeping with the style of Black, who told a reporter a few years ago that there's no reason for him to be highly visible since his is a private company, and Sound, the Washington State subsidiary.

 

Fletcher, a 1984 honors graduate of the University of Oklahoma, earned her first publisher role at the age of 26 at her hometown daily newspaper in Woodward, OK, part of The American Publishing Co. chain that was acquired in 1999 by Community Newspaper Holdings, Inc.(CNHI).

 

CNHI sent Fletcher, then the mother of a 4 year old and a one year old, to be publisher in Enid, OK, as well as to be a vice president overseeing 38 publications in Oklahoma and the central Midwest. She was with CNHI from 1999 through 207, the period when it was acquiring and growing dramatically and Fletcher had a role in acquisitions.

 

When the president of CNHI moved in 2006 to GateHouse, a fast-growing new company that now has almost 100 daily newspapers and 200 weeklies, Fletcher joined GateHouse, moving to Missouri as vice president and overseer of some 80 newspapers across 14 states.

 

Asked during an interview about further acquisitions, Fletcher said "we have a lot of work to do now" and she doesn't anticipate more acqusitions "at this point."

 

Fletcher, her sons now 18 and 15, described her career this way: "While every aspect was somewhat the same, it was always different. And all of it has been a great adventure."

 

Asked about the purchase of the Seattle Weekly as a seemingly unusual one for Sound, Fletcher replied that "it reaches a mass of faithful readers and does it very well. We value what it is for the way it engages its readership."

 

"Our goal is to have people know our publications and be engaged readers," she adds.

 

She describes Sound Publishing as a company that has "quietly grown into a very important communications force in the Puget Sound area." But she adds that the company "isn't growing just to grow, but rather with all the specifics of success in mind."

 

Peter Horvitz, respected former owner and publisher of King County Journal Newspapers who sold his King County daily newspapers, and subsequently the Port Angeles Daily News, to Sound, would agree.

 

"Sound Publishing has been successful in assembling an impressive group of weekly and now daily newspapers in the Puget Sound region," says Horvitz, who fought for years to make a success of his daily newspapers in Bellevue and Kent against major metro competition.

 

"Seattle Weekly and the Everett Herald are great additions to their group of publications," Horvitz added. " David Black is a fearless businessman who sees value where others don't. He's been rewarded by his determination and vision."

 

 

 

 

 

 

 

 

 

 

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To see previous Flynn's Harp columns, click here 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WSU President Floyd also clearly has his eye on online's broad prospects when he said: "With the launch of the WSU Global Campus last fall, we are working to ensure that students are engaged, connected and challenged in a highly personal, digital learning space."

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sound Publishing Inc., as the U.S. subsidiary of what has become the largest-circulation newspaper company in Western Canada, has itself quietly grown into the largest publisher of newspapers in Washington State. But Sound, with headquarters in both Bellevue and Poulsbo, is suddenly attracting attention.

 

 

Since the first of the year, Sound and its parent Black Press Ltd. have purchased the Seattle area operations of two high-visibility national companies, buying the Seattle Weekly from the Village Voice in January and the daily Everett Herald from the Washington Post Co. a few weeks later. The Herald deal is expected to close next month.

 

Attention those two deals have generated with the general public may be in the form of "who are these people," since Sound is known mostly to readers by the names of its local newspapers scattered across Western Washington, while for major media, the attention may be more like curiosity.

 

At a time when the print media is viewed as a dying industry, Sound and its Victoria, B.C.-based parent have focused on print and grown dramatically, publishing clusters of community weeklies. Each newspaper fulfills the company's mantra of local, local, local. And most are distributed as free newspapers to households and retail outlets in their communities.

 

CEO David Holmes Black began his newspaper-ownership career in 1975 with a small weekly in eastern British Columbia and has grown it to a 170-newspaper empire, founding Sound Publishing in 1987.

 

Sound is an independent operation in that while the final check for purchase of a property comes from the parent, the selection, negotiations and due diligence on an acquisition are carried out by the local executive leadership, which then incorporates the new acquisition into its operations.

 

In addition to his dramatic expansion as a buyer of small newspapers, Black has come to make a practice of occasionally buying newspapers from well-known but financially struggling national print-media players, as with The Weekly and The Herald.

 

 

 

 

 

 

Gloria Fletcher

Gloria Fletcher,

Sound President

 

 

 

 

 

 

 

 

 

 

 

Now Black has also "acquired" one of the most successful executives of major media companies to be president of Sound Publishing. Gloria Fletcher assumed her post at Sound last April with a resume that included major executive roles at two of the nation's most prominent publishing groups.

 

In addition to the Black Press flag replacing the Village Voice and Washington Post banners in Seattle and Everett, Black has taken over newspapers from McClatchy Newspapers, The Gannett Co. and Lee Enterprises. And he is personally one of a group of investors in the San Francisco Examiner, once the property of Hearst Corp.

 

Black owns the Akron, OH, Beacon-Journal, bought from McClatchy in 2006. He bought the Little Nickel classified publications from Lee Enterprises that same year, and his company became the major newspaper operator in Hawaii when he bought the two Honolulu dailies, one owned by Gannett Co., in late 2011.

 

When Fletcher assumed her post at Sound, whose publications have total circulation in Western Washington of just under 900,000, there was little visibility surrounding her arrival. That would be in keeping with the style of Black, who told a reporter a few years ago that there's no reason for him to be highly visible since his is a private company, and Sound, the Washington State subsidiary.

 

Fletcher, a 1984 honors graduate of the University of Oklahoma, earned her first publisher role at the age of 26 at her hometown daily newspaper in Woodward, OK, part of The American Publishing Co. chain that was acquired in 1999 by Community Newspaper Holdings, Inc.(CNHI).

 

CNHI sent Fletcher, then the mother of a 4 year old and a one year old, to be publisher in Enid, OK, as well as to be a vice president overseeing 38 publications in Oklahoma and the central Midwest. She was with CNHI from 1999 through 207, the period when it was acquiring and growing dramatically and Fletcher had a role in acquisitions.

 

When the president of CNHI moved in 2006 to GateHouse, a fast-growing new company that now has almost 100 daily newspapers and 200 weeklies, Fletcher joined GateHouse, moving to Missouri as vice president and overseer of some 80 newspapers across 14 states.

 

 

 

Asked during an interview about further acquisitions, Fletcher said "we have a lot of work to do now" and she doesn't anticipate more acqusitions "at this point."

 

Fletcher, her sons now 18 and 15, described her career this way: "While every aspect was somewhat the same, it was always different. And all of it has been a great adventure."

 

Asked about the purchase of the Seattle Weekly as a seemingly unusual one for Sound, Fletcher replied that "it reaches a mass of faithful readers and does it very well. We value what it is for the way it engages its readership."

 

"Our goal is to have people know our publications and be engaged readers," she adds.

 

She describes Sound Publishing as a company that has "quietly grown into a very important communications force in the Puget Sound area." But she adds that the company "isn't growing just to grow, but rather with all the specifics of success in mind."

 

Peter Horvitz, respected former owner and publisher of King County Journal Newspapers who sold his King County daily newspapers, and subsequently the Port Angeles Daily News, to Sound, would agree.

 

"Sound Publishing has been successful in assembling an impressive group of weekly and now daily newspapers in the Puget Sound region," says Horvitz, who fought for years to make a success of his daily newspapers in Bellevue and Kent against major metro competition.

 

 

"Seattle Weekly and the Everett Herald are great additions to their group of publications," Horvitz added. " David Black is a fearless businessman who sees value where others don't. He's been rewarded by his determination and vision."

 

 

 

 

  (Editor's Note: I have been a member of the national advisory board of the WSU College of Business for nine years)

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Business associations joust with Insurance Commissioner over member health plans

Because more small businesses get their insurance coverage through business associations in Washington than perhaps any other state, new eligibility standards for such groups because of the Affordable Care Act could cause major coverage disruptions.

 

At issue is the eventual determination by the U.S. Department of Labor next year on which of the so-called Association Health Plans (AHPs) meet federal requirements or must change, possibly dramatically, to be in compliance with ERISA, which protects the interests of participants in employee benefit plans.

 

The issue looms far larger for small businesses in this state than others because Washington law has recognized associations formed for the purpose of providing insurance, and treated them as "large" groups, providing better healthcare packages for member businesses. State law specifically states that small groups purchasing through associations are not small groups and are exempted from the small group community rating laws, which bring higher insurance costs.

 

 

"There will an incredible amount of disruption in the association market if major changes are imposed on these associations," says Chris Free of Rapport Benefits Group in Tacoma, president of the Washington Association of Health Underwriters.

 

The disruption he warns about would be that since AHPs represent a major portion of Washington's health insurance market, dramatic change could affect the vehicle by which thousands of small businesses obtain insurance coverage for their employees.

 

And because, as with many provisions of the national health care law, there's more uncertainty than certainly about the provisions, associations aren't sure what lies ahead. But they're pretty sure their futures won't be enhanced by the involvement of the State Insurance Commissioner.

 

And it's an issue that has only now begun to gain visibility as business associations like chambers of commerce and the Association of Washington Business, in essence the state's chamber of commerce, grapple with a decision by the Office of Insurance Commissioner (OIC) to get involved.

 

And the visibility ramped up a notch this week when a bill was filed in the State Senate that would basically say "leave the association health plans as they are."

 

The legislative bill would declare that "association health care plans meeting certain standards should be continued as a means of providing health care as the Affordable Care Act is implemented," with standards spelled out that would basically keep most associations in place.

Trade organizations, such as the Master Builders Association whose members are all involved in the home building industry in some manner, are not composed of so many and varied business types. In fact, the Master Builders recently gained OIC approval, with some changes in the members they admit.

 

 

Business interests have long sensed that Insurance Commissioner Mike Kreidler is not a fan of the association market, believing it causes harm tothe market as a whole. Thus some legislators may be wishing to send a message that the association plans are largely a positive thing for the insurance market and that OIC shouldn't be meddling by deciding which plans the department thinks are qualified to go forward.

 

Executives of the associations openly sing the praises of the benefits their plans bring to the healthcare costs of small businesses. As with Debra brown, President of Forterra Inc., the benefit services subsidiary of Association of Washington Business (AWB), who notes a recent national survey foundWashington is the second most affordable state in the nation for the very smallest firms, those with fewer than 10 employees.

 

"Washington ranks fifth most affordable in the nation for all small firms," says Brown, who.estimates that about 500,000 employees obtain their insurance coverage through association plans "The plans represent an important and valuable asset to a lot of employees."

 

But the association executives are understandably reluctant to openly attack the OIC involvement in the futures of their plans.

 

But not so others outside association ranks, like Free, or John Conniff, a Tacoma attorney and former deputy Washington state insurance commissioner, who says: "if an organization says 'we think we comply' and they're willing to undergo the ERISA evaluation, why should they have to convince the insurance commissioner?"

 

There is a concern candidly expressed by association representatives that the Office of Insurance Commissioner's (OIC) intent to approve or disapprove plans by July 31 could have a negative impact on final Department of Labor decisions, even though OIC doesn't control final approval. The wish, apparently, is that the insurance commissioner not be

 

involved since the office doesn't have legal authority over the DOL action.

 

 

"We can't not say anything," says Carol Sureau, the OIC's deputy commissioner in charge of legal affairs. "We have to get the system ready for 2014 and we have been meeting with carriers and some associations trying to see whether they can qualify as 'an employer' under ERISA."

 

"While this determination belongs to DOL, we know that all our associations will not be able to obtain that agency's determination until after January 1, 1914, and we must move forward as the filings must be approved or disapproved by July 31," Sureau said.

 

Bill Baldwin, one of the more respected insurance executives in the state and now a principal with The Partners Group in Bellevue who is on operating committee of the Washington Health Benefits Exchange, suggests that "few" of the association plans meet the requirement of being ERISA compliant. "It's hard for an association to get approval because they represent so many kinds of businesses."

 

But he adds that "associations is all that has saved the healthcare market in this state," emphasizing the comment was his personal view and not his view as a member of the exchange board. "They should change the law to accept association plans."

 

 

AWB President Don Brunell admits that while there is still work to be done on affordability "we believe that without association plans, health care costs for employers in Washington state would be significantly higher. It's important that association plans continue to operate as they do today, or significant disruption and destabilization will occur."

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Cable & Howse was major factor in growth of key industries in the Pacific Northwest

Whether it was fate or serendipity that brought Elwood (Woody) Howse and Tom Cable into business together after a decade of crossing paths, the fact is that the firm they finally created became a major factor in the creation and growth of the technology, biotech and medical-device industries in the Pacific Northwest.

 

It was actually at the urging of their wives that Cable and Howse decided, in 1977, to leave the Seattle securities firm Foster & Marshall and launch Cable & Howse Ventures. But it took two years and almost 200 calls on potential investors before they raised the $9 million to fund the first limited partnership to launch the firm.

 

Tom Cable
Tom Cable

The business quickly grew into the largest venture capital firm in the Northwest, eventually raising more than $160 million for five Cable & Howse funds that helped finance more than 100 companies, about two dozen of which they took public. More than half of those 100 were outside the Northwest.

 

Now they've been selected as 2013 laureates of the Puget Sound Business Hall of Fame. They, along with retired Alaska Air chairman and CEO Bill Ayer and Gary Oakland, who built Boeing Employees Credit Union into the nation's fourth largest, will be honored as this year's crop of laureates March 21 at the annual banquet put on by Junior Achievement and Puget Sound Business Journal.

 

Woody
Woody Howse

Cable and Howse first met and became friends at U.S. Navy nuclear submarine school at New London, CN, following which they parted to serve stints as officers aboard nuclear subs. Next they each wound up in graduate school at Stanford, where Howse got his undergraduate degree, although Cable had been gone a year when Howse arrived.

 

Finally, they took different routes to get from the Bay Area, where they both had jobs in the investment industry, to Seattle to join Foster & Marshall.

 

Cable & Howse was a different breed than VC firms of today in that the five partners in the firm acted as a private investment banking firm, working with early stage companies to help them find funding and then immersing themselves in the start-up companies.

 

Howse recalls that "in those days, no one knew how to put together a thorough business plan and business models, so we worked closely with the managements to get the plans pulled together to staff the companies, and to build selling presentations for investors."

 

"A large proportion of our companies were absolutely seed startups when we invested," Howse added. "Today virtually no local VC funds do seed investing. Individual angel investors, family and friends are the provider of that class of capital now."

 

Along the way, they also helped shape the software industry that was starting to emerge in the Northwest in the early '80s, putting up the money to allow the presidents of some small software companies to start the Washington Software Alliance, which became the industry's dominant trade organization.

 

I asked each of them what they viewed as their best investment, as well as their most interesting and most satisfying. Both agreed that Immunex Corp. was the answer to all three but Cable added that the company, one of the Northwest's earliest and most successful biotech companies, was also perhaps the most frustrating.

 

 

 

The frustration was that by then Cable & Howse, guided by a long-languishing share price as Immunex was impacted by a general investor turnoff on biotech through the middle 1990s, distributed all of its Immunex stock before the picture improvd dramatically.

 

The Immunex involvement was one of a number of investments Cable & Howse made in the medical arena where, as Howse put it, "we always felt the products were aimed at the betterment of mankind, which always made us feel like we were doing something of value."

 

Both, in what some might suggest are their "retirement" years, remain closely involved with medical-related companies. Cable's last board position is with Omeros, a Seattle-based clinical-stage biopharmaceutical company.

 

"I think Omeros will emerge, over the next few years, as the dominant biotech company in the Northwest," Cable offered.

 

Howse is still a member of four corporate boards, two of which he describes as "rank startups: Stella Therapeutics, focused on a technology targeting an orphan disease that is the worst of the brain tumors, and BeneSol, focused on an interesting technology concerning Vitamin D."

 

Both Cable and Howse also were in agreement when I asked them if they recalled their worst investment.

 

In what Howse refers to as "the low point of naivete for us as investors" and Cable recalls only as an investment "with no logical reason," they bought Inside Sports from Newsweek Magazine. Since the advertising staff at Inside Sports had sought a share of ownership, which they didn't get, all the ad people quit.

 

"We stopped funding after two months of having to print the magazine with no ad revenues coming in," says Howse. "We originally thought of it as a road to success but instead it was a black hole."

 

In 1996, after they proved unable to convince institutional investors of the viability of the Northwest as a place where sufficient new investment opportunities would emerge, Cable & Howse liquidated the partners with an IPO for Applied Microsystem and its distribution.

 

It's been 17 years since Cable & Howse closed its doors, but to this day the mark that Woody Howse and Tom Cable made on start-ups in the technology, biotech and medical-device industries remain as visible impacts on the region's economy.

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'Basque entrepreneur' Aspiri is more pleased by jobs created than fortune made

In the course of launching or growing a dozen companies over a half century, first as an entrepreneur then as an investor in entrepreneurs, Ray Aspiri expresses more pleasure at the jobs he's helped create than at the business success he's achieved.

 

And he's brought an unusual business philosophy, gained from his Basque roots, of avoiding what he refers to as the "perverse incentive" of excessive CEO pay.

 

Born John Ramon Azpiri in Boise, he wears his Basque heritage like a badge of honor. And he is particularly proud of being referred to as "the Basque entrepreneur from Seattle" when he is called upon to speak on entrepreneurism and his philosophy of leadership here, and several times in Europe.

 

Ray Aspiri
Ray Aspiri 

While Aspiri has largely avoiding the limelight in his business involvements, though those seeking his backing and the business partners he accumulated knew where to find him, he agreed to an interview following the recent sale of one of the companies he built and guided.

 

Houston-based Oil States International is acquiring Kent-based Tempress Technologies, which Aspiri and four partners had founded 15 years ago and where he was chairman and former CEO. Oil States, a publicly traded, diversified oilfield services company, paid $52.5 million for Tempress, which has an array of specialized drilling products for the oil and gas industries.

 

Aspiri's entrepreneurial career began when, at age 24 in 1961, as a Boeing employee who had dropped out of Seattle University, he co-founding Credco, which provided data credit reports for the mortgage lending and banking industries.

 

Over the next decade, with his initial partners, he launched and guided Color Control, a company that did photo-lithography for major retailers and mail-order catalogue companies, and Precision Automotive, an engine-rebuild firm in the aviation industry.

 

Aspiri was still top executive at Credco and Color Control when he got involved financially in the medical-instrument business that would occupy much of his focus in the coming years.

 

He recalls that Bill Gates Sr. called him in 1967 to tout him on an opportunity to invest in Redmond-based Physio, then on its way to being a world leader in heart defibrillators. He remembers that investor involvement as "one with which I made a lot of money, but I got 1,000 times more value" out of the leadership skills he learned from watching Physio's iconic CEO Hunter Simpson.

 

Credco, Color Control and Precision Automotive were all sold in 1978 and Aspiri spent the following two years reviewing 400 companies to determine where he wanted to next focus his attention. That turned out to be twin ventures: the predecessor of Tempress Technologies and his second investment in the medical-instruments industry that has been a high-visibility part of Seattle's technology successes.

 

In 1980 he became a major investor and board member at Quinton Medical, the Woodinville company where founder and leader Wayne Quinton was guiding what became the largest U.S. provider of cardiac stress testing systems and cardiac rehabilitation equipment.

 

Aspiri has been an investor in and has served since 1995 on the board of publicly traded Omeros, a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing products for inflammation, "coagulopathies" and disorders of the central nervous system.

 

I asked Aspiri if, scattered among his array of investor involvements, were any that had failed and he quickly ticked off several.

 

Interestingly, one of his less successful investments was in a business that nevertheless turned out successful.

 

He and three partners funded the launch of Flexcar, a concept he says his wife, Edith, "Loved," which helped guide his decision to invest.

 

"We probably got about 12 cents on the dollar back from the investment, but we helped establish a concept that has taken off" he said of the idea that eventually became part of Zipcar, which was just purchased by Avis for about $500 million.

 

Aspiri wanted to focus, during our interview, on the importance of encouraging entrepreneurism and on his compensation philosophy, which he calls the "Mondragon concept of employee ownership," gleaned from one of Spain's most successful companies based in that country's Basque region.

 

At Mondragon, a federation of worker cooperatives that is Spain's seventh largest company with 84,000 employees in 256 companies and named after the town where it was founded, the CEO can't make more than six times the salary of the average employee, Aspiri explained.

 

"I'm a real advocate of that concept, which largely eliminates the perverse incentives that contribute to many of the problems of governance found in organizations with more traditional management structures," he said. "In all my years, I haven't exceeded that ratio."

 

Aspiri's investments extend to his community involvement where he was one of three business leaders who helped found the Catholic Fund to sponsor scholarships for private Catholic education in Western Washington, raising more than $25 million for scholarships from 1986 to 2002. His partners in that initiative were Seattle attorney Joh Hempelman and Jack McMillan, then Nordstrom president.

 

A $3 million contribution from the fund in 2002 launched what is now the Fulcrum Foundation, which annually raises funds for Catholic schools from K-12 through university for the Seattle archdiocese.

 

As to what lies ahead, Aspiri says he intends "to make selective investments in the future that can improve the quality of life for people," and and also plans to work with both University of Washington's Foster School of Business and Seattle U's School of Entrepreneurship.  

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New leadership could bring key changes to entrepreneur icon Kauffman Foundation

As a new year brings new leadership at the Ewing Marion Kauffman Foundation, the long-rumored internal struggle over whether the focus of the nation's largest and most influential resource for entrepreneurs should be far flung or local may soon play out.

 

Thomas A. McDonnell, longtime Kauffman Foundation board member and chair since 2006, assumed the role of president and CEO as of January 1, filling the position left vacant since exactly a year ago when Carl Schramm was forced out. McDonnell hasn't indicated yet whether or not he will guide a change of focus.

 

But given the pre-eminent role the Kansas City-based foundation has played in fostering entrepreneurism, the issue of whether Kauffman's focus should be more local than broad-based could have implications for angel-investor groups and entrepreneurs in every region of the country.

 

However, there are some longtime entrepreneur supporters and investors who suggest that the emergence of other foundationsinvesting in entrepreneurial activity and of serial entrepreneurs now actively impacting entrepreneurship mean Kauffman could refocus without negative impact.

 

Despite the substantial amount of time since the departure of Schramm, the architect of Kauffman's dramatically expanded presence in entrepreneurial activity, there's been little national visibility or blogger discussions about the struggle over Kauffman direction or of the real story of Schramm's departure. Nor has there been a lot of discussion about what might lie ahead for the $1.8 billion foundation.

 

During his 10 years as president, Schramm turned the foundation's focus dramatically toward national focus, then a global presence, becoming the largest and most influential resource available to foster technology innovation through entrepreneurial startups.

 

Schramm was asked to leave, though the official announcement was that he had decided to resign to return to academia. Both his departure, and the sudden availability of McDonnell for the top role, may yet provide fodder for discussion.

 

McDonnell's sudden decision in September to retire at 2012 year-end as CEO of publicly traded DST Systems, and the fact that the company's board virtually that same day put a new CEO in place, could provide a new batch of rumors surrounding Kauffman leadership.

 

One Kauffman change that's certain to occur is its involvement with venture-capital and private-equity investing, given its own dramatic report last spring that spelled out the sad experience the foundation has had in its 20 years of such investments. The in-depth report, titled "We have met the enemy...and he is us," amounted to an analytical revisitation what it describes as its "large (almost $250 million) and (largely) underperforming VC portfolio" and a promise to make dramatic changes in such investing.

 

Because of the clout Kauffman has with academia, the angel-investment community and others with financial roles in start-up companies and entrepreneurism, there's a perhaps not illogical reluctance on the part of many in the industry to speak out about the Foundation's apparent internal struggle.

 

But the fact Schramm's departure was the outgrowth of the conflict over Kauffman direction is pointed up by a couple of comments in e-mails to me for this piece.

 

As a friend close to Schramm said in an e-mail, "it was always a fight between Carl's vision of becoming a global leader in entrepreneurship and being a mainstay in Kansas City."

 

Added an angel-investment leader who declined to have his name tied to the comment: "I can tell you that the divergence on direction is based on the interpretation of the donor's (Mr. Kauffman's) intent. After all, it was his money. Far be it for us to determine what is the best use of his money."

 

"I do believe Carl went too far afield and walked away from the original donor intent, including spending vast sums of money outside the U.S.," said retired Kansas City business leader Ritchie Slaughter said in a telephone interview.

 

Slaughter had worked for Kauffman, the owner of the Kansas City Royals major league baseball team who created the foundation in the mid-1960s, before his death in 1993. Slaughter left the board in 2003, a year after Schramm's arrival.

 

"He was very willing to have people come here (to Kansas City) from around the world but did not want to spend money outside the United States," Slaughter said. "It is Mr. Kauffman's money and needs be spent the way he wanted."

 

"The new guy is likely to have community pressure to give more focus to and have more board members from Kansas City, but he's been chairman of the board for six years so I'd be surprised if he's backing away from national involvement," Slaughter said. "Kauffman specifically wanted a national footprint in entrepreneurship and a local footprint in youth development."

 

Among those who suggest a Kauffman refocus would likely not be detrimental to entrepreneurial activity at this point is San Diego angel-investor Michael Elconin, a long-time leader in the five-county Southern California Tech Coast Angels.

 

"Kaufmann was instrumental, to say the least, in the formation and growth of the Angel Capital Association (ACA), enabling the dissemination of best practices, and promoting efforts to bridge the gap between university research and startups," said Elconin, past chair of the San Diego TCA chapter. "I would say that in all three of these areas, the institutions and momentum Kaufmann created will, to Kaufmann's credit, allow them to continue without further Kaufmann support."

 

Janis Machala, one of the founders of the Seattle women's angel-investor group Seraph Capital and now dean of continuing education at Bellevue College north campus, agreed.

 

"Kauffman has done so much and was working in entrepreneurship when no one was focusing on that area," she said.

 

"Now there are many foundations investing in entrepreneurship and many successful serial entrepreneurs now actively impacting the fabric of entrepreneurship and all this activity and money means that Kauffman can refocus to their roots and not lose all that was done," Machala added.

 

Susan Preston, also a founder of the Seraph angel group who then became a Kauffman Entrepreneur-in-Residence and most recently has guided California's CalCEF Clean Energy Angel Fund, isn't quite as certain.

 

"We will feel an impact on programs if the Foundation focuses solely on Kansas City," Preston said. "But I have faith and belief that new leadership will recognize Kauffman's instrumental role in advancing entrepreneurship on a national basis, where the programs created and grants made in a number of areas, including for women eptrepreneurs, have helped change the landscape for the good."

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