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Day: May 16, 2008

RIT innovation + creativity = competitiveness

Here’s a bit of good news to all the Rochesterians who are concerned about New York’s ability to compete in the global economy.
Take a deep breath and relax.
The nearly 20,000 people who had the good fortune to take in the Imagine RIT Innovation + Creativity Festival on the campus of Rochester Institute of Technology on May 3 will understand why I say this.
It was a day about science-but it was a day about much more. It was a day to see the ingenuity and creativity of thousands of students and faculty. What a remarkable festival. From demonstrations of how we can optimize freight transportation, to ways we can bring the joy of seeing online the collections of the world’s greatest libraries to visualization technologies that will enhance discovery, it was a remarkable assembly of people and projects.
In addition to the 400-plus demonstrations of technology proposing to better today’s world, there was something else to be seen. And that is the confidence and upbeat attitude of a whole new generation of students determined to leave their mark.
And rather than being defeated by the challenges associated with the transition of our economy, they are welcoming the opportunity to make life better-one idea at a time.
When you spoke with students and faculty about their projects you saw the same twinkle in their eyes that you see in RIT president Bill Destler’s. There is a reason he is always smiling-he knows what is taking place on his campus. And now thousands more of us know a lot more about what is going on at RIT and at countless other campuses across this state and nation.
Not many college presidents would dare to put it all on the line-but Bill Destler welcomed the opportunity.
When Destler spoke last fall about his plans to have the largest on-campus innovation day in America, many of us said, “Good luck!” Well, we now say, “Thank you.”
To President Bill Destler and to all the students, faculty, staff and volunteers at RIT we say, “Great job!” We can’t wait until next year’s Innovation Day.
Edward Reinfurt is executive director of the New York State Foundation for Science, Technology and Innovation in Albany.

05/16/08 (C) Rochester Business Journal

Cloud over upstate

Only a few days after being sworn in as governor, David Paterson visited Rochester and then went to Buffalo, where he reaffirmed his commitment to Upstate New York and announced that the state’s lead economic development agency-Empire State Development-would establish its permanent upstate headquarters in Buffalo.
“The creation of a permanent upstate ESD headquarters in Buffalo will play a critical role in reviving the upstate economy,” the new governor said.
That was then. Today, upstate business leaders are understandably wondering about Mr. Paterson’s commitment to the region.
The source of their concern: the governor’s apparent decision to overhaul ESD and ditch the dual-chairman structure put in place by his predecessor, Eliot Spitzer.
“The current structure provides the upstate region with a government official with the power to hire and fire staff, approve projects and allocate resources-the powers necessary to effectively move the upstate economy forward,” said Sandy Parker, president and CEO of the Rochester Business Alliance Inc., in a statement last week. “To dilute those powers in any way would be a huge step backwards in terms of Gov. Paterson’s commitment to upstate business owners struggling to stay afloat and the people they employ.”
Mr. Paterson has suggested-while providing few details-that the dual structure, with Daniel Gunderson in charge of ESD’s upstate operations, is dysfunctional. He insists that under a single top official, efforts to revitalize upstate would be even more robust.
History, of course, suggests otherwise. And if the Democrats win control of the state Senate this fall, upstate could have even less leverage than it has in the past.
That said, government inefficiency serves no one. If Mr. Paterson can streamline ESD’s structure while keeping key powers in the hands of a locally based official, it could possibly represent a step forward.
So far, however, the governor has not made that case effectively.

05/16/08 (C) Rochester Business Journal

SNAP POLL: Majority opposes state law requiring paid family leave

Majority opposes state law requiring paid family leave

Nearly two-thirds of RBJ Daily Report Snap Poll respondents this week said they are against New York enacting a law mandating that companies offer 12 weeks of paid family leave, funded by worker payroll deductions. On May 2, New Jersey became the third state-after California and Washington-to enact a paid family leave law. Now, supporters of similar legislation in New York are renewing their push for passage.
The federal Family and Medical Leave Act of 1993 requires employers of 50 or more employees to allow up to 12 weeks of unpaid, job-protected leave to employees for a serious illness or to care for a child, spouse or parent.
Proponents say a paid family leave law is needed because many workers cannot afford to take unpaid leave. Opponents contend it would encourage absences, create an administrative burden on employers and impose a cost of filling in for employees on paid leave.
Roughly 765 readers took part in this week’s poll, conducted May 12 and 13.

In your view, should New York enact a law allowing up to 12 weeks of paid family leave, funded by worker payroll deductions?
No: 63%
Yes: 20%
Yes, but only if it exempts small businesses (fewer than 50 employees): 17%

Does your firm or organization already allow up to 12 weeks of paid family leave?
No: 86%
Yes: 14%

COMMENTS:

The government needs to stay out of this, particularly in New York where it is already unfriendly to business. This is not a socialist country. The definition of employee benefit offerings should remain in the private sector. Companies must be in control of what they decide to offer in light of the competitive environment they face in their industries and what they believe they need to provide to attract quality employees.
-Michael D. Kaser, chief financial officer, Arnold Magnetic Technologies Corp.

FMLA is already creating enough challenges with HR and staffing. Adding a state requirement would be unreasonable.
-Jim Haefner, Pittsford

Provision of paid family leave is a mark of a society that values family. Under the current FMLA, low-wage workers cannot afford to take unpaid leave to care for family. In the U.S., we have become unfortunately accustomed to attaching benefits, such as health insurance, to employment; instead, if care-giving may be considered a societal good, such benefits should be financed by taxes.
-Christine Sevilla, Lumin Guild

Americans are afraid of social programs, but the fact is that nearly every other modernized country has them, and their citizens are happier and healthier than the average American. Let’s catch up with the rest of the world!
-Steven L. Smith

Good employers and good workers will work out the details if circumstances require it, without the need for government mandates. I do not think our founding fathers intended the arm of government to stretch to these sorts of issues.
-Peter Short, JJ Short Associates Inc.

As a contract employee, I never had an option of being paid for any absence from work. My father died from Parkinson’s. I regret not being with him more during his remaining days.
-Tom Woodarek

05/16/08 (C) Rochester Business Journal

Be aware of liability, push advisers to take responsibility

The headlines that followed February’s decision by the U.S. Supreme Court to allow individual participants in 401(k) plans to sue to recover losses have focused primarily on the 70 million people who participate in such plans.
But at least as significant is the potential impact on the millions of employers who sponsor 401(k) plans. More employers are likely to face lawsuits as baby boomers, disenchanted with weak market conditions, are encouraged by the ruling to find fault with their plan’s workings and to seek to recover losses.

LaRue v. DeWolff Boberg
First, let’s discuss the case that led to the Supreme Court ruling. The plaintiff, James LaRue, alleged that his former employer, Dallas consulting firm DeWolff Boberg & Associates Inc., ignored his investment instructions on two occasions. The plaintiff claims that he asked to have his money invested in government bonds and that the plan sponsor improperly invested in dot-com stocks instead. The price of the stocks subsequently fell dramatically, and LaRue sued to be reimbursed for more than $100,000 in losses.
The Fourth Circuit decided for DeWolff Boberg, holding that individual lawsuits such as LaRue’s cannot be brought under Employee Retirement Income Security Act Section 502(a)(2).That section, according to the Fourth Circuit, is intended to enforce the rights of all the participants and may not be used by one participant to bring a lawsuit alleging breach of fiduciary duty.
LaRue appealed to the Supreme Court. The Bush Administration filed an amicus brief, stating that 401(k) participants need individual recourse in case fiduciaries mishandle their accounts. The Supreme Court agreed, ruling that, although Section 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, it does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant’s individual account. LaRue has been allowed to continue his cause of action, and the case is still pending.
Observers say that the high court’s decision reflects a major shift in the kinds of retirement plans offered by U.S. employers. Where defined-benefit pension plans once dominated, many more employers now offer defined-contribution plans-often 401(k) plans-which place a greater burden on employees to make investment decisions, within the plan’s parameters.

Unwitting fiduciaries
While it is too soon to know precisely how LaRue v. DeWolff Boberg will affect the retirement plan landscape, all those who function as fiduciaries for 401(k) plans have been put on notice to brace for a possible surge in legal challenges by individuals.
Particularly as baby boomers near retirement, and as the impact of sluggish markets becomes evident, participants who have experienced disappointing 401(k) account performance may feel encouraged to find ways to blame the plan sponsor, perhaps generating a wave of annoyance lawsuits. Recall the surge of legal actions launched against the brokerage industry following the 2000-2002 bear market, which led to a five-year backlog of cases seeking New York Stock Exchange arbitration.
Unfortunately, many employers fail to fully understand their fiduciary role and unwittingly leave themselves vulnerable to such challenges involving plan performance. Some may not realize that the investment adviser who reviews plan investments for a plan’s fiduciary committee ultimately is not legally responsible for the plan’s decisions, processes or menu of investment options. While some financial advisers may admit to being a “co-fiduciary,” the ultimate liability for overseeing all of the plan’s workings remains with the plan sponsor-nearly always the employer.
Make no mistake: The system is flawed, and the disconnect between function and legal liability is evidence of that. In the event that directions are not followed correctly, or investment choices are deemed inappropriate, it is the employer who faces a possible lawsuit. Only those plan sponsors who formally turn over fiduciary duty to a discretionary trustee help to insulate themselves from some of that liability.
But the system may be improving soon. The Department of Labor is expected to enact regulations requiring full disclosure of fees and potential conflicts of interest that may harm the plan and its participants. To date, plan sponsors have been held liable for excessive fees and conflicts of interest, even if such fees and relationships were not disclosed.
How costly and effective the Department of Labor’s regulations will prove to be, however, is anyone’s guess.

Conclusion
While the buzz over LaRue v. DeWolff Boberg will fade, the reality for employers remains.
At present, fiduciary lawsuits are pending against Northrop Grumman Corp., Bechtel Corp., Caterpillar Inc., Exelon Corp., General Dynamics Corp., International Paper Co., Lockheed Martin Corp. and United Technologies Corp., in cases seeking damages for entire participant groups. With individuals now empowered to take legal action, one might expect the number of fiduciary lawsuits to burgeon.
Willingly or not, most plan sponsors carry the burden of fiduciary liability. Atthe same time, the financial advisers on whom employers count to set up and help administer those plans typically may bear no responsibility at all for what could be labeled poor fund selection, administrative errors or other flaws that result in poorer-than-expected returns for participants.
We continue to strongly encourage plan sponsors to be aware of their potential liability and to push their investment advisers to take full fiduciary responsibility for their actions and advice. Plan sponsors also can achieve a buffer against potential plan liability by engaging a discretionary trustee who, by definition, is a named fiduciary, and allowing that trustee to take investment responsibility for the plan investments.
James V. D’Amico is president and CEO of Pittsford-based Genesee Valley Trust Co., which provides money management, retirement services, and estate and financial planning services to local families, individuals, businesses and non-profit organizations. To offer comments on this column, write [email protected].

05/16/08 (C) Rochester Business Journal

Social and environmental investing evolves, yields returns

It used to be that in order for investors to achieve the balance between their hearts and their wallets, they would have to sacrifice competitive investment returns.
Today, numerous investment options combining social responsibility with fiscal prudence are available. A recent report from the Social Investment Forum found that in 2007, approximately $2.71 trillion in assets in the U.S. were committed to some type of socially responsible investment strategy, up from $2.28 trillion in 2005.
SRI can best be described as a form of investing that not only seeks financial return, but social and environmental returns as well-often referred to as “triple bottom line” returns. Throughout the years, the definition of this approach to investing has broadened, with the landscape of available investments dramatically changing. More and better options for investors can be found virtually everywhere.
Although forms of socially responsible investing have been around for centuries, the modern SRI movement gained momentum during the Vietnam War, when chemical companies that manufactured napalm-a chemical agent used in the war-were the targets of protests across the country. The first SRI mutual fund was a $1 billion fund created in 1971 by Luther Tyson and Jack Corbett of the United Methodist Church as a response to a parishioner’s inquiry about avoiding companies involved in the Vietnam War. Yet, until the mid-’80s, SRI was still deemed to be “feel-good investing” and not taken seriously by the financial community or most individual investors.
The biggest transformation came about between the mid-’80s to the early ’90s, when the number of U.S. companies conducting business in South Africa declined by more than 50 percent. The economic impact of this shift pushed the evils of apartheid to the forefront of the news, helping to end it.
As a result, SRI began to flourish in the 1980s, and the portfolios of churches, universities and pension funds became some of the biggest contributors to the growth of this movement. It also began to spread globally, as countries like Australia, Japan, Austria, France and Germany began to participate in the movement.
Since then, the number of bond, equity, mutual and money market funds that utilize some type of social screening has increased exponentially. In addition, the number of screens applied also has significantly increased. It is now possible for individual investors to avoid not only overt corporate activities, but subtle ones as well.
The National Capital Institute-www.responsibleinvesting.org-database lists all of the screens that SRI funds apply to investments. Through this site, investors can find which companies offer domestic partner benefits to employees and exclude companies that do not invest resources in the communities in which they do business.
Although not always foolproof, screening methodology for SRI has gotten more sophisticated throughout the years. Advocates for SRI strategies maintain that investors will get more thorough investment analysis from an SRI strategy than a standard fundamental process, as an SRI approach will seek to identify companies with better management practices and thereby lower risk.
Certainly, SRI managers are likely to get to know companies intimately and have been known to even check out what type of automobiles are driven by executives of the companies they are considering. The result of this focused research is that there are many funds and strategies offering investors competitive returns-both versus the SRI indices and other more widely known benchmarks. And advisors have many more options to help their clients align their views with their portfolios, including mutual funds, exchange traded funds and separate account manager strategies.

Performance of investments
As the first benchmark for equity portfolios subject to multiple social screens, the Domini Social 400 Index provides the most complete and definitive data available on the financial performance of socially screened portfolios. While the performance of the index has varied with market cycles, returns since its inception in 1990 show that it has outperformed the S&P 500, a widely accepted benchmark for the U.S. market. About 250 of the holdings inthe DSI are also in the S&P 500.
Since its inception in May 1990, the DSIoutperformed the S&P 500 on a total return basis and on a risk-adjusted basis. The graph on page 29 shows the cumulative total return of the DSI and the S&P 500 for the last 17 years.
One of the more recent investment styles to garner a high degree of interest is another offshoot of SRI called “green investing.” This is a more targeted method of investing that focuses on companies with the best environmental report cards. There are various funds and exchange traded funds to address this need already, some of which focus on specific areas such as alternative energy and clean water.
Many companies that pass all of the traditional SRI screens have fallen short as green companies, so there is a niche for new managers to fill. Unlike broader-based SRI strategies, there aren’t benchmarks yet for investors to use to track green investment strategies. However, just as early SRI offerings evolved as individuals and corporations alike recognized the compelling combination of monetary rewards and peace of mind, it is highly likely that green investing will follow suit.
Navigating all of the options in the SRI investing space can be challenging for individual investors, as well as advisers, but the required transparency of corporate behavior combined with today’s technology have helped to make socially responsible investing an easier task.
Laurie A. Haelen is senior vice president and director of Investment Services for AM&M Financial Services Inc. She is responsible for the development, enhancement and management of AM&M’s various investment portfolios and wealth management offerings. Contact her at [email protected].

05/16/08 (C) Rochester Business Journal

Credit crunch forces caution, hurts small-business loans

James Pavone shopped at three banks to help finance Installers Warehouse Inc., a hardwood flooring distribution firm that launched in January.
“One of the three responded within the first 14 days,” says Pavone, who owns Installers Warehouse. “We kind of expected (that) because of the crunch they would be less apt to do what we were asking them to do.”
Still, he was surprised at the lack of response from the lenders. First Niagara Bank responded to Installers Warehouse’s query, and after going over the business plan and client list, the bank felt confident enough to make a $250,000 loan, officials say.
Lenders are tightening lending standards and pulling back on small-business loans here and nationwide, according to business owners and the Small Business Administration. Small businesses are feeling the credit crunch. It is a cautious time on both sides of the aisle.
“Banks are definitely more cautious when it comes to business loans,” says Doug Gaudieri, president of Rapid Printing Service Inc., a 20-year-old commercial offset and digital printer in Victor.
Although Gaudieri was able to secure a line of credit quickly and easily at Five Star Bank recently, he says it is more important now than ever before for his company to do its homework with regard to new capital expenditures, given the tighter lending atmosphere.
Gaudieri carefully studies any investment in equipment, technology or manpower prior to making a purchase to be sure the demand justifies the investment.
“At times like these … we may need to take extra steps to prove that a new piece of equipment will truly produce the returns we expect before we go to the bank or leasing company and ask for money,” he says.
Victoria Reynolds, deputy district director of the SBA in Buffalo and former Rochester branch manager, believes the credit crisis has begun to hurt small-business loans.
“I think it has (hurt loans), by the mere fact that there is a 23 percent decline (in the number of SBA loans) from last year at the same time,” Reynolds says.
There were 281 SBA 7(a) loans made in March 2007 through the Rochester branch compared with 216 in March 2008, recent data show. The SBA’s fiscal year ends Sept. 30; March is its six-month mark.
The 7(a) program is the SBA’s main loan program, which reduces the risk for loans by guaranteeing them. Locally there has been a 16 percent drop in the amount of SBA money loaned through the local office to $22.4 million through March, down from $26.9 million last year, officials say. The loans that Installers Warehouse and Rapid Printing received were backed by the SBA.
“Perhaps some national lenders have tightened policies because of losses, in other markets more so than locally,” Reynolds says. “They are more reluctant to take on additional debt as the economy seems a little uncertain.”
By March 2008, HSBC Bank USA N.A. had made nine SBA loans, down from 16 last year during the same time, while Bank of America N.A.’s SBA loans dropped from 11 in 2007 to seven, data from the SBA show. JPMorgan Chase Bank N.A., however, made two more such loans in 2008, compared with last year, going up to 20.
First Niagara has not seen much change in its commercial underwriting. The bank continues to make sure cash flow is strong and the company has the proper collateral, among other things, before lending, says Stephen Brennan, regional sales manager of commercial business banking.
But one item First Niagara is taking a closer look at now is how fuel prices are affecting business, especially with trucking companies, wholesalers, landscapers and distribution networks.
“We’re looking at that item to see if they have the proper reserves or can pass the cost on to the customer,” Brennan says.
Fuel prices are up 25 percent year-over-year, he says, and if a company depends on a lot of deliveries or deliverables for their livelihood, then that could impact them.
With Installers Warehouse, bankers at First Niagara made a loan based on the background and experience of the owners.
“Strong experience and good background-we felt comfortable in that transaction because of that,” Brennan says.
In addition to Installers Warehouse, Pavone also owns Sail On Carpets Inc., a retail company with two locations, started by his family 24 years ago. Positive business performance at that firm gave First Niagara confidence to back the loan for Installers Warehouse, officials say.
“Installers Warehouse was created out of a segment in the marketplace that was left void by Hoboken Floors (a New Jersey wholesale chain distributor of flooring) going bankrupt,” says Pavone, who owns the firm with Craig Dupra and Randy Rindell.
Since opening its doors, Installers Warehouse has grown from two to seven employees. It is adding business, which causes it to buy more from vendors. But vendors do not want to give more credit until the company has established a little more history, Pavone says. He understands that it takes time to establish a track record.
“They feel apprehensive and we’re forced to pay our payables before we can get credit,” Pavone says.
In contrast, with Sail On Carpets, because of its history, vendors are willing to extend terms if needed, he observes. But if it were a new company, it would likely be a different story because of the retail sector in which it operates. Profit margins are less for retailers, Pavone says.
“Money for retail business is very, very different right now, and I don’t blame (the banks),” he says.
First Niagara’s Brennan has noticed that companies that rely on the disposable income of the consumer are seeing decreases in sales.
Even though banks are more selective right now, Pavone says, establishing a strong relationship and open lines of communication with bankers makes a difference.
For Rapid Printing, the credit crunch has not created a big impact. Gaudieri attributes that to having a history with a local bank and showing them good business practices first hand. The company has experienced growth every year of the two decades it has been in business, Gaudieri says. And its “excellent” credit rating also helps, he says, especially when lenders are tightening lending standards.
“Banks still want to lend money,” Gaudieri adds. “They just want to lend it to someone who will be a good credit risk.”
Lynette Haaland is a freelance writer and a former Rochester Business Journal reporter.

05/16/08 (C) Rochester Business Journal

Expansion in high-tech world demands forethought

As banks try to increase their customer base in a high-tech environment, the decision to add branches has become even more problematic-particularly in areas such as Rochester and Western New York where population growth is virtually stagnant.
The popularity of remote deposit capture technology that allows deposits to be made without going to the bank, along with the growth in online banking, have lessened the need for additional branches, analysts say.
“Most banks rushed into remote deposit with no clear coordinated plan,” said Robert Meara, a senior analyst at Boston banking consultant Celent LLC, at a banking conference early this year. “Now banks are connecting the dots and dealing with the unintended consequences.”
Vijay Balakrishnan, chief operating officer for Atlanta-based VSoft Corp., a banking and payment solutions provider who also spoke at the conference, agrees.
Banks “are putting money into brick and mortar to get people to come into branches,” he said. “But at the same time, they’re offering technology so (customers) do not have to come to branches.”
Banking technologies include remote deposit capture systems that allow commercial clients to use image deposits at their place of business, and image-enabled ATMs that encourage retail customers not to visit branches, analysts say.
“In business banking and commercial banking, and the public sector, many of our clients are depositing their checks at their desks,” says James Carriero, Rochester district president for KeyBank N.A. “We give them a computer. They make their deposits, and they can deposit with us up until 10 p.m.”
KeyBank began its remote deposit service two-and-a-half years ago. Several other banks in the Rochester market also have remote deposit systems.
“We have clients way out in the country, in counties way beyond Rochester, that are banking with us because of how quickly we make their deposits available to them,” Carriero says. “We clear them quickly by using electronic methods.
“It increases their availability to cash. It’s become a very attractive service to clients.”

Making a case
For many banks, building additional branches at a cost of some $2 million apiece, if not more, is not good business in this geographic market.
“Where there’s phenomenal (population) growth, you’re going to see that kind of commitment to more brick and mortar,” Carriero says. “But it’s a very expensive delivery model.
“I would be cautious of people that are saying they’re going to build tons of branches. To absorb that is very expensive to a bank.”
KeyBank’s growth strategy includes making sure existing branches are attractive and aggressively marketing the bank and its services, Carriero says.
He says the bank first makes sure its current branches are clean and painted and in good operating order, investing in current infrastructure.
KeyBank last year began a multi-year process of refurbishing or remodeling some 950 branches. The bank’s downtown office in Rochester, at 25 E. Main St., was on the list.
“We just redid the Main Street office,” Carriero says. “That’s a tough market right there, but it’s worthwhile for us to put that investment of capital into that location. We remodeled the whole office.”
The second aspect of the bank’s strategy, he says, is to market the organization more aggressively in the communities it operates.
“Whether we have high or low market share, we want to be the bank of choice in that community,” Carriero says.
Traditional clients enjoy coming to a bank office, with pleasant surroundings and highly trained personnel available for service, he says.
The third part of KeyBank’s strategy, Carriero says, is to offer services by alternative means, such as online.
“The growth of online banking for our clients is phenomenal,” he says. “That’s a strategy we have, but it really enhances the relationship with the bank because it gives the client another way to interact with us.”
Often, he says, customers use both.
“They’ll use that branch delivery system occasionally,” Carriero observes. “But they’ll use online banking more consistently.”
KeyBank, the banking subsidiary of Cleveland-based KeyCorp, has 15 bank branches in the Rochester market. It has the 15th largest branch network in the country, bank officials say, but 45 percent of its client households use online banking.
“The third delivery model is the telephone,” Carriero says. “We do a tremendous amount of service through those methods.
“It may be becoming an older delivery model, but it really is used quite extensively. We have to offer multiple ways that they can interact (with) us. There’s no one way.”

Bricks and mortar
While many larger banks are embracing the high-tech philosophy, some smaller banks in the local market are trying to grow the old-fashioned way.
“We truly believe in brick and mortar,” says Dana Gavenda, president and CEO of Fairport Savings Bank. “We don’t have enough name recognition at this point for people to go out and find us on the net.”
In addition to its home office on South Main Street, the Fairport bank most recently opened a branch in Irondequoit in January 2007 and has another in Penfield. It plans to open a branch in Webster in July 2009 and a branch in Perinton sometime in 2010, Gavenda says.
“We don’t have enough of a transaction account base for us to move people into the non-branch delivery mode,” he says. “If I want a customer to use something other than the branch, I’m pretty good about getting plastic in their hand so they can use point-of-sale or ATM.”
Few Fairport Savings Bank customers do much of their banking business online, Gavenda says.
“It’s slow to get customers to take their statements online, but we’re making progress,” he says. “We might have 10 percent of our customers that get their statements online. Part of it’s the age of our customer base. It’s taking us a little longer to get people comfortable with that.
“We track it. The online banking segment’s going up. But it’s a hard pull for us.”

Making a mark
Warsaw-based Financial Institutions Inc. will open two Five Star Bank branches in Monroe County late this summer, one in Henrietta and one in Greece, doubling the number of branches in the county.
Five Star had $31.6 million in Monroe County deposits and a 0.33 percent market share as of June 30, 2007, the most recent data from the Federal Deposit Insurance Corp. show. It ranks eighth in the Rochester market with $558 million in deposits, with a 4 percent market share.
The bank has four branches in the Buffalo market, with $98 million in deposits and a 0.28 percent share.
“We are planning on the vast majority of our growth to come from the two larger markets in Erie and Monroe counties,” President and CEO Peter Humphrey told FII employees and shareholders last week.
FII is one of three regional community banks to step up its presence in Rochester in recent years.
Canandaigua National Corp., parent of Canandaigua National Bank and Trust Co., opened its 13th Monroe County branch earlier this year, in Henrietta. Its 14th location-its second in the city-is coming to Alexander Park, the former Genesee Hospital site.
First Niagara Financial Group Inc., parent of First Niagara Bank, has opened 11 branches in Monroe County in the last eight years.
The Bank of Castile and Lyons National Bank are among other smaller banks adding branches in the Rochester market in recent years.
JPMorgan Chase Bank N.A. has 28 branches in the area, trailing HSBC Bank USA N.A., M&T Bank and Citizens Bank N.A. in the local market.
“The No. 1 reason most people open a checking account at their bank is because of the location of the branch,” JPMorgan Chase spokesman Michael Fusco says. “The location drives consumers to the bank.”
He says offerings like free online services, convenient ATM locations, and products and services complement the role of a branch.
“Consumers like to know there’s a live person close by that they can talk to about their finances,” Fusco says.
JPMorgan plans to open 100 to 150 new branches in 17 states this year, although none will be in Upstate New York, Fusco says.
“When a person opens a checking account with Chase, they get free online banking,” he says. “We encourage people to use it because it’s very convenient and it cuts down on paper.
“It takes 15 minutes to pay your bills instead of using a paper check.”
In January 2006, 42 percent of JPMorgan Chase customers with checking or savings accounts used online services, Fusco says. By December 2007, the number had increased to 59 percent, he says.
“We continue to invest and improve our online services,” Fusco says. “We also offer text-message banking, where customers can text Chase and check their balances.”
He adds: “We’re getting to where you can do a lot of things remotely. Now it’s even more convenient.
“Say you’re standing in line to buy something and you want to check your account real quick. You can text it and get text right back saying what your balance is.”
The growth of online banking is evident. Experts say banks should coordinate remote deposit efforts and other technology advancements with branch renewal and development.
In the Rochester market, and in other areas of negligible population growth, branch movement is more likely than branch growth, Carriero says. He says KeyBank will do a number of relocations here over the next five years, “because the population has shifted or the facility needs to have more services offered.”
“The good news with a relocation is you are keeping your book of business, so you have a flow of profitability with you,” Carriero says. “But you still have to make a mortgage payment on a new branch.
“When you do that, it’s like you have a new branch and you have to pay for that. So you have to grow significantly, even if you relocate a branch.”
A December 2007 survey of 157 banks by Celent showed 75 percent promising remote deposit systems in place by the end of 2008 and 75 percent saying they will add branches. That, plus 27 percent of banks surveyed reporting declines of 5 to 20 percent in branch transactions, shows a troubling dynamic emerging in the industry, Celent analyst Meara says.
“If we’re seeing a fledgling product (such as remote deposits) take as much as 20 percent of branch volume out,” Meara said at the conference, “further erosion is a certainty.”

A closer look
A recent survey by banking consulting firm Celent LLC found:
–Seventy-five percent of respondents offered remote deposit capture, or would offer it by the end of the year.
–Banks deploying remote deposit capture, 27 percent, reported declines of 5 percent to 20 percent in branch transactions.
–Midsize banks-those with $1billion and $50 billion
[email protected] / 585-546-8303

05/16/08 (C) Rochester Business Journal

Designing meaningful gift baskets is her joy

While working as an administrative assistant in a dental office some years ago, Melanie Plummer remembers a gift basket arriving. She looked it over and thought what she might have done if she had put it together.
Such a project intrigued her, and Plummer, 42, began reading about gift-basket design. In 1996 she decided to launch a part-time business, believing it could help cultivate her creative interests-an area that did not get much stimulation in her job as an office aide.
“Throwing 100 percent in was not getting 100 percent back,” Plummer recalls of her office job.
She went full time with her home-based business, By the Basketful, in November 2007. Plummer declines to disclose revenues, but says she is not yet matching her former salary but is breaking even on business expenses and revenues.
“It’s not even about being my own boss, setting my hours,” Plummer says. “I’m up here at 7:30 every morning and well after 5.
“It’s more-a burden’s been lifted. I’m doing something I really enjoy doing. A lot of stress has been removed from my life.”
She works in the loft of her and husband Robert’s Fairport home, surrounded by design supplies and inventory. Shopping for items to be used in the baskets is one of the trickiest pieces of the business, Plummer says, because she is trying to anticipate what might appeal to customers who want a basket designed specifically for them. Baskets range in price from $20 to $100.
An area she hopes to develop further is custom baskets for businesses. Plummer has produced a number of popular gift arrangements for Alstom Signaling Inc., where her husband works as an engineering manager.
Among her projects for Alstom has been a new-hire basket, in which Alstom provides a coffee mug and pens with its logo and Plummer adds coffee, biscuits and other items and decorates the basket with ribbons of Alstom colors.
“I think sometimes we look at gift baskets, unfortunately, as coming across without a lot of meaning,” Plummer says.
She works closely with several Rochester specialty food and drink makers, such as Keuka Lake Coffee Roasters, Simply Irresistible Confections, Cheesy Eddie’s and Naples Soaps. Plummer likes to put as much of a local flair in her baskets as possible.
Networking has paid off, especially when she can show her baskets at events such as a recent meeting of the National Association of Women in Construction in Rochester, Plummer says. She sends e-mail blasts via local networking groups.
She estimates 60 percent of her business comes from companies such as Alstom, with the rest from individuals. Her Web site, www.bythebasketful.com, displays many of her products, and most customers view those before calling to place an order. Plummer says she also has had considerable success with an advertisement in the local yellow pages.
Plummer, who is the sole employee at By the Basketful, says she is reaching a point where she finds it hard to manage everything herself and may need to hire a delivery person. She also expects to need part-time help during the winter holidays.
“I’m trying to convince people that speaking with that gift basket is right for them,” Plummer says.
[email protected] / 585-546-8303

05/16/08 (C) Rochester Business Journal

Building a success story

Quincy Allen can thank his mother, Annie, for prompting him toward a career path that has led to a top spot at Xerox Corp.
After growing up in the Boston area, Allen attended college there-commuting from his family home-and had his mind set on a job at an electrical testing lab nearby.
When Xerox came to the college campus months before graduation and sought out Allen for a job interview, he had little interest-especially since he did not even know where Rochester was located.
Then he spoke to his mother, who told him he had nothing to lose going to talk to the company.
Allen agreed and went to the interview. After receiving his bachelor of science degree in electrical engineering from Northeastern University in 1982, Allen packed his bags and went to work for Xerox.
While Xerox’s recognizable name and reputation may have factored in Annie Allen’s decision to nudge her son in Xerox’s direction, Quincy Allen says he later learned his mother had ulterior motives.
“She was afraid I would stay in Boston forever and never leave the house,” he says with a laugh. “(But) it ended up being one of the best things that could have happened to me.”
Allen is president of Xerox’s production systems group. The group is a $5 billion global production operation with nearly 2,000 workers worldwide, with the majority in Rochester, California and Belgium. Allen has held the position since 2004.
The group provides high-end digital monochrome and color systems for customers in the graphic communications industry and for large enterprises.
Recently, Allen’s group has taken on what Xerox is calling the “new business of printing.” The priority is on increasing digital printing in the traditional offset printing market, offering one-to-one and e-based services rather than manufacturing a printed piece to numerous sources.
Xerox has a leg up in such an industry, Allen believes, noting the company has the widest product offerings covering the marketplace, from its flagship product, the high-end iGen3 digital press, to its lower-priced Docucolor digital color printer.
New offerings with advanced technological capabilities are being added to the Xerox line each month. From May 29 to June 11, Allen will join other Xerox brass at Drupa 2008 in Germany, a premier event for the graphic communications industry, to show attendees how the offerings will help their businesses. The Xerox booth is expected to be visited by more than 100,000 visitors.
The $17 billion eligible offset printing market is a worldwide arena that is ripe for digital innovation, Allen says.
“It’s the big Kahuna we are trying to capture,” he says.

Work ethic

Allen, 48, believes his worth ethic and business ethic comes from his father, Quincy Allen Sr. The elder Allen studied electrical engineering but decided to take a more entrepreneurial route, opening his own appliance and television repair store.
As a youth, the younger Allen spent a great deal of his time helping out at the store, along with his five siblings.
“My father was one of 13 kids who grew up on a farm in Georgia,” Allen says. “So he knew about hard work.”
Since joining Xerox in the early 1980s, Allen has held senior technical and management positions in areas such as supply chain, sales and marketing, and product development. He also furthered his education, receiving his MBA from the University of Rochester’s Simon Graduate School of Business in 1993.
In 1999, Allen was appointed vice president of worldwide customer services strategy. In 2001, he was named senior vice president of North American services and solutions. Prior to his current position, Allen served as senior vice president in Xerox business group operations, where he was responsible for the organization’s cost competitiveness initiatives.
Allen says a driving force that has led to success in the production systems group is staying focused on what he calls the three rights: the right business model, right workflow and right technology.
“We have those, and that is what it will take to prosper in this market,” Allen says.
His immediate focus is on Xerox’s customers and employees. Like other Xerox high-level managers, Allen spends one day a month fielding customer calls at Xerox’s service center.
Allen relishes the monthly job.
“What better way to know first-hand about the issues customers face than hearing about them from the customers,” he says.
It also plays into his philosophy: When a problem comes, Allen does not hand it off-he solves it.
He also travels to meet with customers or serves as host to them at the Gil Hatch Center for Customer Innovation at the Webster campus.
Allen also emphasizes his employees. He organizes and holds regular Web chats and town hall meetings, where workers can share ideas and concerns. Not wanting such venues to be boring, Allen tries to come up with ways to make the sessions interesting for employees.
During a recent session on Lean Six Sigma, for example, employees took an approach similar to the hit show “Extreme Makeover Home Edition” to show how services and processes could be streamlined.
Allen admits his enthusiasm for keeping the lines of communication open can border on the extreme.
“I can over-communicate at times,” he says.
But those who know him say Allen cannot be faulted for his high-spiritedness. Dubbed “the man of 1,000 stories” by many co-workers, Allen says his overall approach to work is to have fun.
There has not been one job at Xerox he has not loved, he says.
“The job is what you make it,” Allen says. “My style is having fun.”
But Allen also knows how to get down to business. He describes himself as tough but fair.
“At my center, at my core, I love engaging people,” Allen says. “If I didn’t have a job where I could talk to customers and talk to employees, it wouldn’t be the job for me.”
The most challenging part of the job is balancing work and home responsibilities. It is something Allen says he constantly works to keep on track.
Mark Enzien, vice president of platform development at the product services group, has known Allen for five years.
“He is extremely quick, has a great memory, is very personable, has an excellent sense of humor, and loves old and new movies,” Enzien says. “He is big into sports and likes competition.”
Enzien spoke of Allen’s communicative skills.
“People like to engage him and Quincy likes engaging people,” Enzien says, noting that Allen “prefers laughter over sternness, but is always clear with his intentions.”
Allen commands respect without being commanding, Enzien says.
“He thinks big and small at the same time,” Enzien says. “He has great understanding of Xerox (as a company) and has excellent business savvy. He is well aware of the external forces that Xerox must endure. He is never caught off guard.”
Enzien says Allen sets an enjoyable atmosphere at the Webster building where he is located.
“Quincy sets a consistent atmosphere of respect, fun, trust and hard work,” Enzien says, adding Allen cares about the people but understands that driving the business is critical to the people. “He handles stress well and is quick to turn conflict situations into a ‘common ground’ discussion.
“I always feel that Quincy is doing everything he can to make Xerox and Xerox people better off-it is why we choose to follow.”
Valerie Blauvelt, vice president of marketing for Xerox’s production systems group, describes Allen as intelligent and analytical, yet pragmatic and approachable.
“He is open to new ideas, has a sense of humor and is a person of high integrity,” Blauvelt says. “He is a strong leader and inspires confidence, who approaches the business with a positive and enthusiastic view of the possibilities.”
Michael Salfity, vice president at Xerox’s workflow business solutions group, spoke of Allen’s ability to balance all aspects of his life.
“On the personal side he is very clear about his family values and promotes balance between home and job,” Salfity says. “Whenever there’s a conflict between family responsibilities and job, he quickly lets you know that family is the most important thing in life.”
Allen is bright and a quick study, he adds.
“His analytical skills and broad experience enable him to quickly grasp complex ideas or problems,” Salfity says. “Once Quincy has grasped a complex problem or idea, he has a very unique ability to synthesize it and explains it in a way a second grader can understand.”
Salfity says that while Allen is successful and influential, he has seen him in situations where he has not used his position or title to his advantage.
As an example, he tells about the two of them walking out of a building on the Webster campus as a security guard was placing a ticket on Allen’s car, which was parked in a spot it should not have been.
“Quincy kept asking for the ticket so we could leave; we finally got the ticket and left,” Salfity explains. “Not once did he let on as to whom he was: He only apologized, acknowledged his mistake and asked if the guard was finished so we can make our next meeting.”
There are several attributes that make Allen a good leader, Salfity says.
“Quincy understands our business very well; his depth and broad knowledge of the business enable him to understand the challenges as well as the impacts of his decisions,” he says. Allen is demanding and results oriented, and he does not manage by emotion but by facts.
He characterizes Allen as a “player and coach” who is able to lead when appropri-ate and let his team and staff lead when appropriate.
“My experience with Quincy is that he will push you to achieve results that seem impossible, but he settles for the best we can do as long as we pushed ourselves to the limit,” Salfity says.
Allen’s goal of having fun also comes through for Salfity.
“I have never laughed as much and had this much fun in a job before,” he says. “Quincy is one of the most balanced executives I have ever worked with or for.”

Off the job

When not working, Allen spends time at his Pittsford home with his wife, Sonya, and son, Myles, 13.
A movie buff who often quotes movie lines at work, Allen most enjoys what he calls “guy flicks, such as action and thriller movies.” He is looking forward to the fourth installment of the Indiana Jones series, soon scheduled for release.
Allen also serves as assistant football coach on his son’s team and prides himself on rarely missing those games and practices or his son’s basketball games.
He remains close to his parents, who still live in Massachusetts but visit the Rochester area frequently.
Professionally, Allen says he will continue to put the focus on fun at work while achieving the desired results. Those he works with at Xerox help him meet those goals.
“It’s why I took the job at Xerox,” Allen says. “I may be the head of the group, but nothing happens without the people.”
[email protected] / 585-546-8303

Quincy Allen

Position: President, production systems group, Xerox Corp.

Education: B.S., electrical engineering, Northeastern University, Boston, 1982; MBA, Simon Graduate School of Business, University of Rochester, 1993

Age: 48

Family: Wife, Sonya; son, Myles, 13

Residence: Pittsford

Outside activities: assistant football coach, movie buff

Quote: “If I didn’t have a job where I could talk to customers and talk to employees, it wouldn’t be the job for me.”

05/16/08 (C) Rochester Business Journal

$5M project eyes townhouses for high-end buyers

Tudor-style townhouses are slated for construction as part of a $5 million project at the corner of Barrington Street and Park Avenue.
Michael Donoghue is the developer behind Barrington on the Park. Two months ago he received approval to start building six luxury townhomes on three-quarters of an acre, behind a strip of grassy Park Avenue frontage.
Townhouse prices will range from $700,000 to $900,000.
The lawn on the corner will remain under the city’s ownership and untouched, said Donoghue, president and CEO of Premium Mortgage Corp. He said he got the idea for the townhouses after his own plans for the property fell through.
Donoghue acquired the property and the office space on it roughly six years ago when he was looking to build a house for his family.
Barrington Street caught his eye. But only a couple of weeks after purchasing the parcel, approximately 500 yards away, his dream house went up for sale. So he bought that property too.
“I ended up sitting on the (Barrington Street) property,” Donoghue said. “We thought about selling it but never got around to doing it. I’m in the mortgage business, so one of my builder clients asked if I’d be interested in developing it and building some townhouses there.
“There is a pretty significant desire for high-end properties in the city, and there’s just no place to put them.”
Getting the project off the ground has taken five years, Donoghue said. The process was not waylaid by city approvals but by the objections of a neighbor, he said.
A disagreement over the potential sale of a section of Donoghue’s land to a neighboring property owner led to a dispute in court. Meanwhile, plans for Barrington on the Park were shelved temporarily.
Donoghue said, “I was in court for several months. It held up the process. The city actually was very easy to work with.”
Shortly after installing signs for the development, Donoghue said he received 160 phone inquiries.
Re/Max Plus in Brighton is marketing the houses. Terri Granger, a broker there, said construction will start as soon as the first sale is made. The first house will take approximately four months to build.
“We’ve had a lot of interest, and we’re just getting out of the gate,” Granger said. “The amenities in the units are going to be absolutely gorgeous-granite throughout, eight-inch crown molding-and each unit can be individually designed per customer. We have a suggested layout, but each unit could be designed specifically to fit people’s needs.”
Each house has a garage, garden and veranda. The units range from 2,444 to 4,244 square feet.
The development was inspired by the success of Sagamore on East, the seven-story, $13 million luxury condominium development downtown on East Avenue.
The 23 units, most of which were priced at $400,000 to $700,000, sold fast, making for an unlikely success story. It shed new light on the appeal of downtown and the East End, and on people’s interest in owning urban property instead of renting it.
In a survey released this month by the Center for Economic and Policy Research, a comparison between monthly ownership and rental costs showed a Rochester resident pays roughly $100 less per month by owning instead of renting.
The survey examines Rochester and 99 other U.S. metropolitan areas by using data from the Census Bureau’s American Community Survey.
In Rochester, calculating 75 percent of the median priced home, monthly ownership costs range from $626 to $842.
Monthly rental costs in the city, the report states, range from $773 for a two-bedroom home to $928 for a three-bedroom house.
Largely, people recognize it is more economical to own than it is to rent, yet condos have been slow to catch on in Rochester.
“But that process has begun,” said Heidi Zimmer-Meyer, president of Rochester Downtown Development Corp. “And so its potential for success in other parts of the community is probably much higher than it would have been before Sagamore on East.”
Donoghue said a lot of the interest Barrington on Park has generated so far has come from traveling business executives looking for housing close to downtown.
“They don’t want to have the big house in Pittsford with a big yard to take care of. They want to be close to downtown for those late nights at work,” Donoghue said.
[email protected] / 585-546-8303

05/16/08 (C) Rochester Business Journal

UR unveils new $110 million laser facility

After five years of design and construction, the $110 million Omega EP laser facility will be unveiled today at the University of Rochester’s Laboratory for Laser Energetics.
The Omega EP will be used toward attaining sustainable fusion, a source of clean energy, in conjunction with the lab’s Omega laser, making it one of the most powerful lasers in the world, officials said.
The project was completed in April, and 33 technical staff positions were created as a result. The lab employs 320 full-time staff; provides funding for an additional 140 students, graduate and undergraduate; and supports a range of faculty members from the main academic campus departments.
The staff includes 51 Ph.D. scientists, 46 research engineers and 175 technical engineers and associates in the physical science and engineering fields such as physics, chemistry, material science, optical engineering, chemical engineering and mechanical engineering.
The Omega EP laser system was funded with a $21 million initial investment from the UR and $89 million for design and construction from the Department of Energy’s National Nuclear Security Administration. The building construction began in 2003 and was dedicated as the Robert L. Sproull Center for Ultra High Intensity Laser Research in May 2005. It totals some 300,000 square feet.
Robert McCrory, LLE director, said with the completion of the five-year project on schedule and within budget, Omega EP enhanced capability has been approved for operation and experiments with the existing 60-beam Omega laser on site in support of the LLE science program and national laboratories -Lawrence Livermore, Los Alamos and Sandia in California and New Mexico-for the National Ignition Campaign.
The Omega EP comprises a new set of four ultra-high-intensity laser beams that will unleash more than a petawatt-a million billion watts-of power onto a target just a millimeter across. Working with LLE’s original 60-beam Omega laser, the Omega EP will open the door to a new concept called “fast ignition,” which may be able to increase the energy derived from fusion experiments and provide a possible new avenue toward clean fusion power, McCrory said.
If successful, fast ignition could lead to the highest energy densities ever achieved in a laboratory, he added.
Today’s dedication is to be attended by guests including Sen. Charles Schumer, D-N.Y.; Rep. Thomas Reynolds, R-Clarence, and Thomas D’Agostino, undersecretary and National Nuclear Security Administration administrator.
UR president Joel Seligman said the Omega EP extension would enhance the university’s scientific contributions.
“It is a vital component of our nation’s scientific capital and leadership, a key to strategic work on an independent energy future, and a vital part of the local economy, including $44 million in local expenditures just last year,” Seligman said in a statement.
The original Omega laser fires multi-trillion-watt bursts of energy-more powerful than the entire electrical generating capacity of the United States-making it among the three most powerful lasers in the world, officials said. Omega will become roughly 50 times more powerful with the inclusion of Omega EP.
Fusion, nuclear fission and solar energy are seen as viable alternative energy sources to fossil fuels, environmental experts have said.
Omega’s and Omega EP’s capabilities allow research that cannot be done anywhere else, lab leaders said. For example, the way matter behaves in stars can be replicated on a small scale inside Omega’s target chamber. Laser and materials technologies, electro-optics and plasma physics also will be able to be studied under conditions never before possible.
The LLE was created in 1970 to investigate the interaction of intense radiation with matter. The initial university investment of some $10.4 million in 1975 has allowed the laboratory to attract cumulative external funding, primarily from the federal government, of more than $1.3 billion, including a five-year, $352 million commitment last year from the Department of Energy.
The Omega EP’s extended capabilities also will contribute to the need to recruit and retain graduate students, post-doctoral associates, university faculty members and national laboratory scientists.
McCrory noted that more than 190 Ph.D. recipients trained at the LLE, many of whom have gone on to work in national
laboratories and private industry. The lab supports 65 graduate students conducting their doctoral research.
Research scientists from around the world, U.S. national laboratories, universities and industry travel to Rochester to use the Omega laser facilities. Roughly 45 undergraduates work there each year and, during the summer, roughly 15 high school students participate in a summer research program.
[email protected] / 585-546-8303

05/16/08 (C) Rochester Business Journal

Report warns of turnover

Many local non-profit organizations are unprepared for a coming wave of retirements of their chief executives, a new survey shows.
A report by the Pittsford-based Center for Community Engagement shows nearly two-thirds of the CEOs of 71 small to midsize non-profit organizations, mostly in human services, plan to retire in the next few years.
Only a fraction of those organizations have succession plans in place or are developing them, the report states.
The report confirms concerns that have circulated in the local non-profit community for a few years, officials said.
“We thought the only way to get people’s attention is to maybe bang them over the head with some local data,” said Thomas Toole, CCE executive director.
CCE, an organization focused on helping non-profits, formed at St. John Fisher College two years ago out of free training Toole and former insurance executive Howard Berman offered. It surveyed local non-profits on a request from the Council of Agency Executives.
The council, an alliance of non-profit CEOs, wanted to look more closely at the issue of succession planning in light of anecdotal information about a growing number of planned retirements-and concerns about how such transitions could be managed under non-profits’ traditionally tight budgets, said Joyce Strazzabosco, council administrator.
Recent key announced retirements include Carol Love, longtime CEO of Planned Parenthood of the Rochester-Syracuse Region Inc., and James Mroczek, who has led the Arc of Monroe County for 35 years.
“It’s no secret that a lot of our not-for-profit leaders are aging out,” Strazzabosco said. “A significant number of them will retire around the same time. And not-for-profit agencies don’t have an awful lot of money to backfill. It’s not like they can spend a lot of money recruiting somebody or even training someone. Some people are unwilling to look at the question, and some-they just don’t know what to do.”
CCE has been running workshops around non-profit succession planning. Strazzabosco said the Council of Agency Executives sought the survey in part to help tailor training to needs of local non-profits.
CCE sent questionnaires to the CEOs of more than 100 non-profit organizations in Monroe County in January, requesting that CEOs ask their board chairmen to fill out a version designed for them. Seventy-one CEOs and 40 board leaders responded.
Of the respondents, 85 percent had budgets of less than $10 million; 72 percent had budgets of $1 million to $5 million; and 34 percent had budgets less than $1 million. Most had fewer than 125 employees, with half saying they had fewer than 30.
The vast majority, 82 percent, reported offering health and human services. Toole said the survey excluded higher education institutions and insurers such as Excellus Blue Cross Blue Shield, Rochester Region.
The survey showed 31 percent of CEOs would retire in fewer than three years, and 59 percent would retire within five years. The report notes board chairs gave similar responses to CEOs in their perceptions of upcoming retirements-a result that differs from wide discrepancies between answers of CEOs and board leaders in recent national surveys.
Few local boards expect to find a replacement within their organization or in the Rochester area, the report states, with 18 percent expecting to conduct a search strictly locally.
Ten percent of respondents said a succession plan is being developed, and 5 percent have adopted a plan, the report states. Many reported they were trying to develop internal candidates.
“Asked specifically about discussing executive succession as an opportunity for strategic change, more than 50 percent of board chairs agreed with this, but only 23 percent report having done so,” the report states.
A well-planned succession can help move an agency forward, Toole said. Among non-profits a plan may be even more critical than in a for-profit business because organizations are competing for a limited pool of talented individuals willing to work long hours for relatively little pay, he added.
Toole said he did not want to paint a “doom and gloom” picture on the situation, but he noted that the study suggests a substantial part of the economy-non-profits that together could total $1 billion in revenues-is going to need new executive leadership.
“This is a part of the economy that is expected to produce better results-tackling our hardest problems,” Toole said. “This is just kind of reminding everyone we’d better get on this task. I don’t think this is going to happen, but … no one is going to want to see non-profits looking after children at risk, pregnant teens, dropping out of school, the parts that need the most service-we don’t want to lose or jeopardize taking care of them. I can’t quantify, it but I can just tell you the serious vision of the problem.”
[email protected] / 585-546-8303

05/16/08 (C) Rochester Business Journal

IRS rejects push to nix extra costs

The Internal Revenue Service says it will fight the Sands family’s attempts to escape fines and penalties the agency leveled against the wealthy Brighton clan for allegedly trying to improperly shave tens of millions of dollars off its tax bills.
The roughly 2-year-old tax flap is not connected to Constellation Brands Inc., the $4.8 billion Perinton-based company whose two top leaders, Richard and Robert Sands-Constellation’s chairman and CEO, respectively-figure prominently in their family’s tax woes.
In a brief filed April 25 with the U.S. Court of Claims in Washington, D.C., IRS lawyers said they would not argue with part of an April 11 motion the Sands family’s tax lawyers filed. IRS attorneys said they would not agree to lift millions of dollars in levied fines and penalties and would vigorously dispute the family’s
tax lawyers’ claim that the IRS mistakenly penalized the Sands family’s partnerships.
IRS attorney Thomas Herrin, the tax division lawyer in the Department of Justice’s Dallas office leading the government’s legal team, declined to comment on the case.
Sands family tax attorney Thomas Cullinan, one of several lawyers from Atlanta-based Sutherland, Asbill & Brennan LLP representing the family in the case, did not respond to a request for comment. Cullinan previously has declined to comment on the case.
Filing separate cases on behalf of several family partnerships, the family sued the IRS in 2006, challenging some $18 million in additional taxes, fines and penalties the tax agency had assessed after reviewing returns filed by family-controlled partnerships.
In the April 11 filing, the Sands family’s tax lawyers said the family would drop its fight to avoid taxes on more than $90 million of some $120 million the IRS had accused the family of improperly sheltering. However, the Sandses would not agree to pay fines and penalties the IRS had tacked on to the bill.
At the heart of the tax dispute lies a dizzying and difficult-to-follow series of short sales and trades among Sands-controlled LLCs and partnerships. The IRS maintains that the family used these to mount an illegal tax scheme. The so-called Son of Boss shelter the family is accused of using is supposed to have created paper losses to hide hundreds of millions of dollars in profits the family raked in on stock sales, including divestments of long-held, low-basis Constellation Brands shares.
Embroiled in the tax dispute are descendents of Constellation Brands’ late founder, Marvin Sands, the father of Richard and Robert. Marvin Sands started the company, then called Canandaigua Wine Co. Inc., in the late 1940s as a wine repackaging company. Richard and Robert Sands turned it into an international owner of top brands that now bills itself as the world’s largest wine company.
In the April 11 motion, attorneys for the family said the Sandses would agree to recognize more than $90 million in gains and to drop claims of some $3.7 million in losses, but insisted any claims the family made in previous tax filings were made in good faith and should not incur any penalties.
Not so, countered IRS lawyers. Any concessions the family agreed to in its April 11 filing were “largely a self-serving maneuver to attempt to avoid the 40 percent penalty imposed in connection with their use of abusive tax shelters designed to avoid tax on $120 million in gain.” Sands family claims of losses that supposedly offset the gains-some from the sale of long-held Constellation stock-were “fictitious” and “intended to…avoid tax(es),” the IRS reply brief states.
In the April 11 court filing, Sands family tax lawyers state the Sandses decided to concede some liability after looking at litigation costs and concluding that continuing to fight on all fronts would be too expensive. But, the filing adds, the concession is not meant to be a confession. The family did no wrong, and the IRS erred when it assessed fines and penalties, the tax lawyers state.
“(The Sands family has) the right to concede adjustments that they no longer wish to challenge,” IRS attorneys counter in their court reply. “(But) they cannot use a concession to … (limit) the facts … or the penalties.”
In previous court filings, IRS lawyers alleged Richard and Robert Sands hired and paid $4 million to Heritage Organization LLC to construct a tax shelter. Entered into evidence in the case last year were transcripts allegedly detailing conversations in which the Sands brothers and a Heritage representative allegedly exhaustively discussed ways to structure deals that would turn capital gains into losses.
The Heritage Organization, several of whose wealthy clients previously have settled Son of Boss claims with the IRS, filed for Chapter 11 protection from creditors in 2004. The Sands transcripts-apparently pulled from tapes of sales calls made by Heritage Organization representatives-were obtained by the IRS from Heritage books and records turned over to the bankruptcy court in Dallas.
At one point, the transcripts record Robert Sands, an attorney, remarking on the labyrinthine relationships among various family LLCs and partnerships, stating that “this stuff gets more and more confusing as time goes by and people die. It’s going to get so confusing one of these days I don’t think anybody’s going to be able to figure it out.”
In another passage, Heritage Organization chief Gary Kornman laid out the risks and rewards of sheltering gains by telling the Sands brothers that “loss creation is the riskiest,” but then assuring them that any risk is minimal because “your chances of being audited are less than 20 percent.”
In the April 11 brief, the Sands family tax lawyers state that the family “believed that the positions taken on their returns were reasonable under the law in effect at the time.”
Unlikely, countered IRS lawyers in their court reply. An IRS bulletin published in 2000-some two years before the Sands family partnerships filed the first returns the IRS flagged-fully laid out the types of losses the agency would disallow and gave full warning of the penalties any who tried to use a Son of Boss scheme would incur.
No trial date has been set. Government lawyers were scheduled to take depositions from expert witnesses this week.
[email protected] / 585-546-8303

05/16/08 (C) Rochester Business JOurnal

URMC dedicates Wilmot center

The University of Rochester Medical Center on Thursday held dedication ceremonies for its new James P. Wilmot Cancer Center.
The four-story, 164,000-square-foot building at Crittenden Boulevard and East Place has been planned as the centerpiece of a $65 million plan to significantly expand URMC’s clinical, research and teaching cancer programs. The plan calls for the university to recruit some two dozen researchers and clinicians.
The new center-under construction for two years-doubles URMC’s medical oncology space. In addition to expanded chemotherapy and radiation oncology facilities, the new building features a three-story, glass-enclosed atrium, a multimedia patient and family resource center and a meditation area. It is slated to open to patients May 16.
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05/16/08 (C) Rochester Business Journal

Nominees for IT award selected

The Association for Women in Computing, Upstate New York Chapter has chosen its nominees for IT Woman of the Year.

The eight nominees for the 2008 award are:
–Sylvia Cadena, Blue Heron Consulting Inc.;
–Lynn Garski, EDS Corp.;
–Sharon Martinez, University of Rochester Medical Center;
–Dee Pelow, Jay Advertising Inc.;
–Sandra Roberts, Canandaigua National Bank and Trust Co.;
–Victoria Viglucci, Greater Rochester Independent Practice Association;
–Eileen Wirley, former chief information officer, Carestream Health Inc.; and
–Carol Wright, Enterprise Solutions Inc.
Nominees represent corporate, non-profit and academic institutions. Each nominee has demonstrated significant accomplishments in her career and is an outstanding role model for women in technology, chapter officials said.
The winner will be announced May 29 at the 2008 IT Woman of the Year Awards Breakfast at the Hyatt Regency Rochester. Registration and breakfast begin at 7:30 a.m., and the program begins at 8 a.m. More information is available at www.awc-uny.org.
The keynote speaker at this year’s event is Mary Mack, corporate technology counsel at Fios Inc.
Christine Scheible, CEO of Quantum Technology Associates, received the 2007 award.

05/16/08 (C) Rochester Business Journal