Best & Worst of 2009: Year of Complaints

There’s just no way around it – 2009 was one tough year.

It was a year of more: more lawsuits, more foreclosures, more job losses and more bankruptcies. Not exactly the kind of abundance we were hoping for this time last year. 

By and large, the legal battles and filed complaints that plagued 2008 spilled over into 2009. They even heated up significantly in the second half of the year as money got tighter and many banks needed to move certain assets into different columns.

Unfortunately for all, a few of those businesses thought to be safe just a year ago have folded, either in bankruptcy proceedings or by selling out to competitors.

While there are mixed thoughts about the future (see Economic Forecast, this page) 2009 did have its bright spots along with the blemishes.

One notable platinum lining in all the clouds is the still-burgeoning green industry spawned in large part by Wal-Mart Stores Inc. The next big thing for business, many economists, politicians and laymen agree, will likely have a green element.

In July, the Bentonville retailer announced it would lead in the creation of a global sustainability index to help consumers make informed choices about the products they purchase. One of the big first steps includes the creation of the Sustainability Consortium, which is jointly administered with the University of Arkansas and Arizona State University.

Also in July, the Business Journal celebrated its second annual class of Greenest Offices. The clear winner was Stitt Energy Systems of Rogers, which has since obtained a platinum rating on LEED-certification for its headquarters, one of only three such certifications in the state.

We hope you enjoy our recap of the best and worst in news for 2009.

Worst Radio Shuffle

In June, Cumulus Broadcasting Inc. switched a couple of stations around. The most notable change was that classic rock-formatted KKEG-FM, 92.1 moved up the dial to 98.3. The station that had been at 98.3, a classic country format, disappeared and an all-sports, all-the-time format popped up at the 92.1 frequency. Despite the station’s constant barrage of aired house ads about the change, the move alienated many listeners and confused out-of-towners who arrived in Fayetteville on game weekends.

Best Innovation

Four Walton College of Business students (three working on their MBAs) formed a company called Tears for Life LLC, which licenses technology from UAMS. The technology may help to screen for proteins found in tears to possibly detect breast cancer.

The team won first place at the Donald W. Reynolds Tri-State Cup, an entrepreneurial competition.

Best Consumer Advice

Joel Doelger, director of counseling for Credit Counseling of Arkansas Inc. in Fayetteville, said he has clients who go on a credit management plan cut up their credit cards and throw the remains in a bowl that sits near his desk.

Worst Typo

In a blog by David Nicklaus, a reporter for the St. Louis Post-Dispatch dated March 31, indicated that Robert Rasche, research director at the Federal Reserve Bank of St. Louis, had been mis-quoted by an Arkansas reporter, apparently with the Jonesboro Sun. The reporter used the “D word” instead of “recession” when he quoted Rasche.

“This is not your grandfather’s Great Depression. We are in a serious depression,” the published quote read.

Rasche actually said “recession.”

Best Controversy

Despite the efforts of elected officials to prevent a new liquor store from opening in Springdale, the state Alcoholic Beverage Control board approved a permit for a Macadoodles store in July.

Sen. Sue Madison objected to the permit, claiming Macadoodles, which operates a liquor store just across the Missouri border, has deprived Arkansas of tax revenue by luring people across the state line to purchase alcohol.

Also in opposition was the Arkansas Beverage Retailers Association, which filed a lawsuit against the store in August, asking the court to reverse the decision of the ABC board.

Macadoodles is moving forward with plans to open in the Spring of 2010, despite the pending lawsuit.

Best Consolidated Industry

The accounting firm formerly known as Moore Stephens Frost PLLC gobbled up two area firms and one in North Carolina in the past two years and changed its name to Frost PLLC. In November it announced a merger with Moore Stephens Wurth Frazer & Torbet LLP of California, effective Jan. 1, 2010, creating a national firm that puts it among the top 50 accounting firms in the U.S. ranked by gross revenue.

Springfield-based BKD LLP acquired part of Lundy Allard & Co. of Rogers in January, effectively opening its first Northwest Arkansas office. 

 Best Bad Grammar

“Ryan, this ain’t Chicago.” – Medical Associates of Northwest Arkansas CEO Larry Shackelford, recounting what he said to Razorback Sports Properties executive Ryan Gribble, when the latter told the former health care providers in Chicago “lined up” to sign the kind of marketing agreements the University of Arkansas sought when it overhauled its student-athlete healthcare package.

Best Tech Tenant

Duralor LLC, high-tech manufacturer of nanomaterials, was the first tenant at Springdale’s infant Technology Park. The company, which moved to town in May, was lured away from Northwest Arkansas’ traditional tech alley near the University of Arkansas with equipment and investment incentives, including a 13,200-SF building valued at $1.6 million. The building was constructed by Duralor board member Rick Barrows, who also owns Multi-Craft Contractors Inc.

Nanomech LLC, a subsidiary and sister company to Duralor, landed a $770,000 contract from the Office of Naval Research to work on a new lubricant additive called NanoGlide in mid-December.

Right about the same time, the road through Phase II of the park was completed, opening the way for 37 acres of development there.

Best New Toy

A new Razorback toy really lifted our spirits this year.

The Mascot Slingy, which debuted in stores in November, is made with surgical tubing in its arms, allowing it to fly 20 to 30 feet while singing the University of Arkansas fight song.

A Fayetteville-based group called Serious Antics got the idea for the toy from the flying monkeys developed by Internet retailer Woot!

They’re now in the process of obtaining licensing to make the toy for the Texas Longhorns, Georgia Bulldogs, Florida Gators, LSU Tigers, Alabama’s Big Al, and Tennesee’s Smokey.  

Best Next Big Thing

Many of Northwest Arkansas’ biggest business flops in recent years have centered around grandiose hotel projects. Here’s hoping the latest proposal doesn’t join that group.

Starwood Hotels & Resorts Worldwide Inc. announced in June its plan to build a 234-room Sheraton Hotel adjacent to Bentonville Plaza, right across the street from world headquarters for Wal-Mart Stores Inc. The estimated cost was reported as $42 million.

Worst Idea for a Sequel

Like it or not, Bikes, Blues & BBQ has become a staple of Fayetteville’s fall calendar.

This year, organizers added Bikes, Blues & Hot Rods, Too, a move designed to attract classic car and hot rod enthusiasts to the annual motorcycle rally/economic boon. The idea was that if enough interest was generated, a separate event could be held in the spring.

Apparently believing there is no such thing as too much of a good thing, organizers recently announced yet another fumes-filled weekend. Yes, something called Bikes, Babes and Bling will hit Fayetteville’s Dickson Street in July.

Frankly, we’re not sure what we dread more – another weekend of breathing the exhaust of thousands of motorcycles or the potential for lots of “babes” combining tube tops and beer bellies. As sequels go, we predict this one will rank somewhere between “Weekend at Bernie’s II” and “The Next Karate Kid.”

Worst Denial(s)

When first asked about sponsorship money being tied to agreements with local health care providers, University of Arkansas athletic director Jeff Long said:

“We said from the beginning that’s going to be a separate discussion.”

After learning the Northwest Arkansas Business Journal had obtained a copy of a PowerPoint slide seeking corporate sponsorships as part of a proposed new deal, however, Long said the slide was used “to set the stage for negotiation.”

Some 10 days later, Long told a reporter from ArkansasSports360.com the slide wasn’t released following a request under Arkansas’ Freedom of Information Act because it was in the possession of a former Razorbacks athletic trainer who now lives in Cleveland.

About a week after that, and following a blistering editorial in the Arkansas Democrat-Gazette, Long issued a two-page statement that said, among other things:

“The suggestion that I would have purposefully withheld such a record from a presentation prepared by a member of my staff many months ago is absurd…”

All this from a guy running a $58 million enterprise who expects us to believe he trusted materials with sensitive financial information to someone infinitely better-suited to dealing with groin pulls.

That’s either horrendously bad business practice or a bunch of baloney.

Frankly, to believe otherwise would be, well, absurd.

 

 

 

1.  Banker vs. Developer – As the money got tighter, several lenders put the squeeze on developers by demanding payment and, in some cases, foreclosing on properties. Many developers responded in kind, by filing complaints about the loans, frequently seeking exorbitant compensation for damages.

Gary Combs led the pack in that regard, suing Bank of the Ozarks for $108 million and at least two other banks. Though he’s not unscathed in the downturn, he’s been able to walk away from about 720 lots at Waterford Estates near Goshen, the Sundowner subdivision in Prairie Grove, and other projects.

In an alarming trend toward the end of the year, some developers sued their bankers claiming they shouldn’t have qualified for the money in the first place. One recent suit claimed neither the borrower nor the lender reasonably believed the borrower could pay back the money.

Expect law firms and the courts to be tied up with big-figure suits for the next year. Or two.

2.  New News – Even those – perhaps especially those – who bring you the news aren’t immune to consolidation.

After suffering “significant financial losses during the current economic recession,” Wehco Media, which publishes the Arkansas Democrat-Gazette, and Stephens Media, which published The Morning News of Northwest Arkansas, announced a joint venture on Sept. 3.

After an approval process that involved the U.S. Department of Justice, the two formed a new company, Northwest Arkansas Newspapers LLC, on Oct. 27. The two each own a 50 percent interest in NAN and share in the revenue.

The net effect was the News discontinuing its Fayetteville and Bentonville zoned editions while simultaneously taking over the production of content for the Northwest Arkansas Times and the Benton County Daily Record. Wehco continued to produce the Northwest edition of its statewide product.

Numerous journalists and production folk were laid off, though some writers were rehired within a couple of weeks.

 

3.  Barber’s Bankruptcy – Developer Brandon Barber’s financial troubles continued in 2009, culminating in a $52.3 million bankruptcy filing.

Barber filed for personal bankruptcy in July, eight months after his premiere project, the seven-story Legacy Building in downtown Fayetteville, was sold back to the bank that financed its construction.

His estranged wife, Keri Barber; and former business partner Seth Kaffka, and his ex-wife, Laura Chambers, all guarantors on the $16.7 million loan for the Legacy Building, also filed for bankruptcy in 2009, claiming a combined $65 million in debt.

Barber also filed for divorce from his wife of 10 years in May.

Barber’s Chapter 7 petition is still pending in bankruptcy court. Legacy National Bank has until Feb. 20 to object to the discharge of Barber’s debts.

 

4.  Lotto Bucks – The Arkansas Scholarship Lottery and the salaries paid to some of its executives garnered plenty of criticism, but there’s no denying the team assembled to execute got it in gear.

On Dec. 8, the ASL issued a press release stating it had passed the $100 million mark just 71 days since inception. Supposedly that means $25 million in never-before-seen scholarship money for Arkansas, and that the $62 million in prize money paid out has redistributed some coin.

“Our goal is to have a lot of people play a little bit, not a few play a lot,” executive director Ernie Passailaigue told a group of Benton County leaders in October.

The ASL started a new game Dec. 14, a twice-daily pick three game, and it plans to introduce more diverse games in 2010.

 

5.  Job Losses – Many workers in Northwest Arkansas felt the effects of the recession firsthand as companies were forced to lay off hundreds of employees in 2009.

In January, Arkansas Best Corp. announced 350 employees would be let go.

In February, Wal-Mart Stores Inc. announced it was laying off between 700 and 800 workers at its Bentonville and Rogers offices in an effort to increase operational efficiencies and cut costs.

The cuts affected positions in merchandising, real estate, marketing and support division in Wal-Mart’s U.S. division and merchandising and corporate functions in the Sam’s Club division.

Superior Industries announced in May that it would lay off 107 workers at its Fayetteville plant.

Superior, which makes wheels for the automotive industry, said the cuts were the result of reduced customer demand for the company’s products.

The Pinnacle Foods Inc. facility in Fayetteville cut about 69 employees in June.

There were several announcements out of Fort Smith as well.

 

6.  Washburn Washout – In May, Dana Washburn of Rogers said she had faked documents on two different brokerage accounts used to secure millions of dollars worth of loans from the former Pulaski Bank & Trust Co.

The fraud eventually meant Iberiabank fsb, the most current incarnation of Pulaski, had to write off $3.6 million in the fourth quarter of 2008.

Dana Washburn is married to Colon Washburn, a former Wal-Mart executive, and the couple developed, and later sold, Beau Terre office park in Rogers. It sold in 2004 for $56 million.

 

7.  CEO Changes – Four of Northwest Arkansas’ publicly traded companies saw a change in leadership in 2009.

Announced in 2008, Mike Duke officially replaced Lee Scott as CEO of Wal-Mart Stores Inc. on Feb. 1. The retail giant’s net income increased from $9.5 billion for the first three quarters of 2008 to $9.7 billion in 2009.

At Tyson Foods Inc., Donnie Smith took over as CEO after Leland Tollett served an interim stint of more than 10 months. Smith noted shortly after assuming his new title that all of Tyson’s operating segments made a profit in the fourth quarter.

Daniel Cushman became president of P.A.M. Transportation Services Inc. in July, and Judy McReynolds, of Arkansas Best Corp., will become the only female CEO of an Arkansas-based public company when she moves into that role on Jan. 1.

 

8.  Ice Storm – Much of 2009 was spent cleaning up after the massive ice storm that hit Northwest Arkansas at the end of January.

Hundreds of utility poles and trees were damaged by the heavy accumulation of ice, cutting off power to about 157,000 Northwest Arkansas residents. While most residents had their power restored within a week, the damage lingered for several months while crews worked to remove fallen limbs and debris.

Benton and Washington counties were two of 48 counties in Arkansas that were declared federal disaster areas in the aftermath of the storm. The declaration meant $5 million would be used to help reimburse state and local agencies for their storm relief efforts. Residents are still paying for the damage, however. Ozarks Electric Cooperative Corp. is seeking a rate increase of about 4 percent in order to offset an estimated $17 million in repairs.

 

9. Philanthropic Passings – Northwest Arkansas mourned the loss of two prodigious givers in 2009.

Martin A. “Marty” Roenigk was killed in a car crash in Iowa in June, and he was followed in death by Lawrence H. Schmieding, who succumbed to a two-year fight with cancer in November.

“This is a man who not only put in financial backing, but also his heart and soul [into Eureka Springs],” Eureka Springs mayor Dani D. Joy of Roenigk’s.

Roenigk, who was 68, was a co-owner of the 1905 Basin Park Hotel and 1886 Crescent Hotel, and gave both Eureka Springs’ properties second lives through renovation and preservation work. He also gave substantial gifts to The Nature Conservancy and public radio.

Schmieding, a successful businessman in the produce industry, was 89 and well-known for philanthropy that focused largely on programs for children and the elderly. His gift of more than $15 million to the University of Arkansas for Medical Sciences established the Schmieding Center in 1999 and will fund its operations through 2019.

“His generosity and vision for helping others is a legacy I believe will live long after all of us are gone,” said Larry Wright, director of the center.

 

10.  Poultry Suit – Oklahoma’s pollution case against the Arkansas poultry industry intensified in September, when the state began testimony in support of its claim that several companies have polluted the Illinois River watershed with tons of chicken manure.

Oklahoma sued the companies, including Tyson Foods Inc. and George’s Farms Inc. in 2005, and the trial is expected to stretch through January. That’s assuming U.S. District Judge Gregory K. Frizzell, who has openly scolded the 30-plus attorneys involved in the case, makes it that long.

“I wish we had a jury,” the judge said at one point, according to an Associated Press report.