Tag Archives: investment

GPEC Forum

GPEC targets international business executives

The Greater Phoenix Economic Council (GPEC) this week officially launched an international toolkit and forum series, called “Doing Business in Greater Phoenix, U.S.A,” with additional support from the City of Phoenix. The toolkit is designed to assist foreign companies with investment and expansion decisions in the United States and, specifically, the Greater Phoenix region.

From accessing capital to forming strategic partnerships with universities and purchasing land in Arizona – the toolkit is a compilation of how-to advice ranging from human resources issues, immigration law, investment parameters, taxes, import/export laws and banking.

“Phoenix is open for business,” Phoenix Mayor Greg Stanton said. “In order for our economy to be globally competitive, we have to reach out internationally so we can attract the businesses and jobs that will propel Phoenix toward a stronger future. Making our city a place where it’s easier to do business makes it even more attractive to investment. It’s a win-win.”

The toolkit was officially launched last month in Shanghai, where GPEC joined representatives from Green Card Fund, Polsinelli and BDO for the first forum, held in conjunction with the International Photovoltaic Power Generation Conference and Exhibition (SNEC).

“The response we received to our forum was incredible, with 75 attendees at the forum and nearly 1,000 online views to date – and we are just now starting to actively promote it,” GPEC President and CEO Barry Broome said. “In China, executives are hungry for this type of information so they can grow their businesses abroad. Fortunately for them, Greater Phoenix is primed for growth and is very hospitable in helping companies that are considering foreign-direct investments with their options in the City of Phoenix and the surrounding region.”

Arizona has taken giant strides over the past few years to keep business taxes low and improve available economic development programs. The City of Phoenix has a 24-hour business permitting program that allows businesses to apply for a permit and start construction on the same day.

“The response from businesspeople and government officials in China to the toolkit we presented was excellent. Helping executives understand the benefits that GPEC has to offer companies is a key component to positioning our region for future business opportunities,” said Melissa Ho, a shareholder of the national law firm Polsinelli. “Our international law team is excited to partner with GPEC and the City of Phoenix as we explore the possibilities in China.”

Since last month’s launch in Shanghai, the toolkit’s website has received nearly 1,000 hits without any additional promotion beyond the first forum. As such, the region’s international brand – of which the City of Phoenix is a central part – is receiving a significant boost from the toolkit. The media impact from the initial rollout in Shanghai was also substantial, with media impressions of 370 million from last month’s trip alone.

“By taking the initiative and launching the International Toolkit, GPEC, along with local business leaders and the City of Phoenix, have shown their steadfast commitment to providing foreign firms and individuals with the knowledge and resources needed to successfully invest and expand to the Greater Phoenix region,” said Kyle Walker, Managing Partner at Green Card Fund, which specializes in EB-5 visas and presented at the forum in Shanghai.

“I couldn’t be more excited about GPEC’s creativity in developing ways to attract new businesses to Arizona and am proud to contribute the strength of the BDO network to those efforts,” said Susan Wolak, Office Business Line Leader at BDO USA, which has 37 offices and 4,700 employees in China, and also assisted in the recent trip to Shanghai.

The toolkit is currently available in English, Mandarin and Spanish, and plans are underway for further translations. Both short and long versions of the toolkit are available at http://www.gpec.org/toolkit.

121198354

Ak-Chin Indian Community Invests $10M in Maricopa

During the May 7 Maricopa City Council meeting, Mayor Christian Price announced that the Ak-Chin Indian Community would be making an investment of $10 million in Maricopa. Of the $10 million investment, $2.6 million will support the Maricopa Unified School District and $7.4 million will be allocated to the operation of the City of Maricopa’s Copper Sky Recreational Complex, a multigenerational/aquatic center and regional park, currently under construction.

The Community’s investment in the District will assist with the short fall within the budget and the failure of the previous tax initiative.   Ak-Chin Tribal Chairman Louis J. Manuel, Jr. has long valued the importance of education and has made it a priority for the Tribal Council to find ways to improve upon it, not only for the Tribal community, but for the City of Maricopa as well.

“As true leaders to those our youth look to for guidance, we need to invest in them to promote and partake in a future yet to be determined but with the belief of opportunities,” said Chairman Manuel.  “The Ak-Chin Indian Community believes a partnership like this goes beyond the boundaries and creates a relationship to forge a strong future for everyone.”

The Copper Sky Recreational Complex, slated to open in spring 2014, includes a multigenerational/aquatic center and a regional park.  The 52,000-square-foot center will have many amenities, such as a gymnasium with two full-size basketball courts, a fitness area, an indoor running track, a competitive pool, a recreational pool, and a splash pad.  The regional park is approximately 120 acres and will be comprised of a five-acre lake, tennis, basketball and volleyball courts, a skate park, multi-use fields, a baseball/softball field, a dog park, and bike and multi-use trails.

“I am ecstatic to see the countless benefits that come from building positive and valuable relationships with our wonderful neighbors, the Ak-Chin Indian Community,” said Maricopa Mayor Christian Price.  “As we embark on this new era of collaboration, I look forward to seeing our partnerships continue to develop and our communities continue to thrive. I am encouraged that, together, we will continue to construct a highly-prized and decidedly-successful region.  The City of Maricopa is extremely grateful for the outstanding generosity of the Ak-Chin Community and we look forward to building a prosperous future together.”

The Community’s $10 million investment will be made in one payment to the City, who will serve as the grantor of the $2.6 million to the District.

“We have a life-long relationship with the City of Maricopa; we have shared in each other’s growth and helped when called upon.  We hope to continue our partnership into the future,” said Chairman Manuel.

Translatinal Accelerator looks to invest in Arizona bioscience companies, 2008

BioAccel Challenges Entrepreneurs to Solve Healthcare Problems

BioAccel, a 501(c)3 non-profit and Arizona’s premier resource for healthcare innovation, is announcing the BioAccel Solutions Challenge to solve medical and health delivery problems in Arizona, stimulate new company formation and increase investment in the industry.

BioAccel will publicly release a vetted list of key healthcare problems, or “needs,” identified by industry practitioners and leaders, aimed to challenge entrepreneurs to create innovative solutions to solve them. The needs are expected to focus on improving patient care and health outcomes by using medical devices, molecular diagnostics and potentially health IT, and will be released this summer.

Qualified applicants will receive a $50,000 investment from BioAccel if they succeed in receiving matching funds from investors during a competitive and lively Investment Day event. Successful groups will then have $100,000 in proof-of-concept dollars to form companies to address these patient care needs.

“Necessity is definitely the mother of invention. There are a lot of very talented entrepreneurs in Arizona whose are poised to solve difficult challenges that face the healthcare system. They simply need to be informed about well qualified healthcare needs, so they can apply their creativity to finding solutions to real problems,” said MaryAnn Guerra, CEO of BioAccel. “The BioAccel Solutions Challenge program unlocks the innate nature of entrepreneurs to innovate new products as well as provide the capital and support they need for early-stage success.”

Upon announcing the needs, BioAccel will be hosting Q&A sessions across the state as well as a webinar to support the groups.

“We’re encouraging groups across the state to form in anticipation of the release and to start thinking about how they will create innovative solutions,” said Kelvin Ning, Associate Director of Business and Technology Development at BioAccel.

The final Investment Day event is targeted for the end of 2013.

“The BioAccel Solutions Challenge is bringing together innovators and investors across the state to drive economic development, while at the same time addressing critical needs that face our medical community. Our focus is to catalyze this interaction and stimulate the growth of new enterprises and novel products,” Guerra said.  The BioAccel Solutions Challenge organizes problem, solution and market need, along with the resources needed to support validated outcomes.

As part of the BioAccel Solutions Challenge, winners will receive mentorship and support from BioAccel’s extensive business and financial network. Winners will also have access to BioInspire, BioAccel’s device incubator in Peoria, which provides affordable space and support for medical device technologies.

“BioAccel’s objective is to create sustainable companies that produce valuable products that are needed in the marketplace. Our hope is that these companies progress into our commercialization programs and beyond,” said Dr. Ron King, Chief Scientific and Business Officer at BioAccel.

In addition to creating jobs and new companies, the BioAccel Solutions Challenge will drive the organization’s Technology Advancement Program (TAP) that is focused on creating a more robust and qualified technology pipeline.

The TAP and New Venture Development Programs are commercialization programs unique to BioAccel, which are designed to specifically address the well-known Valley of Death that separates discovery from commercialization. Beyond access to BioInspire and capital, embedded within these programs is BioAccel’s due-diligence process, network of local and national subject matter experts, and healthcare business expertise.

 

veterans

USAA CEO Named Executive of the Year

Hiring and helping our veterans is as important today as it’s been at any other time in history. USAA’s chief executive officer will discuss how to assist veterans as they transition to civilian life when he’s honored for his achievements on April 25.

Ret. Maj. Gen. Josue “Joe” Robles served for 28 years in the U.S. Army. He now serves as president and chief executive officer of USAA, a Fortune 500 financial-services provider for members of the military and their families. This month, Robles becomes the 30th annual Executive of the Year chosen by the Dean’s Council of 100, a national group of prominent executives who advise the W. P. Carey School of Business at Arizona State University.

“Robles has set a superb example in serving both his country and his customers,” says W. P. Carey School of Business Dean Amy Hillman. “USAA is known for exceptional customer service and for aiding our active-duty military members, veterans and their families. We’re proud to honor these efforts.”

USAA provides insurance, banking, investment and retirement products and services to 9.6 million members of the U.S. military and their families. The organization is consistently recognized for outstanding service, employee well-being and financial strength. It was founded in 1922 and now employs more than 25,000 people at offices around the world, including one in the Phoenix area.

Robles was a USAA board member from 1990 to 1994, while he was still on active duty in the Army. His stellar armed-forces resume includes command and staff positions in Korea, Vietnam, Germany, and Operations Desert Shield and Desert Storm in the Middle East. He has received many honors, including the Distinguished Service Medal with Oak Leaf Cluster. He also served as commanding general of the 1st Infantry Division (the oldest division in the U.S. Army, also known as “The Big Red One”) and director of the Army budget prior to joining USAA in 1994 as chief financial officer. He became president and CEO in 2007. This new recognition adds to his full shelf of awards.

“I couldn’t be more honored, especially in a community that’s so important to USAA and our mission,” Robles said. “As a veteran myself, I am looking forward to discussing how we can help members of the military transition into civilian careers.”

Robles was named the “No. 1 Veteran in Business” by The Christian Science Monitor in 2009. Among other honors, he also received the Horatio Alger Award for being a dedicated community leader, committed to excellence. He serves on several boards, including the American Red Cross Board of Governors and the board of directors of the Federal Reserve Bank of Dallas’ San Antonio branch.

The event to honor Robles will be held Thursday, April 25 from 11:30 a.m. to 1:30 p.m. at the Fairmont Scottsdale Princess resort in Scottsdale. The W. P. Carey School of Business Dean’s Council of 100 chose Robles to follow previous high-profile winners, including Michael Dell, chairman and chief executive officer of Dell Inc.; Howard Schultz, chairman and chief executive officer of Starbucks Coffee Company; and Alan Mulally, president and chief executive officer of Ford Motor Company.

This event is part of the Economic Club of Phoenix speaker series. For more information about the club or to reserve seats, call (480) 727-0596 or visit www.econclubphx.org.

Navajo Tribal Utility Authority Solar Investments

First Solar buys S. Calif. power project

First Solar said Monday that it has purchased a 150-megawatt power project in Southern California.

Construction is expected to start this year and finish in 2014. The Tempe company said that the plant could generate enough electricity to power more than 60,000 average California homes.

First Solar Inc. bought the project, which is near El Centro, Calif., from Goldman Sachs Group Inc., energy investment firm Energy Power Partners and a third partner that it didn’t identify. It didn’t say how much it paid.

First Solar, one of the largest solar panel manufacturers in the world, also develops and builds large solar farms that generate electricity sold to utilities.

Its stock added 28 cents, or 1 percent, to $27.24 in afternoon trading.

The industry has in recent years been struggling with a steep drop in solar panel prices. Demand stagnated while manufacturing capacity increased and costs for raw materials plummeted.

wind

Arizona stops unregistered investments

The Arizona Corporation Commission has put the brakes on two separate investment endeavors that involved selling securities in wind and gold mining projects.

The panel announced Tuesday that it reached settlements with three people and ordered more than $16 million in restitution to be paid to investors.

In the first case, Edward Mazur and Ronnie Williams were accused of fraudulently promoting an unregistered investment program involving wind energy development.

The commission found that Mazur and Williams offered and sold to more than 300 investors nationwide but were not registered to do so.

In the other case, the commission found that Larry Goldman of Tucson and his company, MT Explorations, LLC, promoted an unregistered gold mining investment program to more than two dozen people in Arizona, Ohio and Utah.

semiconductor

ON Semiconductor Announces Retirement Of Notes Due In 2024

ON Semiconductor Corporation announced the retirement of $96.2 million in aggregate principal amount of its remaining outstanding Zero Coupon Convertible Senior Subordinated Notes due 2024, Series B (CUSIP No. 682189AE5) (the “Notes”). ON Semiconductor has redeemed approximately $96.2 million in principal amount of the Notes at par using available liquidity.

“We are pleased to announce the retirement of approximately $96.2 million of ON Semiconductor’s Zero Coupon Convertible Senior Subordinated Notes,” said Donald Colvin, ON Semiconductor executive vice president and CFO. “With this redemption, ON Semiconductor will eliminate future potential share dilution associated with the Notes.”

ON Semiconductor is a premier supplier of high performance, silicon solutions for energy efficient electronics. The company’s broad portfolio of power and signal management, logic, discrete and custom devices helps customers effectively solve their design challenges in automotive, communications, computing, consumer, industrial, LED lighting, medical, military/aerospace and power applications. ON Semiconductor operates a world-class, value-added supply chain and a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe, and the Asia Pacific regions. For more information, visit http://www.onsemi.com.

For more information about ON Semiconductor, visit ON Semiconductor’s website at onsemi.com.

Chalkboard - Making the Grade for Growth

STEM Education – Making The Grade For Growth

Arizona Leaders know it’s a problem.

“When one of our top employers of scientists and engineers says that if he had the decision to make all over again, he would never bring his business and its thousands of high-wage jobs to Arizona because of the lack of commitment to education, that is a call to action,” says Phoenix Mayor Greg Stanton.

The top employer Stanton is talking about is Craig Barrett, former Intel CEO, who told state lawmakers in no uncertain terms that cuts in education are stifling Arizona’s economic development. But the financial aspect of education isn’t the only thing suppressing the state’s ability to prosper in the technology and bioscience industries. It’s the quality of Arizona education that’s killing us, according to another Valley tech leader.

“Our high schools are a mess,” says Steve Sanghi, CEO of Microchip in Chandler. “They are among the worst in country and that is a major problem that we need to address before the state can prosper.”

Sanghi sees many hopeful workers come into Microchip looking for a job, but are unable to pass a remedial math test that the company gives to all prospective employees. If they cannot pass, they cannot get hired, Sanghi says.

“STEM education — science, technology, engineering, math — is where we lack,” Sanghi points out. “That’s where the most competitive, high-paying jobs will be in the future. That’s where other countries are taking our jobs and taking our positions. That’s where we need to improve, but that’s a very tall order.”

It seems like a Herculean task. Arizona ranks 44th in the country in the Quality Counts report, compiled each year by Education Week in conjunction with the Education Research Center. That ranking represents a slight drop from the state’s standing in last year’s report.

“Today’s students have a lot of distractions,” Sanghi says. “We cannot compete with Hollywood stars or sports figures because they are bigger than life. It’s easy to get students to dribble a ball or go into music or arts. It’s crucial that we get them interested in science and technology before pop culture gets them. Once pop culture gets them, we can’t get them back.”

The only way to change the way students view education is through visionary leadership, says Pearl Chang Esau, president and CEO of Expect More Arizona, a statewide movement dedicated to making Arizona education the best in the nation.

“Our leaders need to start viewing education as an investment, not as an expense,” Esau says.

Many of Arizona’s leaders are taking the challenge to heart and introducing programs and legislation aimed at promoting and strengthening STEM education in the state:

  • Rep. Heather Carter, R-Cave Creek, has introduced a bill to make it easier for STEM professionals to become certified to teach and bring their expertise to the classroom.
  • Rep. Kimberly Yee, R-Phoenix, has introduced legislation to boost STEM education in poorly performing schools by calling for the State Board of Education to intervene when a school has earned a D or F for two consecutive years.
  • And Stanton, who campaigned on an education platform even though he was publicly criticized because school districts, not cities, have jurisdiction over education in Arizona, has created a Mayor’s Futures Forum on Education.

 

“The city of Phoenix is not as well-positioned as it should be to compete in the national economy,” Stanton says. “We need more of our kids graduating high school and studying in areas that will create the jobs of the future.”

Ironically, the man who has been the biggest critic of the state’s poor education record may be the man to help give it a much-needed spark. Retired Intel CEO Barrett has been named chairman of the Arizona Ready Education Council. He will be heading “Arizona Ready,” which is dedicated to helping Arizona students prepare to succeed in college and in careers that will boost the state’s economy. To improve education, Arizona Ready has established specific, measurable goals and accountability for everyone involved in educating our children.

“There is a lot of room for improvement in the K-12 education system in Arizona,” Barrett says. “I believe it is the responsibility of society to give the next generation the tools to be successful.”

Barrett insists that Arizona schools need to strive not just to be the best in the state, but they need to challenge themselves to be the best in the world so Arizona can compete in the global marketplace.

“It is not appropriate to just compare one local school district, or state, with another,” Barrett says. “You have to compare the accomplishments of your students with the best in the world.”

Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry, agrees with Barrett that raising the standards is imperative to improving education and creating a pipeline of future workers with the skills to succeed in tomorrow’s tech-heavy industries. To accomplish that, Arizona Ready is raising the standards and hopes to accomplish these goals by 2020:

  • Increase the percentage of third-graders meeting state reading standards to 94 percent. In 2010, 73 percent met the standard.
  • Raise the high school graduation rate to 93 percent.
  • Increase the percentage of eighth-graders performing at or above “basic” on the National Assessment of Education Programs (NAEP) to 85 percent. In 2010, the numbers were 67 percent in math and 68 percent in reading.

 

“Every kid has that dream of becoming a celebrity in Hollywood or becoming a sports star,” Sanghi says. “But the chances of the average high school student making it in Hollywood or in sports is 1 in 1,000 at best. But if we can get them interested in STEM and get them to dream about becoming a doctor or scientist or engineer, the chances of them achieving their dream is pretty high. Most will be able achieve that.”

Arizona Business Magazine March/April 2012

SkySong is a mixed-use development in Scottsdale with a focus on global industries. - AZ Business Magazine Jan/Feb 2011

GPEC’s Revamped International Leadership Council Looks To Bring Foreign Direct Investment To Arizona

The Greater Phoenix Economic Council (GPEC) is sharpening its international approach with an aim toward bringing more foreign direct investment to the state. To that end, GPEC has restructured its International Leadership Committee (ILC).

“My vision is to put Arizona on the radar,” says Rudy Vetter, senior vice president of international business development at GPEC.

Sharon Harper, president and CEO of The Plaza Companies, is one of the ILC’s co-chairmen. The Plaza Companies is the co-developer of SkySong, a mixed-use development in Scottsdale with a focus on global industries.

“Repositioning the (ILC) board and a more strategic focus on foreign direct investment on Europe, Asia and Canada has resulted in a greater number of international prospects and successes,” she says.

Harper notes that the top-tier markets for the committee are those that best align with Arizona, such as China, Germany, Italy, Spain, France, the United Kingdom and the Netherlands, along with Japan, Korea and Canada.

The specific industries being targeted are solar energy, other renewable energy products, clean tech and environmental technology, biotech, medical and life sciences, as well as high-tech manufacturing.

“There is a great opportunity for Arizona and Greater Phoenix to benefit significantly from foreign direct investments. By focusing on Arizona’s core strengths, and specifically the vision at SkySong and other projects that are focused on the global economy, Arizona will be attracting and creating good jobs for our region,” Harper says.

Reducing the committee’s size, along with adding leading investors and major academic leaders in the Valley to its roster, has resulted in a concerted effort to make a more powerful impact in the international arena. Intel, Arizona State University, Thunderbird School of Global Management and the University of Phoenix all have a presence on the committee, as well as representatives from the United Kingdom, Germany, Canada and the Netherlands, among others.

“The key element for the ILC is that they invest their expertise, their skills and knowledge about international affairs, and they combine that with investing into their network, connections and international activity,” Vetter says.

With a diverse and experienced pool of senior executives on the committee, the main goal is to get the word out about Arizona and the many perks it offers.

“It’s about creating awareness,” Vetter says. “Arizona is not necessarily the first state that comes to mind to an international investor. (It’s up to us) to make them aware of the great qualities this place has.

“Very often, we create first contact by meeting companies during trade shows and conferences; we find out if there is a company interested in an operation in the U.S., and we make the case for Arizona and Greater Phoenix,” Vetter adds.

He points out that although Arizona can’t compete with companies looking for an East Coast presence, when it comes to the West, the committee’s job is to ensure the state is on the shortlist of candidates.

Since the passage of the Renewable Energy Tax Incentive Program, Arizona has become a power player in the solar industry, attracting several high-level, international companies to the Valley. To keep the momentum going, Vetter and the rest of the committee work closely with international companies, providing them with step-by-step plans to make their entrance into Arizona a smooth one. The process of foreign companies setting up a presence domestically comes with many challenges, and GPEC strives to ensure the companies’ success.

“It’s a seed that we have to nurture, and sooner or later we can grow a plant,” Vetter says. “They’re coming with an investment, but they have to create the business from scratch. GPEC connects them with local business to get them started faster and to create mutual benefit for the whole community. We hear all the time from companies that locate here; they love this one-stop shopping (GPEC offers).”

As the ILC continues on its mission to attract foreign investors to the area, it also will continue to focus on building a strong sustainability industry in the state.

“The idea of seeing the Valley plastered with solar panels, people driving cars they can plug in and knowing they don’t have to pay their utility bills is a nice vision — but we are not that far from it anymore,” Vetter says.

AZ Business Magazine Jan/Feb 2011

Fifth Annual Arizona Entrepreneurship Conference

Fifth Annual Arizona Entrepreneurship Conference

Arizona Entrepreneurs Hold Fifth Annual Meeting Of The Minds

Join in for an exciting opportunity to connect, share ideas and be inspired at the fifth annual Arizona Entrepreneurship Conference.

This year’s conference, which will take place Wednesday Nov. 17, 2010 at the Desert Willow Conference Center, will feature tips and ideas from expert CEOs while also providing allotted time for networking with fellow entrepreneurs.

Over the course of the day several topics will be discussed including everything from effectively using social media and creating an eco-edge to conquering the chaos of entrepreneurship and engaging in top-notch customer service.

Attendees will not only get the chance to learn from local leaders on what it takes to get funded in Arizona, but will also see a showcase exhibit of Arizona companies and organizations that provide services that support entrepreneurs.

Additionally, this year AZEC will be addressing five of the most important needs to consider when reaching out to Arizona communities: collaboration, civics, education and training, arts and culture, and investment capital.

A variety of keynote speakers will accentuate the conference by providing their knowledge and expertise of the entrepreneurship field.

Debra Johnson, founder and CEO of EcoEdge will share how her passion for reducing environmental impact and being frugal created her award-winning company.

Jeremiah Owyang, a web strategist for Altimeter Group will discuss useful approaches to entering the digital world.

Dr. Paul Bendheim, founder and CEO of BrainSavers, a company that provides assistance in reducing the risk of memory disorders by incorporating healthy lifestyle habits, will speak about his entrepreneurial experience.

For those who are just starting out or who have been lifelong entrepreneurs, this year’s conference will provide abundant opportunities to foster new ideas and learn how the experts first got started.

To register and for more information, visit azentrepreneurship.com.

Stocks

Charles Schwab Bringing Hundreds Of Jobs To Phoenix

The investment services company Charles Schwab announced today that it is expanding its operations in Phoenix, which could result in up to 900 new jobs over the next five years.

The company’s main Valley location is at 24th Street and Lincoln Drive. Schwab plans to hire 200 new employees by the end of the year, on top of the approximately 300 that were added last year.

“We currently have approximately 3,200 employees in Phoenix, which makes this home to the single largest population of Schwab employees in the U.S.,” said Joe Martinetto, Schwab executive vice president and chief financial officer. “Our corporate headquarters continues to be in San Francisco, but Phoenix is clearly a very important employment center for us.”

Phoenix Mayor Phil Gordan said the Charles Schwab expansion not only would add jobs, but also $22 million in capital investments.

Schwab currently is recruiting to fill client service positions with starting salaries in the $34,000 to $40,000 range.

“Our purpose as a company is to help people become financially fit — not only our clients and our employees, but the people in the communities where we live and work too,” said Bernie Clark, executive vice president of Schwab Advisor Services, and a Phoenix resident. “This partnership with the city of Phoenix is an example of that — by helping us bring this acquisition to fruition, we are in a better position to continue providing high-quality jobs and opportunities to the people who make Phoenix their home.”

Interested job seekers should visit www.aboutschwab.com/careers.

Benito Almanza Arizona State President Company: Bank of America - AZ Business Magazine Sept/Oct 2010

CEO Series: Benito Almanza

Benito Almanza
Title: Arizona State President
Company: Bank of America

How would you assess the banking industry’s reactions to the new financial reform law? What are the industry’s biggest concerns, particularly in regards to derivatives and less onerous regulation on small banks?
Bank of America has generally supported reforms, including the formation of a new consumer protection agency. While this reform will ultimately have an effect on many businesses across Bank of America and other financial service companies, customers and clients should not expect any abrupt changes as a result of this legislation. The full impact and scope of the bill may take years to be felt, as regulators establish hundreds of new rules to implement the law.

The year 2009 was a tough one for Bank of America in terms of the federal bailout and executive shakeup. How has repaying the bailout and installing a new CEO affected the company’s operations and public image?
In December, Bank of America took a series of important actions to move our company forward. We repaid the entire $45 billion preferred stock investment provided under the Troubled Asset Relief Program (TARP), plus interest. A few days later, Brian Moynihan was selected to lead our company. He has a level of credibility and broad-based experience few can rival, having led every major line of business in financial services, including wealth management, corporate and investment banking, and consumer and small business banking.

As Arizona president for B of A, how have you — and your peers from other large banks — addressed the concerns Main Street has about Wall Street?
The industry understands that our well-being is interconnected with the health and vitality of the economy and the communities we serve. It is not in any companies’ interest to put profit over common sense. Nor is it in anyone’s interest to lose sight of the value our industry provides among legitimate concerns about the difficulties of the recent past. Our challenge for the foreseeable future — and I think we’re moving in the right direction — is to reconcile this and strengthen our financial system by working with leaders and regulators in a spirit of trust and goodwill.

In speaking for my own company, Bank of America has introduced clarity commitments within our card, deposit and mortgage services to make sure customers receive clear and easy to understand language about their relationship with our bank. In addition, our new overdraft fee changes went into effect July 1, whereby we will decline a debit card transaction at the point of sale when there is not enough money in the account for the transaction, and not charge overdraft fees to the customer.

Small businesses are having a difficult time getting loans and various lines of credit. B of A prides itself on its No. 1 SBA-lender status. How important is that role in the economic recovery?
With 4 million small businesses customers — more than any other bank — Bank of America feels a deep sense of responsibility to support them in every way possible. In the first half of 2010, we provided $45.5 billion in loans to small and medium-sized companies, well on our way to meeting our pledge to increase lending by $5 billion over 2009 levels, or $86.4 billion.

We continue to also look for creative ways to help these businesses bridge to a stronger economy. For example, we recently announced a new program that can help as many as 8,000 small businesses obtain $100 million in federal microloans through nonprofit lenders like CDFIs, by providing CDFIs with grants to cover loan loss reserves required to get the SBA/USDA loan capital. This is low-cost, long-term capital for small business microloans nationwide over the next 12 months.

What challenges and opportunities lie ahead for the banking industry in Arizona?
Arizona’s economy will probably be on a slower track than most states because of the significant losses in our housing and jobs markets. That being said, there are many bright spots to look forward to and we must continue to make every good loan we can and focus on opportunities that will help our long-term economic recovery …

    Vital Stats


  • Has been with Bank of America for more than 30 years
  • Responsible for the overall performance of all business banking activities in Arizona
  • Graduate of Stanford University and Santa Clara University
  • Member of the California State Bar Association
  • Member of the U.S. District Court Northern District Association
  • Member of the Greater Phoenix Leadership and Arizona Bankers Association
  • Serves on the board of Phoenix Aviation and Teach for America
  • www.bankofamerica.com

Arizona Business Magazine Sept/Oct 2010

Investors Need Transparency AZ Business Magazine Sept/Oct 2010

Investors Need Improved Transparency When Dealing With Illiquid Assets

Now more than ever, investors and regulators are demanding greater transparency when it comes to hedge funds that invest in illiquid financial instruments. This should come as no surprise given that so many recent defining business failures were related to illiquid assets.

For example, AIG’s downfall was caused by investments in structured credit derivatives that were difficult to value. Bear Stearns’ and Lehman Brothers’ descents were due in part to the illiquid non-agency mortgage assets they held. Many hedge fund investors suffered significant losses in the recent financial downturn, and consequently want a closer view of portfolio assets and valuation processes.

What are illiquid investments?

Illiquid assets are investments that can be difficult to sell and value due to limited market participants, infrequent transactions, complex structures or highly uncertain future performance. In some cases, it can take years to realize a return on the investment. Illiquid investments are frequently held in portfolios managed by hedge funds, private equity groups or investment banks. Examples may include investments in private equity or venture capital companies, distressed credit, bankruptcy claims, over-the-counter (OTC) derivatives, whole loan pools, convertible bonds, auction rate securities and collateralized debt obligations (CDOs). Because of the lack of observable transaction prices, illiquid investments often are valued using models that may include significant management judgment.

Upfront due diligence

In order to mitigate the risk posed by illiquid investments, institutional investors need to perform increased due diligence relating to a fund’s investment strategy. They need to be able to answer questions such as:

What experience has management had with liquidity shocks?

What informational advantages or specialization do they have in the marketplace?

What else is required in order to implement the fund’s strategy, such as sufficient ability to sell/hedge positions in a dealer market or continued financing terms?

It’s also important to ensure that the fund structure is appropriate to meet the cash flow needs of investors and the investment strategy, as well as the financing requirements of asset managers. Is the fund’s structure appropriate given the liquidity profile of its investments? Consider issues of leverage, redemptions and side-pocket accounts that have been used to separate illiquid assets from other, more liquid investments. Is the financing or leverage of the fund appropriate given the composition of its assets? For example, a highly leveraged capital structure with short-term financing is not advisable when combined with illiquid investments.

Lock-up periods, which may restrict an investor’s ability to exit a fund investment, are another area of growing attention due to the recent liquidity crisis. While many funds that specialized in illiquid assets were able to negotiate long lock-up periods for redemptions, other firms were forced to sell in order to satisfy investors’ requests for cash. Funds with long lock-up periods were well-positioned to buy assets at favorable valuations when their competitors had insufficient capital available to make investments. For funds with large concentrations of less liquid investments, a long lock-up period is an appropriate structure.

Hedge funds with long lock-ups need to be able to instill investor trust in their managers’ investment approaches and their funds’ interim values. If investors are restricted in redeeming their fund investments, they should have sufficient information to assess the value and report to internal constituents.

Valuation policies and procedures with an independent third-party review

Hedge funds need to establish and follow clear policies and procedures for the valuation of all assets, but this is particularly true with regard to illiquid investments. During due diligence, investors should review the fund’s written valuation methodologies to ensure management is adhering to industry best practices.

Hedge fund management can ease investor uncertainty by engaging an independent third party to review the fund’s valuation policy, process and the resulting asset prices used for investor reporting. The third party may be hired to review the valuation process and inputs for reasonableness, or alternatively, to provide an independent value of the defined assets.

Additional disclosures to investors

In response to market dislocation, many hedge funds have made disclosures above and beyond what may be required by generally accepted accounting principles (GAAP) in their financial statements to investors. Currently, these disclosures are not part of the regular financial statements, but are provided in an investor letter or as part of a supplemental investor reporting package. However, we may also see additional disclosures required related to fair value measurement, as well as structural or contractual risks.

Such disclosures can help clarify the risks to investors, such as an estimate of transaction and search costs required to liquidate assets, a discussion of market participants and exit strategy, or an estimate of the time necessary to sell or unwind a position — especially a large position. Hedge fund disclosures may also include the liquidation or quick-sale value, i.e., the price if the manager is compelled to sell.

Types of illiquid assets

  • Private equity or venture capital companies
  • Distressed credit
  • Bankruptcy claims
  • Over-the-counter derivatives
  • Whole loan pools
  • Convertible bonds
  • Auction rate securities
  • Collateralized debt obligations

Arizona Business Magazine Sept/Oct 2010

light reflecting off gold bars

Don’t Count On The Current Gold Rush Lasting

The recent economic recession forced society to relook at what we consider to be financial norms. What was considered reasonable several years ago is now unjustifiable based on today’s new standard.

The comfort of having money in an actual wallet is greater than having a pricey purse to carry it in.

It is possible that the same fear that shifted people’s spending habits is what has driven the price of gold to an all-time high.

In my book, “Financial Intelligence,” I show the historical volatility of the price of gold per ounce. Ten years ago this July, gold was trading at approximately $288 per ounce. Today, gold is now trading just shy of $1,200 per ounce. That is a near 15 percent compound rate of return per year over the last 10 years, while the stock market has gained no ground.

Now that the economy is slowly stabilizing, will gold continue to be a profitable investment? Only time will tell, but history suggests that there most likely will be a decline in price. Everything in this modern economic world is cyclical and vulnerable to corrections.

I am amazed about how many people assume that because gold is a tangible asset, it does not carry any risk. Despite what the late-night infomercials say, there is risk in gold and you should consider that risk before investing in it.

In my opinion, when you start to see repetitive get rich quick TV commercials, you should begin to doubt that “investment.” Remember in the late 1990s when TV commercials were touting that through day-trading stocks you could retire in your 4′s? Or the real estate gurus that told you that you could make millions in real estate if you attended their workshops? Today you can’t watch TV without seeing some type of commercial encouraging you to buy gold.

Given the economic environment that we just experienced, it makes sense that gold appreciated in value. Gold historically has increased in value during times of great uncertainty, but the tide is slowly changing. If the global economy can avoid a double-dip recession, we may see the price of gold revert back to its historical mean.

Apart from winning the lottery, there is no such thing as a get rich quick strategy. It always takes longer that you originally hoped and there are always setbacks.

It is always a wise move to invest in an asset that you feel meets your long-term investment objective and that enhances your diversification. Don’t try to time the market or try to get in on the next big thing; you could do more damage than good.

Bottom line, if you had a crystal ball, you should have invested in gold 10 years ago. Now it may be too late.

Onboarding Employees

The Critical Process Of Onboarding Your New Employees

You’ve sorted through stacks of resumes, interviewed the best and selected the perfect candidate. Now what? Once you’ve made the job offer and it has been accepted, it is time to start thinking about your onboarding process.

Onboarding is the term used to describe the process of integrating a new employee into your organization, and there are three steps to consider.

Be prepared
It is very unpleasant for an employee to show up to a new job, excited about the possibilities, and end up with the feeling that she was not expected and the company is surprised to see her. Since that is not the kind of surprise you want for your newest “most valuable asset,” it is important to prepare in advance for her arrival. Take into consideration such factors as:

The workspace — Is it properly equipped? Is it cleaned up, with the remnants of the prior occupant removed? Include a small “welcome” gift.

Name badge — If your staff wears name badges, be sure your new hire has one on her first day of work.

Time — Be sure the new hire’s manager has taken the necessary time to make introductions with co-workers. Your new hire should not be treated like he is an inconvenience to a busy schedule.

Welcome
Many employees make the decision about whether they are going to stay at their new organization within the first week. Since we only have a short period of time to make a good and lasting first impression, take these important steps to make him feel welcome:

Be sure your front desk personnel are trained to welcome new hires in the same way they welcome your customers. The welcome should say, “We’ve been expecting you and are glad you are here!”

Give your new hire a tour upon arrival. Be sure to point out the restrooms, drinking fountain, coffee maker, vending machines and break room, in addition to her workspace, the copier, supply room and other important rooms in your building. Remember, you want to make a good impression, so team her up with someone who is a great spokesperson for your organization.

The road to success
You want to set your new hire up for success from the start, so consider the following when laying out the roadmap for her first several months onboard:

If you have a formal job description, make sure your new hire receives a copy of it on her first day of work. The manager, or a co-worker who is knowledgeable about the job, should review the job duties and clearly define what is expected for each task. Define “success” up front, so your new hire knows what will be expected of her.

If the manager for the new hire is often in meetings or off-site, assign another “go to” person for your new hire. Since new hires decide early on if they are going to “fit” at this organization, it is important they feel comfortable asking questions and seeking assistance when needed.

We all have things to learn when starting a new job. Be sure your new hire is trained on all aspects of his job, from the mundane to the complex. Depending on your environment, it may be best to wait until a couple of days after the start of the new job to train on more complex matters. Give enough information for your new hire to go home loving his new job on the first day, and not so much information that he wonders how he will ever remember it.

Onboarding is a six-month to one-year process depending on the complexity of the work you do. Check in often with your new hire to make sure she has received the training she needs, has the proper equipment to do her job, understands your corporate culture and has made a few friends with whom she feels comfortable.

Since you have made a significant investment in selecting and hiring your newest “asset,” you want to do everything possible to get them onboard and keep them onboard. An effective onboarding process will set everyone on the right track.

money, cash, hundred dollar bills

This Isn’t the First Crisis The Valley’s Banking Industry Has Faced

The Valley has come a long way over the past 25 years, and the banking and financial sector is no exception. Challenges, crises and legislation brought about dramatic change that has created a new era in banking and finance. In the mid-80s local banks dominated the sector, while regional and national banks were nonexistent. The Valley was home to the “big three” — Valley National, First Interstate Bank of Arizona and The Arizona Bank.

The financial sector was real estate driven, with a considerable concentration in housing and commercial real estate development. Second to real estate were the “Five C’s” of Arizona’s economy: climate, cotton, citrus, cattle and copper.

The savings and loan and real estate crises of the late-80s were the turning point in the Valley’s banking sector. At a time when Arizona’s “big three” were suffering, large banking corporations invaded. Bank of America’s first “real” presence in the Valley was assimilating five different savings and loans in the state.

In summary, there have been many milestones over the past 25 years that have shaped the banking sector. Such milestones include sustaining itself through the S&L crisis and the severe commercial real estate downturn of the late-80s; recovering from the infamous Lincoln Savings and American Continental debacle; weathering the “dot-com” implosion of 2000; and passing the Interstate Banking Act that led to dramatic industry consolidation of local banks into regional, national and global banking organizations. More recently, the securitization boom in both the residential and commercial real estate market revolutionized real estate lending.

Today’s “big three” — Chase, Wells Fargo and Bank of America — control the vast majority of deposits statewide and a much more dramatic concentration of banking resources overall. But more importantly, small and mid-size banks have reemerged. 
There is also now more proactive leadership in the business community.

Arizona and the Valley have a more diverse economic base due to the dramatic progress of our investment in education, as well as the high-tech, defense, life sciences, health care, biotech, telecom, optics, hospitality, entertainment and transportation industries. We now have an “alignment” of stakeholders, including the public, business, academic and philanthropic sectors, and therefore stronger initiatives for more diverse economic development, such as sustainable systems, solar and renewable energy and land management.

That said, in 2009 we are again faced with many economic challenges that will no doubt continue to shape our industry and affect how we operate. Banks need to grow wiser and smarter in serving their communities and Arizona’s businesses. We are resource constrained from a state revenue standpoint and by expenditures driven by our phenomenal population growth and federal-mandated programs. Arizona is a high-growth state and we need to strike the right balance between infrastructure “catch-up” and smart and balanced growth. The banking industry has and will continue to support a more knowledge-based and service-oriented economy.

What does the future hold for the banking and financial sector? Banks will need to play a transformational leadership role in public issues, specifically economic diversification and development, as well as public finance. The industry must become a recognized leader for innovative approaches to capital formation and connecting intellectual capital with financial capital.

We must also promote a diverse array of financial institutions from small local community banks and mid-size niche banks to larger regional and global institutions that promote cross-border trade finance and strategic alliances.

There is no doubt that the next 25 years will bring as many challenges and reforms as we have overcome in the past, but our state’s banks will regain their strength; the strong will survive, consolidate the weak and prosper with our state’s growth. And as Arizona’s banking industry continues to grow stronger and smarter, we foster confidence as we reaffirm the leadership role in Arizona’s economic foundation.

test tubes

Biotech Startups Need To Take Ideas From Concept To FDA Approval

Arizona has always been known as a great place to start and grow a business. While some industries have been staples of our economy for some time, there’s another growing industry that is bringing jobs, capital, and most of all, innovation, to our state. Arizona has, in recent years, become home to a growing number of biotechnology and medical device companies.

At the heart of every one of these companies is an entrepreneur with a vision and an idea. Some of these entrepreneurs are starting a biotech or medical device company for the first time. That’s scary enough. But the biotech world comes with a whole other set of hurdles that makes it even harder to go to market. One of the first and most important hurdles is getting U.S. Federal Drug Administration clearance. This is a challenging process every biotech, medical device and pharmaceutical company has to face. Here’s an inside look at how startup biotech companies gain clearance for their products and bring them to market.

For starters, which companies need FDA clearance and which ones can bypass the process? Basically, if a company plans to sell its product directly to physicians and hospitals, and wants insurance companies to pay for it, it needs that FDA clearance. All entrepreneurs in this space need to ask themselves that same key question when they start a new venture: Who are you selling this to?

For a small startup biotech business, or even just an engineer with an idea, the FDA process may seem daunting, costly, and in some cases, unnecessary. Many companies try to shortcut the system or choose instead to market under homeopathic regulations, which are quite different than the FDA’s. In these cases, there is often (but not always) less testing or insufficient data to support claims of what the product can do. In some cases, small businesses think the FDA makes the process so difficult and costly they simply can’t do it. It’s important for these startups to remember that gaining FDA clearance should be seen as an investment in their company that allows them to market effectively. It may seem stifling, but it also opens doors to sales channels that wouldn’t be available otherwise and can be very lucrative.

The public often doesn’t realize there are different types of FDA clearances biotech, pharmaceutical or medical device companies can apply for.

Pharmaceutical companies apply for a new drug application, while medical devices fall into three categories:

Class 1 —
This is for low-risk devices and it costs almost nothing to submit for this clearance.
Class 2 — This is for devices that are substantially equivalent to other devices already on the market. This process can cost about $4,000 just for the submission, not including the cost of testing and developing the submission.
Class 3 — This is for new devices or devices that are deemed life supporting/assisting and can cost millions of dollars after testing and the application process is complete. It’s important to remember that only products with a Class 3 are FDA approved, while the others are FDA cleared. FDA approval simply means that the FDA was involved in the testing and it was a new product unlike any other on the market.

Any startup biotech company will want to spend ample time researching the guidelines and class definitions before applying for FDA clearance. It seems like a tedious process, but it is a sound time investment and helps ensure the company only needs to go through the process once per product. Any mistakes along the way can result in going back to the drawing board and starting the process all over again.

To avoid this, these companies need to hire employees and consultants who have been through the process and can lend guidance from experience. Also, it is strongly advised to open a dialogue with people at the FDA. They are there to help companies get through the process smoothly and efficiently, and can help a startup overcome challenges along the way.

So when should you start the process? In most cases, a company will wait until it has a product prototype or a design it’s happy with before starting the application. The process to apply can often begin at the start of the business, but the real work begins once the company has something that can be tested for safety and efficacy. The good news is once the submission is complete, and if everything in the application meets the FDA’s requirements, it will only take 60 to 90 days on average to hear back from the FDA.

Once a company considers FDA clearance they can also expect some changes to their business. As with every form of government licensing, the FDA has rules and guidelines that must be followed, and these are known as the quality systems requirements. This is simply a form of management by the FDA that ensures biotech companies offer a consistent level of quality in every aspect of their business and are marketing products in a way that will not deceive or misguide the public.

In the end, every biotech company has to decide how they are going to grow their business. As we see more and more medical device and other biotechnology companies emerge in Arizona, we’ll see them go to market in vastly different ways.

shattered glass

Wealth Managers Can Diagnose And Treat Battered Financial Confidence

If the past several quarters have taught us anything about wealth management, it’s the importance of routine maintenance, diagnosis and treatment of our portfolios — even if they are ailing. Much like the consistent faith we place in our doctors for our health, so too must we place trust in our wealth management advisory teams.

Oftentimes, it is the most difficult periods that strain our trust and twist our thoughts. When managing your wealth, don’t let fear or uncertainty guide you. Wealth management is not a product, or even a series of products, but a long-term strategic approach to assisting clients through comprehensive planning, solutions and personalized service.

Just as you wouldn’t seek a dermatologist for a kidney ailment, your selection of a wealth management clinician should be based on a long-standing track record of success in certain specializations. Similarly, seek financial institutions with strong, proven stability and those that are regulated and monitored by federal oversight agencies. Finally, successful wealth management relies on the integration of banking, financial planning and investment management with professionals on client-focused teams working together to develop and implement the strategies clients need to meet their goals.

Bad economy, good opportunities
The past six months have prompted fearful retreats to the sidelines when it comes to managing portfolios. Like ignoring a persistent cough, simply brushing the problem aside will lead to further difficulty down the road. The toughest economic times often provide the biggest opportunities, but a bold and confident approach is required. A back-to-basics approach that examines the variability of returns by asset class — a long-trusted wealth management strategy — can be best suited for those who have lost confidence in their portfolio management.

Wealth management as a field has changed rapidly over the past decade. The advents of technology, the integration of a global economy and a better-educated investor have caused an evolution in the industry. The recent economic crisis simply highlighted this new reality. It also illustrates why your wealth management team should consist of those with differing areas of expertise. There are several upside factors to working with larger, established wealth management institutions. Besides a strong track record of success and regulatory oversight by the U.S. government, larger networks of wealth managers offer precise insight on how to best manage your money.

Ask questions such as: Should I invest in foreign markets? What are the best times to buy commodities and what kinds? How much cash should my portfolio have?

While one wealth management adviser can answer these questions broadly, the better analysis and decisions will come from members of your team who are experts in each sector of investment and have access to the latest, most up-to-date analytics and data.

Assessing your goals
Another key element to assess — and this is truer today than ever before — is your risk tolerance. This answer doesn’t come easily, but ask yourself a few key questions: When do I want to retire? What is my desired quality of life during retirement? What kind of estate am I planning to leave for my children and family?
By educating yourself on your expectations, you can clearly report your needs and desires to your wealth management team and, in turn, they can come up with various strategies and tactics for your portfolio.

Also, expect these goals to change. An investor just starting a family is in a far different financial place than an executive in his 50s and vice versa. Your wealth management team must fluidly advise you on what your portfolio should look like at different phases of your life. A trusted adviser and a seasoned plan is needed for every stage of the wealth management cycle: accumulation, growth, transfer and preservation.

Much like that patient/doctor relationship, education is paramount. Good physicians lay out clear, professional advice on the best way to care for your health. The best doctors will also advise you to seek second and third opinions. You should do no less with your portfolio.After all, you’ve worked hard to build a healthy portfolio.

For me, wealth management has been nearly a four-decade process of learning and building relationships with my clients. They trust me much like they trust their doctor. It’s a cycle of service that continues to evolve. As you would with your health, use the expertise of your most trusted confidants to help lead your decision making — it will pay off in the long run by keeping you healthy, wealthy and wise.

money line

Stabilizing Asset Prices Is Key To An Economic Recovery

The declines in asset prices are sweeping around the globe like a giant tsunami tumbling everything in its wake. Equity prices are down 47 percent from their highs, commodities 53 percent and, of course, residential real estate 25 percent. Industrial production, retail sales and personal consumption expenditures are all showing losses year-over-year and do not appear to be decelerating in any meaningful way.

In the first quarter of 2009, the negative feedback loop — the lower prices go the lower they will go — is being exacerbated by the erosion of confidence and the availability of credit. If this weren’t enough, the lack of accountability and transparency in the system is further eroding investor confidence, thereby curtailing capital spending and stifling employment.

As the monetarists and fiscal policy makers rush to shore up the banking system, they have, for the most part, missed the mark. Long ago, the highly levered global economy transitioned from a banking-dominated regime to one that hides behind securitized lending. The off-bank balance sheet structures such as SIVs (structured investment vehicles), hedge funds, CDOs (collateralized debt obligations) and the like fueled the explosion in asset prices as they levered up the system exponentially. As we are finding out the hard way, no real underlying economic value was being created, other than prices would surely be higher tomorrow, which reinforced speculative non-productive behaviors.

The false promise that rising prices alone create wealth is being unmasked as the de-levering of credit and speculative excesses unwind. The plea from Congress that banks need to start lending fails to recognize that the highly leveraged off-balance sheet bank, the Shadow Bank, is dead. The credit creation in the Shadow Bank was 30- or 40-to-1, versus 10-to-1 for the banking system most of us are familiar with. It is not that the 10-to-1 folks don’t have problems; it is that they simply do not have the capital to restructure all the 30-to-1 junk that is choking the system.

It’s about the capital
Nouriel Roubini, a highly respected economist and chairman of RGE Monitor’s newsletter, has estimated that the charge-offs and write-downs may reach $3.6 trillion before this cycle bottoms out. Bloomberg Financial, which has been tracking these charge-offs, recently reported that the number has reached $1 trillion, or about one third of Roubini’s best-guess number. In October 2008, the Federal Reserve reported that the U.S. banking system had about $1.4 trillion of capital, hardly enough to deal with the massive write-downs Roubini, Goldman Sachs Group and others see on the horizon.

The obvious simple solution is to figure out how to stop asset prices from declining further. Although this has been attempted over the past many months, the seemingly uncoordinated efforts have failed. The TARP (Troubled Asset Relief Program), which explicitly gave the U.S. Treasury the authority and money to purchase assets with the intent of stabilizing prices, instead saw those monies going into the checking accounts of banks. However well-intentioned the program was, it did little to stem the tide in the deflationary spiral, leaving us deeper in debt and virtually in the same position as when the legislation was enacted.

Price stability
In order to encourage investment and spending, we must first have price stability. Asset prices do not need to rise to get the economy moving, nor should we expect that they must. The value of the enterprise over time will be clear and will be priced accordingly. The benefits of price stability encourage investors to take on risk and give lenders the confidence to lend. Rapidly rising or falling prices merely confound and confuse even the biggest risk takers among us and that, in large measure, is why we see return of principal trumping return on principal.

All is not lost, however, as interest rates are down, mortgage re-financings are up and the stock market has attempted to battle back from some very bad economic news. The first half of 2009 is proving tough going. But we are guardedly optimistic that the second half will show signs of stabilizing, laying an important foundation for recovery in 2010. The stock market has its own twisted personality, but if it can move above the October lows the more optimistic we are that better times are ahead.

angel statue

New Angel Investment Group Targets Women Entrepreneurs

A new angel investment group called the Catalyst Committee is gearing up to invest in local startup companies that focus on consumer goods such as apparel, high-end furniture and cosmetics. Heading up the new committee is Dee Riddell Harris, president of the Arizona Angels, a group of private investors that has been funding startup, technology-based companies in Arizona for nearly a decade.

“The Arizona Angels have rejected a number of applications from women entrepreneurs over the years because their ideas weren’t technology based or have a patent behind them,” Harris says. “So the point of the Catalyst Committee is to be supportive of entrepreneurs, particularly women, who have good ideas, as well as businesses that are not tech-based.”

Harris started building the framework for the Catalyst Committee about nine months ago. The group met for the first time in November 2008 and now has 35 potential women investors from around the state. During the kickoff meeting, the founders of three local startups talked to the group to provide an idea of the type of companies that could eventually apply for funding. High-end fashion designer Debra Davenport talked about the fashion industry in Phoenix, her couture collection, which she launched in November 2007 during Phoenix Fashion Week, and her hopes of one day raising $1.7 million that would allow her to participate in fashion shows around the world. She also showed a number of garments from her couture collection.

“Being able to participate in key fashion shows in Los Angeles, Miami, New York, Paris, Milan and London is a fashion designer’s primary marketing tool,” Davenport says. “But it’s not cheap. It can run anywhere from $30,000 to $100,000 per show when you figure in pattern making, fabrication, manufacturing and all the specialized notions, materials and threads that have to be brought in from places like Paris and Italy.”

Last year, Davenport was able to show her luxury collection during the Mercedes-Benz Fashion Week in Los Angeles. It’s the second largest and most prestigious fashion week in the United States next to New York Fashion Week. Davenport was also the first and only designer to show from Arizona, according to IMG, the production company that puts on the show. Now, Davenport was invited to show her fall collection during the most recent New York Fashion Week.

“I’m hoping that with the significant achievements we’ve been able to accomplish over the last 15 months, we will catch the eye of some savvy investment people who think this is a winning proposition,” Davenport says.

She is planning to launch her first signature fragrance later this year or in early 2010. She also plans to expand her design offerings to shoes, handbags and china patterns. The 50-year-old fashion designer has already completed designs for china patterns, shoes and luxury handbags that will be manufactured in Italy.

Kathie Zeider, senior vice president of Legacy Bank and a member of the Catalyst Committee, says there are many worthwhile businesses in Arizona like Davenport’s that serve women, or are women owned, and poised for high growth of $5 million to $50 million.

“We’re in a service and tech economy, so for Arizona to grow and prosper we need to nurture both sides of the economy,” Zeider says. “Kudos to Dee Harris for seeing this gap in the Arizona marketplace and developing an initiative to fill this need.”

Committee member Connie Jungbluth also believes early-stage investors are critical to the state’s economic vitality. “It’s important to infuse capital into early-stage companies in our community, especially in this economy,” she says. “Women are also big consumers, so overlooking businesses that serve them is not a good idea.”

The Catalyst Committee is still in search of investors to join the group. Its goal is to have 100 investors and to help one local startup company a month. Investors must meet state and federal accreditation standards. Individual investors need an annual income of $200,000 for the current year and the past two years. Couples require an annual income of $300,000 for the current year and last two years. A net worth of $1 million is also acceptable in lieu of the income standard.

Entrepreneurs can submit their applications and business plans to the Catalyst Committee via the Arizona Angels Web site. Harris says entrepreneurs seeking angel investment need to be well prepared when applying for funding; they need a strong business plan with important information aimed at investors.

“Angels are extremely interested in the management team that gives credibility to the firm, so oftentimes they read the first paragraph of a business plan, then skip straight to the management team because it’s so important,” he says. “They also want to know about the company’s marketing and sales strategy and whether the company has some type of competitive advantage.”

www.arizona-angels.org

Money Crunch

The Credit Crunch Is Leading Many Organizations To Outsource Asset-Intensive Legacy Processes

Market conditions are always a driving force in organizational spending, and the current environment is no exception. But in 2009, in addition to cost reduction, companies are now evaluating whether they can maximize their scarce credit availability by outsourcing capital-intensive IT functions that were traditionally “off limits” to these sorts of exercises or simply not technologically feasible.

Now, leading organizations are addressing not just the effective use of a third party expense platform, but also are evaluating the use of OPA — Other People’s Assets.

As with everything in business, outsourcing moves in cycles. In the early days of enterprise computing, when mainframes and huge computer systems were the only option and the cost to purchase was high, the only model that made sense was to outsource. However, as technology changed and developed — and as credit became more readily available — many organizations spent large amounts of capital to build and manage their IT infrastructure.

IT infrastructure comprises the data center, servers, routers, switches, firewalls and more — all of the components that make up the back end of your e-mail, CRM, ERP, Web sites, Blackberry servers, file servers, print servers, etc. IT infrastructure is core to every organization and it is not cheap, especially when you want to ensure you are doing it right.

Technology is a powerful enabler of these considerations, and nowhere can this more clearly be seen than in industry of outsourced IT infrastructure and hosted IT infrastructure. Technology has developed to a point where now the highest performance infrastructure can be allocated to multiple users. Companies such as VMware and Cisco have pioneered virtualization. This technology now allows hosting to go to the next level. No longer are hosting companies providing low-end servers and storage to their customers. With virtualization hosting, companies are now providing Fortune 100 quality infrastructure. Access to this type of technology can be a game changer, but at a minimum provides end users with the best opportunity to leverage their IT infrastructure.

Hosted infrastructure is very simply utilizing the above mentioned resources that are owned by someone else. There are multiple benefits to hosted infrastructure, including: specialization by your hosting provider (hosting is their core business), access to typically better infrastructure, newer infrastructure, higher performance, etc. And in times like these, perhaps the most relevant benefit is no capital outlay. In a time when capital is scarce, spending on only what you need and not making a major asset investment in infrastructure could be the difference between being buried in debt and fighting to the top of your market.

Emotion is perhaps the most difficult obstacle to overcome when evaluating an outsourcing decision. Wehave already touched on the fact that the job can be done internally. But another emotional aspect is tied to a person’s job, and if something isoutsourced then someone, maybe even the person doing the analysis, might put themselves out of work.Outsourcing has always been associated with people losing their jobs. But in reality, just the opposite istrue. If an organization is using capital to grow instead of building its IT infrastructure, more people will have opportunities and more jobs will be available.

Outsourcing of IT infrastructure and the use of hosted infrastructure are being utilized by nearly every large organization, and it is growing in the small and medium business sector. In the next five years, nearly every organization will benefit from outsourcing, whether it is their Web sites, e-mail, file servers, offsite storage or their entire data center. Organizations are realizing very quickly that it is more efficient to allocate their capital to grow their business than to buy servers and routers.

Michael Bidwill Arizona Cardinals

Q&A: Michael Bidwill, President, Arizona Cardinals

During these difficult economic times, how vital is an organization such as the Greater Phoenix Economic Council (GPEC) to the local economy?
GPEC is vitally important because it is the only regional organization focused exclusively on bringing new business to Greater Phoenix. Because GPEC works closely with companies considering expansion to the region, they know what companies need to make business decisions and gain insight into what steps the state can take to better compete with our Mountain West competitor states.

What can the Valley do to better position itself to succeed once the recession is over?
Diversify our economy and work with public sector leaders to create sensible, new programs that bring high-wage industries to Arizona. During the last decade of the real estate explosion, Arizona was one of the leading job-producing states. Over the last two years, we have fallen to 49th in terms of new job creation. Business as usual will not work. Now is the time to change our metrics and compete for other industries to migrate to Arizona.

Arizona and Greater Phoenix routinely lose projects to less desirable locations because of aggressive relocation programs in other states. GPEC has developed modest, fiscally responsible programs, such as the Quality Jobs Through Renewable Industries program, for the Arizona Legislature to consider. GPEC has vetted these programs with decision-makers in the renewable energy industry. Senior executives within these industries have told us this program would put Arizona in a more competitive position to win projects. GPEC also had Elliott D. Pollack and Company conduct a third-party review of our program to confirm its fiscal impact.

We need to immediately work with the state to develop and implement new programs that make our region more competitive.

What are some of the initiatives and goals you have planned this year for GPEC, and how will you go about achieving those goals?
In addition to solar and renewable energy, GPEC has three other strategies that we feel are meaningful generators of new business. We continue to work aggressively on a foreign direct investment program, as the United States is still an attractive environment to invest in for international companies. Next, in working with many of our public sector leaders, we are actively seeking to locate companies to Greater Phoenix from neighboring states with higher operating costs of doing business. Lastly, health care in Arizona is an untapped resource. In fact, Arizonans routinely seek health care outside of the state valued at hundreds of millions of dollars. We need to work with the health care industry to determine the needs not currently being met in Arizona and look to those opportunities for economic growth.

How did you first become involved in GPEC and how have your own professional experiences prepared you for your current role?
The Arizona Cardinals have long been stakeholders of GPEC, as we believed in its important work. I had no personal involvement until Glendale Mayor Elaine Scruggs asked me to serve on the GPEC board three years ago. I was honored to join and realized quickly how critical this organization is to helping our local economy grow, especially during this downturn and with the state’s budget cuts to the Arizona Department of Commerce.

You’ve seen first hand how important professional sports are to the local and regional economy. How can the Valley capitalize more on that in the future?
Sports are important to Arizona and we need to support what we have now. But, again, we need to focus on diversifying our economy. Like a personal stock portfolio, we cannot become “over-weighted” in any single sector. We have all the teams we need, but it will be important to attract events with significant economic impacts and exposure like the Super Bowl in the future. Our regional success will depend largely on creating a diverse and vibrant economy around many new industries and we can’t look to real estate or sports to take us out of this downturn.

money squeeze

Tips On How To Navigate The Current Credit Crunch

The credit crunch is making its way from Wall Street to Main Street and squeezing businesses across all industries. There are some proactive steps Arizona companies can take to prepare for potentially challenging days ahead.

Cash is king

If you have cash on your balance sheet, you have a greater degree of flexibility in your decision making.

Issue: In a slowing economy, understanding and managing cash flow are paramount.

Action Steps: Negotiate aggressive credit terms with suppliers and customers. As soon as invoices are late, begin subtle but firm collection efforts. In the short term, it may be wiser to sacrifice profitability in order to generate cash.

Be relentless on cost control

Look hard at discretionary expenses and remove unnecessary spending — but don’t compromise business strategy.

Issue: To maintain your current levels of profitability, you will almost certainly need to cut costs and spending where possible.

Action: Employ zero-based budgeting to review all costs carefully in terms of their value to the business.

Evaluate customers and suppliers

Understand the financial well-being of customers and suppliers. Look for signs of financial distress and express concerns.

Issue: Challenges in credit markets have put increased pressure on the purchasing power and credit worthiness of customers, resulting in a tightening of credit terms and product availability.

Action: Reevaluate credit terms with customers and negotiate the shortest reasonable terms.

Get smarter on taxes

It is important to look at how to manage those costs and the related impact on a company’s cash flow.

Issue: Taking appropriate advantage of the opportunities available to reduce tax liabilities.

Action: Take advantage of available tax credits, such as the fuel tax credit or deductions for domestic production or property depreciation. Take extra care when considering the calculation of quarterly estimated tax payments.

Reconsider capital investment plans

Is now really the time to invest in new capital assets?

Issue: Investing in new assets in a downturn can bleed you of cash. Carefully consider capital investment plans, and question the proposed value and timing.

Action: Take into account the timing of investments. If it isn’t mission critical, consider delaying or deferring.

Get closer to banks

Take a hard look at your reporting and accounting systems. If these are not quite what the bank would like to see, consider improving them.

Issue: Banks will be more cautious and concerned about credit quality. Borrowing will likely come at a higher price — both in terms of interest rates and fees — and will almost certainly include more restrictive covenants and require increased monitoring and transparency.

Action: Treat the bank as a partner by keeping it informed about the status of the business and giving it plenty of notice if you need help.

Consider financing options

Talk to a professional about arranging financing and consider alternatives to traditional lenders.

Issue: Having issues with your bank can result in a severe restriction in your borrowing capacity. It’s not as easy as it used to be to secure an alternative source of capital.

Action: Consider other financing sources such as leasing, asset-based lenders, factoring companies or even government-supported financing programs. Look at negotiating payments on long-overdue accounts receivable or obtain financing through trade vendors.

Keep an eye out for bargains

Be alert to opportunities where business valuations are falling and where business owners are looking for quick exits.

Issue: The current feeling of uncertainty will drive many shareholders to seek an exit rather than hunkering down and trying to weather the storm independently, creating buying opportunities at depressed prices.

Action: Whether playing the stock market, engaging in real estate or considering acquisitions, the best buys are made in a down market. But make sure the action makes sense with your growth plan.

Protect personal wealth

Before agreeing to become more personally exposed for the sake of the business and less diversified personally, think about options.

Issue: It is likely that businesses will have greater borrowing needs. Solving business cash needs with personal assets will reduce diversification of overall personal net worth and further expose you to the recessionary economy.

Action: Equity financing provides resources if the economy does not improve as quickly as expected. If debt financing is the best course, avoid personal guarantees and pledges of personal assets. Employ experienced counsel to help with the transaction.

Worst case scenario

Get help far in advance of a financial crisis, if at all possible.

Issue: The future is uncertain and trade credit is contracting.

Action: Look at your business without its existing debt and determine its debt capacity based on the most current financialprojections. Do not wait until you are almost out of cash.

The more time you have to identify your options and craft a plan, the better your chances of success. Contact your professional services advisors immediately to discuss your current situation.

Ed O’Brien is the managing partner of Grant Thornton’s Phoenix office. For more information, call (602) 474-3444 or visit www.grantthornton.com

Proxies

The SEC Catches Up On New Technology In Proxy Solicitations

A quick tutorial: Proxies are the means by which public shareholders vote. The Securities Exchange Act of 1934 governs the solicitation of those proxies. The act and the regulations adopted by the Securities and Exchange Commission under the act are designed to ensure a fair process with adequate disclosure to shareholders so they may make an informed voting decision in a timely manner.

In the past year, the SEC has adopted significant rules intended to simplify, clarify and modernize proxy solicitations by use of the Internet.

In July 2007, the SEC adopted amendments that modernize the proxy rules by requiring issuers and other soliciting persons to follow the “notice and access” model for proxy materials. Soliciting persons are now required to post a complete set of their proxy materials on an Internet site and furnish notice to shareholders of their electronic availability. The Internet site must be a site other than the EDGAR (Electronic Data Gathering, Analysis and Retrieval system) maintained by the SEC. The site must be publicly accessible, free of charge and maintain user confidentiality. In addition, the materials posted must be in a format convenient for printing and for reading online. Companies must provide paper or e-mail copies, as specified by the shareholder, within three business days of a shareholder’s request.

Notice to shareholders can be provided in one of two ways: the “notice-only” option, which is simply notice of electronic availability; or the “full-set delivery” option, which is a full set of paper proxy materials along with a notice of Internet availability. Under the “notice only” option, a notice must be sent at least 40 calendar days before the date that votes are counted. Under the “full-set delivery” option, notice need not be made separate and the 40-day period is not applicable, so the notice can be incorporated directly into the proxy materials.

Under both options, the notice must include certain specific information and must be filed with the SEC. The options are not mutually exclusive, so one option can be used to send notice to a particular class of shareholders, while the other option can be used to send notice to others. Intermediaries and other soliciting persons must also follow the “notice and access” model, with some exceptions. Specifically, intermediaries must tailor notice to beneficial owners, and soliciting persons other than the issuer need not solicit every shareholder. Most large public companies were required to follow the “notice and access” model for proxy materials as of Jan. 1, 2008. All others, including registered investment companies and soliciting persons other than an issuer, can voluntarily comply at any time, but must fully comply by Jan. 1, 2009.

Effective Feb. 25 of this year, the SEC adopted further amendments that encourage use of the Internet in the proxy solicitation process by facilitating the use of electronic shareholder forums. These amendments are intended to remove some of the legal ambiguity resulting from the use of electronic shareholder forums by clarifying that participation in an electronic shareholder forum is exempt from most of the proxy rules if specific conditions are met. The new rules also establish that shareholders, companies and other parties that establish, maintain or operate an electronic forum will not be liable under the federal securities laws for any statement or information provided by another person participating in the forum.

Specifically, any participant in an electronic shareholder forum is exempt from the proxy rules if the communication is made more than 60 days before the announced date of the company’s annual or special shareholder meeting, or if the meeting date was announced less than 60 days before it was scheduled to occur, within two days of the announcement, provided that the communicating party does not solicit proxy authority while relying on the exemption. Solicitations that fall outside these relevant dates continue to be subject to the proxy rules.

Further, if a solicitation was made within the relevant dates but remains electronically accessible thereafter, the solicitation could then become subject to the proxy rules. In this regard, the SEC suggests that forum operators give posting users a means of deleting their postings or having their postings “go dark” as of the applicable 60 day or two day cut off.

While the amendments exempt solicitations from the proxy rules, they do not exempt posting persons from liability for the content of their postings under traditional liability theories, including anti-fraud provisions that may require a participant to identify himself and which prohibit misstatements and omissions of material facts. Further, the amendments extend liability protection only to shareholders, companies and third parties who create, operate or maintain an electronic shareholder forum on behalf of a shareholder or company. These persons receive protection against liability for statements made or information provided by participants in the forum, so long as the forum complies with federal securities laws, relevant state law and the company’s charter and bylaws.

Karen C. McConnell is partner-in-charge of the mergers and acquisitions/private equity group; Adrienne W. Wilhoit is a partner; and Brooke T. Mickelson is an associate at Ballard Spahr Andrews & Ingersoll, www.ballardspahr.com.