THE LOCAL AREA WATCH

WHITEWASHING FIFTH THIRD’S TROUBLES

Did you know that the Local Area Watch is the only blog in the country with critical reporting of Fifth Third’s financial difficulties?  We are the number one site in that category.  We also rank pretty highly among all newsites in reportage on Fifth Third.  We certainly top the local rag, the Grand Rapids Press.

To keep up, the Press finally did a big story on Fifth Third in the Sunday edition.  Reporter Chris Knape noted critical remarks from Peter Secchia and John Canepa about Fifth Third’s acquisition of Old Kent Bank, but mostly it was a whitewash of the big bank’s problems.  Knape had nothing to say about Fifth Third’s environmental liabilities arising from its ownership of 940 Monroe L.L.C., the “Toxic Towers” development company or about the Federal Reserve forcing is to disgorge the trust department it acquired from Old Kent or about the City of Grand Rapids pulling its pension funds from the bank or about the Old Kent shareholder revolt Fifth Third rising star Kevin Kabat suppressed or about the collapse of Fifth Third’s stock in the wake of L.A.W.’s report of large-scale bank fraud to the U.S. Justice Department.

Whether it was because Knape never wrote about these festering wounds Fifth Third suffered from its purchase of Old Kent or because his editor spiked any really bad news about the bank, I don’t know.  I do know that the story lauded the bank’s “pro-consumer” Pyrex giveaway (while gliding over its loss of one-quarter of the local market share and making no mention of its expulsion of small business customers).  I also noticed that the story featured a logarithmic scale to chart the rise and fall of Fifth Third’s stock over the past five years, which has the effect of visually reducing the magnitude of its recent loss of one-half its value.  Well, did any of us really expect critical business reporting from the Press?

THE LESSON OF KATRINA

The recent onslaught of hurricanes upon our shores, especially Katrina, should be a reminder to us of the importance of local government in the United States.  Whatever alleged reforms to the federal government’s emergency response agency, FEMA, they will be hideously expensive and stubbornly ineffective.  Our local firemen and police officers will continue to be the ones who arrive first at a disaster, and it will remain in their hands to make the crucial early decisions that determine the scope of the catastrophe.

That’s good, because that’s what works best.  The locals respond first, stem the destruction, and then call upon federal assistance if they need it.  We don’t think a lot about that here in River City, because Mother Nature is kind to us.  We don’t have earthquakes or hurricanes.  It’s been a quarter-century since we were last snowed in by a blizzard.  The terror of a tornado is narrowly confined and it’s been many decades since one of any consequence has roared through town.  Floods happen were we expect and we’re too wet for forest fires to blaze out of control.  Outside of a meteor strike or a terrorist attack, we can count our blessings in the City of Grand Rapids.

But then that’s when our local emergency services are most valued – when the unexpected happens.  Maintaining those services at the ready is the first duty of the city government.  Making sure that we have hired the best men and women to protect us, trained them well, and outfitted them with the equipment they need to do the job should be the major focus of our city manager and the city commission.  That doesn’t mean throwing money at the police and fire departments, creating fertile ground for featherbedding and graft.  It does mean getting them the funds they really need and then overseeing their expenditure.

Doing just that is enough to keep a city manager and our elected officials busy.  Yet we let them waste time wi-fi service that the marketplace should take care of and bickering over which constituency to placate in naming streets.  Meanwhile, overpaid, underworked, and unsupervised staff at city hall, like the City Assessor’s Office recently and the City Attorney’s Office right now, get to ply their own corrupt agendas at taxpayer expense in the middle of a budget crisis.  Little wonder that our city officials think they can get away with foolish things concerning our first responders like cut back on the number of firemen while extending our firefighting services to wealthy suburbs that can afford their own departments.

So the conflicts of interests, the violations of ethics and professional conduct, and the misfeasance and incompetence we report about the city government in these pages are fundamentally important.  Letting, for example, the City Attorney’s Office serve the interests of city officials rather than city residents (as in the Toxic Towers dumping scandal and the FOIA fights) has a corrosive effect that will eventually lead to rot in our local emergency services.  What happened in New Orleans in the aftermath of Katrina shows how corruption and incompetence in local government are cancers that eat away at the very heart of why we organize cities and towns to provide collective protection against disaster and crime.  Just because Mother Nature isn’t out to destroy us here is no reason for complacency about keeping government clean in River City.

ANOTHER PHONY BILLIONAIRE

In the latest edition of Forbes magazine, Dirk Smillie reports that recently departed oil billionaire Marvin Davis was in fact no billionaire at all.  He died broke, even though the Davis family fortune made the Forbes 400 list last year pegged at an impressive $5.8 billion.  Well, looks like Forbes had nailed it – give or take six billion bucks.

So the cupboard was bare, and Forbes magazine never had a clue.  So much for its famous Forbes 400 ranking of the richest families in the U.S. being anything more than a guesswork gossip sheet.  It is actually a list of two groups of people:  Those who desperately want to be on it, and then the real billionaires who don’t.  Forbes has placed our very own Rich DeVos of Amway fame on the list at $3.1 billion and the fortune of his late partner Jay Van Andel at $2.6 billion.  So which group do you think these hype merchants belong to?  (Click here and here if you need more clues.)

BIOTECH BACKS SHAFFER AND SHAFFER BACKS BIOTECH

The Grand Rapids Press has endorsed Dave Shaffer over James Jendrasiak in the race for the First Ward city commission seat in Grand Rapids.  One reason is that Shaffer supports the development of the life science/bio-tech industry to replace manufacturing as the foundation of the city's economy.  Well, that might explain the big backing Shaffer is getting from the Amway clans, the DeVoses and Van Andels, who are passing around the hat to collect other people's money to promote their bio-tech boondoggle atop of Michigan Street hill.  The voters might want to let Shaffer know they are OK with his bio-tech dreams so long as their not paid for with the taxpayers' money.

IS THE MEDICAL EXAMINER IN SPECTRUM'S POCKET?

I want to report to you that we have now received information from different sources that the Kent County medical examiner has not been carrying out autopsies requested by the families of patients who have died while in the care of Spectrum Hospital.  It appears that the medical examiner farms out these requests out to an independent contractor who has conflicts of interest with Spectrum.  The suspicion is that this contractor sits on autopsy requests that might reveal medical malpractice by Spectrum.  We'll have more to say about this once we've collected more information.

KIMBALL'S TROJAN HORSE, PART II

Yesterday we commented upon K.C. Caliendo's remark that the need for the city government to raise taxes to solve its fiscal crisis is a "no-brainer".  This is of consequence because Caliendo has been appointed to Grand Rapids City Manager Kurt Kimball's citizen budget advisory panel, which we believe is his Trojan Horse to bring an allegedly citizen-backed recommendation for new taxes to the City Commission.  Because Caliendo was selected by Second Ward City Commissioner Rick Tormala who adamantly opposes new taxes (except as a "last resort" which he says would be reached only have all non-essential expenses have been eliminated and there would be no funds to pay for essential services without new revenues), we asked him what he thought of Caliendo's predetermination that new taxes are needed.

The commissioner's response was this:

"I don’t agree with KC about taxes and I intend to tell her so, but I didn’t, nor do I ever, recommend people who only agree with me on everything.  I recommend smart, honorable and independent people.  Realize that this committee is advisory only, we never did nor would I ever support us abdicating our responsibilities as elected officials or passing the buck.  ...  The citizen committee will open up a process that needs to be open and to get ideas from independent thinkers outside of City Hall.  Bear in mind every citizen is welcome, and needed in this process.  Could Kurt [Kimball] try and make this a tax increase only committee?  Yes, but only with the cooperation and silence of everybody involved and the public."  [Our emphasis.]

Fair enough, especially that last statement.  We do have to get noisy about Kimball's mismanagement of our tax dollars and the city commissioners and the mayor who don't oppose him on this.  However, we still need a tribune to focus our dissatisfaction and bring about the results we want.  That's Commissioner Tormala's job, so make sure you let him know where you stand.  Let him know what services you really need from the city government and which you don't.  Tell him that we don't need new taxes when there are plenty of city salaries and benefits to cut first.  Give him your ideas on how to return Grand Rapids to the black.  So get noisy, so that Commissioner Tormala can noisy on your behalf.  Click here to e-mail him.

HOW LEAN GOVERNMENT MEANS HIGHER TAXES

A Public Pulse letter in the G.R. Press on Friday caught my eye.  Nancy Ayres, general manager of Clipper Belt Lacer and a member of The Right Place committee urged the denizens of River City to applaud the Grand Rapids City Commission for spending fifty grand on a consultant to instruct the bureaucrats of the city government in the ways of “lean management”.  (This is the same report that gained notoriety in the dispute over closing the restrooms at Aberdeen Park.)  Ms. Ayres reminds us that the principles of lean management have served business well.  So they have to the extent that lean management is nothing but the umpteenth repackaging by consultants of the old wisdom of waste not, want not – or in a word, efficiency.

Exactly why the City Commission needs to spend $50,000 in taxpayers’ money to be told that if the city government uses its resources more efficiently, it will need fewer resources to do the same job is beyond me.  Perhaps the consultant will advise the City Commission on specific changes to make the city government more efficient, although I would think that city employees would know better than an outside consultant as to how they could be more efficient in carrying out their work.  But there’s the rub, isn’t it?  A more efficient city employee is a more productive one.  Increased productivity means fewer people can do more work.  Because we don’t need any more government than we already have (and probably can do with a whole lot less), the bottom line to all of this is fewer city employees.  Little wonder they aren’t going to tell anyone how we can get by with fewer them on the city’s payroll.

So maybe we do need a consultant to tell us how we can reduce the biggest expense the city government has, its payroll.  Not according to Ms. Ayres.  Lean management properly implemented by the city government means staffs won’t have to be cut.  Really?  So how does the city government use lean management to cut costs?  By savings in the future, according to Ms. Ayres.  Hmm.  I think I begin to understand the value of this $50,000 report on lean management for the City Commission.  If it works like Ms. Ayres says it should, the City Commission won’t have to rile the primary constituency for more government, city employees, with lay-offs while mollifying the taxpayers with promises of a “lean” future that will hold present costs in check.  Then again, you’d think politicians wouldn’t need a consultant to instruct them in telling tall tales.

Now here’s the real deal with all of this lean management nonsense.  Businessmen have a built-in incentive to operate their companies efficiently.  If they don’t, they do not make money.  If they don’t long enough, they go broke.  Bureaucrats have no such incentive when running a government agency.  They take home no reward from running their departments in the black.  It’s just the opposite.  Their power comes from spending.  Spend more, more power.  So they spend this year’s budget completely to argue they need more for next year.  The deeper they run in the red, the more they show how urgent their need is for more money.  The only check on this native impulse of bureaucrats are our elected officials who vote on how much to spend and how much to tax.

That works so long as the elected officials will stand up to the bureaucrats.  Unfortunately, with a few exceptions, our City Commissioners are notoriously supine when it comes to the city staff.  They are happily led around by the nose by the staff and seldom challenge them in any serious way, especially their head honcho City Manager Kurt Kimball.  That’s why this $50,000 report on lean management appeals to the commissioners.  They can wave it around to show the taxpayers they’re doing something about the city’s budget crisis while giving the city staff a wink and nod to not even break a sweat over anyone losing his job.  In exchange the city manager will put together a citizen budget advisory panel as a Trojan horse provide political cover for the commissioners to raise taxes as way to balance the city’s books.  So, at the end of the day, the commissioners thump their chests on what a swell job they did, the city staff keeps their jobs without having to work any harder, and the taxpayers cough up more dough to hold the whole mess together until the next budget crisis.

Too cynical of a read, you think?  Well, folks, two weeks ago City Commissioner Rick Tormala was emphatic that he is against new taxes to cure the city’s budget woes.  Yet the very first public words to the G.R. Press from one of his picks to Kurt Kimball’s budget panel, K.C. Caliendo, were that it is a “no-brainer” that taxes will have to be raised.  It’s still the same ol’ game with the same ol’ result –- the taxpayer loses.

AMWAY QUIXTAR ROUND-UP

We continue to receive a great deal of interest in our article "The Pyramid is Crumbling" about the lawsuit that is symptomatic of the impending failure of the Amway-Quixtar pyramid scheme.  To assist new visitors interested in this story, below are links to earlier Local Area Watch articles about Amway, Amway founder Rich DeVos, his son Dick DeVos, and his partner, the late Jay Van Andel and the Van Andel Insitute.  Our full coverage of this subject can be found under the category "Project: Pyramid Power".

Were Rich DeVos and Jay Van Andel the billionaires that their publicity machine had made them out to be?  See:  HOW BIG IS A BILLION?, DEVOS'S EMPTY TIN CUP, and WHERE'S THE VAN ANDEL IN THE VAN ANDEL INSTITUTE?

Our three-part series on how DeVos and Van Andel replicated the Amway scam with taxpayer dollars:  THE PYRAMID IS CRUMBLING, THE RIVER CITY KINGPINS, and THE ILLUSION OF WEALTH.  Plus the related story of how DeVos bought a U.S. Senator to quash a Federal Trade Commission investigation in THE FIXER, PART III (THE PIGGY BANK).

Articles on DeVos's and Van Andel's projects in downtown Grand Rapids funded with OPM (other people's money, especially the taxpayers'):  SOX FOR TAXPAYERS, WHITE ELEPHANTS AND BLACK HOLES, BAD MEDICINE, HOPE ON THE HILL HIGH AND DRY, and WATCH YOUR WALLETS.

Articles on Dick DeVos Jr. and his run for governor of Michigan:  DICK AND JEN, AMWAY, WINDQUEST, AND REAL BUSINESS, and THE PRESS IS SWEET ON DICK JR.

And just in case you weren't sure, an opinion piece from yours truly, the Executive Director of L.A.W., as to why Rich and Jay were and remain a pair of low-rent, low-class hucksters no matter what their hype machine says:  PYRAMIDS AND A FINGER TO THE WIND.

THE PROBLEM WITH TEACHERS

I grew up on the northeast side of town.  Thirty-some years ago I attended Aberdeen elementary school.  So it was with some nostalgic interest I read about GRPS Superintendent Bert Bleke's plan to consolidate my alma mater with North Park elementary school because of the continued flight of students from the city's public schools.  Where there were once six public schools for all the kids in my neighborhood -- Aberdeen, Riverside, Crestview, Wellerwood, North Park, and Huff -- there will now only be one.  Oh well, if parents are sending their children elsewhere, Bleke's gotta shut down empty buildings, right?

Right.  Thus his plan to consolidate that last two remaining elementary schools in the upper northeast end of the city.  That's sensible enough, except that instead of using one of six empty buildings for the last of the students -- three or four of those schools aren't much older than I am -- Bleke wants to build a new school for them.  The GRPS is near financial ruin, classroom performance is in the dumper, and students are bailing out of the district at a record pace.  So Bleke's solution is to build more schools!  Insanity.

This is the problem with teachers, principals, and administrators -- i.e., the educrats who rule over our public schools.  They think money grows on trees.  Worse, they have this strange sense of entitlement that the taxpayers always owe them more and more.  Therefore, ingrained in the minds of the educrats are lunacies such as they are underpaid and that we greedy taxpayers are starving them of the funds they need to educate our little darlings.  The fact is, our public schools are wallowing in tax dollars, most of which goes to pay the premium salaries and benefits of the educrats (who still can't get enough and double dip) and to construct new digs for them to drill our children in the latest p.c. nonsense.

Recently, Jay Greene and Marcus Winters of the Manhattan Institute completed a study that puts the lie to the propoganda that our public schools are impoverished.  In the U.S. the federal and state governments spend nearly a half a trillion dollars for public education every year.  That's more than we spend on the defense of our country during a shooting war.  That spending averages out to $10,000 per K-12 student annually.  Adjusted for inflation, that per student figure has doubled since I attended dear ol' Aberdeen School.  Yet, achievement scores in math and reading remain flat over that period, while science and social study scores have fallen.  Worse is that graduation rates have also dropped.  Bottom line:  The taxpayers keep spending more and more on education, and they get less and less.

And where does that money go?  To fatter teacher salaries and benefits.  The next time someone rants about how poorly public school teachers are paid, keep this in mind.  According to the Bureau of Labor Statistics collected by Greene and Winters the average pay for elementary school teachers is $30.75 an hour, not including benefits.  Compare that to firemen who average only $17.91 or cops at $22.64 -- and they put their lives on the line for us.  Among professionals Greene and Winters point out that teachers are better paid than biologists ($28.07), mechanical engineers ($29.76), and chemists ($30.68), and do almost as well as dentists ($35.51) and nuclear engineers ($36.16).  Yet our public school teachers do not have to measure up to objective standards of performance like any of these other professionals do.  With the solid grip their unions have on our public school systems, all teachers have to do to get paid better is stick around for a raise every year and in the meantime collect a next-to-useless masters or PhD in education.  With an easy ride like that, no wonder teachers battle taxpayers against merit-pay proposals.

Among the educrats there is a complete disconnect between spending money on themselves and the effort taxpayers must expend to make that money.  Only in the la-la land of the educrats can teachers think they are underpaid while receiving wages at a rate nearly double that of our firemen and can our very own Superintendent Bleke put forward nutty plans like constructing new schools in a shrinking system.  I have to wonder if the only thing that'll remove the scales from their eyes is the widespread collapse of our public schools.  After all there are only so many more dollars the taxpayers can feed the educrats while educrats in turn produce lousier results every year.

P.S.  Read here for my caveats regarding the good apples in public education, the limits of what teachers can do, and the lack of causation between more money and better-educated students.  That should address the routine complaints of my criticism of the public school system.

GET YOUR FIFTH THIRD NEWS HERE!

A rumor broke yesterday that Fifth Third Bancorp of Cincinnati (ticker symbol: FITB) has become a takeover target after CEO George Schaeffer has managed to halve its stock value over the past three years since the trouble-plagued acquisition of our very own Old Kent Bank & Trust.  Scuttlebutt has it that U.S. Bancorp of Minneapolis and Wells Fargo & Co. of San Francisco are in the market.  On the news Fifth Third's stock bounced up a couple of bucks.  Who knows, with good management the big bank from Cincinnati may very well be a bargain.

For those visiting about website for the first time looking for news behind all of the takeover speculation, here are links to some previous articles we ran on Fifth Third:

FIFTH THIRD CFO TAKES THE FALL - Why Fifth Third's new CFO isn't responsible for Schaeffer's mismanagement of the bank.

A BANK JOB, INDEED - The chain of events that followed from our report to the feds on the shenanigans involved in Fifth Third's acquisition of Old Kent.

DID FIFTH THIRD ABET ILLEGAL DUMPING SCHEME? - How Fifth Third/Old Kent cooperated with its development company to facilitate the illegal removal of contaminated soil from an urban brownfield.

THE FIXER, PART IV (PYRAMID DUST) - The background on how Old Kent got sold out to Fifth Third on the cheap.

All of our stories on Fifth Third can be found under the category "Banks".  If you have any news for us regarding Fifth Third, feel free to post comments to the relevant article or e-mail us at info@localareawatch.org.  Thanks.