Tag: Business

Categories
Memphis Gaydar News

Report Scores Memphis Businesses on LGBTQ Equality

Credit: Memphis Pride Fest

Memphis Pride Fest

The Human Rights Campaign’s (HRC) annual Corporate Equality Index included four of Memphis’ biggest companies and a law firm. Two of the corporations scored towards the top, with one scoring in the middle and another toward the bottom.

The HRC claims it is “the nation’s largest LGBTQ civil rights organization.” Its report reviewed 1,059 companies and law firms this year. That included 25 Tennessee-based businesses. In Memphis, five companies were deemed large enough for review by the Human Rights Campaign.

Of those here, the law firm of Baker, Donelson, Bearman, Caldwell & Berkowitz PC scored the highest with 90 out of 100 points possible. FedEx Corp. scored high, too, with an overall equality score of 85. First Horizon National Corp. also scored near the top with 75 total points.

AutoZone Inc. scored near the middle with 40 total points. International Paper had the lowest Memphis score on the report with 30 total points.

All of these points were awarded to companies based on four broad criteria:

• Non-discrimination policies

• Employment benefits

• Supporting an inclusive culture and corporate social responsibility including public commitment to LGBTQ equality

• Responsible citizenship

”These companies know that protecting their LGBTQ employees and customers from discrimination is not just the right thing to do — it is also the best business decision,” HRC president Alphonso David said in a statement. “In addition, many of these leaders are also advocating for the LGBTQ community and equality under the law in the public square.”
[pullquote-1] HRC began its report in 2002, done largely through a survey of Fortune magazine’s 500 largest publicly traded businesses, American Lawyer magazine’s top 200 revenue-grossing law firms and hundreds of publicly and privately held mid- to large-sized businesses.

In its first year, HRC named 13 top-rated companies. This year, the group named 686 such businesses that had a perfect 100 score ”under the most stringent criteria to date.”

This year, 13 to the Fortune 500’s top 20 companies earned perfect HRC scores.

Human Rights Campaign

Here are some more insights gleaned in this year’s Corporate Equality Index (CEI):

• The more than 680 companies that earned a 100 on the CEI represent 12.4 million employees nationally, 11.9 million globally, and earn a combined estimate of $12.9 trillion in revenue.

• Eighty-three companies participated in the CEI for the first time in 2020, with 36 debuting at a score of 100, including Etsy Inc., Peloton Interactive Inc., Stop & Shop, and Warner Music Group.

• Of all Fortune 500 companies, 93 percent have sexual orientation in their U.S. non-discrimination policy, and 91 percent have gender identity.

• The average CEI score for all Fortune 500 companies increased from 67 to 71 in the past year — with actively participating Fortune 500 companies having an average score of 90, up from 88 last year.

• Tennessee companies averaged a score of 70 in this year’s CEI.

• This year 89 percent of companies participating in the CEI offer at least one health-care policy that is inclusive of their transgender workers.

Read the full report here:
[pdf-1]

Categories
News The Fly-By

Everybody’s Business

CREDIT: KURHAN | dreamstime.com

Several years ago, a Memphis distribution company had a problem. Because of a nearby traffic signal, cars backed up in front of the company’s drive, making it impossible for departing employees to turn left.

And while the employees might have been stuck, the company realized that it wasn’t.

“This was a major corporation, and they were ready to go to DeSoto County,” says Reid Dulberger, vice president over Memphis and Shelby County’s economic development program. “It’s the same everywhere: The little irritants become big irritants over time because no one is addressing it.”

The former head of the Youngstown-Warren, Ohio, Regional Chamber of Commerce, Dulberger was recently hired to run MemphisED, one part of the four-pronged Memphis Fast Forward Initiative. A combined initiative from Memphis Tomorrow, city and county government, and the Memphis Regional Chamber, the $66 million Fast Forward plan aims to create 50,000 new jobs within five years.

Though the chamber already had a business-retention staff, MemphisED gives additional funding to retaining and growing businesses in the community. Though it may not be as exciting or headline-inducing as a major corporation relocating here, Dulberger says it gets more bang for the buck.

“It’s less expensive to work with existing firms,” he says. “You don’t have to convince them about the value of your community. You’re not traveling to distant cities. You’re not producing expensive marketing materials.”

What it lacks in cost it makes up in labor. The MemphisED staff plans to do 400 site visits with local companies this year, with at least 50 of those visits being to minority- and women-owned businesses. And one may not think a traffic light has anything to do with economic development, but Dulberger would disagree.

“The business owners are saying, we’re here, we’re employing people, we’re paying taxes, and I can’t get the littlest thing done,” he says.

“To an adjoining community in another state, it’s an attraction project. The company is promised the moon and the sun. All of a sudden, they’re being shown a lot of love from another community. They feel like they’re being neglected by their home community — that’s a recipe for losing businesses.”

In the case of the distribution company, once the chamber’s retension staff became involved, the problem was corrected within a few days.

Fast Forward aims to create thousands of new jobs by focusing not just on businesses but on government efficiency, making the community one of the safest of its size and educating the local workforce.

“If this isn’t a safe community, we aren’t going to be creating 50,000 new jobs here. Or, if we do, the jobs will be here, but everyone will live someplace else,” Dulberger says.

Fast Forward has five main goals, 15 strategies for achieving those goals, and 12 partnering organizations, making it truly a joint effort.

“Even the city/county efficiency piece plays a role. The cost of government translates into our local tax burden,” Dulberger says. “To the extent that our local tax burden is high, it doesn’t make it any easier to retain, grow, or attract jobs.”

This isn’t the area’s first economic development plan, but it does represent a change. A study last year said that Memphis and Shelby County had one of the most underfunded economic development plans in the country.

When asked what is different about the current plan, Dulberger says simply, “It’s actually being implemented.”

The plan has both public and private funding behind it; the partners have already begun working on their individual components. The Musicians Resource Center is set to open in June. The Center for Emerging Entrepreneurial Development, an incubator for women- and minority-owned businesses in industries in which they are underrepresented, already has seven of its eight possible tenants.

“Getting a document together is not that difficult. If you have some money, you can hire a consultant, and you, too, can have a plan,” Dulberger says.

And he says that some communities have done exactly that:

“I suppose that will make our life a little bit easier, because it will make our competition that much less effective.”

Categories
News

Al Gore Gets New Job

The New York Times reports that former vice president and Nobel Laureate Al Gore is now a partner in venture capital firm Kleiner Perkins Caufield & Byers.

Gore will investigate the potential of alternative energy start-ups and advise the company on whether it should finance those start-ups. If that wasn’t enough, Gore’s salary will be donated to the Alliance for Climate Protection.

It looks to be a good partnership for everybody. Green businesses will get an opportunity for an influx of capital, and there are also rumors that Gore will probably be named Time Magazine‘s Person of the Year. Last year, you may recall, the magazine named “You” the winner.

Read the Times story here.

Categories
Opinion Viewpoint

The Fruitcake Trade

I had been thinking recently that I might start a business that would export fruitcakes to the Iranian Revolutionary Guard. That was the most appropriate export I could think of. But the president has put the kibosh on that idea with his tough new sanctions.

Sanctions imposed by President Bush or Congress are always described as tough, but they only apply to Americans. Anybody in any other country who might like to sell fruitcakes to the Iranians is free to do so.

My point is that sanctions are generally stupid, since they affect only American businesses. As much as the president and Congress might wish otherwise, U.S. laws apply only in the U.S. American businesses can be barred from doing business with a country that displeases American politicians, but the ban doesn’t apply anywhere else.

And it does seem to me that I have at least heard rumors that today there is something called a global economy. Americans can’t invest in Cuba or in any of the other countries on the politicians’ scat list, but Europeans, Asians, and others can and do.

Other than substituting empty gestures for real action and appeasing domestic lobbies, I really don’t see what good sanctions do. It’s no longer 1945. We are not the only surviving industrial power. No matter what product you desire, you can find it in lots of other countries.

This empty gesture is just part of the buildup to attacking Iran militarily. As some noted expert recently said, you have to be living on a different planet to imagine that Iran is or ever would be a threat to the world.

Unfortunately, the president and Vice President Cheney apparently do live on another planet, because after a number of lies, they attacked two countries that were even less of a threat than Iran could ever hope to be.

Never mind that the Israeli foreign minister just said publicly that Israel would not be threatened by a nuclear Iran. Never mind that Iran says it wishes only to enrich uranium enough to fuel its reactors for generating electricity. Never mind that Iran does not have the capability of attacking either us or Israel.

I’d bet a dog that the president has convinced himself that we can stage another “shock and awe” show that will take out Iran’s nuclear facilities and its military assets in one easy surgical strike. Strategic bombing has been overrated ever since World War II. The president might know a lot about baseball, but he knows practically nothing about war.

Ask an American veteran who sat on an invasion fleet for days while naval guns and airplanes blasted some small Pacific island to smithereens. He will tell you that when he went ashore, the Japanese were still there ready to fight.

Our bombing campaign against Serbia no doubt killed Serb and Albanian civilians, but when it was over, the Serb army forces came out of Kosovo virtually intact. The famous shock-and-awe show made for good television but missed its intended target: Saddam Hussein and his top lieutenants.

If you hope that bombing can take out Iran’s nuclear facilities and its military assets, you are hoping for something that only a magic fairy can deliver. And please, to talk about a “surgical” strike with bombs is like saying a sawed-off shotgun can be fired with pinpoint accuracy. You cannot bomb any urban area without killing innocent civilians.

Nobody can know for sure what will happen if our Great Leader decides to attack Iran, but anybody will tell you that it won’t be good. Come to think of it, maybe we all should send fruitcakes to the fruitcakes in the White House, if we can find the address of the planet they are living on.

Charley Reese has been a journalist for 50 years.

Categories
Opinion

“Monetizing Content” at The Commercial Appeal

It started with two little words: “sponsored by.”

Those words appeared in tiny type above a small Boyle Investment Company logo and a collection of short news items about commercial real estate in the Sunday business section of The Commercial Appeal two weeks ago.
The column is called “Done Deals.” Many readers probably paid little or no attention to the sponsorship. But the issue of sponsored news, or “monetizing content” as the CA calls it, is sending a shock wave through the newsroom at 495 Union.

Sources at the CA say sponsorship of an upcoming series of stories about Memphis and world business was scratched after the writer, editor, and other reporters objected. A staff meeting was scheduled for Wednesday, October 17th.

The reporter, Trevor Aaronson, and the editor, Louis Graham, declined to comment. Flyer sources said as many as 50 newsroom employees signed a petition expressing their concerns about sponsored stories. The story is about business in China and was to be sponsored by FedEx.

CA editor Chris Peck declined to comment about the FedEx sponsorship or the series, which has not yet been published. He did comment about “Done Deals” and the general issue of sponsored news.

“The Commercial Appeal, like most newspapers these days, is looking for ways to monetize content,” Peck wrote in an e-mail. “This is part of the new business model that will support journalism in the future. The Web is way ahead of newspapers on this. Online, many ads already are linked directly to particular content.”

Peck said there was no expectation by Boyle or the CA that the sponsorship would influence content. “Advertisers clearly understand the value of having their paid messages associated with independently reported, relevant content,” Peck wrote. Some newsroom employees apparently do not share that view.

Flyer sources say Peck, Graham, and Aaronson had what is sometimes called a “frank exchange of views” about the proposed sponsorship of Aaronson’s series, which involved considerable investment in time and travel expenses by the newspaper. Representatives of the Poynter Institute, a journalism school and resource center in Florida, were called in.

“Two of us on the Poynter faculty, myself and Butch Ward, have had telephone conversations with individuals at The Commercial Appeal,” said Bob Steele of Poynter. “We play this role as a guide on ethics issues hundreds of times every year.”

Poynter’s input was confidential, Steele said. Flyer sources say Poynter sided with the employees who objected.

Three weeks ago Peck and Rob Jiranek, vice president of sales and strategic planning, sent employees a three-page letter on “monetizing content guidelines.” The main message was that “we are in a new world of newspaper survival” and looking for ways to “attach ads in print and online to specific stories, features, and sections.” The memo said “no longer are there thick, impenetrable walls between the newsroom, advertising, and circulation departments.”

“Survival” apparently means big profits. The Commercial Appeal is owned by E.W. Scripps, a publicly traded media company based in Cincinnati. In 2006, its newspaper division, with papers in 17 markets, earned $196 million on revenue of $717 million, for a profit margin of 27 percent. The CA’s share of that was not disclosed. On Tuesday, Scripps announced that it is splitting into two separate companies, one focused on lifestyle media, such as HGTV, and the other on local newspapers and television stations.

“The proposed separation is not expected to have a material effect on the day-to-day lives of employees,” the company said.

Sponsorship is a relatively new wrinkle in a murky area that includes “special sponsored sections” and “advertorials,” or text-heavy advertisements that look like news stories. Such sections have long been a staple of business at the Flyer, Memphis magazine, and national publications. Targeted ad placement, where an ad appears near or next to a particular story or type of story, is also commonplace.

But most newspapers maintain separate advertising and editorial staffs. That is sometimes referred to as a mythical “10-foot wall.” Advertisers, of course, are free to complain about sensitive stories, and they sometimes withdraw ads. Sponsorship of specific news reports goes back at least to the 1950s when Gillette and Camel cigarettes were big on sports. The Philadelphia Inquirer has a business feature sponsored by a bank.

Most reporters, however, are comfortable with their employer being sponsored by a collection of advertisers but not their specific reports or stories. Many newspapers, including the CA and the Flyer, are quite strict about what perks their reporters can accept. Bob Levey, a former columnist for The Washington Post who holds the Hardin Chair of Excellence in Journalism at The University of Memphis, said, “News columns should never be for sale or for lease.”

Internal CA Monetization Memo

Internal CA Monetization Memo

Categories
News

Memphis NetWorx: Confusion Still Reigns

Tuesday morning, Councilwoman Barbara Swearengen-Ware offered a resolution (unanimously passed) asking the Tennessee Regulatory Authority not to approve the sale of Memphis Networx, MLGW’s $28-million telecom disaster. The sale is, “premature and not in the public’s interest,” she said.

On Thursday afternoon, as she solicited votes in front of the Greenlaw Community Center, Ware admitted that she didn’t fully understand everything that has transpired regarding Networx’ $11.5-million sale to Communication Infrastructure Investments (CII), a heavily financed holding company based in Boulder, Colorado.

“I’ve never heard of them,” Ware said, when asked what she knew about Zayo Bandwith, a Denver/Louisville-based commercial bandwith company founded by a group of telecom executives including CII founders Dan Caruso and John Scarano. Zayo has recently issued a series of press releases touting its recent acquisition of Memphis Networx.

Earlier this summer, Scarano appeared bewildered when councilwoman Carol Chumney asked if his company was willing to discuss forming a partnership with the city of Memphis. After a few one-liners about never having conducted business in public, he allowed that, if Memphis was ready to take on the financial risks of a venture-capital firm, maybe they could talk.

Chumney looked silly, and a portion of the audience — the middle-aged white guys in suits portion — chuckled at the blond crusader’s naivete. Didn’t she know the city had dragged the private investors into the partnership then bailed when Networx needed more dough? Couldn’t she understand that business is business no matter who the partners are? And it’s not like CII — a company created to manage risk — was a commercial bandwith company like the newly minted Zayo.

Ware says she’s “offended” that CII refuses to cooperate with the City Council by answering questions pertaining to the management and private ownership of Memphis Networx prior to the company’s sale.

Unquestionably, the sale of Networx to CII was a deliberate and successful end-run around the City Council, but the council couldn’t enforce transparency even when MLGW was the majority investor in Networx, so it’s unlikely to gin up any leverage at this late date. And it’s hard to know if Ware’s resolution was anything more than political theatrics on an election eve. At best, it’s an idea that has arrived years late and millions of dollars short.

Zayo is heavily capitalized, with a quarter-billion in venture capital and the full attention of industry analysts, who are beginning to cite Zayo’s immense capitalization as further proof that the great telecom revival has arrived. And Zayo’s “we-got-it-come-and-get-it” attitude suggests that attorneys will be unleashed if any roadblocks are thrown up by the council or the TRA. The company’s press materials state that while some of the company’s fiber acquisitions are still pending regulatory approval, Networx is owned outright by Zayo.

It’s a big pill to swallow, but Networx is probably gone. And all suggestions of a public fleecing aside, if there wasn’t a question of partial public ownership, the company’s sale would have been covered in its entirety in a two-inch column on page three of The Commercial Appeal‘s business section. It would be over and forgotten by now because, all value judgments aside, in business these things happen every day.

When asked if a bidding process that even MLGW’s board of governors described as “flawed” could be considered relative to approving the sale of Memphis Networx, a TRA spokesperson was vague to the point of being unquotable.

And what would happen if Networx’ sale to CII/Zayo was somehow reversed? Even in the midst of what appears to be a telecom comeback, its unlikely that the city will find a buyer actually willing to fork out more money for some holding company’s sloppy seconds.

And if Memphis decided to go it alone in the telecom biz, ratepayers and/or taxpayers would be called on once again to pony up millions (if not tens of millions) to effectively reboot the entire system and get new and necessary building projects underway.

Two weeks prior to his third-place finish in Memphis’ mayoral race, former MLGW president Herman Morris admitted he was too ambitious in his decision to create Memphis Networx as a public/private partnership.

“It’s not that it can’t work,” he said. “But it didn’t work here.”

Even with a new City Council on the horizon, there’s still no reason to believe that it can work here. If Networx executives and private investors have been secretive, our civic leaders have shown a bizarre and counterproductive unwillingness to understand the telecom industry they waded into. Now, like an orphaned baby, they curl up next to the sock monkey of their resolutions, unable to understand that they are alone and adrift, with no easy excuses or answers.

Should the council continue to seek closure and gain a better understanding of what went wrong with Memphis Networx? Absolutely. And an investigation into MLGW might be a good place to start. But its probably delusional to think that reclaiming Memphis Networx would be anything short of disastrous. The only thing dumber than starting the telecom was selling it. Taking it back would be a trifecta of what the insane Captain Queeg called geometric logic.

On Tuesday, City Council attorney Allan Wade pointed out that Networx owes the City nearly $500,000 in unpaid fees. That bill should probably be sent, not to Networx or CII but to Zayo, along with a note asking about leveraging the old debt against a tiny piece of the action.

— Chris Davis

Read more about Networx.

Categories
Living Spaces Real Estate

In Focus

There’s a new bumper sticker in town, it’s been reported to me: “Summer is my Poplar.” Whatever genius came up with it, they have my eternal respect and thanks. It echoes a sentiment I’ve long felt, but I’ve lacked the mental capacity to enunciate the message. For there’s no denying it: There’s something exciting going down on Summer Avenue.

There is of course nothing wrong with Poplar Avenue. In fact, it’s a great model for success that Summer and other like-worn streets would do well to emulate.

Drive down Summer, and you can see evidence of a history marked by varying degrees of prosperity. There are some empty businesses and some parking lots that are much bigger than the current tenants could ever possibly need. The fact that they exist at all means they were once viable locations for big-box and other large businesses.

But I’m happy to report that Summer is in the midst of an economic renaissance. Happily, formerly depressing buildings are being renovated for new tenants. In the last year and a half, choosy national retailers such as Lowe’s, Ross Dress for Less, and Northern Tool + Equipment have all opened along Summer. Aqua Terra, a new store specializing in plants, garden, pool, and patio, is about to open, as well. Buildings beyond salvation, such as the Admiral Benbow Inn, have been torn down in anticipation of new development. It’s something of a mended-windows theory of community improvement. The clock is being turned back on Summer. Progress long dormant has been reawakened.

Oh, Summer, how I love thee. Let me count the ways. I love your restaurants, which run the culinary gamut from old-school meat and threes to Middle Eastern, from the Far East to south of the border. I love the home-improvement stores, where national chains compete with locally owned specialty shops. I love the thrift shops and antique boutiques and junk stores. I love the butcher, and bakers, and lampshade maker.

Summer’s got businesses that will get you on or off the road on bikes, ATVs, scooters, or used cars. You can go bowling, or you can pick out a new state-of-the-art kitchen and go down the road and stock it with wholesale-price equipment. You can have elaborate glasswork done or get cooking with a Big Green Egg. (And, okay, I admit it: I miss the Admiral Benbow.)

And that’s all on the west side of I-40. Summer wreaks a path of awesomeness for miles to the northeast too.

Call me a Summer Avenue patriot. I live along the street’s corridor, in Berclair. I defend the area with livelihood, and I take up its banner and spill my dollars like blood for businesses along its hallowed way.

It’s the same enthusiasm I expect from any resident of any neighborhood. Civic pride usually shows itself in little ways. It’s about the only level of diehard partisanship left uncorrupted these days. Being a regular at a local business. Being mindful of the appearance of your little plot of land. Doing all you can to support your neighbors. Putting the light on the hill.

Summer is my Poplar. If I lived off of Winchester, the sentiment wouldn’t be any different. ■

greg@memphisflyer.com

Categories
Cover Feature News

It’s Now or Never for Networx

CREDIT: Richard Thompson

Who made the best bid for Memphis Networx? Was it the well-funded seven-month-old holding company from Colorado — Communications Infrastructure Investments (CII)? What about New York’s proven infrastructure firm American Fiber Systems (AFS)? Or was it BTi Corporate (BTi), the darkhorse candidate that wants to turn Memphis into the bio-tech research hub of the Americas?

MLGW’s board says CII won the bid fair and square. The other bidders say the fix was in from day one.

It might be helpful for the City Council to hear all three companies explain why they think they made the best bid. But given the long, strange saga of Memphis Networx, such an occasion might distract from the unspoken question that loomed like a family curse over last Thursday’s vote by the MLGW board to sell Networx for a cash return on its $29 million investment of just $994,000: Namely, how in the world did Memphis Networx become lodged so inextricably between the frying pan and the fire?

Networx representatives made the case that delaying the company’s sale any longer will send it into a tailspin of irreversible loss. “It’s now or never” has been a reoccurring theme in the Networx debate. But when “now” is a paltry return of $994,000, “never” isn’t much of a threat.

The MLGW board meeting did reveal several apparent flaws in the bidding process. A presentation delivered by the McLean Group — the consulting firm hired to assist Networx through the sale — may have done more damage to the credibility of the consultants’ ultimate findings than anything brought to the podium by angry representatives of AFS and BTi.

McLean Group chairman Dennis Roberts and junior consultant Tom Swanson made the losing bidders sound so bad it became impossible to imagine how such nonserious bidders could have made it to the final three in the first place.

As the deal was explained to the media by Nick Clark — who sits on the boards of both MLGW and Memphis Networx — the bidding process was managed quietly through the McLean Group to weed out frivolous bidders and to avoid conflicts of interest. In a sneering assault on BTi’s credibility, one McLean Group consultant announced that a BTi principal had been making his living installing stereo equipment. (BTi founder and CEO Paul Allen has since stated that nobody in his telecom company has ever installed stereo equipment.)

The McLean consultants also said Allen’s company didn’t follow the rules and that its bank letters were unconvincing. They said BTi representatives didn’t show up for a scheduled due diligence meeting. (BTi has given the Flyer a letter from Thomas Murray of Fifth Third Bank reconfirming its interest in financing the Networx purchase based on a thorough process of due diligence.)

AFS’ problem, as identified by the McLean Group, was basically that they couldn’t show anybody the money. AFS has filed a declaratory action suit to prove their seriousness.

No BTi representatives were present when McLean consultants trashed their company’s bid, but AFS CEO Dave Rusin was visibly disturbed by the McLean Group’s findings. He shook with anger at times while explaining in measured words how his company survived the dot-com crash in 1999, weathered the telecom meltdown of 2001, and is a serious and reputable company.

He convincingly answered charges that his company wasn’t good for the cash by asking what was wrong with the $60 billion available to AFS’ historically cooperative financiers: Sierra Venture Partners, Lucent Venture Partners, North Atlantic Capital, and Hamilton Lane.

Dave Danchak, AFS senior vice president of corporate development, angrily said that the McLean Group’s figures didn’t look like anything he’d ever seen before.

Germantown resident David McCabe, a representative of BTi Corporate, arrived for the second half of the marathon meeting.

“They’re hiding something,” he insisted, accusing the McLean Group of spinning the facts.

McCabe also challenged the McLean Group’s assertion that BTi missed its due diligence meeting. He said that Networx representatives called unexpectedly on a Wednesday afternoon and asked if BTi could assemble its team and be in Memphis the next morning. According to McCabe, doubts were expressed on the front end as to whether or not his people could make it on such short notice, but they said that they would be in Memphis as soon as possible.

McLean consultant Swanson admitted that the due diligence process had been “accelerated,” a fact conveniently left out of the McLean Group’s original narrative, which alleged that the stereo-installing bunglers of BTi just couldn’t follow the rules. “Their story keeps changing,” McCabe declared.

After listening to McCabe’s indignant rebuttal of the McLean’s Group’s analysis, the MLGW board concluded that the McLean Group and BTi had had “a miscommunication.”

Although Rusin and Danchak of AFS had initially refused to comment on BTi’s proposal, the AFS reps returned to the podium and expressed sympathy for their competitor.

“Mr. McCabe talks about how the story keeps changing,” Rusin said. “Well, guess what? We come here today and find that the numbers have changed.”

Rusin and Danchak then unveiled their company’s lawsuit. MLGW board chairman Rick Masson expressed concern that the suit was part of an intentional ploy to further devalue Networx, which has only enough operating capital to survive for a month to 45 days.

CEO Dan Platko then delivered a grim assessment of Networx’ financial condition, and Clark described what might happen if the sale was delayed. Staff cuts would be necessary, he said, service would then decline, and customers would flee. According to Platko and Clark, it was doomsday eve for Networx, and the clock was ticking.

In spite of potential conflicts of interest, Clark maneuvered back and forth between his dual roles as MLGW governor and Networx board member. He spoke of the need for a transparent process and occasionally played the role of devil’s advocate, despite the fact that the Networx board had approved the sale to CII and had signed a binding agreement with the company.

Clark cited a Flyer story and asked a series of questions supposedly based on this newspaper’s ongoing coverage of the Networx sale. But Clark’s Flyer-based line of questioning left out the same embarrassing facts about possible conflicts of interest that were raised in the article that he’d omitted in a previous report to City Council chairman Tom Marshall.

After confirming that Platko had once been employed by Intira, a company co-founded by former Networx CEO Mark Ivie, Clark moved to another subject, without mentioning the fact that Swanson — the McLean Group’s allegedly unbiased third party — had also been a vice president at Intira. Nor did Clark mention that Swanson, prior to assuming his McLean Group duties, may have accepted a lucrative, paid consulting gig with Networx via his personal firm, TJSwansonCo.

After Clark’s omissions were noted, Platko and Swanson admitted that they’d worked together at Intira. Swanson later said that prior to the Networx deal, he and Platko hadn’t done business together since leaving Intira. However, a contract signed by Platko on October 5, 2006, suggests that Networx’ chief executive offered Swanson $2,000 a day for consulting with Networx’ sales division, a month before the McLean Group was called in to assist in Networx’ eventual sale.

The information becomes doubly troubling in light of Networx officials’ repeated failure to identify Swanson as having any duties above and beyond the work he was doing through the McLean Group. (Detailed questions submitted by the Flyer to Swanson and Platko have yet to be answered.)

“It was an imperfect process, but it’s an imperfect world.” This, more or less, was the opinion MLGW board members unanimously expressed prior to finally signing off on the sale of Networx to CII.

In a two-to-one vote with one abstention, the board passed a resolution to go forward with the sale of Memphis Networx to CII. In light of AFS’ lawsuit and mounting concerns within the City Council, it’s unclear what that resolution ultimately means.

Documents dating from 2004 show that Networx executives and at least one board member were actively negotiating to sell Memphis Networx to AFS in an unpublicized all-stock deal.

Although sources conflict on the details, it appears that Networx officials’ enthusiasm for closing the original deal may have faded when it was discovered that the offer would be small and paid in stocks, especially in light of the fact that MLGW, as a publicly held company, is prohibited from owning stock in a private company.

When asked last Thursday, Networx board member Andrew Seamons said it was highly unlikely that any of the private investors would have an interest in absorbing the AFS stock into their share of the sale. Seamons is professionally affiliated with Pitt Hyde’s Pittco investments. Hyde, who recently stepped down from his position as AutoZone chairman, is one of the original private investors in Memphis Networx.

Over the weekend, one highly placed proponent of the Networx sale to CII circulated news items intended to prove BTi was in over its head on the Networx deal.

Considering the board’s vote to sell Networx to CII, it’s hard to imagine what anyone stands to gain by further discrediting BTi. Unless it’s the fact that continuing the debate over who placed the best bid shifts focus away from the only questions that matter: When did Networx’ executives know the company was in a tailspin; and how were the company’s finances managed from that point on?

If the McLean Group was contacted to assist with the sale of Networx in December, as reported, serious concern over the company’s finances had to be growing by the time Platko offered Swanson $2,000 a day for services that have yet to be sufficiently explained.

Networx’ history of questionable decision-making ranges from disastrous technology purchases to a miscalculated deal with ServiceMaster that cost the telecom thousands of dollars a month for nearly a year. How did that history change when new CEO Platko found out that his company was in serious trouble? Did he tighten up the company’s belt or did he enable spending that further exacerbated Networx’ dire situation?

Platko and his predecessors had the advantage of using Networx’ private status to withhold information whenever anyone attempted to delve too deeply into the specifics of the company’s spending practices. The choice Networx executives have given its public owners — nothing or next to nothing — demands answers not available in the financial postmortems Clark has delivered to the press.

Epilogue: When Platko replaced his former colleague Mark Ivie as head of Memphis Networx in 2006, MLGW’s ratepayer/owners were not notified of the change. Clark, an appointed steward of the public’s interest in Networx, has described the lack of attention given to such changes at a company funded (in part) by public dollars as “fortunate.” To interpret his comment as “the less the public knows about what’s being done with its money, the better” may be unfair, but it’s also unavoidable.

Clark says he recognized that Networx was experiencing trouble when he joined the board in 2005. Ironically, given the final outcome, he says he kept quiet for fear of scaring off potential customers.

MLGW has fully enabled this disaster. Its board members have harbored concerns about Networx’ financial well-being for at least two years but allowed Networx to keep a low profile while the telecom was clearly wasting away. Silence and complicity in the name of maintaining Networx’ “competitive edge” precipitated MLGW’s recent “damned if you do, damned if you don’t” decision, wherein the only thing worse than selling its valuable telecom asset for a $28 million loss is not selling it right now … for a $28 million loss.

On Tuesday the Memphis City Council voted to discuss Networx-related issues at a meeting of the MLGW committee. Details of that committee meeting were not available at press time.

See MemphisFlyer.com for updates on the Networx story.

Categories
Editorial Opinion

Learning from Networx

After years of secrecy (to preserve the company’s competitive edge, we’re told), MLGW has finally released Memphis Networx’ financial statements for public scrutiny. No doubt, many interesting revelations will turn up in those pages, which document MLGW’s disastrous plunge into the telecom business.

Not that it matters anymore. Now that MLGW is on the verge of selling its $29 million investment for around $1 million, it’s too late to do much of anything but smack your skull and cry, “Oy!”

For anyone familiar with the history of confidence rackets, the tale of Memphis Networx offers a more-than-passing resemblance to “the Spanish Prisoner,” a classic con that originated in Europe during the Inquisition and which has since become quite popular among Nigerian e-mail writers.

The scam works like this: The con man endears himself to his mark by entrusting him with something that is allegedly of great value. He tells the tale of his friend, a generous nobleman, who has been falsely imprisoned by the king of Spain. The con man says he knows whose palms need greasing in order to release the nobleman, and he assures the mark that the rewards will be beyond imagining … but he’s broke. The rube ponies up some coin. After all, he’s got the valuable object as collateral. Unfortunately, the money the rube provides is never quite enough to spring the prisoner, and so the game continues until the rube gets wise or runs out of dough.

The metaphor isn’t perfect. By participating in a dubious public/private partnership that shut out public oversight and by hanging onto its worthless shares to the bitter end, MLGW played the dual role of rube and con man. It’s an object lesson that should remind us of why seeing where the money goes — when it’s going — is far more valuable than hearing about where it went.

It also reminds us just how empty and artificial modern “competitive” business practices can be. It is accepted that executives should receive big salaries, nice bonuses, and perks, even when they fail to grow the company’s bottom line. Networx played the game by the rules, rewarding its first-generation executives quite nicely, even though the company tanked. The taxpayers, of course, who represent the “public” side of this partnership, were denied access to the company’s numbers — until it was too late.

The private investors — including Memphians Fred Smith and Pitt Hyde — will be repaid at least a portion of their investment. Both of these men have done a lot for the city, and it’s likely they thought they were doing a good deed when they responded to MLGW’s overtures and attached their names to Networx. Their participation in the telecom venture was more symbolic than anything else, solicited primarily to create confidence in the venture. The real suckers in this deal — and unwittingly so — were the taxpayers.

Now we’re faced with a Hobson’s choice: We can either put more money into the venture, betting that Networx has finally turned the corner and that the fiber-optic infrastructure it has created will bear fruit, or get out and watch a private company reap the rewards of our public investment.

Oy.