And since its founding in 1987 with a single product, it has pursued that goal by becoming a world-leading biotechnology powerhouse that touches the lives of millions of people around the globe every day as its products and services ensure the safety of prescription drugs, the cleanliness of health care and consumer products, and the protection of hospitals and other environments from harmful contaminants.
But it’s not just products the company is using to grow corporate social responsibility is a critical driver and key component to the company’s growth plan. Each year, STERIS employees invest thousands of hours supporting the missions of nonprofits both in Northeast Ohio and in communities around the world in which it has operations.
Employees’ volunteer efforts include fund-raising campaigns and serving in mulityear leadership commitments as trustees or board members to various organizations.
In addition to the work of its employees, the STERIS Foundation is managed by a board of trustees and funded by STERIS Corp. The foundation makes grants in support of health and scientific education, human services, and civic and cultural activities in the communities in which STERIS operates major facilities. Since its inception in 1995, the foundation has contributed $2.4 million to nonprofit organizations.
STERIS also provides corporate donations to support community events that are more appropriately funded by the company than by the foundation and include memberships and sponsorships.
It invests more than $2 million annually in corporate donations. Recipients include AmeriCares, which received $383,000 in STERIS products to aid in tsunami disaster relief; and Lakeland Community College and the Pennsylvania Department of Environmental Conservation, which both received a donation of a $100,000 sterilizer. STERIS has also donated medical supplies to U.S. military units overseas and donates medical supplies to organizations such as Doctors Without Borders.
In addition, STERIS President and CEO Les Vinney served as chairman for the 2004 fund-raising campaign of United Way of Lake County. The campaign exceeded the $3.6 million fund-raising goal for the first time in 10 years and increased donations 4.2 percent over the 2003 campaign.
STERIS employees donated $102,000 to United Way, exceeding the $60,000 campaign goal by 70 percent. And 36 employees participated in United Way of Lake County Day of Caring, an all-day event to improve the communities in which they live.
How to reach: STERIS Corp., (440) 354-2600 or www.steris.com
Its customer were original equipment manufacturers including General Electric Corp., Thomas & Betts, Lithonia and Osram Sylvania.
Then Yan saw the potential for energy savings with compact fluorescent bulb and ballast technology and began exploring ways to improve his products and position his company to become a major source of energy-efficient lighting bulbs and accessories.
In 1996, two significant technologies were discovered, the SpringLamp design and the dimming ballast. TCP recognized that these new products offered huge application benefits to the industry, which resulted in the decision to begin marketing direct to the industry. Since then, the SpringLamp, a twisted tube design , has become standard in the CFL market.
Although CFLs are more expensive than traditional lamps, they use only 25 percent of the electricity and can last up to 15 times longer.
Last year, the Aurora-based TCP introduced fresh TCP is also gaining market share in the linear lamp category by providing school gymnasiums, warehouses and manufacturing facilities with innovative, energy-efficient high bay fixtures. As a result of its innovation, TCP has increase revenue from $22 million in 2000 to more than $89 million last year. It has also increased its employee base from 37 in 2000 to 84 last year, increasing its Ohio payroll dollars by more than 110 percent. TCP’s ability to commercialize compact fluorescent bulbs and accessories has established it as a major player to those seeking to reduce electricity costs Both commercial and retail outlets are serviced through a national network of more than 40 representatives and 1,200 electrical distributors. The company emphasizes designing products that are energy-efficient and environmentally sound, recycling an average of a ton of cardboard and paper each month and donating large quantities of light bulbs. How to reach: Technical Consumer Products Inc., www.tcpi.com
TCP is also gaining market share in the linear lamp category by providing school gymnasiums, warehouses and manufacturing facilities with innovative, energy-efficient high bay fixtures. As a result of its innovation, TCP has increase revenue from $22 million in 2000 to more than $89 million last year. It has also increased its employee base from 37 in 2000 to 84 last year, increasing its Ohio payroll dollars by more than 110 percent.
TCP’s ability to commercialize compact fluorescent bulbs and accessories has established it as a major player to those seeking to reduce electricity costs Both commercial and retail outlets are serviced through a national network of more than 40 representatives and 1,200 electrical distributors.
The company emphasizes designing products that are energy-efficient and environmentally sound, recycling an average of a ton of cardboard and paper each month and donating large quantities of light bulbs.
How to reach: Technical Consumer Products Inc., www.tcpi.com
"There are some days when I'd trade it to you pretty quickly," he says. "Most days, though, we're excited about what we do. I think the excitement here is this very unique organization, in how entrepreneurial we've made it."
The Detroit Regional Chamber covers 10 counties and 5 million people. It's the largest chamber in the country; with more than 21,000 members, it far outdistances chambers such as those in Los Angeles and San Francisco, says Blouse.
"It's just a very different model that we've created here," Blouse says. "Consequently, we have probably 19,000 of those 21,000 members that have less than 50 employees. We have the General Motors of the world, but we also have many, many small businesses."
Smart Business spoke with Blouse about the Detroit region, its biggest issues and its future.
How do you balance the diverse interests of your membership?
Diversity of membership is a difficult thing to balance, because the General Motors and Daimler Chrysler and Delphi and Comerica banks are looking for more of the public policy agenda, the chamber being a leader in the community and driving the business economy. On the other hand, the smaller enterprises are looking more for things that make their cash registers ring.
It takes a lot of focus. We try to maintain ourselves as a business advocacy organization, meaning that we're not a social service, and any of the public policy items we work on are probably more related to the quality of life of community development or things that are going to help the business development program.
The model that we've created really allows for great growth. We have created a concept where we have contractual partnerships with many different business groups and other ethnic-based organizations. What that's given us the opportunity to do is really delve pretty deeply into a very diverse business community.
Why is it important to include the religious community in the mix?
In any urban community, there's a great deal of power in the religious community. The churches throughout this city and their leadership are pretty entrepreneurial. A lot of business in this city is generated from these churches. And they're not shy at the pulpit in trying to convince their congregations what is the best direction to go.
They're a very strong political force, and the more we can associate with them on certain issues like education, transportation, the better. To create a group like that, there's a great deal of trust-building that has to take place so that each group trusts and understands each other.
How does the economic development arm of the chamber encourage, grow and bring business to the area?
We've created the Detroit Regional Economic Partnership. It's a partnership between 10 counties and the city, and it's an agreement among all of us that we will go out to the global marketplace and compete in a friendly way for that business. The objective is to get that investment into Southeast Michigan. Each of the different players, then, would hope to capitalize on that because our folks that work for us bring the investment here, then they'll work with the different economic development groups in the county as well as the state to try to cement the deal.
That group also tries to bring companies from other countries here, and we are marketing the U.S as well, talking to companies about having a presence in Detroit, particularly in the automotive business.
How do you attract these businesses?
We operate this program on about two, two-and-a-half million dollars a year, but largely it's labor intensive. We've just never had the luxury of having a lot of dollars to do advertising, but we believe the best way to really attract these companies is one-on-one marketing.
So we go to trade fairs around the world. We follow a lot of the automotives in Europe. ... A lot of it is one-on-one, and it's an interesting process because sometimes it takes four or five years of calling on those companies until a deal comes along as an opportunity.
We don't turn anything down. If we can get a company in the south to put a marketing office here, we know someday that may turn into something bigger.
We would like to maintain this area as the brain center of the automotive industry. The R&D aspect of the automotive industry is ours in Southeast Michigan.
What are the biggest issues facing Southeast Michigan?
Anything related to the cost of health care is an important issue for us. It's impacting all the businesses today. Anything related to transportation. We like to think of it more intermodally, connecting all the different areas of transportation, but certainly roads.
Living on the Detroit River with Canada right across the river, anything with border crossing becomes important to us. Environmental issues, workplace issues, workers' comp, unemployment compensation, taxes, are all important issues.
We've long lobbied -- 36 or 37 years -- to get a regional transportation system in place, but we finally got that this year. We feel like we can retire now. We don't have a great transportation system, but at least we have the foundation finally in place to build it. We've been very, very aggressive on road funding. When 9/11 occurred, we had trucks backed up for 20 hours.
The economy here is a just-in-time economy. ... So when trucks are backed up 20 hours, we have really big problems. And the manufacturing plants started to shut down, and we had to get the trucks moving. And there weren't enough resources at the border, so we put our whole team into a very active state for about six months, a lot of lobbying, getting the people together from both sides of the river, Canadian customs and our customs and immigration to sit together and figure out a solution. ... It was a real nightmare for quite some time.
Regional transportation is very, very critical. It's really a piece that ultimately helps this region continue to expand and grow. And it's so far in the future. The time lag to get from a mediocre bus system to integrating those bus systems, to get to the rapid transit, to get the funding in place and go through all the politics, it's years in the future.
And health care costs are impacting the economy here in very dramatic ways. In the automotive industry, the cost of health care and pensions are huge.
And then, just continuing to try to get our region to operate as a region is probably a daily challenge. Things happen in a very slow way.
Last November, voters returned control of the Detroit school district from the state to the city, a move the chamber opposed. Before the election, you stated, 'If we lose it, I fear for the city of Detroit. I believe that it's very possible that the business community will just start to disengage again, as they were back with the old elected board.' Following the loss, what impact do you anticipate?
Five years ago -- and we supported this -- the state took over the city schools and appointed through the mayor the school board, and brought in a CEO to run the school district and to rebuild the schools, and there's been great progress in the last five years.
I had some concern when we got into the campaign. I thought it was, at best, a 50/50 chance that we could win this, but there were two sets of issues out there. The opposition (to keeping the schools under state control) focused on the business community and really put us out in front as leading this effort, and did it in a very negative way. And then there was another group that focused on the mayor having anything to do with the school district. Between the two pieces, it was just an overwhelming victory for the opposition, who spent much less money.
It was certainly a huge loss.
Where do we go from here? They will go back to the old type of governance structure, previous to the reform of governance structure, and time will tell how that works.
We're very disappointed. We obviously felt that a strong CEO form of governance was the right form of governance, regardless of how it was put in place. We felt the model was the best model, still think it's the best model, and were pleased with some of the progress that was made.
But that's the way it happened, and we'll just have to see how it goes. And we'll help when we're asked to help.
In the meantime, we're relooking at all of our policy regarding education in general. There are many other districts in this state that are seeing some severe financial problems, and so we want to look at this from bottom up now.
What projects does the chamber have on the horizon?
One of our newest programs that we (took) nationwide is a health care product that is designed to address the growing number of working uninsured. In Southeast Michigan, there are 600,000 individuals who are working that are uninsured. A large hardware chain with a lot of part-time retail employees, they maybe couldn't afford coverage, but now maybe they can afford some coverage because the premiums can get pretty low, $40 or $50 a month vs. $800 a month.
What chamber programs are an ongoing success?
There's one that's become pretty significant with us and is a model that people from all over the country come to see if they can replicate. Our Mackinac Policy Conference brings together community leaders from the whole state.
It is by far the most successful thing we do.
Attendance is limited, because on Mackinac Island, you have to get a ferry boat out to the island, and once you get to the island, you have to get up on a smelly horse. That's the only mode of transportation.
Most people, when they arrive, they stay there, and for some strange reason, when they cross the water, they seem to leave everything else behind. And you can get people to sit down, and there are a lot of deals that are made on the island and a lot of future legislation originates there.
How to reach: Detroit Regional Chamber, (313) 596-0384 or www.detroitchamber.com
The regulations, which went into effect in 2001 but don't require compliance until April 14, 2003, are part of the Health Insurance Portability and Accountability Act (HIPAA). The act covers organizations including hospitals, health plans, billing agencies, doctors' offices and employers that are self-insured.
For employers that sponsor an insured plan such as an HMO, which deals directly with employees on claims, the effects will be minimal. But employers that deal with a patient's medical information -- even if that just means writing reimbursement checks from a pre-tax flexible spending plan -- will have to do more to comply.
"The more protected health information you have from your employees, the greater the impact of HIPAA will be on you and your organization," says Laura Koballa, senior manager at Deloitte and Touche and a member of its national HIPAA team. "I think employers in many cases are going to start looking at data at a more summarized level so that in as few cases as possible are they dealing with a specific individual's information."
HIPAA includes regulations covering the electronic transmission of health records and security, but for most organizations, the privacy regulations are going to be the most burdensome, says Koballa. Privacy regulations in general are not new, Koballa says -- "banks have been dealing with security and best practices for years and years, because it's a highly regulated industry" -- but there hasn't been that kind of regulation of health records, she says.
"Most of the privacy regulations are brand new for these entities, and the way in which you currently conduct business, the way in which you handle protected health information, is going to be different," Koballa says.
Those authorized to view health care information will have to ensure no one else sees it. That could be as simple as relocating a workstation so passersby can't see the screen or locking file cabinets when leaving the room or as complicated as installing new systems.
"The biggest challenge is going to be for nonhealth care employers who sponsor health plans, because most employers are not geared up already as physicians' offices and hospitals are in the world of confidentiality," says Scott Sandrock, chair of the health care practice at Black McCuskey Souers and Arbaugh in Canton.
Not for sale
In addition to restricting who can view medical records, HIPAA prohibits the selling of a patient's health care information to outside entities.
"Your health information is yours," says Sandrock. "And you decide who gets it, and unless you give permission for the release of it, it can't be used, shared or disclosed unless there is some express situation that permits disclosure of that information."
That regulation arose from a case in which the maker of Prozac bought lists of patients taking the drug and sent them clearly marked samples in the mail, says Sandrock.
"That caused some people to be very upset, because family members picked up the mail or it came at work, and they didn't want the universe to know they were taking Prozac," Sandrock says. "Those situations are so incredibly rare, but so egregious," that the government took action in the form of HIPAA.
Can I see?
Also included in the privacy regulations are rules regarding a patient's right to view his or her health information.
"There's nothing from an employer perspective right now to really formalize that process," Koballa says. "You have the right to see a certain claim, but if you said, 'I want to see my whole claims history,' there's no process. An employer, a health plan, doesn't need to save anything in a certain format or for a certain period of time right now."
As part of the process, each organization must develop its own standardized forms.
"The government will tell you what needs to be included in that form and implemented, but they have not created the forms," Koballa says. "However, many consulting and law firms have begun to put together a standard set of templates that can be customized for individual clients. It may sound simple, but customization can be huge."
Although the regulations apply to anyone who deals with protected health information, it is large hospitals that face the most difficult task, Koballa says.
"The security there has typically been pretty weak," Koballa says. "On the health plan side, and probably for most employers, security may already be a high priority, so what needs to be addressed from a security perspective might be minimal. For health care organizations, because their primary focus, especially on the provider side, is patient care, they've been very slow at adopting best practices around privacy and security."
Who's in charge?
The Federal Office of Civil Rights has been charged with enforcing HIPAA regulations, but Congress has not granted it any significant budget increase to do so, says Sandrock.
"They don't plan to go out and do field audits," Sandrock says. "They're not going to ask to see your HIPAA manual. But to the extent that complaints are filed, they will investigate and respond. The government is going to leave it up to people who are upset to rat out employers and health care providers."
Koballa agrees that organizations will have to police themselves, and says public image will drive compliance.
"What if an employee of your organization blows the whistle on you and tries to claim that the organization did not have the proper safeguards in place, and therefore that information got into the wrong hands and they were denied a promotion or they weren't extended a job offer because their information was used incorrectly?" Koballa says.
Not only would that company be facing a lawsuit, it could also face criminal penalties, Sandrock says. The statute allows for a fine of up to $250,000 and/or imprisonment for up to 10 years for knowing misuse of individually identifiable health information.
"If it's an innocent situation, you're talking about a slap on the wrist and fines. People aren't going to go to jail for innocent violations, although the statute authorizes it. But if they find egregious conduct, there will probably be some selective criminal enforcement," with the hope that that will intimidate other businesses to follow the rules, he says. How to reach: Black McCuskey Souers and Arbaugh, (330) 456-8341; Deloitte and Touche, (216) 589-1402
Businesses have until Oct. 16 to either begin submitting enrollments, eligibility and claims processing electronically or file for a one-year extension.
The National Standards for Electronic Transaction rule of the Health Insurance Portability and Accountability Act (HIPAA) applies to everything from the largest insurance company and hospital system to the one-person doctor's office. The goal is to simplify and standardize forms sent electronically, says Laura Koballa, senior manager at Deloitte and Touche and a member of its national HIPAA team.
"When the government started writing this, they looked at the ways in which providers, being the health systems and hospitals, and the payers, being the health plans, were communicating in terms of sending standard types of transactions back and forth," Koballa says.
Congress found that there were many different formats for sending transactions, and because of that, it was taking too long to process them.
"So they ... made some very specific requirements on how these transactions need to be," Koballa says.
The deadline for businesses to comply with this section of HIPAA has always been Oct. 16, 2002. But about three years ago, some of the larger health plans started looking at what it was going to take to implement HIPAA regulations.
"When they realized there's no possible way they're going to be ready for this by the October 2002 deadline, the Blue Cross Blue Shield Association was able to convince Washington that they needed (more time)," Koballa says.
To receive an extension, a business must submit a compliance plan to the Department of Health and Human Services which includes the reasons the business is not compliant; a budget and strategy for achieving compliance; and a timeframe for testing, among other things. But there is no approval process.
"The government realized it would be absolutely impossible to have a committee in place to review and validate these extension forms," says Koballa. So the plan "doesn't need to be approved, it just plain and simply needs to be submitted and on file." How to reach: Deloitte and Touche, (216) 589-1402
For nearly 100 years, Baker McMillen Co. survived, but it wasnt until its sale to Rich Miller in 1975 that it began to thrive.
That year, the company had two customers and 19 employees. Today, it employs more than 350.
You had a company that basically sat dormant from 1874 to 1975, says William Kimmerle, who in February completed purchasing the stock from Miller, his father-in-law.
The Stow company, which specializes in precision hardwood turnings, has grown through diversifying into new products and through acquisitions, including that of Phoenix Millwork, a Texas company with a unique product line whose owner was ready to retire.
Our original company grew through offering more to the existing customer base than we already had to offer, says Kimmerle. We wanted to grow the company and worked very hard together to grow it aggressively. Our goal is to continue to do that.
The strategy has paid off, as Baker McMillen nearly doubled its 1994 sales revenues to more than $30,000,000 last year.
Baker McMillen continues to make products for other manufacturers, including vacuum rollers, and through the acquisition of companies with their own proprietary line of products, we were able to develop our own products, beginning in 1987, Kimmerle says.
The company, the second oldest in Akron after BFGoodrich, has three facilities in Stow, including the Waddell Manufacturing Co. division, purchased in 1987 and moved from Grand Rapids, Mich., to Stow in 1990. It sells unfinished wood products to the do-it-yourself home center and hardware chain retailers, such as Lowes and Home Depot, and employs about 40.
Were playing with some of the largest retailers in the industry, which means the company is held to very high standards, says Kimmerle. We believe were the biggest wood turner in this niche.
The Crook-Miller Co. division in Hicksville, Ohio, was purchased in 1982 and manufacturers garden tool handles for the original equipment manufacturers market. It is vertically integrated with a state-of-the-art saw mill. Crook-Miller employs approximately 75.
The Phoenix Millwork division in Beaumont, Texas, acquired in 1995, produces and sells unfinished Victorian gingerbread wood trim items to the same do-it-yourself retailers as the Waddell Manufacturing division and employs about 95.
With a strong board of advisers and clear goals, Kimmerle is optimistic about the companys future and its continued growth.
Its a challenging environment, but a great business.
Entrepreneurs often set their sights high, aiming for the biggest clients with the most money to spend. But as Kent Adhesive Products Co. (Kapco) found out, sometimes targeting the little guy can result in tremendous growth and profit.
With an extensive background in the adhesive coated papers industry, Joe Barnette had often encountered small businesses that were not able to meet the minimum purchase requirements demanded by that industry.
With that niche begging to be filled, in 1974, Barnette founded Kapco, a coater and converter of flexible materials which applies pressure sensitive adhesives to flexible materials. Companies that before had to buy in large quantities or do without flocked to the new business, which did not have the larger companies strict mill minimums.
If someone only needs 10,000 labels, thats not a whole lot of stock, says Brenda Shick, vice president of marketing. They dont need master rolls.
Barnette says that when he started selling at less than the mill minimums, he was the only one in the country doing so. But he had just a small window of opportunity before others quickly followed in his footsteps.
He targeted customers whose small orders were routinely rejected by major manufacturers because they werent large enough to bother with. He reasoned that if the huge minimum order the mills required customers to buy were sliced into small, manageable quantities, low volume users would pay a reasonable premium for such custom service.
Everyone was looking for the big order and didnt want to sell to the smaller business, says Shick. They were looking to sell a carload or a truckload, but printers with a short run job maybe didnt want to buy a truckload of florescent orange labels or other items.
Although technology has vastly improved since the company was founded 25 years ago, those needs still exist today, Shick says.
The company now includes a graphic division, which is a major source of custom punched, adhesive-coated vinyl used in 20,000 U.S. and international sign shops; and a library products division which includes self adhesive book covers, repair material and preservation products. That division arose out of the companys ability to produce small salable items which could be cut like paper dolls from enormous rolls of materials.
As Kapco is celebrates 25 years in business, it has grown from three to 115 employees who share directly in the companys success with annual bonuses. A 90,000-square-foot plant built in 1996 has the capacity to expand to twice that size as the business continues to grow.
Kapcos customers have rewarded the companys dedication with loyalty. Barnette believes three of his current customers have been with him since the beginning.
It now has Fortune 500 companies as customers and does more than $20 million a year in sales. But it remains true to its roots, continuing to serve the needs of the smaller business community.
"I don't run a business, I don't know anything about business. I have people for that," said Vizquel at the unveiling of "Omar! My life on and off the field," by Vizquel with Bob Dyer.
Vizquel's ventures off the field include salsa, ice cream and a clothing line, as well as his paintings, done in a variety of textures.
"Because the Indians have played so well, and because I'm perceived as a decent guy, I've had good success with commercial products," says Vizquel in his book.
His first product, salsa, was introduced in 1998 as the result of a suggestion by a marketing person.
"I didn't think up the idea, I didn't create the recipe, and I have nothing to do with manufacturing it," says the Venezuela native. "But I did contribute the paintings for the label."
According to Vizquel, Bob Barlow of RBA Sports saw a painting by the nine-time Gold Glove winner and thought it would make a good label for salsa.
"So we got together and cut a deal," Vizquel says.
Omar Vizquel Baseball Ice Cream came about after Vizquel visited Mitchell's Homemade Ice Cream in Westlake.
"We liked their ice cream so much that I asked my marketing guy, Barlow, to contact the owners, Mike and Pete Mitchell, to see if they could develop a brand to carry my name," Vizquel says. "In the off-season, they sent a bunch of shipments of ice cream to my house in Seattle, and we tested them to see what we liked. We settled on four flavors: Triple Play Berry Sorbet, Double Play Chocolate, Bases Loaded Mint Cookies & Cream and Omar's Awesome Vanilla Bean."
Vizquel also paints -- his favorite artist is Salvador Dali -- and although prints of his work are available on his Web site for $175, he does the work more for himself than as a commercial venture.
"My main interest isn't selling them," he says. "I paint for fun. It's a great escape. When I sit down to paint, I can leave baseball and everything else behind. I lose myself in the work."
Vizquel's biggest commercial success has been with his clothing line. The line launched with T-shirts, sweatshirts, hats and boxers, all with Vizquel's name on them, then evolved to leather pants and bathing suits. Now the focus is tight-fitting, flashy leather coats.
His clothing line, including a $45 sports bra, is also available at his Web site, as are autographed balls and photos, rookie cards, mini-bats, and, of course, his book.
Although he trusts to others the day-to-day operations of the businesses that carry the Omar Vizquel name, the quality of the products is still important to him.
"I'm careful about what I put my name on," Vizquel says. "Nothing can mess up your good name faster than being associated with an inferior product."
Banks and mortgage services have been under scrutiny lately with questions about whether they have fully complied with legal requirements in seeking to foreclose on property securing mortgage loans.
“With the downturn in the market, there was a massive surge in foreclosures,” says William A. “Mac” McBride, a litigation attorney at Baker, Donelson, Bearman, Caldwell & Berkowitz, PC. “The systems at banks and mortgage servicers were not designed to deal with the tsunami that hit them. They had systems in place designed to deal with X number of foreclosures and were suddenly dealing with X to the 100th power.”
Smart Business spoke with McBride about how the industry fell apart and the steps it is taking to put itself back together.
How did the problem regarding affidavits in mortgage foreclosures come to light?
It came to light this summer when an employee for a lender/servicer stated in a deposition that he had not taken all the steps necessary to verify the information in affidavits he was signing. Out of that came the term ‘robo-signing,’ which refers to the situation where a large number of documents are allegedly placed on an employee’s desk and he signs them without fully investigating their accuracy.
The problem is that when one signs an affidavit, the signer, or affiant, is stating under oath that he or she has personal knowledge or has made sufficient investigation to swear and affirm that the information in the affidavit is accurate, that the borrower is, indeed, in default on the underlying loan and the parties pursuing foreclosure own the note or otherwise have the right to pursue the foreclosure.
What was the result of the disclosure of ‘robo-signing’?
Virtually all banks undertook reviews of their internal systems. A number of banks instituted temporary moratoriums on foreclosures, halting them while they reviewed their systems, while others looked at their systems and determined a moratorium was not necessary. In addition, in an increasing number of foreclosure proceedings, borrowers are contesting the foreclosure by challenging the associated affidavit.
Although you are seeing a lot of these cases among plaintiffs, in the overwhelming majority of these cases the affidavits are factually accurate and reflect the state of affairs at the time they were signed. The borrowers are in default and, generally, by the time they get to foreclosure, they are as many as 12 to 18 months in arrears, and it’s safe to say the foreclosure is going to happen once the paperwork is sorted out.
The problem is not that homes are being taken from innocent people because other people are making things up. The problem is that if you are signing an affidavit, you are testifying you have personal information or have made sufficient investigation to confirm that what you are signing is accurate, when, in some cases, the signers were simply relying on their underlings to do their jobs properly without verifying it. That is not a trivial thing; filing documents under oath with a court is serious business. But to the extent inaccurate affidavits were filed, the inaccuracies related to the knowledge of the affiant rather than to the default status of the borrower.
What has been the negative impact on banks?
The sole realistic collateral for mortgage loans is the underlying property, because, by the time of foreclosure, borrowers rarely have other significant assets. A bank can’t sue and realize a money judgment; the assets aren’t there. The house backs up the loan, and if there is a significant delay in the bank’s ability to foreclose on the property and liquidate it, that slows down the process. Not only could that temporarily impair capital while banks try to foreclose and liquidate, it could also affect future lending decisions. Every time you throw an obstacle in the way for a lender to be able to realize on collateral, that calculates into its decision to make loans. In theory, you could see banks further raising their lending standards because this is one more potential obstacle. The biggest impact though is likely to be on the housing market and economy generally. Anything that delays foreclosure delays the ability of the market to clear and prolongs the housing crisis, which has already lasted for three years.
What other institutions are being impacted?
An increase in challenges to foreclosure also burdens the judicial system, which was designed for a very different economic reality. Banks have more flexibility to adjust in that they can hire people or acquire new technology. But the court system, being dependent upon the political process, isn’t as nimble. For the system to suddenly change from a model where it might have 5,000 foreclosures a month to where it now has 100,000 hugely stresses a court system that already has a very large backup.
How does this issue impact third-party purchasers of foreclosed property?
It creates uncertainty. For example, say the bank foreclosed on Joe and Mary Smith a year ago, and the property was sold to Susan Jones. But the affidavit submitted in connection with the foreclosure wasn’t properly verified, so the chain of title is being challenged. If the original borrower complains that the foreclosure was wrongful because the affidavit was fraudulent, suddenly you have a third-party title issue.
That presents potential concerns for those who buy property out of foreclosure, as well as for title insurance companies that verify the title is good. If that adversely impacts the willingness of purchasers to buy property out of foreclosure, it’s another factor that may slow the clearing of the market and prolong the housing crisis. That inability to sell will further damage banks and lenders by impairing their ability to realize capital on that collateral as a result of either being unable to sell or having to sell at a significant discount that reflects that there’s a title uncertainty.
William A. “Mac” McBride is an attorney at Baker, Donelson, Bearman, Caldwell & Berkowitz, PC. Reach him at (404) 221-6537 or email@example.com.
As technology continues to evolve, the risk of doing business online continues to increase. Businesses often fail to plan for transactions completed via the Internet and e-mail. They also often don’t have the proper protection in place when they market their products and services via social media.
To make sure that your company is protected in the world of social media and online transactions, you need to develop policies and procedures to avoid unnecessary risk and liability, says Donald R. Scherer, an attorney in the Business Services Group at Stark & Knoll Co., L.P.A.
“An ounce of prevention is worth a pound of cure,” says Scherer. “Plan upfront and spend small amounts of money to update your forms, to make sure that your employees are integrating your terms and conditions properly and that they understand your company’s online expectations. If you don’t, you’re going to get hit with a big lawsuit somewhere off in no-man’s land, when you could have planned for that and made it much less expensive for yourself.”
Smart Business spoke with Scherer about how to protect your company from the risks that technology poses.
Have risks increased for businesses as they are using more technology?
Yes. Companies are facing increasing risks, partly as a result of social media. It’s more difficult for companies to brand themselves because they have a lot of people including employees talking about their brand, and not always in a positive light. In addition, you have employees who have the potential to damage the company, either by exposing confidential information online through social media, or by making comments that could potentially jeopardize relationships with clients. Additionally, companies are branching into new markets via online transactions without doing proper research or planning.
What are some of the most common mistakes that businesses make with technology?
In the past, you had to wait days for a purchase order and days for the acceptance. Now you can enter into a transaction in a couple of minutes and get the order shipped before you ever would have received the purchase order in the past.
As a result, people are entering into transactions via e-mail and don’t even recognize they’re doing so. Typically, when you enter into a written transaction, you include terms and conditions. But when companies enter into transactions electronically, they often forget to include those terms and conditions. And if you receive a purchase order online and accept that purchase order online, forgetting to include terms and conditions can lead to legal issues where you would have otherwise been protected by favorable contract terms in your agreement.
Also, companies are expanding globally as they sell online, but they don’t understand the ramifications of a global transaction versus an intrastate or intra-U.S. transaction. When you have a global transaction, commercial law that applies within the U.S. may not apply. Instead, you may be subject to U.S. treaties with other countries, and you need to be aware of what those are and how they are different from traditional commercial law.
What can a business do to protect itself from these risks before they blossom into a major problem?
With respect to online transactions, companies need to update their terms and conditions to ensure that they are complying with whatever type of international law may apply. If you’re selling goods over the Internet, U.S. treaties can be substantially different from traditional commercial law that you’d normally understand to apply to an interstate contract. You can frequently opt out of these treaties, but you have to make sure you’ve done it properly.
Finally, you need to ensure that if you’re entering into transactions electronically that you’re incorporating those terms and conditions into your transaction, and we can help you do that.
How can businesses stay ahead of the curve as technology and society cause changes to the way they do business?
The best way is through planning. If you’re going to expand your business into a new market or a new technology, talk with your advisers to make sure that everything you’re doing is compatible with those new technologies and markets.
A lot of planning can be done up front by working with your attorney and your accountant. You wouldn’t go into business in Brazil and not familiarize yourself with any accounting requirements that might apply. So if you’re going into business in Brazil via online transactions, you need to look at the legal ramifications, as well.
Continue to review your policies on a regular basis as technology and markets continue to change. If you put a social media policy in place a couple of years ago, it might not account for things like Twitter or other new technology, and terms and conditions might have become outdated as you move into new markets.
Donald R. Scherer is an attorney in the Business Services Group at Stark & Knoll Co., L.P.A. Reach him at (330) 572-1317 or DScherer@stark-knoll.com.