777’s Engine Explosion Puts Boeing’s Reputation On The Line — Again

By Edward Segal

February 22, 2021

Boeing has had a lot of experience dealing with ​crisis situations​ over the past several years.

It was only three months ago that Boeing returned the ​737 MAX to service​. The planes had been ​grounded f​or two years following the crash of two planes that killed 346 people. Then, last Saturday an engine on a United ​777​ exploded over Denver, ​raining debris​ on a neighborhood below.

Airlines in the U.S., Japan, and South Korea ​have already grounded​ dozens of the 777s, and the Federal Aviation Administration ​ordered United​ to increase their inspections of all of those planes.

Boeing’s Statement

Yesterday, Boeing posted the following statement ​on their website​: “Boeing is actively monitoring recent events related to United Airlines Flight 328. While the NTSB investigation is ongoing, we recommended suspending operations of the 69 in-service and 59 in-storage 777s powered by Pratt & Whitney 4000-112 engines until the FAA identifies the appropriate inspection protocol.

“Boeing supports the decision yesterday by the ​Japan Civil Aviation Bureau​, and the FAA’s action today to suspend operations of 777 aircraft powered by Pratt & Whitney 4000-112 engines. We are working with these regulators as they take actions while these planes are on the ground and further inspections are conducted by Pratt & Whitney. Updates will be provided as more information becomes available.”

Bad Timing

Although there is never a good time to have a crisis, the timing of a crisis can certainly make things worse for companies and organizations.

Caroline Sapriel​ is the managing partner of crisis management company ​CS&A International.​ She noted that, “This is bad timing for Boeing and inevitably parallels [with past crashes] will be made….[the company’s] reputation is on the line.”

“At least here they had an immediate response, advised grounding 128 777s powered by that particular engine type, and appeared more in sync with [the] FAA…”

The fact that the engine that fell apart mid-flight was made by a different company could turn out to be a silver lining in the crisis for Boeing.

Quick Action

Speed is essential when responding to any crisis situation, especially when lives may be at stake.

She observed that Boeing’s “… early response seems better, but now the real test comes in terms of actively seeking to expedite the appropriate testing and investigation protocols and avoid blaming the engine manufacturer, who is also a long-term partner.”

The airlines and aviation authorities, “have been extremely quick in taking action that aims to protect stakeholder trust and Boeing should continue to demonstrate alignment with them to sustain their stakeholder confidence. They will be walking a tight rope and will be under the microscope,” Sapriel said.

A Pilot’s Perspective

David Nolletti​ is a commercial pilot with multiple jet type ratings and more than 3,000 hours of flight time. He is currently a managing director at ​Conway MacKenzie​ and leads the firm’s aerospace, defense and government services practice.

By The Numbers

According to Nolletti, the United Airlines Boeing 777 that experienced the in-flight engine failure was powered by ​Pratt & Whitney​ PW4000 engines which entered into service in 1987. “In the subsequent 33+ years of service, Pratt & Whitney has delivered more than 2,500 engines to 70 different operators and accumulated more than 135 million flight hours,” he said.

A Safe And Proven Design

“This is a safe and proven engine design, “Nolletti observed, “ but I think that Boeing responded quickly to ensure the flying public saw them responding with alacrity to a potentially dangerous situation and I think that travelers will be comforted by the speed and decisiveness of the grounding.”

Recommendations

Nolletti said Boeing and Pratt & Whitney should:

  • Partner to communicate the safety statistics of this program to the public to ensure the consumer know that this is a proven, long serving design, with an excellent safety record. Essentially, that this is an isolated incident, and that the investigation will, in due time, determine why this engine suffered an apparent fan blade failure.
  • Highlight the fact that the engine contained the apparent fan blade failure as it is designed to do. By containing the failed blade, the engine cowling prevented more serious damage to the aircraft (e.g. flight controls, hydraulic systems, fuel systems, etc.) or harm to passengers and crew in the aircraft.

Bottom Line

“In short, this could have been a much more dangerous situation, but the robust design of the aircraft and engine coupled with the training of the crew made it relatively uneventful,” Nolletti concluded.

The Importance Of Scenario Training

Practicing responses to various crisis scenarios is an important way to help ensure that companies are prepared for a crisis as much as possible and will react strategically and effectively when a crisis strikes.

The ​NTSB’s findings ​on the two deadly 737 MAX accidents, “… highlighted both a technology vulnerability and pilots’ inadequate training on crisis scenarios to mitigate that vulnerability,” recalled ​Jayson Kratoville​, who is the interim director of the ​National Center for Security & Preparedness ​at the University at Albany’s College of ​Emergency Preparedness, Homeland Security, and Cybersecurity​.

He said, “While we will need to wait for more information on the 777 engine failure to draw any conclusions, it’s likely that good crisis scenario training prevented loss of life. Both are important examples for how manufacturers have a stake in product implementation and worst-case scenario training to mitigate risks.”

The Investigation

Mark Dombroff​ is a partner at the ​Fox Rothschild ​law firm, and has more than 30 years of experience in administrative, legislative, regulatory and legal aspects of the national and international aviation industry.

Proactive Approach

He noted that, “The actions Boeing and others have taken relative to 777’s with Pratt & Whitney’s engines demonstrate a pro-active approach to an event that is still under investigation.”

Dombroff observed that, “The ​NTSB​ is charged with investigating the event. Boeing, along with Pratt & Whitney, United, and [the] FAA will be parties to the investigation. Parties to an investigation are not permitted…to conduct their own investigations. The NTSB controls the engine debris and the engine itself and , quite likely, the aircraft itself, at least so long as the engine remains on the wing.”

Early Focus

“At this stage,” he said, “we don’t know whether the engine or something else is the cause of what occurred. What we do know is that the reporting is focusing on the aircraft being a Boeing 777. Coupled with the attention already focused on Boeing due to the MAX, the spotlight on Boeing is made brighter..

“That having been said, there’s a certain amount of unfairness associated with that occurring since the investigation is at a preliminary stage and we don’t know why the fan blades (which reportedly failed) actually failed,” he said

Lessons Learned — Or To Learned Commercial Aviation

Dombroff noted, “There are always lessons to be learned from any event of this type. It’s too early however, to determine what those lessons may be here or to whom any such lessons may be applicable.”

He said, “Commercial aviation in the United States is a phenomenally safe activity. That never means we have achieved perfection. There is always room to make things safer and better, but it remains to be seen in this instance, not only why what occurred, actually occurred, but also what lessons the industry can take away from it.”

Boeing

Jane Robbins, PhD​, is a retired professor of entrepreneurship and organizations specializing in strategy and institutional integrity. She said,“It seems Boeing has already learned one lesson from the 737MAX debacle: don’t wait until you are forced to take action by the government: get ahead of the problem. But that isn’t really the right lesson for leaders—that’s a reaction, and reacting to a crisis that could have been prevented is never good.

Business Leaders

“Leaders need to learn that every single business decision has consequential ethical content that cannot be dealt with in probabilistic terms; it can only be dealt with organizationally, through an operating philosophy and process designed to ensure institutional integrity, which ‘ solves’ crises before they happen. What’s at stake is reputation or trust, the ultimate form of capital. Once lost, it is extremely difficult to recover, and can bring a company down.

“The organizational basis of disasters is pretty well-known—think ​Challenger, BP oil spill​, etc. This was a near-miss,” she concluded.

All Industries

Joseph Smith​ is director of aviation services for investment banking firm Cassel Salpeter​. “The lesson for all industries where there is an inherent danger to consumers/end users (both products and services), is that safety has to be the number one priority period, hard stop,” he said.

“Safety precautions [for] your customers and [for] your employees (as we have all witnessed especially during Covid) must be engrained in the fabric and DNA of all decisions made, regardless of the costs, or unpopularity of the moment,” he advised.

“The repercussions could be deadly and or costly, both economically, reputationally, morally, and can bring down organizations,” Smith said.

Advice For Business Leaders

Carla Bevins is an assistant teaching professor of business communications at Carnegie Mellon University’s ​Tepper School of Business​. Based on the the latest crisis to hit Boeing, she had the following advice for companies and organizations.

Prepare Ahead Of Time

  • Businesses should have strategic solutions and effective, up-to-date crisis management plans in place to safeguard their reputation before a crisis strikes.
  • Create crisis press release templates ahead of time, so you can put them into action quickly when the crisis happens. Don’t wait to create your key messages until you’re in the middle of the crisis.
  • Companies that think in terms of ‘when’ and not ‘if’ a crisis will strike are better positioned to emerge intact on the other side.

Speed Is Essential

  • Speed is absolutely key in these situations, and the first, well-crafted response must go out within an hour of the crisis going public.
  • It can be difficult to bring a situation back under control if online and social media create an alternative narrative to the one you want to share.
  • When there is a vacuum of information from the source, others will find information elsewhere and come to their own, often misinterpreted conclusions.

Collaborate

  • Strong collaboration between the company’s communication and legal team is needed, as company crisis management responses will post on traditional and social media simultaneously.
  • Key spokespersons will need to be available for press conferences and media interviews.

 

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This Major Miami Company Just Announced It Will Pay Its Employees to Get Vaccinated

By Rob Wile

February 3, 2021

One of the largest companies in South Florida announced this week it would pay its employees to get vaccinated against COVID-19.

Ryder System Inc., a publicly traded trucking and logistics company, said its 40,000 company-wide workforce would receive up to six hours of paid time off to get inoculated. That includes three hours of PTO for the first vaccine and an additional three hours of PTO for treatments that require a second dose.

Miami-based Ryder said it employs 1,121 workers in Miami-Dade County.

“We want to provide assurances to our workforce that they don’t need to worry about being penalized either in pay or PTO balance when getting vaccinated,” Robert Sanchez, Ryder chairman, CEO, and a Miami native, said in a statement.

He noted Ryder already pays sick leave to employees who have contracted the virus.

“This paid vaccine decision was no different,” he said. “Two of our core values at Ryder are trust and safety, so it was an easy decision to extend this protection to our workforce.”

Ryder shares are listed on the S&P 400 index of “mid-cap” stocks of companies usually worth between $1 and $10 billion; it has a market capitalization of $3.4 billion and annual revenues of $8.9 billion. Other South Florida firms on that S&P index, including AutoNation, MasTec, and Watsco Inc., declined or did not respond to request for comment about their companies’ vaccination plans.

Other companies reportedly giving employees paid time off to get vaccinated include grocery giant Aldi, Chobani, Darden Restaurants, Dollar General and Trader Joe’s.

Yet these remain the exception, as the majority of U.S. firms have not yet issued vaccine policies. Many may be navigating employees’ religious, cultural and even political sensitivities surrounding vaccines, said James Cassel, co-founder and chairman of investment group Cassel Salpeter & Co. Cassel’s firm is now helping middle-market companies navigate COVID.

“For some groups, no incentive would work,” he said. “So many companies are waiting until they believe their employees are at a given comfort level.”

Jay Starkman, founder and CEO of Hollywood-based staffing group Engage PEO, said decisions like Ryder’s should not remain the exception. Employers, he said, “[have] an obligation to getting us all through this, and getting vaccinated is the only way out.”

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James Cassel of Cassel Salpeter & Co.: “You have to be willing to make mistakes”

As part of my series about “How To Take Your Company From Good To Great”, I had the pleasure of interviewing James S. Cassel, cofounder and chairman of Cassel Salpeter & Co., LLC, an investment banking firm with headquarters in Miami, Florida, that works with middle market companies.

Using his unique experience as a dealmaker and attorney to guide clients and help them achieve their goals, Jim has successfully negotiated, structured, and executed a broad spectrum of transactions including mergers, acquisitions, and divestitures, corporate and transactional financings, and public offerings for clients nationwide and worldwide. Having developed a keen understanding of the issues faced and alternatives available for distressed companies, he has particular experience in developing financial restructuring plans, negotiating with creditors, and guiding debtors through bankruptcy proceedings. Nationally recognized for his investment banking expertise, Jim frequently lectures on timely issues related to middle market investment banking and writes a column for the Miami Herald about emerging trends, strategies and tactics for middle market business owners. Before founding Cassel Salpeter & Co., Jim was cofounder and chairman of Capitalink, an investment banking firm that was acquired by Ladenburg Thalmann & Co., a New York Stock Exchange member firm where Jim continued and served as vice chairman, senior managing director, and head of investment banking.

Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?

I was a securities lawyer for 17 years but really didn’t have anything close to a work/life balance. Like most securities attorneys I thought we did all of the work while the investment bankers were making all the money. I had a client who encouraged me to become an investment banker and join his firm because I was good at making deals, so I finally did it. Although I have better work/life balance, today, I still continue to be deeply absorbed by my work. I’m not complaining. I love the career I’ve chosen, but I’ve had to work very hard to carve out the success I and my firm enjoy today.

Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?

I grew up comfortably, but there were times in my professional career in both law and the financial industry when things looked bad. As a budding securities attorney, I found myself working very hard for a six month stretch without getting paid. I was getting seriously worried, when a friend who knew of my situation called informing me that I had won 5000 dollars in a raffle. I thought it was a joke, but he showed up at my home 10:30 at night with the check. I used that to pay my next mortgage payment.

I then joined a new law firm. After 17 years of law practice, I walked away from that career as a corporate/securities attorney, and as managing partner of the firm’s largest office during my best year and entered investment banking. Little over a year later, things went south with a business partner, and I had to face a decision: Do I turn back and practice law, or do I start an investment bank? To a certain extent, in both cases it would be a restart.

I think it’s important to note that I expected to succeed either way. This is not about being arrogant, but about believing you will succeed and having that confidence. It’s fundamental to succeeding, and a key to taking a business from good to great. You really do have to believe. I thought, I’m going to be successful at whatever I decide, but by creating an investment bank at the end of my career, I’ll also have a quality business to sell. So, I found new partners and started the investment bank Cassel Salpeter & Co.

About six months after kicking off my first investment banking firm, I did consider giving up when things were not going well. But by then realized there was a niche opportunity in the market issuing “fairness opinions.” Here, after substantial analyses we might determine that a transaction is fair from a financial point of view — and that saved our firm. That was 25 years ago, and we were rescued by a lawyer who sent us one deal that turned out to be the difference between making it or not making it. I never forget what he did for me.

There is also a lesson here in going from good to great in how this all played out, because before you can even get to good, never mind great, you have to survive. That lawyer decided to trust our services even though we didn’t have the track record that other firms had. Some might say we weren’t entitled to the opportunity, but we seized it and performed at a very high level and went on to prosper. We still do business 25 years later.

I started the first investment banking business from scratch when I was writing checks without receiving them. In both of my early starts the money was going out the door and not coming in as fast. When things got difficult what most kept me going was that I could not afford to fail. I had a wife and four children, and lots of bills and knew I could and had to make it work. There was no alternative.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘takeaways’ you learned from that?

I wouldn’t say this was a mistake, but when I quit practicing law and started in the investment banking business, I found myself with my new partner rising on a lift preparing to ski with clients. When we got to the top of the mountain, my new partner turned to me and said, “It’s all downhill from here.” I guess technically he was right.

What I’m trying to say is that depending on the sort of investment banking work we are doing, there can be significant impacts on the people behind the deals. Quite often we are selling what amounts to a person’s baby, and quite often it’s a baby in deep trouble. This can be traumatic for many business owners for whom their company can be an extension of their personality. Having a sense of humor and real compassion and feel for the players in a deal goes a long way.

What do you think makes your company stand out? Can you share a story?

I think, maybe more than other companies, we are very much committed to being a relationship business and doing what is best for our client and maybe, at times, to our own detriment. It is our culture. What I mean by that is that while we are always looking for a business opportunity, I think that we really are there to help irrespective of whether or not the person is ultimately going to become a client. To a certain extent this is in line with our work culture of giving back. And as a result, there have been more than a few occasions when we were going after business and lost it when the potential client switched directions, but we were still called back later to do work for them.

There may not be an immediate monetary benefit to committing to building a relationship, but you never know when those efforts may come back to benefit you and others if you take a long-term perspective. Very often, for example, we will see a client who really wants to sell a business and our analysis tells us this just isn’t the optimal time for a sale. I could take a fee to create a deal, but ultimately, I don’t believe that serves the client, so we encourage them not to move forward at this time. That’s about being relationship-minded, putting people above a single deal, and I think it’s something that separates us from the pack.

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?

The investment banking business is not an easy one. There’s a lot of research, analytical work, and background reading you have to put in to serve your clients at the level they expect. And then you have to really commit to developing and managing your relationships. This takes time. There are no shortcuts.

You have to pace yourself as you take this on. You have to constantly keep a clear head about where a relationship or deal is going and be prepared to pivot at all times. If you are really having a challenge with a client, for example, you have to face the fact that you either have to work it out or disengage from the client. If you keep a toxic working relationship going too long, you are setting yourself up to fail as well as to burn out.

When it comes to thriving, it starts with accepting that investment banking work means fundamentally understanding that this is a relationship/knowledge/idea business. If you can think creatively, you’ll find that developing those relationships isn’t a burden. Also, what clients are looking for are ideas, advice and knowledge. With many today working from home and not having face-to-face contact, maintaining relationships and developing new ones has never been harder. But by coming up with new ways of connecting and helping people and clients, you not only perform better, but sleep better. When you can see that there are people behind your deal strategy, I think it puts you on a pathway to a healthier lifestyle.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?

Besides my wife and family, I really owe a lot to my partner, Scott Salpeter. I was blessed to be introduced to him over 25 years ago by his father, who was a client of mine when I was practicing law. I went on to have Scott as a client, as well. When I left the practice to change careers and become an investment banker, I needed someone with his skills set and he agreed to join with me. We’ve been partners ever since, working together for almost 25 years through three investment banking businesses, the original Capitalink — which we sold to Ladenburg Thalmann & Co. and where I was vice chairman and head of investment banking — and our firm now, Cassel Salpeter & Co., that has been doing work I’m very proud of for over a decade.

Our personalities are very different. Between I and Scott we have a sort of yin yang balance. Our personalities and skills sets are very different, yet perfectly complimentary to our investment bank and therefore our clients. I believe, and I think that Scott would agree, that by teaming up we’ve been more successful working together than we would have been on our own. We’ve managed to be greater than the sum of our parts. One key is that we have implicit trust in each other, and that is priceless in this business.

Luck has also been a part of success for me. I was lucky when I married my wife. I got engaged to my wife after dating her six weeks and we’ve been together over 43 years and raised four kids together. So, I’ve managed to have great people to spend my time with during the day at work, as well as when I get home. When you talk about thriving without burning out, finding the right people to spend most of your time with is fundamental.

Ok thank you for all that. Now let’s shift to the main focus of this interview. The title of this series is “How to take your company from good to great”. Let’s start with defining our terms. How would you define a “good” company, what does that look like? How would you define a “great” company, what does that look like?

A good company usually has reached a high level in a range of criteria from having the right people in key positions, to being in a sound financial position, to having a good work culture, to having a leader with a clear and achievable mission. A good company will do well frequently in a lot of these areas, but a great company goes a step further and is firing on all pistons, without any areas of deficiency and therefore will have longevity.

As an investment banker working with companies across a range of industries, I’ve seen what look to be good, some might say great companies, but they don’t perform well because of the industry they are in. And I’ve seen good companies where that’s just a fine place to be, and the leaders are happy operating at that level. To take a company to the next level, for example, takes hard work and a commitment to be a great company. It starts at the top and must be the culture throughout the whole company. Not every company can be great, but they can strive to be better.

Based on your experience and success, what are the five most important things one should know in order to lead a company from Good to Great? Please share a story or an example for each. First read the book “Good to Great” by Jim Collins. He describes this much better than I could ever do.

• To take a company from good to great you have to have the right people in the right positions to begin with. We run a small company. As with any company, having the right people in each role is critical. You can take someone with an outgoing personality and put them in the back room drafting documents and end up setting them up for failure instead of putting them in a position where they can flourish.

• You have to have leadership that is openminded and collaborative, and at the same time, has a real vision and determination to achieve greatness and make the tough decisions. This starts with bringing in people to your team that may not necessarily have the same ideas or background as you and being open to doing things in new ways that you may not have previously experienced. If it’s getting you more efficiently to your ultimate goal, and you can incorporate your contributions as well, you have to be open to that.

• You have to be willing to innovate and part of this is being willing to take calculated risks and think outside the box.

• You have to be willing to make mistakes, acknowledge them, and change direction. I’ve hired wrongly, for example, and I’ve learned to correct that quickly. You do no favor to the employee, or the company by extending the relationship.

• And you have to be willing to help others and extend yourself to others in your industry, while taking a long-term view about business relationships.

Extensive research suggests that “purpose driven businesses” are more successful in many areas. Can you help articulate for our readers a few reasons why a business should consider becoming a purpose driven business, or consider having a social impact angle?

When I think of purpose driven businesses, I see this as an internal and external dynamic that ends up promoting the overall health of a company, as well as the environment it comes into contact with.

Look at a company like TOMS shoes which does good by not only selling a product, but by donating a substantial amount of that product to people in need. What they do helps the company internally in terms of morale because they feel good about their mission, but it also helps the company externally, because they are right to get their message out regarding their efforts to help others. That not only helps build brand loyalty, but it can lead to other companies following suit.

As the company itself says, “TOMS has always stood for a better tomorrow–one where humanity thrives. To us, that means no matter who you are or where you live, you feel physically safe, mentally healthy, and have equal access to opportunity. Every TOMS purchase enables us to invest in local partners around the world who are working to create positive change in these three areas.”

You can also look at a company like Apple, which now has great momentum with its watch. But that watch is not just telling time, it connects to one’s health care stats. They are developing a product that’s far beyond something designed just to make its creators money. They are developing a product that can actually do good.

As an investment banker engaged in health care industry M&A, I look at companies that are working on COVID-19 vaccines and therapies and it can be argued that they are purpose driven businesses. Sure, they are looking to earn a profit, but you can bet that they are also motivated to do great things for our society. The folks I work with in the health care industry are also mission and purpose driven.

At the end of the day, when you are a purpose driven business you are building momentum to make the world a better place and that’s definitely a part of going from good to great, because another aspect of a great company, is that everyone on board is motivated and feels their work has meaning and is part of something larger. Greatness isn’t just about a bottom line, but it’s how you feel inside about your company and your work. That builds camaraderie and helps create energy to achieve your mission and goals as a company. When you have satisfied employees, they end up more innovative, harder working, and they help your company grow, which is just better for everybody.

All that said, it’s important to note, that before you can be a truly purpose driven company, you have to have a quality product and a viable economic model. You can’t skimp on that.

What would you advise to a business leader who initially went through years of successive growth, but has now reached a standstill. From your experience do you have any general advice about how to boost growth and “restart their engines”?

From what I’ve seen many times in my work, companies come to a standstill when they fail to innovate or when they cut back on new product development. They really need to readjust their mindset. They need to reevaluate why they aren’t growing. Do they have the right products and services? Are they in a stagnant market in which case they need to find new markets and new products and services? Then they have to determine how to become innovative. Sometimes this requires a change of management at the top.

There has been many a company that was wonderful until it wasn’t. Much like people, sometimes it’s complacency and arrogance that keeps a company down. Consider Kodak or Polaroid. In the beginning, they were very innovative, and then they weren’t. Kodak went on to survive although as a shadow of its former self, but there was a point where they lost their edge, their drive, their innovation. Getting that drive back is sometimes about bringing in new people to get that fire started again. In some cases, it’s bringing back experienced, senior-level people, like when Steve Jobs rejoined Apple.

Business moves rapidly and there’s no place for those who take their current success for granted. If you are not moving forward, generally you’re moving backwards. Just look at Sears and what happened to them. They really should be the Amazon of today, but they didn’t innovate. They missed the boat. Sears Roebuck was the first catalogue company. What was Amazon? It was just an online catalogue for a bookseller at the beginning. But they obviously had a much bigger plan. They were looking to go from good to great.

Generating new business, increasing your profits, or at least maintaining your financial stability can be challenging during good times, even more so during turbulent times. Can you share some of the strategies you use to keep forging ahead and not lose growth traction during a difficult economy?

Focus and sales are the key. I believe that in a service business, which I’m in, it comes down to networking, staying in touch with your referral sources, not cutting back on revenue-generating things like marketing and PR, even though it might be difficult in the present environment to see their value right away.

When things are not going well you have to figure out where to cut back, and many make the mistake of cutting back on advertising, marketing and sales when it might be better to cut back on employees. PR and marketing are the front-facing part of a business, not something you necessarily want to cut back on. These are tough choices and one must choose wisely. You have to be out there with your advertising, with your PR, with your relationships.

Finally, you have to evaluate all of your expenses and look at risk and reward, with it coming down to making sure you’re getting the best bang for your buck. With the coronavirus it is even more difficult. So, we have to adapt and learn new ways to market.

In your experience, which aspect of running a company tends to be most underestimated? Can you explain or give an example?

I think this can come down more to perception rather than truth. We tend to underestimate whatever aspect of the work we aren’t doing. The other guy’s job is always easier. But one aspect isn’t really less valuable or harder to do than the other. It doesn’t matter how good you are at one side of your business, if you don’t make all the parts seamless from sales, to production, to collections, it makes things harder for the other positions. Sales is always important, but if execution or production is not done properly it is all for naught.

As you know, “conversion” means to convert a visit into a sale. In your experience what are the best strategies a business should use to increase conversion rates?

I don’t think there is a one-size-fits-all when it comes to conversions. I think you have to tailor your pitch, your products and services to particular sets of consumers and customers. I think listening to your customers and clients and understanding what their needs and wants are is the important thing.

You get that feedback by asking your clients and customers for it. You can do so directly, one-on-one, or using digital communications platforms and social media. My father used to tell me there’s a reason God gave us one mouth and two ears: we should listen twice as much as we should talk.

Of course, the main way to increase conversion rates is to create a trusted and beloved brand. Can you share a few ways that a business can earn a reputation as a trusted and beloved brand?

What’s behind the image of a great brand really comes down to consistent customer service, standing behind your products with good warranties, and ensuring they are of top quality. It’s about not cutting corners, listening to your customers and being responsive, and providing good value. And, ideally, you do want to go that extra mile by giving back and there’s no reason a business shouldn’t let its customers know that they are giving back. Customers want to know they are supporting a company with a vision that’s larger than the bottom line, especially now.

Great customer service and great customer experience are essential to build a beloved brand and essential to be successful in general. In your experience what are a few of the most important things a business leader should know in order to create a Wow! Customer Experience?

Developing a “wow” experience is about developing a “wow” product or service. You have to look at companies like Disney, Apple and Amazon. They are all great brands that people perceive they get great value from. They are all also very protective of their brands, making sure everything they put out on the market is great. For them, being second best isn’t an option and they are willing to invest substantial assets to ensure this.

What are your thoughts about how a company should be engaged on Social Media? For example, the advisory firm EisnerAmper conducted 6 yearly surveys of United States corporate boards, and directors reported that one of their most pressing concerns was reputational risk as a result of social media. Do you share this concern? We’d love to hear your thoughts about this.

You obviously have to monitor social media and really have to have consultants to help you because even the best of companies can piss off somebody. You also have to be vigilant and prepared to respond to attacks you may receive. Part of this comes back to creating a culture of providing great customer service. And you have to have a system in place so that what’s happening on social media is being monitored and reported to top leadership. You don’t ever want leadership blindsided. Concerns have to be elevated. Today, this is so important. Damage can be done that might be irreversible.

What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?

The most common mistake I’ve seen through decades in the investment banking business is that CEOs and founders underestimate the amount of capital needed to succeed. They haven’t done enough homework on the market to understand its size. They don’t understand the competitive landscape they are playing in and they underestimate the time it will take to get to cash flow breakeven and then profitability. Another thing I see quite a bit, is trying to fix a problem that doesn’t really exist.

To not get into this sort of trouble, they have to make sure they have really done serious, thoughtful work on the way in, so that they have a realistic budget in place to move forward. But keep in mind, not every business will be successful. Knowing when to cut and run is also important.

Thank you for all of that. We are nearly done. You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

If I were to start a movement, it would have to begin with getting businesses to increasingly make the preservation of the environment a central concern, while at the same time raising consciousness about equal opportunity. Without a healthy environment, and an engaged, diverse workforce whatever we may do might be all for naught. When looking at businesses, buyers and operators should really be taking into consideration what every individual business can do to help with sustainability and to limit or reverse environmental destruction. Businesses need to be profitable to survive, and I don’t think anyone should be ashamed to be profitable, but you can make a profit and still be conscious about the environment, and about the dignity of your employees by promoting and benefiting from diversity, and committing to creating equal opportunity. Encouraging diversity and giving people equal opportunity is not only good for the business, but it’s the right thing to do. Making a profit is nothing to be ashamed of provided you do it responsibly.

How can our readers further follow you online?

James Cassel may be reached via email at jcassel@casselsalpeter.com or via LinkedIn at https://www.linkedin.com/in/jamesscassel. His website is: www.casselsalpeter.com

This was very inspiring. Thank you so much for the time you spent with this!

James Cassel of Cassel Salpeter & Co.: How To Take Your Company From Good To Great

By Jerome Knyszewski
December 5, 2020 

As part of my series about “How To Take Your Company From Good To Great”, I had the pleasure of interviewing James S. Cassel, cofounder and chairman
of Cassel Salpeter & Co., LLC, an investment banking firm with headquarters in Miami, Florida, that works with middle market companies.

Using his unique experience as a dealmaker and attorney to guide clients and help them achieve their goals, Jim has successfully negotiated, structured, and executed a broad spectrum of transactions including mergers, acquisitions, and divestitures, corporate and transactional financings, and public offerings for clients nationwide and worldwide. Having developed a keen understanding of the issues faced and alternatives available for distressed companies, he has particular experience in developing financial restructuring plans, negotiating with creditors, and guiding debtors through bankruptcy proceedings. Nationally recognized for his investment banking expertise, Jim frequently lectures on timely issues related to middle market investment banking and writes a column for the Miami Herald about emerging trends, strategies and tactics for middle market business owners. Before founding Cassel Salpeter & Co., Jim was cofounder and chairman of Capitalink, an investment banking firm that was acquired by Ladenburg Thalmann & Co., a New York Stock Exchange member firm where Jim continued and served as vice chairman, senior managing director, and head of investment banking.

Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?

I was a securities lawyer for 17 years but really didn’t have anything close to a work/life balance. Like most securities attorneys I thought we did all of the work while the investment bankers were making all the money. I had a client who encouraged me to become an investment banker and join his firm because I was good at making deals, so I finally did it. Although I have better work/life balance, today, I still continue to be deeply absorbed by my work. I’m not complaining. I love the career I’ve chosen, but I’ve had to work very hard to carve out the success I and my firm enjoy today.

Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?

I grew up comfortably, but there were times in my professional career in both law and the financial industry when things looked bad. As a budding securities attorney, I found myself working very hard for a six month stretch without getting paid. I was getting seriously worried, when a friend who knew of my situation called informing me that I had won $5000 in a raffle. I thought it was a joke, but he showed up at my home 10:30 at night with the check. I used that to pay my next mortgage payment.

I then joined a new law firm. After 17 years of law practice, I walked away from that career as a corporate/securities attorney, and as managing partner of the firm’s largest office during my best year and entered investment banking. Little over a year later, things went south with a business partner, and I had to face a decision: Do I turn back and practice law, or do I start an investment bank? To a certain extent, in both cases it would be a restart.

I think it’s important to note that I expected to succeed either way. This is not about being arrogant, but about believing you will succeed and having that confidence. It’s fundamental to succeeding, and a key to taking a business from good to great. You really do have to believe. I thought, I’m going to be successful at whatever I decide, but by creating an investment bank at the end of my career, I’ll also have a quality business to sell. So, I found new partners and started the investment bank Cassel Salpeter & Co.

About six months after kicking off my first investment banking firm, I did consider giving up when things were not going well. But by then realized there was a niche opportunity in the market issuing “fairness opinions.” Here, after substantial analyses we might determine that a transaction is fair from a financial point of view — and that saved our firm. That was 25 years ago, and we were rescued by a lawyer who sent us one deal that turned out to be the difference between making it or not making it. I never forget what he did for me.

There is also a lesson here in going from good to great in how this all played out, because before you can even get to good, never mind great, you have to survive. That lawyer decided to trust our services even though we didn’t have the track record that other firms had. Some might say we weren’t entitled to the opportunity, but we seized it and performed at a very high level and went on to prosper. We still do business 25 years later.

I started the first investment banking business from scratch when I was writing checks without receiving them. In both of my early starts the money was going out the door and not coming in as fast. When things got difficult what most kept me going was that I could not afford to fail. I had a wife and four children, and lots of bills and knew I could and had to make it work. There was no alternative.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘takeaways’ you learned from that?

I wouldn’t say this was a mistake, but when I quit practicing law and started in the investment banking business, I found myself with my new partner rising on a lift preparing to ski with clients. When we got to the top of the mountain, my new partner turned to me and said, “It’s all downhill from here.” I guess technically he was right.

What I’m trying to say is that depending on the sort of investment banking work we are doing, there can be significant impacts on the people behind the deals. Quite often we are selling what amounts to a person’s baby, and quite often it’s a baby in deep trouble. This can be traumatic for many business owners for whom their company can be an extension of their personality. Having a sense of humor and real compassion and feel for the players in a deal goes a long way.

What do you think makes your company stand out? Can you share a story?

I think, maybe more than other companies, we are very much committed to being a relationship business and doing what is best for our client and maybe, at times, to our own detriment. It is our culture. What I mean by that is that while we are always looking for a business opportunity, I think that we really are there to help irrespective of whether or not the person is ultimately going to become a client. To a certain extent this is in line with our work culture of giving back. And as a result, there have been more than a few occasions when we were going after business and lost it when the potential client switched directions, but we were still called back later to do work for them.

There may not be an immediate monetary benefit to committing to building a relationship, but you never know when those efforts may come back to benefit you and others if you take a long-term perspective. Very often, for example, we will see a client who really wants to sell a business and our analysis tells us this just isn’t the optimal time for a sale. I could take a fee to create a deal, but ultimately, I don’t believe that serves the client, so we encourage them not to move forward at this time. That’s about being relationship-minded, putting people above a single deal, and I think it’s something that separates us from the pack.

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?

The investment banking business is not an easy one. There’s a lot of research, analytical work, and background reading you have to put in to serve your clients at the level they expect. And then you have to really commit to developing and managing your relationships. This takes time. There are no shortcuts.

You have to pace yourself as you take this on. You have to constantly keep a clear head about where a relationship or deal is going and be prepared to pivot at all times. If you are really having a challenge with a client, for example, you have to face the fact that you either have to work it out or disengage from the client. If you keep a toxic working relationship going too long, you are setting yourself up to fail as well as to burn out.

When it comes to thriving, it starts with accepting that investment banking work means fundamentally understanding that this is a relationship/knowledge/idea business. If you can think creatively, you’ll find that developing those relationships isn’t a burden. Also, what clients are looking for are ideas, advice and knowledge. With many today working from home and not having face-to-face contact, maintaining relationships and developing new ones has never been harder. But by coming up with new ways of connecting and helping people and clients, you not only perform better, but sleep better. When you can see that there are people behind your deal strategy, I think it puts you on a pathway to a healthier lifestyle.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?

Besides my wife and family, I really owe a lot to my partner, Scott Salpeter. I was blessed to be introduced to him over 25 years ago by his father, who was a client of mine when I was practicing law. I went on to have Scott as a client, as well. When I left the practice to change careers and become an investment banker, I needed someone with his skills set and he agreed to join with me.

We’ve been partners ever since, working together for almost 25 years through three investment banking businesses, the original Capitalink — which we sold to Ladenburg Thalmann & Co. and where I was vice chairman and head of investment banking — and our firm now, Cassel Salpeter & Co., that has been doing work I’m very proud of for over a decade.

Our personalities are very different. Between I and Scott we have a sort of yin yang balance. Our personalities and skills sets are very different, yet perfectly complimentary to our investment bank and therefore our clients. I believe, and I think that Scott would agree, that by teaming up we’ve been more successful working together than we would have been on our own. We’ve managed to be greater than the sum of our parts. One key is that we have implicit trust in each other, and that is priceless in this business.

Luck has also been a part of success for me. I was lucky when I married my wife. I got engaged to my wife after dating her six weeks and we’ve been together over 43 years and raised four kids together. So, I’ve managed to have great people to spend my time with during the day at work, as well as when I get home. When you talk about thriving without burning out, finding the right people to spend most of your time with is fundamental.

Ok thank you for all that. Now let’s shift to the main focus of this interview. The title of this series is “How to take your company from good to great”. Let’s start with defining our terms. How would you define a “good” company, what does that look like? How would you define a “great” company, what does that look like?

A good company usually has reached a high level in a range of criteria from having the right people in key positions, to being in a sound financial position, to having a good work culture, to having a leader with a clear and achievable mission. A good company will do well frequently in a lot of these areas, but a great company goes a step further and is firing on all pistons, without any areas of deficiency and therefore will have longevity.

As an investment banker working with companies across a range of industries, I’ve seen what look to be good, some might say great companies, but they don’t perform well because of the industry they are in. And I’ve seen good companies where that’s just a fine place to be, and the leaders are happy operating at that level. To take a company to the next level, for example, takes hard work and a commitment to be a great company. It starts at the top and must be the culture throughout the whole company. Not every company can be great, but they can strive to be better.

Based on your experience and success, what are the five most important things one should know in order to lead a company from Good to Great? Please share a story or an example for each.

First read the book “Good to Great” by Jim Collins. He describes this much better than I could ever do.

  • To take a company from good to great you have to have the right people in the right positions to begin with. We run a small company. As with any company, having the right people in each role is critical. You can take someone with an outgoing personality and put them in the back room drafting documents and end up setting them up for failure instead of putting them in a position where they can flourish.
  • You have to have leadership that is openminded and collaborative, and at the same time, has a real vision and determination to achieve greatness and make the tough decisions. This starts with bringing in people to your team that may not necessarily have the same ideas or background as you and being open to doing things in new ways that you may not have previously experienced. If it’s getting you more efficiently to your ultimate goal, and you can incorporate your contributions as well, you have to be open to that.
  • You have to be willing to innovate and part of this is being willing to take calculated risks and think outside the box.
  • You have to be willing to make mistakes, acknowledge them, and change direction. I’ve hired wrongly, for example, and I’ve learned to correct that quickly. You do no favor to the employee, or the company by extending the relationship.
  • And you have to be willing to help others and extend yourself to others in your industry, while taking a long-term view about business relationships.

Extensive research suggests that “purpose driven businesses” are more successful in many areas. Can you help articulate for our readers a few reasons why a business should consider becoming a purpose driven business, or consider having a social impact angle?

When I think of purpose driven businesses, I see this as an internal and external dynamic that ends up promoting the overall health of a company, as well as the environment it comes into contact with.

Look at a company like TOMS shoes which does good by not only selling a product, but by donating a substantial amount of that product to people in need. What they do helps the company internally in terms of morale because they feel good about their mission, but it also helps the company externally, because they are right to get their message out regarding their efforts to help others. That not only helps build brand loyalty, but it can lead to other companies following suit.

As the company itself says, “TOMS has always stood for a better tomorrow–one where humanity thrives. To us, that means no matter who you are or where you live, you feel physically safe, mentally healthy, and have equal access to opportunity. Every TOMS purchase enables us to invest in local partners around the world who are working to create positive change in these three areas.”

You can also look at a company like Apple, which now has great momentum with its watch. But that watch is not just telling time, it connects to one’s health care stats. They are developing a product that’s far beyond something designed just to make its creators money. They are developing a product that can actually do good.

As an investment banker engaged in health care industry M&A, I look at companies that are working on COVID-19 vaccines and therapies and it can be argued that they are purpose driven businesses. Sure, they are looking to earn a profit, but you can bet that they are also motivated to do great things for our society. The folks I work with in the health care industry are also mission and purpose driven.

At the end of the day, when you are a purpose driven business you are building momentum to make the world a better place and that’s definitely a part of going from good to great, because another aspect of a great company, is that everyone on board is motivated and feels their work has meaning and is part of something larger. Greatness isn’t just about a bottom line, but it’s how you feel inside about your company and your work. That builds camaraderie and helps create energy to achieve your mission and goals as a company. When you have satisfied employees, they end up more innovative, harder working, and they help your company grow, which is just better for everybody.

All that said, it’s important to note, that before you can be a truly purpose driven company, you have to have a quality product and a viable economic model. You can’t skimp on that.

What would you advise to a business leader who initially went through years of successive growth, but has now reached a standstill. From your experience do you have any general advice about how to boost growth and “restart their engines”?

From what I’ve seen many times in my work, companies come to a standstill when they fail to innovate or when they cut back on new product development. They really need to readjust their mindset. They need to reevaluate why they aren’t growing. Do they have the right products and services? Are they in a stagnant market in which case they need to find new markets and new products and services? Then they have to determine how to become innovative. Sometimes this requires a change of management at the top.

There has been many a company that was wonderful until it wasn’t. Much like people, sometimes it’s complacency and arrogance that keeps a company down. Consider Kodak or Polaroid. In the beginning, they were very innovative, and then they weren’t. Kodak went on to survive although as a shadow of its former self, but there was a point where they lost their edge, their drive, their innovation.

Getting that drive back is sometimes about bringing in new people to get that fire started again. In some cases, it’s bringing back experienced, senior-level people, like when Steve Jobs rejoined Apple.

Business moves rapidly and there’s no place for those who take their current success for granted. If you are not moving forward, generally you’re moving backwards. Just look at Sears and what happened to them. They really should be the Amazon of today, but they didn’t innovate. They missed the boat. Sears Roebuck was the first catalogue company. What was Amazon? It was just an online catalogue for a bookseller at the beginning. But they obviously had a much bigger plan. They were looking to go from good to great.

Generating new business, increasing your profits, or at least maintaining your financial stability can be challenging during good times, even more so during turbulent times. Can you share some of the strategies you use to keep forging ahead and not lose growth traction during a difficult economy?

Focus and sales are the key. I believe that in a service business, which I’m in, it comes down to networking, staying in touch with your referral sources, not cutting back on revenue-generating things like marketing and PR, even though it might be difficult in the present environment to see their value right away.

When things are not going well you have to figure out where to cut back, and many make the mistake of cutting back on advertising, marketing and sales when it might be better to cut back on employees. PR and marketing are the front-facing part of a business, not something you necessarily want to cut back on. These are tough choices and one must choose wisely. You have to be out there with your advertising, with your PR, with your relationships.

Finally, you have to evaluate all of your expenses and look at risk and reward, with it coming down to making sure you’re getting the best bang for your buck. With the coronavirus it is even more difficult. So, we have to adapt and learn new ways to market.

In your experience, which aspect of running a company tends to be most underestimated? Can you explain or give an example?

I think this can come down more to perception rather than truth. We tend to underestimate whatever aspect of the work we aren’t doing. The other guy’s job is always easier. But one aspect isn’t really less valuable or harder to do than the other. It doesn’t matter how good you are at one side of your business, if you don’t make all the parts seamless from sales, to production, to collections, it makes things harder for the other positions. Sales is always important, but if execution or production is not done properly it is all for naught.

As you know, “conversion” means to convert a visit into a sale. In your experience what are the best strategies a business should use to increase conversion rates?

I don’t think there is a one-size-fits-all when it comes to conversions. I think you have to tailor your pitch, your products and services to particular sets of consumers and customers. I think listening to your customers and clients and understanding what their needs and wants are is the important thing.

You get that feedback by asking your clients and customers for it. You can do so directly, one-on-one, or using digital communications platforms and social media. My father used to tell me there’s a reason God gave us one mouth and two ears: we should listen twice as much as we should talk.

Of course, the main way to increase conversion rates is to create a trusted and beloved brand. Can you share a few ways that a business can earn a reputation as a trusted and beloved brand?

What’s behind the image of a great brand really comes down to consistent customer service, standing behind your products with good warranties, and ensuring they are of top quality. It’s about not cutting corners, listening to your customers and being responsive, and providing good value. And, ideally, you do want to go that extra mile by giving back and there’s no reason a business shouldn’t let its customers know that they are giving back. Customers want to know they are supporting a company with a vision that’s larger than the bottom line, especially now.

Great customer service and great customer experience are essential to build a beloved brand and essential to be successful in general. In your experience what are a few of the most important things a business leader should know in order to create a Wow! Customer Experience?

Developing a “wow” experience is about developing a “wow” product or service. You have to look at companies like Disney, Apple and Amazon. They are all great brands that people perceive they get great value from. They are all also very protective of their brands, making sure everything they put out on the market is great. For them, being second best isn’t an option and they are willing to invest substantial assets to ensure this.

What are your thoughts about how a company should be engaged on Social Media? For example, the advisory firm EisnerAmper conducted 6 yearly surveys of United States corporate boards, and directors reported that one of their most pressing concerns was reputational risk as a result of social media. Do you share this concern? We’d love to hear your thoughts about this.

You obviously have to monitor social media and really have to have consultants to help you because even the best of companies can piss off somebody. You also have to be vigilant and prepared to respond to attacks you may receive. Part of this comes back to creating a culture of providing great customer service. And you have to have a system in place so that what’s happening on social media is being monitored and reported to top leadership. You don’t ever want leadership blindsided. Concerns have to be elevated. Today, this is so important. Damage can be done that might be irreversible.

What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?

The most common mistake I’ve seen through decades in the investment banking business is that CEOs and founders underestimate the amount of capital needed to succeed. They haven’t done enough homework on the market to understand its size. They don’t understand the competitive landscape they are playing in and they underestimate the time it will take to get to cash flow breakeven and then profitability. Another thing I see quite a bit, is trying to fix a problem that doesn’t really exist.

To not get into this sort of trouble, they have to make sure they have really done serious, thoughtful work on the way in, so that they have a realistic budget in place to move forward. But keep in mind, not every business will be successful. Knowing when to cut and run is also important.

Thank you for all of that. We are nearly done. You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

If I were to start a movement, it would have to begin with getting businesses to increasingly make the preservation of the environment a central concern, while at the same time raising consciousness about equal opportunity. Without a healthy environment, and an engaged, diverse workforce whatever we may do might be all for naught. When looking at businesses, buyers and operators should really be taking into consideration what every individual business can do to help with sustainability and to limit or reverse environmental destruction. Businesses need to be profitable to survive, and I don’t think anyone should be ashamed to be profitable, but you can make a profit and still be conscious about the environment, and about the dignity of your employees by promoting and benefiting from diversity, and committing to creating equal opportunity. Encouraging diversity and giving people equal opportunity is not only good for the business, but it’s the right thing to do. Making a profit is nothing to be ashamed of provided you do it responsibly.

How can our readers further follow you online?

James Cassel may be reached via email at jcassel@casselsalpeter.com or via LinkedIn at https://www.linkedin.com/in/jamesscassel. His website
is: www.casselsalpeter.com

This was very inspiring. Thank you so much for the time you spent with this!

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More charged, $12 million to victims: an update in South Florida company’s $281 million fraud

By David J. Neal
December 28, 2020

Victims of the 1 Global Capital fraud received another $12 million this week and the Securities and Exchange Commission charged three more unregistered brokers allegedly involved in selling the Hallandale Beach company’s securities this month.

But that $12 million and the $317,690 from one of the men charged by the SEC still might be scant solace to the 3,600 investors scammed out of hundreds of millions by 1 Global Capital’s white collar gang.

THE MONEY

Cassel Salpeter’s James Cassel, liquidating trustee of the 1 GC Collections Creditors’ Liquidating Trust, said the $12 million brings the total returned to investors to $124 million, about 44 cents on the dollar.

“I got a phone call from a retired teacher in California who put $10,000, everything she had other than Social Security, into the the company. That is who I’m working for,’” Cassel said he told another attorney connected to the case. “We want to feel we’ve maximized recovery for over 3,500 investors, who are, unfortunately, going to lose money.”

At 44 cents on the dollar, that puts the amount ripped off at $281.8 million. Various court documents place the amount at $322 million.

THE SCHEME

As stated in various court documents of those already convicted of their role, 1 Global Capital was sold to investors as a short-term, high-interest cash lender for small businesses. Investors would get their principal and some interest when the businesses repaid 1 Global.

Lies fooled those investors concerning the high commissions paid to middlemen and unlicensed brokers; the securities laws being broken, concealed by fraudulent legal opinions; the money sucked out of 1 Global for personal use by CEO Carl Ruderman; and the $50 million in arrears the group attempted to cover up, Ponzi-scheme style.

Over the last 15 months, the Justice Department and SEC pulled a parade of 1 Global cronies through the federal courts on their way to federal prison.

  • Chief financial officer Alan Heide​ already is sitting in federal prison in Jesup, Georgia until December 2024 after pleading guilty to securities fraud.
  • Attorney Jan Atlas’ sentencing has been set for Jan. 21 on securities fraud.
  • Former 1 Global director Steven Schwartz is set for sentencing April 9 on
    securities fraud and conspiracy to commit wire fraud.
  • Attorney Andrew Ledbetter has entered a plea agreement​ on those same charges and even was allowed to travel to Washington D.C. to spend Thanksgiving with his adult son.

Ruderman still hasn’t been criminally charged. ​The SEC gained a judgment against him​ in 2019 that included a $32 million disgorgement, a $15 million civil penalty, another $750,000 in cash; and half the equity in his five-bedroom, seven-bathroom, 9,600-square-foot tower suite condominium at Aventura’s Bella Vista North, 20165 NE 39th Pl.

THE NEWLY CHARGED

The SEC charged Roger E. Dobrovodsky, a 66-year-old from Indianapolis, with being an unregistered broker during the 16 months in 2017 and 2018 that he sold 1 Global Capital securities while using fraudulent materials. The SEC says Dobrovodsky has consented, without legally admitting any wrong, to giving up the $317,690 he made in commission, $32,038 in prejudgment interest and $50,000 civil penalty.

The amounts of those punitive payments from Robert Seth of Georgetown, Texas, the SEC says, still have to be determined although Seth’s consented to them. He made almost $282,000 in commissions, the SEC charges, from his two years of selling 1 Global securities as an unregistered broker.

Matthew Walker, 40, from Olathe, Kansas, is the managing partner and chief compliance officer of Pinnacle Plus Wealth Management. The SEC says Walker, also, was an unregistered broker who kept selling 1 Global securities until June 2018, “despite being confronted with numerous red flags that the 1 Global investments were not what he had been told and that 1 Global officers had not been honest with him.”

The SEC says Walker earned $393,306 in commissions and his companies earned another $300,000. Most of his customers, numbered at over 140, were from the Kansas City area.

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Bankruptcy trustee recovers $12M more for victims of $332M 1 Global Capital fraud

By Ashley Portero
December 28, 2020 

A bankruptcy trustee recovered and distributed $12 million to thousands of creditors who were victims of a $332 million investment fraud.

Cassel Salpeter and Co. chairman and co-founder James S. Cassel, who was appointed director of 1 Global Capital’s estate in bankruptcy court, said about 3,750 creditors that invested in the company received a payment. To date, Cassel has recovered $124 million on behalf of 1 Global Capital victims, after distributing an initial $112 million payment to investors in 2019.

“Considering the challenges posed in collecting on 4,000 cash advances and pursuing legal actions all over the country, this significant additional distribution is a spectacular result for a situation like this,” Cassel said. “It is a testament to the team of professionals and the staff who worked diligently to continue the recovery efforts during the difficult year of 2020.”

Cassel said the liquidating trust will continue to pursue actions to generate additional returns to creditors.

Hallandale Beach-based 1 Global Capital, which provided loans to small businesses, filed for Chapter 11 bankruptcy in 2018.

Soon after the bankruptcy filing, the U.S. Securities and Exchange Commission filed civil fraud charges against the company and former CEO Carl Ruderman, claiming they fraudulently raised $332 million from investors.

According to the SEC lawsuit, 1 Global Capital overstated the value of investors’ accounts and their rate of returns and misappropriated at least $32 million to personally benefit Ruderman. Ruderman agreed to disgorge $32 million in ill- gotten gains and pay a $15 million civil penalty to settle the charges.

Many of the scheme’s victims were elderly individuals who invested between $50,000 and $100,000, Cassel said.

Earlier this month, the SEC charged three former 1 Global Capital sales agents with federal securities registration violations. The commission alleged the trio collectively sold more than $21 million in unregistered transactions to retail investors while acting as unregistered brokers.

In September, the SEC filed charges against Fort Lauderdale attorney Andrew Dale Ledbetter for allegedly using false legal opinion letters to raise $100 million from investors as outside counsel for 1 Global Capital.

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Though slow to come, better times are ahead | Opinion

2020 highlighted how critical agility is for middle market businesses, with many rapidly reinventing themselves to secure their future. While many technology and ancillary companies thrived, if your business did not fulfill a need created, or required by the pandemic, you likely had to be especially creative to stay afloat. While we are not through with 2020’s pandemic challenges, a gradual comeback is on the horizon, even as many traditional business norms may never be the same.

Here are four areas that companies need to watch in 2021:

Technology: Software and artificial intelligence will continue to revolutionize labor. Advances in virtual reality now promise equal or increased productivity from the comfort of your home office. Meanwhile, telemedicine, video conferencing, and a slew of apps with expanding capabilities exploded in usage with much faster adaptation than anticipated, but also with some obvious limits. Technology will continue to define 2021, but how much so and what will stick remains a question.

Work-from-home (WFH): Call me contrarian, but as an investment banker, I find it hard to achieve the same productivity working from home, especially when it comes to new client origination. In my view, you also lose corporate culture, camaraderie and collaboration.

However, some studies disagree, positing that productivity increases when employees work from home. For those working from home with families, the intangible benefits of spending more time with them is now evident, and they will likely lobby for WFH to continue.

For companies that can provide the option, a hybrid model seems likely, with some days spent at the business location or traveling, and others spent working from home. But keep in mind this is simply not an option for many industries.

How will the COVID vaccine rollout go? Will the vaccines be like a flu shot? Will enough people take them? Will vaccines be required yearly, and will each be as effective? Once taken, what comes next? Is it back to the office immediately, or will we ease back into reentry? How long will your immunity last?

Given our interconnectivity, these answers will have huge implications for the 2021 marketplace, but without knowing them, businesses will find it difficult to plan next moves. Flexibility will be key. In any case, the rollout’s impact likely won’t be felt until the second part of the year.

Will we even go out when it’s safe? This newly guarded approach to life has many wary of shaking hands or venturing to business functions. But your company can’t grow unless you’re hunting and securing fresh opportunities, while also developing new relationships. At some point, people will certainly break out of their silos in 2021, but how often, and what must be done to make us be and feel truly safe? Finding the right pace will prove a balancing act.

So much remains uncertain. Most of us survived 2020, albeit not unscathed, and we saw the acceleration of innovations like virtual meetings, telemedicine and WFH. Many of these changes are here to stay, and yet, even with an ambitious vaccine rollout, much business activity may look like it did in 2020, especially for the first half of 2021. There are, however, promising bright spots ahead, but much we have to watch carefully to make the best adjustments and come out on top in 2021.

James S. Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment- banking firm with headquarters in Miami that works with middle-market companies. jcassel@casselsalpeter.com or via LinkedIn at  https://www.linkedin.com/in/jamesscassel.

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Creditors recovering another $12 million lost in Broward securities fraud case

By David Lyons
December 23, 2020
 

It’s technically not a gift for the holidays. But the 3,750 investors and other creditors allegedly defrauded by a payday loan operation based in Hallandale Beach will gladly accept the $12 million recovered on their behalf.

The money is the latest distribution to people who are said to have lost more than $300 million to a business called 1 Global Capital. The firm filed for bankruptcy in mid-2018 after running short of cash amid a Securities and Exchange Commission probe that led to civil fraud charges against a variety of individuals, as well as criminal charges against lawyers by the U.S. Attorney’s Office in Miami.

“There was a substantial group of investors in South Florida” who lost money, said James S. Cassel, trustee of the 1 GC Collections Creditors’ Liquidating Trust and chairman of the Miami investment banking firm Cassel Salpeter & Co.

Last year around this time, creditors received $112 million thanks to the efforts of a court-appointed legal team that tracked down assets connected to
the companies.

The latest distribution pushes the total sent back to investors up to $124 million, or 44 cents on the dollar, Cassel said Wednesday. Other firms involved in the recovery include Baker Mckenzie, Greenberg Traurig, Development Specialists, Inc., along with special counsel Genovese Joblove & Battista, and Stichter, Riedel, Blain & Postler, P.A,

According to allegations brought by the SEC, 1 Global was a commercial lending business that made the equivalent of payday loans with high interest rates to small businesses. The firm obtained the funds to make the loans from investors nationwide, offering short-term investment contracts. The investors would supposedly receive a proportionate share of the principal and interest payments as the loans to the small businesses were repaid.

1 Global, according to federal authorities, raised money using investment advisers and others who were promised significant commissions.
Many of the investor victims funneled retirement funds by the tens of thousands into the operation, Cassel said.

Last week, the SEC in Miami filed civil charges against three more individuals for illegally selling securities of 1 Global Capital, LLC in unregistered transactions to retail investors while acting as unregistered brokers.

The commission previously charged 1 Global, its owner and others with operating a fraudulent scheme to misappropriate millions of dollars from investors. The SEC also charged 1 Global’s largest sales agent for various registration violations.

The SEC’s latest complaints alleged that Roger E. Dobrovodsky, Robert Todd Seth and Matthew L. Walker were among 1 Global’s top revenue producers, cumulatively selling more than $21 million in unregistered transactions to many retail investors, according to a statement.

According to civil complaints filed by the commission, the three men marketed 1 Global securities to investors “as a safe alternative to the stock
market and reaped hundreds of thousands of dollars in commissions on their sales even though they were not registered as broker-dealers or associated with registered broker-dealers.”

 

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Drawing on brand loyalty can help ensure your company’s survival | Opinion

It’s going to be a long winter. Even with a successful vaccine, normalcy may be as far away as next summer.

Middle market companies can learn from a recent CBS news story about the famous Strand bookstore in New York City. The struggling independent bookstore turned to social media to highlight its economic plight, successfully motivating a cavalry of support from loyal and new customers, and even some celebrities. With many businesses facing tough choices right now, finding new ways to tap into customer loyalty and secure new clients, while keeping people comfortable doing business with you, is critical to survival and success.

Here’s what to consider:

IS THERE A PATH FORWARD?

Most middle market businesses have already belt-tightened on their expenses, sought capital, and right-sized. Now, it’s once again time to project revenues, expenses, and capital needs for the next six to 12 months and pursue any existing government aid, or new aid that might become available. If you do not see a clear path forward, seek a buyer or a capital partner now. Do not wait. If selling is the only option, position your narrative to explain why your business is a good opportunity. An investment banker can help.

Middle market businesses that do have a path to survival should focus on actively engaging consumers, building client confidence, and tapping into brand loyalty.

Invest in resources that make consumers/clients feel safe doing business with you. Retail outlets and restaurants, for example, can put up plexiglass dividers, secure air purifiers, and/or Far-UVC lighting that may curtail the spread of COVID-19. They should also coach staff on promoting and maintaining social distancing, create or beef up delivery/pickup services, and of course, wear — and even provide — masks and other PPE to employees, guests and customers. Some businesses can set up tents and move merchandise into the open and would do well to invest in outdoor kiosks, awnings and umbrellas, as well as fans or heaters, and move business outside.

You can make other strategic moves, too. Review your product/services line and tailor them to pandemic needs. Seek accommodations with landlords who would rather have some rent than none at all. You can engage real estate consultants to assist in negotiations, while seeking concessions, and also consider collaborations or partnerships that might help.

Most important, do not underestimate the power of drawing on brand loyalty. Like The Strand, use social media and other channels, such as customer lists you may have built, to call for action and help, letting your customers know how much you need and appreciate them. Explain how buying local means revenues stay local, so getting goods and services from you means supporting their community. They will want you around when things get back to normal.

HOLIDAYS MATTER

Many businesses secure a disproportionate amount of their business during the weeks before the holidays. Get ready now. Use messaging to let customers know about the range of extra measures taken to keep them safe. And with many retailers and online businesses already offering bargains, run your own deals now too.

This next COVID phase may be the most challenging yet for business owners. While many middle market companies have already implemented or exhausted traditional cost-cutting and capital-raising efforts, more can be done to keep loyal customers returning and maybe even gain some market share as we get to the other side of this crisis.

James S. Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment- banking firm with headquarters in Miami that works with middle-market companies. jcassel@casselsalpeter.com or via LinkedIn at  https://www.linkedin.com/in/jamesscassel.

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Keralty buys Westchester General Hospital in Miami

By Brian Bandell
October 29, 2020
 

Westchester General Hospital in Miami-Dade County was sold to Keralty, an international health care firm based in Colombia.

The 125-bed hospital at 2500 S.W. 75th Ave. was sold by the family of ​Gregory Fox​. The deal includes the 78,000-square-foot hospital building and 5.7 acres of parking lots and undeveloped land. Keralty said it would retain the hospital’s 570 employees and appoint ​Juan Carlos Echandia​ as chairman. Echandia was previously the South American region president for Keralty.

The price wasn’t disclosed.

Westchester General was one of the few stand-alone for-profit hospitals remaining in South Florida.

Keralty operates Sanitas Medical Centers in Florida and three others states in partnership with Florida Blue. It also operates hospitals in Latin America and offers insurance products. The company moved its global division headquarters to Miami in 2019.

“On behalf of the nearly 20,000 Keralty employees worldwide, we welcome Westchester to our family of companies,” said ​Sergio Martinez​, CEO of Keralty Global. “This addition provides a new opportunity to expand our presence in the U.S. and to advance our journey to establish a better model of care and support for our patients and health plan partners.”

Keralty said it plans to “re-engineer” Westchester General to expand its behavioral health, advanced palliative care, and complex care for individuals with multi-chronic conditions.

According to the Florida Agency for Health Care Administration, Westchester General had a bed occupancy rate of 53.4% in 2019, which was below the county average. It lost $5.9 million on revenue of $39.3 million in 2019, a year when most South Florida hospital saw earnings growth.

Most South Florida hospitals have suffered financially during the Covid-19 pandemic this year, so having an owner with deep pockets should be beneficial for Westchester General.

“Our vision is to reimagine the services provided by the hospital and to coordinate with Sanitas Medical Centers, other healthcare providers, community organizations, and insurance companies, to establish a patient-centered health program supporting the local community and designed to keep patients healthy, rather than treating someone who is sick,” Echandia said.

Greenberg Traurig was legal advisor to Keralty in the purchase. The sellers worked with law firm McDermott Will & Emery and investment banking firm Cassel Salpeter & Co.

“When Westchester General Hospital and the Fox family who owned it approached us to help them find a buyer for their hospital, they were adamant that they were only looking for a buyer who would continue putting patients first and would provide the same quality of care that had long been the family’s legacy,” said ​James Cassel​, chairman of Cassel Salpeter. “Keralty and their Sanitas Medical Centers checked off all those boxes. We then worked closely with both parties on behalf of the seller to secure this successful outcome.”

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