Wake Forest: So elite you should bribe your way in
Wake Forest: So elite you should bribe your way in
Plus: Sick burns against Wells' CEO; Owners of The Palm face financial setback; Can you say 'Cooleemee'?
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Good morning! Today is Wednesday, March 13, 2019. If you have kids in Charlotte-Mecklenburg Schools, lucky you: They are coming home three hours early today.
Like those daffodils in your front yard, news has been busting out all over the last couple days. Here are today’s big stories in Charlotte-area business news:
Face Palm:
The owners of The Palm steakhouse chain, which has a restaurant at Phillips Place, are engaged in a family legal battle that pushed an affiliated licensing company into bankruptcy protection last week.
Operation of The Palm’s two dozen restaurants isn’t affected – at least not yet. The bankruptcy filing is by Just One More Restaurant Corp., a company whose only asset is The Palm’s intellectual property: its menu, recipes, trademarks and its decor, including those caricatures of local celebrities that give the restaurants a classic feel.
That company was pushed into financial distress after a stunning $120 million judgment in New York in November. In that case, family members who inherited shares of the intellectual-property company sued Wally Ganzi and Bruce Bozzi Sr., claiming that the two started opening Palm restaurants beginning in the 1970s under their own ownership while shortchanging the intellectual-property company, which they also ran but that was more widely held by family members. The original Palm opened in Manhattan in 1926.
All sizzle: Ganzi and Bozzi opened The Palm at Phillips Place in 1997. It was one of the first big upscale steakhouse chains to come to town, following Morton’s, which opened uptown in 1994. It has that upscale, Old Charlotte kind of feel.
Drawings of Ganzi and Bozzi, upper right, on the wall at The Palm’s Phillips Place restaurant.
Minimal royalties: Licensing agreements provided that Palm restaurants, operated by Ganzi and Bozzi, pay just $6,000 a year for the right to use One More Restaurant Corp.’s intellectual property, according to court documents. Typically, royalties for steakhouses cost much more and consist of a percentage of sales, usually between 2.5 percent and 5 percent. The judge called the agreement to pay so little “a textbook case of fiduciary misconduct.” Licensing property from one company you control to another company you control at below-market rates is a form of self-dealing.
Appeal pending: Ganzi and Bozzi are appealing the ruling. In documents filed with the court of appeals, they stated that if forced to pay, “the Palm restaurant business … will lose the financing it requires to operate and be forced to close.” Court docs show they have an $11.3 million term loan from Bank of America.
Reaction: In a statement to The Ledger, Ganzi and Bozzi’s lawyer, Sarmad Khojasteh, said the two “are confident that they will prevail on appeal and that the judgment entered against them will be reversed. Nevertheless, whatever the outcome, they remain committed to ensuring that the Palm Restaurant business — which they have devoted their entire lives to building — will continue to provide superb service to its valued guests.”
The lesson: Even family businesses need to follow the basics of corporate governance — especially if some of the owners aren’t involved in its operation. In the Palm case, the judge said there is no evidence the business held any corporate meetings since 1976: “Purported family discussions at the kitchen table in the 1970s do not constitute properly-noticed corporate meetings,” she wrote.
Quote: “At The Palm, we’re all about family and friendship and teamwork.” — The Palm’s website
Great! Another bank!
Observer banking guru Deon Roberts with the details this morning of JPMorgan breaking into the Charlotte market:
JPMorgan Chase said on Wednesday that it plans to open its first branches in Charlotte, a major announcement in a city that has long been dominated by financial giants Bank of America and Wells Fargo.
JPMorgan, the largest U.S. bank by assets, has not disclosed the number of branches and automated teller machines or their addresses but said they are expected to open by the end of this year.
So the initial impact on Charlotte’s big banks is unclear. But the move brings more competition for Charlotte-based Bank of America and San Francisco-based Wells Fargo. Combined, those two banks hold more than 89 percent of the deposits in the region, according to the latest FDIC data.
Boeing jet rare at CLT:
Nervous about flying on the new Boeing 737 MAX 8 plane, the kind that has had two fatal crashes minutes after takeoff in the last five months? If you are flying out of Charlotte, you have nothing to worry about — probably. American has 90+ percent of flights from Charlotte and does not seem to use the plane here. WSJ reports:
More than 30 airlines around the world, including Southwest, American and United, operate 737 MAX airplanes, 350 in all. Southwest has the largest fleet of MAX jets, with 34 MAX 8s in service throughout its system. (Southwest has a fleet of about 750 total 737s.) American has 24 MAX 8s. All fly to or from Miami.
Charlotte has seven daily nonstops on American to Miami, but none of them in the next several days is scheduled on a Boeing 737 MAX 8.
The 7 most savage takedowns of Wells Fargo CEO Tim Sloan
Wells Fargo CEO Tim Sloan testified before the House Financial Services Committee on Tuesday about the bank’s recent string of scandals. Members of Congress wasted no time giving him the business. Here’s a sampling:
1. Rep. Maxine Waters (D-Calif.): “Wells Fargo is a recidivist financial institution that creates widespread harm with a broad range of offenses. What’s more, this misconduct appears to persist. … Wells Fargo’s ongoing lawlessness and failure to right the ship suggests the bank … is simply too big to manage.”
2. Rep. Patrick McHenry (R-N.C.): “Each time a new scandal breaks, Wells Fargo promises to get to the bottom of it. It promises to make sure it doesn’t happen again. But then a few months later, we hear about another case of dishonest sales practices or gross mismanagement.”
3. Rep. Carolyn Maloney (D-N.Y.): “Last October, Wells Fargo issued a new $40 million line of credit to the manufacturer of the exact gun that was used to kill 17 people in the Parkland shooting. … Why does Wells Fargo continue to put profits over people by financing companies that are making weapons that are literally killing our children and our neighbors?”
4. Rep. Al Green (D-Texas): “We need to know: What did you know, and when did you know it?”
5. Rep. Brad Sherman (D-Calif.): “No, it’s my time, and I asked you about whether you’d support the [overdraft protection] bill, and you’re trying to filibuster by talking about your practices!”
6. Rep. Gregory Meeks (D-N.Y.): “Do you realize that if someone on Main Street caused such hazardous results – whether it was stealing your money or conning them – they go to jail? That’s what they do. They. Go. To. Jail. What you have done, your bank that you’ve been a part of for 31 years, no one has paid a punishment at all! … When the general public looks at this, they do not see any justice at all. Nothing.”
7. Rep. Alexandria Ocasio-Cortez (D-N.Y.): “Why was the bank involved in the caging of children and financing the caging of children?”
Sloan faced the anger, finger-wagging and constant interruptions with a calm, Droopy Dog demeanor – which is probably the right tone. His appearance was more Roman Colosseum spectacle than thoughtful examination of Wells’ repeated problems, which the bank and regulators are clearly spending a lot time addressing.
Discuss: What do you think? Are members of Congress justified in their outrage? Or are they just showboating? Reply to this email, and I’ll print some of the responses in a future newsletter. (I’ll identify you by name or not, as you prefer.)
Moving up…
Former Charlotte Observer publisher Ann Caulkins was named president of the Novant Health Foundation. (Observer)
Deloitte named John Giannuzzi as head of its Carolinas operations. (Observer)
Industrial engineering products manufacturer EnPro Industries, based in Charlotte, named Marvin Riley as its next CEO. (NC Business News Wire)
… and moving down:
Saundra Torrence, former CEO of Charlotte’s First Legacy Community Credit Union, was sentenced to six months in federal prison for embezzling $375,000, WSOC reports. She also served as campaign treasurer for Charlotte City Council member James “Smudgie” Mitchell, who wrote a letter to the court urging leniency.
Carolinas & Beyond
The scandal Wake Forest needs?
In these times marked by bitter political division, this blockbuster story of parents cheating and bribing to gain college spots for their kids is just the kind of news we need right now. It can unite us as Americans, and we can collectively hope: “May the people guilty of this rot in jail.”
If you somehow missed it yesterday, federal officials alleged dozens of wealthy parents schemed for their kids to gain admission to elite colleges by cheating on standardized tests and bribing athletic coaches to vouch for nonexistent athletic prowess with admissions offices.
‘Full House’ to the big house: There are plenty of angles to this story, which has inspired plenty of memes and the excavation of now-hilarious old social-media posts from actress Felicity Huffman.
But one of the angles is local: Wake Forest was one of the schools where a coach is alleged to have intervened for a student in return for cash. From the Winston-Salem Journal:
William Ferguson, the head volleyball coach at Wake Forest University, has been placed on administrative leave after being charged with racketeering in a massive national college admissions bribery case that includes wealthy executives and Hollywood actresses. …
Ferguson is accused of accepting $100,000 from [admissions consultant William Rick] Singer to help the daughter of a Singer client get into Wake Forest after she had been put on a wait list. It is not clear whether the student associated with Singer and Ferguson is enrolled at the university or if her parents have been charged in the case.
Wake Forest said in a statement that “it is aware of the allegations regarding head volleyball coach Bill Ferguson. The university has retained outside legal counsel to look into this matter.”
A court document filed Wednesday morning shows Ferguson posted a $50,000 bond by paying $5,000 in cash. He was required to surrender his passport, refrain from traveling outside of central North Carolina and submit to supervision by federal probation authorities. He’s due in court in Boston on March 25. He also filed a financial affidavit under seal, which could indicate he lacks the money to pay a lawyer.
A different kind of scandal? Most scandals diminish the institutions where they take place. But will this one actually burnish Wake Forest’s reputation? Many universities only dream of being considered in the same league as Yale, Stanford and Georgetown. Wake has a sterling academic reputation but probably a lower national profile than some of the other schools. But now, Wake is receiving national exposure alongside the nation’s most elite colleges as a school so selective that parents are accused of bribing a volleyball coach to give their kid the chance to study in Winston-Salem.
Source: the schools
Speaking of Wake Forest, did its basketball players bribe their way onto the team? The Demon Deacons finished their season with an 11-20 record on Tuesday, losing in Charlotte in the opening round of the ACC Tournament. They fell to Miami — a fellow pillar of athletic integrity — by a score of 79-71.
Loves me some internet:
Can you pronounce the names of these North Carolina towns? Cartoogechaye. Cooleemee. Pfafftown. Most can’t:
Off the Clock
Low-key ideas for the weekend
Movies opening in Charlotte this weekend:
Captive State (PG-13): Aliens invade Chicago
Five Feet Apart (PG-13): Cystic fibrosis love story
Wonder Park (PG): Girl saves amusement park (animated)
Nancy Drew and the Hidden Staircase (PG) (Rotten Tomatoes: 80%): Girl detective investigates ghosts
Highly rated movies now playing:
Captain Marvel (PG-13) (79% on Rotten Tomatoes)
How to Train Your Dragon: The Hidden World (PG) (91)
The LEGO Movie 2: The Second Part (PG) (86)
Big sports on TV:
Thursday
7:00pm: UNC basketball vs. Notre Dame/Louisville (ESPN/Raycom)
9:00pm (approx.): Duke basketball vs. Pitt/Syracuse (ESPN/Raycom)
Friday
7:00pm, 9:00pm (approx): ACC Tournament semifinals (ESPN/Raycom)
7:00pm: Hornets @ Wizards (Fox Sports SE)
Saturday
8:30pm: ACC Tournament Final (ESPN/Raycom)
Sunday
1:00pm: Hornets @ Heat (Fox Sports Sun)
6:00pm: NCAA Selection Show (CBS)
Cheap weekend getaways from CLT:
This weekend: Charlotte to Boston, $231 round-trip on American (nonstop), March 14-17
Charlotte to Orlando, $91 round-trip on Frontier (nonstop), March 21-25
Charlotte to San Jose, Calif., $213 round-trip on United (one-stop), April 5-8
Charlotte to San Francisco, $207 round-trip on Frontier (one-stop), May 3-6
Source: Google Flights. Fares retrieved Wednesday morning. They might have changed by the time you read this.
Got a news tip? Think we missed something? Drop me a line at editor@cltledger.com and let me know.
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The Charlotte Ledger is an e-newsletter and web site publishing timely, informative, and interesting local business news and analysis Mondays, Wednesdays, and Fridays, except holidays and as noted. We strive for fairness and accuracy and will correct all known errors. The content reflects the independent editorial judgment of The Charlotte Ledger. Any advertising, paid marketing, or sponsored content will be clearly labeled.
The Charlotte Ledger is published by Tony Mecia, an award-winning former Charlotte Observer business reporter and editor. He lives in Charlotte with his wife and three children.