Crain's Cleveland Business

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VOL. 37, NO. 32

AUGUST 8 - 14, 2016

Source Lunch

Business of Life

Mary Sue Tanis, Youth Challenge After 40 years, head of nonprofit is as enthusiastic as ever. Page 20

Post-WWII Quonset huts are still in business

CLEVELAND BUSINESS

Making room for more

Park Place is seeking space Page 3

Page 19

PORT AUTHORITY

REAL ESTATE

Keeping closer watch on Corps Keyes-Treuhaft nears By JAY MILLER jmiller@crain.com @millerjh

It used to be that the ClevelandCuyahoga County Port Authority would just keep an eye on the U.S. Army Corps of Engineers as the federal agency managed the dredging that would keep the Cuyahoga River channel open for commercial shipping. Making sure the Corps did its job of keeping the channel deep enough

for the big ore boats to navigate the Cuyahoga without scraping bottom was light duty for Port Authority officials, who spent most of their time managing the lakefront docks and helping developers and public agencies finance projects like the Rock and Roll Hall of Fame and the Flats East Bank project. But then it started looking like it was going to cost the state $1 million a year if the Port Authority, and the state of Ohio, wanted the dredging done in what they consider the right way. Now, the Port has charged its vice

president of external affairs, Jade Davis, with keeping his eyes on the Corps and better asserting the Port’s interests in the halls of Congress and at the statehouse in Columbus. Until now, the external affairs position had been more a media relations position, and the Port Authority’s interests in Washington were largely represented by a variety of Great Lakes maritime associations. The job had gone unfilled for two years before Davis was hired in September 2015. SEE PORT, PAGE 8

end after 92-year run By STAN BULLARD sbullard@crain.com @CrainRltywriter

Keyes-Treuhaft Co., a commercial real estate company that traces its roots to 1924, when two rival home builders in then fast-growing Shaker Heights joined forces, is getting close to shutting down its business. Art Treuhaft, Keyes-Treuhaft pres-

ident, said there is no one to continue the business owned by himself and his sister, Carol Schmidt, so it is selling the last of its properties. That explains why one of its sister companies sold Landerwood Circle, a shopping center with office space on its second floor in Pepper Pike that the company built in 1960, to Pittsburgh-based Glimcher Group. Realty insiders say the property is a SEE KEYES-TREUHAFT, PAGE 7

FOOD

On the cusp of culinary stardom

Eddie Tancredi preps for world chef challenge By MARK OPREA clbfreelancer@crain.com

In a teaching kitchen downtown, two chefs — one with an American flag stitched on his sleeve — stood at their marks over cutting boards. Around them stood three upright carts packed with dozens of measured-out spices, 15 pots and pans labeled —“Grenache,” “Mousse” — with blue marking tape. At a nearby table sit mixers, deep fryers, a boiler set to 144 degrees, the precise temperature one properly cooks halibut. With an offset spatula in his sleeve pocket, the chef with the slick-blond hair hovered his hand over one of 10 armed kitchen timers. It was 9:17 a.m. Across the hall, a lecture began. “Ready, Earl?” he said to a chef in a Hurley cap and gauged earrings. “Ready, chef.” “All right.” A quick breath. “Here we go.” He smacked the timer. The two chefs are Eddie Tancredi and his 24-year-old assistant, Earl Eddie Tancredi, executive chef at Adega, temperature-tests a tray of chowders during a timed cooking trial. (Peggy Turbett for Crain’s) Entire contents © 2016 by Crain Communications Inc.

SEE TANCREDI, PAGE 22

CYBERSECURITY

Benefits of the Internet of Things come with significant security risks CSU keeps attorneys fresh on cyber law Q&A with Veracode’s Tom Eston FOCUS, Pages 13-18

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New hires have Park Place looking for space Data center maintenance company expects more growth under new owner By CHUCK SODER csoder@crain.com @ChuckSoder

Maybe Park Place Technologies wasn’t being ambitious enough when it took over the entire third floor at Landerbrook Corporate Center II. Back in 2014, 40,000 square feet seemed like a lot of space. After all, the computer hardware maintenance company only needed to move about 115 employees when it left the Chagrin Falls area for Mayfield Heights that spring. Then Park Place went and hired another 75 local employees. This year, 21 of them are expected to graduate from Park Place’s new sales training center on the building’s first floor. Once they move upstairs, the company will be more or less out of space, said chief operating officer Chris Adams. And then more trainees will take their place on the first floor — which the company just opened on June 20. “If you’d look back, you’d say, ‘Boy, we should’ve taken more space,’ ” Adams said. How to solve this problem? For now, Park Place is working with its landlord to secure a portion of the second floor, but that involves some negotiation: The space is currently occupied, Adams said, though he declined to be more specific. Park Place is offering financial incentives to the landlord and the tenants to help cover the costs of moving the tenants to a building across the parking lot: Landerbrook Corporate Center I. Both buildings are owned by an affiliate of Lone Star Funds, a private equity firm in Texas. Park Place CEO Ed Kenty said the company could lease space in Landerbrook I, even temporarily, but it’s trying to avoid separating its employees. The company also is giving some thought to a third option: Constructing a building. Even if Park Place does take space on the second floor, however, it may need its own build-

ing in the not-too-distant future, if it continues growing at this rate, Adams said. “At some point it may be our only option,” he said. If built, the building would probably be located near the company’s existing headquarters, Kenty said. “We’re not leaving Cleveland,” he said. Park Place, which employs about 425 people worldwide, has reason to believe that the company will keep growing. For one, in December it was acquired by GTCR. The Chicago-based private equity firm has encouraged the company to continue expanding internationally and hunting for acquisitions, Adams said. Park Place already has “a pipeline of deals” and could close one in the European Union “as soon as September,” Adams said. “We walked away from one last month. We started a new one this month. And we have another one coming after that,” he said during an interview on July 25. Given that GTCR is bigger than Park Place’s previous majority owner, WestView Capital Partners, which still owns a stake in the business. Thus, GTCR has more capital to help Park Place buy other companies and more staff to help execute those deals. “When we get into integration, they have resources that can help us,” Kenty said. The company will continue to grow organically as well — a prediction that Adams said is easy to make. The company employs a lot of employees who conduct sales by phone, so over time it has come up with what he describes as a reliable way to estimate how much revenue each new cohort of “business development associates” will generate after they graduate from training and gain a few years of sales experience. “Anybody who’s been here three years is doing well,” he said. Park Place also is expanding in other cities — and countries. Park Place gained an office near Toronto

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Drew Teller, left, and Brandon Bellar in the Park Place Technologies training center. (Contributed photos)

Matt DeSicom, left, and Bob DeGaetano are Park Place’s manager and director of sales development, respectively.

in 2014, when it bought the data center maintenance services division of Cycom Canada Corp. The next year, it opened an office in London and a distribution center in the Netherlands. Now it’s in the process of moving an employee to Singapore. The company has been pushing to expand internationally partly because its larger clients have data centers all over the globe, said Kenty, who added that Park Place also works with a third party distributor in India. As of July 25, the company had about 6,350 customers in 89 countries. But those numbers are growing quickly, according to Sean McNeeley, director of marketing. For instance, the company served 5,500 customers in 84 countries according to a marketing sheet he created five months ago. “Every time I print it, it’s pretty much out of date,” he said.

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z AUGUST 8 - 14, 2016 z CRAIN’S CLEVELAND BUSINESS

New OT rule could be taxing for nonprofits

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Though nonprofits morally support an updated federal policy that will extend overtime protections to 4.2 million workers, many face operational anxiety trying to meet the requirements and their budget, according to a recent survey. In May, the U.S. Department of Labor published its new overtime regulations that require most employers to pay overtime to all employees earning less than $47,476 per year beginning Dec. 1 — more than double the current threshold of $23,660. Since the department’s last salary update in 2004, rules had said that anyone who makes more than $23,660 annually earns too much to qualify for time-and-a-half overtime pay. With the update that many say was much-needed, employers paying qualifying employees an annual salary less than the new $47,476 threshold now have to either increase that annual salary to surpass it, or pay employees time-and-a-half when they work more than 40 hours. “Some people who are near the threshold are thinking about just giving raises to people to avoid all the additional burdens of having to track time and pay time,” said Doris Day, director of tax at Walthall CPAs in Independence.”Other people are looking at their budget and seeing what they can do.” To help with workloads, Day said organizations can spread duties among employees or shift certain responsibilities to those who are exempt from overtime pay. Nonprofits could also lean on volunteers for certain things, such as an annual event that takes a lot of extra time, she said. Though she isn’t sure how much nonprofits have begun looking at what the changes mean for them, Day said she urges them to do so in order to comply come December. A survey by the Washington, D.C.based National Council of Nonprofits looked at how this will impact nonprofits, which employ 10% of the workforce in the United States. Roughly one third of respondents predict their organizations will have to reduce staff to adjust to new costs and a third further expect they’ll be forced to reduce services, according to the survey, which focused on nonprofits with government grants and contracts. Mike Headen, chief financial officer for United Way of Greater Cleveland, said his staff is “very cognizant” of the fact that many of their employees — roughly 17% — are impacted by the change. “Needless to say for any not-forprofit organization, human resources, literally people, is a significant cost for us,” he said. “It’s something that, again, we have been preparing for very diligently leading up to it.” It’s a change that’s been several

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■ President Barack Obama in 2014 directed the U.S. Department of Labor to update regulations defining which white-collar workers are protected by the Fair Labor Standards Act’s minimum wage and overtime standards. ■ The new rule, released in May, raises the salary threshold beyond which employees must be paid overtime from $23,660 to $47,476 annually. ■ The updates, which are effective Dec. 1, extend protections to 4.2 million workers in the United States — 134,000 in Ohio. ■ The new rule means the salary threshold, which was last updated in 2004, will update automatically every three years based on wage growth over time.

What employers can do: ■ Pay employees time-and-a-half for overtime work ■ Raise worker’s annual salaries above the new threshold ■ Limit employees to working only 40 hours per week SOURCE: United States Department of Labor

years in the making. Though the jump was a bit of a jolt, it ultimately didn’t come as a surprise, Headen said, considering how long it’s been since the threshold was adjusted. Written into the new rule is a re-

“Some people who are near the threshold are thinking about just giving raises to people to avoid all the additional burdens of having to track time and pay time. Other people are looking at their budget and seeing what they can do.” — Doris Day, director of tax at Walthall CPAs s Cleveland Bus sines ss Volume 37, Number 32 Crain’s (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 441131230. Copyright © 2016 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s s Cleveland Bus sines ss, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 212-2 210-0 0750

quirement that the salary threshold automatically updates every three years based on wage growth. Ann Manby, chief financial officer and chief operating officer of United Way of Summit County, said the organization is still figuring out what exactly the impact — financial and otherwise — will be on the organization, but she’s certain it will impact them and many other local nonprofit agencies with limited resources. “We’re working with our HR manager to educate ourselves and vet our options and implement the regulations in a way that make sense for both our employees and for us organizationally,” she said. “Once we wrap our head around it completely, we’d be happy to share our expertise with other local agencies who aren’t fortunate enough to have HR departments.” The baseline of figuring out the new rule’s impact is ensuring that employees are properly classified, Headen said. There are various exemptions to the rules that can determine whether an entity or individual qualifies for the new requirements, Day said. For instance, certain employee duties, such as some executive or administrative roles, would exempt them or a nonprofit that has less than $500,000 of its revenue from a commercial-type endeavor — such as collecting and selling donations — may not be subject to the rules, she said. Alicia Mazzi, director of human resources at St. Augustine Health Ministries, said the Cleveland-based health care and social services nonprofit is “lucky” to have only 10 of its roughly 600 employees impacted. Four will be surpassing the salary threshold with their annual raises anyway. For the other six affected employees, she said the organization had to figure out whether raising salaries or paying overtime would be more cost effective. Having many of their employees properly classified already made the evaluation and shifts much easier, Mazzi said. “It wasn’t as difficult as it could be,” she said. “We’re lucky that that was something that we’ve kept up with over the years.” The law is “going to take a much bigger toll” on companies that haven’t kept up, or perhaps had people incorrectly classified in the past. Visiting Nurse Association of Ohio last year went through an “exhaustive exercise” to update job descriptions and ensure employees were properly classified, said Gene Karlen, chief human resources officer for VNA of Ohio. This work simplified the VNA’s process in finding that fewer than 10 of the organization’s 550 employees are impacted. “The good thing to do is to jump right on this and see where you’re at so you have time to react and respond before the Dec. 1 deadline,” Karlen said. Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan, 48207-9911, or email to customerservice@crainscleveland.com, or call 877-824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777.

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z AUGUST 8 - 14, 2016 z CRAIN’S CLEVELAND BUSINESS

Four Buildings for Sale Prime Downtown Location

Team Lorain in ‘stall mode’ Economic development group is short on funding By JAY MILLER jmiller@crain.com @millerjh

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Team Lorain County, a nonprofit economic development organization, has closed its doors — at least temporarily. The 12-year-old organization was shuttered in June. Board members still hope to revive the organization, which assisted Lorain County businesses with expansion plans and helped sell the county as a place to do business, when funding can be restored. “It’s up in the air right now,” said board chairman Thomas Ubbing. “Due to funding concerns, we had no choice but to put it in a stall mode at this point and see where we can go going forward.” Ubbing said he believes the organization served an important role in Lorain County, though, “our investors didn’t see it in the same way. But we believe we can regroup and come out of this. I think we serve a role in Lorain County, and the gap will become clear.” When the organization was launched, business attraction — promoting Lorain County as a good place to bring a new factory, warehouse or business to site selectors and businesses across the country — was a key role. It also was the place to turn for deep knowledge of the financial incentives that might be available to a relocating company. But that role had to change when JobsOhio was formed in 2011. That nonprofit, created by Gov. John Kasich, controls many of the most attractive financial incentives and has delegated the role of marketing those incentives to six regional groups, in-

cluding Team Northeast Ohio. So Team Lorain County focused on business retention and expansion, a job that entails making calls on local companies to find out what their future plans might be and making sure the companies know that financial incentive or other assistance would be available to make sure they remain in Lorain County. Frederick said that job is more costly than business attraction, which is marketing. “With retention and expansion, it takes time and effort to listen to businesses and what they need,” he said. In that role, Team Lorain County was given credit for helping keep Bendix Commercial Vehicle Systems LLC and football helmet maker Riddell in Lorain County, when they both were looking to expand to a new location. The organization stumbled when, in April 2013, longtime president and CEO Steve Morey resigned to take a job in Florida. A new leader, Dawn Calvert, didn’t join until September 2014. “When Steve Morey left, we did some strategic planning, looking into the future,” said Team Lorain County board member Brian Frederick, president of the Community Foundation of Lorain County. “We made a decision not to hire a new (president) until we got a better sense of what the new plan was going to say and, frankly, it took longer than anyone anticipated and we lost momentum.” That, Frederick said, affected the ability to get communities and foundations to make financial pledges to support the organization, which already was struggling. Revenue in

2014 had fallen to $176,674, according to the organization’s 2014 tax filing, from $265,958 in 2013. The Community Foundation of Lorain County and the Nord Family Foundation were among the organizations supporting Team Lorain County. It lost support from the Lorain County commissioners in 2011 after the failure of a county sales tax increase. Jerry Good, economic development coordinator in Lorain County’s community development department, said his office is gearing up to bridge any gap in business retention and expansion efforts. “What we’ve done is taken over the role of (working with) Team NEO and JobsOhio,” Good said. “What I’ve been doing is getting our team in place and getting our programs sorted out to work on some great opportunities for Lorain County.” He has a staff of three, which is larger than the two-person office Team Lorain County had, though his agency’s job will continue to include making and monitoring business development loans made by the county. “We are actively starting a business retention and expansion program, getting out to companies to let them know we are here to listen to what they need,” Good said. But Good said Lorain County’s role could be temporary. “If, in fact, someday they come back, that role would go back,” he said. “But for now, the county team here is filling that role.” Frederick hopes Team Lorain County can bounce back because he believes there is a role for the private sector in business development, that a business’s relationship with a private sector organization can be broader than with a government agency.

Sterling expands, stays close Talent solutions firm getting a larger space in Independence By STAN BULLARD sbullard@crain.com @CrainRltywriter

Sterling Talent Solutions, a New York City-based provider of criminal background checking and related services for employers, plans to move its Independence operations from the south side of Rockside Road to the north side so it can lock in room to grow. The company has leased 40,000 square feet on the third and fourth floors of the Freedom Square III office building, 4511 Rockside Road, as a new office for 200 workers now at the 6111 Building, which takes its name from its address at 6111 Oak Tree Blvd. The company also will transfer 30 employees from an office in Warrensville Heights when it moves to the new location in early 2017. The consolidated office will have the capacity to house the company’s future growth as it will be able to accommodate as many as 400 workers. “We’re all on one team and this will help that,” said Nick Fishman, Sterling communications director, in a phone interview. “Our office at 6111 Rockside has expanded over time, so it is also disjointed, with some employees on the first floor and some on the fourth. If we could

have gotten them all on one floor, we would have. The move will allow us to update our operations in an employee-friendly fashion.” He said the company does not plan to immediately hire “a boatload” of workers but regularly add staff as sales grow. However, the company stayed in Independence because of its central location, Fishman said. The city of Independence also sweetened the attraction of the new office with a Job Creation and Retention Grant that will total an estimated $509,000 over the next five years if the company meets a city-negotiated requirement that it have 300 jobs in the suburb. Sterling has a payroll of $8.65 million yearly at its current office and would have a payroll of $13 million annually in five years if it grows as it expects. Independence Mayor Anthony Togliatti said the city incentive essentially defrays a cost that Sterling encountered to stay in Independence at Freedom Square. Due to the nature of its work, firms such as Sterling need nine spaces per 1,000 square feet of office space while the suburb’s code required Freedom Square to provide five spaces per 1,000 square feet. To meet the additional parking need, Sterling will lease 132 spaces that the adjoining Home2Suites, which is un-

der construction, added to accommodate the background checking firm. Leasing the parking costs about $500,000 yearly, according to a city document. CBRE Group brokers Scott Halloran and Chandler Converse represented Sterling in its site search. “They’ll get a state-of-the-art work environment,” Converse said in a phone interview. “Their current space needed significant upgrades. It helped that the owner (New York-based Time Equities Inc.) has updated Freedom Square III’s lobby and conference rooms. It made the building a lot more attractive.” None of the parties would disclose terms of Sterling’s 10-year lease. The company had staff in Warrensville Heights following its acquisition of EmployeeScreenIQ last year, which was based there, Fishman said. Sterling provides criminal background checks, résumé checking, drug screening and on boarding, or new-hire, services for employers. Workers in Independence include verification specialists who contact academic institutions, check public criminal records and do drug testing, Fishman said. Sterling, which is privately held, has 20 offices in nine countries and a total of 3,500 employees, according to its website.

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gem, a legacy property in a region once known for building owners who kept their assets for generations. Anchored by a freestanding Heinen’s, the property on the northeast corner of the traffic circle at Lander Road and Chagrin Boulevard consists of three buildings with a total of 47,000 square feet of retail and office space. The plaza is the only office-retail building in Pepper Pike and the last major shopping center for about 4 miles between downtown Chagrin Falls and Eton Chagrin Boulevard in Woodmere Village. It’s near other moneyed suburbs such as Moreland Hills and Hunting Valley. Joe Staffilino, Glimcher vice president of acquisitions/operations, said in an email that the company was attracted to the center because of “the special way it serves its local area” with long-term, local tenants, and by its 95% occupancy rate. Keith Hamulak, a vice president specializing in retail leasing and investment sales at CBRE Group, said, “You’d be hard pressed to find a better shopping center than Landerwood Circle.” Thanks to its high occupancy level and location, Hamulak said, the center likely is getting top-drawer rents despite its age. Neither Treuhaft nor Staffilino would disclose how much Glimcher paid for the office-retail center. A deed transfer recorded July 15 in

Cuyahoga County does not disclose a sale price because of the way the sale was structured. However, land records also show that Landerwood Consolidated Cos. LLC, the outfit formed by Glimcher to hold the property, secured an $18 million mortgage the day of the sale from Huntington National Bank. The county assigns the mixed-use center a market value of almost $13 million for property taxes. Treuhaft said in an interview that Keyes-Treuhaft also is preparing to demolish its only remaining property, the former Center Mayfield Theatre, 3909 Mayfield Road in Cleveland Heights, a small retail plaza with an auditorium that served as a movie theater where Treuhaft saw films as a boy. Treuhaft has not found a buyer willing to undertake updating and retenanting the high-vacancy, 20,000-square-foot property. The idea is that land may be easier to sell than a property dating from 1936. “A lot of real estate executives fall in love with the properties,” Treuhaft said. “I don’t. I remember the memories and the merchants. I most value the people who worked for us. I am highly confident the properties we have owned have played a significant role in the community during our ownership and will survive our lives and serving businesses.” Treuhaft said Glimcher is a new owner that will continue to provide the property careful attention.

Glimcher’s Staffilino said the firm is sizing up some updates it hopes to make to Landerwood. The property is the company’s sixth in Ohio. Its portfolio includes more than 50 shopping centers and more than 700,000 square feet of selling space. Keyes-Treuhaft has been winding up its affairs for several years. The company has sold five other office buildings in the eastern suburbs and an office/warehouse building in Hudson, all properties it had built or bought years ago. Asked why the family-owned concern held its properties so long, Treuhaft said, “We’re investors. Not merchants.” Treuhaft is 72 and ran the operation since 1970. However, he said he does not plan to retire. Instead he plans to focus on continuing to run a family foundation and will continue to be active in civic and educational affairs, including a seat on the board of directors of University Circle Inc. Keyes-Treuhaft was a prolific builder in Shaker Heights, constructing 65 homes in the suburb before shifting its interest to commercial properties in the 1950s. Art Treuhaft’s father, Alex, joined with competitor Earl Keyes to start the joint venture. Originally, the firm bought land from the Van Sweringen brothers, railroad magnates and major real estate developers who developed Shaker Heights as an early master planned city served by their train line and Terminal Tower in downtown Cleveland. Keyes-Treuhaftbuilt homes span the suburb from its eastern to its western borders.

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PORT

CONTINUED FROM PAGE 1 “When the board and (president and CEO) Will Friedman looked at the public affairs division of the Port, we went more this time for a skilled legislative Davis advocate,” said Chris Ronayne, the board chairman. “We very intentionally went after a person expert in the legislative process in D.C. and Columbus, and Jade was the right pick.” What changed was the Corps deciding that the dredged material was no longer toxic enough to require dumping it inland, into what is called a confined disposal facility, or CDF, where it wouldn’t pollute Lake Erie. Instead, the Corps would be able to save money by dumping it directly into the lake. The Port and the Ohio Environmental Protection Agency objected, saying the material’s toxicity continues to make it a threat to drinking water and the aquatic food chain. The Corps said, in essence, “Fine, we’ll put the stuff in a CDF, but you pay the $1 million-plus that it will cost.” That dispute landed in federal court in Cleveland. In April 2015, U.S. District Court Judge Donald Nugent issued an injunction temporarily preventing open-lake dumping and the two sides have been arguing the issue before Nu-

The Port Authority is taking a more active role in water quality and environmental issues. (David Kordalski) gent ever since. So Davis, a native Clevelander, is pressing the local view of the toxicity of the dredged material in Washington. Until Davis joined the Port Authority, he was senior director of state affairs and outreach for the American Coalition for Clean Coal Electricity. He also has launched an effort at making state government in Columbus more aware of the Port Authori-

ty’s role in economic development and transportation logistics, Ronayne said. He credited Davis with being instrumental in helping the Port Authority win a $2.5 million allocation in the state capital budget, the first construction money committed to the rebuilding of the slowly collapsing hillside above the Irishtown Bend of the Cuyahoga River. Davis said he also will lead an ef-

fort to make the Port Authority a thought leader on water quality and related environmental issues. “Part of the job is to make sure we educate decision makers (on water quality) and position (the Port Authority) as a thought leader on maritime issues,” he said. “We’re cleaning up the lake, we’re cleaning up the harbor, cleaning up the river and we’re making investments to lower our emissions on

the docks, and we want to make sure we’re seen as a leader on that.” In the near term, Davis is working to make sure pending water and energy legislation includes provisions that will keep the sediment out of Lake Erie without a $1 million annual price tag. “One of the reasons I was brought on is (because of) my experiences being on the front lines of legislative fights,” he said. Davis is helping the Ohio congressional delegation on legislation to prevent future toxic dumping into the lake. In May, the Senate passed H.R. 2028, a House-passed appropriations bill that includes language that for the current financing cycle prevents the Corps from disposing of dredged materials in Lake Erie without approval by the Ohio EPA. It now awaits approval from a joint conference committee before going to President Barack Obama for his signature. In addition, Davis is closely following the Water Resources Development Act of 2016 (WRDA), now winding its way through both houses. It’s part of Davis’ job to make sure sections that would permanently require dredged material disposal to meet state water quality standards stay in the bills. “The Cleveland Port does a tremendous job of making sure everyone in Ohio and Washington knows the economic importance of the port by keeping everyone informed and engaging them in solutions when issues arise in transportation, infrastructure and economic policy,” said Rep. Bob Gibbs of Holmes County, who chairs the House subcommittee on water resources and the environment, in an emailed statement.

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Opinion From the Publisher / Editor

The powerful pull of your hometown

Editorial

Old school

A dispiriting political year got a little worse last week with the death of former U.S. Rep. Steve LaTourette, a Republican who wasn’t afraid to challenge the orthodoxies of his party and who was a key advocate in Congress for Northeast Ohio. Combined with the June death of George Voinovich, another Republican who was a workhorse rather than a showhorse, the region in the span of a couple months has lost two experienced voices of moderation. Both were conservatives, in an older (and currently unfashionable) conception of what that terms means, who had strong connections with constituents and worked with local leaders to solve realworld problems and to aid job growth. LaTourette, 62, who died last Wednesday, Aug. 3, from complications of pancreatic cancer, represented the 19th and then 14th congressional districts from 1995 to 2013. He served on the House Transportation and Appropriations committees, which allowed him to help direct critical funding to Northeast Ohio, and he was a leading supporter of infrastructure spending. Many projects, including the Euclid Avenue HealthLine, exist in part because of his work. He also was a strong supporter of credit unions and co-authored the Credit Union Membership Access Act. In 2005, LaTourette was instrumental in protecting 1,000 jobs at the Cleveland operation of the Defense Finance and Accounting Service, which the U.S. Department of Defense at the time intended to close. LaTourette also possessed something that’s in short supply in political life today — a sense of humor. It sometimes got him in trouble, but along with his ability to see Democrats as colleagues rather than enemies, it helped make him, in the words of U.S. Sen. Rob Portman, R-Cincinnati, “an effective legislator who could find common ground with just about anyone.” Sen. Sherrod Brown, a Cleveland Democrat, called LaTourette “a good man who was always willing to reach across the aisle to do right by the working men and women of North-

east Ohio.” Another Democrat, Rep. Tim Ryan, said LaTourette “always looked out for his friends, regardless of what political party they belonged to — he was very old school in that way.” LaTourette, like Voinovich, was a dedicated public servant, not a partisan. The country could use more people of the same stripe.

Turnaround At least temporarily, Cleveland has taken the right route for determining the best use of the rejuvenated Public Square. The city and the Greater Cleveland Regional Transit Authority are giving a fresh look to whether RTA will resume bus service within the square, as had been intended on Aug. 1. The stretch of Superior Avenue that runs through the 10-acre square was designed to be a bus-only corridor, but after the public’s embrace of the space during and after the Republican National Convention, the return of buses has been delayed. A city spokesman told The Plain Dealer that in the wake of the RNC, “We need to get baseline data of how traffic flows around the renovated square.” Collect away. The $50 million Public Square project was a major undertaking, and getting it right is critical to maintaining downtown’s momentum. We like what we’ve seen to date of the center of the square filled with food trucks and, as of last week, a farmers market. But we also want to know about the costs — both in dollars and in inconvenience to riders — of detouring buses around the square rather than going through it, especially given that the design incorporating buses was made with public input. A group that calls itself Clevelanders for Public Transit estimates that having buses go around the square would add more than $1 million in operating costs to the budgetstrapped RTA. Any final decision to keep the center of the square bus-free must include options to trim those costs or help RTA cover them.

PUBLISHER AND EDITOR: Elizabeth McIntyre (emcintyre@crain.com)

CLEVELAND BUSINESS

MANAGING EDITOR: Scott Suttell (ssuttell@crain.com) SECTIONS EDITOR: Timothy Magaw (tmagaw@crain.com)

Youngstown is like a magnet. I point my car east, and my hometown pulls me back. I set the car on cruise and go. I get back to the Mahoning Valley a couple times a month. My parents still live there, and I visit as often as possible. I steer clear of Judson Avenue, though. My parents no longer live in the aluminum-clad colonial sitting atop the hill on the South Side. The steep lawn and driveway served as a playground for me and my five siblings. We would throw buckets of water down the cement slope in the winter. Our makeshift toboggan run brought hours of delight until dad returned home from his bowling league, his tires spinning and his frustration growing as he struggled to gain traction on the driveway. My three brothers, two sisters and I were all taught by the nuns at St. Dominic and encouraged by our parents to work as soon as we could. I, like my older siblings, delivered the afternoon edition of The Vindicator. Shortly before my 13th birthday, I started Elizabeth scooping ice cream for Alice Handel. Alice McIntyre was a savvy businesswoman. She ran Handel’s Ice Cream seasonally, from mid-March to early October, which meant she could hire workers as young as 12. That first summer, I earned a buck and change per hour and brought home checks barely over $40 for 40 hours of work. I felt like a millionaire. This story may sound familiar to you. Maybe you grew up tossing the afternoon Press onto porches in Cudell, or you developed your right forearm, and your respect for an earned dollar, scooping mint chocolate chip at Malley’s. Where we come from is a big part of who we are. That’s not to say where we are now is unimportant: We’re committed to the places we now call home, the hometowns of our children. But as I headed west on the turnpike, back from another trip to Youngstown, I had a renewed sense of the importance of never forgetting where I came from. By the 1970s, the place I came from was changing. When Youngstown Sheet and Tube laid off 5,000 workers in the fall of ’77 on Black Monday, the decline accelerated. As an adolescent, I saw my schoolmates’ fathers losing jobs, their families moving out of town. By the time I went off to college, my neighborhood was decaying. My father was held up at gunpoint in the ‘90s. The number of abandoned homes on Judson Avenue increased during the early 2000s. Finally, after years of urging, my parents agreed to leave the homestead — they were among the last to do so — for a condo on the edges of Mahoning County, where they could still attend their church and maintain their lifelong friendships. Recently, I had an impromptu reunion with some of my childhood girlfriends, many of whom I’ve known since kindergarten. Some I haven’t seen since we graduated high school three decades ago. A few scooped ice cream with me at Handel’s. We picked up like we’d last seen each other yesterday. It stirred in me the realization that Youngstown is part of me, as Warrensville Heights or Mansfield or South Lorain may be part of you. Youngstown may yet rebound. It may one day see the renaissance we’re witnessing in Cleveland, though renaissance depends on which neighborhoods you’re focusing on. Even if it doesn’t, it remains a part of me. Social scientists have a term for the way I feel: “Sense of place.” Whether your place is as you remember it, or, like mine, has changed, it is still home.

WRITE US: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing letters@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

SOUND OFF: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.

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Stipe Miocic

WORLD HEAVYWEIGHT MMA CHAMPION

Web Talk Re: Kasich and the GOP convention John Kasich’s “job” is to represent the majority. The majority has spoken, and like it or not, they said Trump. He has shown his true colors, as a politician who is out for himself (and votes). — Katie Sutter Contrary to the focus of Crain’s Aug. 1 editorial, Kasich didn’t take “the high road.” He took his ball and stayed home. Acting like a child, in other words. He’s as done as Rafael “Ted” Cruz. — The Complaint Department

Re: Where are the good jobs? Manufacturing jobs are being lost from this region and being relocated to China, Mexico and other Asia locations. They are never coming back here. New job creation at the House of Blues, Bob Evans and Target is not a one-for-one equal offset to the lost manufacturing job. My rough math calculates a single manufacturing job at a mainstream employer with all benefits is worth two service jobs. The Ahola Crain’s Employment (ACE) report for June is fine from a raw headcount numbers perspective, but it does not cover the full take home pay impact of a manufacturing job versus a service job. America has been in decline for the middle class working family for years and will continue to decline for a variety of reasons. The closed Ford plant in Walton Hills, the razed Chrysler plant in Twinsburg, the closed GM plant in Mansfield and many more local job losses are grim reminders of what has occurred and will continue unchecked. The light at the end of this tunnel is less like sunshine and increasingly like a economy-wrecking freight train with “Hasta La Vista USA Courtesy of Mexico and Asia” written on it. — Jim Daniloff

Re: Engage! Cleveland’s new leadership council How is this organization different from Leadership Cleveland and Bridge Builders? — Richard Clark One can only imagine the cries of sexism if only five or six of the members were female, as opposed to the current lineup where only five or six of the 38 are male. Is the Cleveland (young professional) workforce 86% female now? — Phillip Rose

Re: Indians’ big trade With the Andrew Miller acquisition, the Dolans finally show signs of wanting to win the World Series. Must be the LeBron effect. — Donald Sinko

Shift in focus leads to growth for MFS Supply By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

MFS Supply LLC got its start about nine years ago, serving the foreclosure market by selling products such as lock boxes. But as the housing market improved, the small security and property management supplier in Solon switched gears and saw its business grow along with the industry. Today, MFS Supply works with a variety of big-name brands like Whirlpool and Maytag to offer everything from kitchen appliances to generators, as well as cabinets from its sister company, Partners Home Supply. The company serves contractors, real estate agents and property managers looking to renovate or build single-family or multifamily properties across the country. And the company has put a focus on growing its market share locally, efforts that may be helped by its most recent investment: an on-site showroom designed to highlight the array of products it offers. Right now, the showroom has a variety of different kitchens set up to appeal to different parts of the company’s customer base, said director of sales Brandon Guzman. But it will evolve and change over time as trends do. That type of evolution is familiar to MFS. Guzman said it was about 2010 when the company decided to take the products it was offering in the foreclosure space and go after the “exploding” rental industry. It started with a focus on regions with strong rental markets like Dallas, Houston and Atlanta. “Foreclosure industry, I mean, while it’s around forever, it’s not going to be booming forever,” said director of operations Mike Hajec. “We still have those core products that we’re going to sell, day in and day out, but in order for us to continue and expand and grow and see the growth year after year, we knew we had to look elsewhere.” And expand it did. Today, the company offers customers about 1,200 different products, including the Partners Home Supply cabinets assembled on site. But a market like Cleveland, which MFS put a focus on 19 months ago, offered some new challenges. In a smaller market like Cleveland, it’s all about referrals and customer service, Guzman said. “Cleveland is an older market,” Guzman said. “When we decided to put a very large push into Cleveland, we knew that it was going to take a very long time. And we

knew we had to have a different strategy. It’s not going to be over the phone sales. It’s going to have to be a face-to-face ground attack on actively just reaching out to every property manager, letting people know who we are, what products we have and then killing them with service.” About eight months ago, Hajec said MFS decided it needed a showroom to better display its product offerings. It got to work renovating an old space in the building, investing more than $100,000. The showroom takes up about 7,000 square feet of the company’s 185,000 square feet in its building on Solon Road. Another 3,000 square feet are used for a walk-in area with some other small product models. MFS takes up close to 80% of the total space on the site. Guzman said the idea behind the space was to let its customers touch the products and envision the property they’ll go in. Hajec declined to share annual sales or the ownership behind the privately held company, though he said it has seen strong growth in recent years. CFO Jeffrey J. Muencz said the ownership was local. When MFS got its start, it had three employees, Guzman said. Today, Hajec said, it has 78, with most located in the Solon headquarters. Peggy Weil Dorfman, economic development manager for Solon, said the city was happy with the company’s growth and had worked to help it expand there. Solon approved a six-year job-creation grant for the company, which began in 2016. The company will receive 50% of the payroll taxes that new employees pay to the city. Guzman said MFS and Partners Home Supply, the latter of which had not previously been in Solon, brought 90 jobs to the city when the two moved into the same building and committed to bring 30 more. Guzman said MFS wants to continue to expand its product line and scope and to be seen as a “one-stop shop for all things renovation.” That growth will be driven by customer input, Muencz said, adding that MFS plans to continue to grow its sales team and expand its distribution centers, which it already has scattered around the country. Muencz said the company is entrepreneurial in nature — it even essentially leads by committee, instead of having a CEO — and, without a board, can decide to enter new markets and to offer new products quickly. “That’s one of our constants,” he said.

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Focus CYBERSECURITY

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CYBER INSURANCE - P. 14 | Q&A - P. 16 | CYBER LAW - P. 17

The risks are all around us By DOUGLAS J. GUTH clbfreelancer@crain.com

Today, almost any electronic device — phones, thermostats, cameras and even coffee pots — can be connected to the internet. That also means they can probably be hacked, and cybersecurity professionals say businesses should be prepared if they hope to protect their online assets. The concept of the so-called Internet of Things, or IoT for short, is a system of physical devices accessed through the internet that can identify themselves to other online devices with the ostensible benefit of transferring data across networks. Anything from a company vehicle to a printer can be linked to a larger network, which increases the number of access points for hackers to exploit, said Joe Marquette, owner of Cleveland-based IT consulting firm Accellis Technology Group. “Low-cost, high-volume devices are coming into the market without any security standards, which makes them prone to hacking and eavesdropping,” Marquette said. “These are windows that criminals are able to use to gain control of info.” Hackers can craft sophisticated strikes not just from conventional public networks, but also from the growing cluster of private sources that function interconnectedly with the internet. A 2014 study from Hewlett Packard indicated that 70% of IoT gadgets were vulnerable to attack, a problem exacerbated in industry environments by companies that may install a Bluetooth television transmitter on the same network as a data-rich computer. “Businesses aren’t putting devices into a separate security profile, which would ensure they don’t provide backdoor access into security or information assets,” Marquette said. “Info is left wide open when it goes over the wireless network.”

A growing problem Though ransomware, malware and other traditional security concerns remain prevalent, IoT-related breaches deserve serious scrutiny, experts say. Research and advisory firm Gartner predicted more than half of business systems will involve the IoT by 2020, while safety measures for these interconnected structures will represent 20% of an organization’s total security costs. Connected equipment is already widespread in the health care industry, a major target for data breaches. For example, an IoT-linked fingerprint scanner accessing patient records reSEE INTERNET, PAGE 18

iStock

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CYBERSECURITY

Fear of hacking? There’s a policy for that By JEREMY NOBILE jnobile@crain.com @JeremyNobile

Materion Corp. falls into a line of industries that didn’t typically see itself as a target of cyber crime. But the times are changing. Gregory Chemnitz, Materion vice president and general counsel, said the Cleveland manufacturer is evaluating its cyber risks, sparking conversations that simply didn’t happen years ago. Cyber theft of intellectual property, confidential quotes and company secrets belonging to them or another company could all disrupt business or leave them liable for legal damages. “We are presently reviewing our needs and the available cyber insurance products to determine whether our cyber-related exposures would be covered under them,” Chemnitz said, adding that it has become a growing concern in recent years. Cyber risk insurance is far from new. Coverage in some form has been available through some of the nation’s largest insurance companies for well over a decade. What’s different today is a sense of urgency. As high-profile hacks of large companies and email servers loaded with personal information make headlines in today’s increasingly connected, internet-powered world, businesses large and small in nearly every imaginable industry are questioning their vulnerability to cyber attacks.

And that’s resulting in a surge of demand that’s impacting the industry itself as more companies realize the significance of cyber protection and its role in protecting their businesses.

A push for protection According to a late 2015 report by Timetric, a UK-based business information provider, total global written premiums in the cyber risk market hit an estimated $2.5 billion in 2014 — a value that ballooned 194% over an estimated $850 million market in 2012. Global losses from cyber crime, meanwhile, racked up to $445 billion as of June 2014, according to Timetric. “The reality is, this is probably the biggest and most valid offering by the insurance industry in a very long time,” said Oswald Cos. vice president Kimberly Ferenchak, executive risk practice leader in the commercial insurance group. “There are a lot of new products out there. We are seeing carriers continue to compete for market share, which they are doing by offering broader insurance coverage, being more flexible in offerings and trying to respond to client needs.” Those clients see a growing need for protection today simply because the risk of being the target of a cyber crime simply feels more real than ever before. And every company has some amount of personal or proprietary info that could be exploited. Besides a risk that feels more tangible, many companies large, small and midsize are seeing a need for cy-

Ferenchak

Bauer

ber protection just to do business, said Joseph Bauer, founder of Bauer Advising LLC. Bauer is an independent adviser who consults with insurance companies and their potential clients about coverage needs. While his work spans the country, about one-third of his consulting work is in Cleveland. Consider large companies, like Apple and Sony, and their relationships with smaller companies. A smaller or middle market business — which may not have seen a need for cyber risk protection in the past — providing electronic parts or services to larger companies like that are starting to feel contractual pressure to have their own protection, Bauer explained. Either Apple, in this scenario, wants to know their supplier has protection, or, they’ll require indemnity from cyber attacks that might implicate them prior to signing any deals. In the latter case, while the insurance isn’t contractually needed, the company will want protection anyway as they take on liability for cybersecurity issue, even if it’s a small operation. Bauer said he estimates that about 40% of U.S. corporations

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with $500 million or more in revenue are buying cyber insurance in at least some form, if he were to “hazard a guess.” After all, as the market is learning, sometimes the smallest, unsuspecting targets are actually easiest to hit. “If our government can be hacked, if Bank of American can be hacked as well as the federal government,” Ferenchak said, “then a small company can be hacked.”

The imperfections The very nature of cyber risk insurance lends itself to imperfections like confusing policies and coverage limitations. Companies themselves want their insurance responsibilities to, internally, lay in one area, Ferenchak said. But that’s a luxury that doesn’t really apply here. Cyber risks can implicate nearly every function of a business today. The companies who don’t grasp that are the ones more likely to overlook cyber protection in their toolbox — or maybe their firstaid kit in this analogy. “There’s really cross-departmental exposure,” Ferenchak said. “Some want it to stay in HR. Others think it’s an IT issue. But this is HR, IT, it’s compliance, public relations and communications. It’s even a board-level issue. That makes this an enterprise issue. And a company that sees it as an enterprise issue will fare significantly better versus the ones who do not.” But that may require a paradigm shift in how those businesses think about their insurance overall, especially since treasurers, traditionally, have largely managed corporate insurance. Bauer encourages general counsel to get involved in the process, particularly as it relates to cyber risks because products and definitions can vary widely between carriers. Chemnitz is closely involved with Materion’s evaluation of cyber risk insurance. “In the final analysis, insurance policies are legal contracts filled with

legal loop holes,” Chemnitz said. “Some companies are concluding that the legal department should be responsible for them just as they are responsible for other important contracts of the corporation.” When buying the insurance, there is a menu of products, and it may not always be immediately clear what each offering actually covers. Take, for example, someone who wants a policy generally protecting themselves from losses following a hack of their own servers. But does that policy protect against third-party damage? If you’re a merchant, and a virus from your system damaged a customer’s network, forcing them to spend $500,000 to replace their servers, that’s physical damage to a third party. “If you’re not doing any electronic transfers in commercial activity, an independent consultant would probably say you don’t need that. But a sleepy-eyed treasurer might say that’s a risk, so let’s buy it,” Bauer said. “This is why companies really need to understand where their own risk lies.” Another issue that will shake out in the industry centers on capacity. Some insurers may only want to offer a policy that pays out a max of $25 million, which is about the maximum policy in the market today. But a company like KeyCorp might actually require $250 million worth of coverage. That would require procuring multiple policies. “If you’re KeyBank, having just $25 million is frightening. It’s just too little,” Bauer said. “If you have a disaster, you could be looking at a billion dollar liability.” The cyber risk market needs to figure out a way to layer multiple polices where one would kick in after $25 million, another kicks in after $50 million, and so on. That’s where the industry is heading. And it’s what needs to happen next to meet this surge in demand from clients. “In cyber, we’re just not there yet,” Bauer said. “And that’s a problem.”

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Q & A: Tom Eston

ADVISER: Thomas F. Zych

Manager of penetration testing, Veracode Tom Eston leads a team of highly skilled penetration testers. Basically, he’s a professional hacker. And for the last several years, he’s co-hosted what is now known as the Shared Security Podcast — a usually monthly podcast that explores how technology affects the security and privacy of our personal lives and businesses. Crain’s recently chatted with Eston, who is based in Cleveland, about how companies can keep their data safe even if they can’t afford a big security budget. It turns out the best advice he could give is to stay vigilant. — Timothy Magaw So, you’re a professional hacker — an ethical hacker even. What does that mean? We always have permission before we do any of our testing. If you don’t, it’s illegal. Companies hire ethical hackers to simulate what a bad guy or evil hacker could do to a website, network or company. We provide a simulation and go in like a real hacker would. We try to find the vulnerabilities and gain access to data. It’s all meant to see if a company is ready. Take a small business, which doesn’t have much of a security budget. How can they protect themselves? Look at your overall security posture. Even as a small business, there are simple things you can do from an awareness perspective. Look at what information you are trying to protect and what is most valuable to you and your business and start from there. Be aware of your surroundings. Don’t click links in any emails that seem suspicious. That seems to be the No. 1 attack vector. A lot of small businesses are being targeted through email. It also seems like brands’ social

media accounts are hacked quite frequently. It’s pretty surprising that still happens, and it’s usually as a result of weak passwords. My advice to companies is that you limit who has access to your Twitter account and make sure the password is strong and can’t be guessed. What are the elements of a good password? It has to be unique, strong and complex. When I say unique, I mean it can’t be the same as all your other passwords. Humans are lazy and like to use the same passwords. If one does get breached, all other accounts should have unique passwords. That’s a popular kind of attack. If your Facebook is comprised, then they’ll try your Gmail, bank account and other places. It’s also good to use a password manager of some type — LastPass, KeePass, for example. That takes the work out of creating all these unique random passwords for everything you use. And change them how often? Usually we recommend for your sensitive accounts — online banking, for example — you change your password once or twice a

year. Password managers can set a reminder and prompt you to change them. LinkedIn was breached back in 2012, but just recently someone decided to release the database to the public. That’s one of the reasons Facebook founder Mark Zuckerberg had his password compromised on Twitter. It was most likely the same one he set up on LinkedIn in 2012, and he never bothered to change it. Any other tips? Stay alert, Stay aware. If something seems suspicious — an email or phone call — trust your gut on that. If you get an email that looks like someone you know but seems suspicious, give that person a call instead of replying back or clicking a click. One click could cause problems of malware and accidentally giving aware information about your company. Favorite part about this field? Every day is different. There’s always a new security breach or a new technique for hacking any type of technology. Security, you would think, over the years would only get better, but we’re always fighting the same issues around education and awareness.

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A baker’s dozen: Cybersecurity tips for every business Every business is, almost by definition, unique. Each faces its own specific risks, including information security risks. Nevertheless, we have found 13 common principles at the heart of any enterprise’s information security profile. The order is not necessarily important, but a comprehensive approach is. Data mapping: A business cannot protect information that it does not know it has. Before undertaking any information security upgrade, the business should confirm its understanding of what types of information it actually gathers, uses and stores; how that information really is used in the company’s operations; where it is stored; and who interacts with it. For example, a wellsecured document management system is a good thing, but if users regularly email documents and save them as attachments, or if they copy them to desktops and mobile storage media, the document management system itself no longer provides security. A realistic assessment of actual information practices is the only way to ensure that security measures meet the real world. Network security: Formal network security requires having the proper technology in place to secure the internal network from unwanted intrusions. Examples are multi-layered firewalls, intrusion detection systems and intrusion prevention systems. Physical security: It is equally critical to properly safeguard facili-

security team.

Thomas F. Zych chairs Thompson Hine’s emerging technologies practice and heads its privacy and

ties. Secure facility entry, surveillance equipment, security personnel, shredding procedures and clean desk policies are critical components of sound physical security. Computer and mobile device security: Individual desktops, laptops and mobile devices require security measures including virus protection, encryption and individual firewalls. Network authentication: Business systems must be protected from unwanted users. Strong passwords and two-factor authentication technology are some of the methods for strengthening this protection. Security policies: Institutionalizing good information practices in an understandable and enforced program is essential. Appropriate policies include statements regarding the proper use of company technologies, best practices for securing computers and mobile devices, and expectations for informing management of any security irregularities users may encounter. SEE ZYCH, PAGE 17

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CSU law arms attorneys, execs ZYCH for cybersecurity frontlines

CONTINUED FROM PAGE 16

By JUDY STRINGER clbfreelancer@crian.com

From the investigation surrounding Hillary Clinton’s private email server to the multi-million dollar lawsuits related to massive consumer data security failures by the likes of Target, eBay and UCLA Health, one fact is becoming glaringly clear: The data protection “buck� does not stop — or start, for that matter — in the IT department. “It used to be ‘We don’t have to worry about it; The IT guys will take care of that,’� said Brian Ray, a Cleveland State University Cleveland-Marshall College of Law professor. “Now organizations recognize it really is something that the C-suite and even the board of directors need to be aware of and have a working understanding.� That includes attorneys, Ray said, who are increasingly involved in setting information security policies at one end, litigating cases of data intrusion at the other and various stops in between. “We are at the point where law is very aggressively — and much more quickly than being asked — beginning to confront these issues,� he said. Many law schools, however, don’t incorporate basic technology training into the core curriculum, and few offer detailed courses in how information databases work, electronic discovery or the tools and protocols used to protect electronic information. Even fewer have a dedicated cybersecurity center. Ray and colleague professor Candice Hoke are committed to make Cleveland-Marshall one of those schools. The duo officially launched the Cleveland-Marshall Center for Cybersecurity and Privacy Protection this spring with the inaugural Cybersecurity and Privacy Protection Conference in April.

One of the main goals of the center is to arm all law students to a baseline understanding of information systems. “When you come out as a new associate or a new prosecutor or if you hang up your own shingle, you already are dealing with technology,� he said, particularly in fields like health care and finance in which a range of regulatory requirements govern the use and sharing of sensitive data. Yet, even outside those fields, mishandling or exposing data “is just bad for business and bad for your client,� he said. Beyond basic training, the center will provide more sophisticated courses for grads interested in finishing law school with a cybersecurity certificate and for practicing attorneys who want better insight into cyber-risk management. The aim is to impart to these attorneys enough technical background they can communicate and collaborate effectively with other data security stakeholders. That is the key, according to Paul Janowicz, an associate at Tucker Ellis, who has worked in cybersecurity cases. While attorneys don’t need to be the technical experts in this field, he said they do “need to work with those experts, understand the language and provide some guidance.� “That need is increasing every day,� added Tucker Ellis partner Rob Hanna. “Like it or not we are becoming a fully electronic society. We all need to be conversant, and students coming out of law school need it even more because they are going to be confronted with it a lot more than I am.� The center also will serve as a community resource, Hoke said, with cross-disciplinary classes or seminars aimed at IT and health care executives, for example, and events to promote greater awareness and

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understanding of cybersecurity issues across professional and industrial segments. “To be effective, one has to be much broader than simply law or engineering or management. It requires all of the above,� she said. The kick-off Cybersecurity and Privacy Protection Conference drew more than 200 participants and was “a nice mix of technology and law,� Ray said. It will return in April 2017 with a keynote address from the Federal Trade Commissioner Maureen Ohlhausen. “We really hope to grow it into an event where we become the signature Midwest/Great Lakes event in this space,� he said. The duo also took advantage of the Republican National Convention last month to partner with Baldwin Wallace and organize a one-day cybersecurity forum attended by about 150 lawmakers, delegates, government relations professionals, congressional staff, technology executives, lawyers and academics. Hoke sees an opportunity to keep that conversation alive with events throughout this election cycle. “At this point there are only basic, rudimentary standards for protecting customers and we have this multimillion dollar set of lawsuits (brought by) not only consumers but also banks related to identity theft,� she said. “We want to bring these issues front and center into the national discussion.�

Security incident response policies and procedures: No entity can ensure that it will never fall victim to a data breach. It can, however, implement a response plan and empower an incident response team. A good plan identifies a team whose active participation is required, sets out a clear and understandable set of response tasks, provides for operational and legal risk management measures, and includes accountabilities for remediating the issue and informing management, clients and vendors, if necessary. The plan should be tested frequently so those charged with implementing it in a real crisis aren’t reading it for the first time. Vendor security assessment: Any time a business relies on a third party to house or process its confidential information, the same level of rigor must be applied to ensure the vendor’s security measures are at least equivalent to the organization’s. Security officer or committee: To emphasize the importance of security issues, it is vital to have an individual or team charged with providing planning oversight to ensure the proper measures are in place and that the company’s systems are regularly reviewed and tested, and who can advocate for appropriate budgetary support. Security awareness training: One of the biggest risks to a systems environment is user error or

negligence. Phishing attacks, ransomware intrusions and other “human factor� strategies require just one careless user to succeed. Security awareness training is critical to educate employees about this particular risk as well as many other basic best practices. Third-party security assessments: The best way to determine what vulnerabilities exist within a company’s systems is to retain an independent security consultant who can perform vulnerability scanning and penetration testing. These assessments also can include a review of security policies and procedures and socially engineered vulnerability exercises. This type of assessment reveals weaknesses in perimeter protections and provides a new set of eyes on actual security practices. Cyber risk insurance: A company should at least evaluate available cyber risk insurance as part of its security risk management protocol. It may be necessary to have a cyber risk policy in place to help remediate the cost of any damage resulting from a security incident. Executive sponsorship and support: As with any corporate initiative, a security improvement plan will only succeed when management at all levels acknowledges that the initiative truly is a company priority. Grassroots buy-in is critical, or the program will be filed away and not actively implemented in day-to-day operations. Clear communication from the highest executive levels and real accountability are irreplaceable components of success.

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motely and sending them to a centralized database represents a risk due to the very mobility that makes it convenient, said Craig Marvinney, a partner at Cleveland law firm Walter | Haverfield who also advises clients on cybersecurity issues. “Before we’d hear about cell phone calls being intercepted,” Marvinney said. “Now data can be intercepted in a mobile chain, which provides a greater possibility for people to get into secure locations. The IoT creates that gap because there’s data being produced from different sources with the additional mobile layer.” Hackable digital objects are putting more than information in peril: Last year, security researchers Charlie Miller and Chris Valasek remotely hacked a 2014 Jeep Cherokee to disable its transmission and brakes. The experimental breach led Fiat Chrysler to issue a recall for 1.4 million vehicles and provide a patch for the network connecting its cars and trucks. Ted Shorter, chief technology officer at Certified Security Solutions in Independence, said protections for vulnerabilities in systems and software have not caught up to the sheer amount of digitally connected devices currently being built. “People worry about security last after bringing a product to market,” Shorter said. “Security should be included in the very beginning of the design process.”

Solutions to serious risks Cyber threats aren’t new, meaning companies can leverage best practices even as the surface area for attack widens, said Nick Barendt, a for-

Regional consortium takes aim at hackers, cyber crime

mer LeanDog studio head currently teaching electrical engineering and computer science at Case Western Reserve University. Robust security management protects the data flowing to, from and between products and guards those products from unauthorized use. A compromised device like a thermostat or coffee maker can be removed from the network without much fuss. However, even connected machines essential to daily operations — like a computer that monitors facilities or equipment — should be behind a separate firewall from the core infrastructure. “If devices don’t need access to the corporate network, they can be isolated,” Barendt said. “Separating the traffic from those devices is the only sensible rule of thumb.” Consistently changing passwords, usernames and web server controls build additional layers of security, said Marquette of Accellis. “Train your employees about what info they have access to and what they should be downloading,” he said. “The easiest thing to do is to put all IoT devices on a secure wireless network that exists outside the network that connects all of your employees, data and information. Do that and you’re going in the right direction.” While most enterprises understand the basic need for cybersecurity, many are unaware of the depth of the potential danger, a mindset area experts said needs to change as the connected online world becomes increasingly pervasive. “There’s no silver bullet,” said Shorter of CSS. “It’s a combination of encryption, background checks and who’s allowed to access data. It’s about analyzing risks and coming up with systems to mitigate those risks.”

By JUDY STRINGER clbfreelancer@crain.com

What do cyber attacks and the heroin epidemic have in common? Yes, both are nameless, faceless enemies, whose origins often extend well beyond Northeast Ohio and even our national borders. But, there’s a lesser known local connection. A private-public program to combat heroin addiction laid the foundation for its Cleveland-based partners to consider other threats best addressed through similarly structured collaborations. Cybersecurity was the obvious choice, according to Elizabeth Keefer, senior vice president for administration and general counsel for Case Western Reserve University. “It was the first thing to come to mind really,” Keefer said, “because it’s on everybody’s mind.” Last year, founding partners Case, Cleveland Clinic, the Federal Reserve Bank of Cleveland and the U.S. Attorney for the Northern District of Ohio launched the Northeast Ohio CyberConsortium to fight back against the growing danger of hacking and other types of cyber attacks. The consortium provides a platform for organizations to share realtime cyber threat and defense information. In an ideal world, it works something like this: An IT worker at Key Bank, for instance, sees a cyber threat and raises a flag to the consortium, where colleagues from Case Western Reserve University, perhaps, see the warning, recognize the

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threat as something they saw the day before and share the defense that was deployed. “Instead of starting from ground zero, they’re crowd sourcing the defenses to threats as they see them,” said Carole Rendon, U.S. attorney for the Northern District of Ohio, “and also alerting one another so they are vigilant and on the lookout for what it is that is coming at their computer programs, their computers systems on a daily basis.” Rendon said that while some sectors, such as banking, health care and energy, have industry-specific cybersharing capabilities in place, “they don’t talk to one another, and they don’t talk as offensively as they need to with the federal government.” And, although a few other regions across the county have established cross-industry threat-sharing platforms, their model does not incorporate the feds. “This was designed to break down all those barriers and be a consortium that would allow for incoming threat information and cyber defense amongst all of the various types of institutions in our region,” she said. How the federal government became a partner in the Northeast Ohio CyberConsortium is where heroin comes in — at least partly. The Cleveland Clinic had worked closely with the local U.S. Attorney’s Office to host a heroin epidemic summit a few years ago. Both Case and the Clinic were also involved with the Northeast Ohio Business Ethics Coalition initiated by former U.S. Attorney Steve Dettelbach in 2010. In early 2015, Case’s Keefer and Cleveland Clinic chief legal officer Dave Rowan sought to engage that collaborative backbone for the creation of a cybersecurity conference. Plans, however, blossomed into something much grander following a visit to Bedford, Mass.-based MITRE. The federally funded R&D organization houses the Advanced Cyber Security Center, a live and ac-

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tive threat-sharing consortium with about a dozen private and nonprofit members but no law enforcement. “We thought, when we came back from that, this was the place, Cleveland was the place this could really stand up,” Keefer said. Others apparently agreed. By the time its inaugural Cyber Resiliency Conference took place in October 2015, 15 more private corporations like Goodyear, Diebold, Medical Mutual and Forest City had joined the consortium, which now includes the FBI and the U.S. Secret Service. Another half dozen have shown interest, according to Mike Tobin, a spokesman for the U.S. Attorney. “What we wanted to do is have a broad range of industries,” Rowan said, “so that it was not just this silo of say health care or education with regard to sharing threat and the like. We found a very receptive audience.” Along with abating network attacks, one of the main goals of Northeast Ohio CyberConsortium is to make Northeast Ohio a leader in cybersecurity with an army of cyber savvy experts and employees at the ready. To that end, Keefer said it is working closely with area colleges and universities, including the relatively new Center for Cybersecurity and Privacy Protection at the Cleveland-Marshall College of Law. Another goal, Rendon said, is to build trust so that local businesses feel comfortable sharing threat information with each other — and with law enforcement. Although immediate threat updates are posted electronically, she said the “key cyber defense tech folks” meet face-to-face on a regular basis to discuss the kinds of cyber intrusions they are experiencing. “It really becomes a very safe space for the people who are actively trying to protect their computer systems and IP to share that information in real-time on an ongoing basis,” Rendon said. “That is already happening, and it is incredibly successful so far.”

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Business of Life By STAN BULLARD

S

emicircular topped Quonset huts, often relics of World War II, are starting to go to scrap yards like tanks, cannons and ships from that long-ago conflict. However, many have been in service throughout Northeast Ohio for a variety of uses, from auto shops and restaurants to warehouses. A Quonset hut at The Foundry, 1831 Columbus Road in Cleveland, was razed this summer to make way for an expanded parking lot after efforts to find a way to use it or a new home failed. Aaron Marcovy, executive director of the youth rowing center, said he talked with eight nonprofits interested in the rusting structure, but the efforts came to naught. “We found it would cost several times the cost of a new version to take it apart, move it and reassemble it,” Marcovy said. When the corrugated steel building had to go, Marcovy said, a back hoe brought it down in minutes. So it goes for the steel shelters that were developed for the rapid buildup of U.S. and Allied Forces during World War II. When the war ended, they became military surplus and spread across the homeland. More than 140,000 were sold throughout the nation, according to the book “Quonset Hut: Metal Living for the Modern Age,” which said the structures took their name from their first use at a Quonset Point, R.I., naval air base constructed in 1940. Frank Samsel, the retired founder of Samsel Supply Co., said the structures fill the bill for wide-open storage because they do not have

The semi-circircular shape of the Quonset hut housing Kathy Schriner’s pastry shop is visible only to eastbound traffic on I-90. The front is covered by a square façade that makes the building look like a more conventional structure. (Ken Blaze for Crain’s)

Biz huts becoming thing of past interior supports and provided inexpensive buildings in the postwar expansion. “After putting in a foundation to support it, with five guys and a crescent wrench you could put up a building,” recalled Samsel, 86. He remembers several Quonset huts in the Flats, including one on Old River Road where Flats East Bank Neighborhood stands that once housed a car repair shop. “They were everywhere,” Samsel said. Although new Quonset huts and similar designs are widely available, the World War II relics have long outlived their original, temporary use. Tom Lavelle, owner of RL Wurz Co. of Cleveland, recently bought a property at 16110 Brookpark Road in Brook Park that has a crane building he will use for storage as well as a Quonset hut he expects to raze within the next year. Wurz supplies sealants, water proofing and related products and architectural panels. The company often supplies large quantities of materials to contractors who are rehabilitating old buildings for use as hotels and apartments downtown, so he appreciates the value of aged properties. However, he believes the arched metal roof building that originally housed an aviation parts manufacturer needs to go. “The metal is degrading. It is paper thin,” Wurz said. “You could put foam over it, but it would not be that appealing.” One Quonset hut rehabilitated for new use is the former Shaker Racquet Club, 26310 Emery Road in Warrensville Heights, which last year became the home of McGregor PACE (Program of All-Inclusive Care for the Elderly) East, a provider of adult day care and other services. Joel Scheer, a Chagrin Falls-based investment property owner, bought the property, last used as an office building, at a 2014 foreclosure sale. “I like the shape of it,” said Scheer, who has a degree in architecture. “Who sees

The signature curved walls are barely visible inside Kathy’s Kolackes and Pastry Shop, above, but the odd shape is celebrated inside and out in Joel Scheer’s recently remodeled Quonset hut in Warrensville Heights.

Quonset huts around anymore?” He also thought it would be a challenge, so much so that Scheer’s wife called it “Joel’s Folly” when they drove past the building. “It’s not a conventional building,” Scheer said. “The inherent problem was the structure itself. The side walls that hold it up are metal. It flexes. It moves from the heat and the cold. A lot of contractors and five engineers looked at it. It’s not a conventional building. A lot of people thought I was nuts.” A square façade on the front of the building — often used to camouflage Quonset huts on the streetscape — was close to separating from the structure and had to be replaced. Duct work for heating and cooling had to be suspended from overhead. Scheer made basic repairs until a tenant was found for the property for a use he had not expected as an adult day care center. All told, more than $2 million later, the building provides a large dining room and activity space for McGregor PACE clients.

Even so, Scheer might undertake another Quonset hut repurposing project. “I now know what not to do,” he said. People younger than the vets of World War II frequently recognize the distinctive shapes of the structures because of their presence in old war movies and the 1960s TV shows McHale’s Navy and Gomer Pyle, USMC, which both showed offices, barracks or warehouses in Quonset huts. That may help explain why Kathy Schriner, the owner of Kathy’s Kolackes and Pastry Shop, 24961 Detroit Road, fields several questions every week about the bakery’s location as new customers ask, “Is this a Quonset hut?” She might get more questions about it, but the hut is visible only to eastbound traffic on Detroit and I-90. It’s shielded by a square façade that makes it look like a typical frame structure. Schriner initially hoped to capitalize on the round top. “We wanted to paint it orange. It would look like a pumpkin roll,” she said, but the landlord wouldn’t go for it.

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Source Lunch In the summer of 1976, Mary Sue Tanis began organizing summer programs, partnering teenage

volunteers with physically disabled children to do sports, games, arts, plays and more. She helped adapt activities to make them possible for children with different abilities. A few years later, Tanis filed with the IRS to make Youth Challenge a nonprofit corporation. That year, in 1983, the group had an annual budget of about $24,000. Today, that’s close to $1.2 million. For 40 years, Tanis has led the organization that allows hundreds of children in the area to participate in adapted sports and recreational activities. Seeing volunteers greet kids arriving in the vans, helping them off the lifts and into the pool is what makes it all worth it. “When you see that interaction, it’s just like the tip of the iceberg of what they can all do together,” she said. — Lydia Coutre

Why did you create Youth Challenge? I knew I wanted to work outdoors. I knew I wanted to work with kids. I knew just working with regular kids wasn’t very challenging. When I was at the University of Colorado, I worked a lot with the vets that were coming back from Vietnam (who) didn’t have legs, wanted to ski, constantly swam. And I worked at the rec center at school, so I used to swim with them. We went skiing. I ran with some kids that were at the local school for the deaf. And I liked figuring out how we could create avenues for them to do things that I always had a passion to do, which pretty much are summed up in outdoors. What would you consider some of your biggest accomplishments in 40 years with Youth Challenge? I think for me, the successes have been the balance of internally, juggling a staff and a board, and externally, keeping collaborations and involvement with organizations, the partnerships, the families we serve. The other huge milestone was finally having our own home in 2008, which proved me wrong. In 2008, we moved into Sharon Drive, but it was more or less my mantra through the ’80s and ’90s that we don’t want to own a facility. We really didn’t want the overhead, and one of the main reasons for our existence was to project the kids out into the community, to

have the team volunteers help the kids and go swimming, go bowling, go downtown. … Now that we have a home, it’s made all the difference. We’ve doubled since ’08. What else have you learned about nonprofit administration that you wish you knew back in ’76, in ’83? Oddly enough, in the very beginning, there were a lot of, as we call them, the greatest generation around, that were very willing to share their knowledge and help. I always had good friends from that generation. Whether they were my skippers sailing — I sailed a lot in my 20s — or older men that were around the business world who knew my father. They were like fathers. They were all my dad’s generation. I never hesitated talking to them. They helped me a lot. … And I can honestly say I don’t think anyone ever said no to anything we’d ask. We’d ask the Rotary to help us with the race, or we’d ask a school if we could use their gym, or just now, we just found out some of the pools we use were going to start charging us that never did. We appealed to them and they waived it. So we’ve been able to get by because of the resources within reach in this community. How has the need in Northeast Ohio for your services grown or changed and how have you been able to respond to that? The need is almost greater today

Mary Sue Tanis NONPROFIT

for our teen volunteers that need to be introduced and learn that diverse abilities are something that are very real and they’re a part of life. I’d say the education we did to over 470 teen volunteers last year in 2015, that we trained, brought into programming and interfaced with the kids that are disabled to pull off what we do. That need is important. … And then as far as the need for the disabled children, there’s no one else who does what we do anywhere. We’ve been asked to franchise that and model it and sell it to Chicago and Pittsburgh, and we’re not interested — I’m not. Now the next person after me might want to do it.

FIVE THINGS:

What do you hope to see in the future for Youth Challenge? The mission has grown forward with our board, our staff, the kids, the teen volunteers, the number of vehicles we use to service the families, and it’s always been about exploring the next thing. It’s kind of like we put one foot in front of the other and that hasn’t stopped. It’s always changing because we’re active and we’re alive. I am always curious what’s the next step? What’s the next best thing we can do to service these teen volunteers and these kids that are disabled in Northeastern Ohio? It doesn’t always mean bigger. It means stronger; it means do it better.

To be artistic or musical

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Warren. Both will compete at the WorldChefs Global Chefs Challenge in Thessaloniki, Greece, in late September. Battling top European culinary knights, Tancredi and Warren will have seven-and-a-half hours to impress 10 judges with a four-course meal — from foie gras to dessert dishes punctuated with caramelized banana. Every element is judged — from the spotlessness of his white coat to the swift and timely technique in which his final plates are set. “If you’re late, that can mean a full point off,” Tancredi said. “At that point, you’re done. You might as well pack up your bags and go home.” Although Tancredi is well-known as head chef at Adega, a Mediterranean restaurant in downtown Cleveland, the U.S. culinary world fancies him more as a sort of a foodsavvy Michael Phelps. Congenial and ultra-competitive by nature, Tancredi is on his way up the ladder of culinary stardom (after opening up his own spice company, ETC), a path that could lead, with a Greece win, to the 32-year-old chef’s 31st medal in about 12 years. It’s his first global competition of its kind. Tancredi, born in Solon, found his place in the cooking world as a high school sophomore. He graduated school early to attend Le Cordon Bleu, where his beat-all urge was sated via hot foods competitions led by mentor-chefs. “I loved all of it. The discipline, the intensity, the structure,” he said. All of which paid off. Out of the several dozen of Bleu’s 2003 graduating class anticipating an apprenticeship at the famed Greenbrier Resort, Tancredi was the only one accepted that year. Bryan Skelding, current executive chef of the Greenbrier, recalled Tancredi’s drive while working 18-hour days “literally side-by-side” with the chef, making sauces, butchering cows. “A lot of culinarians coming out of school are looking for that executive chef position right away,” Skelding

said. “But Eddie wasn’t like that. He pushed himself to the max. No one practiced more than him.” Although the Greenbrier’s “sink or swim” atmosphere — think West Point, but for cooks — threatened to break Tancredi (he was once bedridden with shingles for two weeks), both he and Skelding pulled through when many, at the time, fell short. Of the 13 apprentices that year, only three graduated. “It’s my favorite medallion I have today,” Tancredi said. From then on, Tancredi ran the U.S. culinary circuit. He backpacked Europe, knocking on restaurant doors, staging for three months at Michelin-praised restaurant The Fat Duck (where he actually turned down a job offer). In 2004, he joined the U.S. Culinary Olympic Team as its youngest member. Restaurants opened, closed. Kitchen brawls started, simmered. Bronzes were handed out instead of golds. After Tancredi married his wife, a 20-year-old former Greenbrier hostess on visa from the Philippines, and finished a threeyear long bout for a Germany win (“half a point away from being third place”), he moved home for the first time since he was a teenager. In fall 2015, Tancredi got an offer to compete in Greece. “I’ve been mentally processing this in my head for eight years now,” Tancredi said. “But we are representing the States. It’s not just me.

Tancredi pours pastry glaze onto a layered cake as part of the test.

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Earl Warren, apprentice cook, left, and Tancredi prep dishes during a timed trial run for a four-course meal for 12. The blue tape marks the end of the table space alloted when Tancredi represents the United States in the Global Chefs Challenge in Thessaloniki, Greece, in late September. (Photographs by Peggy Turbett for Crain’s) I’m representing our entire country. I’m going out there saying, ‘This is the best the U.S. has in the present moment. This is the best we have.’ ” After the final timer beeps that morning, the Olympian takes a breath and checks off his final item of the day: a pastry stuffed with Nutella and banana. Over four dozen exquisitely-drawn plates lie around the kitchen, as if waiting to be scored, consumed. Every minute or so, another chef pops their head in

the room to see what all the fuss is about. “Oh, chef!” Warren said. Tancredi looks up, alarmed. “We forgot to smile,” he joked. Tancredi laughed, relieved. “If you don’t smile,” he said, playing along, “then the judges take points off.” It’s a remark that pervades the room with a kind of sadness: all this preparation time, this money and labor can be for nothing. Just a silver, in Tancredi talk.

Yet, there’s still bliss assured after the last burner looses its gas. This, Tancredi knows, is why he constantly plays the game. No matter the outcome. The medal. The judge. The mouth to feed. “The best feeling is right when you put that last dish out,” he said. “And when that timer goes off. After all that, you take a deep breath, clean your station, and think back at everything you’ve done that has gotten you to this point.”

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