Monday, January 30, 2012

City Leaders Excited About Prospect of Leaving San Angelo


San Angelo CIty Manager Harold Dominguez will bolt for the Rocky Mountain foothills, taking the city manager job in Longmont, Colorado. The TimesCall reported:

"I think the future's bright for Longmont," he (Harold Dominguez) said. "I'm excited about the opportunity to be considered and to be part of that future."

His deputy, Assistant City Manager Elizabeth Grindstaff, is a finalist for the city manager slot in Burleson, Texas.  The Standard Times reported:

"I'm excited at the opportunity," Grindstaff said.

Burleson is "vibrant," while Longmont is "moving forward."

"I did not know Mr. Dominguez was also in the running" for a new job when she applied for the Burleson position, Grindstaff said. "Timing was interesting to say the least."

Yes, the timing is interesting.   Did City Council excite paid staff right out of San Angelo?

Update 2-7-12:  Council appointed CFO Michael Dane as Interim City Manager. Will Michael pull a Harold and rise to the official slot?  Dane said he'd like the job.  Might Council decide by May?  There's more than one job with that goal.

Update 2-9-12:  Assistant City Manager Elizabeth Grindstaff is also excited to stay in San Angelo.  She withdrew her name on February 8.

Sunday, January 29, 2012

Texas Suspension: ASU Athletes vs. Governor Perry

Before Texas Governor Rick Perry "suspended" his Presidential run, Angelo State University administrators reinstated over 20 "suspended" student athletes. 


Rick Perry failed more than once to identify the three departments he would eliminate as President.  Nearly two dozen ASU athletes  failed to keep a 2.0 grade point average in their major.  This slated them for a semester off, per university policies, OP 10.04 and OP 1007.  ASU's website states:

Students on Academic Suspension
Students who were suspended at the end of their last term in attendance may appeal to the dean of their college to be reinstated. Students must complete their appeal prior to the first day of classes for the upcoming semester. Contact the dean of your college if you have questions regarding your suspension. For specific information regarding suspension regulations, please refer to the University Catalogs.

Did all reinstated athletes follow this procedure, appealing to the dean of their college?  If not, SACS might like to know.  Accrediting bodies evaluate an organization on its ability to follow procedures.

ASU's suspension policy is clear, establishing a bare minimum which allows departments to enact stricter requirements.  For example, suspended students need to fill out a Request for Release of Academic Suspension for the College of Business.  

Will Rick Perry fill out a similar Request for Release of Presidential Suspension in 2016?  Simple words have little meaning anymore, at least to ASU and Governor Perry.  Here's to a viable path forward for ASU's accreditation.

Click on an image to make it larger

Saturday, January 28, 2012

MedHab to Choose by Valentine's Day


On January 5th MedHab's President Johnny Ross said he would decide within 35 to 40 days between San Angelo and Abilene for his company's manufacturing site.  That puts the decision at Valentine's Day at the latest.

San Angelo's economic development package appears to be a sweetheart deal for a fledgling company.  How often has City Council offered an employer roughly $3 million in cash incentives?

Add the investment romance between Mayor Alvin New and MedHab and things get more interesting.  City leaders purposefully misled area reporters and the public on Mayor New's stake in MedHab, as well as his board of director position.

Take the City's piece on Council approved MedHab incentives, which stated:

The company has raised $1.8M from less than 10 investors (3 in Austin, 3 in San Angelo, 1 in Lubbock, 2 in Dallas).
The piece stopped at "3 in San Angelo," failing to specify local investors Mayor Alvin New and Randy Brooks, a member of San Angelo's Development Corporation

Nine investors ponied up $1.8 million, an average of $200,000 apiece.  The Standard Times indicated New and Brooks held less than 1% of the firm, a $30,000 equity stake.  As MedHab sold equity in $25,000 increments, the other seven investors had to put up an average of $250,000.

Red flags suggest corporate ownership of MedHab stakes.  MedHab's Texas filing had two corporations as board members, NNNN and Deaton Engineering.  Mayor Alvin New has three NNNN corporations on file with the state of Texas.  Deaton Engineering offers medical device design, however its website does not show MedHab as a case/customer.

Deaton helped Neil Bush profit from his Presidential brother's No Child Left Behind.  Neil's Ignite Learning used Deaton to design its COW, curriculum on wheels.  Deaton described the case:

Ignite! came to Deaton Engineering with an urgent need to design and prototype their product concept and begin shipments in just six weeks. The device would be a self-contained unit featuring a built-in computer, LCD projector and speakers. The overriding requirement was that elementary and middle school teachers would be able to simply plug in the device and begin a lesson.
MedHab's timeline isn't quite as urgent, given their Australian product launch will occur in June 2012.  Deaton's news feed is surprisingly light the last eighteen months, especially for a firm with deep capabilities and interesting partnerships

The COSA Development Corp piece showed an additional incentive, not included in City Council slides. 

- an economic development incentive in the form of a reimbursement of up to 25% of costs incurred by the company for building
I would look at the motion made by City Council regarding MedHab for clarification, however this crew has a notorious record in documenting decisions.

San Angelo's economic development package is a sweet non-debt, non-equity capital injection for MedHab.  It should help the company land $3 million in mezzanine financing.  That should boost Mayor New's and Randy Brooks' investment.

(Click on the image to make it larger)

Update 2-16-12:  Deaton Engineering's YouTube site has MedHab videos.

Update 4-17-12:  Valentine's flowers wilted long ago.  MedHab is yet to announce a production site.

Thursday, January 26, 2012

MedHab's NNNN is Alvin New


MedHab's website lists San Angelo Mayor Alvin New as a member of the company's board of directors, yet New's name is absent from MedHab's officer and director filing with the State of Texas Comptroller of Public Accounts.  The filing does list an "NNNN" with offices in the 500 block of South Koenigheim.  Mayor Alvin New has an office in such a building.

Mayor New owns the 4N Ranches.  He's also the 4N on the MedHab board.  It's not a stuck electronic typewriter key, not "nnnn" the least.  Three of four Texas NNNN corporations have Alvin and Patricia New as sole members of their board.

Mayor New clearly wanted little to no attention on his MedHab holdings and governance position.  The clues are numerous.

Wednesday, January 25, 2012

Did Harold's Longmont Offer Come from Stiffing Retirees?


San Angelo City Manager Harold Dominguez is the top candidate for Longmont, Colorado's City Manager slot.  He has a month to negotiate a favorable contract though Longmont's headhunter, appropriately titled Slavin Management Consultants.  Many City of San Angelo jobs appear to pay "slavin" wages

This isn't a new phenomenon, given city workers slaved for decades under pitiful wages, all for the promise of lifetime health insurance coverage.  Harold significantly eroded this benefit for the city's early retirees.  He characterized federal money, intended to help keep insurance affordable for early retirees, as "iffy" and "problematic, one time funds."  .

The City refused to use ERRP funds during 2011, when dependent premiums rose from 36 to 58%.  Those increases sent nearly 200 people from the rolls of the insured.

Harold will apply ERRP funds in 2012 in order to "reduce federal strings."  Expending ERRP funds, in a year where the city expects major savings from an exclusive provider arrangement, appears to violate the one string that employers maintain their level of contribution toward health insurance.

Longmont proposed changing its retirement plan for city workers, making it far less generous.  How did the December 2011 City Council vote go?  Also, Longmont received nearly $200,000 in ERRP money.  How might Harold put his signature stamp on it?

According to retired police chief Russell Smith, a number of San Angelo's early retirees have to choose between medicine and food, as health insurance premiums exploded under a fixed income.  The lucky ones found a new job to pay for their health insurance.  The unlucky?  They may be happy to see Harold go.

"I think the future's bright for Longmont," he (Harold Dominguez) said. "I'm excited about the opportunity to be considered and to be part of that future."

Longmont City Employees should do their research.  Slavin could be their retirement future, which might not be so bright under Harold.

Update 1-27-12:  Harold accepted Longmont's offer. He's ready to move Longmont forward, likely at the expense of retirees. 

Tuesday, January 24, 2012

Tom Green County's Cash Cow Continues Full Bore

The Tom Green County Indigent Health Program came in $700,000 under budget fund for the year ended August 31, 2011.  The County budgeted over $2 million, but spent less than $1.3 million, counting $1 million in Upper Payment Limit (UPL) contributions.  The $700,000 savings made its way to the County's general fund.

The long standing pattern held as county leaders reported spending a mere $69,888.66 the last four months, That doesn't include UPL funds allocated to San Angelo's two area hospitals.  It's less than $17,500 per month for Esperanza Clinic and independent providers caring for indigent patients..

The county is required to budget 8% of its general tax levy for Indigent Care, which amounts to $2.2 million for 2012.  Giving the County a $1 million credit for its UPL contributions, that leaves $1.2 million to spend on indigent care.  At the current rate of spending the county will pay $210,000 though 8-31-12, which translates to another $1 million transfer to the general fund. 

It's a decade long cash cow, which may be used to "increase yields to reduce taxes.".

Shannon Gets Bigger Chunk of Smaller UPL Pie

Tom Green County Commissioners awarded Shannon Medical Center a greater share of Upper Payment Limit monies.  Tom Green County contributes $1 million per year, which is levered by the state and federal government.  Shannon's share of UPL money rose from 80% to 85%, which sounds like a badly needed shot in the arm for San Angelo's safety net hospital,. burdened by state budget cuts and the City's exclusive provider arrangement with Community Medical Center.  It's not.

The match decreased from 3.55 to 2.5, so Shannon gets a bigger slice of a smaller pie.   Of the $1.05 million cut, Shannon's hit is $655,000, while SACMC loses $385,000. 

Shannon's stress is not alleviated by this move, not in the least.

Saturday, January 21, 2012

City Leaders Duped Reporter on MedHab

San Angelo City leaders duped the public and a talented reporter on Mayor Alvin New's ties to Medhab LLC.  The first misrepresentation centered on Mayor New's position at MedHab.  The Standard Times reported New as a member of MedHab's advisory board.  This was patently false.  MedHab's website listed New as a member of the board of directors and not on their advisory board.  When I notified Kiah Collier, she wrote back:

I reported that because that's what Donna Osborne told me. I called her this morning and she said she told me that because New is an adviser to MedHab, i.e. serves in an advisory capacity on its board of directors. We'll run a clarification tomorrow.  Thanks.

Board members provide governance, a considerable step up from advice. They are either independent board members or insiders.  Osborne's language is typical of today's leaders, obfuscating facts with language. Frankly, it's sad.

The second misrepresentation dealt with substantial investment and corresponding conflicts of interest.  The Standard Times stated:

City staff said New and Brooks have chosen voluntarily to recuse themselves from all votes and discussion on the MedHab deal, even though they do not have substantial interest in the company, defined as owning 10 percent or more of the company's voting stock or shares or $15,000 or more of its fair market value.
This also is patently false.  Mayor Alvin New filed two affidavits, one in May and another in November 2011, regarding his substantial conflict of interest in MedHab LLC.  .

Mayor Pro Tempore Charlotte Farmer and City Manager Harold Dominguez could've shown up with Mayor New's affidavits and laid everything out on the table and the merits discussed. By not being forthcoming City leaders look mendacious and manipulative. It's becoming a pattern with this group.

Oddly, a Standard Times' poll finds the public appalled by the lack of ethics, with 82% voting the city acted inappropriately in changing its ethics rules.  The fodder exists for a follow-up piece, which take awhile given Kiah's leaving for the Houston Chronicle.  While Kiah reports on shipping, will Mayor New's MedHab ship come in?

Wednesday, January 18, 2012

Latest Nightmare: Rallo May I?


A strange cast of characters lined up before Dr. Joseph Rallo, President of Angelo State University, in my dream.  The group stood roughly thirty feet away from Dr. Rallo, who sat on a ledge of ASU's $375,000 "Evolving Helix" yard art.  Oddly, Rallo wore a large blue jeweled and gold crown

Kingly Rallo addressed a man in camouflage gear, asking "Servant, what do you carry?"

Camo-man responded, "Your highness, I have an animal trap and sardines, good for trapping cats.."

President Rallo surmised, "Do you wish to rid our residential campus of pesky feral felines?"  Camo-man replied, "Rallo, May I?

Dr. Rallo thought for a minute before stating, "Yes, you may, but there's one condition.  You must do it on Christmas break, when students are not around.  Be evasive and circumspect about your plans.  In this, I have taught you well."

Camo-man nodded.  "I'll catch those #@%& cats."  He popped the sardine can, taking a big sniff.  After removing the tin lid, he made a cutting motion across his neck.  "That's the fate of caught kitties."  He ran off, sardine juice sloshing.

Rallo turned to address a man holding a much smaller crown, resting on a blue pillow.

Crown-man extended his arms such that President Rallo could read the title emblazoned on the crown, Provost.  Rallo spoke, "You wish to recruit me a Provost Prince."

Crown man replied, "Your highness, I would be so honored.  Rallo, May I?"

Dr. Rallo crossed his legs.  He rubbed his chin as his mind sought the right words.  "This search, must it be serious?  May I give the crown to one I have in mind?"

Crown man replied, "You look thoughtful if you seek the right one, even if they are already under your very nose.  We can make theater.  It won't be the first time we've conducted a search in name only.  This I can do.  Rallo, May I?"

Dr. Rallo replied, "Yes, you May.  This May, the person you are searching for, I'd like him to fill my seat when I retire.  Ensure he is eventually crowned King."

Crown man dutifully asked, "Rallo, May I?"  Rallo simply repeated, "May, yes, may, yes, may..." as he admired his thrown on ASU's Evolving Hell-ix.

Update 2-4-12:  ASU's Provost search is underway, driven by a faculty led committee.  Will they make theater by May or for May?

Monday, January 16, 2012

Twin Buttes Irrigation to Go Year Round


San Angelo City Council may amend their contract with the Bureau of Reclamation on irrigation water from Twin Buttes.  The proposed resolution states:

"providing for allocation of the Project water supply and to reflect the change in the irrigation season from February 1st through October 31st , to year round use." 
The originator of the memo amending the contract is Water Chief Will Wilde.

City of San Angelo
Memo Date: January 10, 2012
To: Mayor and Council members
From: Will Wilde, Water Utilities Director 
Subject: Agenda Item for January 17, 2012
Council Meeting Contact: Will Wilde, Water Utilities Director, 657-4209

Caption: Consent Agenda. Consideration of a Resolution authorizing the City Manager to execute an amendment to the Contract for Twin Buttes Reservoir with the Bureau of Reclamation.

Water Chief Will Wilde owns a 300 acre "hobby farm" with rights to the irrigation water.  City leaders said there was no conflict of interest in September.  Did Wilde ever file a disclosure statement in this regard?  Has that been made available to the public?

Coming on the heels of Mayor New's unsubstantial, but substantial conflict of interest and his advisory board vs. board member position, City leaders should be out front on declared conflicts.  However, this Council is consistent in their opacity.

Sunday, January 15, 2012

New's November 1: Middle of the Arc

San Angelo Mayor Alvin New had a busy November 1, 2011.  He chaired the first City Council meeting of the month, where council addressed employee and retiree health insurance.  Sometime that same day New signed an affidavit indicating his substantial conflict of interest in MedHab LLC, a firm in negotiations with the City of San Angelo for economic development assistance.

Affidavit Mayor New; MEDHAB, LLC 12-159

During the summer budget process City Council prioritized economic development for an $800,000 increase.


Council made sure health insurance stayed low on the priority list in budget deliberations..


After Council budgeted no increase in health insurance, it entertained an exclusive provider arrangement with Community Medical Center, projected to save $483,000 in 2012.  .City Council refused to consider using ERRP funds for the second year in a row.  The projected $480,000 in ERRP money could've kept Shannon as a provider, while the city's health insurance bill remained reasonable.

Council approved the money saving, exclusive provider arrangement on November 15.  It addressed capital items at their next meeting..

Mayor New clearly stated his desire to use health insurance savings for capital budget items.    On December 20 Council decided to use ERRP money in 2012 to "avoid federal strings."  This combination should free up a huge amount of health insurance money.

Watch upcoming budget amendments for financial sleight of hand.  To think that health insurance money could fund the new Business Resource Center, well that's appalling.  It fits with a Council that wiped out local ethics standards for economic development assistance.  Mayor New and MedHab are dual benefactors.

Much of the arc remains to play out on all three issues, health insurance, capital projects and MedHab's $3.6 million incentive.  However, there are enough clues to be concerned about the trajectory..

(To see all MedHab posts click here)

Saturday, January 14, 2012

City Council Minutes Hapless on Ethics Change

How far can the bar fall in San Angelo City Government? Below are the minutes from the January 3rd City Council meeting relative to MedHab LLC's $3.6 million in economic development incentives.

16. Page 234 Minutes Vol. 103 January 3, 2012 RECESS At 11:41 A.M., Mayor New called a recess.EXECUTIVE/CLOSED SESSION At 12:17 P.M.,

Mayor Pro Tempore Charlotte Farmer chaired the meeting as Mayor New was in Australia.
The minutes have Mayor New calling a closed session to discuss economic incentives.

Council convened in Executive Session under the provision of Government Code, Title 5. Open Government; Ethics, Subtitle A. Open Government, Chapter 551. Open Meetings, Sub-chapter D. Exceptions to Requirement that Meetings be Open, Section 551.087 to discuss an offer of financial or other incentive to accompany or companies with whom the City of San Angelo is conducting economic development negotiations and which the City of San Angelo seeks to have, locate, stay or expand in San Angelo.

The absent Mayor New "concluded the Executive/Closed Session" on MedHab, then reconvened the Open Session at 1:01 pm.

Council reconvened, and the following business was transacted: CONSIDERATION OF MATTERS DISCUSSED IN EXECUTIVE/CLOSED SESSION APPROVAL OF A RECOMMENDATION BY THE CITY OF SAN ANGELO DEVELOPMENT CORPORATION (COSADC) BOARD TO AMEND THE CITY OF SAN ANGELO DEVELOPMENT CORPORATION GUIDELINES FOR JOB CREATION ASSISTANCE SECTION ENTITLED ELIGIBILITY OF APPLICANTS AND REVISING OUTDATED CONTACT INFORMATION.
The proposal related to elected officials and city leaders holding an economic interest in a venture.  Such holdings made the venture ineligible for economic assistance.

Development Coordinator Robert Schneeman presented background information. A copy of the presentation is part of the Permanent Supplemental Minute record. Council member Morrison expressed his concern regarding the amendments to the application eligibility criteria noting that the current criteria rules have been styled to prevent elected and appointed officials from receiving funds from the City of San Angelo Development Corporation. He expressly spoke in opposition of the amendment.

Council members Alexander, Hirschfeld, and Adams spoke in favor of the amendment and proposed MedHab incentive (item immediately following this item). Motion, to approve the amendment to the Guidelines, as presented, was made by Council member Hirschfeld and seconded by Council member Alexander. AYE: Alexander, Adams, Hirschfeld, and Farmer. NAY: Morrison and Silvas. Motion carried 4-2.
With Mayor New's impediment removed, Council moved on to the $3.6 million incentive for MedHab referred to in the minutes as "background information.".

APPROVAL OF AN OFFER OF ECONOMIC INCENTIVES TO MEDHAB, L LC, A MEDICAL DEVICE COMPANY CONSIDERING LOCATING IN SAN ANGELO INCLUDING, BUT NOT LIMITED TO, A TAX REBATE, JOB CREATION GRANT, BUILDING RENOVATION GRANT, AND LEASE ASSISTANCE

Community and Economic Development Director Shawn Lewis and Economic Development Coordinator Donna Osborne presented background information. A copy of the presentation is part of the Permanent Supplemental Minute record.

17. Minutes Page 235 January 3, 2012 Vol. 103 Council members Hirschfeld, Alexander, Silvas, and Mayor Pro Tempore Farmer spoke in favor of the incentive.Motion, to authorize the incentive, as presented, was made by Council member Adams and seconded by Council member Hirschfeld. AYE: Alexander, Silvas, Adams, Hirschfeld, and Farmer. NAY: Morrison. Motion carried.
Here's how the minutes ended:

ADJOURNMENT Motion, to adjourn, was made by Council member Adams and seconded by Council member Morrison. Motion carried unanimously.The meeting adjourned at 2:01 P.M. THE CITY OF SAN ANGELO

___________________________________ Alvin New, Mayor (conflicted and absent)

ATTEST:_______________________________Alicia Ramirez, City Clerk Annexes A-G In accordance with Chapter 2, Article 2.300, of the Official Code of the City of San Angelo, the minutes of this meeting consist of the preceding Minute Record and the Supplemental Minute Record.
Following these minutes, I might believe Alvin New directed things in abstentia.

Update 2-9-12:  The City cleaned up the minutes for final approval.

MedHab: Mayor New's Substantial Conflict of Interest


San Angelo Mayor Alvin New filed this affidavit in May 2011 indicating his substantial conflict of interest regarding MedHab LLC. At the time of this filing the Mayor was prohibited from any ownership position in a company doing business with the city.

Affidavit Mayor New; Medhab May 2011

Mayor New filed a second affidavit regarding MedHab LLC in November 2011 as the city neared a final deal with MedHab. City leaders presented that deal on January 3, 2012.

Affidavit Mayor New; MEDHAB, LLC 12-159

City Council changed their local conflict of interest policy to keep Mayor New in compliance. Leaders did not reveal the contents of New's affidavits or his board position and board compensation arrangements, which often involve equity awards.

Council approved a $3.6 million incentive package for MedHab LLC, which the company will accept, at least that was staff's promise.  That's a nice $2.95 million nondebt, nonequity cash injection.

There are many if's to solve for MedHab to become a viable enterprise.  Should that come to pass, my guess is Alvin New won't be Mayor when MedHab's founders and early investors cash in. How much will taxpayer cash aid MedHab investors, including San Angelo's Mayor New?  It remains to be seen.

Update 1-19-12:  Scripps Howard papers in West Texas stated "New and Brooks do not have substantial interest in the company."  Yet New filed two affidavits declaring his substantial conflict of interest in MedHab.  One reporter got taken.

Update 4-17-12:  Did Alvin New invest once MedHab's Steprite patent was approved?  

Wednesday, January 11, 2012

MedHab: City Council Made New Compliant

Had San Angelo's City Council not changed local regulations, Mayor Alvin New faced a major conflict of interest.  New would've had to resign or sell his stakes for MedHab to get an incentive package. 

During the ethics debate, Council members argued that San Angelo needed 227 jobs, as if those positions were guaranteed.  Hardly,  MedHab projected 85 jobs for its knee-and-below rehabilitation product.  It's other three product lines remain in the conceptual stage.

Jim Turner at ConchoInfo researched MedHab's high tech product for knee rehab.  He found MIT worked on shoe sensors in 2006 and a year later tested wireless pressure sensors in a shoe.  Nike and Apple have patents dealing with shoe sensors that measure pressure, motion and temperature.  Their patents mention training and rehabilitation. 

MedHab submitted their idea in 2008.  Jim believes MedHab's one patent is shaky, given strong prior art in the space. To produce the product, Jim believes MedHab will need to license other firms' patented technology, especially in the wireless arena.

The $2.95 million cash incentive is based on jobs provided and capital investment made.  Add in-kind incentives and the total grows to $3.6 million.  Council can say "no jobs, no investment, no incentives."

While that's true, the multimillion dollar package makes it more likely, Medhab will be able to borrow money and recruit new investors.  Many small firms want to grow enough for a bigger company in the same space to buy them out.

It's possible MedHab's venue shopping for incentives will markedly increase the company's value.  Nearly $3 million in cash is one heck of a nonequity, nondebt capital injection.  

Jim couldn't shake the feeling of snake oil around City Council's two moves.  He reminisced about past firms with big employment promises, Apex-Maxima, SafeCar and CCI, Bill Robinson's faith based prison.  AgriLight sent jobs to San Antonio and R.G. Barry closed after City Council funded their RFID machine.

Economic development guru Shawn Lewis promised MedHab would come to San Angelo if Council approved the package.  Mayor New's $25,000 MedHab investment isn't considered a conflict of interest.  MedHab will provide 227 jobs.  And Jim Turner knows where you can buy snake oil

Saturday, January 07, 2012

PEU Warning: City Council & Staff Not Angels

San Angelo's Economic Development Coordinator Donna Osborne presented a $3.6 million incentive package for MedHab.  During her time Osborne defended the apparent conflict of interest two city leaders had under city rules.
Osborne shared history, includingd MedHab's sponsorship by the Concho Valley Angel Network (CVAN).  Interestingly, Donna Osborne is CVAN's administrator.  Their website states (under membership):

Membership is by invitation only and may require a short screening process. For more information regarding membership or for an application to join, please contact our Administrator, Donna Osborne, at cvan@cvan.org or 325-652-9214.
Osborne played a key role in the incentive contract associated with lowering the ethical standards bar for government leadership.  State ethics law ignores investments, instead focusing on income.

City Council wiped away their local requirement that no city official have any conflicted contract with the city until six months after they leave their position, doing so in a 4-2 vote.

Mayor Alvin New's holdings, a minimum $25,000 if bought in either of two equity floats filed with the SEC, would be in excess of state law (more than $15,000 in fair market value of a company) and thus a conflict of interest.  

Recall the issue is elected leaders holding a financial interest in a company under contract to the city.  Here's what council members said:

Dwain Morrison called it a direct conflict of interest, saying the city was changing bylaws to make unethical behavior right.

Paul Alexander said we grow or dry away, that leaders cannot invest in San Angelo.  Leaders should not be disqualified from financial health.  It's the structure of what we've done in America through corporations.

Kendall Hirshfeld applauded those who've done well for San Angelo, those doing well and those who will do well for San Angelo in the future.  Nothing should hurt, slow down or detract from investment.  Keep good strong people, regardless of business background, on boards and commissions.  Shouldn't discriminate against those who've been successful. 

Fredd Adams said he is for the creation of 227 jobs, for creation of 220 jobs that are going to pay a living wage, allow 227 people to invest in our tax base.   The City doesn't have six months for the Mayor and Randy Brooks to resign.  MedHab will chose soon.  Adams hated to lose jobs on a technicality.

Johnny Silvas noted cities are struggling to keep unemployment down.  This deal could be a shot in the arm for the community.  Let Mayor New and Randy Brooks do their thing and not sleep if it's wrong.  If it goes away, it will hurt us, especially the 227 people struggling to support their family. 

Note MedHab's 227 jobs, of which 142 are highly speculative.  Only 85 positions are associated with a patented product.

Charlotte Farmer banged the gavel in Mayor New's absence.  She beiieves in rules, favors guidelines.  The way the current ethics guideline is written, it will make it more difficult to recruit members.  The policy needed to be amended to fit today's times and needs. 

The need is for wealthy people to invest in start up companies milking various local, state and federal programs for capital.  When investors lever taxpayer cash, returns are magnified. 

How long before other City Council leaders shepherd their investments toward economic incentives?  Greed does that.

P.S.  Thematically, this post could sit on my PEU Report blog.  PEU Report tracks private equity underwriters (PEUs) and their distorting impact.  The Concho Valley Angel Network members include "Active, SEC accredited private equity investors."  Members only...

Update 1-10-12:  KLST did a story on the city's deal with MedHab.  They interviewed the Mayor.   It took a city council vote to eliminate the Mayor's conflict of interest.

Update 8-30-14:  MedHab CEO presented for the first time on his company's progress under the economic development agreement.  The company has 6 employees in San Angelo, with one hired last week.  It turned out there was plenty of time for Mayor New and Randy Brooks to resign and MedHab still get the package.  Fredd Adams resigned from City Council after his third DWI conviction, but just resurfaced as a member of the Zoning Board of Appeals.  Neither his resignation letter or his board application referred to his felony conviction and steps made to rehabilitate since. 

New-Angel-MedHab Timeline


When did Alvin New became an investor and board member of MedHab LLC?  Where in the following timeline did his initial investment occur and when was he elected to the board?  These could be two different dates.

1.  MedHab is introduced to the Concho Valley Angel Investor community by Lee Pfluger.  Discussions begin with the City of San Angelo (2008)

2.  Alvin New meets MedHab's Johnny Ross at an investor presentation.  New volunteers to help MedHab with negotiations with the City of San Angelo, the Chamber of Commerce and State of Texas (prior to October 2009).

3.  MedHab's Johnny Ross supports Alvin New in his bid for Mayor via a Standard Times Letter to the Editor in October 2009.  Ross indicates he will select a plant site in the coming year (2010).

4.  Mayor New wins election in December 2009.  Turnout is low as citizens are focused on Christmas.

5.  MedHab's floats $255,000 in equity in October 2010.  Eight investors are shown on the SEC filing.  Minimum stake is $25,000.

6.  MedHab offers another $1.8 milllion in equity in May 2011.  The minimum investment remains at $25,000.

7.  Mayor New files an affidavit on his relationship and holdings with MedHab (not published).

8.  San Angelo City Council approves a change in its conflict of interest policy to allow elected representatives to hold an equity stake in companies doing business with the city.  Council drops their previous standard which would have caused Mayor New to choose between his MedHab stake and being Mayor.  (January 2012)

9.  City Council gives MedHab a late Christmas present, $3.6 million in economic incentives.  (January 2012)

Obviously Mayor New's investment came before Item #7.  Maybe New's affidavit will add light to this rough timeline.

MedHab Floated Equity Twice in Last Two Years


SEC filings indicate MedHab LLC offered equity stakes of $2,055,000 the last two years.  The first offering was $255,000 in October 2010, where eight investors bought stakes.  The second offering of $1.8 million showed a May 2011 filing date.  They intend to move the whole amount within a year.  The minimum investment accepted by MedHab is $25,000 under both filings. 

What impact might a $3.6 million economic incentive from the City of San Angelo have on MedHab's investment sales pitch?  Government support valued at twice the investment offering would be rather compelling.

COSA's proposal mentioned MedHab's pursuing EB2 financing.  San Angelo Chamber of Commerce Director John Dugan stressed "interesting EB3 funding," which originate mostly from China, but include other foreign nationals.   Dugan expects EB2 and EB3 to attract a great deal of interest in our area.

No one said EB2 and EB3 are designations for employers to import skilled foreign workers.   Does the money come from saving on wage and benefits via importing cheaper, high skilled foreign labor? How many of the 227 proposed jobs would be occupied by foreign workers, i.e. not area citizens?  Immigration Blog reported:

USCIS Director Alejandro Mayorkas announced recently in a blog post several new initiatives to encourage entrepreneurs and high-skilled workers to bolster the U.S. economy and stimulate job growth. Director Mayorkas noted that the U.S. has a long history of welcoming innovative entrepreneurs and skilled workers into our country, and in turn they would fuel the nation's economy by creating jobs, and promoting new technologies and ideas.
MedHab's Johnny Ross is from San Angelo, but Tim Sanghera was born Jagdeepinder Singh Sanghera.  Sanghera may be the key to any capital financing available to EB2 workers.

San Angelo's Mayor Alvin New invested in MedHab and sits on its Board of Directors.  City leaders said they began their discussions with MedHab in 2008.  New was elected Mayor in December 2009.  Turnout was light as citizens focused on Christmas.  

MedHab's Johnny Ross wrote a letter to the editor supporting New.  The Standard Times ran it in October 2009.  It stated:

Upon meeting New at a business presentation, he immediately volunteered his services to assist MedHab’s efforts working with the city of San Angelo, the Chamber of Commerce, the economic development council and the state.

MedHab could be capitalized in a major way by San Angelo taxpayers.  Investors and international financiers, could be the benefactor.

San Angelo:  Cornpone, Uptown for some,  Money for Goodtimes

MedHab's Pay Levels


MedHab plans to crack the sports rehabilitation, corporate loss prevention, diabetic/neuropathy and back prevention/rehab markets with patented high tech medical devices.  In six years MedHab's employment could reach 227 people with a payroll of $6.5 million.

That equates to $28,600 in annual pay per worker, just over $14 per hour.  In 2003 the average wage in Tom Green County was $13.13.  Should MedHab's number include benefits (roughly 25%), hourly pay would drop to $10.50 an hour.  These projected pay levels are for 2018.

It remains to be seen how much "living" can be had at MedHab's wages, assuming stars align for the company to pierce all their targeted markets.

Does MedHab have any projections for Board compensation between 2012 and 2018?  Will Board members get cash compensation, stock units and stock options?  How much will the City's $3.6 million in economic incentives boost MedHab's net worth?  That didn't make the City Council presentation.

Friday, January 06, 2012

Mayor New's Unshared MedHab Affidavit

Leaders charged with governance need to declare the size and nature of financial conflicts of interest.  City staff presented the following slide at the San Angelo City Council meeting on January 3rd.


Staff indicated Mayor Alvin New, a board member and MedHab equity holder, had filed an affidavit.  This information was not shared with the public, thus I assume other City Council members had not seen it.  If he holds "$15,000 of more of the fair market value of the business entity," New has a substantial interest

Not mentioned in the meeting is a conflict of interest questionnaire, required of local officials with board seats and substantial holdings. 

Councilman Kendall Hirschfeld said:
"A lot of good things will come from this, I hope."  Hirschfeld spoke in favor of the project "regardless of who the investors are."
Councilman Paul Alexander offered:
"MedHab will cause other employers to come here...  Fertile ground that's inviting."
Councilman Fredd Adams spoke sagely:
"Fortune favors the bold...  Industry follows industry."
Councilman Johnny Silvas quipped:
"Bring 'em in."
Councilwoman Charlotte Farmer noted:
"This is the first project brought in by COSADC, which should make half cent sales tax voters very happy."

How does $3.6 million in City funded incentives compare to the half cent sales tax that funds economic development efforts?  While the city decimates health care benefits and services, it's growing an economic development Taj Majal.

As most City Council members are businessmen, the gate swung open for them to have a financial stake in new city projects.  This council institutionalized conflicts of interest, which appears in violation of the City Charter and their qualifications for office.  The world seems odder by the day, even in Surprisingly Conflicted San Angelo.

MedHab's Ross: Mayor New's Political Supporter


Medhab's Johnny Ross, founder of the fledgling medical device company, supported candidate New in the Fall 2009 Mayor race.  His letter to the Standard Times stated:

As the co-founder of a new medical device company, I am in search of a city to establish an operational plant. Upon meeting New at a business presentation, he immediately volunteered his services to assist MedHab’s efforts working with the city of San Angelo, the Chamber of Commerce, the economic development council and the state.

Although a final decision regarding the plant will not be made until next year, New’s ongoing effort has placed San Angelo in the top two locations.

Leadership and experience are the two most invaluable attributes a candidate can possess. Alvin New possesses these attributes and will make a fine mayor.
At what point did Alvin New become an equity investor in MedHab?  When was he appointed to the board of directors and what is his compensation arrangement?  How might New personally benefit from San Angelo's $3.6 million in incentives for MedHab?  Ethical leadership and forthright experience would have New out front on these questions, not AWOD, in Australia With Out Disclosure.

Note that Johnny Ross' 2010 decision on a plant location leaked into 2012.  Does that imply anything relative to MedHab's employment commitments?

Wednesday, January 04, 2012

Curious Citizen Brigade Rides


One day after San Angelo City Council amended economic development restrictions and approved $3.6 million in incentives for MedHab, a research posse rode out.  Here's what they found:

1.  Mayor Alvin New is listed as a board member on MedHab's website, not an advisory member as represented.

2.  The deal may need more than a COSADC policy change, as it appears to violate the City Charter which states

SECTION 9. QUALIFICATIONS:
A. In addition to the requirements prescribed by law, the following shall be the qualifications for the Members of the City Council:

1. Candidates for the City Council shall have been City residents for the 12 months next preceding the election and Candidates for Single Member District representatives shall have been residents of their respective districts for 6 months next preceding the election.

2. No Member shall be an employee of the city.

3. All candidates must possess the qualifications of a voter.

4. No person shall be eligible for the City Council who, at the time of taking office, is delinquent in payment of a valid tax levy, assessment paving lien or contractual debt or is indebted to the City in any sum of money on judgment.

5. No Member shall have an interest in the profits or emoluments of any contract, job, work or service for the City.

6. No Member shall have an interest in the sale to the City of any supplies, equipment or material.

B. Any Member who shall cease to possess any of the qualifications herein required shall forfeit his office.

C. Any contract in which a Member is or becomes interested may be declared void by the Council.

D. Each person elected to City office, as a condition to being administered the oath of office, shall have filed with the City Clerk a signed, sworn statement indicating that he or she is in compliance with the above stated qualifications and requirements.

E. Each person subject to this provision shall file with the City Clerk a signed, sworn, updated revision of this statement, annually, while in office.

Amended 4/13/76, 5/6/89 and 11/16/07)

Mayor New has a clear interest, currently undisclosed as to the nature of his MedHab investment and compensation arrangements for serving as a board member. 

3.  The board list filed with the Texas Comptrollers' Office shows ten members.  Oddly, one is a business, Deaton Engineering, while another looks like a stuck typewriter key, NNNN.  NNNN's address is the same as Lisa Eady Investments, 502 S. KOENIGHEIM, SUITE 1A.  Only the MedHab listing had the zip code as 76904, when it's really 76903.

4.  MedHab is already getting aid from the Ft. Worth Tech Accelerator and has a development agreement with Rice University in addition to their connections with ASU. In addition to their office in Ft Worth, their home is in Mansfield, TX and they have another office in Tyler. Pretty spread out for such a young start up.

The U.S. Patent and Trademark Office website showed only one patent assigned to them. It was approved in June.  There were no pending patents or patents assigned to MedHab or their listed inventors. I hope they have the licenses they will need to other patents and intellectual property needed to manufacture these devices. Hard to make even a simple pair of shoes anymore without infringing on someones patent, trade secret, or other IP.

ConchoInfo, GoSanAngelo's Old Yeller and State of the Division found these tidbits.  Join the ride and post what you find out here.

Tuesday, January 03, 2012

Mayor New on Board of Firm Approved for $3.6 million Incentive


San Angelo City Council approved an incentive package for MedHab, a medical rehab device maker.  The $3.6 million in incentives requires MedHab to add 227 jobs in the next six years.  Council voted 5-1 for the package.  Mayor Alvin New was not in attendance, as he is out of town.

Alvin New sits on MedHab's Board of Directors.  MedHab's website stated:

Board of Directors - Alvin New

Former Principal, Town & Country Food Stores

Alvin was born in Brownfield, Texas in 1963. He graduated from Pecos High School in 1981 and Angelo State University with BBA in management in 1984. He married Patricia Neal in 1983; they have two daughters, Victoria, 15, and Elizabeth, 13.
Alvin worked as a sales clerk at a Town and Country Food Store on Pulliam Street while attending ASU. He stayed with the company after graduation and worked his way up to a vice president when officers of the company purchased the business from Steve Stephens in 1999. Alvin was one of six equal partners in the leveraged buyout. The six partners named Alvin executive vice president over operations and marketing, and later president and CEO.
Alvin and the management team improved Town and Country’s size and profits, leading to a surprise offer from Susser Holdings to buy the company at a price shareholders could not refuse. The company sold in 2007, and Alvin helped in the transition before leaving the company in 2008.
Alvin was elected the Mayor of San Angelo in December 2009. He currently serves in that capacity.
Many companies compensate board members with stock and options.  Mayor New's holdings and director compensation arrangement should be disclosed to the public.

The City of San Angelo approved a substantial investment in MedHab through job incentive money, paying for renovations, helping with capital equipment costs, paying a portion of a building lease, 100% tax abatement, dirt cheap space and refunding a portion of code compliance fees.

City Council voted to drop the following requirement for MedHab to get the award:

The guidelines say no member of the City Council or COSADC board of directors "shall be eligible for assistance from the COSADC during his/her tenure or for six months thereafter."
Does this mean public service can now be private service?  Council effectively voted such.

Mayor New is out of town, however I assume he knew these items would be on the agenda.  Council cleared the way for New to financially benefit.

Disclosing financial conflicts of interest and recusal from voting are basics for anyone serving on a nonprofit board, much less elected officials.  The Mayor effectively recused with his absence.  The public awaits full disclosure.

ERRP: Sad State of Council Minutes


Surprising San Angelo's leaders lowered the transparency bar again.  One might expect an important motion specifying the exact use of $343,000 in Early Retiree Reinsurance Program (ERRP) funding to make the minutes.  It didn't.

A vote was taken on the motion on the floor. AYE: New, Alexander, Silvas, Adams, Hirschfeld, and Farmer.  NAY: Council member Morrison. Motion carried 5-1.

It was hard watching the replay of the council meeting, with staffers gathered around the computer, trying to get the right words on the screen.  All that work and the epistle wasn't shared with the public?

Council acted like ERRP funds were iffy, until the check arrived from Uncle Sam in December.  City Council rushed to spend the money in a jiffy, to avoid "federal strings."  In their excitement Council broke the only ERRP string, that federal funds not displace, i.e. lower, current local commitments.

Good thing it's all on tape, beginning in November 2010.  It'll make quite the movie.

Sunday, January 01, 2012

Limbaugh's Havre Not: ASU


Angelo State University's first Vice President for Strategic Planning happened to be its last.  ASU finally spoke to Vice President James Limbaugh's leaving in a press release

Administrative changes will be implemented at Angelo State University in the wake of the departure of Dr. James M. Limbaugh, vice president for strategy, planning and policy, to become chancellor at Montana State-Northern in Havre, Mont., effective Jan. 1. As the vacant vice presidential position will not be re-filled, those offices and individuals who reported to that vice presidential position will be reassigned to other vice presidents.  
ASU blew up their strategic plan as a result of state budget cuts.  Oddly while facing the loss of millions of dollars, the university added a fifth Vice President and announced a study evaluating a move to Division I athletics.  Many people thought "What the hey?"

Santa did not bring a replacement for Limbaugh or Division I status.  The holidays found ASU announcing a drop to four Vice Presidents (December 20) and shooting to be competitive in Division II (December 21).

Limbaugh had strategic planning and institutional effectiveness, most of which moved under new Vice President Brian May.  How will ASU do in the New Year accreditation wise?  The foundation needed to already be laid.

Organizational jumbling, after traumatic budget cuts, can't be helpful.  The possibility of probation exists.  Is the probability growing?  There's only so much a good editor can do.  Accreditation, havre or havre not...