Sunday, February 03, 2008

Illinois 8th CD candidate Steve Greenberg: A successful businessman?

Revised slightly at 11:25 am on Sunday, February 3, 2008.

Illinois 8th CD candidate Steve Greenberg: A successful businessman? Why is that a relevant question, you ask?

First, a bit of background on the 8th CD. Republican Phil Crane held the seat for 35 years until he was upset by Melissa Bean (D-Barrington) in 2004, 52% to 48%. The 8th CD consists of portions of NW suburban Cook County, West Lake County and McHenry County. Bean warmed up by losing to Crane 57 to 43 in 2002, but she never stopped running.

Congresswoman Bean is a formidable Democratic campaigner and congresswoman in a District that was thought to be solidly Republican for the last half century. Unlike her predecessor (especially for the last portion of his tenure), she works hard on constituent service and getting around the district. She is now in her second term, having turned back investment banker David McSweeney, 50% to 44% in 2006, with Bill Scheurer, running as the candidate of the Moderate Party, picking up 6%.

Scheurer ran as an anti-Iraq War and anti-Free Trade candidate, attacking Bean as being indistinguishable from Bush and the Republicans, especially on the War and Trade (Watch and read about Bean’s support of CAFTA and union troubles, here). McSweeney attacked Bean’s honesty, as well her credibility and consistency arguing she voted to keep various Republican sponsored legislation from coming to the House floor [to please her Democrat colleagues] and then she voted for the legislation on the House floor, in an effort to please her 8th CD majority Republican constituents. McSweeney tried to argue Bean was a junior John Kerry, “voting against the legislation before she voted for it.” Bean argued she was the “centrist,” asserting that McSweeney was an extremist on the right and Scheurer an extremist on the left. Right or wrong, Cong. Bean sort of won that argument with a number of voters.

In addition to the above arguments, Bean was a clear beneficiary of the Democrat Tsunami that brought Democratic Majorities to the House and Senate.

Vying to take on Bean in the fall are Steve Greenberg, Kirk Morris (Watch here and here) and Ken Arnold.

Arnold picked up about 2 % of the primary vote in 2006 and seems more interested in attending forums and issuing position papers than in putting together a credible campaign. Morris seems interested in articulating positions on issues and in trying to win [but, it is not clear he knows how]. Greenberg seems to understand campaigns are about message, money and organization. And, it is reported that he alone of the three has the personal wealth and sufficient wealthy friends to take on Cong. Bean, who, as of a few weeks ago, reported cash on hand in excess of 1.2 million dollars.

Further, Greenberg has out-raised and outspent, as of two weeks ago, his opponents ten to one, having raised in excess of four hundred thousand dollars.

Greenberg’s website and mailer bios seem to have three main components: successful businessman, former professional hockey player and family man.
He omits academic background from his bio—he dropped out of Lake Forest College after a semester or so. While not having a college degree is probably a bit unusual, these days, for a congressperson, it probably is not a deal breaker.

We’ll give him the family man thing. Some have questioned his claim that that only physical injury prevented Steve from playing in the NHL [See here]. As to whether he really was National Hockey League material—that doesn’t seem too relevant to being a good congressman, so we’ll let that one go.

But, as to whether he was a good businessman—yeah, that could matter for Congress. One, Greenberg seems truly passionate about free enterprise, free markets, business, less spending, less taxes, less regulation, i.e., the whole Republican capitalist mantra. And, it is good to know if people do really well in what they are passionate about. Two, this is an important matter of credibility. If someone says they have been successful in business, we want that to check out.

Greenberg sat down with this reporter about two weeks ago, with some of our discussion being off the record and some on.

Elsewhere, Greenberg has denied the blog buzz there is a bankruptcy in his past. Bankruptcies are a matter of public record and no one has stepped up to contradict Greenberg.

Steve got his feet wet in the family business-Promotions Unlimited- started thirty-five years ago by his dad, Ira Greenberg. Steve’s assertion about what he accomplished there is on his web site [See here] and he added to that in our conversation:

I helped grow 1000 stores to 5500 and that’s real success, in the face of everyone running to Wal-Mart, Kmart and Target. When I left my day-to-day involvement in Promotions Unlimited, that’s what we were doing (5500 stores)… They are still doing around those numbers. Actually, maybe a little higher. So, that’s entirely accurate. And, my roles and responsibilities there at that time is what helped drive that number up.

The trouble with family businesses is that you can never be sure who is responsible for what, especially when the kid is following in the father’s footsteps. In the free market, most of the time people move up based on merit. In a family business, you can’t be sure.

So, we are most interested in how Steve did outside his father’s business. Let’s take a look.

Steve was CEO of Goliath from 1999 to 2001. Greenberg said “they did not go into bankruptcy. Like many other dotcoms, they just stopped operating.” Compaq invested five million dollars in cash and five million dollars in equipment for Goliath Falls’ customers to use. “Like a great many internet companies, this one lost its funding on the day that the market crashed.” Greenberg said. He also noted that, “We lost more cash than Compaq lost.”

For the last six years, Greenberg said he has been involved, with his brother Michael and two sisters in the “turnaround business.” To succeed in this business, the acquiring company has to identify companies that are struggling financially, but that are good candidates to “turn around,” and to make profitable. You need someone who can identify good investments and someone who can execute operationally, i.e., make the failing business profitable.

Greenberg summed up why he thinks he has been a successful businessman in the last six years (and he would argue he was successful, as well, prior to then in his family’s business). He discussed four asset acquisitions that his turnaround business made: Herr’s, Pacific Creative Distributors, Somady and E. Z. Gregory [They never acquire the liabilities, just the assets]:

Herr’s was a success; Pacific was a successful acquisition; Somady a successful acquisition and transaction; and E. Z. Gregory ended up not being successful…that is a 75% success rate with a transaction base. So, those are legitimate successes. [Greenberg also spoke of a successful “BMK” transaction, and sometimes spoke of an 80%, or 4 for 5 success rate; he was unavailable after our conversation to answer this reporter’s question as to whether he wanted to include BMK, or not, in his success list].

Today, Herr’s Pacific is still operating in a fashion that is driving an engine for the craft industry. We are providing a service to our Ben Franklin stores in providing arts and crafts and providing the kind of services they need.

My defined role is as an investor in those businesses. My job was [and is] to provide funding in the acquisitions.” The day to day operations of those businesses were…run by my brother [Michael] who …has done a great job operating those businesses.

Greenberg said he was “just a notch above a silent investor,” acknowledging (with a laugh) that he was still a brother to his brother and sisters.

Greenberg showed a lot of passion in discussing the E.Z. Gregory failure:

The EZ Gregory experience was the single greatest thing to happen to me.

…for me to have to battle through something like that…when I saw what my brother went through… we had to buy back a business … we had to do what we had to do…that to me really gave me the respect of the process of success and you have heard me say this before in many of my speeches. I have never said I have been perfect…I stand by my record of turning around businesses, creating jobs that wouldn’t have been created otherwise. Those businesses would have been shut down. That’s a very good record to stand by.

But, in fact, the E.Z. Gregory experience does not look good from the perspective of some, if not many of the employees [See here].

Further, there are some additional questions for Greenberg:

IKG was [and is ?] the holding company for the Steve and Mike Greenberg turn-around acquisitions. IKG is owned by Steve and Mike, and their two sisters [the ownership may have been expanded subseqent to the 2006 restructuring for the creditors, see below]. IKG bought Herr’s in 2001. Public reports peg Herr’s as a very successful company in the 70s and 80s. Not much is reported publicly about it in the 90s and in 2001 when IKG bought it. Can and will Greenberg document the asserted change in performance by Herr’s in 2001? [Greenberg was unavailable for this follow-up].

Herr’s purchased Pacific Creative Distributors in 2002. Can Greenberg document the change in performance that IKG is asserted to have brought about for Pacific. [he was unavailable for this follow-up].

Herr’s Pacific merged with E.Z. Gregory in 2004 and both were folded into IKG in terms of IKG's corporate function before the law, but they were kept separate operationally. In 2006, IKG, based on reliable sources, cut its losses from E.Z. Gregory by doing an “Assignment for the benefit of the IKG creditors restructuring,” that may have resulted in the IKG creditors losing 5.9 million dollars. Such a loss would have resulted in IKG's creditors receiving only 60 cents on the dollar. [See here, go to Herr's Pacific Update, or was that loss mitigated by revenue that flowed to the IKG creditors subsequent to the liquidation of the E.Z. Gregory assets and the sale of Herr’s Pacific assets] [Can Greenberg document the actual loss by the creditors of IKG].

So, Steve Greenberg does have a few more questions left to answer pertaining to his [and his siblings'] turn-around business. He can do this prior to the 8th CD Republican Primary election on Tuesday, or if he wins, prior to the general election in the fall. But, one imagines somebody in the mainstream media or in his opposition will raise these details along the way.

Notwithstanding those questions, Steve Greenberg seems pretty clear in his own mind about the success of his family business, or should I say businesses. He told this reporter two weeks ago:

Our family business has supported a lot of jobs…I will absolutely not apologize for anything we have ever done. We’ve worked our tail off, we’ve made some mistakes, we’ve built some good businesses, we’ve had to go through the ups and downs like everyone else has, but in the end, we still employ a lot of people and I can’t say that for anyone right now that I would be running against.

So, in the end, you ask: Is Steve Greenberg a successful businessman? And, of course, we say: We discuss, you decide. Or, maybe the jury is still out.
Jeff Berkowitz, Show Host/Producer of "Public Affairs," and Executive Legal Recruiter doing legal search
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