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Removing Employment Barriers For the Most Vulnerable. Work To Be Done.

August 11, 2017 Leave a comment

Today I read an article from the ABA JournalNY District Attorney’s efforts resulted in some $644,000 of minor offenses being dismissed. Check out the article here.

In making his argument in support of the massive dismissals, the District Attorney explained to the Judge that:

“New Yorkers with 10-year-old summons warrants face unnecessary unemployment risk, housing and immigration consequences,”

 

Such unintended consequences are not unique to New York City.

In West Michigan, our community development organizations see firsthand that outstanding warrants cause significant barriers to employment and housing. Immigration is an ever increasing topic of local and national concern.

 

Indeed, the ABA Journal had noted several years ago that Post-conviction consequences make it difficult for ex-offenders to find jobs – here

The ABAJournal noted that: “The U.S. economy loses up to $65 billion in output each year because of fewer job opportunities for convicted felons, according to a 2010 study by the Center for Economic and Policy Research.

The Small Business Association of Michigan – has previously reported that:

Convicts leaving incarceration often have a difficult time re-entering the working world because, according to one survey, 65 percent of employers would never consider hiring someone with a felony record.

 

Michigan’s Role..

Michigan government has taken steps to remove such employment barriers. The Work Opportunity Act was introduced in the Senate back in February to further incentive businesses in hiring former convicted felons.  You can check out my previous articles on the matter here.

More Locally…

Check out Mel Trotter Ministries and their Community Outreach Court – formerly “Street Court” initiative.

mel-trotter-ministries-1122_20111229171415_320_240

An older  press release (here) details how MTM, Degage Ministries and Heartside Ministries help the homeless with criminal backgrounds.

I’m thankful for the work that Mel Trotter, Degage, Heartside, and other organizations are doing to help the homeless in West Michigan clear up outstanding legal issues that are just another obstacle between them and employment..

Also Worth Praising their Efforts….

There are a number of great companies who reach out to support putting Michiganders with certain barriers to work.  Goodwill Industries of Greater Grand Rapids lead by CEO Kathy Crosby does a fantastic job of equipping this demographic and putting them into long term employment.

Some West Michigan companies who do a great job of reaching out to hire/place those with employment barriers are Cascade Engineering and its Founder Fred Keller. Others include Lacks EnterprisesKentwood Office Furniture and Express Employment Professionals of Grand Rapids lead by Janis Petrini to name a few.

These community partners deserve praise for their work putting to work the “unemployable” and the vulnerable in our local community.

To conclude:

there’s work to be done.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

Community Revitalization To Include Downtown Grocery Stores: Update on The Urban Food Initiative.

August 1, 2017 Leave a comment

Yesterday I read a story about a Detroiter, Raphael Wright who plans on opening a “mission-driven supermarket” in downtown Detroit. Check out the article on NextCity.

Raphael’s idea is sparked by a much needed grocery option in Detroit- particularly for low-income residents.

I love this idea.

A few years back I took my family to New York City. We loved the walk-ability of City life – that you could walk down a block to a grocery store and get all of your household needs.

food-healthy-vegetables-potatoesI love downtown Grand Rapids.

 

If Grand Rapids wants to encourage urban living, it needs a downtown grocery store.

In February, House Bill 4207 was introduced in the Michigan house. Known as the “Urban Food Initiative” it would provide incentives for community revitalization that would include a downtown Grocery Store.

 

 

Specifically, HB 4207 would make “Urban Food Initiatives” allowable to receive funds under the Michigan Community Revitalization Program

 

An update since my last post, in May, the Trade and Commerce Committee recommended a substitute bill, check here.

The Bill substitute changed the name,  Urban Food Initiatives, to “NEIGHBORHOOD AND COMMERCIAL CORRIDOR FOOD INITIATIVE”  – thereby broadening the applicability of these community revitalization incentives –  I have bracketed the additional language:

Property that will be used primarily as a retail supermarket, grocery store, produce market or delicatessen that is located in a downtown [OR IN A DEVELOPMENT AREA AS DEFINED IN SECTION 2 OF 3 THE CORRIDOR IMPROVEMENT AUTHORITY ACT] area…that offers unprocessed USDA inspected meat and poultry products or meat products that carry the USDA organic seal, fresh fruit and vegetables, and dairy products for sale to the public.”

The other substantive revision to the substitute bill would require that at least 5% of community revitalization incentives be awarded to these initiatives. Check out the Bill Analysis from the House Fiscal Agency, for more information.

 

Clearly having available and healthy food options in a downtown are necessary to City living, particularly for low-income residents. Check out a previous article from Next City about the Food Revolution in Detroit.

A downtown grocery store is necessary if a City wants to attract urban living – it is also necessary to provide healthy food options for those living downtown without readily available transportation.

 

 

I think particularly of the under-employed and the homeless who receive services from organizations like Mel Trotter Ministries. Grand Rapids has a need for affordable housing for the most vulnerable in our society. It would be great to see grocery options as well.

I am looking forward to tracking the progress of this bill. I am also encouraged by the many businesses in West Michigan taking serious their responsibility as community stakeholders and asking the question: “How am I building a better community?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Cautionary Tale for Real Estate Investors: Yesterday California Investor Sentenced to Prison for Bid Rigging at Foreclosure Sales.

There are many pitfalls for real estate investors who purchase distressed property.

In today’s market, good deals for real estate investors are getting harder to come by. With distressed property becoming a scarce resource and competition ever increasing, some real estate investors have resorted to less than legal  acts to boost their profit.

IMG_1684

Rosa Parks Circle in Downtown Grand Rapids

Investors should know that the Department of Justice as well as State Agencies are cracking down on unfair real estate practices.

 

As a follow up to a story that I have been keeping tabs on, just yesterday, the Department of Justice announced that a judge sentenced a real estate investor for his roles in a conspiracy to rig bids at public real estate foreclosure auctions held in Northern California.

This after a 3-week trial.

 

 

You can see the press release here

 

According to the press release: Alvin Florida Jr. was “sentenced to serve 21 months in prison and to serve three years of supervised release. In addition to his term of imprisonment, Florida was ordered to pay a criminal fine of $325,803.

Based upon the DOJ’s investigation – this was a large conspiracy “to rig bids to obtain hundreds of properties sold at foreclosure auctions. The conspirators designated the winning bidders to obtain selected properties at the public auctions, and negotiated payoffs among themselves in return for not competing. They then held second, private auctions at or near the courthouse steps where the public auctions were held, awarding the properties to conspirators who submitted the highest bids.”

 

What is particularly striking to me is that including today’s sentencing the DOJ report that:

68 individuals have pleaded guilty or been convicted after trial as a result of the department’s ongoing antitrust investigations into bid rigging at public foreclosure auctions in Northern California.

 

Question for Real Estate Investors:

What type of unfair practices do you believe is going on in your state? What are you seeing take place at foreclosure sales?

In Michigan the record numbers of foreclosed properties since 2008 has provided a market (albeit one that is slowing down) for flipping residential real estate. With this opportunity to profit has also created an opportunity for abuse and fraud.  The real estate legal landscape is complex enough, do yourselves a favor – follow the rules.

 

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Business Law Update: Court Lessons on Personal Guarantees.

Rosa Parks Circle in Downtown Grand Rapids

In the world of lending if a business wants to secure financing, you will be hard-pressed to find a bank that is not going to require some collateral, including a personal guarantee of the debt by the principal owner(s) of the business.

businesses don’t want to sign personal guarantees; it’s why businesses take on the corporate formalities of a limited liability company, or a corporation – to limit their personal liability. Therefore, it is understandable in a lawsuit over a promissory note that an individual would argue against the enforceability of a personal guarantee.
This is a reason why lenders, private investors, should make sure their legal documents are precise – so that in the event a lawsuit needs to be filed the document is not drafted so as to create an ambiguity.
Two cases come to mind that illustrate problems in enforcing personal guarantees – one recent and one a few years back.
June 29, 2017 Real Estate Development case
For an interesting case that went up and down the appellate courts, just look no further than a June 29, 2017 decision of WNC Housing LP v Shelborne Development Company
In that case a mortgage loan for a particular real-estate development project, the “Shelborne Park project,” was in default, and to avoid foreclosure, plaintiffs purchased the debt at a negotiated price.” Id.
The trial court found the general partner in a limited partnership of the development, Makino, to be a guarantor.
Makino appealed the trial court’s determination that she was personally liable, attacking the language of the general partnership agreement. The Court of Appeals affirmed the trial court’s decision that Makino was liable, but the Michigan Supreme Court, vacated that portion and essentially told the Court of Appeals to reconsider it.  The Court of Appeals reconsidered, reviewing the text of Makino’s partnership agreement and found, once again, Makino was liable under the language of the agreement (The pertinent language stated that Makino as general partner “hereby guarantees lien free Completion of Construction of the Apartment Housing on or before May 1, 2003”) . Id. at page 3.
October 9 , 2012 Case of the Ambiguously Signed Promissory Note.
Another example is illustrated in the 2012 unpublished Michigan Court of Appeals case of Marcuz v. Steven Premiere Properties & Dev., L.L.C., 305733, 2012 WL 4801060 (Mich. Ct. App. Oct. 9, 2012)
The promissory note was signed by Branoff twice: once as a “member” of Premiere Properties, and once “individually.” The note was also signed by defendants Mario and Antonio Giannandrea “individually.”
Premiere Properties defaulted on the promissory note so Marcuz sued the company and individuals on September 3, 2009.
In court, Branoff admitted that he signed the promissory note twice, but he claimed his second signature was not intended as a personal guarantee.  But his signature and the two other individuals were simply “because “we were showing…who were going to be the finalized members of the company.

Thus, an ambiguity exists.
Regardless, the trial court and the Court of Appeals disagreed with Branoff.
The Court held that “[w]hen Branoff signed the promissory note first as a “member” of Premiere and second “individually,” he manifested his intent to personally guarantee the note. Simply put, it would have been redundant for Branoff to sign the promissory note a second time if he did not intend that his second signature have some legal effect different from his first signature.”
LESSON from these two cases:Don’t Draft Legal Documents In a Manner That Creates Ambiguities.
Although the Lender in both instances did in fact win the day, the problem remained – they won after litigating a case that went to appeal, (and in Makino’s case, up to the Supreme court and back down to the Court of Appeals) which undoubtedly cost significant legal fees. The  drafter of the promissory note and the partnership agreement – much of the trouble could have likely been avoided if the partnership agreement and promissory note were more clearly drafted.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

OCC’s Remarks on Fintech Charter and a “Conversation about Financial Innovation and Fintech”

Today, Keith A. Noreika, Acting Comptroller of the Currency gave remarks encompassing the topic of Responsible Financial Innovation and Fintech Companies.

2015-11-14 13.57.51You can read Mr. Noreika’s remarks here.

All the excitement surrounding fintech companies reminds me of something that gets me excited – college football, particularly Michigan State Spartan Football (thus, a photo from one of my past experiences at Spartan Stadium)

 

Back to Fintech, by way of recap…

The prior OCC, Thomas Curry announced earlier this year that OCC would move forward with considering applications from financial technology (fintech) companies to become special purpose national banks.

 

Mr. Curry had this to say, in the past:

“Over the past year, no topic in banking and finance has drawn more interest than innovative financial technology, and for good reason. The number of fintech companies in the United States and United Kingdom has ballooned to more than 4,000, and in just five years investment in this sector has grown from $1.8 billion to $24 billion worldwide.

 

“The OCC published a paper discussing the issues and conditions that
the agency will consider in granting special purpose national bank charters.” You can check that paper out here

 

Fintech Charter: Praise, Debate, and a Lawsuit.

The propriety of a Fintech charter has been supported by the Fintech community in general.

 

As reported by Crowdfund InsiderBrian Peters, Executive Director of Financial Innovation Now  “a public policy coalition comprised of Amazon, Apple, Google, Intuit and PayPal” stated;

“FIN believes that payments and lending regulation needs streamlining for the modern era. We commend the

OCC’s leadership and vision in driving this regulatory discussion. The OCC has rightly concluded that its approach must evolve to ensure that all American consumers and small businesses are empowered with better access to the benefits of financial technology.”

According to Crowdfund Insider  “Fintech Charter could benefit innovative financial firms that can provide superior services at a lower cost for both consumers and businesses.”

 

 

That being said, the propriety of such action by the OCC has been questioned by others, and officially sued by the Conference of State Bank Supervisors as an “unprecedented, unlawful expansion of the chartering authority”- check out the Press Release from the CSBS back in April.

 

 

The OCC’s present Stance on a Fintech Charter

It appears no action will be taken until at least the lawsuit is resolved.

Mr. Noreika stated today that “at this point, the OCC has not determined whether it will actually accept or act upon applications from nondepository fintech companies for special purpose national bank charters that rely on this regulation. And, to be clear, we have not received, nor are we evaluating, any such applications from nondepository fintech companies.

Still, Mr. Noreika expressed his thoughts on the need for a fintech charter:

“I also believe that if you provide banking products and services, acting like a bank, you ought to be regulated and supervised like a bank. It is only fair, but today, that is not happening. Hundreds of fintechs presently compete against banks without the rigorous oversight and requirements facing national banks and federal savings associations.”

 

Why Fintech Intrigues me – Purpose Driven.

I’ve previously talked about why fintech is so intriguing.

a. taking a risk doing something different;

b. disrupting business as usual;

c. for the good of others.

That’s social entrepreneurship at its finest.

 

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Fintech Company “Lemonade” Following Through on Its Purpose Driven Mission.

In the past I have posted on Fintech Companies – and highlighted a few – namely Lemonade.  Below is an update on some exciting things Lemonade is doing.

2015-11-26-13-04-02

 

But as a threshold matter:

What is Fintech?

 

According to FinTech Weekly:

Financial technology, also known as FinTech, is a line of business based on using software to provide financial services. Financial technology companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software.

 

The idea of a business’ purpose of “disrupting incumbent”…anything is intriguing to me.

Some systems need to be disrupted. I have previously posted my own thoughts on being a disruptive force for good.

To that point, Lemonade seemingly fits the bill. Look no further than it’s mission statement on its homepage: “Instant everything. Killer prices. Big heart.

About Lemonade:

According to its website, Lemonade is the “World’s First P2P Insurance Company” (Peer-to-Peer).

Lemonade provides Renters and Homeowners Insurance to New

Yorkers.

According to a CrowdFundInsider article: “Lemonade has positioned its platform in a David vs. Goliath battle to challenge antediluvian insurance incumbents by providing a far better service at a superior price.”

Who doesn’t root for the underdog?

Technology Driven.

Shai Wininger, co-founder and President of Lemonade, explained to CrowdfundInsider that technology drives everything at Lemonade.

“From signing up to submitting a claim, the entire experience is mobile, sim

ple and remarkably fast. What used to take weeks or months now happens in minutes or seconds. It’s what you get when you replace brokers and paperwork with bots and machine learning.”

Disruptive Force for Good.

Daniel Schreiber, co-founder and CEO of Lemonade. told CrowdfundInsider “the opportunity is unusual. Disrupting an industry that has not changed for a hundred years ”

According to an article posted by Venture Beat:

Lemonade is also setting out to combat existing models through an annual “giveback,” where it donates unclaimed money to good causes.”

Talk is cheap.  Has Lemonade followed through on its actions?

Apparently so – in a very impressive way.

 

Lemonade’s 2017 GiveBack

Lemonade posted today that its Giveback for 2017 was $53,174:

this amounts to 10.2% of its 2017 revenue.

 

The article highlighted one such GiveBack recipient: New Story

“New Story builds safe homes for the homeless, and aims to transform slums into thriving communities in the developing world.”

 

“Through the Giveback to New Story, the Lemonade community built a new home for the Quitéño family, from start to finish. Now, the Quitéño family will have a safe home to return to every day, giving them a stable foundation to improve their health, education, and income.”

 

Conclusion.

Lemonade is doing some innovative work for the social good.

I love the concept of this startup –

a. taking a risk doing something different;

b. disrupting business as usual;

c. for the good of others.

That’s social entrepreneurship at its finest.

If you are a homeowner or tenant residing in New York, this company is worth checking out.

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Business Law Update: Lessons From Court on Deadlock Between Business Owners.

July 12, 2017 2 comments

This morning was rainy and gray in Grand Rapids.

It is one of those days that prompted me to write on a topic that can be downright depressing – when relationships between shareholders go bad.

I had a client come in recently and ask me to set up an LLC for him.

rainy dayClient planned on owning the LLC 50/50 with a business partner. Someone he trusts (right, because no one goes into business thinking it will end in a lawsuit.) Regardless of the best intentions between these business partners, The 50/50 ownership can be problematic.

For an example, look no further than the May 11, 2017 Court of Appeals Decision in Shamee Catwilmat, LLC v Shamee Development Company, LLC et al.

The Shamee case originated out of Kent County’s Business Court Docket. (A little pride here, for our esteemed business court).

 

Shamee was a convoluted case regarding default on a Note, Mortgage and collateralized business assets – and ended in a mess for both sides. In essence, the Bank erroneously  foreclosed on only a portion of the Property that was otherwise secured by the mortgage.

However, of particular note for the purpose of this post is how the LLC was owned and the resulting problems:

50/50 ownership between members – Shah and Mead.

According to the Court:

“At some point, Shah and Mead began to disagree about the management of Shamee Development. Unable to reconcile their conflicting viewpoints, they reached a “membership deadlock” that prevented Shamee Development from continuing to service its debt to the Bank and from taking the necessary steps to refinance or renegotiate such debt. After Shamee Development failed to make payments as agreed, the Bank accelerated the debt, including the mortgages, and instituted this action against
defendants.”

 

Thus, one equal member had the power to halt business operations, fail to service its debt, and the result was this lawsuit foreclosing on real estate and an appeal.

There are several ways the members could have avoided this scenario, here are just a few:

  1. Create an Operating Agreement that contained a deadlock provision.  This provision could call for mediation/arbitration, or even a buy-out in the event that equal owners halt the business from making key business decisions.  Going back to my client mentioned above, that was my solution for him. Creating a deadlock provision in his Operating Agreement.
  2. Negotiate different ownership prior to forming your business: someone  has majority control, someone has minority.
  3. Set up the LLC as a manager-managed LLC – give certain powers to a single manager to take care of the daily business affairs of the Company – and retain some of the “major” decisions, such as amendment of operating agreement, admission of new members, dissolution, etc… to the members.

 

Lesson:

When setting up a business, you should always have the end in mind. How does a business owner get out of the business?  You should also make sure that one member does not have the power to halt business operations, like in the Shamee case.

 

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka