It is not a stretch to say that the biggest business stories of the year in Pittsburgh were in no small part shaped by the people behind the news.
Post-Gazette business writers were asked to outline the people who set the tone for the region’s business in 2011.
While the list of movers and shakers — presented in random order — speaks to our homogeneous nature, there are some surprises and people who are sure to continue to impact the region in 2012 and beyond.
JEFFREY ROMOFF President and CEO, UPMC
The Highmark-UPMC contract impasse has been called a battle of giants — the region’s largest insurer pitted against the region’s largest health system. But after UPMC decided that Highmark’s plans to acquire the West Penn Allegheny Health System made a new contract untenable, the backlash was both immediate and personal — and primarily directed at UPMC president and CEO Jeffrey Romoff.
Despite UPMC’s statements that board members unanimously support the no-negotiation position with Highmark (board members are not speaking publicly), mr. Romoff has become a lightning rod for people unhappy about being told to change insurers or lose affordable access to UPMC services. one letter writer likened him to the mr. Potter character from “It’s a Wonderful Life.”
But, noted former Allegheny County commissioner Bob Cranmer, mr. Romoff is also the primary architect of a world-class health system as well as head of Western Pennsylvania’s largest employer. give mr. Romoff credit, he said, for keeping “the lifeblood of our regional economy pumping.”
With both UPMC and Highmark now agreeing to continue the current contract until July 2013, just six months shy of the launch date for the major national health care overhaul, the heated discussions may subside — or not. But the reach and influence of mr. Romoff and the health system he leads cannot be denied.
JOHN PAUL Consultant, Highmark medical provider division
Nearly eight years after his sudden — and much-chattered-about — departure from UPMC, John Paul resurfaced in 2011 to take the reins of Highmark inc.’s new hospital and provider division, which will operate the West Penn Allegheny Health System if and when that acquisition is completed.
For years, mr. Paul was right-hand man to UPMC CEO Jeffrey Romoff, but in mid-2003, he announced a surprise sabbatical — which became permanent.
“I’m coming back as long as they want me, and they said they want me. it really is a sabbatical. That’s all there is to it,” he said at the time.
They didn’t want him, even though he helped build UPMC Health Plan insurance division, not to mention the hospital system itself, acquiring hospital after hospital in the 1990s.
He laid low for a while, even after his noncompete clause with UPMC expired in July 2007, and was passed over when various leadership positions came open at West Penn Allegheny. Finally, in may 2011 Highmark brought him on board, at a time when Highmark and UPMC were exchanging body blows over the expiration of their 10-year reimbursement pact
His consulting job with Highmark sounds as if it’s similar to the one he had at UPMC — building a health network. While mr. Paul has been mum on the issue to date, his boss, Highmark CEO Ken Melani, says WPAHS could be just one of the hospital systems that Highmark may eventually acquire, hinting that mr. Paul may soon lord over a “cadre” of health care providers.
MARK PRICE Economist, Keystone Research Center
Just as people head for the nearest doctor when they are sick, so have we as a nation been turning to economists to explain the problems in our economy.
Unemployment in Pennsylvania, like that in most of the rest of the country, stayed high throughout 2011. And the economist on the front line of that was mark Price of the Keystone Research Center in Harrisburg, whose specialty is labor economics.
“I get more calls when the economy is really bad and there’s uncertainty,” said mr. Price, of Carlisle, who earned his doctorate at the University of Utah.
The forecast for 2012 is that the economy will stay fairly bad, with high unemployment, so mr. Price’s phone should still be ringing.
Unemployment rose above 7 percent in February 2009, according to the state’s Department of Labor and Industry, and has not dropped below that level since then.
In December 2007, the official start of the Great Recession, unemployment in Pennsylvania was 4.5 percent, which mr. Price said he would like to see again.
He said that when unemployment stays high, “it carries with it a lot of risks.” Young people have to delay starting their careers, older workers empty their retirement savings. People lose their homes.
In order to help people, he said, government should spend money now, possibly raising revenue through taxes on natural gas extraction. after that, he said, the state can cut spending.
MIKE STUBLER Co-founder and managing director, Draper Triangle Ventures
As Pittsburgh’s reputation as an emerging technology hub grew throughout the year, Mike Stubler let the region know that progress couldn’t continue without support for emerging startups.
Downtown-based Draper Triangle Ventures co-founder and managing director, who also sits on the board of the Pittsburgh Venture Capital Association, raised awareness surrounding a crisis in venture capital available for startups locally. During September’s Three Rivers Venture Fair, which drew more than 600 tech CEOs and potential investors, mr. Stubler noted that the economic downturn had lead to a decrease in the amount of investment funds venture capital firms were seeing from large public institutions.
He said the shortage in investment dollars had encouraged local venture capital firms to put their money on proven investments or established companies within their portfolios.
Mr. Stubler wants the state to consider creating a tech startup investment fund. he also encouraged investors to take part in the Three Rivers Venture Fair and other local endeavors to support startups.
STEPHEN SADOVE Chairman and CEO, Saks Fifth Avenue
After shutting down seven stores over the span of a year, Saks Fifth Avenue CEO Stephen Sadove acknowledged in April in an interview with Women’s Wear Daily that there were “still a few more that we might want to close.”
Little did anyone know then that one of those would be hitting very close to home.
The upscale retailer announced in October that it would be closing its Downtown store on Smithfield Street sometime next year, most likely when its lease expires in September.
Saks will be shutting its doors after more than 60 years Downtown, including 36 at its present location.
The decision could have a big impact on the retail environment Downtown. the city will be losing not only an exclusive destination retailer, but also its third department store since 2004. Others to close were Lord & Taylor and Lazarus-Macy’s. it will leave Macy’s as the only traditional department store remaining Downtown.
Saks sought $10 million in improvements to its store in order to stay Downtown. in August, the city offered the retailer $8.6 million in tax credits, state and county grants and a low-interest loan. however, Saks determined that “it would not be practical” to accept the offer.
It said major competitive shifts in the marketplace had reduced its revenue and that several key fashion designers had pulled out because of the condition of the store and declining sales volume.
– mark Belko
TODD S. NELSON CEO, Education Management Corp.
As CEO of Education Management Corp., Todd S. Nelson sits at the helm of one of the nation’s largest for-profit college companies and has been a central figure in a congressional investigation of education companies that receive up to 90 percent of their profits from taxpayer dollars.
Downtown-based EDMC, which operates the Art Institutes and other schools, has vigorously defended itself against lawsuits and government scrutiny of its recruiting practices.
Mr. Nelson, 52, was the driving force behind the meteoric rise of the University of Phoenix to the no. 1 for-profit education company in the nation between 2002 and 2006, but reportedly was forced out of that job by the company’s board of directors amid allegations of high-pressure student recruitment tactics and lawsuits from former students.
He assumed the top job at EDMC in 2007 and guided it to become the nation’s no. 2 for-profit education company.
Students at for-profit colleges make up 12 percent of those in college nationwide, but they represent almost half of those who default on student loans.
Members of Congress laid out a plan in June to protect taxpayer dollars that flow into for-profit colleges by placing new rules on these institutions that will go into effect in July 2012.
To hold onto their eligibility to dispense federal aid, for-profit schools, such as those owned by EDMC, will have to show that their former students meet one of three criteria: at least 35 percent are repaying loans or that loan repayments do not exceed 30 percent of their discretionary income or 12 percent of their total earnings.
The first time a school could be ruled ineligible is 2015.
THE COUPON CLIPPER
The coupon clipper’s metamorphosis from slightly embarrassing cheap relation to star of the small screen and even a force on Wall Street was complete in 2011.
Nathan Engels, one of the coupon rock stars featured on cable network TLC’s “Extreme Couponing” show, isn’t exactly the everyman coupon clipper. But he illustrates how hunting down discounts and sales has become a honored American past-time.
Mr. Engels, who lives near Cincinnati, swung through Pittsburgh this fall. His story of using his mad couponing skills, including a bit of Dumpster diving, to climb out of debt is irresistible in a time of economic turmoil, joblessness and uncertainty.
Couponing, and those who practice the art, had been in decline until the recent financial downturn. A survey this year by NCH Marketing Services inc., part of the Livonia, Mich.-based coupon distribution company Valassis, found that more than 80 percent of consumers now claim to be using coupons regularly.
While printed advertising inserts still account for 90 percent of all coupons distributed, according to promotions consulting firm Inmar of Winston-Salem, N.C., studies show young shoppers especially are beginning to try downloading coupons to their mobile devices.
And what are online daily deals but coupons that consumers pay for?
If the economy rebounds and the unemployment rate declines, the coupon clipper may lose some cachet. unless, like those who lived through the Great Depression, this generation found the recent Great Recession scary enough to stick with some of its newfound money-saving ways.
– Teresa F. Lindeman
RICHARD J. HARSHMAN Chairman, president and CEO, Allegheny Technologies
Richard J. Harshman could not have picked a better time during his 33-year career to take the pilot’s seat at Allegheny Technologies.
Mr. Harshman, 55, became chairman, president and CEO of the specialty metals producer in may, taking over after a long, successful run by L. Patrick Hassey. the Robert Morris University graduate assumed command as the company’s major markets — aerospace and defense, oil and gas, chemical processing and medical — were humming despite a constrained U.S. recovery.
Through September, Allegheny Technologies had booked $183 million in profits, triple what it recorded in the same period of 2010. Analysts are expecting full year profits of about $235 million when the company reports fourth-quarter results later this month vs. 2010 earnings of $71 million.
Mr. Harshman’s job will be to capitalize on surging demand and complete a $1.2 billion modernization of the company’s Brackenridge plant, an ambitious project unveiled near the height of the 2008 financial crisis.
He faced some minor turbulence in July, when protests over dramatic hikes in retiree health care premiums prompted members of the United Steelworkers union to reject a four-year contract proposal covering about 3,000 workers. USW members ratified the agreement a week later after concessions were made to current workers. Retirees, who did not get a vote on the proposal, are suing over the health care premium increases, which take effect today.
JAMES ROHR Chairman and CEO, PNC Financial Services Group
PNC Financial Services Group, led for almost 12 years by CEO James Rohr, was revealed as the mystery buyer of some $19 million worth of properties amassed since early 2010 along Wood Street, where Pennsylvania’s dominant bank plans to erect a 33-story headquarters tower.
The announcement in may of the $400 million office-retail project — which PNC hopes to begin in March and have completed in roughly three years — came just two years after the opening of Three PNC Plaza on Fifth Avenue, which was the first new Downtown skyscraper in two decades and is home to the Reed Smith law firm and the luxury Fairmont Pittsburgh hotel.
PNC’s new headquarters tower, which is to rise between Fifth and Forbes avenues adjacent to the bank’s current headquarters at one PNC Plaza, will be angled to the street to maximize the use of natural light and feature a transparent skin giving pedestrians a view of what’s going on inside.
The project also will extend the bank’s ambitious commitment to the environment by seeking the highest “platinum” green building certification from the U.S. Green Building Council.
RONALD CAPLAN President, CEO and founder, PMC Property Group
Under the leadership of Ronald Caplan, Philadelphia-based PMC Property Group is becoming a major player in the Downtown real estate market.
PMC is the largest residential landowner in the City of Brotherly Love, and an executive said during an interview in July that it was “looking to do the same” in Pittsburgh.
It hasn’t disappointed.
Since buying the former Verizon building on Stanwix Street for $4.4 million in December 2010, PMC has been gobbling up property Downtown like a teenage boy feasting at the all-you-can-eat breakfast buffet.
In April, PMC bought the 117-unit Penn Garrison apartment building on Penn Avenue in the Cultural District for $13.5 million. the 200,000-square-foot building once was the headquarters for GNC.
PMC also is in the process of buying the Regional Enterprise Tower — the former Alcoa building — on Sixth Avenue. it has plans to convert the 30-story skyscraper, which was the subject of a sheriff’s sale last spring, into housing, but it has yet to close on the transition. first Commonwealth Bank, which acquired the 58-year-old aluminum office tower at sheriff sale, was asking $10.4 million for the property.
In November, PMC beat out two other developers in a bid to acquire the 13-story John P. Robin Civic Building on Ross Street from the city’s Urban Redevelopment Authority. as with its other properties Downtown, PMC is proposing to put 100 residential units, plus possible street-level commercial space, in the building, which is home to city, URA and city housing authority offices.
PMC also offered to buy the historic former Schenley High School building for $2 million and spend $35 million to transform it into apartments; but the bid was rejected by the Pittsburgh School District, which wanted $4 million for the property.
– mark Belko
TOM CORBETT Governor, Pennsylvania
Marcellus Shale drilling brought hundreds of new rigs to regions of Pennsylvania throughout 2011, but the real action was focused in a part of the state home to no shale at all: the state capital, Harrisburg.
Over the past year, Tom Corbett has overseen a heated legislative battle over how to regulate or impose a fee on the booming natural gas industry, and the industry has found a stalwart cheerleader in the Republican governor.
At the beginning of the year, the governor appointed a Marcellus Shale Advisory Commission to make recommendations on shale legislation. the 30-person team included industry players such as David Porges, CEO of EQT Corp., and Ray Walker, the Range Resources executive overseeing the driller’s Marcellus development.
But the main topic of debate in 2011 focused on imposing a tax or impact fee on the gas being extracted from underneath the commonwealth. mr. Corbett, careful not to renege on his pledge for no new taxes, announced legislation in October that would levy a $40,000-per-well fee on new wells.
The impact fee revenue would be directed toward communities where drilling is concentrated and could lead to more lenient local regulations as small towns hope to secure the cash. the legislation would also supercede the scores of local ordinances drafted by communities that want to regulate the industry on their own terms.
With the EPA introducing more federal regulation on gas drilling and its controversial fracking technique, mr. Corbett can expect 2012 to be a year primarily focused on one thing: Drilling is here. Now who gets to regulate it?
first published on January 1, 2012 at 12:00 am