THE LOCAL AREA WATCH

DEVOSES DOUBLE UP TO DOUBLETALK

Gubernatorial candidate Dick DeVos and his dad, Amway co-founder Rich DeVos, have been busy trying to douse the fire Guv Jen lit in Monday's debate regarding the DeVos family's investment in Alterra Health Care, a chain of old-age homes.  Jen asked Dick why he hadn't publicly disclosed his interest in Alterra, which collapsed in bankruptcy after several government investigations into charges that its staff was abusing residents.  Dick replied that he no longer had any holdings in the defunct company and that when he did he was nothing but a passive investor owning less than one percent of the company's stock.

Immediately after Monday's debate the facts began coming out about the true relationship between the DeVoses and Alterra.  Although the DeVoses, including Dick, didn't have direct ownership of a significant number of shares of Alterra, they held bonds convertible into 40% of the company's stock.  The Securities & Exchange Commission defines the ownership of such an option as having control over the company.  Nevertheless, both DeVos Jr. and Sr. disputed that definition in the media this week insisting that they had no control of Alterra.  So let's give them the benefit of the doubt on that one.  That still leaves unexplained by the doubletalking duo the fact that the DeVoses appointed four of the directors of Alterra's corporate board who had the right to veto any decision made by the other directors.  Plus the chairman of Alterra's board was the same fella who runs RDV Corp., the DeVos family's investment management company.

However, you slice it, Dick wasn't straight with the voters in Monday's debate when he passed off his holdings in Alterra as a tiny fraction of the company's stock.  That was an omission of fact that amounted to a lie.  The follow-up statements by Dick and his dad are no better.  They claim that their family had no control over Alterra to correct the abuses at its old-age homes, because they only had an option to convert their bonds into stock and didn't have actual ownership of it.  Well, folks, what is left unsaid by the doubletalking duo is that they chose not to exercise that option to take direct control and stop the abuse that was occurring.  Of course, that assumes they even had to exercise it to have effective control of Alterra, and remember their control of four veto-empowered directors plus the chairman of the board.

So these half-truths don't give me a lot of confidence that Dick is telling us everything when he said he never knew about the abuse at Alterra until recently.  But maybe that's true.  I find it difficult to believe that even a family that made its fortune conning ordinary people into a Ponzi scheme would be so heartless as to make money off of a company whose employees were physically and sexually abusing helpless old men and women suffering dementia.  Furthermore, the various state investigations into the abuse at Alterra old-age homes concluded that the knowledge of abuse had not been communicated to corporate headquarters.  Yet, that really doesn't let Dick off the hook, because those investigations were wrapped up while the DeVoses held their controlling stake in Alterra -- not afterwards.

So, either Dick hadn't a clue about a MAJOR scandal in Alterra's operations that prompted government investigations in at least four different states or he lied about his knowledge of it because he and his family chose not to act while in the position to do so to fix the scandal.  At the very least Dick is a lousy businessman who couldn't keep safe an important investment his family had made (after all, every dime they had in it got flushed in Alterra's bankrupcty).  Worse, he is a liar covering up his heartless pursuit of a buck at the expense of abused elders -- and still a lousy businessman because he lost everything anyway.

Either way, it doesn't speak well of Dick's self-proclaimed business acumen to pull Michigan out of its economic funk.

DICK DEVOS DISHONEST IN DEBATE

Monday night Bridget and I watched the first debate of the governor's race.  Both Gov. Jennifer Granholm and challenger Dick DeVos were disappointing.  When they weren't shoehorning preprogrammed talking points into their answers like the robotic political hacks they are, they let the panel of reporters bait them into slinging mud at each other.  Mind you, I'm not prissy about politics.  There's nothing wrong in principle with so-called negative campaigning or raising issues of character.  But that doesn't mean tarring your opponent can't be pointless, which most of Monday's attacks were.

However, Guv Jen did launch one attack that revealed a lack of character in Dick.  She asked him why he failed to report on his public disclosure of assets an investment in Alterra Healthcare Corp.  Alterra operated a chain of nursing homes in the U.S., including Michigan, until it collapsed into bankruptcy in 2003 amid allegations of patient abuse.  Dick retorted that Alterra was a publicly traded company in which he and his wife made an investment and had no control of it because they owned less than one percent of the company's stock.  In fact, Dick stressed the sub-one-percent figure twice.  In doing so, he characterized his investment as akin to owning some shares in GM or Microsoft or any other ordinary investment in a public company.  Befuddled by this, Guv Jen retreated.

Although Granholm's attack didn't work the way she had expected -- did she really think that DeVos somehow OK'ed the abuse of patients at Alterra nursing homes? -- DeVos's response showed us something we should know about his character.  He lied.  If not blatantly, he did so in fine Clintonian fashion, which is just as reprehensible for its deliberate slipperiness.

DeVos's characterization of his investment in Alterra was dishonest.  In 2000 Jerry Tubergen -- at the time president of RDV Corp., the DeVos family asset management firm -- was a member of Alterra's board.  He persuaded the DeVos family, including Dick and his wife Betsy, to collectively invest $173 million into Alterra to bail out the financially troubled company.  The investment purchased only a small amount of the company's stock.  Most of the investment was in the form of Alterra bonds (i.e., unsecured loans to the company) that were convertible into stock.  If the DeVos family had exercised their option to convert their bonds into stock, they would have owned 40% of Alterra's stock, including 90% of its Class A stock.  Control of that stock controls the company's board of directors.

So DeVos and his family were in fact THE major players in the financing of Alterra.  Their bonds allowed them to take that control of the company whenever they wanted, and so gave them a great deal of informal influence over Alterra if not direct control -- and that assumes none of the Alterra boardmembers other than Tubergen answered to the DeVos family.  That situation is rather different from how DeVos described it in the debate.  He and his family had rather more influence over Alterra than owning less than one percent of the stock in a publicly traded company would suggest.  While DeVos's statement about ownership of stock in Alterra was technically true, it was so incomplete as to the real stake he and his family had in the company that it was a deception.

BROTHER'S KEEPER

Oh sure, little brothers can be a pain, but sometimes they're pretty helpful.  Just ask Dick DeVos Jr., closet organizer entrepreneur, Amway scion, and candidate for governor.  What he is not, any longer, is the owner of the racing sloop Windquest.  Dick was the owner a year ago when he had his sailboat up for sale.  But apparently there were no takers.

Now Dick Jr. is running for governor, and I suppose a man of the people just doesn't go sporting around in regatta-winning racing sloops.  So, we learn in today's edition of the Detroit Free Press that his younger brother Doug is now not only the new owner of the Windquest but is also replacing Dick as the vessel's skipper in this year's big race from Port Huron to Mackinac Island.

Maybe Doug provided his brother this bit of P.R. cover, because Dick figured that Michiganders are a small-minded race who would begrudge him a token of his success as the proprietor of a capital-venture-firm-now-shelving-concern, husband of an heiress, and son of the biggest multi-level marketing huckster in the world.  But then, with Dick now trimming his sails on all manner of political positions he once held, maybe he's just tired of literally trimming them.

WE'RE NOT ON OUR OWN, WE HAVE DICK JR!

I closed the preceding story with the statement that you're on your own when it comes to making sure that you and your loved ones get the proper health care from River City's medical monopoly, Spectrum Health.  Maybe some of you are tempted think that because Dick DeVos Jr. has now pledged to protect the little guy against rapacious Big Oil, he will do the same against Big Medicine up on the hill.

Don't count on it.  Gubernatorial candidate Dick Jr. won't be addressing the failure of both state and local governments to police the problems at Spectrum Health and the Kent County medical examiner's office that have been revealed by the tragedies of the Jennings and Sallie families.  The reason is simple.  The DeVos family has mired their business interests in the financial well-being of Spectrum Health.  The old man, Rich DeVos, was the founding chairman of the health care colossus and remains an active member of the board.  Dick Jr. headed the Butterworth Foundation, a non-profit that solicits funds for the expansion of Spectrum Health, and keeps his hand in the game with his recent investment -- ahem, gift -- to the Spectrum's children's hospital that bears his mother's name.

With this influence over Spectrum, the old man has hitched the family's star to the big Michigan Street medical complex which will be paid for with income from Spectrum Health and its affiliates, doctors, contractors, and other related business activities.  Plus, there are all the entanglements that the DeVoses' partners, the Van Andel family, have with Spectrum Health through the Van Andel Institute.  So, don't look to Dick Jr. to watch your back on this one, dear readers.

SAY ANYTHING

I've had a lot to say about Dick Jr.'s campaign ads for governor -- and none of it good.  But I haven't wanted to leave the impression that Guv Jen has covered herself in glory by a lack of commentary about her campaign, so I was working on an article about her economic illiteracy.  Alas, this morning Dick Jr. had a radio commercial that trumped any of the economic nonsense that Jenny has spouted.  So he's not giving me a chance to appear even-handed in this campaign -- even though I'm trying.

To wit, Dick Jr. pronounced that evil Big Oil is raping the consumers with record high gasoline prices while raking in record profits.  The problem with Dick's charge against the oil companies is that it's a load of cobblers, as any experienced businessman -- as he claims to be -- would know.  (Besides, who is Dick Jr. to complain about high prices for ordinary products in light of the extortionate amounts his Quixtar "Independent Business Owners" browbeat their relatives and friends into paying for soap and vitamins?)

Gasoline is expensive, because China and India have greatly increased the demand for the petroleum from which it is refined.  In time new oilfields will go into production, and supply will exceed demand and prices will drop.  Meanwhile supply is artificially restricted because U.S. lawmakers banned drilling for oil across large swaths of the country, including the Alaskan Arctic, the West Coast, the eastern half of the Gulf Coast, and the Atlantic Coast.  Another problem is that environmental regulations and petty NIMBY politics have prevented the construction of any new gasoline refineries in the U.S. since the late '70s.  That's another bottleneck that restricts the supply of gasoline.

On top of all this, the federal government has mandated a myriad of different gasoline formulas for different parts of the country.  Therefore, if oil companies don't estimate the need for different formulas correctly, one part of the country can experience a gasoline shortage of one formula while another part has plenty of another formula, which is illegal to sell anywhere else.  (Fortunately, the Bush Administration has recently suspended, but not abolished, this idiocy to alleviate shortages ahead of the summer travel season.)

Despite these problems restricting supply, gasoline is still a lot cheaper by volume than that bottled water you buy while filling up at the corner gas station.  That's because the competition in gasoline is intense.  There is no conspiracy to jack up prices above the level that the laws of supply and demand dictate.  (Indeed, it would be a criminal violation of federal law to do so, and repeated investigations have found no shred of evidence of such collusion.)  And that is why oil company profits net out at about 10% percent, which an experienced businessman like Dick Jr. should know is pretty typical for most large companies.

So what should we conclude from Dick Jr.'s latest ad?  Either he isn't the experienced businessman he claims to be, which is why he is spewing such tripe about oil company profits, or he is a political whore who will tell you anything to get your vote.  You decide.

DEVOS NIXES LEGACY

Amway co-founder Rich DeVos made a curious statement after receiving the taxpayer-subsidized Woodrow Wilson award for public service.  According to Mark Fellows in the May 4th edition of Business Review Western Michigan, DeVos stated that he and his wife "have no concern about keeping a foundation alive" after they die.  He apparently has no plans of endowing, upon his demise, a foundation to carry out charitable works.

He then, once again, boasted about getting his name on various things in Grand Rapids and prided himself on his vanity which drove him to "outbid" everyone else to get his name on projects like the new convention center downtown.  Of course, vanity is of little use to a man six-feet-under.  Likewise, a foundation that has been the vehicle for that vanity.  So, DeVos's coolness to an enduring charitable legacy makes sense in that regard.

Then again, the old man may be setting the stage to pre-empt the embarrassing prospect of his heirs looting the cash from his foundation after his death in the way the children of his late partner Jay Van Andel sacked the Van Andel Foundation a month after their father's funeral and then permanently shut it down.

THE AMWAY PROMISE

Amway co-founder Rich DeVos addressed the Grand Rapids Economic Club on Monday and said, "If it's free, it's not worth much."  That quip was in reference to the Kalamazoo Promise, a charitable program bankrolled by an anonymous benefactor providing college scholarships to graduates of Kalamazoo public schools.  Since the advent of that remarkable program, there has been a great deal of curiosity as to why our local tycoons, namely the DeVos and Van Andel families of Amway fame, aren't doing something similar.

After all, if Forbes Magazine estimated correctly just DeVos's fortune, he is netting $8 million a week.  That's a heckuva lot of dough, folks.  With just one week's cash, DeVos could put 200 kids through college.  A couple of months' cash takes care of all the seniors in the G.R. public school system, still leaving DeVos about $300 million in new cash to roll around in every year.  Of course, the real question is whether that Amway fortune is a growing pile of cash or the smoke-and-mirrors of P.R. flacks.  If it's the latter, then we know why the DeVoses and the Van Andels will never sponsor a Grand Rapids Promise.  They can't.

But, of course, the success of the Amway (now Quixtar) scheme is the illusion of great riches that can be had by selling their soap and vitamins and other stuff.  That illusion isn't going to be too convincing if the owners of Amway do not appear to be fabulously wealthy themselves.  The DeVoses and the Van Andels have put on a good show in that regard, until it comes to the point of "show me the money!"  Where is it?

What happened the Van Andel Foundation that supported the Van Andel Institute?  Where is the commitment from the Van Andel children to replace the missing foundation funds with the purported fortune they inherited from their father?  Why do the Amway billionaires need taxpayer subsidies for their business ventures?  Why does DeVos have his share the Orlando Magic in hock to the banks for a quarter billion dollars?  Why did he have to sell the debt-encumbered Plaza Towers building for chump change?  Why does every public project the DeVoses and Van Andels donate money to end up streaming out cash back them?

And, of course, why does DeVos tell the Economic Club that the Kalamazoo Promise is a worthless program?  Why does he make the sour joke that kids trapped in wretched urban school districts can earn millions by skipping college and playing NBA basketball?  All of these things point to the conclusion that the DeVoses and the Van Andels only pretend to be billionaires, because that hype is critical to sustaining the Amway/Quixtar deception that selling their soap is the path to fame and fortune.  Actually, the real Amway Promise is that they'll suck you dry while they dazzle you with the illusion of wealth.

Having run out of marks in the private sector, the Amway clans are having success in re-jiggering their formula to extract cash from taxpayers and charitable donors.  It's you, folks, who need to pony up to them.  It you who must provide the tax subsidies (new hotel downtown, medical complex on Michigan Street), business franchises (the Van Andel Arena, the DeVos Convention Center), the higher rates for health care (so Spectrum can do its part in subsidizing DeVos's new medical complex), and donations (to pay for the Van Andel Institute now starved of Van Andel family financial support).  So forget that nonsense about the DeVoses and Van Andels funding a Grand Rapids Promise.  You people just don't understand which direction the cash is supposed to flow in.

[NOTE:  I should make clear that I believe no businessman like DeVos is obligated to turn over one dime he earns to charity.  He owes you and me, as members of the public, nothing.  However, he and his Amway cohorts have opened the door to this scrutiny by putting themselves out as great public benefactors, while in fact reaping substantial benefits from the public.  I find dishonesty in this, and that is why I bring attention to these matters.  Click here for links to related articles.]

HOW DICK JR. SAVED RIVER CITY

I saw the latest campaign ad for Dick Jr.'s run for governor.  It opens with photographs of a dilapidated downtown Grand Rapids circa 1970, which Dick DeVos credits himself for rescuing from its pit of despair.  Other than Dick Jr. being barely out of short pants when he allegedly began his program to renovate downtown, there's the inconvenient fact that the Amway co-founders, his father Rich DeVos and the late Jay Van Andel, took the credit for everything.  Well, maybe Dick Jr. was working behind the scenes.

Even so, I think there were other factors involved in bringing downtown out its funk of the '70s.  For example, the strong economy of the '80s and '90s that brought renewal to city centers across the country.  But, I'll let Dick Jr. have credit for all the glory of a reinvigorated downtown Grand Rapids, if he makes public all of the benefits he, his family, and the Van Andels have reaped from their involvement in downtown development projects.

MEDIA CLUELESS ON DICK JR.'S WEALTH

The big news in state politics this weekend was Dick DeVos's disclosure of his financial interests in lieu of making his tax returns public, as past contenders for the governor's office have traditionally done.  (State law requires neither disclosure.)  DeVos, the eldest son of Amway/Quixtar/Alticor founder Rich DeVos, said that the list of companies in which he has a stake is sufficient for voters to determine what, if any, conflicts of interest he may have.  Because that was the purpose of the disclosure, he attached no values to these financial interests.

Nevertheless, both the Grand Rapids Press and the Detroit Free Press surmised that DeVos must be very wealthy.  Indeed, the Free Press declared that Dick Jr. must be worth a half billion bucks.  How?  Apparently Forbes Magazine's estimate that Dick's dad is worth $3.4 billion had a role to play in this mystery math.  What is overlooked is that the Forbes estimate relies heavily upon the P.R. the DeVos family puts out about itself.  However, the Grand Rapids Press assures us that all of Dick Jr.'s finances are hunky-dory because the Fixer Charlie McCallum's law firm, Warner Norcross & Judd, says so.  (Of course, the Press didn't mention that the Fixer sits on the board of the DeVos family firm which has been reduced to bottling soap for other companies, essentially a big job shop that if Forbes were correct has the incredible net value of almost $7 billion -- remember the Van Andel family accounts for the other half of Amway.)

As we have said here before, when the DeVoses and the Van Andels have to hock everything they own and then panhandle for tax dollars and charitable donations to build and operate anything new they start in town, there is reason to believe that the Scamway fortune is nothing but smoke and mirrors.  But the financially illiterate local media hasn't figured that out, so they keep reporting about billions for which little evidence exists.  (Again, where is that press release from the Van Andel family about their huge endowment of the Van Andel Institute?  Perhaps it got buried under the release about the thirty grand the VAI is paying into CEO Dave Van Andel's retirement fund.)

So, if you ask me, here's why Dick Jr. won't release his tax returns:  He is telling the truth when he says it is to keep private the financial interests he has in common with family members.  And what is that?  You heard it here first:  The DeVoses are paupers and Dick Jr.'s wealth comes from his wife Betsy, heiress of the Prince Corporation fortune.  Unlike Dick Jr.'s father, her father really did create wealth by building a successful manufacturing company.

CONFESSIONS OF A FORMER PYRAMID BUILDER

Caught an interesting political spot on t.v. tonight.  Dick Jr. in his run for governor ran an ad in which an Alticor (f.k.a. Amway) employee admitted that the company had been in serious trouble recently.  Then other employees lauded Dick Jr. for turning Scamway around.  Apparently he feels the need to establish his bona fides as a real businessman.  For reasons I have stated elsewhere, I think this is an uphill battle for the young DeVos.

Of course, you heard it here first about Amway's financial problems.  We covered how the Amway/Quixtar pyramid was crumbling and the Fixer helped the DeVoses and Van Andels with a financial workout of their multi-level marketing scheme.  We explained how these alleged benefactors of River City got their hooks into tax dollars and other public revenue streams to fund their workout payments.  And we showed why that indicates that there is no multi-billion-dollar Amway fortune.  (We're still waiting for the Van Andel heirs to commit Dad's billions to the Van Andel Institute, while son Dave is making sure he nails down that $30,000 pension for heading up the institute.)

Because of all this, for the past twenty years there has been an ethical sewer flowing from Ada down Michigan Street hill into downtown G.R.  Even though it stinks to high heaven, the local media has ignored it all, especially DeVos suck-up Danny Gaydou, publisher of the Grand Rapids Press.  So why did Dick Jr. run counter to the family's 11th commandment to hype Amway at all costs?  Maybe he thought the hostile Detroit media would eventually catch up with the Amway's financial troubles and report them an at inopportune moment doing the campaign.  So he's making a virtue out of a vice in a pre-emptive move.  Clever politicking to ensure smooth sailing, I suppose.