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August 2018

Spotlight on Chilton, Dallas & Wilcox Counties

The Edmund Pettus Bridge over the Alabama River at Selma is a thing of beauty, as well as a historic icon. Photo courtesy of Alabama Tourism Department/Art Meripol

Chilton, Dallas and Wilcox counties range from the foothills of the Appalachians south along banks of the Alabama River — a region that’s home to agriculture, rich with history and appealing for hunting and fishing.

Cities and towns have made the most of their assets, with riverfront developments, downtown redevelopment and other amenities designed to enhance the quality of life.

Forest products and other agriculture have long been the backbone of the economy in these counties. While those industries continue to thrive, newer sectors have joined the mix in recent years — especially automotive suppliers.

Chilton County’s largest employer is Adient, in Clanton, an automotive seating and interiors supplier with 750 employees. Another major Clanton automotive supplier is Kumi Manufacturing Alabama LLC, which makes molded plastic products. More such firms are being recruited.

Major wood and paper employers in Chilton County include Boise Cascade, West Fraser, South Coast Paper and Taylor-Made/Reynolds. And the county’s new hospital, St. Vincent’s Chilton, opened in 2016, is also proving to be an economic engine.

Chilton County also has a branch of Jefferson State Community College, and its airport continues to grow to accommodate larger aircraft.

In Dallas County, which was named the state’s No. 1 county for new investment in 2017, there’s also a healthy automotive sector. HL-A came to Selma in 1988 — first called All Lock — and continues to be a major employer today. The county’s largest employer is in the forest products sector — International Paper Co. with 768 employees. Recently, International Paper announced plans for a $552.7 million expansion at its Riverdale Mill in Selma to increase its industrial packing business.

Dallas County is a hub for health care in west central Alabama, with Vaughan Regional Medical Center and related health care industries. Wallace Community College Selma and the historic Selma University offer opportunities for higher education.

Dallas County’s Craig Field Airport and Industrial Complex continues to grow. History-based tourism is important in the county, as are the sites of many civil rights events in the 1960s and beyond, and several sites are part of the Alabama Civil Rights Trail. The Selma Interpretive Center is a major attraction and recently opened an expansion.

Wilcox County’s largest employer is International Paper, in Pine Hill, with 470 employees. Golden Dragon Copper Tubing is also among the largest.

Last year, J. Paul Jones Hospital in Camden became affiliated with UAB Health System. The hospital also operates two rural health clinics. The county’s Camden Municipal Airport is lighted and the town is working on GPS equipment.

Lori Chandler Pruitt is a freelance writer for Business Alabama. She lives in Birmingham.

Top Headlines: Digium acquired, NAFTA deal, Mercedes-Benz’s new electric SUV

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Canadian communications company to acquire Digium

Canada-based Sangoma Technologies Corp., a provider of hardware and software for voice over IP, plans to acquire all of the outstanding shares of Digium Inc. of Huntsville. The $28 million deal is expected to close on or about Aug. 31. Digium is the creator of Asterisk, the most widely used open source communication software in the world, along with Sangoma’s FreePBX. – MarketWatch

New NAFTA deal set between U.S. and Mexico

U.S. President Donald Trump and Mexican President Enrique Peña Nieto announced a new US-Mexico trade deal on Monday, completing a major step toward the renegotiation of the North American Free Trade Agreement, or NAFTA. The deal is the result of five weeks of intense one-on-one talks between the Trump administration and Mexican officials. – Business Insider

Hoar Construction names new leadership plan

Hoar Construction has announced its succession plan coming out of its annual Officer’s Planning Meeting, and changes have already begun. As of Friday, Turner Burton began serving as president of Hoar Construction; Rob Burton remains chairman and CEO. In addition, Randall Curtis has been named COO, and Will Watson has taken over as vice president of the Alabama Division. – News release

Mercedes-Benz gives a peek at new electric SUV

Mercedes-Benz is getting closer to revealing its plans for the EQ electric brand, and the SUV that it plans to build in Tuscaloosa. Mercedes’ parent company Daimler put out a tweet over the weekend giving a quick flash of the EQC’s front end. The EQC’s global reveal will take place on Sept. 4. – AL.com

Alabama Republicans mostly mum on Sessions

House Republicans’ Alabama delegation has been remarkably quiet as Attorney General Jeff Sessions endured his latest round of criticism and humiliation at the hands of Trump, who has accused the man he nominated to lead DOJ of being “missing in action” and “scared stiff.” Amid this latest confrontation, not one member of the House delegation from Alabama has tweeted a word of support for Sessions except Rep. Gary Palmer, who responded only to what he claimed was negative media attention and publicly defended the attorney general. – Politico

‘Black Panther’ star tells kids in Montgomery to mind teachers

Black Panther” star Michael B. Jordan just started working on a new project in Alabama, but he’s also trying on another role for size as a motivational speaker for young students. Jordan reportedly touched down in the Southern state on Monday, alongside co-stars Jamie Foxx and Brie Larson for the upcoming film Just Mercy,  which is based on the memoir by Bryan Stevenson, a Montgomery, Ala., attorney and Equal Justice Initiative co-founder. But it was a different group of people that the Creed actor was spotted hanging with on his first day. – Yahoo

Alabama Medicaid work rules up again for federal approval

Alabama’s second try at imposing Medicaid work requirements is almost ready to submit to the Trump administration for approval, after an earlier version got kicked back for revisions this summer. The state submitted its first application to the Centers for Medicare & Medicaid services on June 29—coincidentally the same day that a federal court in the District of Columbia struck down the CMS approval of Kentucky’s Medicaid work requirement plan. Alabama revised its proposal per instructions from the CMS. – Bloomberg


Dave Helms

Weathering the Storm: Insurance Coverage For Risks Posed By Natural Disasters

Alabama businesses face significant risks posed by weather-related natural disasters, including physical losses to property, business interruptions and loss of income. Though Alabama was mostly unaffected by the devastating natural disasters suffered throughout the country last year, these events resulted in more than $330 billion in losses according to some insurance industry estimates.

While the full economic impact of the 2017 natural disasters is not fully realized, a 2013 study by the American Sustainable Business Council revealed natural disasters are particularly devastating to small- and mid-size businesses. According to the study, one-quarter of small and mid-size businesses hit by a catastrophic storm do not reopen. The researchers also estimated small businesses lose an average of $3, 000 per day after closing caused by a major storm event.

The impact of last year’s extreme natural disasters, as well as those other disasters of the past decade, demonstrate how important insurance is for businesses in absorbing resulting financial losses. Thus, Alabama businesses should take proactive measures to ensure their insurance policies meet their particular risks and expectations.

Insurance coverage for damage caused by a natural disaster is available through a variety of common insurance products generally referred to as “property” insurance policies, but they come under other names, such as “inland marine, ” “fire, ” or “multi-peril” or “all risk” insurance policies. Depending on the circumstances of the loss, the following coverages are available to insure damages caused by natural disasters:

Physical Loss or Property Damage

Property damage coverage generally provides coverage for physical loss or damage to business property, such as buildings, machinery, equipment, inventory and raw materials. The typical property insurance policy provides coverage for the cost to repair, replace or rebuild property that suffers physical damage. However, the cause of the loss is often crucial to determining whether coverage is afforded under the typical property insurance policy. For example, most property policies cover damages caused by fire, windstorms, hail, riots and explosions. However, many property insurance policies contain exclusions for flood damages, but flood insurance is generally available either as stand-alone products or as endorsements to other policies. Thus, Alabama businesses vulnerable to flood damages should review their insurance programs to ensure insurance is available to provide coverage for flood risks.

Debris Removal

Debris removal coverage is a common additional coverage to most property insurance policies. It covers expenses incurred in the removal of debris of covered property damaged by an insured peril, such as a tornado or hurricane. Debris removal coverage can be particularly valuable for businesses needing to dispose of hazardous materials following a natural disaster due to the high costs associated with the disposal of such materials. However, debris removal coverage may be limited to a percentage of the total loss and may exclude trees, shrubs and plants.

Extra Expense Coverage

Natural disasters often cause businesses to incur additional expenses beyond repairing or replacing damaged property. The cost of operating a business often increases during the aftermath of a natural disaster. Extra expense coverage is intended to cover the insured for such extra expenses. Extra expense coverage may include the cost of generators when electricity is lost in the aftermath of a storm, costs of security guards to prevent looting or costs associated with the usage of a temporary business location during the restoration period.

Business Interruption Coverage

In the aftermath of a natural disaster, businesses likely suffer lost income and profits from the suspension of their operations. Business interruption coverage is designed to cover lost income and profits. This coverage is typically limited, however, to the loss of income sustained during a “necessary suspension” of operations. Depending on the policy, this may require a total cessation of operations or a partial cessation. Additionally, most policies include a 72-hour waiting period after the damage occurs before business interruption will be covered. Thus, business owners are advised to read this coverage closely and determine whether their needs are being met for potential business interruption risks.

Contingent Business Interruption Coverage

Even if your business is not directly impacted by a natural disaster, you could still suffer losses if your business relies on an affected party. Contingent business interruption coverage provides coverage for loss of income due to physical loss or damage to property of a third party, such as a supplier, customer or logistics company your business relies on to operate your business. For example, a manufacturer can purchase contingent business interruption coverage to protect it if its sole supplier of a key component suffers destruction of its factory and that causes the manufacturer to suffer a business income loss from its inability to complete manufacture of its product. Accordingly, a business that has a close relationship with a supplier physically located in a destroyed building may be able to recover for losses suffered in the wake of the destruction of that supplier’s physical plant. Similar to business interruption coverage, contingent business interruption coverage is often subject to a waiting period and does not incept until after the specified waiting period has elapsed.

Civil Authority Coverage

Civil authority coverage is designed to provide coverage for business income losses incurred as a result of an order by a civil authority preventing access to the insured’s place of business. For example, this coverage applies if an evacuation order, roadblock or forced power outage prohibits access to your business.

Service and Utilities Interruption Coverage

This coverage is designed to provide coverage for business income losses attributable to interruption of utility or telecommunications service. Income losses from such outages should be covered under most property insurance policies. As with contingent extra expenses, a policyholder’s expenses in minimizing the loss caused by service interruption should be covered. For instance, the policy may cover the purchase of cell phones for employees to use while the company’s phone service is out of order.

Builders Risk Insurance Coverage

This coverage is designed to protect construction sites from loss and damages. Businesses in the construction industry should consider builders risk insurance products to protect against damages caused by natural disasters. Like traditional property insurance, builders risk insurance generally provides coverage for damage caused by fire, lightning and wind. However, damages caused by floods are frequently excluded on most builders risk policies. If your business is working in an area where you have a high risk of flooding, you may need to add supplemental coverage to your builders risk policy to cover it.

Summary

Each business faces unique obstacles and challenges, and it is critical to develop a plan to prepare for potential impact arising from natural disasters. As we have all been reminded over the past decade, disasters will happen. With this realization, Alabama businesses should consult with their insurance and legal advisors to identify the most appropriate insurance products for their business risks.

Brandon J. Clapp is an attorney in the Birmingham office of Swift, Currie, McGhee & Hiers, LLP. He is a member of the firm’s coverage and commercial litigation section, where he counsels clients in a broad variety of litigation matters, including insurance coverage, construction, commercial disputes, professional liability and personal injury. He may be reached at brandon.clapp@swiftcurrie.com.

Top Headlines: Airbus flying cars, Atlas RFID Jovix drone, UAB Stroke Center

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Macon County officials expect decision on Air Force project soon

Advocates trying to land a major U.S. Air Force contract in Macon County should know in a matter of weeks whether it's coming. Moton Field, home of the famed Tuskegee Airmen, is one of the sites in contention for an assembly plant for the next Air Force jet fighter trainer. Leonardo DRS, an affiliate of an Italian company that builds jet fighter trainers for several of America's allies, is one of the bidders for the project and chose Macon County as the plant site if it wins the contract. – AL.com

Airbus involved in finally bringing us flying cars

Japan is making a push to develop flying cars, enlisting companies including Uber Technologies Inc. and Boeing Co. in a government-led group to bring airborne vehicles to the country in the next decade. The group will initially comprise 21 businesses and organizations, including Airbus SE, NEC Corp., a Toyota Motor Corp.-backed startup called Cartivator,  ANA Holdings Inc.,  Japan Airlines Co., and Yamato Holdings Co., according to a statement Friday. – Bloomberg

Oracle Innovation Lab picks Atlas RFID's Jovix drone

Birmingham's Atlas RFID is one of six firms picked for participation in Oracle Construction and Engineering's Innovation Lab, based in Deerfield, Ill. The lab is described as a technology and digital innovation site where visitors can interact with connected devices, autonomous vehicles, augmented reality and artificial intelligence. – AL.com

Alabama among states where poor credit hikes auto insurance cost

The dreaded credit score strikes again, this time hiking your auto premium. According to a study from insuranceQuotes.com, credit history can have a significant impact on car insurance costs, meaning drivers with poor credit can pay double—or even triple—depending on where they live. Alabama ranked as the fifth worst state in the union for paying higher premiums due to poor credit. – News release

PPG Foundation gives $20, 000 to two Alabama organizations

The PPG Foundation recently invested $20, 000 in two Alabama organizations in support of educational programs. The grants were made on behalf of PPG’s aerospace facility in Huntsville. The foundation provided $15, 000 to The Schools Foundation in support of its Summer Adventures In Learning (SAIL) program, which reaches 500 low-income students in the school districts of Huntsville, Madison County and Madison City. A $5, 000 grant to the University of Alabama Huntsville Foundation will provide scholarships for underprivileged girls to attend Girls Science and Engineering Day. – News release

Alabama physician gets 12 years, 1 month for pill mill role

An Alabama physician has been sentenced to 12 years and one month in prison for his role in a Montgomery pill mill. U.S. Attorney Louis Franklin Sr. told Al.com that 56-year-old Gilberto Sanchez was found guilty last week of prescribing unnecessary controlled substances for his patients. He was also guilty of committing health care fraud and laundering money. – AP

UAB Stroke Center joins NIH StrokeNet

The University of Alabama at Birmingham will fill a large hole in the stroke belt as it leads a consortium of Deep South medical institutions in joining the National Institutes of Health StrokeNet under a grant of $1 million over five years from the National Institute of Neurological Disorders and Stroke. – News release


Dave Helms

Flashback: Gulf Drilling Vigorous after Disaster

Offshore oil platform in the Gulf of Mexico off the coast of Louisiana, April, 2017.

In the April 2014 issue of Business Alabama, four years after the April 20 explosion on BP’s Deepwater Horizon drilling platform in the Gulf of Mexico, our feature “Gulf Oil Feeding Frenzy” detailed the re-emergence of drilling in the Gulf.

Drilling activity hardly blinked at the environmental disaster of the BP spill. After a modest 18-month decline in Gulf production, there began a steady rise that has continued through 2018.

Set that alongside this month’s feature on Energen’s full-bore drilling in west Texas and you get the idea of an industry undaunted by anything, including low prices.

“The Gulf states depend on offshore drilling, and no one would tolerate an end to it, ” said Philip Johnson in 2014. “Fishermen work on the rigs so they can pay for their fishing boats, ” the University of Alabama petroleum engineering professor said. “California doesn’t allow new offshore drilling, but their economy doesn’t depend on it.”

“A monster reservoir, ” Johnson called the Gulf, noting that the costs of production are monstrous as well — deepwater platforms costing around $3 billion.

To hedge the risk of another environmental blowup, exploration companies formed the Marine Well Containment Co., which comprises 10 members, including ExxonMobil, Chevron, ConocoPhillips and Shell. In 2013, MWCC selected Theodore, on the west side of Mobile Bay, as one of its two shore base locations.

“Gulf of Mexico oil production is among, if not the, most profitable of any region in the world, ” said Fadel Gheit, managing director of oil and gas research for Oppenheimer & Co. in New York. Unit profit in the Gulf of Mexico, he said, is $25 to $30 BOE, or 50 to 100 percent above the industry’s world average of $12 to $18 BOE.

With Gulf production at 1.2 million barrels a day in April 2014, industry analysts were estimating 1.9 million b/d by 2020.

Four years later, the U.S. Energy Information Administration recorded 1.7 million b/d in January 2017, with estimates of 1.9 million b/d by January 2019.

Chris McFadyen is the editorial director of Business Alabama. 

Top Headlines: UAB business school opens, Hibbett Sports Q2 falls short

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Adtran CEO: CenturyLink Rebuilding Investment After Level 3-Induced Pause

Adtran’s CEO says his company has diversified in recent months after overcoming a “holiday surprise” from CenturyLink. Tom Stanton told reporters this week that his company had gone through three consecutive quarters of record revenue when CenturyLink paused its partnership with the networking hardware vendor. “That was when the Level 3-CenturyLink merger happened, and at that point in time we were headlong into a very large-scale vectoring program with CenturyLink, and all of that kind of got put on hold, ” Stanton said at media event at the company’s headquarters in Huntsville. – CP Online

UAB Collat School of Business opens today

UAB bridges innovation and entrepreneurship with the opening of the $37.5 million facility that houses the Collat School of Business and Bill L. Harbert Institute for Innovation and Entrepreneurship. The 108, 000-square-foot building was designed with input from students and community business leaders so that every detail enhances the learning experience while preparing students to work in modern business environments. – AL.com

Hibbett Sports Q2 falls short of Wall Street expectations

Hibbett Sports Inc. (HIBB) on Friday reported a loss of $1.2 million in its fiscal second quarter. The Birmingham-based company said it had a loss of 6 cents per share. The results fell short of Wall Street expectations. The average estimate of five analysts surveyed by Zacks Investment Research was for earnings of 8 cents per share. – AP

Alexa may be losing her grip on home speaker market

It’s easy to imagine a world in which “Alexa” is synonymous with talking computers, or Echo with smart speakers—just as Kleenex is synonymous with facial tissue, Xerox with copy machines, or Google with online search. (These are called genericized trademarks, or proprietary eponyms, by the way. They need a better name.) That’s almost the world we live in today, thanks to the dramatic early success of Amazon’s pioneering smart speaker and the surprisingly capable digital assistant that animates it. Almost, but not quite. – Slate

Co-writer of ‘Sweet Home Alabama’ dies at 68

Ed King, the Lynyrd Skynyrd guitarist who joined the band in 1972 to give the Southern rock group its iconic three-guitar sound, died Wednesday in Nashville. He was 68. A cause of death was not specified, though King had been battling lung cancer and had recently been hospitalized for the disease. – Rolling Stone

Tyonek Global Services of Madison wins $9.8M Air Force contract

Air Force Space Command has awarded a $9.8 million to the Madison office of Tyonek Global Services. Tyonek, a subsidiary of Tyonek Services Group, Inc. and Tyonek Native Corporation, will provide formal cyber operations training, course development and other services for the 39th Information Operations Squadron, the U.S. Air Force's information operations and cyber operations training unit. – AL.com

Women-owned businesses grow in Alabama, down slightly in Birmingham

Alabama is 17th among the 50 states for growth of women-owned businesses since 2007. And while those numbers have also improved for Birmingham over the same time period, the Magic City did see a decrease over the last year. That's according to the eighth annual State of Women-Owned Businesses Report, commissioned by American Express. – AL.com

Business Expo draws thousands to Mobile Convention Center

Thousands of people packed the Mobile Convention Center on Thursday for the 2018 Business Expo hosted by the Mobile Chamber of Commerce. It's Mobile's largest business-to-business trade show. More than 200 vendors set up inside the Convention Center to showcase different products and services. The expo features businesses from a variety industries such as health care, fine dining, and education. The annual event attracts more than 2, 000 people each year. – Fox-10

Toyota creates joint venture to bolster AI tech advantage

Four Toyota Motor group members including Denso and Aisin Seiki intend to combine their research and development operations for self-driving vehicles in a joint venture, sources say. The new entity — to be set up by the end of the year at the earliest — will develop technologies for controlling acceleration, braking and steering based on the judgment of artificial intelligence. The idea is to pool the companies' resources to develop integrated self-driving tech packages. – Nikkei


Dave Helms

Top Headlines: New tariffs on Chinese goods, Another Broken Egg expands

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Hyundai gets a little crazy with 2019 Elantra

As it slowly expanded its beachhead in the U.S.,  Hyundai played it pretty safe. But now that the automaker has been acknowledged for making some darn good vehicles, it's getting a little more… experimental. First came the Kona, then the 2019 Santa Fe SUV and now the 2019 Elantra. The 2019 Elantra is, frankly, a wild departure from the more demure 2018 model. The front end is a menagerie of triangles, from the headlights to the heavily sculpted lower fascia. – Roadshow

New round of tariffs on Chinese goods takes effect

A new round of U.S. tariffs on $16 billion worth of Chinese imports kicked in on Thursday, prompting Beijing to retaliate with its own levies on American goods worth the same amount. The latest trade escalation comes as officials from the world's two largest economies meet for tariff negotiations in Washington. – CNBC

IllumiCare partnering with Vizient Southern States

A Birmingham-based health tech company is partnering with an Atlanta firm on a four-state venture. IllumiCare and Vizient Southern States, a membership alliance of not-for-profit health care providers, are teaming up to provide lower-cost option information to member healthcare systems in Georgia, Mississippi, Louisiana and Tennessee. – AL.com

New Medicare cards going out to Alabamians this month

Residents of Alabama, as well as four other Southern states, will begin receiving new Medicare cards this month. The Centers for Medicare & Medicaid Services say everyone with Medicare in Alabama should receive the new card by the end of September. – AL.com

Another Broken Egg café expanding in Huntsville

Another Broken Egg is adding another metro Huntsville location. The popular breakfast, brunch and lunch eatery will open a restaurant in downtown Huntsville on Oct. 8. The restaurant will be in the Twickenham Square development at Pelham Avenue and Gallatin Road next to Publix, according to developer Crunkleton Commercial Real Estate Group. – AL.com

CVS to pay $1M penalty for recordkeeping flaw in Alabama store

CVS Health Corp has agreed to pay a $1 million penalty to resolve allegations that a pharmacy it owns in Alabama violated federal recordkeeping regulations in relation to its dispensing of painkillers and other prescription drugs. The settlement, announced by the U.S. Justice Department on Tuesday, resulted in the largest civil fine paid in Alabama by a company registered with the U.S. Drug Enforcement Administration to dispense controlled substances. – Reuters

Ex-lawmaker who took bribes to be sentenced this afternoon

A former state legislator who said executives from Drummond Company and Balch and Bingham wanted him to influence north Birmingham residents to oppose expansion of an environmental cleanup site will be sentenced today in federal court. Oliver Robinson pleaded guilty in September 2017 to one count of conspiracy, one count of bribery, four counts of fraud, and one count of tax evasion. His sentencing will be held at 1:30 p.m. before U.S. District Judge Abdul Kallon. – AL.com

Birmingham's Byars Wright acquires The Insurance Store

Birmingham-based insurance company Byars|Wright Inc. has acquired Alabaster-based independent insurance agency The Insurance Store. The deal, concluded July 1, is the company's second acquisition in a year's time, following its acquisition of Junkins-Yarbrough little more than a year ago. The acquisition should increase the agency's revenue by about 10 percent and add roughly 1, 500 customers to the company portfolio. – AL.com


Dave Helms

Energen Corp. Bought for a Premium, $9.2 Billion

Diamondback Energy Inc. on August 14 agreed to buy Energen Corp. for $9.2 billion. Energen — based in Birmingham, Alabama’s sixth largest public company — has been focused on drilling for oil in the Permian Basin of west Texas. Diamondback, based in Midland, Texas, has been one of Energen’s closest competitors in the Permian Basin — which has become the hottest and most competitive oil play in the U.S., most recently attracting giants Exxon-Mobile and BP LLP.

Here are some of the reasons why Alabama’s Energen was such a valuable prize:

  • Energen now maintains a pure play focus on oil exploration.
  • Energen has become a specialist in the west Texas fields. Between 2009 and 2012, the company invested around $1 billion in the Permian Basin in West Texas and New Mexico, with at least seven major land acquisitions to stimulate growth. By 2014, the company owned 300,000 acres in the drilling hot spot.
  • The Permian Basin is home to the nation’s most plentiful oil reserves. In April, Tortoise Capital Managing Director Rob Thummel told Bloomberg that the Permian Basin could eventually surpass Saudi Arabia’s Ghawar as the largest oil field in the world. According to a June report by the U.S. Energy Information Administration, activity in the basin produces approximately 3.5 million barrels of oil per day. Drilling in the Permian Basin began in the 1920s, but natural pressure started to wane 50 years in. In the 2010s, Energen and other companies turned to fracking and horizontal drilling to maintain output.
  • Energen’s performance in the basin has been particularly impressive. While their wells are spread across three sub-basins, Energen has focused largely on the Midland Basin, with the development of the company’s Generation 3 hydraulic fracking wells. In the first quarter of 2018, Energen’s wells produced a total of 92.9 thousand barrels of oil equivalents per day. Adjusted EBITDAX was $240.6 million, 10 percent better than their early expectations.
  • Energen stock experienced its most drastic drop in 2016, with stock prices falling from over $60 to $23 that February, corresponding to a drop in oil prices. Noticing Energen’s record, activist investors have taken a keen interest in acquiring the company, and Energen has been resisting invitations to auction for over a year now. Corvex Management LP first broached the subject in May 2017.
  • Also in May Corvex officer Keith Meister, protégé of billionaire activist investor Carl Icahn, sold Ichan 2 million shares of Corvex’s Energen stock, which at the time went for $64.84 per share. He also gave Icahn the option to buy 2 million more shares by November. At the time, Corvex claimed about 8.7 percent ownership of Energen with 8.5 million shares.
  • By early July, Energen stock was up nearly 19 percent over the same time last year. Just before Independence Day, a new filing showed that Icahn had increased his stake to 7.5 percent. Even as stock continued to climb, Icahn suggested that Energen shares should be valued as high as $100 each. At the time, stock was already trading around $72.50. Prices showed a 57 percent leap from their lowest point of $46.16 last year.
  • Diamondback’s offer of $84.95 per Energen share was a premium of 16 percent to Energen’s Tuesday, August 14, close. Energen shares rose 9.3 percent to $79.90 in after-market trading, while Diamondback shares fell 5.5 percent to $126.40.

Click here to read the original article on Energen from the August 2018 issue 

Investor Protection Requirements for Seniors and Vulnerable Adults

Sarah Yates, associate with Bressler, Amery & Ross P.C. in Birmingham

Alabama was one of the first states to enact legislation requiring certain financial institutions to report suspected financial exploitation of senior and other vulnerable investors. Other states have since followed suit, and recent efforts by the Financial Industry Regulatory Authority (FINRA) and Congress to protect senior investors indicate that these issues will remain in the spotlight as the senior population continues to grow. Alabama broker-dealers and investment advisers should ensure they are in compliance with the law and monitor continuing developments in this area.

The Protection of Vulnerable Adults from Financial Exploitation Act

Drafted by the Alabama Securities Commission (ASC), the Protection of Vulnerable Adults from Financial Exploitation Act went into effect in July 2016. Its goal is the protection of “vulnerable adults, ” defined to include persons 65 years of age or older and persons over 18 years old who are senile, have intellectual or developmental disabilities, or are mentally or physically incapable of adequately caring for themselves — in short, individuals who are most susceptible to financial abuse.

The Act applies to broker-dealer and investment adviser firms, as well as their agents, investment adviser representatives and persons serving in a supervisory, compliance, legal or associated member capacity. Banks are not subject to the Act.

Key Provisions of the Act

First, firms are required to notify both the ASC and the Department of Human Resources (DHR) if they have a reasonable belief that financial exploitation of a vulnerable adult has occurred or is being attempted. Signs that a senior investor could be the victim of financial abuse may include uncharacteristic and repeated cash withdrawals, the appearance of new and unknown associates at meetings, or sudden changes to financial documents such as powers of attorney and account beneficiary forms, among other unusual activity and behaviors. The initial reporting form for suspected financial exploitation was developed by the ASC and DHR and is located on both of their web sites.

Second, firms are permitted (but not required) to notify a trusted third party, such as a family member or someone closely connected to the vulnerable investor, about unusual or potentially exploitive activity. It is up to the firm to choose an appropriate individual to contact; however, in doing so, the firm must abide by federal privacy laws and consider other possible ramifications of sharing sensitive financial information with third parties. Firms can avoid many such issues by taking proactive measures early in the relationship with the investor to identify a trusted contact.

Third, firms are authorized to delay or place a temporary hold on a disbursement of funds from the account of a vulnerable investor in situations of potential financial exploitation. If a firm chooses to delay a disbursement, it is required within two business days to notify all authorized parties on the account at issue and report to the ASC and DHR. The firm must also conduct an internal review of the suspected exploitative activity. The review and final resolution of any potential issue must be expeditious: a firm may not delay a disbursement of funds beyond 15 days without an extension from the ASC or DHR.

Firms that fully comply with these provisions can expect to receive immunity from civil and administrative liability that could result from, for example, disclosing confidential information to third parties. The Act maintains that a firm must act both in good faith and with reasonable care to receive the benefit of immunity.

Guidance from the Alabama Securities Commission

The ASC has provided a written guide for firms to assist in implementation of the Act. The guide—located on the ASC’s web site at http://asc.alabama.gov—discusses policies, procedures, and training that firms should develop to identify vulnerable investors and to detect potential financial abuse. Some suggested practices include specialized training for advisors and other personnel to spot the signs of cognitive decline and to communicate with persons experiencing diminished capacity, and developing policies such as placing “watches” on accounts with suspicious transactions, documenting contact with senior investors, and instituting appropriate escalation procedures. The guide also walks through the mechanics of the Act’s reporting requirements and considerations when notifying third parties or delaying disbursements.

New Developments in Senior Investor Protection

Since the passage of Alabama’s Act, other states have followed suit and enacted their own laws protecting senior investors. Any Alabama broker-dealer or investment adviser seeking to expand their business to another state should be aware of that state’s requirements and how they may differ from Alabama’s requirements. In Missouri, for instance, reporting of suspected financial abuse is optional, not mandatory.

In 2018, both the Financial Industry Regulatory Authority (FINRA) and Congress took action to protect senior investors from potential exploitation. Changes to the FINRA Rules include allowing member firms to place temporary holds on disbursements and requiring firms to make a reasonable effort to identify a trusted third-party contact in connection with the account opening process.

Recent federal legislation titled the Senior Safe Act provides immunity to institutions — including banks, credit unions, insurance companies and insurance agencies, in addition to broker-dealers and investment advisers — if they report suspected exploitation in good faith and with reasonable care and provide related training to their employees. However, unlike Alabama’s Act, the federal Act does not require such reporting or authorize the delay of distributions.

These new developments are not a passing trend. According to the U.S. Census Bureau, by 2035, there will be 78 million people age 65 years and older, meaning that one in every five persons in the U.S. will be retirement age. Baby Boomers currently control $13 trillion in investable assets, and that number will only grow, making financial abuse protection for these older investors acutely important. Alabama financial institutions should prioritize the development of policies and procedures to protect their senior and vulnerable adult investors, not only to comply with Alabama’s Act but to stay ahead of the next wave of rules and regulations.

Sarah Yates is an associate with Bressler, Amery & Ross P.C. in Birmingham. She received her J.D. from the University of Alabama School of Law and her B.A. from the University of Alabama. Yates’ practice focuses on the defense of brokerage firms and financial institutions against claims asserted by their customers. She is also a member of the firm’s Senior Issues: Counseling and Litigation Defense group, which provides counsel to corporate clients who confront issues affecting seniors.

Top Headlines: Montgomery council static on budget, Tuscaloosa museum closing

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Grand opening Friday for UAB’s new business nexus

The University of Alabama at Birmingham bridges collaboration, innovation and entrepreneurship with the opening of the $37.5 million state-of-the-art facility that will house the Collat School of Business and Bill L. Harbert Institute for Innovation and Entrepreneurship. “This addition to UAB’s campus heralds a new era of leadership in business education, ” says Collat School of Business Dean Eric P. Jack. The grand opening and ribbon-cutting ceremony will take place Friday at 10 a.m. at 1201 University Blvd. – News release

Hunter Lyons named to ServisFirst Bank board

ServisFirst Bank has named Hunter Lyons as a board member of ServisFirst Bank Mobile. Lyons is the president of Gulf City Body & Trailer Works. He is also a board member of ATA Truck PAC, Clear Point Charities, and the Mobile Area Chamber of Commerce. Lyons is a graduate of the Virginia Military Institute where he earned a degree in economics and Finance. – AL.com

Real Time Summit set Oct. 8-9 in Chattanooga

Chattanooga social media agency SocialLion has partnered with Jeramie McPeek Communications to host a Real Time Summit for Oct. 8-9. The event, for professionals in the news, sports, weather, travel, entertainment and retail industries, will be held at The Westin Chattanooga. Talks will deal with learning how to use high-speed real-time storytelling to grow brands and engage audiences. – AL.com

Business filings now easier to research online in Montgomery County

Submitting mandatory business filings in Alabama is going to be a little bit easier for residents in Montgomery County. On Tuesday, Secretary of State John Merrill announced the continued expansion of online filing tools for citizens and businesses to submit filing documentation to the Secretary of State’s Office and the county Probate Judge’s Office, when the county signed on to provide its citizens the ability to form a Domestic Limited Liability Company. – AL Today

Montgomery Council getting static on latest budget

The Montgomery City Council needs more time to go over the budget for the next fiscal year. They heard loud and clear from residents Tuesday night over some of their concerns. The proposed budget forecasts revenue of $250 million.  But it also calls for an $8 million increase over last year’s budget. And the mayor proposed maybe cutting back on garbage pick up to just once a week. But it’s not sitting well with everyone. – ANN

New markets tax credit helps Talladega College grow

New markets tax credit equity helped an iconic historically black college in Alabama get over a final financing hurdle so it can continue to grow. Talladega College used equity from tax credits allocated by three community development entities (CDEs) as the final piece in a $23 million development that allowed the school to build a new student center and student dormitory facility. – Novoco.com

Museum at Alabama business to shutter

An art museum at a decades-old Alabama company is closing. The Tuscaloosa News reports The Westervelt Co.'s Tuscaloosa Museum of Art will close Aug. 31. Some of the museum's collection of American and Asian art and furniture will remain. But Corporate Communications Manager Susan Poole says other pieces will be “prepared for shipment” and not available for public viewing. – AP


Dave Helms

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