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Zen and the Art of Infrastructure Maintenance

Building Boston’s thorniest construction projects made him rich enough to afford his own island. Now he’s plotting a giant wind farm-an undertaking that could bring Jay Cashman the one thing that’s always eluded him.

By John Wolfson

If you wanted to see Jay Cashman this summer, you needed an invitation to his island. As he has for the past three years, Cashman was using the 200-acre Strong Island, just off the coast of Chatham, as a retreat for himself and his family. One day each week he’d make the four-hour roundtrip drive to his office in Cambridge-he had sworn off helicopters in June after nearly crashing in bad weather-and he’d occasionally agree to important off-site meetings, but that was it. As the season wore on, one of Boston’s most prominent construction moguls pretty much dropped out of sight.

Cashman has long been known as much for his personal life as his huge civil works projects. He lives in what he says is the largest single-family residence in Boston, a six-floor, 16,000-square-foot home with two kitchens, a mini movie theater, and an authentic pub shipped piece by piece from New York. He spent much of the ’80s and ’90s tearing through Boston’s singles scene, cruising the streets in a blue Rolls-Royce, a millionaire Casanova whose tomcatting became a staple of the gossip pages. His role in some of the city’s most controversial construction projects, meanwhile, caused less of a stir. Cashman does the dirty work, the digging and drilling and dredging, yet he’s always managed to keep his hands clean. The work he did on the Big Dig achieved the rare distinction of having no one complain about it. The diffuser tunnels he dug in 100 feet of water for the Deer Island sewage treatment plant were an unqualified success. And while half the South Shore howled in opposition to the Greenbush commuter rail line, Cashman efficiently went about the business of laying track.
Now, however, everything’s turned on its head. Cashman’s private life has settled down since he remarried in 1999, while his business dealings have become the subject of intense scrutiny. First came the news that he’d agreed to sell 73 acres he owns in Fall River to a group proposing to build a liquefied-natural-gas terminal, a project that city’s mayor called “stupid.”

Then, at around the same time Cashman went into semi-seclusion on his island, he announced plans for a spectacularly audacious development venture all his own. No longer satisfied doing the contract work on someone else’s deals, Cashman wants to erect a $750 million cluster of massive windmills in Buzzards Bay. He believes the wind farm could supply half of Cape Cod with electricity-but he’ll have to build it first. A flurry of resistance has so far stalled a similar proposal in Nantucket Sound, and already Cashman has heard from outraged citizens who want to know what business a guy who digs tunnels has constructing 400-foot windmills that are certain to jeopardize narrow shipping lanes, a fragile ecosystem, and, by the way, the view.
The controversy didn’t seem to particularly disturb Cashman. He kept busy with his plans, enjoying his time on the island. Then, on the night of July 10, a 38-year-old Jamaica Plain woman was crushed to death by several tons of plummeting Big Dig ceiling tiles. The demise of Milena Del Valle, unlucky enough to have been traveling with her husband through the I-90 connector at the precise moment 24,000 pounds of tiles came loose, precipitated a public firestorm in Boston. No longer merely an embarrassing boondoggle, the costliest construction project in U.S. history was now a deathtrap, and somebody was damn well going to be held responsible.
Jay Cashman Inc. had done several hundred million dollars’ worth of Big Dig work-but that wasn’t the source of his problems. It turned out that the ceiling tiles at the center of the unfolding tragedy had been installed in 1999 by Modern Continental, the construction behemoth that had made itself the perfect symbol for the entire Central Artery debacle by somehow managing to parlay a few billion dollars of Big Dig contracts into impending bankruptcy. To head off that looming financial disaster, the insurance firm that was on the hook for Modern’s failures hired Cashman in 2004 to provide management oversight of the company. That meant media inquiries about Modern Continental’s role in the tunnel accident were directed to Jay Cashman Inc. Cashman, ensconced on his island, was uncharacteristically silent. He wasn’t returning my messages, either, even though he’d invited me to his island weeks earlier. Just as I started to think he was going to cancel on me, I got a call: It was Cashman, wondering when I was coming down.
Cashman can seem a little distracted at times. You’re never quite sure if he’s heard what you’ve said, or remembered what he’s told you. Which is why it crossed my mind, when I called him from Route 6 on Cape Cod, exactly as he’d instructed me to do just two days earlier, that he might have forgotten about me. “Oh, you’re at Exit 11,” he said, sounding surprised. “Do you swim?”
Upon arriving at the Strong Island landing, I walked down a gently sloping beach, past several overturned dinghies, and approached the water. Cashman sat in a Boston Whaler bobbing five feet offshore, talking into a cell phone and puffing on a cigar, an empty Coors Light can at his feet. He looked tanned and healthy in a black rugby shirt, nylon cargo pants, and sunglasses, still possessing, at 53, a splash of the charm that had made the bedroom conquests of his bachelor days the topic of so much conversation. So engrossed was he in his phone conversation that I assumed it involved the Big Dig accident. Gradually I realized he was discussing the 16-foot gazebo he was building outside his island home. He’d been authorized to build only a 12-footer. He told his lawyer he’d make it right, and then he hung up.
For a man who routinely deals with some of the toughest characters in Boston, this seemed a strangely accommodating way to negotiate. “I don’t like the hard-line approach-it takes too much time,” he explained as a handyman named Mark steered us out into the bay. We were heading for Nauset Spit, a long strip of sand a couple of miles from his island, where Cashman’s wife and her visiting family were swimming. “I always worry that if I get too greedy about something I’ll blow the deal, I’ll have nothing.” He narrowed his eyes, the way he often does during conversations, as though searching for a sign that his point is getting across. “Some people have to milk every deal. My father was that way. He hated to think he’d left a nickel on the table. I often know I could have gotten more out of a deal.”
This approach should not be mistaken for passivity. After all, you can’t compete in Boston’s tooth-and-claw construction industry by playing nice. Peter White, president of J. F. White Contracting, describes Cashman as an extremely aggressive rival. “Until you’ve banged heads with Jay,” he said, “you can’t know him or respect him.”
Cashman’s certainly willing to roll up his sleeves when the need arises. In 1994, while separating their interests after 20 years in business together, he and his brother Jamie got into a fistfight in their lawyer’s office. Jamie had accused Cashman of stealing money from the company. (Friends of both men say there was nothing to the claim. Jamie Cashman did not respond to requests for comment.)
Then there’s the feud with Boston’s mayor. “The problem with Tom Menino,” Cashman told me, “is when everyone is kissing your ass, you start to believe your ass is beautiful. But it’s really just a big, fat ass.”

He went on like this for a while. “Tom Menino works that job like no other mayor. Every little bakery that opens up, he’s there.” Cashman and Menino were good friends going back 25 years. They used to meet for beers during the summer at the Red Coach Grill in Braintree. Cashman traces their falling-out to an incident five years ago, when one of his employees “ripped Menino a new asshole” after Jay Cashman Inc. failed to land a particular contract for the new convention center. “I tried to explain the story to him, that the guy was nuts,” Cashman said, “but it didn’t seem to do the job. Ever since then, it’s been weird.” The frostiness, he said, didn’t inhibit Menino from requesting a $30,000 contribution for the 2004 Democratic National Convention.
A Menino spokesperson was a little more circumspect: “Mayor Menino is surprised that Jay would characterize their relationship in that way. He believes he has a good relationship with Jay Cashman.”
Zipping across Pleasant Bay, we finally arrived at Nauset Spit, and Cashman hopped into the water. He waded over to a pontoon boat that had ferried his wife and her family to the spit and grabbed a few cans of Coors Light. He handed me a can and we set out across the spit. As we walked, patches of sea grass peeking out of the white sand, Cashman told me about the first time he’d seen Strong Island, when he was a boy and he and his father were scouting summer rentals. “I kept bugging him about it,” he said. “One day in the garage-my father could be a real grouch-I asked him why we couldn’t rent the island. I still remember this; he said, ‘Cause I don’t know if I want to spend seven thousand on it! I knew then to drop it.”
The Jay Cashman Inc. headquarters overlook the Charles River from the top two floors of the Modern Continental building on Memorial Drive in Cambridge. Cashman’s company has moved at least seven times in the past 15 years, and will soon vacate the Cambridge building as well now that Cashman’s work with Modern Continental is nearly finished. “We’re like gypsies,” he said.
Cashman’s office is overrun with photographs of his family and certificates of his achievement. On one wall is a framed yellowed flyer for Humpty Dumpty Construction, the snow removal company Cashman, then 12, founded with his brother Jamie, who was 10. Cashman was born into construction. He grew up in Quincy, where both his grandfather and father ran contracting companies. His father, Jack, had a reputation as “a bit of an Irish rogue,” says Paul Losordo, Cashman’s longtime friend and attorney. “You might find him after work at Jimmy’s Harborside with a bunch of the other Irishmen.”
Cashman has been known to enjoy the odd tavern himself. His daughter Jaclyn Cashman, a television news anchor, recalled the time her father disappeared during a family vacation in the Caribbean. Frantic, Jaclyn burst into a bar looking for him, tears streaming down her face. There was Cashman behind the bar, shirtless. “He says, ‘Jaci, you want a beer?’” Cashman was buying drinks for everyone, but only on the condition that he got to pour them. “One of the things I really liked about my father,” Cashman told me, “he’d go and thump a bar. He’d set it up, beer and champagne for everyone.” That was on the good days.
Cashman said his father also had a vicious temper, and his mood could blacken without warning. “We’d go places in the family car and we’d be singing. Other times, he’d be other ways. Why do you think my favorite charity is battered wives and children?”

Cashman’s best friend, the auto magnate Herb Chambers, says the complicated relationship has affected Cashman throughout his life. “That’s part of what’s made Jay so loving,” Chambers said. Despite building a thriving business, Jack eventually ran into financial trouble and suffered a fatal heart attack at the age of 51.
Cashman played sports in high school, “but he was always more interested in making money,” his classmate, and now employee, W. Bruce Wood, once told the Patriot Ledger. When it came time to choose a quote for the yearbook, Cashman settled on “Why should the devil have all the good times?” He married at 19, fathering two daughters, and worked his way through Boston University. During college, he leased dorm room refrigerators to students across the city. By his junior year, he was worth $31,000.

While in school, Cashman founded a construction company with his brother. They ran J. M. Cashman out of a trailer in Weymouth. Paul Losordo remembers that he first represented them in 1977 on a $40,000 job for the town of Hull. The Blizzard of ‘78 hit Boston the following year, doing millions of dollars in damage, much of it to seawalls and piers-precisely the sort of work the brothers specialized in. Losordo said the storm had an effect “of biblical proportions” on the company. Cashman won federal repair contracts worth more money than he’d ever dreamed of. “That’s when I became a millionaire,” he said. Two years later, Cashman stretched his company even further, winning a $3.5 million job to overhaul the Vineyard Haven ferry terminal.
By the time the brothers split in 1994, their company was bringing in $100 million a year, according to David Ferrari, who was hired to liquidate the business. After paying off the banks and shutting everything down, each brother walked away with about $17 million. By then, Cashman had already cashed in his 401(k) and mortgaged his house in order to seed his new business. “I hit a couple of big jobs right off the bat and I was back in the game,” he said.
He told me what he’s worth these days but insisted I keep the information private. It’s a staggering figure, heavy on the “multi” part of multimillionaire. All told, Cashman employs a thousand people. He has offices in three states and in India, and did $250 million in sales last year.
“In my family, being a financial success was a source of pride,” he said as we talked in his office. “My father respected that. You were valuable if you were successful.”
Cashman is comfortable with the language of psychotherapy. He saw a therapist for 10 years, starting when his first marriage began to fall apart. Among his discoveries was the source of his need for constant activity. “Psychologically,” he said, “there is a fear with people that if they don’t have anything to do, they’ll be by themselves. They’ll have to face themselves.”
Cashman wound up alone in 1985, when he and his wife divorced. It’s debatable whether he used the time as an opportunity to face himself. He drank and caroused and hit Newbury Street in his flashy Rolls. He was romantically linked to glamorous models, and is said to have once offered $50,000 to anyone who could broker a date for him with Madonna. A worn-out Herb Chambers was once compelled to tell Cashman that it was not, in fact, a good idea for them to buy adjacent residences on Commonwealth Avenue. “I couldn’t possibly live next door to him,” Chambers told me with a laugh. “This guy would kill me!”

In 1992, after too many appearances in the gossip columns, Cashman resolved to put some distance between his professional and personal lives, taking an apartment in Manhattan. There, he continued the high life, drinks on the town and fabulous parties at the apartment.
At one of his bashes, Cashman met a striking brunette who intrigued him. They lost track of each other, though, and he forgot all about her until a few years later, when she showed up at a party on a 180-foot yacht he had rented for a cruise to Atlantic City. Her name was Christy, a model, and she wanted to be an actress. She’s his wife today, the mother of his two young sons. Cashman spent hundreds of thousands of dollars on their wedding in 1999, renting a castle in Ireland. He hired actors dressed as leprechauns to leap out of bushes and startle guests. Cashman sometimes puts money into Christy’s independent films, and when she landed a small part in What’s the Worst That Could Happen?, a 2001 comedy starring Danny DeVito and Martin Lawrence, he opened up his Back Bay mansion for filming.
Everyone says Cashman is much happier and calmer since meeting Christy. “Before my dad and she were married, he was so much more short-tempered,” Jaclyn said. Cashman told me it can be embarrassing to think about his past antics. “When I look back at dating and I look at the hurt I caused people-you start to think about needing to change. If you’re a playboy, you’re selfish. You endear people to you and then you move on.”
These days, Cashman is putting most of his attention into his wind farm project. The people who know him say his passion for alternative energies is real, and that he will shrug off any setbacks he might encounter. “There’s almost a clairvoyant part of Jay,” said his attorney Losordo. “He’ll see over the horizon. If it’s not in Buzzards Bay, Jay will surface in Puerto Rico or Venezuela or wherever the wind’s blowing. And if wave-generated power proves more effective, he’ll go that way. This is not about putting windmills in Buzzards Bay. It’s about seeing into the future.” It’s also about profit. “If we’re half as successful as we think we can be, it will be a real score,” said David Ferrari, who’s involved in the project. But Ferrari did add one warning: “The only thing I worry about with him is that he spreads himself too thin. I worry that something might slip through the cracks. I’ve mentioned that to him.”
Cashman, for his part, said the project represents a chance to transcend his local roots, to be a part of the international solution to our energy problems. But there’s something else. With the wind farm, Cashman finally has the opportunity to rise out of the dirt, to create something more than a hole in the ground. “I’ve mastered making $10 million on a deal,” he said. “I just bought a company for $25 million and I know I made at least $15 million. Now I’ve got my eyes on something bigger. I’ve got something that I’ve always wanted-the higher order.”
Reaching the ocean side of Nauset Spit, Cashman spotted Christy and her family on the beach. He stripped down to a pair of bright orange swim trunks and dove into the water. “Jay!” Christy called to him from the shore. “There’s a seal right there!” Off to Cashman’s right, the animal poked its head from the rolling waves, regarding Cashman for a few seconds before darting away.
Toweling off, Cashman talked with Christy’s brother Hans about the next day’s planned fishing trip. A tropical storm was heading for the Cape, Cashman told him, so it looked as if they might have to cancel the outing. “Those are no big deal,” joked Hans, an American Airlines pilot. “I’ve flown around them.” Cashman laughed, but the truth is he doesn’t like unnecessary risk. He hates sharks, aviation, and a lot of other things he can’t control. “Back when I was dating,” he told me, “I used to tell girls, ‘Let’s fly over for lunch on Nantucket.’ It was part of the bag of tricks, but I never liked flying.”
We headed back to the boat, and Mark brought us across the bay to the island. Once ashore, Cashman entered a boathouse and grabbed a couple of Coors Lights from a refrigerator. We cracked them open as we waited for Mark to bring around the golf cart. Cashman drove us up a path, eventually coming to a grassy clearing, in the middle of which sat his tastefully distressed summer home. Several landscapers and handymen worked the property. We stopped for a moment as Cashman chatted with his chef, passing by in another golf cart, about lunch for the fishing trip the next day. “You want me to make sandwiches?” the chef asked. “I don’t know if we’re going to go,” Cashman replied. “But make something anyway. And use those special cold cuts I bought at the deli.”
Inside the house, Cashman changed back into his clothes. He grabbed a couple of fresh Coors Lights and a cigar from a desk in the living room, then turned toward me. “You want to see something?” He led me downstairs into the basement. It was dark but I was able to make out a large metal box sitting atop a table. “I’m raising chickens!” Cashman said. There were 30 of them, just chicks, peeping in the box. Once big enough, they’ll be transferred to a proper coop Cashman is having built out by the old barn. “You know how they come?” he said. “They ship them live right to the post office. I couldn’t believe it.” Cashman said the chickens were mostly Christy’s idea, but he seemed pretty excited. He likes having things. He’s already accumulated about 40 19th-century paintings, and then there’s his latest passion, coins. He’d been buying them off eBay until receiving a letter from an expert appraiser, who informed him that he’d overpaid by double for nearly every piece in his collection, and advised him against buying rare coins from people who also have Barbie dolls for sale. Cashman laughed while reading me the letter. “I’ve spent like $300,000 on eBay, okay?” He said that he should probably stop drinking red wine when he makes his purchasing decisions.
Back in the golf cart, Cashman lit his cigar and we set off on a tour of the enormous island. A set of trails rings the perimeter, offering views of Pleasant Bay and the Atlantic. We ended up at a small shack outfitted with a couch, an easy chair, and an office workstation. Cashman settled into the chair and reached down to another small fridge stocked with Coors Lights. “I’m a little buzzed,” he said. He opened a new beer and relit his cigar.
I asked him about his plans for the wind farm. “My father always had a disdain for the construction business,” he said. “It hasn’t been until the last 10 years I’ve said, ‘You know something? The construction business is a good life. You build things that last.’ It wasn’t until I was 40 years old that I learned that. I finally decided that I was okay. I was okay with being a contractor. It’s okay.” The small room was growing hazy with cigar smoke and there was a drowsy calm to Cashman, not quite melancholy but a touch of sadness. “Maybe the windmills represent what my father always wanted.”
His father had also wanted Strong Island, but couldn’t afford it. “This was kind of his dream, so to speak, to have a place like this,” Cashman said. “One of his dreams was he was going to become a big national contractor. I went out and did that. Sons of carpenters become carpenters. Sons of doctors become doctors. Why does a guy who gets born pursue a certain path? Why did I come here? I’m so happy to be here. I’m so proud to be here. I’m living the life my father always thought was valuable.”
We walked out to the golf cart and Cashman drove me back to the water. It was a quarter past 8 and, with all his assistants gone, we were alone on the beach. The sun had set and the sky was streaked with purples and oranges that reflected off the now still bay. A small plane buzzed overhead. Cashman stretched out his arms, silently encompassing all of it. Then he grabbed a rope and, hand over hand, hauled in the boat.

Penny stocks pillory companies

By Steven Syre, Globe Columnist  |  March 6, 2009

Question: What could you get with a share of Citigroup Inc. yesterday?

Answer: Change from your dollar. That was true on and off during the day, when shares of the financial giant changed hands for as little as 97 cents before finishing the session at $1.02.

The fact that shares of a company such as Citigroup would trade at penny-stock levels was a shocking development, no matter how much trouble the financial conglomerate faces. But stocks trading below $1 per share, sometimes far below that level, are becoming increasingly common.

The penny-stock ranks are growing as markets continue to take a pounding, sinking more than 4 percent yesterday alone. The Dow Jones industrial average plunged 281.40 to 6,594.44, while the Standard & Poor’s 500 index tumbled 30.32 to 682.55. The S&P benchmark closed at levels unseen since 1996.

US financial shares took a particularly hard fall, but the decline hit all industry sectors and stock markets around the world. Chinese officials dispelled hopes they would add to their stimulus plan, and investors braced for more bad news on US jobs that’s due out today.

Slumping markets have already prompted leading stock exchanges to loosen listing requirements for companies whose shares are under intense pressure. Last month, NYSE Euronext temporarily eased a requirement for companies listed on the New York Stock Exchange to maintain a minimum share price of $1. The Nasdaq Stock Market had already temporarily waived several listing rules, including the $1 per share minimum price requirement.

The danger of delisting is only one headache that develops when a company finds itself in the world of penny stocks. Financing becomes harder to arrange and much more expensive. Stock researchers are less likely to cover shares trading below a dollar, making it less likely investors will remember or remain interested in the business stories of those companies.

Worst of all, a stock that trades for less than $1 looks like a loser. “Once you’re there you’re in a netherworld and you’ve got a death rattle,” says Brian Stack, a portfolio manager at Pioneer Investments in Boston who invests in mid-size stocks.

There are stocks of all sizes in that category. Among companies included in the S&P 500, the ultimate blue-chip stock club, four saw their shares finish below $1 yesterday.

In Massachusetts, 37 of 232 public stocks traded below $1 yesterday. Virtually all of them have been clobbered since the stock market peaked on Oct. 9, 2007. On that sunny day, just five of the same 232 Massachusetts setts stocks were worth less than $1 per share.

Shares of Altus Pharmaceuticals Inc., a Cambridge company working on protein therapeutics, were worth $11.49 each in October 2007. They traded for just 17 cents yesterday. Shares of First Marblehead Corp., the student loan company in Boston, have plunged from $39.09 to 76 cents. Helicos Biosciences Corp., a Cambridge company that makes genetic-analysis equipment, saw its stock tumble from $8.75 to 50 cents. That’s a very long way down.

Stack points out that some small companies with share prices quoted in cents are salvageable businesses victimized by a dearth of stock-trading activity. Anyone who wants to sell shares of a big company like Citigroup can always find a buyer, but an investor unloading the stock of a small business in a bad market may see prices plunge because no one wants to purchase the stock.

The vast majority of Massachusetts companies with stocks under $1 qualify as small. A few names may be familiar, but most are relatively obscure. At those prices, the stocks are probably going to stay under the radar.

Many life-science companies and biotechnology businesses pop up on the local list of shares below a dollar. They usually need multiple rounds of financing to develop products and prefer to go to the stock market for that money. Raising money was their purpose for going public in the first place.

“These biotech companies tend to have a [cash] burn rate,” says Jim Weiss of Weiss Capital Management in Concord. “Until you get a product of some substance approved you have to continually replenish the cash.”

Companies with stocks below $1 are long-shot bets to bounce back, but it does happen sometimes. Shares of Boston’s American Tower Corp. sank to 75 cents in 2002 but climbed back to over $45 last year and closed yesterday at $27.35. Shares of Sonus Networks Inc., a Westford communications company, plunged below 20 cents in 2002 only to recover to more than $8 in 2007. Sonus stock has since slumped back to $1.18.

But most companies with shares below $1 don’t experience any big stock market recovery down the road. Some go out of business, others are acquired at low prices, and others just continue bumping along the bottom of the market.

Shares of Ibis Technology Group Inc., a semiconductor wafer company in Danvers, traded for just a penny each yesterday. But the same shares were worth just 7 cents when the market was riding high in October of 2007.

No matter where a company’s shares start, the penny-stock category is an expensive place that’s hard to escape. More companies are learning that every day.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.

Fidelity wants to hold your hand

As investors reel, the fund giant and others step up their advice-giving
By Robert Weisman, Globe Staff | March 11, 2009

• It’s not easy peddling financial advice when people are queasy about opening their quarterly retirement account statements.

But Fidelity Investments, seizing on what it views as an opportunity in uncertain times, will introduce a three-pronged financial guidance program in an effort to reassure wary investors buffeted by the turbulent economy, the company said yesterday.
Fidelity will host more than 500 free seminars for customers and noncustomers this month at its investment centers across the country, including more than 50 at New England branches. The sessions will cover more than a dozen topics, from market intelligence to retirement road maps, promising “actionable financial strategies” for investors at different stages of their lives. Fidelity said it may extend the seminars beyond March if there’s demand.

• It also is rolling out free online calculators and other Web-based tools to help investors evaluate their portfolios. And it is launching an advertising campaign promoting its program, called Guide to Personal Savings, or GPS, a play on the acronym for the navigational system that guides drivers.

The mutual funds giant, based in Boston, declined to say how much money it will spend on the program.
“Many individuals are looking at their portfolios with a fresh set of eyes,” Kathleen A. Murphy, the president for personal investing at Fidelity, said in a conference call with reporters yesterday. Fidelity’s goal is “to make this process easier” for those people, she said.
Murphy cited research showing 83 percent of Americans have not sought financial help in the past year because they feared it would be too costly or was designed solely for the affluent.
The campaign is designed to educate ordinary investors so they can “get back on track with their finances,” in Murphy’s words, not explicitly to sell stock-based mutual funds.

• Fidelity unveiled its program on a day the Dow Jones industrial average jumped 379.44 points, or 5.8 percent, to 6,926.49 in a bounce-back rally. It was the biggest point gain for the Dow since Nov. 24.

Famously bearish investor Jeremy Grantham, chairman of the Boston investment firm Grantham, Mayo, Van Otterloo and Co., meanwhile, posted a commentary on his firm’s website yesterday, urging investors to start moving money from cash to stocks and suggesting stocks may now be undervalued by 30 percent.
The broad market retreat has hurt mutual fund firms particularly. More money has flowed out of stock mutual funds than into the funds in five of the seven months ended Jan. 31, the most recent period for which data are available, according to the Lipper unit of the Thomson Reuters research firm. That lowers the amount of assets fund firms manage, which in turn reduces the fees they collect. The lower revenue means fund companies don’t have as much money to reach out and give new customers financial help.
“The assets in the fund industry, like every other industry, are down, especially equity fund assets,” said Greg Ahern, spokesman for the Investment Company Institute, a mutual funds industry group in Washington. “You’re seeing the demand for professional advice increase exponentially at a time like this, not only for advice about retail funds but about 401(k)s and other retirement funds.”

• Analysts said mutual fund companies and other financial firms have stepped up their hand-holding in recent months as the market has tumbled and the financial crisis has deepened, sending out investment newsletters, sponsoring Internet seminars called “Webinars,” and having more frequent phone conversations with rattled customers.

Other firms, such as Vanguard Group and T. Rowe Price, also host free seminars, though they are usually restricted to customers, and offer their own online planning tools. “We are continually coming up with new analyses helping people prepare for retirement and manage through this environment,” said Brian Lewbart, a spokesman for T. Rowe Price, a mutual funds firm based in Baltimore.
Fidelity’s program may be unique, analysts said, not only because it is backed by advertising but because it is tailored to investors – including noncustomers – spooked by the recession. The campaign, reaching out to individual investors and employees who are investing retirement funds through managed workplace accounts, is following the playbook of businesses that seek to capitalize on bad conditions to boost their market share in downturns, they said.

• “A lot of fund firms are ramping up communications,” said Dan Sondhelm, partner at SunStar Strategies, an Arlington, Va., marketing consulting firm for the financial industry. “They’re getting more phone calls and Web hits than ever because investors are scared. But not a lot of firms can afford to invest in advertising right now when their revenue is down 50 or 60 percent” because of the stock market slump.

Fidelity said details of its program, including its interactive online calculators and the times and locations of its educational seminars, will be posted on its website, www.fidelity.com.
Robert Weisman can be reached at weisman@globe.com.

An Arrest in the House of Ayer

John Doorly – John F. Doorly

John F. Doorly has been charged with stealing $20 million from the family trust of Frederick Ayer and is looking at 20 years in jail.

Authorities allege that Doorly, the 60-year-old former chief operating officer at Tenens Corp., used his position to steal funds to buy himself, his family and his girlfrends real estate, cars, three airplanes, timeshares and golf club memberships at the Ritz-Carlton Golf Club & Spa in Jupiter, Fla.

Our own Francis Storrs wrote about Doorly in the December, 2007 issue of Boston magazine.

Storrs describes the fateful events on March 21, 2006 when the family fired Doorly.

His head reeling, Doorly pulled his Cadillac Escalade out of Essex Street’s driveway and started dialing his cell phone, trying to manage the pieces of a secret life that was starting to emerge. His first call was to his mistress, Sarah Hunt (a former Ayer family employee herself), who had been named in the suit as a beneficiary of his stolen money. She couldn’t believe that Doorly had been fired. Neither could Peter Broom, the guy who serviced his jet down in Florida. When Doorly reached him, it was to tell Broom not to contact him through his Essex Street e-mail address. Broom was puzzled by the instructions: He’d always assumed that Doorly was Essex Street, that the vast fortune was his own. It was a common misconception among those in Doorly’s circle, one that he worked hard to cultivate—one that he himself might even have come to believe.

A Stranger in the House of Ayer

Illustration by David M. Brinley for Boston magazine

Trade deficit falls to $36 billion in January
By Martin Crutsinger, AP Economics Writer  |  March 13, 2009

WASHINGTON –The U.S. trade deficit plunged in January to the lowest level in six years as a deepening recession cut demand for imported goods at an even faster rate than for exports.

The Commerce Department said Friday the trade imbalance dropped to $36 billion in January, a decline of 9.7 percent from December and the lowest level since October 2002.

The improvement was better than the $38 billion deficit that economists had expected and reflected the fact that crude oil imports dropped to the lowest point in three years and demand for a wide variety of other foreign goods from autos to heavy machinery and household appliances declined.

The import declines helped offset a continued slide in U.S. exports which fell to their lowest level since September 2006, a drop that has contributed to the severe recession in U.S. manufacturing.

For January, exports of goods and services fell 5.7 percent to $124.9 billion. Demand for a wide variety of U.S.-made products from farm goods to autos to civilian aircraft all dropped in January.

Boeing Co. and Caterpillar Inc. are among a number of major U.S. exporting companies that have announced layoffs due to falling demand for their products in key overseas markets.

Imports fell even more sharply in January, declining by 6.7 percent to $160.9 billion, the lowest level for imported goods since March 2005. The decline in imports was led by a 25.2 percent drop in imported crude oil, which fell to $11.9 billion in January, the lowest level since February 2005. The average price for a barrel of crude dropped to $39.81, also the lowest point since February 2005.

America’s deficit with many of its trading partners declined sharply although the politically sensitive imbalance with China bucked the downward trend, rising by 3.5 percent to $20.6 billion. U.S. exports to China plunged by 19.7 percent, a much bigger drop than the 1.3 percent decline in Chinese goods shipped to the United States.

U.S. manufacturing companies who have been battered by what they view as unfair competition from China said that the continued high deficit with China, the largest U.S. trade gap with any nation, pointed to the need for the Obama administration to take a tougher line than the Bush administraiton with China.

“The United States will not be able to jumpstart its economy unless it stops trade cheats like China from decimating U.S. manufacturing,” said Auggie Tantillo, the executive director of the American Manufacturing Trade Action Coalition, a group which is pushing the new administration to impose trade sanctions on China.

The overall January deficit of $36 billion, if it continued for the entire year, would result in a deficit of $432 billion for 2010, a drop of 36.5 percent from the $681.1 billion deficit recorded in 2008. That deficit represented a 2.7 percent drop from 2007, the first year that the trade gap had narrowed after setting records for five straight years.

Many economists believe the improvement for this year will be sizable as the country’s most severe recession in decades trims Americans’ appetite for foreign goods.

U.S. exports are also falling as the recession that began in the United States spreads worldwide. However, so far, the drop in imports is larger than the fall in exports, reflecting in large part the fact that oil prices have plummeted from the record levels they hit last year.

The trade deficit has now declined for a record sixth straight month, beating the prior record for declines of five straight drops set in 2007.

By country, the U.S. deficit with Canada, America’s biggest trading partner, dropped by 10.7 percent to $2.5 billion, the lowest imbalance since May 1999. The deficit with Japan fell 18.4 percent to $4.3 billion, the lowest trade gap with that country since January 1998. The deficit with the 27-nation European Union plunged 50.1 percent to $3.5 billion.

Many economists are worried that the spreading global economic weakness could prompt countries to resort to raising trade barriers in an effort to protect their domestic industries.

Treasury Secretary Timothy Geithner was meeting in Britain on Friday with finance ministers from the Group of 20 countries, which include the world’s wealthiest economies and major developing countries such as China, Brazil and India. President Barack Obama is pushing the G-20 nations to adopt sizable economic stimulus programs to jump-start their stalled economies. The U.S. Congress recently passed a $787 billion stimulus package that had been championed by Obama.

Former Dallas mayor Ron Kirk, tapped by Obama to be the nation’s top trade official, told the Senate Finance Committee at his confirmation hearing on Monday that his main objective as U.S. trade representative would be to enforce existing law and insist that U.S. trade partners play by the rules.
 
© Copyright 2009 The New York Times Company

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A Marblehead investment adviser who allegedly defrauded two of his elderly clients of a combined $750,000 was charged Monday with wire fraud.

Ryan Nestor, 32, formerly was registered with an affiliate of Mass Mutual, according to U.S. Attorney Michael Sullivan’s office, which brought the criminal case. He worked out of a Boston office.

Prosecutors said Nestor invested funds in what the government called a “massive ponzi scheme,” planning to keep some of the proceeds. His clients allegedly did not know how the money was being invested.

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Feds say adviser defrauded elderly clients

By Julie Manganis
Staff writer

Over the past few weeks, the U.S. newspaper industry has entered a new period of decline. The parent of the papers in Philadelphia declared bankruptcy, as did the Journal Register chain. The Rocky Mountain News closed, and the Seattle Post-Intelligencer, owned by Hearst, will almost certainly close or only publish online. Hearst has said it will also close the San Francisco Chronicle if it cannot make massive cuts. The most recent rumor is that the company will lay off half the editorial staff. Still, that action may not be enough to make the property profitable.

Related

24/7 Wall St. has created a list of the 10 major daily papers that are most likely to fold or shutter their print operations and only publish online. The properties were chosen on the basis of the financial strength of their parent companies, the amount of direct competition they face in their markets and industry information on how much money they are losing. Based on this analysis, it’s possible that 8 of the nation’s 50 largest daily newspapers could cease publication in the next 18 months. (Read “The Race for a Better Read.”)

1. The Philadelphia Daily News. The smaller of the two papers owned by Philadelphia Newspapers LLC, which recently filed for bankruptcy. The company says it will make money this year, but with newspaper advertising still falling sharply, the city cannot support two papers, and the Daily News has a daily circulation of only about 100,000. The tabloid has a small staff, most of whom could probably stay on at Philly.com, the Web operation for both of the city dailies.

2. The Minneapolis Star Tribune has filed for Chapter 11. The paper may not make money this year, even without the costs of debt coverage. The company said it made $26 million last year, about half of what it made in 2007. The odds are that the Star Tribune will lose money this year if its ad revenue drops another 20%. There is no point for creditors to keep the paper open if it cannot generate cash. It could become an all-digital property, as supporting a daily circulation of more than 300,000 is too much of a burden. It could survive if its rival, the St. Paul Pioneer Press, folds. A grim race.

3. The Miami Herald, which has a daily circulation of about 220,000. It is owned by McClatchy, a publicly traded company that could be the next chain to file for Chapter 11. The Herald has been on the market since December, but no serious bidders have emerged. Newspaper advertising has been especially hard-hit in Florida because of the tremendous loss in real estate advertising. The online version of the paper is already well read in the Miami area, Latin America and the Caribbean. The Herald has strong competition north of it, in Fort Lauderdale. There is a very small chance it could merge with the South Florida Sun-Sentinel, but it is more likely that the Herald will go online-only with two editions, one for English-language readers and one for Spanish.

4. The Detroit News is one of two daily papers in the big U.S. city badly hit by the economic downturn. It is unlikely that it can merge with the larger Detroit Free Press, which is owned by Gannett. It is hard to see what would be in it for Gannett. And with the fortunes of Detroit getting worse each day, cutting back the number of days the paper is delivered would not save enough money to keep the paper open.

5. The Boston Globe is, based on several accounts, losing $1 million a week. One investment bank recently said the paper is worth only $20 million. The paper is the flagship of what the Globe’s parent, the New York Times, calls the New England Media Group. The Times has substantial financial problems of its own. Last year, ad revenue for the New England properties was down 18%. That is likely to continue or get worse this year. Supporting larger losses at the Globe will become nearly impossible. Boston.com, the online site that includes the digital aspects of the Globe, will probably be all that remains of the operation.

6. The San Francisco Chronicle. Parent company Hearst has already set a deadline for shuttering the paper if it cannot make tremendous cost cuts. The Chronicle lost as much as $70 million last year. Even if the company could lower its costs, the Northern California economy is in bad shape. The online version of the paper could be the only version by the middle of 2009.

7. The Chicago Sun-Times is the smaller of two newspapers in the city. Its parent company, Sun-Times Media Group, trades for 3 cents per share. Davidson Kempner, a large shareholder in the firm, has dumped the CEO and most of the board. The paper has no chance of competing with the Chicago Tribune.

8. The New York Daily News is one of several large papers fighting for circulation and advertising in the New York City area. Unlike the New York Times, the New York Post, Newsday and Newark’s Star-Ledger, the Daily News is not owned by a larger organization — real estate billionaire Mort Zuckerman owns the paper. Based on figures from other big dailies, it could easily lose $60 million or $70 million, and has no chance of recovering from that level.

9. The Fort Worth Star-Telegram is another big daily that competes with a larger paper in a neighboring market — in this case, Dallas. The parent of the Dallas Morning News, Belo, is probably a stronger company than the Star-Telegram’s parent, McClatchy. The Morning News has a circulation of about 350,000, while the Star-Telegram has just over 200,000. The Star-Telegram will have to shut down or become an edition of its rival. Putting them together would save tens of millions of dollars a year.

10. The Cleveland Plain Dealer is in one of the economically weakest markets in the country. Its parent, Advance Publications, has already threatened to close its paper in Newark. Employees gave up enough in terms of concessions to keep the paper open. Advance, owned by the Newhouse family, is carrying the burden of its paper plus Condé Nast, its magazine group, which is losing advertising revenue. The Plain Dealer will be shut or go digital by the end of next year.

— Douglas A. McIntyre

March 09, 2009

Index Funds Win Again

A net loss … if GM survives: Comments on Lutz’s retirement

Chrissie Thompson
Automotive News
February 9, 2009 – 2:02 pm ET
UPDATED: 2/9/2009 4:55 p.m. ET

Dealers and analysts sound off on Bob Lutz’s decision to leave General Motors after almost eight years as its product development chief. GM announced today that Lutz, 76, will become an adviser on April 1 and retire by year end.

Ramsay Gillman, GM dealer and president, Gillman Cos. dealership group, Houston: Texas dealer Ramsay Gillman   “He’s always been a product guy, which is something dealers have always needed and wanted and need today more than ever before. I’m more concentrating on the very, very near-term future right now. If General Motors doesn’t make it, we’re not going to see any of that new product.”

John Casesa, automotive adviser, Casesa Shapiro Group LLC, New York : Auto analyst John Casesa   “I was afraid this day would come because he’s the last of a breed in Detroit: a product-driven executive who understands the customer. The non-U.S. automakers are still very much steeped in the product and the customer, but that has not been the practice in Detroit for decades. You worry that GM will lose the product momentum that it had just begun to build.”

Jim Hall, analyst, 2953 Analytics, suburban Detroit:“He’s turning 77. That’s a long time to be traveling the way he is and run the schedule that he runs, and at some point in time, you just need to slow down. The problem is, GM doesn’t need a slow Bob Lutz. He put conscience back into product development at General Motors, and the question is: Will it stay there? Only time is going to tell.”

Joe Serra, GM dealer and president, Serra Automotive Inc., Grand Blanc, Mich.: Michigan dealer Joe Serra Photo credit: A.J.MUELLER   “What was of importance to him, his team now understands. I’m very confident that he was there long enough that his DNA will remain. He’s worked more years than most of us are ever going to work.

Efraim Levy, equity analyst, Standard and Poor’s: Analyst Efraim Levy   “I would consider it a net loss to the company. His know-how and his gut feel were all assets to the company. It will take time for someone to replace his stature in terms of ability to cut through the red tape.”

John McEleney, Iowa GM dealer and chairman, National Automobile Dealers Association: Iowa dealer and 2009 NADA Chairman John McEleney   “I’m not surprised, given Bob’s age, but I think he’s done a lot for GM. I think just about every product he’s touched has been a winner and an improvement over what came before — the (Cadillac) CTS, the (Chevrolet) Malibu and the crossovers.”

Mike Jackson, CEO, AutoNation Inc.: AutoNation CEO Mike Jackson Photo credit: JOE WILSSENS   “Bob’s leadership unleashed the design talent at General Motors from the shackles of a moribund development process. The results are clear today and will be even more so in the future: world-class products with distinctive design and outstanding fit and finish. Interiors are his greatest triumph. Third world to world class in record time.”

Fin O’Neill, president, J.D. Power and Associates: J.D. Power and Associates President Fin O’Neill   “He’s really the poster boy for car guys, and there’s nobody that has that complete set of characteristics, so he’s really going to be missed. I think he showed the way. Whether the folks will follow all depends.”

George Peterson, president, AutoPacific:

“You have to pay attention to the right things as you’re developing these products. He’s gotten them focused, and now there’s a more routinized process that they use in developing their products. This is something that they’ve needed for decades. No one has the persona of Lutz, so the process has to live based on what it is, not on who’s at the top. Hopefully the process is in place enough that it can run when Tom Stephens, not Lutz, is at the top.”

Adviser leading ‘double life’ stole $57M for planes, mistress

The U.S. Attorney’s Office in Massachusetts yesterday indicted John Doorly, who has managed the trust funds left behind by wealthy New England industrialist Frederick Ayer, on charges that he looted millions of dollars from the family for more than a decade.

The Ayer family, which has several hundred million dollars in trusts held for more than 100 of the industrialist’s descendants, began asserting in 2006 that Mr. Doorly had stolen family money for his personal use.

And through a family attorney, the Ayer’s noted that the federal indictment now “clearly spells out how Doorly led a ‘double life’ and exploited the trust of his victims” to provide personal extravagances to “himself, his wife and son, and his mistress.”

The attorney went on to put Mr. Doorly in some dubious company: “Doorly looted this family out of tens of millions of dollars and joins the likes of disgraced money manager [Bernard] Madoff,” stated Will Nystrom, an attorney a Boston-based law firm Nystrom Beckman and Paris LLP. Marc Salinas, an attorney at Andrews & Updegraph P.C. representing Mr. Doorly, said his client denies all of the allegations in the indictment and will plead not guilty to all of the charges. Mr. Salinas said that his firm is in the process of reviewing the indictment and is planning for a trial, although a specific date for a court hearing has not yet been set.

Mr. Doorly, 60, allegedly pilfered the assets from the Ayers family trust through various different tactics, according to charges in the indictment. He is said to have stolen roughly $10 million over the course of eight years when he “systematically overcharged” the trusts for accounting and administrative fees that were 60% greater than the trusts’ actual operating expenses, according to the indictment.

Mr. Doorly, who was also responsible for managing the cash portion of the Ayers’ family trust, allegedly managed to steal another $13 million from an internal money market fund he created and oversaw for the family.

The money was then used by Mr. Doorly to fund a number of personal purchases and business ventures, according to federal investigators. Aside from buying real estate, three airplanes, timeshares and golf club memberships, the indictment claims that Mr. Doorly put the money toward the “payments of extravagant credit card expenses,” investments in side businesses, real estate, and construction projects, and also to make “unsecured loans to friends and acquaintances.”

If convicted on the charges brought by federal investigators, Mr. Doorly faces up to 20 years in prison, followed by five years of supervision and a fine of up to $250,000.

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Attorney Marc Salinas:

Marc Salinas is a trial attorney whose practice areas include criminal defense, civil litigation and domestic relations. Marc was born in Boston, Massachusetts and attended Suffolk University and Suffolk University Law School where he was a member of the National Trial Teams.

Marc has successfully represented individuals and small companies throughout the Commonwealth of Massachusetts.

He is admitted to practice in the Commonwealth of Massachusetts and in the United States District Court for the District of Massachusetts.

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