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Add pricey ‘nepotism’ to Best Buy’s problems

Best Buy CEO search; intriguing Ponzi scheme “cast of characters”; Legislature back in business; sailboat accident victim recovering; intense feelings about moving the Fishing Opener; and more.

I suspect many of you read the Strib’s Sunday pieces on Best Buy. In the Paul McEnroe, Tony Kennedy and Patrick Kennedy story looking at the “nepotism” surrounding founder Richard Schulze’s various arrangements, I was particularly struck by moments like these: “In March 2010, the independent research firm Management CV Inc. raised significant concerns about nepotism and business arrangements it considered ‘inappropriate for a public company.’ As outlined in public documents, those dealings include six-figure jobs for Schulze family members, real estate and corporate aviation agreements that steer nearly $2 million a year to separate businesses owned by Schulze, millions spent on products from a company owned by Schulze’s brother and spending on services from businesses affiliated with board members. … it’s highly unusual ‘for such a big dominant public company to have such a long list of unflattering behaviors.’ … Schulze also benefits from Best Buy’s patronage of his corporate travel company, Minneapolis-based Best Jets International. According to Best Buy’s proxy statements, it leased airplanes and chartered aircraft services from Schulze over the past five years for $3.56 million.  ‘Our senior management generally use the airplanes when it is more economical or practical than flying commercial airlines,’ the proxy statement said. Best Buy purchases store fixtures from Phoenix Fixtures Inc. of Roberts, Wis., which is owned by Schulze’s brother. The total amount paid to Phoenix in a five-year period that ended last year was $70.7 million, documents show.” And … “Schulze’s daughter who spends a significant amount of time at a home in California, is founder, chairwoman and CEO of the Best Buy Children’s Foundation. In addition, she serves as a Best Buy vice president, receiving a base salary for fiscal 2011 of $242,000. The proxy statement said she was eligible for a cash bonus with a ‘target payout’ of nearly half of her salary.”

At, Dhanya Skariachan looks at the mess and writes: “[I]nvestors, analysts and retail consultants are focusing on the search for [Brian Dunn’s] replacement. They want to see a fresh face at the retailer, which has lost many of its customers to Amazon. com … and Wal-Mart Stores … which are often able to offer cheaper prices on gadgets.”I do think you want someone at the top that can bring a bit of different viewpoint, that can shake things up,” said Connor Browne, portfolio Manager of the Thornburg Value Fund, which owns Best Buy shares. Part of what the new CEO will need to do is to be tougher in trying to control the practice of ‘showrooming’, in which shoppers come to Best Buy to check out televisions and other electronics and then buy them for less online — sometimes using their mobile phones while still standing in the store. ‘We do think that Best Buy’s leadership hasn’t done a good enough job of being tough on the vendors when it comes to their products being available online at lower prices on Amazon,’ Brown said. … Even [former CEO Brad] Anderson ‘will be perceived as one of the authors of Best Buy’s current strategy … the path that has now proven to be insufficient,’ said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors. The new CEO ‘will have to make some hard choices which will have negative implications for many of the current team at Best Buy.’ [Anthony] Chukumba [at BB&T Capital Markets] also doubted that Anderson had enough ‘fire in his belly’ to pull off a successful second act like Apple Inc’s … Steve Jobs or Starbucks Corp’s … Howard Schultz.”

Meanwhile, on the “inappropriate relationship” end of the story. City Pages is probably not winning any fans of Old School Journalism ethics by splashing the name and photo of a 29 year-old woman … who might be the lady in question. Even CP’s commenters are queasy about “going there.” “I don’t think she should be ‘outed.’ It’s not about her it’s about Dunn” says one. “What if that’s not the right person? You shouldn’t be revealing a name or face without confirmation. So what if the Star Tribune revealed a name already? There’s some rule requiring their screwup be repeated? If that is the right person, so what? She’s not a public person,” says another.

The Trevor Cook Ponzi scheme has lived in the shadows of the larceny of Tom Petters and Denny Hecker, but as Dan Browning of the Strib follows it into a courtroom this week he reminds readers of a cast of characters that feels like a cross between “Donnie Brasco” and a Coen Brothers farce. “The trial scheduled to begin on Thursday in Minneapolis targets three men alleged to have been among his top lieutenants. They are:
• Jason “Bo” Beckman, 42, a former high school hockey standout from Plymouth who claimed to be one of the top money managers in the United States.
• Gerald Durand, 61, a former pro wrestler, coin dealer and entrepreneur from Faribault with a reputation for consorting with strippers.
• Patrick Kiley, 73, a longtime Minneapolis huckster who once bought airtime on 200 radio stations and a Christian radio network to predict economic Armageddon and promise a haven to ‘truth seekers’ who called in after the show.
… In pretrial filings, prosecutors said that evidence contradicts any notion that the defendants believed they were working for a bona fide investment program.
‘Legitimate financial services businesses generally do not feature strippers, prostitutes, and alcohol and drug abuse in the office. Witnesses have reported that, when they went to work at the mansion, people would sometimes be passed out as a result of the previous night’s debauch,’ the prosecutors wrote. Durand’s attorney, Brian Toder, said in court papers that he fears the government will mount a ‘stripper-centric’ case against his client and asked that such evidence be barred. … There’s no love lost among the defendants. Durand told federal regulators that Kiley ‘should not be walking upright.’ Kiley refers to Durand, Beckman and Pettengill in court papers as ‘the three stooges.’ And Beckman said in an interview that he dislikes Kiley and distrusted Durand. He bristled as he recounted writing a personal check to settle a sexual harassment complaint against Durand by a former employee.” I mean really, you get Joe Pesci, Steve Buscemi and John Turturro and you’ve got a movie.  

Like me, I’m certain you’re relieved to know that our legislators are returning to the Capitol to continue doing the people’s work. At MPR, Tom Scheck looks at the home stretch: “Senate Majority Leader Dave Senjem, R-Rochester, said he believes passing a tax bill is the only thing that has to get done this session. ‘We’re at the point of session where what really matters is a good tax bill and working with the governor to get one,’ Senjem said.But Republican legislative leaders disagree with Dayton on taxes. The Republicans want to cut the statewide property tax paid by businesses. Dayton wants to give businesses a tax break only if they agree to hire returning veterans and recent college graduates. Still, Dayton said he’s willing to cut taxes as long as lawmakers find a way to pay for it. … While Senjem said he considers a bonding bill a priority for the session, House Speaker Kurt Zellers, R-Maple Grove, said a bonding bill will pass only if it’s focused on improving and maintaining existing projects. Zellers said he won’t support building new local civic centers or spending on a new light rail transit line. … Zellers said he believes the session has been a success because the Legislature has streamlined regulations for businesses. Democrats in the House disagree. State Rep. Erin Murphy, DFL-St. Paul, is one of many Democrats who have traveled the state this week to criticize Republicans for running a ‘do-nothing Legislature.’ ‘We haven’t accomplished much this session,’ Murphy said. ‘We’ve gone through a lot of motions. We’ve heard a lot of bills. A lot of bills have been vetoed and there’s not yet a lot accomplished that Minnesotans can point to and say that was worth our time and money.’ ” You get points for candor, ma’m.

Steve Wagner of the Bemidji Pioneer is keeping watch on the 8-year-old survivor of that sailboat accident in Clearwater County. The latest: “Isaiah Risland remains at Children’s Hospital in Minneapolis, where he’s showing positive signs of recovery from hypothermia. ‘Isaiah is still gaining consciousness occasionally and responding to voice,’ wrote Sara Staley, an aunt, in the boy’s online journal on the CaringBridge website. … ‘When he is conscious and someone speaks to him he will turn his head or eyes toward them,’ Staley wrote Saturday. ‘His oxygen levels have been staying up and he has overrun the ventilator a couple of times, taking more breaths than the ventilator is set to. (This is pivotal) He has been off the temperature control blanket for two days and his body has maintained correct temperature.’ “

The idea of moving up the fishing opener gets some attention from a former Minnesotan in The Christian Science Monitor. Says Scott Armstrong: “When I was growing up in northern Minnesota, only two holidays existed on the calendar: opening day of deer hunting season and opening day of fishing. Christmas was the time you received equipment to participate in the other two. … In Minnesota, messing with opening day is like messing with the Mayo Clinic or Swedish meatballs. It’s not something you do blithely. While many anglers do welcome the extra time in the boat, other fishing interests are less enthusiastic. … All this might sound like a tempest in a tackle box, until you consider this: 2 million people fish in Minnesota, which includes about 1 in 5 adults. Still, leaving the schedule the way it is, with Mother’s Day and opening day falling on the same date, would no doubt cause a few tense discussions in Minnesota homes.”

Duluth News Tribune outdoors guru Sam Cook uses the word “hallowed.” He writes: “I’ve talked to a lot of folks in the past 10 days about the possibility of an advanced opener. The reaction has been all over the place. Some anglers are happy to go fishing sooner. A lot are quite content to leave the opener as it is. Many resort owners would rather stick with the normal opener rather than trying to shuffle guests around at the last moment. I have not canvassed mothers, and I suppose many would favor an opener without Mother’s Day conflicts. But quite honestly, I don’t recall any mom’s marches in the streets over the past several years when Mother’s Day fell on opening weekend. … The most common reaction I’ve received is simply to leave the opener as it is. It’s a big deal. People have made plans. It’s the Minnesota fishing opener, and maybe we just shouldn’t mess with something so big. Legislators say, well, don’t think of it as an earlier opener. Just think of it as an extra weekend of fishing. Sorry. If we move it to May 5, it will be ‘the opener.’ You can’t get around it. So, instead of just having an extra weekend of fishing, moving the opener ahead might take most of the luster off one of the most hallowed weekends Minnesotans celebrate all year.” More “hallowed” than Thanksgiving and “Black Friday”?

Mary Ann Grossmann at the PiPress covered the Minnesota Book Awards over the weekend. A of couple highlights.:“GENERAL NONFICTION
Shawn Lawrence Otto — ‘Fool Me Twice: Fighting the Assault on Science in America’ (Rodale)
An expose on anti-science views in modern-day America that traces the relationship between science and politics throughout our history. The author is an award-winning screenwriter and co-founder of the political initiative, “Science Debate 2008.”
Kurtis Scaletta — “The Tanglewood Terror” (Knopf/Random House Children’s Books)
When Eric Parrish comes across glowing mushrooms in the woods behind his house, he’s sure there’s a scientific explanation. But when the fungus begins to overrun the town of Tanglewood — in a repeat of a blight that, legend has it, reduced the town to rubble 200 years ago — it falls to Eric, his brother Brian, and a runaway girl named Mandy to get to the bottom of the mystery. Scaletta lives in Minneapolis.”