Taking Stock

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Local Notes 

A federal grand jury has named nine Baltimore food retailers, indicting them on charges of stealing nearly $7 million from food assistance programs in a scam known as “food trafficking.”  Those retailers are accused of agreeing to debit cash for beneficiaries without selling food and then retaining a cut of the proceeds. Specifically, the indictment alleges that the retailers allowed customers to convert their SNAP (Supplemental Nutritional Assistance Program) debit cards into cash, typically splitting the proceeds. Federal prosecutors allege that, to avoid being detected, the store owners debited the funds from the cards in multiple transactions over a period of hours or days. According the U.S. Department of Agriculture, c-stores and small grocery stores account for 15 percent of all redemptions, but 85 percent of all trafficking, and violations are more likely to occur in higher-poverty neighborhoods. Among those indicted is Abdullah Aljaradi, 51, owner of prosecutors say owns the Second Obama Express on Harlem Avenue in CharmCity, who is accused of defrauding the government of $2 million in benefits over a three-year period. Eight other merchants are charged with bilking the SNAP program of between $348,000 and $1.4 million. Prosecutors say those charged face a maximum sentence of 20 years in prison for each count of wire fraud, and others face additional charges of food stamp fraud…who likes the Affordable Care Act (“Obamacare”)? As Giant/Landover and Safeway begin their labor negotiations with UFCW Locals 400 and 27, one of the major bargaining challenges will be to try to work within the costs, constraints and uncertainties about the Affordable Care Act (“Obamacare”) which began the next phase of implementation on October 1. And if you think it’s just corporate America that dislikes Obamacare, think  again. It appears labor unions, which typically provide some of President Obama’s strongest base, are finding the potential ramifications of the new health care law, aren’t in the best long-term interest of its membership. One of those unions is UFCW Local 1500, which admitted it is struggling to make progress in bargaining a new contract with King Kullen and Stop & Shop in metro New York (the existing pact expired on September 28, but has been extended by two weeks). “The Affordable Care Act is presenting tremendous and unprecedented challenges to these negotiations,” said Bruce W. Both, president of UFCW Local 1500. “The complexity of this 22,000 page law, combined with confusing interpretations of the law by various federal agencies, such as the Department of Labor, IRS and Treasury Department, has left union negotiators with no choice but to proceed slowly and cautiously as we negotiate the legally required changes. The one factor that has not changed during these negotiations, compared to previous ones, is our union’s commitment to provide the members of UFCW Local 1500 comprehensive healthcare. For decades the healthcare plans, mutually agreed to between UFCW Local 1500’s union members and participating employers, has provided health insurance to thousands of New Yorkers. UFCW Local 1500’s healthcare plan has been a model of efficiency, achieving better cost savings than for-profit insurance carriers that ensured a large percentage of every dollar spent goes to patient care. Savings in healthcare cost frees up money to negotiate fair wages and secure pensions. The Affordable Care Act has greatly complicated this respected and successful labor bargaining model. It is very difficult to negotiate an entire contract with the fair wages and comprehensive benefits our 23,000 truly deserve with so much time being spent consulting with healthcare consultants on the ACA and bracing for additionally confusing regulations from Washington D.C. All our members wanted was what Congress promised them when this bill was passed: a law that would not require them to change their coverage or their doctors. They did not get that from this law. Regardless of what takes place in Washington, DC, the leadership of UFCW Local 1500 is going to fight any effort by anyone to undermine the excellent union contracts our members have fought for and earned over these many years.” Local 1500 is New YorkState’s largest grocery workers union and about 10,000 of its members work for King Kullen and Stop & Shop covering stores on Long Island, New York City and Westchester, Putnam and Dutchess Counties. More Ahold news: the Northeast’s largest retailer is postponing its annual vendor meeting from Tuesday, October 29, 2013 to Tuesday, March 11, 2014. The location of the meeting will still be the GiantCenter in Hershey, PA. According to the company, “We realize that all of us, as suppliers and retailers are extremely busy during the 4th quarter and having the meeting in late October would not be the best time to interrupt our planning and preparation for the busiest time of the year. We apologize if our change in plans causes you any inconvenience. We promise that we will be well prepared to present the type of meeting you have become accustomed to with Ahold USA; one that is informative, interesting and exciting.”…after much speculation about which retailer would open the new food retail location at Baltimore’s historic Rotunda site (40th Street in Baltimore) which will undergo a $100 million renovation, the winner is MOM’s Organic Market. The Rockville, MD organics retailer will open its third Baltimore location and11th overall in the next 18-24 months. Long-time tenant Giant/Landover moved to a larger nearby location (41st Street) about 18 months ago and the new developer Hekemian & Co. selected MOM’s to occupy the 15,000 square foot space… Shuanghui International Holdings has finalized its $4.7 billion acquisition of Smithfield, VA-based Smithfield Foods.  The deal is officially the largest Chinese purchase of a U.S. company and within the first week of completion, Shuanghui has reportedly already begun integrating international sales staffs…    two obituaries of note the report this month. Although he wasn’t very well-known and only recorded a limited body of work, it’s sad to note the death of rock and roller Jackie Lomax, 69, one of the first artists to record on Apple Records, the label founded by The Beatles. In fact, Lomax’s first album on Apple – “Is This What You Want?” –  included the excellent single “Sour Milk Sea” penned by George Harrison. Among those who played on the album were Harrison, Paul McCartney, Ringo Starr and Eric Clapton. The album is kind of hard to find, but worth hunting down if you’re a fan of the pop-rock genre that was an important part of the late 60s-early 70s music. Also passing on was Robert R. Taylor, 77, one of the greatest (and most unsung) entrepreneurs of the past 50 years. Among dozens of enterprises he was involved with, two stand out as genius. In the early 1980s, for $1 million, Taylor acquired the rights to Obsession, a fragrance developed by fashion designer Calvin Klein that was failing miserably. Taylor bankrolled a sexy, glitzy $15 million ad campaign that hyped Obsession – “Between Love and Madness Lies Obsession” – that amassed $30 million in sales in 1985, the first year it hit the stores. In 1980, a small Minnesota company he also founder – Minnetonka Corp. – introduced a revolutionary new product that he developed in his home after years of testing – Softsoap. Fearing that his formula would soon be replicated by industry giants P&G, Unilever and Colgate-Palmolive, Taylor made the ultimate “bet the company” move. He secretly ordered 100 million of the little plastic pumps that were at the time used to dispense various lotions. That tied up a full year’s production of the pumps’ only manufacturers, giving Taylor time to establish his brand without rivals. In 1987, a few years after the soap giants caught up, he sold Softsoap to Colgate for $61 million.”The best way for an entrepreneur to compete in today’s marketplace,” he told the New York Times shortly after the sale, “is to avoid competition – or at least find ways to circumvent it.”