Plea deal raises questions about ice firm's local clout BEHIND THE NEWS
Home City Ice Co. has a stranglehold on the Indianapolis-area ice market. Good for the company, you say? Not if the Cincinnati-based ice powerhouse avoided competition through old-fashioned, monopolistic shenanigans.
Whether Home City did is a reasonable question to ask in light of the June 17 announcement that the company has pleaded guilty to conspiring to suppress and eliminate competition in the Detroit and southeast Michigan ice markets.
The Justice Department says Home City and co-conspirators agreed to allocate territories, rather than compete head-on. It was the first case investigators have brought since publicly disclosing their probe early this spring. They say it continues, but decline to discuss its scope.
Class-action attorneys charge it goes far deeper. In a torrent of lawsuits filed around the country in recent months, convenience stores, grocers and other ice purchasers charge Home City, Dallas-based Reddy Ice and Canada-based Arctic Glacier carved up the United States into territories, with Home City holding sway in the Midwest.
"There is virtually no overlap between the geographic markets in which each defendant operates," a lawsuit filed in Nebraska noted.
This isn't a case of no harm, no foul. Competition helps keep prices in check for retailers and, ultimately, for consumers. It was inflated pricing in the Indianapolis market, in fact, that spurred Indianapolis entrepreneur Scott Beil to return to the ice business two years ago.
Beil had been part-owner of Indianapolis-based Polar Ice Co., which Home City purchased in 2000. Polar had been a formidable player, with 400 employees and $17 million in annual revenue. It and other ice companies that have since sold out or closed once helped keep Home City in check.
By comparison, Beil's startup company is minuscule, with 20 workers and revenue in the mid-six-figures. But Home City noticed. Beil recalls that when Penguin opened, Home City went to its smaller customers and slashed prices, reducing the wholesale price on a seven-pound bag from about 80 cents to 60 cents.
"It was totally my presence," Beil says. "They went to all the retailers I could serve and lowered their prices"
A Home City spokesman declined to comment in detail. But under a plea agreement unsealed in U.S. District Court in Cincinnati, the company said that from January 2001 through July 2007, it colluded with rivals-a scheme it says was directed by a former vice president of sales and marketing who has since died.
In the agreement, the company admitted to anticompetitive practices only in Michigan. The privately held firm, which has more than $80 million in annual sales, markets ice in Indiana, Ohio, Illinois, Kentucky, West Virginia and parts of Michigan, Pennsylvania, Tennessee, New York and Maryland.
The Justice Department says the company is cooperating, which could soften its punishment. Sentencing guidelines call for a fine ranging from $24 million to $48 million. Because of the help, the government says it plans to recommend a penalty in the "lower end" of that range.
Beil, 42, doesn't have firsthand knowledge of Home City's colluding with other big ice companies. But he thought it was curious that other heavyweights stayed out of Indiana, even when retailers they had strong relationships with treaded into the state.
He figures Penguin only can benefit from the tur moil. It's not big enough to service the largest retail chains. But others have reason to consider switching vendors.
"It gives you something else to talk about, that's for sure," Beil said.
ATA founder still paying debt
George Mikelsons stepped down as CEO of ATA Airlines Inc. three years ago. But recent court filings show he's still settling his debts to the company, which shut down and filed for bankruptcy in April.
Mikelsons, now 71, borrowed more than $650,000 from ATA in 2004. Under an agreement struck when he resigned in August 2005, Mikelsons agreed to chip away at the debt by making quarterly payments. He also agreed to apply toward the debt quarterly payments of $50,000 he receives for agreeing not to compete with ATA.
Court records show he's scheduled to make payments in July and October of this year. His final payment, $2,569, is due in January 2009.
Ex-Norwood CEO settles
The former CEO of locally based Norwood Promotions Products has settled a lawsuit that charged the company shortchanged him when it showed him the door in 2006.
Thomas Roller is one of five former executives who alleged in a Marion County lawsuit that Norwood undervalued their shares and withheld severance pay, cheating them out of millions of dollars.
Attorneys for Roller and Norwood declined to disclose the terms of his settlement. The other former executives are pressing ahead with their case.
Norwood is one of the nation's largest makers of promotional products, such as awards and logo-laden coffee cups. It has annual revenue of $333 million.