Bentonville’s Planning Commission rubber stamped Wal-Mart’s request for three waivers needed to get approval for the planned drive-in grocery fulfillment center to be located near the intersection of S. Walton Boulevard and J Street.

The retailer asked the city to approve slight variations in its parking stall depths, number of curb cuts and the building materials. The planning commission approved each of these waivers with no discussion.

Wal-Mart then obtained approval to build to the 15,000 square-foot retail warehouse facility with 52 parking places — 33 for customers driving through to pick up grocery orders and 19 for employee parking. The company is also providing an onsite-storm water detention vault, according to the plan submission. The building will be brick and composite wood construction with steel and structural insulated panel, which required a waiver.

The lot is flag shaped with a narrow strip of frontage facing Walton Boulevard, where the NWA Psychic has been located. That house will be torn down. The facility will be built facing north toward Walton Boulevard and shoppers will drive into the lot from the west side along Dotson Road.

According to the plan the consumers will drive up to the kiosk and get a parking slot number where they will park and wait on the delivery of their groceries. Early descriptions of the drive-in facility were Sonic-like, a closer examination of the plans look to be more like a cross between a Boomerang Car Wash and a Sonic. The consumer drives up to the kiosk similar to Boomerang and then instead of pulling through the carwash they drive into a parking space and wait on the delivery, said Jon Stanley, city planner.

Construction crews were already moving dirt on the lot Tuesday (May 6) as Wal-Mart said it plans to open this facility and begin offering online grocery service before the end of this year.

Wal-Mart has not yet disclosed the name of this drive-in initiative, city officials refer to it as “Project Drive”. The 15,000 square-foot facility will house 10,000 fresh and dry grocery products – from cereal, chips and bread to fresh produce, meat and milk, according to Deisha Barnett, corporate spokeswoman for Wal-Mart Stores Inc. 

Barnett said the concept will allow consumers to shop online for their grocery items, schedule a pickup time at their convenience then drive up like they would at a Sonic drive-in, call to the associates who then bring their grocery order to car.

“We know at Wal-Mart our customers’ needs are changing. They want and need more shopping options and we have the means to give them low prices, wide assortments along with value and convenience in a seamless shopping experience,” Barnett said.

Bill Simon, CEO of Walmart U.S., first announced plans for this type of new format earlier this year. He said these drive-in formats will give consumers the option of ordering online and picking up their groceries on their way from work. He said some of the pick-up centers would sell fuel. The plans for the concept facility in Bentonville do not include fuel. 

Simon has said the concept centers are designed to provide convenience and in no way are meant to replace traditional stock-up trips that its supercenters provide. Those trips are valued annually at $585 billion and remain about 60% of the total grocery spend.

Spartan Logistics plans to expand its operations in Fort Smith by acquiring the almost 620,000-square-foot warehouse and distribution facility that is part of the Whirlpool manufacturing site that ceased operations in June 2012. The larger Whirlpool manufacturing building and ground remains dormant.

Columbus, Ohio-based Spartan, which announced in October 2013 it was leasing about 100,000 square foot of space within the Whirlpool distribution building, now employs 12 in Fort Smith with total employment possibly rising to around 200 when the space is fully utilized. Ed Harmon, chairman of Spartan Logistics and president of its associated industrial development and real estate company, told The City Wire that not all of the new employees would work for Spartan, but may work for Spartan clients within the facility.

Spartan Logistics is a second generation family business with more than 25 years in the business of supply chain solutions. The company employs 300 in and operates 17 locations in four states. The company has more than 3 million square feet of space under management.

The company also manages two building in Little Rock for customers, with customer-support operations also in California.

“We’re basically from New York to California,” Harmon said when asked about the Spartan service area.

Harmon also stressed that Spartan and its associated companies provide “one-stop shopping” to many Fortune 500 companies with a packaging handling, light manufacturing, packaging assembly, inventory controls, shipping and other needs. Harmon said it’s likely the company may expand or build new structures on the property it acquires from Whirlpool to provide specialized assembly or warehousing needs.

“We’ve done this in the past with other sites throughout the country that we have purchased,” Harmon said. “We’re very enthused to be in Fort Smith ... and know that we’ll have a lot of those opportunities there.”

The deal with Whirlpool is expected to close later this year. However, the deal with Whirlpool allows Spartan to immediately begin operating in the entire facility.

“Whirlpool has been great to work with in this process and although they regret closing this facility, they want to see it put quickly back into productive use and contribute to the Fort Smith economy,” Harmon said in a statement provided by the Fort Smith Regional Chamber of Commerce.

Tim Allen, president and CEO of the Fort Smith Regional Chamber of Commerce, said Spartan’s decision is important because it shows that the property is active.

“The sale of the Whirlpool facility to Spartan Logistics is outstanding news for this community. Spartan Logistics believes Fort Smith will play an important role in the company’s strategic plan. To have a world-class company like Spartan Logistics permanently located on that property will help bring that area of Fort Smith back to life,” Allen said in the statement.

Benton Harbor, Mich.-based Whirlpool Corp. announced in October 2011 it would close the Fort Smith plant. The eventual June 2102 closure of the plant marked the end of more than 45 years of Whirlpool operations in Fort Smith. Employment at the refrigerator production plant ranged from a high of 4,600 in early 2006 to around 1,000 when the plant closed.

History is on a course to repeat itself no matter how technology changes the retail landscape. In the 1960s, calling in grocery orders for home delivery was common in American cities and towns across.

In more rural areas a shopper might go to town on Saturday, purchase their weekly goods and have those groceries delivered by the store operator. It was also common for milk and dairy to be delivered each week by the local milk man. This was done without a sophisticated supply chain and long before computer algorithms became commonplace in retail.

But today, retailers from Amazon to Wal-Mart and many others are in a moon race to give consumers convenient grocery delivery through numerous formats.

Amazon recently announced its Prime Pantry option which will allow consumers to shop for groceries online and have them shipped to their home for a flat rate of $5.99. The flat rate is good for up to 45 pounds of product. For access, users have to be Prime members which is a $99 annual subscription rate.

AMAZON, GOOGLE TESTS
Amazon said this service is good for bulky, stock-up items like large packs of paper towel or fridge packs of soda. With this venture Amazon appears to target the legion of 140 million Wal-Mart Supercenter shoppers a week. Prime Pantry plans to ship the products within one to four business days. This initiative comes on the heels of the Amazon Fresh test which is available in San Francisco and Seattle. 

Jason Long, CEO of Shift Marketing Group in St. Louis, said he has tinkered with Prime Pantry online since it was announced. 

“It’s smart and easy. I filled one box almost full with a bag of dog food, a 12 pack of toilet paper, 6 rolls of paper towels and a box of cereal. It looks to me like Prime Pantry is an attack on Club stores or anywhere consumers buy in bulk,” Long said.

He doesn’t see Prime Pantry making a huge dent in Club sales at this point given so much of Club grocery sales are around fresh and frozen products. He said Prime Pantry is a great alternative for center-store items – and at a $6 delivery charge not much more than gas to get back and forth to the store, not to mention the time saved and hassles avoided. Yes, it can take up to four days to get delivery but a little planning can solve that problem. That said, Long believes Prime Pantry is an obvious way for Prime subscribers to help justify the new $99 Prime charge.

There is ample competition in the San Francisco market with Google’s Shopping Express available in 88 zip codes throughout the Bay Area since September. Google allows consumers to shop online from 17 difference retailers, including Walgreens, Staples and Target, and then Google delivers the purchases within a three-to-four hour window. The cost is $4.99 for each store in the order.

The Google Shopping Express is more than just groceries, but according to the San Jose News, the most popular items ordered are grocery — mayonnaise, baby food, Nutella, candy and coffee. The most popular days for orders are Sunday and Monday. Other popular items include: Sriracha hot sauce, toothpaste, potting soil and soup.

Some believe this business model is flawed because neither the consumer nor the company wants to pay for the full cost of delivering low-margin products from big-box and drugstores, and a $5 fee doesn't come close to covering expenses.

"Google is subsidizing same-day delivery," according to Sucharita Mulpuru, an e-commerce expert at Forrester Research. In general, she said, “it's not cost-effective to deliver something like diapers. ... Store pickup is a better option in the U.S."

ONLINE PICK-UP
Grocery pick-up is also makes more sense to Long, who can see more grocers delving into this convenience option.

Wal-Mart has tested online grocery with pick-up in San Jose, Calif., and Denver in an initiative called Walmart to Go. But last week the retail giant told The City Wire it plans to build an online grocery fulfillment center with drive-in pick-up for more than 10,000 grocery items including meat, dairy and dry grocery. This is the retailer’s first test with this type of grocery fulfillment and unlike the other online grocery options it’s being offered in a town of 35,000 — Bentonville.

City planners approved the large scale development on Tuesday (May 6)granting Wal-Mart three waivers as requested to meet the city’s guidelines. The waivers involved parking stall depth, number of curb cuts and building material. Wal-Mart said the online grocery fulfillment service will be offered later this year in Northwest Arkansas.

Population density has been a key metric for retailers wanting to test online grocery. The recent Wal-Mart initiative is being tested in a small market, like hundreds of others where the retailer already enjoys strong brand recognition.

Long said for retailers, the cost structure of a drive-in and pick-up model is advantageous to home delivery, especially in less densely population areas.

“For consumers, they still experience the trip to the grocery store, and the psychological satisfaction of providing for their family, without the hassle of going inside or worrying about delivery times, a stranger coming to their home, etc. Prime Pantry can’t offer this experience,” Long said.

San Antonio-based H-E-B, an aggressive grocery competitor of Wal-Mart in south and central Texas, announced its own plans to offer online sales this later this year. Bob McCullough, senior vice president of manufacturing for H-E-B, recently told the San Antonio Business Journal the online operation will be a world-class offering, but he gave no further details.

H-E-B operates 337 stores in Texas and Mexico and has sales of more than $18 billion, making it one of the nation’s largest grocery chains. It makes and processes food products at more than a dozen manufacturing facilities, including three dairy plants.

A project that was all but confirmed thanks to artist's renderings submitted to the city of Fayetteville as part of a planned retail development has now been officially confirmed.

In an earnings report released Tuesday (May 6), Whole Foods Market confirmed that it would be opening its second Arkansas location in Fayetteville.

Plans for a Fayetteville Whole Foods first came to light in April, when Fairburn, Ga.-based developer S.J. Collins Enterprises submitted plans to the city showing a redeveloped property near the intersection of U.S. 71 and Millsap Road. Conceptual drawings submitted to the city clearly showed a more than 35,000-square-foot building with a Whole Foods Market sign above the front entrance.

Attempts at the time to confirm the location at 3535 N. College Ave. with Whole Foods was unsuccessful, but the earnings report said Fayetteville, along with eight other locations stretching from Hawaii to New York, would be joining the company's roster of 379 stores.

The expansion, the company said, was part of a plan to increase the store count by hundreds to meet customer demand.

"The company currently has 379 stores totaling approximately 14.4 million square feet and expects to cross the 500-store mark in 2017," the report stated. "Longer term, the Company sees demand for 1,200 Whole Foods Stores in the United States."

As part of the planned 500 stores by 2017, Whole Foods said it had "increased its development pipeline to a record 114 stores" following the signing of the leases for the nine planned locations. The earnings report also mentioned one relocation, which is commonly believed to be the Little Rock location which is presently located along Rodney Parham and Interstate 430. A list of stores in development on the Whole Foods Market website lists Little Rock as a location.

With the company confirming the new Fayetteville location, the project can now move through the formal steps necessary to receive approval for building permits without the veil of unconfirmed rumors about what was already certain about the new location.

A source familiar with the process said the first step was having the developer appear before the city's plat review committee on April 16, where committee members could make comments which would cause the developers to revise plans based on the feedback from the committee.

A planning commission subcommittee meeting was held May 1, with developers again meeting with commissioners to discuss plans and possibly receive direction on revisions that would be needed before the project could receive final approval, which would be on May 12 at the earliest.

In addition to the confirmation from Whole Foods on the Fayetteville location, Tuesday also saw the Fayetteville city council approve spending $150,000 on a new traffic signal for the shopping center.

Import volume at the nation’s major retail container ports is expected to increase 3.5% in May as negotiators prepare to begin talks on a new contract for West Coast dockworkers, according to the monthly Global Port Tracker report released May 7 by the National Retail Federation and Hackett Associates.

“We’re expecting a lot of cargo to move through the ports this summer and we want to make sure there aren’t any supply chain disruptions that would impact the cargo flow,” said Jonathan Gold, NRF vice president. “We hope there won’t be any issues, but the sooner labor and management can agree on a new contract, the better it will be for everyone who relies on the West Coast ports.”

Representatives of the Pacific Maritime Association and the International Longshore and Warehouse Union are scheduled to begin negotiations next week on a new contract to replace the current agreement that expires June 30. NRF has urged both sides to avoid any disruptions that could affect the flow of back-to-school or holiday season merchandise.

West Coast ports handle more than two-thirds of U.S. retail container cargo each year, including the bulk of cargo from Asia. The last major shutdown there occurred in the fall of 2002, closing ports for 10 days and creating a weeks-long backlog to be cleared.

U.S. ports followed by Global Port Tracker handled 1.3 million containers (20-foot) in March, the latest month for which after-the-fact numbers are available. The number was up 5.1% from February, traditionally the slowest month of the year, and up 14.5% from March 2013.

April was estimated at 1.38 million containers, up 6.1% from the same month last year. May is forecast at 1.44 million containers, up 3.5% from last year; June at 1.43 million containers, up 5.6%, according to NRF.

The total for 2013 was 16.2 million containers up 2.3% from 2012. The import numbers come as NRF is forecasting 4.1% sales growth in 2014. Cargo volume does not correlate directly with sales but is a barometer of retailers’ expectations.

“Most economic fundamentals are pointing in the direction of continued, sustained recovery in consumer demand and import volumes,” Hackett Associates Founder Ben Hackett said. “This is turning out to be the longest period of growth for some time now.”

A Van Buren-based company is banking on the support of generous strangers as it attempts to raise $250,000 to fund development of a new video game using local students to get the game to market.

The company, JAZ Games, was founded by siblings Jacob, Allyson and Zachary Siler, who are all graduates of the University of Arkansas at Fort Smith.

According to Jacob, the CEO of the company, the idea for a the new game came to him about a year ago.

"I was just outside walking with one of my friends and I was thinking about the future of gaming," he said. "I had thought about online games a lot and I just had this idea. 'Wouldn't it be awesome to have a steampunk game that had a vast world and included open exploration of it?' I just had that spark and as I kept going through the months, the idea formed into this project, this series of games."

Before going any further, a definition of "steampunk" may be necessary. According to Dictionary.com, steampunk is"a subgenre of science fiction and fantasy featuring advanced machines and other technology based on steam power of the 19th century and taking place in a recognizable historical period or a fantasy world." Siler broke it down even further.

"Steampunk is the idea of retro futurism," he said. "In the case of steampunk specifically, it's the idea of the Victorian Era with futuristic ideas and technologies. It's also known as neo-Victorian."

With that out of the way, Siler said he and his siblings determined that Kickstarter would likely be the best and easiest way to fund their new project.

Initially, the trio published a book and raised 200% of the funding they were seeking through Kickstarter.

The book, he said, serves as the introduction to the video game "Sky Bridge: Fallen Stars," which describes a variety of characters fighting "their way deeper into a web of mystery and intrigue, they begin to discover that the lines between good and evil are not as clearly defined as they once believed. When secrets threaten to tear them apart, they must weigh their dedication to their cause against the cost of battling a conspiracy which could ultimately destroy the fabric of their civilization."

The money raised through the campaign will get the game off the ground, Siler said, through allowing the company to hire a variety of programers and graphic artists.

"The majority of the cost is so that we can set up our workspace, our office and furnish it with employees for long enough to complete the game," he said. "Most of the cost there is going to employees. We want to get as much of that money into work on the game as we can."

The company will also use interns from UAFS, he said, adding that the company would likely "cycle through" interns over multiple semesters while the game is in development.

Dr. Argie Nichols, a UAFS professor and the department head of Computer Graphic Technology, said students working toward a bachelor of arts in animation technology would be a good fit for companies like JAZ Games.

"Because they are internship positions in animation, the students can work here on our machines, our software. They can get real world experience and gain college credit at the same time," she said, adding that she was scheduled to meet with the company within days to work through details on the internships, which she said would be paid.

Nichols added that the degree program, which is only about two years old, allowed the university to service all sorts of businesses in the region, not just JAZ Games.

"The world is going to 3-D," she said. "It's not just video games. We've done real world projects, training videos for Gerdau, training videos for the Arkansas State Police, forensic videos for airplane crashes and car accidents. We even did a 3-D recreation for the Pentagon when 9/11 occurred. That particular one we had to keep quiet. We had to have government clearance to do that."

With the university's technology and interns coupled with Kickstarter funding, Siler is hopeful the project can get off the ground and on Apple and Windows-based computers sometime in "early 2015," all while employing between 40-50 people. But securing the $250,000 needed to get jumpstarted will be tough with only $800 raised toward the goal. It's a situation Siler said could be a challenge.

"We set out funding goal at $250,000. It's a lot for an unknown company, I think, but it's exactly what we need to accomplish the project."

The largest banks in Arkansas continue to get bigger through active mergers and acquisitions in recent months. Home Bancshares/Centennial Bank, Simmons First and Bank of the Ozarks have been on shopping sprees, growing their footprints well beyond the Natural State.

This active M&A climate is fueled by stronger balance sheets by the mid-tier banks and higher regulatory costs which are more burdensome for the smaller community banks.

“One of the reasons for consolidations is the elimination of overhead costs by combining banking institutions It costs the same for a $100 million bank as it does for a $500 million bank in compliance costs. Larger organizations are generally more efficient,” said Garland Binns, bank attorney with Dover Dixon & Horne. 
 
Tom Michaud, president of Keefe, Bruyette & Woods, recently said during the Boston Bank Conference that investors recognize regional banks can grow faster than their larger counterparts. Investors are also just generally more supportive of investing in the the financial sector where there are fewer regulatory hurdles. 

Michaud said Wall Street is supportive now, largely because fewer deals are auctions and more are negotiations which allows for ample due diligence. He said “Regional Champions” like Home Bancshares remind him of something he recalls from the 1980s where regional compacts for interstate banking created an artificial barrier to letting some acquirers in. He said today the artificial barrier is SIFI – Systemically important financial institutions with more than $50 billion in assets).

“You're not seeing SIFI banks active in M&A and I think it's because they're still adjusting to the new regulatory framework, including the stress tests. But, there is a runway here for these $5 billion to $50 billion banks to build their companies and build these new Regional Champions,” Michaud notes.

FLORIDA MARKET
Home Bancshares is not just garnering praise from Michaud.

“Home Bancshares is trading at a 3.6 times (book) valuation and 15 times analyst’s projected earnings for 2015. Their price to earnings are inline with other similar acquiring banks. They keep doing transactions that are accretive to future earnings which is building share value,” said Mark Saunders, managing director for Banks Street Partners.

He told The City Wire that the nine deals Home Banschares has done in Florida involve about $2.5 billion in added assets and now comprise about one-third of the bank’s assets.

“Florida is a pretty attractive market for growth. ... In Arkansas there are three metro areas in the 500,000 population range – one of those is Memphis. In Florida there are nine metro areas 500,000 or more and most are growing faster than the national average,” Saunders said.

He said Home Bancshares has a solid enough presence in Florida to see more running room, which is why investors view the stock a growth play, even though it’s trading at higher valuations.

HIGHER  VALUATIONS
The heightened interest in M&A this past year has pushed bank valuations higher, according to industry experts. There were 19 bank acquisitions across the country in January with a total value of $1.8 billion, compared to deals worth $767 million in the prior year period, according to the Atlanta-based Banks Street Partners. They also report the average tangible book value rose to 160%, from 101% a year ago.

Experts agree that healthier balance sheets and a rising stock market are the two main ingredients making more deals possible like the Bank of the Ozarks purchase of Summit Bancorp for about $216 million in cash and stock. Bank of the Ozarks agreed to pay around 160% of tangible book value for Summit, in line with the industry average. Also, the deal was expected to be immediately accretive to earnings.

"Ozarks has a very strong currency, and they're able to use that currency to create attractive pricing,” Saunders said.

He said Bank of the Ozarks was aggressive with bids on failed banks a few years ago and had some home run bids that have helped to build franchise value. In Texas, he said Bank of the Ozarks has been able to increase its value and brand given the investments made there.

“Texas banks have higher valuations. Population density is growing and businesses are relocating there because of lower tax climate. Bank of the Ozarks benefits because of its Texas presence,” Saunders said.

Binns agreed that the pricing of banks has increased during the past year. 

“In the Southwest region of the U.S. the medium price-to-tangible book multiple was 174.3. Liberty, Delta and Summit had a multiple of book of approximately 1.6. The value of the currency of a bank such as Home Bancshares and Bank of the Ozarks which trades at approximately 3.5 times book adds to the value of their currency in an acquisition of another bank,” Binns said.

BANK OF OZARKS
Bank of the Ozarks shares rallied earlier this year on news of the $216 million Summit purchase, outpacing the KBW Bank Index by a three to one margin. But, Bank of the Ozarks shares (NASDAQ: OZRK) have regressed some after the first quarter results that were a little softer than expected.

Share were trading at $58 per share on Thursday (May 8) down from $63 a share in January following the announcement of the Summit deal. The Summit purchase came of the heels of smaller $23 million cash acquisition of Bancshares, a small Houston, Texas-based bank in December.

Seeking Alpha contributor Stephen Simpson of Krastisto Investing, notes that Bank of the Ozarks paid less than 1.0 times tangible book value for the Texas assets, a cheaper deal than the Summit 1.6 times valuation. 

He said the Summit deal was an ideal fit for Bank of the Ozarks because Summit’s model (50% real estate and construction lending) compliments its own and more than half of the offices are within two miles of an existing Bank of the Ozarks office, suggesting a good cost reduction potential. Analysts project Bank of the Ozarks will shave 38% from Summit’s operational expenses with synergies.

“Even with these deals, Bank of the Ozarks could still acquire additional assets if the right deal came along. I would project that Texas, North Carolina, South Carolina, and Tennessee would be attractive target markets,” Simpson said.

Bank of the Ozarks CEO George Gleason said in a January conference call that the bank is "seeing more [M&A] opportunities than we can take a look at.”

SIMMONS FIRST
Saunders said Pine Bluff-based Simmons First National is trading 12.9 times its projected earnings at $38 per share. It’s discounted valued of 2 times book shows there is room for this stock to rise.

On Tuesday (May 6) Simmons acquired Community First Bancshares of Union City, Tenn., for $243.4 million. This deal was priced at 177% of book value, which was more expensive than average pricing multiple in the region. Saunders said Simmons was able to pay that high price because of the untapped value in its share price.

The Community First deal came less than two months after Simmons announced the $66 million acquisition of Little Rock-based Delta Trust and Bank, and comes less than a year after Simmons’ $53.6 million bid to buy Little Rock-based Metropolitan National Bank out of a bankruptcy process.

In a recent interview with Talk Business, Simmons First CEO George Makris Jr. hinted that the next moves might be in Kansas or Missouri.

“We really would like to fill in our footprint in Missouri and Kansas. We have a strategy now for de novo growth. We’ve got some really good bankers in those markets,” Makris said in the interview. “We need a little more scale in those markets to be able to do some of the things that we really want to do.”

RIPE FOR CONSOLIDATION
Saunders expects the consolidation to continue. He said there are fewer failed bank deals, but much room for strategic plays by up and coming regionals.

“In Atlanta, where we are located, it was ground zero for failed banks. There have been none this year. But, we have seen five whole bank deals for institutions between $150 million and $200 million in assets,” Saunders said.

The experts agree the timing is ripe for more consolidations of smaller banks that cropped up in the past decade with plans to sell when valuations rose. 

Saunders said the small banks have a tougher time competing on loans, and their regulatory oversight costs are rising to the point where earnings are squeezed.

NorthWest Arkansas Community College will host its credit commencement ceremonies on Saturday, May 10, at Arend Arts Center in Bentonville. Almost 500 students are expected to participate in ceremonies at 9 a.m., noon and 4 p.m. A total of 941 graduates have made application to receive 1,150 credentials, the college said.
 
Bob Crafton and EvaLena Mayo are scheduled to receive honorary degrees. Crafton will receive an honorary associate degree of entrepreneurial leadership, and Mayo will receive an honorary associate degree of educational service.

Distinguished graduates to be honored are Bethany Hollis, Myrlinda Huff and Lemanuel Allen. NWACC distinguished faculty members to be honored are Denise Nemec, Sandy Tedder and Alan Clark.

Raul “Rulli” Torres will be recognized as the recipient of the Dick Trammel Distinguished Alumni Award. This is the first commencement for college president Dr. Evelyn E. Jorgenson, who became NWACC’s chief executive on July 1, 2013.
 

A new disposable insulin patch pump, smaller than any pump on the market, is in development from Fayetteville-based SFC Fluidics Inc., a medical device and diagnostics company.

SFC Fluidics recently closed a $2 million, Series B investment round that will help it to commercialize the pump, with a footprint of less than two inches in diameter. The battery-powered pump offers high precision, pain-free dosing over a wide range of delivery rates, the company said in the release.

SFC will initiate clinical studies in 2015, involving up to 50 patients, to demonstrate the pump's effectiveness. The device is expected to be market ready in 2016.

“Several of our medical devices will enter the market within the next three years," said SFC Fluidics CEO Anthony Cruz. "Having a partner who has manufactured devices in facilities compliant with the FDA and European regulatory agencies can only enhance our success."

Diabetes is a disease affecting roughly 26 million Americans. Roughly 4 million of these suffer from type 2, adult-onset diabetes and are insulin dependent, and these patients represent SFC's initial market.

Officials with Community Health Systems, the parent company of Sparks Health System in Fort Smith, moved fast to remove interim CEO Tim Schmidt following a racially insensitive remark he made during an employee meeting.

On Tuesday, Schmidt was addressing a group of 100-150 hospital employees. During the question-and-answer portion, Schmidt was asked why he wanted to move from Laredo, Texas – a larger city with population of about 240,000 – to Fort Smith.

According to three sources who spoke to The City Wire, Schmidt responded: “Have you ever been to Laredo, Texas? It’s 97% Hispanic.” The sources said the comment soon made its way through the hospital, with Hispanic employees – to include at least one physician – expressing displeasure with the comment.

According to the U.S. Census Bureau, Laredo’s population was 95.6% Hispanic in 2010. The city is the third most populous city on the U.S.-Mexican border, trailing San Diego and El Paso.

“Laredo continues to be a community on the rise,” notes the Laredo Chamber of Commerce website. “With four bustling international bridges, three modern hospitals, a constantly-evolving university and an expanding system of infrastructure, Laredo and Webb County provide a safe and promising environment for families and entrepreneurs alike.”

Officials with Franklin, Tenn.-based Community Health decided Thursday to announce that Schmidt would no longer be employed at Sparks. It is uncertain if he will remain employed by Community Health.

“Sparks Health System continues its search for a new CEO after the interim candidate for the position was taken out of consideration. The hospital continues to identify and evaluate qualified candidates,” noted a statement Sparks Health System sent The City Wire on Thursday (May 8). “Sparks is a vital community asset, a trusted healthcare provider and a major employer. We look forward to identifying the experienced, dynamic, community-minded leader who will build on strengths of our medical staff and dedicated employees and lead our health system to continued success.”

One of the three sources who spoke to The City Wire said Community Health plans to send officials to Sparks next week to directly address the issue with hospital employees.

Schmidt, who has more than 20 years experience in hospital administration and previously served as CEO at hospitals in Illinois, New Mexico and Texas, was in March named the interim Sparks CEO.

Sparks has had a tough time finding a CEO. Schmidt was the third interim or named CEO to resign or be dismissed since the January 2013 departure of CEO Melody Trimble.

Gary Blan was picked to succeed Trimble when she was promoted to president of Naples, Fla.-based Health Management Associates' Southern and Western Group. Trimble’s promotion was effective Jan. 1, 2013. HMA was then the parent company of Sparks. Blan resigned in May 2013, less than three months after being hired.

Charles Stewart was then named CEO in September 2013, but his resignation would come less than six months later.

Sparks and Summit were part of the sale of HMA to Community Health Systems, a company whose portfolio of hospitals was nearly double the size of HMA's portfolio. Locally, CHS owns four Northwest Arkansas facilities — Northwest Medical Center-Bentonville, Northwest Medical Center-Springdale, Siloam Springs Regional Hospital and Willow Creek Women's Hospital in Johnson.

Capital is the lifeblood startup ventures, particularly those like PicaSolar and Overwatch that are in the midst of bringing new products to market. Expanding into new markets is also a go for Oh Baby Foods and EcoVet, while DataRank continues to add to its local staff in Bentonville.

“We are presenting to a number of angel and venture groups in the coming weeks. Things are looking positive for closing our next round of funding,” said Douglas Hutchings, spokesman for Fayetteville-based PicaSolar.

He said more money – an estimated $1 million – is needed if the company is going to be able to add four to five new jobs this summer.

“We submitted our application for the next Tier of the SunShot Incubator Program which if successful would provide $1million in additional capital,” Hutchings said.

PicaSolar was one of the SunShot Incubator winners in October 2013. The startup invented the N-type solar cells that are more efficient that tradition solar cell models. The company had been testing the viability of its product with the help of the Department of Energy with plans to bring this new technology to market with a manufacturing site in Arkansas. The first round of tests were good.

The DOE program managers for the SunShot program recently visited Fayetteville, according to Hutchings, who said they gave a talk at the University of Arkansas about other initiatives with the DOE that entrepreneurs could engage.

“We will be presenting our company and results at the SunShot Grand Challenge Summit the week of May 18 to May 22 in Anaheim. We will also be visiting our partner Meyer Burger in Germany on June 3 to discuss technology scaling opportunities and challenges,” Hutchings said.
 
He said the solar industry is beginning another expansion cycle which means this is the time to be selling equipment. 

“We need to be quick to get to that point to take full advantage,” he added.

Hutchings also said the company recently added former Arkansas Lt. Gov. Bill Halter as a new board member.

“I believe he will be a great help as we progress into the next stages of the company,” Hutchings said.
  
CRUNCH TIME FOR OVERWATCH
High school senior Josh Moody, CEO of Overwatch, is finishing his finals in preparation for his May 15 graduation. In his spare time, Moody works with his partners — Joe Saumweber and Michael Paladino, software developers in Bentonville — to get the hardware gaming product prototypes approved and the software application completed in time for a late June, or early July product launch.

Moody told The City Wire he will hit the ground seeking more investors as soon as he graduates next week.

“We are seeking $300,000 in additional capital to bring the products to market in a big way. We have a matching interest of $50,000 from a local angel group and we would like to get all the funds instate if we can to further Arkansas’ entrepreneurial base,” he said.

Overwatch created a real life gaming simulation app for mobile phones and the hardware gun mounts and arm bands that secure the phone during the gaming play.

“In the next two weeks we will be testing sample designs of the arm bands and case mounts and choosing the final selections for manufacturing. The mobile application is 100% complete of iOS and 95% completed for Android.”

He said the backers who signed up to test the product on Indiegogo.com will be getting their promotional packages shipped next week. These contain shirts, stickers and the airsoft guns and gear they ordered. He said the mounts will be shipped later as the manufacturer is still working on them. In the next six weeks, Moody said he and his partners will decide on the final hardware designs, complete the Android application, raise the needed capital and launch the Overwatch gaming experience by early July at the latest.

“Our plans are to launch successfully, grow the Overwatch user community and this as big as we can. Selling the company is also option, but we hope to grow it first,” Moody said.

Overwatch was formed last summer in time to get into the Ark Challenge competition last fall. If the trio is successful they will have taken an idea on a napkin to national market in one year’s time on a budget of $450,000. And for 18-year-old Moody, running his own company, slightly overshadows other events during his senior year of high school at Little Rock Catholic.

ECOVET SALES OUTLET
Drake Vanhooser, founder of EcoVet, said the startup’s furniture struck a chord with Sam’s Club after a few road shows in the past couple of months. The high-end wooden furniture is now being sold on SamsClub.com.

Vanhooser said the company also has been active in providing assistance following the recent tornadoes.

“Some of our veterans went down to the tornado disaster area to help. This week as well, they are working with the Fontanini Meat Company from Chicago to deliver food to the tornado victims,” he said.

DATARANK’S ACCOLADE/ ADDITIONS
Matthew Seubert, who joined DataRank as an intern in 2012 and full-time after he graduated in 2013, was voted as one of NWA's Fast 15, by the NWA Business Journal. Seubert leads all research at DataRank as director of client services.

CEO Ryan Frazier said over the last six months Seubert more than doubled revenue for his team with the help of Daniel Harris who joined DataRank in October 2013 and wears several hats. 

“Building on his success Seubert recently hired two new analysts graduating from the University of Arkansas Honors College in May; James Brown and Lauren Hayes who will be joining the company in the coming weeks,” he said.

DataRank is a “big data” analytic firm in Bentonville with a growing Fortune 500 customer base. 

GROWING OH BABY
Oh Baby Foods CEO Fran Free said the company moved into a larger office last week, hired a new business manager that began work on Monday (May 5) and on Tuesday (May 6) got word the baby food is ready for sale in 11 more states come August.

The City Wire will have more details in an update from Oh Baby Foods next week.

Benton County Circuit Court Judge John Scott granted Bank of the Ozarks and Summit Bank one more week to file their answers to the Arvest interpleading regarding Dennis Smiley’s Arvest stock proceeds.

Bank of the Ozarks and Summit, now merged, each have their own answers to file with the court about the funds they are owed from Smiley – loans that could have been guaranteed by his Arvest stock account.

Judge Scott gave the two banks until May 16 to file their responses. Arvest placed $551,754.58 on deposit with the court in its April 2 filings as an interpleader, asking the court to disperse the money to the creditors, as it had no way to determine how to divide the proceeds between the 21 banks making claims for the money.

A hearing date on the Arvest interpleading is expected to be set after the May 16 extension.The court agreed to Arvest’s motion and accepted funds into the registry on April 4. Since that time a flurry of filings, answers and counter suits have been entered with the court. 

The Bank of Fayetteville was the first to respond on April 7 with a 200-page filing that included a counter suit against Arvest Bank and the other lenders who loaned money to Smiley. Bank of Fayetteville is owed $250,000.

On April 11, First National Bank of Fort Smith filed its own suit against Dennis Smiley and Arvest Bank claiming loan defaults to Smiley totaling $383,384.

On April 21, Integrity Bank filed an answer to the Arvest interpleading and also sued Dennis Smiley doing business as Design for the Home, claiming $159,781 is in default. 

First State Bank Russellville also filed its answer on April 21 and countersued Arvest Bank and Dennis Smiley asking for judgments totaling $145,965. First Security Bank also filed its answer to the court on April 21, providing no details for the amount its owed  by Smiley and his business interests.

On April 22, First National Bank of Fort Smith, filed an objection to the Arvest interpleading claiming a breach of fiduciary responsibility.

First State Bank of DeQueen filed its answer April 28 to the Arvest interpleading. First Bank of Hampton filed its answer to the Arvest interpleading on April 30, and countersued Arvest Bank and Dennis Smiley for $180,000 it is owed. The two loans were made to Smiley, who pledged his Arvest bank stock as collateral.

First State Bank NWA, now Today’s Bank, and Centennial Bank each filed an answer to the Arvest interpleading on May 1. No details were given on the amount owed. 

Benefit Bank filed an answer to the Arvest interpleading on May 2. Dennis Smiley also filed his answer that same day. Smiley asked the court to deposit the funds to him to cover his legal costs.

Signature Bank of Fayetteville entered their answer to the Arvest interpleading on May 5. No details were given on the amount owed to Signature on loans made to Smiley in 2009 and extended several times.

Bank of Oklahoma, Chambers Bank and Legacy National Bank have yet to file an answer with the court regarding the Arvest interpleading. Summit and Bank of the Ozarks asked for and were granted filing extensions until May 16.

OTHER SUITS FILED
Delta Trust & Bank filed its own suit against Smiley on March 25. Smiley has answered that claim admitting that the loan made to he and his father Henry Dennis Smiley Sr. for $245,126, and the corresponding documents might have contained signatures that were not original. Smiley Sr. also answered the court confirming that he did not sign or authorize any loan in his name. Delta has asked the court for a judgment against Smiley Jr.

Simmons First Bank sued Dennis Smiley doing business as Design for the Home on May 2, asking the court for judgments totaling $67,879. Simmons also sued Centennial Bank who may have claims against the same collateral that is residential property in Fayetteville which Smiley sold to Debra Parker-Ladd in August 2013 for $1, according to Washington County real estate records. 

On April 11, First State Bank of Lonoke filed suit against Smiley for $159,000 for three loans made and renewed between 2011 and 2012.

First Federal Bank also sued on April 24 against Smiley for nonpayment of loans totaling $70,000 that were guaranteed by a family trust. 

WHAT’S NEXT?
The civil suits will be heard in Benton County. Meanwhile, the ongoing federal criminal investigation has not resulted in any criminal fraud charges. It is possible the banks who can prove fraud in relation to their loans made to Smiley could be pulled into the federal proceedings and eligible for restitution if awarded by the court.

Legal counsel familiar with the case told The City WIre that there are a couple of scenarios in which Smiley could face criminal charges. Given the mounting evidence of fraud entered into the circuit court proceedings, there is a high probability a grand jury indictment could be waived. 

The other scenario would involve a “Filing by Information.” This would involve a defendant’s attorney working out a deal with U.S. Attorney’s office. In this scenario, a defendant would waive indictment and enter a negotiated plea. 

Tim Tarvin, law professor at the University of Arkansas, said in federal cases there is an incentive to come forward and cooperate because in doing so the defendant could shave points off of the sentencing formula. Tarvin has no connection to the Smiley investigation and was speaking merely about the process.

He said the fastest way for creditors to get paid is to race to the courthouse and file their judgments. But given the number of mounting claims, he said creditors are likely to get pennies on the dollar when all their legal costs are factored into the equation.

A new Wal-Mart grocery drive-in experiment, problems at an area non-profit, Beaver Lake water facts and dumb federal policies are part of the Northwest Arkansas Friday Wire for May 9.

NOTES & ANALYSIS
• The 15,000-square-foot experiment
One of the most beautiful structures and spaces in Arkansas is the Crystal Bridges Museum of American Art in Bentonville, but a soon-to-be built structure in Bentonville that looks like a cross between a Sonic Drive-In and an automated car wash will soon be one of the most closely monitored sites in the retail world.

Wal-Mart Stores received approval this week to build a drive-in grocery fulfillment center near the intersection of South Walton Boulevard and J Street. The 15,000 square-foot retail warehouse facility will have 52 parking places with 33 spaces for customers driving through to pick up grocery orders and 19 for employee parking. Also, the facility is expected to house 10,000 fresh and dry grocery products – from cereal, chips and bread to fresh produce, meat and milk.

Wal-Mart officials say the concept will allow consumers to shop online for their grocery items, schedule a pickup time at their convenience then drive up like they would at a Sonic drive-in, call to the associates who then bring their grocery order to car.

The retail world is in the midst of a scramble to figure out how to make the retail experience more convenient among shoppers who use a variety of technologies to compare prices, compare products and compare delivery methods. All those baby boomers who made the supercenter concept work will soon be wholly replaced by generations who are blowing up the supercenter model with their fancy-schmancy smart phones and tablets and iPads and other highly disruptive devices.

This 15,000-square-foot project may not be an answer – and likely will not be THE answer –  to the question of providing convenience to the shopping decision makers of tomorrow. But if it meets certain corporate expectations, don’t be surprised to see hundreds of them pop up around the U.S. and help secure Wal-Mart’s retail leadership for a few more decades.

ICYMI
Following are a few stories posted this week on The City Wire that we hope you didn’t miss. But in case you missed it ...

• Whole Foods on for Fayetteville
A project that was all but confirmed thanks to artist's renderings submitted to the city of Fayetteville as part of a planned retail development has now been officially confirmed.

• New Arvest poll
Consumer sentiment is a strong factor in economic performance given that household purchases comprise about 70% of the nation’s gross domestic product. National polls like the Thomson/Reuters Michigan Sentiment Survey and the Consumer Sentiment Index are reported monthly. But, Arvest Bank seeks to drill down to a more regional and local reading of consumer sentiment with a poll of its own.

• Nonprofit problem
An organization that raised $10,000 at a fundraiser in February is not recognized as a tax-exempt 501(c)(3) organization by the Internal Revenue Service or as a charitable organization by the state of Arkansas.

NUMBERS ON THE WIRE
$243.4 million: Expected price that Pine Bluff-based Simmons First National Bank will pay to acquire Community First Bancshares based in Union City, Tenn.

45 million: Average number of gallons of water pumped daily from Beaver Lake to a treatment facility in Lowell. For every 100 gallons treated, just one gallon is used for drinking water, the rest goes to maintaining homes and industry across Benton, Washington, Madison and Carroll counties.

$175,000: Starting salary for Randy Massanelli, the newly named University of Arkansas vice chancellor for governmental relations. Richard Hudson, who now holds the vice chancellor position, is retiring July 31.

OUTSIDE THE WIRE
• Technology and dumb federal policies
Regardless of political persuasion, few who ever visited or tried to use HealthCare.gov after its launch would argue that the Obamacare website was anything other than a colossal acquisition failure. The site wasn’t openly bid. It was limited to companies “pre-qualified” to do IT business for the feds. But the HealthCare.gov fiasco is only the visible tip of the iceberg that is federal government procurement, and notwithstanding the titanic disaster of that experience, neither Congress nor the administration is trying to fix it.

• The payday lender debate continues
The demise this week of a Louisiana bill that would have reined in payday lending demonstrates how hard it is for states to regulate the quick loan industry, which consumer groups criticize as a trap for the working poor.

WORD ON THE WIRE
“When I think about the vision a few men had to create an abundant water supply for this region, it’s amazing. Without it, there is no way our region would have been able to experience the exponential growth it has seen over the past 20 years. Before we had Beaver Lake each town had to find it’s own water source.”
– Springdale Mayor Doug Sprouse during the recent ceremony to publicize Drinking Water Week

“Prayer is an important part of my daily life and in the lives of countless Americans and I am thankful the Supreme Court has upheld this core American value.”
– U.S. Sen. Mark Pryor, D-Ark., in response to the 5-4 vote of the U.S. Supreme Court to uphold public prayer as part of a public meeting

Reducing the Whirlpool footprint, a rise in area building activity, prayer at public meetings and dumb federal policies are part of the May 9 Friday Wire for the Fort Smith region.

NOTES & ANALYSIS
• Reducing the Whirlpool footprint
The importance is primarily three-fold that Columbus, Ohio-based Spartan Logistics is purchasing the large (620,000 square feet) distribution facility on the shuttered manufacturing site owned by Whirlpool.

First, it puts part of a facility that once was home to more than 4,500 good-paying jobs back to full use. Spartan officials say the facility could be home to as many as 200 jobs, and while they may not come with the pay and benefits of union-member manufacturing jobs, they are jobs. And it is a start.

Second, it proves to Fort Smith residents and the national business world that the facility is usable; that the space may again be productive. And with part of the overall Whirlpool complex tainted with cancer-causing leftovers, that proof is more important than we might have realized.

And third, it reduces Whirlpool’s ownership of assets within the region’s economy. In stark contrast to the many years that Whirlpool may have been a good actor in the regional economy, the company did not make a graceful exit.

We should thank Spartan officials for their selection of Fort Smith to help grow their business, and also tip the hat to the Fort Smith Regional Chamber of Commerce and other local interests who helped secure the deal.

ICYMI
Following are a few stories posted this week on The City Wire that we hope you didn’t miss. But in case you missed it ...

• Rise in building activity
Building permit values for the cities of Fort Smith, Greenwood and Van Buren increased 26.23% in April from the same period in 2013. Permits issued in the three cities were $23.163 million, compared to $18.35 million in April 2013.

• New Arvest poll
Consumer sentiment is a strong factor in economic performance given that household purchases comprise about 70% of the nation’s gross domestic product. National polls like the Thomson/Reuters Michigan Sentiment Survey and the Consumer Sentiment Index are reported monthly. But, Arvest Bank seeks to drill down to a more regional and local reading of consumer sentiment with a poll of its own.

• ‘Shop Local. Sell Global’
The 2014 Business Expo, hosted by the Fort Smith Regional Chamber of Commerce, emphasized growing businesses in a global economy. "Shop Local. Sell Global." was the message chamber members heard from numerous speakers.

NUMBERS ON THE WIRE
$243.4 million: Expected price that Pine Bluff-based Simmons First National Bank will pay to acquire Community First Bancshares based in Union City, Tenn.

53.5%: Number of respondents in a new Talk Business-Hendrix College survey who said they will vote for U.S. Rep. Tim Griffin, R-Little Rock, in the GOP primary for Arkansas Lt. Governor.

$21.759 million: Value of permits issued by Fort Smith during April, up 23.24% compared to April 2013.

OUTSIDE THE WIRE
• Technology and dumb federal policies
Regardless of political persuasion, few who ever visited or tried to use HealthCare.gov after its launch would argue that the Obamacare website was anything other than a colossal acquisition failure. The site wasn’t openly bid. It was limited to companies “pre-qualified” to do IT business for the feds. But the HealthCare.gov fiasco is only the visible tip of the iceberg that is federal government procurement, and notwithstanding the titanic disaster of that experience, neither Congress nor the administration is trying to fix it.

• The payday lender debate continues
The demise this week of a Louisiana bill that would have reined in payday lending demonstrates how hard it is for states to regulate the quick loan industry, which consumer groups criticize as a trap for the working poor.

WORD ON THE WIRE
"There've been some national baseball and softball contacts we've made who've contacted us about getting this thing up and going with tournaments and high-level activity to the complex. It's exciting to us and it's the economic development that we've stressed all along that would be a benefit to our region."
– Sen. Jake Files, R-Fort Smith, about the ongoing development of the new River Valley Sports Complex at Chaffee Crossing

“Prayer is an important part of my daily life and in the lives of countless Americans and I am thankful the Supreme Court has upheld this core American value.”
– U.S. Sen. Mark Pryor, D-Ark., in response to the 5-4 vote of the U.S. Supreme Court to uphold public prayer as part of a public meeting

Wal-Mart Stores Inc. does not agree with the recent denial from U.S. Magistrate Judge Erin Setser regarding its motion to dismiss a shareholder lawsuit filed by a Michigan pension fund in 2012.

Setser entered her denial recommendation for Wal-Mart’s motion to dismiss on Thursday (May 8) in Fayetteville. The denial ruling is subject to review by U.S. District Judge Susan Hickey. 

Robbins Geller Rudman & Dowd representing the plaintiffs said they are encouraged, and are hopeful Judge Hickey agrees with the findings.

Wal-Mart does not concur.

“The motion to dismiss simply points out that even if the allegations in the complaint were true, they would not meet the standard necessary to move the case forward. We respectfully disagree with the magistrate's opinion, and continue to believe that the complaint does not meet that standard,” said Randy Hargrove, Wal-Mart spokesman.
“We are considering our options, including the filing of objections.

Wal-Mart has 14 days to file an objection to the denial, according to the ruling.
 
The City of Pontiac, Mich., general employees retirement system sued Wal-Mart Stores and former CEO Mike Duke for failure to disclose the suspected corruption in its Mexican business unit when it first learned of the violations. The lawsuit was filed in May 2012, less than a month after the New York Times reported the investigation, and seeks class-action status for the Dec. 8, 2011, to April 20, 2012, period.

The plaintiffs, led by the pension fund, claim that top Wal-Mart officers, including Duke, knew as early as 2005 about bribery practices in Mexico to facilitate the rapid building growth in that market. In the court filing the plaintiffs believe Wal-Mart had the opportunity to “come clean” long before they did, given there were emails between legal counsel and Duke in October 2005.

In Wal-Mart’s fiscal 2012 10Q, the plaintiffs also allege that Wal-Mart had worded the corruption disclosure as if they had just learned of the allegations, covering up the fact that some top executives had known for several years and chose to investigate internally.

Setser noted in the denial ruliing that the plaintiffs have “sufficiently alleged that omission of the 2005 revelation of the suspected corruption and defendants’ 2005 and 2006 investigation rendered defendants’ statements in the Form 10-Q materially misleading to a reasonable investor.”

She adds that “Without any reference to the 2005 and 2006 events, a reasonable investor could have certainly been left with the impression that defendants only learned of the suspected corruption in fiscal year 2012, and that, upon learning of the suspected corruption at that time, defendants promptly began investigating and referred the matters of the Department of Justice and the Securities and Exchange Commission.”

Wal-Mart reported in late April that it had spent $439 million in legal fees, compliance costs and other expenses in the past two years related to the alleged violations of the U.S. Foreign Corrupt Practices Act.  Wal-Mart officials said during the February earnings call that compliance costs for this year would range between $200 million and $240 million, a figure that also includes the company’s internal compliance overhaul.

Link here for a PDF copy of Setser's May 8 ruling.

Booneville-based First Western Bank has filed its response to the Arvest Interpleading and countersuits stemming from the Dennis Smiley loan saga, which cost him his job as a top bank Arvest bank executive in March.

First Western is one of 20 banks known to have loaned the former Arvest Bank-Benton County president an estimated $4 million since 2011. At least 10 of those banks were defrauded by Smiley who used the same collateral – his Arvest Group Bank stock gifted to him as a top executive – for each loan.

Arvest Bank noted in its April 2 interpleading with the Benton County Circuit Court that Smiley knew the stock was not transferable when he pledged it as collateral. Several banks including First Western have provided documents to the court that show at least three other top Arvest executives signed security control agreements on behalf of Arvest Bank granting the lender access to the shares in case of default.

First Western noted its May 9 filing that Arvest knowingly allowed and directly participated in Smiley’s fraudulent pledge of his shares of Arvest Bank Group shares as collateral for a loan of $125,000 in February 2011 for real estate investments. Unknown to First Western at the time of the loan was that Smiley had already pledged that same collateral in loan with the Bank of Fayetteville.

First Western said it relied on financial statements provided by Arvest agent Euva Phillips and Smiley showing the shares could be used as collateral when making the loan. Absent the fraudulent statements from Arvest’s authorized agent and Smiley, First Western said it would not have made the loan, much less entered into a second loan arrangement with Smiley. In November 2013, Smiley borrowed another $85,983.86 from First Western through his limited liability company HDS Holdings.

First Western said Smiley did the same song and dance by misrepresenting his true financial status and again pledging the Arvest Bank shares as collateral through a signed control agreement by an Arvest officer Jeb Mills.

Phillips and Mills continue to work at Arvest Bank and spokesman Jason Kincy told The City Wire, and no other executives have resigned or left the company as a result of the Smiley situation.

First Western said it is owed $210,899.85 from Smiley’s fraudulent pledges in two loans made with Arvest signatures which shows that the bank knew or should have known of Smiley’s actions to pledge the stock as collateral. First Western notes that Arvest breached its contract to provide payment out of the stock account in case of default.

In its filing First Western said it reserved right to countersue any of the parties involved. The bank has not yet done so as of the close of business on Friday (May 9.)

Arvest has already been sued by Bank of Fayetteville, First Bank Hampton and First National Bank of Fort Smith, with each alleging that Arvest knew the collateral was pledged multiple times, given the same Arvest signatures appear multiple times on control agreements which they have disclosed to the court.

Outside of the Arvest interpleading on April 2, the bank has not made any public statements about their discovery of the Smiley situation. Kincy said the bank does not comment on pending litigation.

Arvest notes in its interpleading that Smiley knew he was not permitted to pledge or otherwise encumber the shares in the Arvest Bank Group common stock plan. Counsel for Arvest asked the court for a release of any liability related to Smiley’s stock proceeds ($551,754) which were deposited with the court on April 4.

There have been no criminal charges filed against Smiley or his former employer. There is a federal criminal investigation underway into Smiley’s loan activity. Sources believe there is enough evidence to waive a grand jury seating and move straight to a plea bargain with the U.S. Attorney’s Office.

It will be up to courts to decide the extent of Arvest’s liability in the alleged loan fraud perpetrated by Smiley, an officer and high ranking bank official. Acts of individual employee fraud can protect companies to a certain extent. But, the Federal Deposit Insurance Corporation notes in its regulations that bank management is responsible for preventing and detecting fraud and insider abuse: “The primary responsibility to prevent fraud and insider abuse rests with the board of directors and senior management.”

Smiley was senior management, but the FDIC states there should be checks and balances in place to circumvent and detect suspicious activities at the executive level.

When Fran Free launched Oh Baby Foods in 2009 she saw herself in an apron making baby food in her kitchen well into retirement. She had no idea the natural baby food business she founded would sprout wings and soar, but that’s what has happened.

“Oh my gosh we are so busy. We outgrew our new offices and had to move to a larger suite last week. We have seven offices now and I think a little more growing room,” Free said.

Next Monday (May 18), Free will travel to California to her processing facility for a second production run of the six varieties of natural baby food pouches in her product line.

“It will be a fast trip. My food scientist Dan Heiges, will meet me out there. The three 16-hour days will start at 4 a.m. We sample and test each batch that comes off the line for quality assurance and several taste and texture attributes,” Free said.

This is her second production run of a half million items, split between the six flavors, since transitioning to the baby food squeeze pouch product in August. 

“This production round kind of snuck up on us. We sold out of product much faster than we planned. Our production is slated to go quarterly after this round,” Free said.

Free received word May 6 from her largest customer, Whole Foods, that she had made it to national distribution status, which granted her access into nine more states and regions. Those areas are: Colorado, District of Columbia, Kansas, New Jersey, New Mexico, Ohio, Pennsylvania, Utah and Virginia.

Whole Foods has 11 regions, and Oh Baby has been accepted into all but three of those – the Northeast, Florida and the South.

“We have another retailer with 32 stores in the Northeast who wants to bring us on. This new account is on hold until after our production run next week. After that I will back in touch to set up that business,” Free said.

LOGISTICS & STAFF ADDITIONS
Now that Fayetteville-based Oh Baby Foods is a national brand for Whole Foods, Free said sales are expected to spike higher in the new states, particularly the Rocky Mountain states where Whole Foods has a large market share.

“We are now working with CaseStack to help us with the logistics of our growing company. Our product will ship out to CaseStack warehouses in Illinois and Southern California. They will store the product and broker the LTL shipments with tracking ability every step of the way to retailer,” Free said.

She said the company has used two different providers — one for warehousing and one for LTL shipments. 

“But these two businesses didn’t talk to one another and I had to be the monitor to make sure the product got to where it was supposed to go on time. I never dreamed I would be running a logistics operation as a baby food maker,” Free said.

She is hopeful the new relationship with CaseStack will free up her time to concentrate on building more sales with new clients. Oh Baby also uses United Natural Foods Inc. as its food distributor which helps set the pricing and sales forecasting for the retail stores.

Oh Baby also recently hired Audrey Chancellor as its office manager. She handles all the accounting and general invoicing for the growing company.

“I no longer go the mailbox. Again Audrey is freeing up my time for other things,” Free said. “Dan, the food scientist, is now on a 20-hour per week contract, that is huge for me, because he handles raw souring protocol, recall process and works with the manufacturer on quality assurance issues.”

Kelley O’Callaghan works as the opportunity analyst for Oh Baby. Free said she tracks daily, weekly and monthly sales through the Whole Foods portal. She also works with retailers and brokers on sales forecasts. All of this help allows Free to concentrate on product expansion and growing company sales through more retail outlets.

Two weeks ago Free went to the Whole Foods headquarters in Austin to get feedback on opportunities to grow the product line to toddler and big kids snacks.

“I am definitely going to pursue this product expansion this fall when the apple harvest is ripe. Until then, I am surveying the market to see what other products are already available in the natural foods segment,” Free said.

Snowy winter weather did not ding the local hospitality sector among the Northwestern Arkansas’ four largest cities as they cumulatively reported a 7.57% gain in hotel and restaurant taxes collected in the first three months of 2014. Hospitality tax receipts totaled $1.235 million, compared to $1.148 million in the same period of 2013.

The cities of Bentonville, Rogers, Springdale and Fayetteville collect a 2% room tax on hotel and meeting space. Bentonville and Fayetteville also collect a 1% tax on prepared food.

HOTEL REVENUE RISES
Allyson Dyer, executive director for Visit Rogers, said she is pleased with the first quarter hotel collections.

“I was expecting weather to be a factor but we had another record January and February collections. We hosted the Arkansas Municipal League Winter Meeting in January and that really helped our month,” Dyer said.

Rogers reports hotel tax collections of $157,814 for the first three months of 2014. Receipts rose 3.33% from the year-ago period. The hotel industry STR report indicates 98 hotels in the two-county area posted cumulative sales revenue of $27.719 million in the first quarter of 2013, a 4.7% increase from the same period in 2013.

STR reports occupancy rates averaged 47.2% in the first quarter, up from 45.6% in the same period in 2013. February was particularly strong with a 51.8% occupancy rating, compared to 48% a year ago. 

With better demand from business travelers, average room rates were $79.89 in the quarter, an increase of 2% from a year ago. Roger Davis, general manager for the Holiday Inn in Springdale, told The City Wire in recent months that there are less promotional rates given because personal and business travel is picking up steam.

Bentonville reported lodging receipts worth $118,544, up 12.62% from $105,261 collected a year ago. The city expects the Sheraton Four Points Hotel to open later this year in the former Clarion space. The new hotel will have roughly 105 rooms in addition to meeting space. 

Davis said the Sheraton Four Points and a new $12 million Hilton Garden Inn near Interstate 540 exit 64 and Wedington Drive in west Fayetteville will mean excess capacity in the region. The Hilton Garden Inn will have 115 rooms.

“There is still an excess room capacity in this market and both of these hotels will also add meeting space — 20,000 square feet combined estimate. Right now 2014 is off to a very slow start, but we expect when the weather clears that leisure and corporate business travel will pick back up. Even so, these two new venues will add to the excess room capacity,” Davis said.

Springdale reported hotel tax receipts of $62,021, compared to $57,905 last year, a gain of 7.10%. 

Fayetteville reported hotel receipts of $60,168, up 1.68% from a year ago, according to the Fayetteville Advertising and Promotion Commission report onfApril 14. 

Marilyn Heifner, director of the A&P, said two events — the Tyson Invitational Indoor Track & Field event and the Ozark Juniors Volleyball Club Tournament — picked up 2,290 room nights in February with an economic impact of $2,594,130.

FORWARD LOOK
Four new events booked will result in 10,780 room nights and will have an economic impact of $3,535,429, Heifner noted in the April 15 report. (The economic impact is annualized and includes food sales.)

“I expect a very healthy second quarter as June is always one of our biggest months with Walmart Shareholders, Poultry Festival, LPGA, and Daisy BB Gun Competition, plus the AMP opens June 7 and I believe that has potential to help our weekend hotel stays as well,” Dyer said.

Davis and Heifner also predict strong summer receipts as each city is aggressively pursing and booking more group travel.

On a national scale, the STR United States hotel forecast predicts revenue-per-available-room growth in 2014 and 2015 will slow. The forecast recently released by STR expects an approximate 5.3% RevPAR growth in 2014 and 4.7% growth in 2015. This comes on the heels of 5.4% growth in 2013.

FOOD SALES SHIFT
Bentonville reported food tax receipts of $278,576 during the first quarter, rising 5.27% from the year-ago period. The five McDonald’s restaurants in Bentonville reported taxes of $19,503 in the quarter making them the highest grossing restaurant group reporting. Tax receipts were down slightly in the period from $19,644 a year ago.

The Eurest Dining Services that run the Wal-Mart Cafeteria at the home office reported tax receipts of $18,953 in the quarter, down from $22,626 in the year-ago period.

Chick-Fil-A picked up sales from a year ago with tax collections of $8,563, up from $7,785 reported a year ago. Panera Bread had less sales taxes of $6,119 down from $6,272 a year earlier.

Upscale restaurants like The Hive at 21c reported improving sales. The Hive had total food tax receipt of $4,584 in the recent quarter, up from $2,750 a year ago. The restaurant opened in January 2013. Eleven at Crystal Bridges also grew its sales year-over-year, tax receipts rose to $3,956 from $3,063 a year earlier.

Fayetteville’s food tax receipts totaled $558,542 in the first quarter of 2014, up compared to $552,971 in the year-ago period.

Chick-Fil-A is the highest grossing eatery in Fayetteville. With three locations the chicken quick-serve venue has combined tax revenue of $29,684 in the quarter, up slightly from a year ago. 

Other top grossing restaurants include: Olive Garden, Red Lobster, Penguin Ed’s and Shogun Japanese Steakhouse. Fayetteville is opening a food truck court downtown on Dickson Street that will provide consumers more food options of the go.

The Shulertown food truck court has already signed up seven vendors who will soon stake out the spot in the former lot that was the outdoor beer garden for the Phoenix bar. The vendors signed up to date include:
• Shakedown StrEAT Grill
• Feltner Brothers
• Greenhouse Grille
• Mamma Deans
• Great Dane Pies and Tamales
• Baller Food Truck
• Burton’s Comfort Cremery

The project must get final approval from Fayetteville Planning Commissioners on May 27. If approved, the businesses plan to open immediately.

THE NUMBERS
Hospitality Tax Revenue
Fayetteville 
2014: $618,710
2013: $612,226
1.04%

Bentonville
2014: $397,120
2013: $369,900
7.35%

Rogers
2014: $157,914
2013: $152,726
3.33%

Springdale
2014: $62,021
2013: $57,905
7.10%

FedEx Freight in Harrison recently announced a donation of $100,000 to Arkansas Children's Hospital (ACH) to support the care of abused and neglected children. The money, which will be paid over three years, will provide funding for the new Children’s House, a single, safe place where patients and families can receive needed services in a child-friendly, multidisciplinary setting. The building is set to open in 2016.

This approximately $7.8 million, 23,000-square-foot facility will provide several services, including: medical care by board-certified specialists in child abuse; individual, family and group therapy; long-term psychiatric treatment; and support through the law enforcement and legal processes of abuse investigations.

“I am extremely honored to represent FedEx Freight as we join the Arkansas Children’s Hospital in making Children’s House a reality,” says Pat Reed, executive vice president and chief operating officer of FedEx Freight.  “We have had a strong alliance with this wonderful organization for many years, and we are proud to support the communities we serve.”
 
Children’s House will also enable ACH to better train the next generation of child maltreatment specialists.

“Our goals for the new Children’s House are to meet the needs of abused children in our state more effectively; minimize the trauma that these children experience; and provide a safe place where children can feel comfortable, protected and safe,” says Dr. Jerry G. Jones, medical director of the ACH Team for Children at Risk. “With this dream realized, we can set a new standard for care of abused children and their families.”

As a long-time donor to ACH, FedEx has supported other projects at the hospital including the South Wing, an expansion to both inpatient and outpatient space that opened in 2012.

This gift from FedEx is being celebrated as part of the ACH Century of Possibility Centennial Campaign. Through the fundraising campaign, the hospital has set a goal to raise $160 million to support pediatric care, research, education and prevention, and has already raised $148 million. The campaign will conclude on Dec. 31.

Northwest Medical Center in Bentonville delivered its 10,000th baby today (May 12). Braxton Lee Gorman, 9 pounds, 3 ounces was born  to parents, Kristi and Dr. Aaron Gorman.

Todd Hannah, MD, OB/GYN with LifeSpring Women’s Healthcare was the delivering physician. Since opening in 2003, Northwest Medical Center – Bentonville has offered obstetric services and today delivers approximately 100 babies a month.

“We are very excited to be part of this family’s special day in welcoming their new baby into the world,” Dan McKay, CEO, Northwest Health System said. “We are grateful for the confidence our physicians and the Gorman family placed in our hospital and staff in choosing to deliver here.  It is a special day for all of us.” 

According to McKay, combined deliveries between Northwest Medical Center – Bentonville and Northwest Medical Center -Willow Creek Women’s Hospital, Northwest Health System delivers 10% of babies born in the state of Arkansas annually.