April 29, 2010

The May Report: 4/29/2010: Just the facts: ITA chairman Terry Howerton is now
individually sitting with multiple judgments against him totaling more than
$2.5MM since February and March 2010 and creditor actions to seize assets by
Orbitz, LLC are imminent.

Editor and publisher: ron@themayreport.com, ronaldmay@aol.com,
www.themayreport.com , 773-525-3944.

If you missed an article, go here:
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Workshops at Web Content 2010 Chicago Conference

Choose from Four ½ -day web content strategy workshops plus a full day of
breakout sessions at the fourth annual Web Content 2010 Chicago, June 7-8 at
the Gleacher Executive Conference Center. www.webcontent2010.com

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Seth Earley – Using Taxonomies to Improve Search
Matt Morse – Use Sharepoint to Power your Internet Site
Expert Panel – Web Enablement with Drupal for Non-Profits & Small Business

Register at bit.ly/WebContentRegister
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TABLE OF CONTENTS
The Scoop section:
— Briefly noted, by Ron May
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Guys Night Out for the Kids
Benefitting the Chicago Children’s Advocacy Center

Friday, May 7, 2010 5pm-9pm
Carmichaels Chicago Steak House, 1052 W. Monroe

About Guys Night Out
Don’t miss the chance to hang with “the guys” on Friday, May 7 at Carmichael’s
for the 3rd Annual Guys Night Out for the Kids presented by US Cellular. The
event kicks-off with an outdoor Happy Hour in the courtyard followed by an
indoor barbeque, games, golf pros, hand-rolled cigars and celebrity athlete
appearances. There will be a live auction featuring unique items such as a VIP
package to a White Sox game including batting practice on the field or a suite
to a 2010 Bears game.

The evening is being hosted by Mully and Hanley from 670AM The Score, and all
proceeds benefit the Chicago Children’s Advocacy Center (CCAC) for abused
children. Founded by Mayor Daley, the CCAC has served over 19,000 abused
children and their families since opening its doors in August 2001.

Details
Date: Friday, May 7, 2010
Where: Carmichael’s Steak House, 1052 W. Monroe
Time: 5pm-6pm Outdoor Happy Hour in the Courtyard
6pm-9pm – Party inside!

Tickets In Advance: $100 5pm-9pm (includes Happy Hour); $75 6pm-9pm

To Purchase Tickets: www.guysnightoutforthekids.org

Current Sponsors:
U.S. Cellular, Cameron Venture Partners, CA, Continental Resources, Huen
Electric, Labor Management Cooperation Committee of Chicago/IBEW, Northern
Trust Corporation, ComEd, Illinois Medical District, Midwest Generation, Sidley
Austin LLP/Partners of Sidley Austin, Johnson & Krol, LLC, Loop Capital,
Bombardier, CDW, Brown-Forman, Goose Island Beer Company and Vienna Beef

For More Information: www.chicagocac.org; 312.492.3720 Melissa Siemasz

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The Scoop section:
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Briefly noted, by Ron May

* There is so much going on with Mr. Terry Ivan Howerton II that one observer
quipped, “I’m surprised he hasn’t left for Mexico yet.”

That would be Terry redux, a repeat of what happened with Terry in Kansas City.

I will try to keep this clean and not intermix all the other things I have
found out about the ITA, and its governance or non-governance, as the case may
be. Well, that promise failed.

I have been holding off on a full discussion of the March 2nd board meeting,
which appears to have finally been the first time that Howerton and Hoch were
taken to task by the board for poor communication, poor procedural operations,
and a number of other things. Board members wanted to be sure that the
committees were active and that everyone is on the same page before money goes
out the door, like to Ukrainian programmers being paid by FastRoot.

Among those who spoke up at the last board meeting were:

Andy Goldstein
Linda Darragh
Scott Woodard
Art Roldan
Jack Noonan

Others who have expressed their opinions in the past include:
Gina Sandon
Jan Davis

The upshot of all this talk is that the current situation is unsustainable.
That situation is the continuation of Terry Howerton in the role of chairman
attempting to do everything. As much as many of his “causes” are worthy, they
have overtaken the overall strategic role of the organization, some key board
members feel, again, according to my sources.

Transparency is a key issue. Why isn’t there a complete list of Tech Nexus
tenants? The marketing person they just hired, Gloria somebody, is being paid
$40K for part-time work! Gee, can I have that job?

Margaret Plett was being paid $90K which was a cut in pay for her, and on top
of that, what was the first thing Fred did when the ITA got the largesse of
$500K from the ITDA? I think enough time has passed now that I can reveal the
story.

Fred fired her. It was an amicable departure, but they did renege on promises
made. Margaret was supposed to do some web development work but they gave it to
Robert Jacobi. Fred and Margaret just did not get along since Margaret was a
“can do” person whereas Fred is and was a pout in the corner stick in the mud.
Just ask Tim Krauskopf about this. Don’t take my word for it.

All of this leads to the question: What is being produced for all this money?

And how long will it last?

And what will they do when it inevitably runs out?

A consensus seems to have been building that Terry cannot continue doing all
the work for the ITA and the City of Chicago Public Schools that he has been
doing and in the meantime ignoring his own business.

The board, according to my sources, was clear. They want to see a succession
plan for both Terry and Fred Hoch. They want clear timelines for their
departures and their successors.

What has brought this on is many things, but one major contributor is that the
board now appears to be awake to the fact that the $500K or more that the ITA
got from the now defunct ITDA engineered by two board members, Dick Reck and
Scott Glickson, cannot be spent willy nilly and must be closely controlled and
monitored. There were really no clamps on the money given from the ITDA. Why
should there have been? There was no control on the ITDA money.

Glickson himself was not at the meeting and Reck was just on the phone. As one
person put it to me, it may be time for the old guard to go.

As one person put it to me, that money is a windfall — largesse, if you will,
and could be considered an ill-gotten gain.

Folks around town praise the ITA for its sponsorship of events. That is true.
The ITA does appear to be spending more money on supporting community events
even if they are not the organizers of those events. In politics, they call
that street money.

The numbers made available at the meeting made it abundantly evident that the
ITA would not be able to do what they are doing without that extra $500K, and I
did hear it was $500K, not $750K.

In my view, if you gave me that kind of money, I could spread it around and
seem like a big shot too.

In fairness, Tech Nexus and the ITA have become a center of activity, even if
they do not directly run the activities.

Belatedly, a few new roundtables are being formed, one in Mobile Computing, and
one in Energy and Clean Tech. Jay Marhoefer told me that his Clean Tech
roundtable had 12 people in attendance on March 11th. This is good.

And in fairness, Fred Hoch does not pound his chest like David Weinstein and
there does not appear to be much ring kissing. If the CEC under Weinstein went
away, one observer quipped, “no one would even notice.”

The ITA is much more in the center of the action. But is it there by its own
merits or by stolen goods, so to speak?

The other side of the picture is a very funny story that someone told at the
ITA board meeting about how the Chicago Tribune ran a story about how Motorola
was looking to move to California and the ITA called up the Trib. to get its
imprint on the story and the people at the Trib. said “Who are you? Call the
subscription department.”

The ITA has to raise its image by glomming on to people they had nothing to do
with creating, such as GroupOn, or FeedBurner or Tech Cocktail. When they are
late to the party, they try to give out awards to make themselves feel
important.

There is some sense that Chicago tech is at an inflection point. We do have
more firms getting funded. We do have much more activity. And there is some
sense in which Mr. Howerton has eaten some humble pie.

I was flat-out told that the last board meeting on March 2nd could have been a
turning point. After months of slumber, the board is awake and on to the game
that is being played. I know I have been pounding on that table since July 8,
2009 and even earlier than that. Maybe some board members are waking up.

So, why this report, why today, just an hour before the CityLIGHTS awards?

Well, I found out last Friday that multiple judgements have been rendered
against Terry Howerton, both individually and against FastRoot. And of course
timing is everything. Someone will see this on his or her Blackberry and turn
to his tablemate, “Did you see this?”

The big case I am interested in is Orbitz, LLC v. Terry Howerton. Actually
there were two cases. The first case against FastRoot was supposedly settled
and there was a settlement agreement that Howerton signed, but then he
defaulted on the settlement agreement.

And if the ITA and Tech Nexus went away tomorrow, for many people there would
be a big hole left. Dare I suggest that the same goes for this report?

We can dance around all the new and positive things that are going on, but the
bottom line is that Terry Howerton is now about to be besieged by creditors who
have won judgements against him and one of those creditors is Orbitz itself,
the firm that sublet the space to FastRoot and Howerton at 200 S. Wacker Drive
in the first place!

I have talked five or six times to Kevin Sterling in the last two or three
days. He is a Jack Webb type, just the facts. He refused to characterize for me
Mr. Howerton’s personality or character. I am not so constrained.

www.thesterlinglaw.com/ATTORNEYS.html

Sterling told me that an exhaustive search into the assets of FastRoot show
nothing there. That makes me wonder: Who paid for that $460 dinner we had in
March 2007 at Ruth Chris? Was that Terry’s money? It was surely his credit
card. Who paid for all the charity poker tickets Terry “generously” bought for
people over the last few years, supposedly on his dime? Who paid for all those
roof top and down by the river summer parties on Terry’s dime — supposedly?

How many actual and paid employees does FastRoot have?

I went down to the Daley Center Wednesday to take a look at the voluminous
papers in Room 601 and Room 801, both part of the Circuit Court of Cook County
under Dorothy Brown. One room is the Muni division, the other Law. There were
two suits.

The settlement agreement held Howeton personally liable for the money and
required that he pay $10K in rent for a period of four months. I don’t know how
many checks he bounced but he did bounce at least one.

There were other tidbits I picked up in a few minutes. The original lease, or
sublease I should say, called for FastRoot to pay one half the rent for the
first ten months. Meanwhile, Terry and Fred were touting the so-called
clubhouse as a general hang-out place and they repeated said that money was not
important to them. “Just come on down” was their mantra. Was any of that rent,
even the half rent, paid?

I also found out that when Terry was represented by a lawyer — he is now pro
se — one of those lawyers was none other than Craig Bradley. How’d you like
them apples? What about conflict of interest since Craig is on the ITA board?

I called Patrick B. Howell today in Milwaukee. Howell just got two judgments
against Howerton for over $2MM total, one for $800K plus and one for $1.3MM,
both for non-payment. Both deals were also settled with a settlement agreement
that was violated.

This is all very recent activity. It took the sheriff’s office six trips to the
offices of 200 S. Wacker to serve Howerton back in September before they got
him on September 15th and one of the documents has his age as 45 which we all
know to be patently false. Terry is 37. tinyurl.com/2wjyqzu
He was 19 years old in 1992. Why would he lie, if that is what he did, about
his age? My sources say that people lie about their age to evade creditors.

Here are links to the two Wisconsin cases.
tinyurl.com/24o2uw2

tinyurl.com/2d2rt2l

Here is a link to Patrick B. Howell who is preparing to bring his case to
Chicago so he can collect on Terry’s assets, such as they are.
www.whdlaw.com/ViewTeamMember.aspx?ID=168

Tech Nexus, I have found out, is a C-Corp. but for millions of dollars that
could easily be challenged. It is called piercing the corporate veil. There is
some question about whether Tech Nexus has any money, but it does have cash at
times during the month before it passes it on to the building.

At this point, if I were a Tech Nexus tenant, I would go to the building
management, bypassing both Fred and Terry since the Tech Nexus corporate veil
is clearly a sham, and since Orbitz, LLC, in all likelihood, paid the bill for
the entire build out as a part of rent amortization and I would tell them I
want to pay rent directly to the building because I had nothing to do with the
scam and want no association with these guys. Terry is the guilty party, but
Fred is an accomplice, that would appear to be certain.

Did Fred, aka James Alfred Hoch, go to the board and call Terry out on all the
shenanigans? I would bet the answer is a big fat NO.

The entire board is an accomplice here.

As I sat there yesterday, and time was rushed, looking at the records and
having my assistant make a few copies, I noticed legal fees approaching $7K for
things like phone calls about bounced checks and this is just for the Orbitz
case alone.

I saw one sheet with the list of months of unpaid rent and there were many.

In fact, how much rent was actually paid? I could not tell you that now.

Terry told me on the phone last October that the underlying amount of the $415K
owed to Orbitz is $50K. I can now say that is horse manure.

Ain’t life strange. I just see NBC Nightly News coming on and they have a shot
of some kids with the caption reading “Scouts Honor.”

Yes, Terry, Scouts Honor. You have brought shame unto the land.

The stench rubs off on all of us. Time to go, time to go, buddy.

I don’t think the ITA or Fred would shed a tear.

By getting that space on false pretenses, imagine the bind that you have put
Orbitz in. That was made clear to me by Kevin Sterling, Orbitz’s lawyer. After
all, Orbitz is an ITA member and even on the board. Kevin made it clear to me
that they will not let this pass. They feel at Orbitz that they have given
every break to Terry.

Kevin says he will do what his client tells him to do, but does Orbitz, a
for-profit, publicly traded, firm want to now be made to look like the bad guy
for just wanting to get paid?

I have to go over the papers more thoroughly, but it looks like a pre-abatement
amount owed was $199K.

Another figure I saw was for $347K.

More to come and come and come on this, of course.

The news here is the final judgements. The judgement for $415K against Terry
personally came down on March 17th and it becomes final on April 17th. That is
all after the last board meeting of the ITA.

w3.courtlink.lexisnexis.com/cookcounty/Finddock.asp?DocketKey=CAAJ0L0ABA
EEG0LD

w3.courtlink.lexisnexis.com/cookcounty/Finddock.asp?DocketKey=CABA0L0AFA
CDJ0LD
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