Cascade Management Group principles pull back on incubator plans

May 19, 2012|By C.J. LOVELACE |

Less than two weeks after a company that announced plans to start a business incubator in Hagerstown met with city and financial representatives, one of its principles says the makeup of the group has changed and the project has been put on hold.

Cascade Management Group Inc., a newly formed Hagerstown company that was established April 4 as a business development entity, says it has severed ties with Perry Ealim, president and CEO of Merge Business Development Systems Inc., who had been providing pro-bono guidance for Cascade.

Cascade Management Group Chairman James A. Mills said in an email May 8 that Cascade was no longer affiliated with Ealim.

That followed an April 30 meeting that Mills, Ealim and other Cascade officials held to provide information to local business leaders about the prospect of starting up a small business incubator as a way to help revitalize Hagerstown's struggling downtown.

Funding for the incubator — Mills estimated about $1.5 million would be needed to get it off the ground — would come in the form of grants to 501(c)3 nonprofit organizations or from private investors, according to a concept proposal issued at the meeting by Cascade and Ealim.

The proposal includes a Strategic Alliance Memorandum with the U.S. Small Business Administration that lists Ealim's company, Merge Business Development Systems Inc., based in Pasadena, Md., as "a 501(c)3 tax exempt agency ... established in the year 2005 with the idea of helping business people who always had a dream, and never had the means."

GuideStar — an online information service that, among other things, provides tax information from the Internal Revenue Service about nonprofit organizations — contains information about Merge. A posting of IRS data on GuideStar indicates that Merge's tax-exempt status was revoked May 15, 2010.

The GuideStar report states: "This organization's exempt status was automatically revoked by the IRS for failure to file a Form 990, 990-EZ, or 990-PF for 3 consecutive years. Further investigation and due diligence are warranted."

GuideStar's report says Merge was founded in 2007, two years after the 2005 listed in the Strategic Alliance Memorandum. The report contained no financial information.

The GuideStar report does not list Ealim's name, but has the same address in Pasadena, Md., that is on the Merge website.

Mills said Ealim had told Cascade officials that Merge was a nonprofit working in concert with the SBA to help foster small business growth.

Ealim did not respond to five phone calls, including four calls to his personal cell phone, and three emails during the past two weeks seeking comment. A number listed on his company's website had been disconnected.

A spokeswoman with the SBA's Baltimore District Office responded to questions in an email Tuesday. According to SBA Public Information Officer Rachel Howard, the government agency no longer has a formal relationship with Ealim.

Several years ago, the SBA had a loan program that required recipients to receive one-on-one business counseling through a pre-approved assistance provider, according to Howard.

Merge was one of the consulting businesses, Howard wrote.

"The loan program no longer exists and Mr. Ealim has no affiliation with the SBA Baltimore District Office," according to Howard.

What happened?

On May 3, Cascade representatives and Ealim met with city economic development officials in an effort to forge the beginning stages of a potential partnership, Mills said.

The meeting did not go quite as planned, with city officials focusing on finding out more about Ealim and Cascade than on discussing their incubator proposal, Mills said.

Ealim talked May 4 about the meeting with the city, calling it "eventful," and said city officials spent only "five minutes" of the 90-minute session talking about the incubator proposal.

City officials said the proposal was full of "erroneous information," according to Ealim.

"It's a concept," he said.

With city officials apparently more concerned with how Mills and Ealim became affiliated, the meeting turned into more of an "I got ya kind of thing" rather than a meeting to discuss a new business in Hagerstown, Ealim said.

Asked May 9 about that meeting, John Lestitian, the city's director of Community and Economic Development, had no comment on the meeting with Ealim or Cascade.

"The city is ready to partner with private industry on economic development when a reputable firm (brings forth) a plausible proposal," Lestitian said.

Cascade officials have since said that they sensed "something was up" during the meeting, and had a feeling that the city had information that they didn't.

Moving forward

Mills sent a letter to city officials on May 8 that said Cascade would cease its business relationship with Ealim, and move forward toward building new partnerships that are in line with Cascade's policy of ethical conduct.

"We're just a couple of citizens trying to make a change," Mills said, calling the incubator a "grassroots" type of venture to help the community.

Mills said he is in talks with private investors and organizations — in Hagerstown as well as Frederick, Md., and Chambersburg, Pa. — about possibly establishing an incubator.

The goal of the incubator would be to create opportunities for people to earn a livable wage locally and to provide ways to revitalize local commerce, Mills said.

Mills said company officials on May 10 met with a marketing firm to discuss a feasibility and tourism study that would survey local businesses about the needs of downtown and how an incubator could benefit the city and surrounding communities.

In an email Wednesday, Mills said Cascade is slowing down and taking its time before entering any future contracts to develop its incubator project.

Mills wrote in the email that the company has made some changes and the incubator is on hold for the time being. "I (have) been talking with some state and federal reps" about the situation, he wrote.

What Cascade proposed

Mills acknowledged that changes to their incubator proposal will be needed, and said the company plans to use other successful incubators as a model for one possibly in Hagerstown.

According to Cascade's original concept proposal, the incubator would serve as a launch pad for low- to moderate-level income individuals, including but not limited to minorities, women and veterans, that will help foster long-term business ownership and expansion.

The business incubator would be a not-for-profit entity and be funded through grants, donations and internal revenues, such as rent and workshops, with a goal of breaking even in two years to ensure a continuous and ongoing venture.

A seed fund of approximately $100,000 would be automatically available for loans to all companies accepted into the incubator, according to the plan.

Cascade would require a space of about 8,500 square feet, preferably donated or leased at a cost of $1 per year, that would provide a place for centralized training and provide participating businesses with office space at a reduced rate.

A full-time paid director would manage the facility. Two secretaries and an outsourced technical consultant also would be hired, Mills said.

Positions would be paid by funds generated by the incubator, unless Cascade teams up with a 501(c)3 nonprofit organization or finds other funding, Mills said.

Mills said paid positions would be based on the Davis-Bacon Act, a federal law that established requirements for paying prevailing wages on public works projects.

A board of unpaid directors, made up of community leaders — such as those in business development and finance — as well as elected officials, would oversee the incubator. An unpaid advisory group also would provide access to needed skills.

Once up and running, a business incubator would promote job creation and could produce as many as 244 new positions in a community over a five-year time period, according to data in the original proposal.

About Cascade

Cascade Management Group Inc. takes its name from the town of Cascade, which is in the mountains near the border of Pennsylvania.

The newly incorporated company of about seven people, including advisors, aims to provide professional consulting services and support to its strategic partners, Mills said.

Cascade was incorporated April 4 under the guidance of Ealim, who last week was still listed as Cascade's resident agent through the Maryland Department of Assessments and Taxation website.

Serving as the company's chairman, Mills, a 21-year retired military veteran, was laid off from his two previous jobs and decided he wanted to go into business for himself, with the goal of helping others get their own ventures off the ground, according to his biography included in the incubator plan.

Mills, a lifelong county resident who participates in a number of community organizations, holds an associate degree in business from Kaplan University, Hagerstown, and is in the process of attaining a bachelor's degree in business management, he said. Mills has also attended Hagerstown Community College and Phoenix University.

The company is headed by president and chief executive officer Sandra L. Callimer, who was raised in the Cascade area before moving to Florida in 1999. Callimer worked in real estate and provided research and analysis in settlement processing while out of the area, according to her bio.

Callimer returned to Maryland in 2002 and began working for a real estate closing company in Frederick. When the housing market plunged, she was let go from her job, prompting the shift toward going into business for herself.

Callimer, a Smithsburg High School graduate, also worked as a business administrator for a physical security contractor in Hagerstown and Baltimore, where she oversaw human resources and payroll for more than 200 employees, according to her bio.

'One step at a time'

Mills said he understands the difficulties faced by a start-up venture and noted "it would take everybody" playing a part to make it happen.

Although their timetable has changed abruptly in the wake of recent changes, Mills said Cascade is taking it "one step at a time for now" and has not entered into any contracts with partnership firms that could help move the project forward.

Despite the rocky start, Cascade plans to continue pressing on with its plans to start an incubator as a way to revitalize local business and help re-establish "The American Way," Mills said.

"It's my calling," he said. "I'm very passionate about this."

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