Wednesday, May 29, 2013

Kevin Kane’s Conflicts

Some realistic thoughts on conflicts of interest at the CVB.

Posted By on Wed, May 29, 2013 at 7:59 AM

Some people think Kevin Kane has a conflict of interest because he is head of the Memphis Convention and Visitors Bureau and one of the owners of Club 152 and Blues City Café on Beale Street.

More accurately, he has a convergence of interest. The distinction is important and says a lot about cronyism in the nonprofit world and how business gets done in Memphis, whether you're talking about Beale Street, sports and entertainment, hospitals, or the airport.

The "news" that Kane is a part-owner of the clubs is no surprise. Kane has made no secret of it for years, and it has been the subject of several media reports.

"With the approval of the Executive Committee of the CVB's Board of Directors, I became a minority investor" in 1996, Kane said in a letter to his board last week, adding that he was "shocked" to hear Club 152 had been closed as a public nuisance. Less shocking, it reopened a week later in time for the biggest Beale Street weekend of the year.

The businesses, he said, were "underperforming assets" and he is a "passive investor." Club 152 grosses somewhere between $5 million and $10 million a year, according to a trade publication Kane referred me to. If you can invest worry-free in a $10-million-a-year business fueled by alcohol and after-hours parties, then you make good money in your day job, which Kane does. He earned $341,000, according to the CVB's most recent tax form, with a steady revenue stream of hotel industry taxes.

"I have worked hard and successfully to keep my job-related responsibilities and decisions separated from my personal investment decisions to preclude conflicts," he wrote. "Our internal systems validate our performance."

One of those internal systems, board chairman Harold Graeter told The Commercial Appeal he saw no cause for concern. As well he might. Graeter works for the Liberty Bowl Festival Association, which, like the CVB, is a nonprofit organization. Kane was listed as chairman of the board on the most recent tax form. The AutoZone Liberty Bowl doesn't disclose its salaries, but other bowl games pay their top guys $341,000 or more.

All that Kane seems to be saying is that he doesn't deprive the CVB of his full-time services. He has a convergence of interests, not a conflict. What's good for the convention and tourism business is good for Beale Street and vice versa, and the same goes for the AutoZone Liberty Bowl, the Orpheum, the Riverfront Development Corporation, the Memphis Area Chamber of Commerce, and the Memphis and Shelby County Airport Authority.

All of those are nonprofits, too. Their boards and executive ranks are dotted with familiar names of former public officials, consultants, and staffers at other nonprofits. Their top executives, like Kane, earn way more than the city mayor's $171,000. But not nearly as much as the top people at some local nonprofit hospitals, colleges, or private schools. I used to think disclosure would keep nonprofit salaries in check, but the opposite is true. Pay is measured against one's peer group. Sky's the limit.

Is Kane screwing other establishments on Beale Street and other parts of Memphis by channeling business to his joints? That's a tricky one. The CVB's direct bookings amount to a few thousand dollars worth of business, but Kane's oft-made claim that Beale Street is Tennessee's top tourist attraction could be seen as a soft sell. If he were showing favoritism, you would expect an outcry from other restaurants and club owners. Kane has been on the job for 20 years, long enough to remember that if Beale Street was ever an "underperforming asset" hard up for investors, that was long before FedExForum, the Westin, the Grizzlies, and ESPN cameras.

Kane also has a convergence of interest with the local media. He is a super salesman and quote machine who is usually easy to reach. He's photogenic. He's on the ball and in the know. He's helpful. He has been on the cover of Memphis Parent and Memphis magazine, both owned by the parent company of this newspaper.

So are we conflicted? I guess so, but the same could be said of media relationships with many newsmakers and advertisers. How would Kane divest himself of his Beale Street investments if he decided to do so? Certainly he would want his original stake back plus appreciation. I don't see that happening. Like the closing of Club 152, this too shall pass, soon.

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