By Robert Strauss
Today’s Machining World Archives May 2006 Volume 02 Issue 05
“Imagine…” reads the white lettering over the bucolic green, leafy cover of the Conserve School brochure. “The Dream… The School… The Future…”
Each set of ellipses in this case means not things left out, but the story of a man’s imagining of the dream school of the future. The man was the late James R. Lowenstine, and if they made a follow-up to “Citizen Kane,” the Conserve School would be his Rosebud, the icon that inspired him through an otherwise hardnosed career as the Chairman of the Board and President of Central Steel & Wire Company in Chicago.
Lowenstine spent most of the spare time of his adult life on his 1,200-acre estate, Lowenwood, in the north woods of Wisconsin, near the resort town of Land O’ Lakes. It was a marvelous contrast to the urban toughness of the South Side of Chicago, where he ran the Central Steel & Wire Company, founded by his father.
Long before his death in 1996, Lowenstine decided that upon his death, Lowenwood would trans-form into a unique boarding school, emphasizing environmental studies and living with the land. He created a trust to do just that in 1981, the trust getting 56 percent of Central Steel voting stock. There was a particularly vital line in the trust document, indicating Lowenstine’s intent to keep his business connected to his dream: “I recommend Central Steel stock not is sold.”
Now Lowenstine’s imagined dream, the school, is a reality, but one of the other dear places in his life says it is not part of the future. The Culver Military Academies, a prestigious prep school in Indiana from which Lowenstine graduated, has brought suit against Central Steel’s board of directors, which oversees the Conserve School, saying there is no way Conserve can be successful in the long run and that Culver should be getting the residue of Lowenstine’s trust, which could be running in the hundreds of millions of dollars.
The trust says clearly that Lowenstine wanted the Conserve School and wanted his board, most of whom were long-term friends of his and near-life-time employees of Central Steel & Wire, to control its establishment and growth. He did have a fail-safe for the money, however. The trust states that if putting together and then operating the school Lowenstine dreamed of is too impractical, the proceeds of the trust should go to Culver.
Just as the Conserve School was preparing to graduate its first four-year class, the Culver Educational Foundation filed suit against Conserve’s trustees alleging those trustees – the Central Steel & Wire board of directors – “knew that a sale of the shares of the company could affect their positions as directors and management employees.” Since the trust’s assets are at least, according to figures quoted by Central Steel & Wire trustees, $217 million, that chunk of change would clearly pay a lot of bills at the Culver Academies.
Since the complaint was filed in U.S. District Court in Chicago last November 14, both sides in the dispute have taken a relatively silent stance, claiming that they have been instructed to comment as little as possible on pending court action.“We have had conversations with Culver in the past, but they seemed to have gone nowhere,” said Ronald Kazmar, Central Steel & Wire’s chief financial officer, a board member, and managing trustee of the Conserve School. “Culver has filed a lawsuit and they just want all of the money. They allege that the trustees breached their fiduciary duties. The Conserve School is, in their minds, impractical, and all the money should go to them. Obviously, we don’t agree.”
The Culver Academies, for its part, has a boiler-plate official response, provided by a spokesman, Doug Haberland:
“The issue of the suit is a lack of diversification of the assets of the Trust,” the statement reads. “Responsible financial policy requires for a certain level of diversification, and a majority of the assets of the Trust are represented by one company – Central Steel & Wire. The decision not to diversify could result in depletion of the assets of the Trust, and this would be contrary to Mr. Lowenstine’s wishes.”All of this baffles Stefan Anderson, the Conserve School’s headmaster, who came to conserve in the summer of 2001 as director of admissions and became headmaster a year and a half later. He had been dean of students at the Breck School, a top private school in Minneapolis, Minnesota, but viewed the chance to be at a school at its inception as “the opportunity of a lifetime,” he said.
“I couldn’t resist the chance to get in on the ground floor of an institution with a great mission,” said Anderson, noting that being out in the back woods, rather than in the hustle of a big city, was something that did not bother him.
“I studied geophysics and did glacier research, so I have been in remote places,” he said. “My wife, Jennifer, grew up on a farm in Southern Minnesota. We wanted to do a lot of cross country skiing and there are 17 kilometers of groomed trails here. Whatever it is, you have to find the place that works for you. It is not the right environment for everyone.”
Clearly it was for Lowenstine. He had inherited the mantle of running a tough steel business from his father, but yearned for the ease and tranquility of a rural retreat. He bought 1200 acres adjacent to the Sylvania Wilderness of the Ottawa National Forest on the Michigan-Wisconsin border, 260 miles northeast of Minneapolis, and 360 miles – a good, long day’s drive – from his hometown of Chicago.
“Mr. Lowenstine had always said his mother carried him in the womb up to that part of the world,” said John M. Tiernan, the retired president of Central Steel & Wire and the first managing trustee of the Con-serve School. “His father was a big trout fisherman and started going up there in the late 1800s.
“Mr. Lowenstine was going up there just shy of 73 years,” said Tiernan from his home in Florida, where he moved after retiring from Central Steel & Wire last year. “That to him was really home. He loved that property. He wanted all future generations to enjoy the clean air, the lakes, the streams, the same as he did as a child and growing up. He wanted the students to be good stewards of nature.”
Lowenstine and his wife of 30 years, Elaine, had no children. She died in 1994, two years before him. Thus, there was no challenge by relatives when he set up the trust in 1981. Years before, in 1965, he wrote a poem that presaged his bequest:
To the future young folks of Lowenwood:
I wish you all love, hope, happiness
And a long and healthful life.
May your understanding of mankind
Be broadened through your association with
And, I am sure, your love of Lowenwood.
Tiernan said that Lowenstine was conservative both in the old and new meaning of the word politically. He sought to conserve the environment, to be sure, but also was conservative in business and how citizens should feel about the United States.
“Mr. Lowenstine was in World War II and a very, very patriotic man,” said Tiernan, noting that he went to Culver when it was primarily a military academy. “He was an outstanding American. He used to pass out American flags for us to wear on our lapels. The sales force really had to do that. You were almost required to believe in God, your family, the country, and the company, probably in that order. He was serious about that.”
He was also a conservative businessman, said Tiernan. The point was to have the company exist for a long time, not just the next quarter. When Lowenstine died, Tiernan said, everyone on the board of directors had been at the company for 30 years.
“He had loved his mom and dad, and he knew what was important and how to treat people and to run a business,” said Tiernan. “And to think he felt blessed despite having his wife pre-decease him and having no children. He said to me that he just wanted future generations to be able to enjoy the things he did as a youth, so that is why the school is important to all of us.”
Still, the Culver Academies suit implies that no matter how important the Conserve School is to Tiernan or its current managing director Kazmar or headmaster Anderson, it may be too much money chasing too small a dream.
Since Central Steel & Wire’s stock is so thinly traded, it is difficult to compute what the trust is worth is at any particular moment. Steel companies have seen their stocks – or if privately owned, their values – rise fairly well of late. It may be that the 56 % of Central Steel & Wire in the trust may be worth considerably more than the couple hundred million the trustees admit to.
“There has been a consolidation over the last several years, when bankruptcy cleaned out the bad guys,” said an observer close to the steel industry, who preferred to remain anonymous in case his comments offended some companies. “Three years ago, some of these companies were dead men walking.”
“Then the Chinese came in and took the slack out of the market. Suddenly, you went from the customer dictating the price to the healthy companies left doing that,” said the informed observer. “If you believe that the rest of the world aspires to our American level of consumption, then these materials, like steel, are going to be tight all around the world for a long time.”
He said that Central Steel & Wire could be even in a better position than the regular steel producers. Central Steel & Wire’s business is selling steel bars in smaller quantities. In some eras, that would not provide a premium, but the observer said in today’s tight market, Central Steel & Wire can do well.
“They have always been the warehouse people to go to for steel bars,” he said, noting that a big manufacturer may sell in 20-bar loads, but the buyer may only want four or five, in which case they would go to a company like Central Steel & Wire. “They now look at themselves as a service center. They sell to the accounts the mills will not bother with. Their value should shoot up in the years to come.”
Kazmar agrees and credits the long-term potential of the Central Steel & Wire to good business practices instilled by Lowenstine.
“He preached good moral character and good business practices and always looked ahead,” said Kazmar. “It is the same way we approach, as trustees, the Conserve School.”
The Conserve School now has 140 students, most from the Upper Midwest, in grades 9 through 12. The curriculum is designed to meet general accreditation standards for high schools, but also focus on Lowenstine’s principles, according to the school’s materials: “environment, ethics and community, innovation, critical thinking, effective communication, and creative expression.”
Anderson, who got his degrees at St. Olaf College in Minnesota and the Massachusetts Institute of Technology, does not agree with the Culver Academies’ premise that the school is over-funded. For one thing, it took upwards of $60 million just to build the campus. For another, there is evidence; he says, that good new schools can die without what some feel is over-funding, at least initially.
“The Shackleton School in Boston went belly up after only a few years, and that was a school that already had a good reputation for education,” said Anderson. “I am sure a lot of that had to do with the stock market going down in 2000 to 2002, which dried up its funding. Programmatic ideas don’t close schools, demographics and finances do.”
For the time being, the trustees at Central Steel & Wire feel the Conserve School is safe, but they are taking the Culver lawsuit seriously. Still, they cleave to their friend Lowenstine’s desires and have made them their own. “Jim was always of the opinion that the betterment of mankind came either through education or medicine,” said Kazmar, noting that Rush University Medical School would be the tertiary beneficiary of the trust, were it to make it that far. Rush has pretty much stayed on the sidelines in the snit between Culver and Con-serve. “When it came time to start thinking about what he wanted to do with his estate, he decided to build the school. We didn’t have anything to do with it, but we have embraced the idea and are all ecstatic about having to implement it.”