By Kim Harvey Looney

The Joint Commission announced the introduction of new standards require accredited healthcare organizations to address bad behaviors.  While healthcare leaders and caregivers have recognized for years that intimidating and disruptive behaviors are a serious problem, the Joint Commission goes a step further and states that such behavior poses a serious threat to patient safety and the overall quality of care.   The new standards apply to hospitals, nursing homes, home health agencies, laboratories, ambulatory care facilities, and behavioral healthcare facilities.  These entities have long struggled with healthcare professionals with intimidating and disruptive behaviors.  The Joint Commission is going to assist accredited healthcare organizations  in dealing with this issue by requiring them to create a code of conduct that defines acceptable and unacceptable behaviors as well as to develop the process to deal with those professionals who exhibit behaviors that are unacceptable.  The Sentinel Event Alert recommends that healthcare organizations take 11 specific steps to help put an end to intimidating and disruptive behaviors, including implementing a zero tolerance policy, providing education, and holding all team members accountable for behavior.  The new Leadership standard that addresses disruptive and inappropriate behaviors will take effect Jan. 1, 2009. 

By Kim Harvey Looney

On Wednesday afternoon, July 9, 2008, the Senate voted 69 to 30 to stave off a cut in Medicare fees to physicians.  Senator Edward M. Kennedy (D- Mass.) made a surprise appearance.  While President Bush has promised to veto the bill, Senate leaders are not worried because the bill has now passed both the House and Senate by veto-proof margins – 355-59 in the House and 69-30 in the Senate.   Without such action, physicians would have started to feel the 10.6 percent automatic cut sometime after July 15.   A number of Republicans who had previously voted against the bill ended up voting for it after they were targeted by ads from the American Medical Association, including Senators Kay Bailey Hutchison (R-Tex.), John Cornyn (R-Tex.), Arlen Specter (R-Pa.),  Bob Corker (R-Tenn.) and Lamar Alexander (R-Tenn.).  A total of nine Republicans switched their votes.    

By James Bristol

For several years companies have employed a number of tools to measure compensation paid to executives. These include benchmarking, performance measures and goals, internal pay equity, stock ownership and retention guidelines and accumulated wealth analysis. Compensation is analyzed with these tools in order to assure that amounts paid to executives are reasonable and appropriate. These terms are described as follows:

• Benchmarking. This is the most common measurement used to support a particular level of executive pay as “reasonable.” Benchmarking is a comparison of a company’s pay practices with those of its competitors or peers in the industry.
• Performance Measures and Goals. Closely related to compliance with Internal Revenue Code section 162(m). Usually applied to incentive pay to make payment conditional on the achievement of financial budgets.
• Internal Pay Equity. This is a comparison between the pay of the CEO with other top managers. Reasonableness is based on CEO pay not exceeding a pre-set multiple of pay to others.
• Stock Ownership and Retention. Companies may require executives to acquire and maintain ownership of a minimum level of stock. The minimum may be set as a percentage of salary. The purpose is to align the financial interests of officers and stockholders.
• Accumulated Wealth Analysis. This involves an assessment of an executive’s financial position and accumulated stock holdings. This can inform the compensation committee as to the personal impact of compensation decisions and the appropriate mix of compensation components (e.g., stock, salary, long-term incentives).

There has been a lot of press on the efficacy of these tools used by corporate America. For some (but not all), the process has done little to police “runaway” executive pay. Risk Metrics (formerly Institutional Shareholder Services or ISS), has undertaken a compensation analysis project that resulted in a white paper as well as tools for measuring these effectiveness of these compensation considerations. This report is available at www.riskmetrics.com/compensation (users must create a free login ID). For cash compensation, Risk Metrics says the focus should be on appropriate benchmarks for base pay and the performance hurdles for bonus or incentive pay. For equity pay, attention should be given to comparing new grants with an executive’s current holdings, and whether or not equity awards are actually aligning the interests of executives with stockholders. With regard to other forms of pay, such as SERPs, perquisites and severance, attention should be given to the liability that is being created. Moreover, the integrity of the pay-setting process seems to be impugned with generous benefits that are not performance-based, according to Risk Metrics..

One of the more interesting features of this report is a tool for evaluating the peer group companies that are included in benchmarking. Risk Metrics warns that compensation “distortions” often occur when the peer group is not appropriately assembled. The measuring tool is intended to help a company avoid such distortions. It includes an assessment of the homogeneity of companies in the selected peer group, the disparity of pay between similar and dissimilar companies and the ranking or relative position of the company with regard to the size of companies in the peer group. The Risk Metrics website includes a demonstration that has values assigned for larger U.S. companies and gives the user an opportunity to build a peer group from the database.

One can wonder if this is an entrepreneurial effort by Risk Metrics. The premise of the white paper seems to be that the current state of compensation analysis is not getting the job done. The paper recites some well-known anecdotes of executive pay “excesses,” arguing that the benchmarks relied on to justify such pay were inappropriate. For now, this report is advisory and Risk Metrics seeks feedback. Some who have worked with Risk Metrics for a few years may worry that this is a testing stage for a product that will be added to the suite of proxy review services offered to institutional investors and companies seeking stockholder approval in the proxy process.

By Bobby Guy

For the senior living company looking to expand its portfolio, distress sales can provide a unique opportunity to purchase a diamond in the rough at a very favorable price.

Article available at this link from the May/June 2008 issue of ADVANCE for Long-Term Care Management.

By Wynne James and Joseph Woodruff

In our last posting we discussed that overtures from illicit investment promoters often begin with the “cold call.”  We think that investment calls from people representing companies you’ve never heard of should be cause for immediate rejection.  If they’re so successful, why do they need your money (particularly when they’re paying salesmen 10-15 percent of what you invest, plus overhead)? 

Nevertheless, let’s assume your sense of adventure, not to mention the allure (and, too often, promise) of amazingly high profits, leads you to throw caution to the wind.  We do think you ought to try to check out the company promoting its investments.  How can you do that? 

The first thing to understand is that you’re being sold a security, just like a stock or bond.  That means that the company is subject to federal and state securities laws.  Without going into the complexities of those laws, and they are complex, there are a few things you can do to investigate the company trying to sell you an investment. 

First, the most handy and helpful informational tool available is Google.  Enter the name of the company and the president of the company (if you don’t have it, ask for it – and if you’re told it’s not important, well, there’s a red flag).  You’d be amazed at the information available on Google.  Look for newspaper articles, actions by state securities regulators and anything else that pops up.  Two cautions: 1)  if you see articles about the company doing really big deals, particularly international deals, think twice.  Too often these companies have names the same as or very close to that of very successful, large companies.  Adopting very similar names is a way to get credibility.  2)  If you see articles that make the company look like an industry leader, consider that it may have been placed by or on behalf of the company – simple public relations. 

Other places you can look include the websites of large newspapers in the area of the company’s offices.  You may have to go to the newspaper’s “archive” section, since newspaper websites rarely maintain stories on their primary pages for more than a few weeks. 

You might also check the websites of state securities regulators.  These are easily accessed on Google by typing in the name of your state plus the words “securities division.”  Once you’re in the state website, look for the areas on “enforcement actions,” “administrative actions” or “cease and desist orders”.  The absence of any information about a company on any particular state securities division website is not an endorsement.  These regulators, while conscientious and capable, are often understaffed and rarely start an investigation unless someone has made a complaint.  Further, there is no centralized national informational data base, but we suggest you check the securities division websites of at least the state in which you live and the state in which the company has its main offices.  Since these searches don’t really take a lot of time, you might also check the securities division websites of big states in which there are a lot of potential investors – such as California, Pennsylvania and Illinois. 

What we’ve given you is a place to start, and we’ll continue to give you tips on how to investigate (and evaluate) a potential investment.  Remember that high investment returns are almost always a result of high risk, but don’t compound or increase the risk by investing with a company that only wants your money. 

By James Bristol

As reported in recent postings [April 24 and May 19], executive pay has entered the political debate in this presidential election year. New sounds bites have been recorded from a June 10th speech by Senator John McCain in Washington to the National Federation of Independent Business (NFIB), an organization that supports small businesses. The speech included a call to federal prosecutors to crack down on abuses and advocated “say on pay” legislation, i.e., that all aspects of executive pay be subject to approval by shareholders. McCain said, "Something is seriously wrong when the American people are left to bear the consequences of reckless corporate conduct while the offenders themselves are packed off with another $40 million or $50 million for the road."

Senators Obama and Clinton have either introduced or supported legislation that would require say on pay and impose new limits on executive pay. McCain’s comments indicate his position has less emphasis on congressional action. Regardless of who wins the election in November, however, it seems that executive pay will be on the radar screen in Washington for a while.

This political development may be echoing a trend in the world economy. Say on pay is the law in other countries, like the United Kingdom and Australia. As we’ve recently posted, however, the concept gets less traction in shareholder meetings. To date, only eight US companies have agreed to follow the say on pay path: Tech Data, MBIA, Par Pharmaceuticals, Littlefield, Risk Metrics, Verizon and Blockbuster. Shareholder support in 2008 was down from 2007, however.

Why is shareholder review of executive pay failing to garner the attention that shareholder activists – and perhaps presidential candidates – are expecting? Risk Metrics (corporate parent of ISS) organized a roundtable discussion in April to address this and related issues. The attendees noted that say on pay generally is perceived as positive in other markets but has not resulted in pay declines or measurable improvements in pay for performance. Shareholder advisory votes may have forced boards to consider the business rationale for their pay practices. On the other hand, there is concern that annual advisory pay votes would require investors to expend more resources to analyze compensation and could stifle boards' creativity in crafting performance-driven programs.

Others in the industry have voiced similar concerns. There is concern that shareholders would not be well equipped to analyze the details of executive compensation. This could give a board an out. Rather than be burdened with weighing difficult and competing considerations, they can be absolved from fiduciary obligations by throwing a proposal on the proxy and watching shareholders provide a rubber stamp approval. If mandatory shareholder review of compensation becomes law, the clear winner would be proxy advisory firms.

By Jennifer Weaver and Nate Gilmer

On June 9, 2008, the United States Supreme Court limited the scope of the False Claims Act (FCA) with its opinion in Allison Engine Co. v. United States ex rel. Sanders, a decision that potentially calls into question the applicability of the FCA to Medicaid claims.

For more information, please see the Waller Lansden bulletin at this link.

By Chris Phillips

Once upon a time, there was an issue that came up in every card association sponsorship and processing agreement and in any sophisticated merchant agreement negotiation (that is, one where the merchant read their terms and conditions and actually tried to make a change).  Every card processing agreement includes a covenant to abide by Card Association Rules (commonly know as "The Rules," this included Visa Operating Regulations and Bylaws and the MasterCard Bylaws and Rules, though it might also include Amex rules, Discover rules, debit network rules, etc.). 
 
There was one very good reason everyone included this - The Rules said that an agreement to follow The Rules had to be in the contract.  Or at least, that's what the bigger fish always said to the smaller fish (it had the added virtue of being true).  But the quirky thing was, most of the parties agreeing to be bound by The Rules couldn't get a copy of them.  Sure, the banks had the rules and the processors had the rules, but for ISOs, sub-ISOs, merchants, etc., forget about it.  Sometimes, neither party to the contract knew what was really in there. 
 
Absurd, you might say.  How could you be bound by The Rules if you couldn't read them?  How would you know if you violated them?  What's more, violation of The Rules was usually a Big Deal (triggering termination of the agreement, cutoff of residuals, fines, etc.).  So, there would be a dance.  Smaller Party would agree to be bound by The Rules if they were provided by the Bigger Party.  "Sorry," Bigger Party would say, The Rules are confidential.  "We could show them to you, but then we'd have to kill you."  Or something like that.  In the end, Smaller Party would suck it up and agree to be bound by The Rules, sight unseen.  If they were lucky, maybe the Bigger Party would allow immaterial violations of The Rules without triggering a really Big Deal as long as the violations were cured in a reasonable period of time.  One helpful large acquiring bank did provide a handy-dandy summary of The Rules in just a few pages, but that was about as goo      d as it would get.  Maybe a magazine article would quote The Rules, or an ISO would go to the ETA convention and listen to the Associations talk about changes in The Rules, or new enforcement actions under The Rules. 
 
Well, Virginia, there is a Santa Claus, and after much hand wringing, both Visa and MasterCard (no longer the club of banks they once were) have both made their Rules (or at least most of them) public.  MasterCard, to its credit did this a few years ago (large excerpts anyway), but Visa just gave up the ghost last month (in fairness, it had earlier allowed merchants to access The Rules if they would executed a confidentiality agreement).  (I could link to them for you, but that would be too easy, wouldn't it?)
 
Now everybody knows what those of us who worked for banks and processors knew.  The Rules are long, complex, alternatively granular and vague and generally not that surprising.  Most of the stuff that affects an ISO or merchant's daily life was already in their Agreement elsewhere (as required by The Rules, of course).  But if you're taking that plane ride to Sydney or need a hefty doorstop that pulls double duty as the foundation of our wonderful retail system, warm up the printer - it's all there for you. 

By Wynne James and Joseph Woodruff

Welcome to the Investment Scams Blog. This is our first posting. We hope this will be informative, with the goal of saving you money and heartache. Every investment has risk, but investing with untrustworthy people or companies adds a component to an investment you shouldn’t have, and it virtually guarantees you’ll lose your money.

Why are we doing this Blog? We’ve been representing investors who’ve lost money in these deals for some time, and we’ve tried to put together a profile of the average investor who gets taken to the cleaners. We haven’t been able to do it. Perhaps some psychologist can, but the average person would probably have some trouble locating it. Our experience indicates that all types of people, men and women, of all ages, and interestingly enough, people with little money and people with millions, end up investing. So we’ve decided to focus on what to look for. If you’ve got a personality that isn’t risk averse, then we’re going to try to help you take risks somewhat intelligently. We don’t know what a good deal is or isn’t, and we’re not experts in any industry. But we’ve picked up some ways that shady characters entice investors, and we’ll share and discuss those with you. Think of these as caged canaries in a coal mine: if you see that canary getting woozy, break off discussions and get out.

We also want your comments and feedback. We’ll post them and answer your questions if we can.

So let’s start with the way illicit companies often start: with the cold call. You get a call from some guy you don’t know about a great investment opportunity. He may talk to you for a while, perhaps even several times, about your investment philosophy, but eventually he’ll tell you about a great deal that’s too good to pass up. Where did this guy get your name? You probably don’t know this, but these companies can purchase lists of thousands of prospects. He’s very likely working off a script that’s been provided to him (we’ve seen actual samples), and one of the requirements of his job is to make 300-400 phone calls a day.  He’s also very likely had some training in how to generate your interest and trust.

The chances are very high that his calling you is a violation of federal and state securities laws (but only if you make an investment – more about that on a later posting). Legitimate companies don’t have salesmen making hundreds of cold calls all over America (and some other countries). So, a very good rule of thumb – don’t invest with anyone who cold calls, no matter how nice and personable he may be.

So that’s it. Pretty simple, although some other things we’ll tell you will be a little more complicated. Helping you avoid loss is our goal.