Terra Extraneus

It always amazes me how unhelpful the software sites of manufacturers truly are. I was forced to upgrade to Windows 7 by an accumulation of errors in XP until my choices were only either reinstall XP or install 7. I chose the latter.

Yes, I own an Apple Lap Top, so I already know there is at least one alternative to Windows. But, my desktop computer still has plenty of life and the weakened economy does not seem to have depressed prices at Apple. So, once again I decided to wander through the unholy land of software installation.

The replacement of XP by Windows 7 was extremely time consuming and fatiguing. This was mostly true because of the riddles wrapped in enigmas that exist for online and other help. The people that provide most of this written help work in the field and often do by instinct rather than thought, and thus do not explain in the articles many of the things they take for granted. Those of us who are forced to actually fix these things only every few years, however, are clueless about some of these preparatory steps.

For example, only after reading article after article both on the open internet and on the Microsoft web sites does the process for transferring .pst files from a back up drive to Outlook, once again safely nestled in Windows 7, become doable.

First, of course, figure out where Outlook keeps its files in your old XP installation and back them up. Back up everything in sight and then check and make sure hidden files are copied as well. Do not stop until these files are safely copied onto a UBS external hard drive or a disk. Just finding these files can be a challenge if you fail to do so early. I had to use an Outlook file recovery program I had left over from a past problem just to relocate them.

Once you have installed Outlook successfully, the import file pull down menu in Outlook will drive you insane unless you do more work on the .pst files you copied in the step above. For, in Windows 7, there are many little quirks, and there may be some in XP that I had long forgotten.

These steps include weird things like making hidden files visible, and making sure “permissions” line up. The .pst files themselves must have the correct permissions engrafted into their very being. How to do all of these steps are easily explained in articles freely available, but the problem is that Outlook does not in the import pull down menu mention any of them and the articles on importing .pst files into Outlook rarely mention these necessary steps either.

In the upgrade to Windows 7, one other thing caught me. My sound card stopped working. My sound card was not easily identified either on the computer using its system information or looking at the drivers. Just before opening the case and looking directly at the card, I noted that the latest available driver for my card was last amended by the card manufacturer while Windows 7 was still in beta. There was no driver available from the time that Windows 7 went public in the fourth quarter of 2009 or after, even though Dell’s diagnostics swore up and down the computer was completely compatible with Windows 7. Maybe an IT professional could make it work. But, I opted to invest $100 in a new sound card that presumably has a later driver.

The moral of the story could be “buy Apple.” It could be “never give up.” It could be “hire someone to do it.” For me, once again, I have defeated the dastardly plot of Microsoft.

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NewsOK.com reported on December 2, 2008 about a Jackson County man ripped off by BlueHippo, a company that sold inexpensive electronics at inflated prices and then never delivered about a third of the sales, continued to dun checking accounts and generally practiced economic vampirism.

This sad story was not just about a victim in Jackson County, but about a sad news heritage gone and lost forever. NewsOK.com did not seem to know the Attorney General of Maryland forced BlueHippo to mend its ways in May 2007, did not know that a class action law suit against BlueHippo also endangered Gateway, a computer manufacturer, and did not know that at least one ABC affiliate in Baltimore had already done an expose on Blue Hippo many months ago.

At least, none of that was in the story by NewsOk.com.

The other sad part of the story is that NewsOk.com could have used the fact that there have been “thousands of complaints nationally against the company” according to the Central Oklahoma Better Business Bureau as a case study of consumer protection. The Oklahoma Attorney General received twelve complaints in 2008, but there was no action taken. Thus, clearly, there is no consumer protection.

Finally, it seems unlikely the victim in Jackson County will be able to engage a tort reformed lawyer to address the fraud. The legal profession does not have the capital any longer to address such small claims which would require multi-state suit and collection efforts.

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Investment News writer Darla Mercado reported that fixed and variable annuity sales by banks fells 4% in April and that for the third consecutive month, fixed annuities out sold variable. She quoted Jackson National Life Distributors, LLC as blaming the decline and the change in the mix of sales on “market volatility.”

It certainly could not be because consumers have figured out that for every nine well meaning and competent annuity sellers, there is one idiot, or fiend, on the loose using variable annuities to the detriment of their customers and attracted by commissions that are too high and consumers that are too gullible.

This is sad because variable annuities should be a good product. Why is it a poor product for the average consumer, especially consumers over 50?

Once the sale is made, banks, insurers and the financial services industry think they can turn their back on them. A variable annuity is like a car, it requires maintenance. The underlying funds and fund choices get out dated, hammered by the market or suffer from bad management, just like anything else. But, once sold, the only protection the consumer has from huge losses of principal is the selling agent. If the selling agent is an idiot, lacks worth ethic, or is perpetually on to the next big sale, the consumer is all alone with a product they do not have the tools to manage. Even some selling agents lack the tools to manage large numbers of these accounts and have to look at them manually in a disciplined manner.

I thought it was funny that Jackson National spoke out on the situation. I have a Jackson National product and it has lost 20% of principal and all earnings to date in the last quarter. This loss is purely market driven because I have one of the good agents and I litigate in this area for a living so I know something about it.

The other reason variable annuity products can be dangerous to older people is because the financial services industry uses terms that the consumer does not realize have meaning that will lead to unintended consequences. Everyone wants to be “moderate,” right? No one wants to be “speculating” or too “conservative” when it comes to financial risk. But, if the customer tells the securities industry that they are, indeed, a “moderate” investor, the customer is in reality telling the industry the customer is comfortable risking some principal loss, maybe as much as half.

Also, the term “growth” sounds like a good thing, right? Like “moderate,” to obtain growth means the acceptance of risk of principal. Most of the portfolios of elder customers I have reviewed, that is, persons well above retirement age, contained too much investment in “growth.” Most “growth” investments take at least five years to produce that “growth.” Most “growth” investments will fall at the same rate they rise. Very few “growth” investments are based on the stock issued by large corporate entities, but rather by the smaller and more vulnerable companies. But, too many customers move most of their principal into these products.
Fixed annuities on the other hand, too boring in good times, become more popular when the economics become uncertain.

It is amazing to me that organizations like AARP, the SEC, or the Congress, do not seem to recognize these defects. If the SEC would simply ban surrender charges or severely limit their use, variable annuities would not be the product of choice. If the SEC required an annual positions review in the variable account by the selling broker dealer, that might reduce the risk because supervisors would be forced to fill in the gaps left by the weaker members of their sales forces.

Market volatility should not be the only policeman on the street.

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For many years, every kid I knew that did not go to college was somehow located and drafted by some pyramid or outside sales company. They were each eager to make their initial presentations to family, friends, and friends of their parents. Thus, I sat through many presentations on vitamins, cleansers, vacuums, and other life essentials. I would listen and decline, or if there seemed to be any hope, listen and then dissuade.

People that are drawn to a life of sales have unique gifts both of personality and articulation. Most people simply do not have these gifts. Training can enhance these gifts, and help them emerge, but it does not seem often that they can be instilled and created. Thus, dissuading someone from the waste of struggling in a career in which they have little hope seems humane. All of the kids eventually left sales, no matter what I said or did not, and obtained an education, or found an otherwise suitable career.

The same may be said for opening and running a business - some people have what it takes and others do not. Moreover, a business is subject to so many factors that stress is existence, even the right person running it might not be enough.

Unfortunately, many people are willing to buy, even if it takes all of their life savings and more, based on a good sales presentation. Most buyers of franchises do not have CPAs and do not hire CPAs to look over the disclosures, contracts and projections. Most buyers do not have lawyers and do not hire lawyers to look at the contracts. Most buyers do not consult their professional financial advisors. At most, buyers of franchises will normally interview prior buyers without realizing they may be part of the hustle or themselves victims that have not yet figured it out.

There are many legitimate franchising operations. But, any business, including a franchise sold by a reputable company, requires capital, expertise, and experience to evaluate, customize, and implement. Even a knowledgeable buyer should get a second opinion.

In the internet age, no business is likely to be truly unique, even if it is the only one in a town or on a corner, and therefore, there is likely to be information available. Thus, industry associations, newsletters, and business writers will generally explore the trends in an industry to determine pricing trends, revenue trends, expense trends and resale trends. A new business that is projected to be more successful than regional and national averages of existing businesses is likely infected with a terminal case of optimism.

While owning a business is the quintessential American Dream, business failure is a pervasive reality. While owning a lawsuit about a failed business is not the American Dream, it is often the only way a buyer can recoup some of what was lost.

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Stephen Bloom’s new book, The Believers Guide to Legal Issues (2008, Living Ink Books), is mis-titled. While the book is very generally about legal issues, it is more of a consumer protection guide for Christians. Possibly it should have been entitled, The Legal Services Christian Consumer Guide.

The book is written in the current form of the Christian book: it is infantile and tawdry. It uses novelized short stories at the outset of every chapter to make a point, most of which are dripping with emotional resonance but distant from reality. Mr. Bloom assumed or was told that no Christian would sit and read a real book. Compare the book to Sekulow’s real book, Witnessing Their Faith. Nevertheless, Bloom’s book gives some excellent consumer protection tips to the Christian trying to navigate the legal system or deal with problems that seem legal.

Thus, and the book is RECOMMENDED for this purpose, if someone wanted to teach a Sunday School class to a group of adults of mixed ages and educational levels about legal problems Christians might face and how to deal with them, this book could be helpful to the class (although it would not do much for a teacher not already an expert in such things). The only thing missing from the book are the sentences with the blanks to fill in that seem to be the standard in most Sunday School teaching materials.

Thus, for the Christian with limited interest in reading, the Christian without formal education beyond high school, and the Christian with little experience in the business world, Bloom’s book could be very helpful.

But, Bloom’s book is NOT a Believer’s Guide to Legal Issues, except in the sense of consumer protection. Mostly, he tries to warn Christians to avoid being mesmerized by the secular legal system’s approach to problems and remember that there are alternatives, some of which are biblically recommended. While he quotes Scripture at length and does try to make certain applications, the book is simply too short and too much of an over simplification to be meaningful as any sort of actual guide. Bloom seems to assume, too, that Christians end up in legal problems because they did not pray hard enough or did not talk it all out. Bloom does not seem to recognize that in a Jeffersonian Democracy, some disputes cannot be resolved except by the legal machinery, especially those disputes with large commercial entities and institutions.

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There seems to be some fear that many eligible taxpayers will not receive their tax rebates because they did not file a 2007 tax return. An old friend sent around an email indicating that some of the people that might not have filed a 2007 return could include disabled Social Security beneficiaries and disabled or retired veterans otherwise receiving benefits, as well as others. Thus, it is time to check in with these folks and make sure they get their money by filing a return.

Please access these links for special filing instructions and a sample Form 1040A (.pdf) that highlights the simple, specific sections of the return to fill out.

Of course, the tax rebate probably would not be needed if Americans financed their federal government with sales tax receipts rather than income taxes. But, that is a topic for another day.

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The Small Business and Work Opportunity Tax Act of 2007 imposed penalties on tax preparers if the tax return understates the taxes due to the government and the tax preparer knew or should have known. Most tax preparers will wisely avoid this problem by asking for less documentation from the client to avoid the “knew or should have known problem” and rely more on the representations made by clients. Thus, the government will actually reduce the accuracy of returns by blinding tax return preparers. This is a typical example of legislative over reaction.

But, some CPAs will panic and demand from their clients voluminous proofs, and no doubt, become defacto auditors for the government.

To avoid this problem, will CPAs need a duty of zeal to their clients ingrained into them through their ethics code as has been drilled into lawyers through theirs? In the meantime, taxpayers will have to determine who their non-attorney tax return preparer or tax advisor actually represents, them or the government?

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What requires the skills of an appliance technician and Spiderman? A brand new satellite dish!!

In 2007, the Oklahoma Supreme Court reiterated a time honored rule of law that before there is liability in a negligence claim there must be a duty. The breach of the duty must also cause the damage (injury). But, fundamentally, if there is no duty by one person to another, then there can be no liability.

Thus, in Lowery v Echostar Satellite Corp., 2007 OK 38, the Oklahoma Supreme Court held that the satellite dish company had no liability because it had no duty to prevent its customer from falling off her own roof when she tried to repair the satellite dish. The customer suffered several broken bones in the cause of satellite dish television. It did not matter that the customer had customer service on her wireless so that they could talk her through the repair. The satellite dish company could not see the roof, the customer, or whether the two would not be compatible.

More interesting is the fact that what caused the customer to try to scale her roof was the need to repair the satellite dish. The customer called customer service and was sent a package of three small screws. She again called customer service to inquire how the three screws were sufficient to her need and why someone was not out to repair the dish. Customer service told her no one would be coming out.

The satellite dish warranty contract apparently did not specifically require that a human be dispatched to do the warranty work, but rather anticipated that the customer would be the one to scale the roof and do the repair. Thus, the Supreme Court could do nothing for the consumer.

Nobody with any sense of fairness would sell a warranty that required the skills of a technician and Spiderman to maintain a consumer device – except the satellite dish folks, it seems. Maybe they have forgotten that the satellite dishes are small and installed on high places, rather than the old ones that were as big as small cars and had to sit on the ground.

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After the United States Supreme Court defanged the tort system in Campbell v State Farm Insurance Company by limiting punitive damages to ten times actual damages, insurance companies almost uniformly reverted to their business methods employed prior to the advent of theories of recovery involving bad faith breach of contract. The primary method of boosting insurance company financial performance has almost always been by increasing the cash reserves the companies invest, such that in the modern era, most insurance companies make more money from their investments than they do their sales of new policies.

One of the ways insurance companies increase their cash reserves, and thus the size of their investments and the resulting investment profits is to refuse to pay claims to policyholders. Insurance companies accomplish this by tightening their claims investigation procedures and excluding claims, in whole or in part, on ever more detailed guidelines for claims payment. This method has several permutations. One method is to never actually deny the claim, but rather to put up so many requirements to qualify for payment, usually manifested in ever more clever paper work technicalities, that the policyholder eventually in exhaustion gives up. Another method is to do post claim underwriting.

Post claim underwriting is manifested in “investigations” of the claim that start with the initial application, if the application is still within the time it can be contested, and sometimes even if it is not, and look for any flaw or mis-statement. The initial application is often as much authored by the commission seeking (and sometimes commission hungry) insurance sales person as it is by the prospective insured or policyholder. The application questions are usually detailed and often use technical medical or other terms.

Most insureds and policy purchasers assume that the insurance company obtained a release of medical records from them for some purpose and that erroneous medical history answers will be corrected by a review of the medical records supposedly obtained. While this might or might not be true, a few months or a few years later when the major claim is being “investigated,” many companies often revisit the original decision to accept the policy, called “underwriting,” and determine if there were any errors in the application that could be characterized as wrong or fraudulent.

Companies that engage in this sort of retrospective underwriting analysis assume the insured or policy purchaser lied and assume the selling agent just faithfully took down their answers to the questions, even though the insurers know fully that the agents often have to explain the questions and help decide what the answer should be.

In a binding arbitration in California, Bates v Health Net, Inc., BC321432, [hat tip to Lisa Girion, Los Angeles Times, otherwise, no one would have known and to TerraX’s editor, Terry Hull, or I would not have known] the arbitrator wrote a lengthy report of the testimony about post-claim underwriting that led to policy rescission (cancellation). Health Net wanted out of the policy as soon as Ms. Bates developed breast cancer and $125,000 in medical bills. The arbitrator awarded Ms. Bates $9 million, some substantial part of that in bad faith punitive damages. Thus, this Award was doubly rare, a large award in arbitration to a consumer, and, a report on the practice of post-claim underwriting, which is typically illegal or typically unfair, or both.

The Award is presently on the LA Times website, the link is in bold above, and is an excellent explanation of the post-claim underwriting methodology. The only thing missing is the one thing only a Grand Jury could probably get a handle on, and that is the cold blooded actuarial data the insurance company likely used to determine whether post-claim underwriting denials would be cost effective in preserving or increasing reserves and profits. You can bet that even though this Award laid it out in cookie cutter clarity, there will be no hearings by the enforcement division of any Insurance Commissioner in any state. That makes Campbell v State Farm all the more effective to protect insurance company financial statements.

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The District Attorney of Oklahoma County according to The Oklahoman has announced that the sellers at the Affair of the Heart craft show will not be prosecuted for violation of trademarks of the University of Oklahoma or Oklahoma State University. The District Attorney has not announced and has reserved on the issue, according to the newspaper, whether that office will prosecute representatives of OU or OSU for confiscating crafts displayed at Affair of the Heart that bore either or both school logos.

Obviously, I am not privy to what precisely what happened, and all I know of the facts came from the newspaper. But this incident bothered me. Trademark and copyright protection of late has become very edgy. Now frustrated with the deliberate machinery of the court system, or maybe in ignorance of it, it may be turning to something else.

Self-help repossession, of course, has been permitted to secured creditors under the Uniform Commercial Code for many years. Indeed, the leading case on self-help repossession, Williams v Ford Motor Credit Co., dates from 1982. The rule has been in such cases that self-help repossession remains lawful under the uniform commercial code for secured lenders if there is no breach of the peace. But in Williams, the court made it clear that if the car owner had objected to the repossession, it would have been a breach of the peace for Ford to proceed to repo the car.

There is no corresponding right of self-help repossession in trademark or copyright law. It is possible to get a court order permitting seizure of the infringing goods, especially in cases in which the infringing goods are in fact ringers, i.e., counterfeit knock offs. See, Lorillard Tobacco Co., Inc. v. A&E Oil, Inc., ___ F.3d ___, 2007 WL 2736622 (7th Cir. 2007)(counterfeit cigarettes with counterfeit tax stamps), in which a couple packs of the counterfeit cigarettes were purchased by Lorillard and then used as evidence to support a seizure order. This would have been the correct procedure for OU and OSU to follow. Also, they could simply have photographed the infringing items and then prepared lawsuits against the crafts people.

Both OU and OSU have so many lawyers in their employ that they own their own small law firms, and they no doubt employ many private law firms as well. Therefore, there would have been no excuse if in fact OSU and OU personnel wrongfully seized anything. If they seized anything without a court order and over the objection of anyone, it was a breach of the peace, and if they acted under color of state authority, it was a violation of civil rights statutes.

If the OU and OSU people, as alleged in one news story, had in their company a law enforcement officer, then that officer, too, breached the peace, because without a warrant or a court order and over the objections of anyone, even a bystander, the law enforcement officer was violating the civil rights of the owners. The law enforcement officer could have stood there and prevented disturbance of any evidence if a crime was being committed in the officer’s presence, while lawyers scrambled to obtain the appropriate court orders. While the Oklahoma Governmental Tort Claims Act might shield some the actors, or place dollar limits on some of the theories of recovery, it likely would not much impact a federal lawsuit under §1983.

The other thing that bothers me about all of this is that OU and OSU are public universities, not private businesses. They are political subdivisions of the State of Oklahoma. They survive on legislative appropriations, regardless of the profitability of their fund raising, their R&D programs (if any) or their sports programs. While that does not place their logos in the public sphere for random or unlicensed use, it does at least morally qualify their claims to protect those logos.

Moreover, both OU and OSU use their logos to brand high profile products, their multi-million dollar sports programs: revenues of $30 million for OU and $15 million for OSU. Legitimate public comment about those logos is lawful. Honoring one’s favorite team by creating a homemade craft incorporating one or both of the logos is just as much a fair comment as making fun of them. That a crafts hobbyist made a few extras and sold them at Affair of the Heart is hardly a threat to those logos, especially since they exist, as a practical if not a legal matter, partly in and partly out of the public domain.

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