Terra Extraneus

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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During the sub-prime crisis, many people started out by blaming the poor people. You know, the dead beats that could not pay their mortgages. They were the people that tricked the billion dollar banks into giving them mortgages they could never afford, especially those on floating interest rates.

The front page of The Oklahoman reported today that Oklahoma Insurance Commissioner Kim Holland at the Oklahoma Health Summit has diversified the game into blaming the sick people for their lack of health insurance. Her suggestion is that there have to be government imposed penalties on people that do not have health insurance.

Holland believes the sick people really can afford health insurance but prefer to stand in line at emergency rooms to drain state resources and participate in a culture of non-payment of medical bills.

Holland has suggested that season football tickets should be forfeited by those that do not have health insurance (as well as driver’s licenses, hunting and fishing licenses, and, of course, state tax refunds). Her underlying premise is that the sick people really have money and are spending it on everything but health insurance. Holland correctly, however, diagnosed that one third of Oklahomans do not have health insurance, but she thinks it is their fault rather than the Insurance Commissioners’ fault.

Holland has apparently never spoken to anyone in those emergency rooms. She has never spoken to any family that has to pay its own insurance premiums. Holland probably enjoys her health coverage provided by state taxpayers and believes she could trade places with those that do not have state benefits.

Obviously, Holland does not understand the insurance system she is supposed to be regulating. Health insurance in Oklahoma is not affordable, just like everywhere else in the United States, because the insurers cannot solve the cost of health care in this country any better than anyone else. If Holland wants universal health insurance coverage in Oklahoma, she should have the legislature pass a cap law that limits the exposure of health insurers to $500,000 and has the state pick up everything above that on a covered claim. With that limitation on exposure, the price of premiums for health insurance would begin to decline. If they did not decline enough, then the cap could be lowered to $400,000, and so on.

Who would pay for the state’s “above the cap” share of medical expenses? Wrong question. What are we as state taxpayers already paying and would this be better? State tax payers are paying for the medical care of one third of the state’s population from zero. By making health insurance more affordable, and thereby reducing the third to a smaller percentage, by having more people buy insurance, the cost would likely be less.

To work the problem from the other end, the state should make health insurance premium payments for children deductible from state income taxes. That would also increase the number of middle income tax payers that could afford health insurance.

If the Insurance Commissioner needs a funding source, maybe she could propose a special tax on season tickets to OU and OSU football seasons. Maybe she is so smart she could retool the lottery into not only the funding rescue for Oklahoma education, but the funding source for health insurance (or season football tickets for everyone). But, blaming the sick people, or the poor people, for their lack of money, or their lack of fiscal responsibility, is based on the bogus notion that people want to stand in line at the emergency room, want to lose their homes in foreclosure, and are just wastrels and ne’er do wells.

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Selling off, even in market “crash,” later called more accurately a “correction,” is usually driven by switching from the investment strategy based on company fundamentals to the strategy based on market timing. The market timing approach always fails because it is based on prophecy, only without God’s help. It fails because it is based on emotion, fueled by media language, and not business principles. It fails because it takes the investor out of the market just when opportunity, even in an inflated market, abounds.

A true market “crash” involved auction rated securities, which most people did not own. The regulators, for a change, made the issuers step up and buy the failed product back. This “recall” of a bad product made sense. Thus, that “crash” was defanged and the whole thing has all but fallen off the stage. If the regulators had not acted, the wirehouses would have turned it into a debacle because they were treating it as a sales practices violation by their own brokers. I compliment the regulators even though I was deprived of many years of gainful litigation employment.

This market down turn has the same lesson for investors all the others have had. Do not over concentrate. Diversify. Balance stocks (sometimes called equities) against other types of investments in a portfolio (bonds, CDs, mutual funds that are not themselves concentrated only in stocks) or against non-market investments like real estate. Read at least the first couple of pages of the prospectus to make sure the product, be it a mutual fund or whatever, does not over concentrate your portfolio. Do not rely only on your financial advisor to read it for you. Your financial advisor might need the commission that month, or might have been misled by the broker-dealer employing him or her. Most will do their best. When in doubt, get a second opinion from your Certified Public Accountant (except during tax season, when their attention is too divided). You should be in doubt enough to consult your CPA every two or three years even if you have a static portfolio, whether you think you need to be or not. Let your CPA scare you a little bit, even if you do not change anything. If they scare you a lot, rethink your strategy. Many persons who thought they might retire this year or next will regret not doing so.

Those of us that never gave up the concept of whole and universal life insurance still have cash value sitting there. While it might be at risk in a general depression, in every market “correction” I have lived through it has been “untouched.” It is just another diversification and another form of professional money manager, even if it is not a dramatic gainer. There may be better products to use, but I got in at a time in my life when I understood that product and did not understand the stock market, and it has always served me well.

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I hate to be pessimistic, but the United States Senators running for the Presidency of the United States are not businessmen, and never have been, and thus, the bailout will fail. For example, during the debate Tuesday night, Senator McCain claimed he was in favor of the bailout so there could be sources of credit for businesses, especially small businesses, so that they could borrow to make payroll. Senator Obama did not disagree.

Line up every banker and venture capitalist that wants to lend money to a business so it can make payroll. It will be a very short line. Usually, when any business is borrowing to make payroll, assuming such a thing can be done even in the best of times, the business is doomed. Apparently, both of our major party candidates will spend tax dollars even on the futile, or else, they do not know where the line of futility lies. I do not know which is more worrisome. It was like a scene from Doctor Strangelove, only about money.

Of course, Tom Brokaw is not a businessman. He did not remark on the error, if it was one. The studio audience had been sworn to silence, or else, were picked because they would not know enough to know better. Either way, the silence was “golden.”

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The demise of Bear Stearns and the bankruptcy of Lehman Brothers, followed by the purchase of Merrill Lynch by Bank of America, heralds the final end of the Wall Street business model.

B of A’s CEO claims that for seven years he predicted the commercial banks would end up owning the investment banks. Merrill’s CEO claims that this would be great for Merrill’s 16,000 registered representatives because they will have access to B of A’s customer base.

However, the bank owned model of broker dealers and the Wall Street model have been radically different. The banks have never been as tolerant of risk nor as tolerant of salesmanship. As a result, the banks have had a narrower range of products.

Merrill Lynch training and compliance has always been enviable in the industry. But, neither will be as necessary in the new world where banks dampen the sharp edges more than regulators. Banks like to charge fees and so many of the free services with which Merrill Lynch built its book of business will no longer be free. Banks like the wealthy and have very little to offer the non-wealthy (currently defined as someone with less than $500,000 of investable assets). Retail broker dealers liked everyone. It is interesting to see which business model failed.

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Imagine that you had a right to exercise certain stock options that you had earned. Imagine that the contract under which you were going to exercise the stock options gave you a three month window in which to do it, but that no one sent you a copy of the contract or the amendment that contained the three month limitation. Assume that the stock issuing company admitted that you never got the amendment and could not have known about the three month exercise window. Imagine that after you tried to exercise, you were told you were outside the three month window and your options had been cancelled. Breach of contract, right? All the elements are there: contract, breach of contract, and now you just have to prove damages.

Well, imagine the stock issuer puts on an expert that testified that no sensible investor would have exercised those options because at best, at the time, they were a break even proposition. Therefore, you have no damages. The expert was not allowed to give an opinion that you would not have exercised the options.

Surely that testimony was irrelevant, right? Just as your damages in most state would be limited to delivery date pricing, i.e., the price of the stock on the date you should have exercised but could not because of the breach of contract brought about by failing to give you a copy of the contract amendment, the other side should not be allowed to speculate about whether you would have exercised or allowed the options to expire, right?

The United States Court of Appeals for the First Circuit, in First Marblehead Corporation v House, held the expert’s testimony was admissible and would support a verdict that the employee had no damages because the expert testified a reasonable investor would not have been likely to have exercised the stock options because at best it was a break even proposition.

The testimony was not that the employee could not financially afford to exercise. The testimony was not that the employee would have lost so much money exercising that the exercise would have been uneconomic. The testimony was just that it would have not been attractive enough for the reasonable investor. That seems speculative. Worse, it allowed a party to breach a contract with impunity.

Of course, as it turned out, it would have been a good investment because several years later when the company went public the stock value would have been multiples of the cost of exercising.

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Fort Hays State University fired its debate coach because he allegedly mooned others attending a debate round between the Fort Hays team and Towson University according to an article posted by the Kansas City Star at their website. A debate coach from the University of Pittsburgh was somehow involved. This allegedly occurred at the CEDA (“Cross Examination Debate Association”) national tournament in 2008. The tournament was attended by about a thousand debaters from colleges around the country, according to CEDA.

Fort Hays State University “dismissed” the debate coach, an “assistant professor of communications,” by holding him to the same standard of conduct that would be applied to a Fort Hays sports coach. That was undoubtedly a good decision. However, I would be willing to bet debate coaches at Fort Hays have never been paid as well as sports coaches.

Fort Hays also suspended its debate program, and this is the actual debacle. Apparently, someone else in the Fort Hays college community desired the budget. Would Fort Hays suspend a sports program because of the dismissal of a coach? Would Fort Hays suspend a sports program until misconduct in the activity was addressed “nationally?” In other words, Fort Hays actually held debate to a higher standard than sports.

CEDA is a relatively small organization, only a handful of colleges are members. Clearly, the organization is going to have to institute conduct guidelines, not just for coaches, but for the activity. Also, CEDA is going to have to negotiate such rules with the National Debate Tournament committee and the American Debate Association.

CEDA’s first national debate tournament (in perspective, something like the NIT) was held in 1986 (the National Debate Tournament started in 1947). The first (and the second) national champion of CEDA was coached by Scott Nobles, one of the debaters from Southeastern Oklahoma State University that won the first National Debate Tournament in 1947 at West Point. The first team from Oklahoma to win a CEDA national championship won in 1990 and was from the University of Central Oklahoma (then called Central State) and was coached by Doug Duke, one of Oklahoma’s great debate coaches. The University of Oklahoma won the tournament in 2007 when the tournament was hosted by OU (the tournament director was from the University of Miami so there was not likely much “home court” advantage). It was not until the 2000s that the CEDA tournament was considered by the same colleges that tend to dominate the National Debate Tournament.

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Here’s a fascinating webpage with images of 54 famous trials, and links to hundreds of additional pages of info about each of them. One Oklahoma trial is included. Can you guess which one? (Answer below)

The 54 trials start with the trial of Socrates, 399 B.C., and end with the 2006 trial of Zacarias Moussaoui, the 9-11 terrorist. The website was created by Douglas Linder, a professor at the University of Missouri-Kansas City School of Law. (Answer to Oklahoma question: the 1997 trials of Oklahoma City bomber Timothy McVeigh.)

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• Part One
• Part Two
• Part Three

Terra Extraneus happily adds seven more entries to our list of Oklahoma Law Blogs. Six are based in Tulsa, which had been poorly represented on our Oklahoma Law Blogs directory. We now list 19 blogs: 9 in OKC, 8 in Tulsa, and 1 each in Paul’s Valley and Pine Ridge.

The newest additions come thanks to some help from a few friends. Michael Bates at the popular BatesLine blog was the first to join us in sounding the call for Sooner State blawgs. J.M. Branum of JMBzine.com also mentioned our quest. Bates and Branum were also kind enough to point us in the direction of law blogs they knew about. Thanks also to Jim Calloway at the OBA, who mentioned our directory on the OBA.net forum, which brought us a few more responses.

Here are the seven Oklahoma law blogs newly added to our list:

• Reinsurance Law Blog: Jody R. Nathan is a Tulsa attorney at Stauffer, Graves & Nathan. The firm works in insurance-related cases. Nathan has been writing the blog since Feb. 2006.

• Oklahoma Criminal Defense: Tulsa defense attorney Glen R. Graham has also been writing his blog since 2006. Graham is a frequent blogger on a variety of legal topics.

• Tulsa attorney Dan Nunley reports that he is now writing four law blogs. I mentioned Nunley’s Oklahoma Family Law blog in Part Two of this series. Nunley followed up in an email to tell us that he recently started three more blogs to promote his other practice areas: Personal Injury Lawyer Blog, Social Security Disability Blog and Workers’ Compensation Blog.

It will be interesting to see if Nunley can write quality posts for four blogs and keep them all up-to-date. He has been posting once or twice a month with consistency for almost two years. If he follows that pace on all four blogs, he will still be writing less than 10 posts a month, which is certainly doable.

• Jeffrey Taylor is an Oklahoma City University Law School grad who just took his bar exam last week. Taylor plans to enter private practice, and he has gotten a jump on his law marketing by beginning a blog, Legally Easy, at the beginning of this year. Taylor plans to practice in personal injury, business development and protection, and family law.

• Last by hardly least in today’s batch of law blogs is the Bill Kumpe Blog. Bill Kumpe is a Tulsa attorney who has been blogging since July 2006. Kumpe’s blog is by far the most interesting of the bunch. Kumpe passes along his strong opinions about the law, politics and the Christian faith. He brags, “My redneck Okie credentials are impeccable.” I’m not sure, but I think the very use of a four-syllable word like “impeccable” may disqualify you as a redneck, Bill. Kumpe and his blog are interesting enough that I believe I will review it further in a separate post.

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If you know of any Oklahoma law blogs, please tell us about them in the comments section. Our goal is to assemble the most complete list possible of active Okie law blogs.

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If you use Sitemeter on your blog or website, it is probably causing problems when people visit using Internet Explorer 7. The problem began on Friday and remains unsolved Saturday afternoon.

I took a day off yesterday and was away from my computers, so I only learned about the problem this morning. When IE7 users click on many Sitemeter-using sites, an error message displays: “Internet Explorer cannot open the Internet site http://___. Operation aborted.” Apparently some IE6 users are having the same problems.

I tried going to the Sitemeter website for an announcement, but I got the same error message there. Apparently Sitemeter changed something in its code on Friday. Many bloggers are blaming IE7 for the problem and are using this as an opportunity to promote its chief competitor, FireFox. However, 54% of all pages are viewed through Internet Explorer, so if you want your site to be accessible to most visitors, it won’t help to curse IE.

To prevent your visitors from having problems (and leaving your site in disgust), temporarily disable Sitemeter on your site. If you know how to access your sidebar or footer or homepage (or wherever else you display your Sitemeter), it is an easy fix. Just add < ! - - before the Site meter code and - - > after the code. That’s the HTML tag designers use to leave comments in the code that are not displayed online. That will prevent your Sitemeter from displaying. Then, when the problem is resolved, go back and remove that little bit of before-and-after code.

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LATER AUG. 2: Sitemeter says the problem is solved. I will restore Sitemeter operations on our site and hope for the best.

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