Checklist for Hiring a Private Investigator

Looking for an old friend? Want to know if your spouse is cheating? Need to check out a potential tenant or employee?

A good private investigator (PI) can help you obtain these answers. And as with any expert you hire--a doctor, a lawyer, an insurance broker--it benefits you to take the time to ensure you're hiring a professional who has experience, quality reputation, and good-business ethics. Below is a checklist that will help you find just such a private investigator:

1. Ask friends, business associates, your lawyer for a referral. Word of mouth gives you the inside scoop, and the opportunity to ask questions specific to your needs.

2. Check your state's private investigator associations, most of which have web sites that post their membership directory.

3. If you can't find a private investigation association for your state, there are multiple national PI organizations that refer investigators, such as The National Association of Investigative Specialists (http://www.pimall.com/nais/dir.menu.html). Also, check your state's legal organizations--for example, affiliates of the American Trial Lawyer's Association or the state defense bar--which typically have a directory of recommended investigators.

4. Insurance companies use PIs constantly. Especially if your needs fall into surveillance and background checks, an excellent resource is your own homeowners insurance company. Ask to speak to a claims representative. With a few inquiries, you should be able to pinpoint which investigators your insurance company uses, which is a good referral.

5. Check Internet and Yellow Pages for private investigator listings, but remember these are paid-for ads. Ask for references; check if the PI is licensed (most states require a PI to be licensed, a few don't); if you're going before a judge and jury, ask if the PI has courtroom experience. NOTE: An untrained investigator may not know the laws and end up doing something illegal during an investigation--which causes you problems.

6. Before you speak to an investigator, decide what's in your budget.

7. When you speak to an investigator, ask if he/she has done the type of work you're seeking. More important, ask them the outcome of that type of investigation.

8. Ask to see examples of reports they've produced for similar cases.

9. Gauge your comfort level while speaking to the investigator. Good communication will be critical after the investigation begins. Also, be open minded--your investigator may have new ideas that are worthy of exploration.

10. Expect to pay a retainer up front. Just because a PI doesn't ask for one (or even a reasonable hourly rate), doesn't mean he/she is better at what they do. You want to hire someone who's competent, not hard up for work.

Remember, a good private investigator can be your best resource!

Subscribe to Highlands Investigations & Legal Services, Inc. free quarterly e-newsletter, which provides leading-edge legal, forensic, investigative articles, and more. All subscribers are automatically eligible for free gift drawings. To subscribe, go to http://www.highlandsinvestigations.com.

Colleen Collins, Highlands Investigations and Legal Services, Inc.

Highlands Investigations & Legal Services, a product of two logically related sets of background and training?-attorney and information specialist--offers a unique blend of investigative and writing/research skills. To learn more about our services, go to http://www.highlandsinvestigations.com

Corporate Wellness Programs Open Doors to Integrative Therapies

The National Center for Complementary and Alternative Medicine (NCCAM) website lists over 600 specific alternative therapies. According to Ken Pelletier, PhD, MD (Professor of Public Health, University of Arizona School of Medicine), "When I hear someone in a workplace wellness program say alternative therapies don't work, I ask: 'Which therapies, for what conditions, in what populations, and in what situations?' It really depends on what you are talking about. Then there are people who say, 'If it's natural, it must be OK.' But look at that list of over 600 therapies. A significant number carry a very real potential to do harm."

Ken has extensively reviewed complementary and alternative medicine (CAM) studies from around the world. "Because of where I work, my research must conform to a standard of best possible evidence as seen in randomized clinical trials. But there are a number of potentially important therapies and interventions that simply don't lend themselves to that type of analysis."

Often such studies lack the necessary documentation but still see excellent outcomes. Ken cautions corporate wellness practitioners against discounting such studies and recommends analyzing them using a 3-pronged triage-type approach:

Is there clear evidence from clinicians that the therapy works well in the patient's situation?
What's available in the literature and online showing what does not work?
What studies are underway that require us to simply wait and see?

As increasing numbers of CAM therapies gain acceptance in employee health programs, it becomes necessary to develop a common vocabulary. The term Integrative Medicine (IM) describes an evidence-based fusion of conventional and CAM practices. IM is not a physician-centric system -- practitioners function in truly integrated or virtual systems with providers of diverse competencies. Together they form a clinical network where outcomes are enhanced from working together, rather than at odds with each other. These networks typically fall into 4 categories:

Freestanding IM clinics that house multiple disciplines
Family practice group with a virtual network of respected CAM practitioners for patient referrals
IM services affiliated within a hospital setting
Therapeutic disciplines offered through nonmedical settings like worksite health promotion programs, schools, extension programs, and even churches.

According to the 2007 National (US) Health Interview Survey of 23,393 adults and 9417 children ages 17 and under, 38% of adults and 12% of children use some form of CAM. This is reflected by the increasing numbers of health insurance plans that cover such CAM therapies as acupuncture, chiropractic care, naturopathy (in certain states), nutrition counseling, stress management, and behavioral medicine. Even vitamins/minerals, herbals, exercise equipment, books, videos, and fitness club memberships can be found as health plan benefits. Ken points out the reason: it's what their corporate health and wellness customers want. "Although health plans increasingly counsel corporate clients on CAM coverage trends, the insurance industry is not the point of innovation here; it's the purchaser. Larger companies form a purchasing coalition based on demands from employees and unions. If there is solid evidence behind the request, they balance the interest with legal issues, costs, and other practical considerations to determine what becomes part of a benefit package."

High-tech industries took the lead in offering IM to corporate wellness audiences. Computer, telecommunication, banking/financial, airline/aerospace, petrochemical, and automotive employers know IM appeals to their highly educated, competitive employees... who tend to stay with their company for the long term. "These corporations look at their employees' welfare as an investment. They want to preserve these assets and enhance their productivity on the job in every way possible. Because these industries are so competitive, IM therapies often become a recruitment and retention benefit."

Even when a health plan can't (or won't) cover CAM, other workplace wellness programs have opened their doors to practitioners who provide onsite services. Ken is all for this. "Certain CAM providers are almost universally accepted now, but this is too new an area to know definitively what works. If a wellness program wants to offer aromatherapy in conjunction with a relaxation room, why not? I've seen Ayurvedic medicine in larger employee wellness programs along with traditional benefits, especially when there's a significant Asian demographic. Fitness programs go beyond aerobics to include yoga and martial arts. If these services meet employee expectations and are done responsibly with employee cost-sharing, it's a win-win proposition."

Finding the Right Practitioners

The trend is toward outsourcing IM therapies, and corporate wellness purchasers must do their homework when selecting practitioners. Whittling down the field can be challenging; find out if the practitioner:

Carries appropriate licenses/credentialing
Is a member of any well respected professional associations and serves on any boards in their field
Graduated from a recognized school in their field
Has a successful record in providing the services required -- demand measurements and outcomes that show evidence within a given period
Provides excellent references
Has a history of any lawsuits or complaints
Maintains a good reputation... ask around.

Planning the Program

Wellness program planners need to involve employees, unions, labor, and management in defining what is wanted. If they help develop specifications, it won't be viewed as a union or management program... it will be their program. This minimizes problems with acceptance or disillusionment.

Next build a clear picture of the desired services and define specifications to practitioners. What will the chiropractor do for us? What will an acupuncture session look like? If pain is a cost center, what is the evidence that this therapy will reduce those claims and disability leaves?

A Bright Future Ahead

As Director of the Corporate Health Improvement Program (CHIP), a collaborative research program involving 15 Fortune 500 corporations, Ken has a unique perspective for IM's future. "CHIP is 25 years old. Over that time, some of the first true IM models have been tested within member corporate wellness worksites. We meet twice a year with our corporate members to review the research. The data is extremely positive and the impact will permeate throughout the industries involved."

"One of our members is Ford. Back pain was the single largest contributing cost to producing their cars. They had 24/7 clinic staff onsite to deal with back pain alone. We demonstrated that combining traditional medicine with acupuncture and mind/body therapies was more effective than traditional medicine alone."

"When you can demonstrate a more cost-effective way to manage a condition, a company will be interested. They have no inherent bias; they just want evidence -- and a vast amount of literature shows it. The return on investment runs from 3:1 to 5:1, taking about 3.25 years to see that ROI."

Corporate wellness professionals can read Ken's summary, "A Review and Analysis of the Clinical and Cost-Effectiveness Studies of Comprehensive Health Promotion and Disease Management Programs at the Worksite: Update VII. 2004-2008," in the Journal of Occupational and Environmental Medicine, Volume 51, Number 7, July 2009.

Ken concludes, "Read the evidence. The literature is there to allow you to make informed choices. But be a Doubting Thomas. As researchers say, 'In God we trust; all others must present data.' Wellness program managers will find IM to be a sound business strategy... a tremendous investment in your population. They are worthy of that investment and they'll reciprocate when they see you care."

Dean Witherspoon, CEO and founder of employee wellness firm, Health Enhancement Systems, has 25 years in health promotion. He has served on the board of the Association for Worksite Health Promotion and held several regional as well as state offices. Dean is a nationally known speaker and author, having presented at more than 70 conferences and written hundreds of employee wellness articles for national publications.

For more information on employee wellness topics, check out the free white papers at http://whitepapers.hesonline.com/.

Contact: Dean Witherspoon, Health Enhancement Systems, http://HealthEnhancementSystems.com, 800.326.2317

Let the Lawsuits Begin - Banks Brace For a Storm of Litigation

In an article in The San Francisco Chronicle in December 2007, attorney Sean Olender suggested that the real reason for the subprime bailout schemes being proposed by the U.S. Treasury Department was not to keep strapped borrowers in their homes so much as to stave off a spate of lawsuits against the banks. The plan then on the table was an interest rate freeze on a limited number of subprime loans. Olender wrote:

"The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth. The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

". . . The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC . . . .

"What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back."1

The thought could send a chill through even the most powerful of investment bankers, including Treasury Secretary Henry Paulson himself, who was head of Goldman Sachs during the heyday of toxic subprime paper-writing from 2004 to 2006. Mortgage fraud has not been limited to the representations made to borrowers or on loan documents but is in the design of the banks' "financial products" themselves. Among other design flaws is that securitized mortgage debt has become so complex that ownership of the underlying security has often been lost in the shuffle; and without a legal owner, there is no one with standing to foreclose. That was the procedural problem prompting Federal District Judge Christopher Boyko to rule in October 2007 that Deutsche Bank did not have standing to foreclose on 14 mortgage loans held in trust for a pool of mortgage-backed securities holders.2 If large numbers of defaulting homeowners were to contest their foreclosures on the ground that the plaintiffs lacked standing to sue, trillions of dollars in mortgage-backed securities (MBS) could be at risk. Irate securities holders might then respond with litigation that could indeed threaten the existence of the banking Goliaths.

STATES LEADING THE CHARGE

MBS investors with the power to bring major lawsuits include state and local governments, which hold substantial portions of their assets in MBS and similar investments. A harbinger of things to come was a complaint filed on February 1, 2008, by the State of Massachusetts against investment bank Merrill Lynch, for fraud and misrepresentation concerning about $14 million worth of subprime securities sold to the city of Springfield. The complaint focused on the sale of "certain esoteric financial instruments known as collateralized debt obligations (CDOs) . . . which were unsuitable for the city and which, within months after the sale, became illiquid and lost almost all of their market value."3

The previous month, the city of Baltimore sued Wells Fargo Bank for damages from the subprime debacle, alleging that Wells Fargo had intentionally discriminated in selling high-interest mortgages more frequently to blacks than to whites, in violation of federal law.4

Another innovative suit filed in January 2008 was brought by Cleveland Mayor Frank Jackson against 21 major investment banks, for enabling the subprime lending and foreclosure crisis in his city. The suit targeted the investment banks that fed off the mortgage market by buying subprime mortgages from lenders and then "securitizing" them and selling them to investors. City officials said they hoped to recover hundreds of millions of dollars in damages from the banks, including lost taxes from devalued property and money spent demolishing and boarding up thousands of abandoned houses. The defendants included banking giants Deutsche Bank, Goldman Sachs, Merrill Lynch, Wells Fargo, Bank of America and Citigroup. They were charged with creating a "public nuisance" by irresponsibly buying and selling high-interest home loans, causing widespread defaults that depleted the city's tax base and left neighborhoods in ruins.

"To me, this is no different than organized crime or drugs," Jackson told the Cleveland newspaper The Plain Dealer. "It has the same effect as drug activity in neighborhoods. It's a form of organized crime that happens to be legal in many respects." He added in a videotaped interview, "This lawsuit said, 'You're not going to do this to us anymore.'"5

The Plain Dealer also interviewed Ohio Attorney General Marc Dann, who was considering a state lawsuit against some of the same investment banks. "There's clearly been a wrong done," he said, "and the source is Wall Street. I'm glad to have some company on my hunt."

However, a funny thing happened on the way to the courthouse. Like New York Governor Eliot Spitzer, Attorney General Dann wound up resigning from his post in May 2008 after a sexual harassment investigation in his office.6 Before they were forced to resign, both prosecutors were hot on the tail of the banks, attempting to impose liability for the destructive wave of home foreclosures in their jurisdictions.

But the hits keep on coming. In June 2008, California Attorney General Jerry Brown sued Countrywide Financial Corporation, the nation's largest mortgage lender, for causing thousands of foreclosures by deceptively marketing risky loans to borrowers. Among other things, the 46-page complaint alleged that:

"'Defendants viewed borrowers as nothing more than the means for producing more loans, originating loans with little or no regard to borrowers' long-term ability to afford them and to sustain homeownership' . . .

"The company routinely . . . 'turned a blind eye' to deceptive practices by brokers and its own loan agents despite 'numerous complaints from borrowers claiming that they did not understand their loan terms.'

". . . Underwriters who confirmed information on mortgage applications were 'under intense pressure . . . to process 60 to 70 loans per day, making careful consideration of borrowers' financial circumstances and the suitability of the loan product for them nearly impossible.'

"'Countrywide's high-pressure sales environment and compensation system encouraged serial refinancing of Countrywide loans.'"7

Similar suits against Countrywide and its CEO have been filed by the states of Illinois and Florida. These suits seek not only damages but rescission of the loans, creating a potential nightmare for the banks.

AN AVALANCHE OF CLASS ACTIONS?

Massive class action lawsuits by defrauded borrowers may also be in the works. In a 2007 ruling in Wisconsin that is now on appeal, U.S. District Judge Lynn Adelman held that Chevy Chase Bank had violated the Truth in Lending Act by hiding the terms of an adjustable rate loan, and that thousands of other Chevy Chase borrowers could join the plaintiffs in a class action on that ground. According to a June 30, 2008 report in Reuters:

"The judge transformed the case from a run-of-the-mill class action to a potential nightmare for the U.S. banking industry by also finding that the borrowers could force the bank to cancel, or rescind, their loans. That decision was stayed pending an appeal to the 7th U.S. Circuit Court of Appeals, which is expected to rule any day.

"The idea of canceling tainted loans to stem a tide of foreclosures has caught hold in other quarters; a lawsuit filed last week by the Illinois attorney general asks a court to rescind or reform Countrywide Financial mortgages originated under 'unfair or deceptive practices.'

". . . The mortgage banking industry already faces pressure from state and federal regulators, who have accused banks of lowering underwriting standards and forcing some borrowers, through fraud, into costly adjustable loans that the banks later bundled and sold as high-interest investment vehicles."

The Truth in Lending Act (TILA) is a 1968 federal law designed to protect consumers against lending fraud by requiring clear disclosure of loan terms and costs. It lets consumers seek rescission or termination of a loan and the return of all interest and fees when a lender is found to be in violation. The beauty of the statute, says California bankruptcy attorney Cathy Moran, is that it provides for strict liability: the aggrieved borrowers don't have to prove they were personally defrauded or misled, or that they had actual damages. Just the fact that the disclosures were defective gives them the right to rescind and deprives the lenders of interest. In Moran's small sample, at least half of the loans reviewed contained TILA violations.8 If class actions are found to be available for rescission of loans based on fraud in the disclosure process, the result could be a flood of class suits against banks all over the country.9

SHIFTING THE LOSS BACK TO THE BANKS

Rescission may be a remedy available not only for borrowers but for MBS investors. Many loan sale contracts provide by their terms that lenders must take back loans that default unusually quickly or that contain mistakes or fraud. An avalanche of rescissions could be catastrophic for the banks. Banks were moving loans off their books and selling them to investors in order to allow many more loans to be made than would otherwise have been allowed under banking regulations. The banking rules are complex, but for every dollar of shareholder capital a bank has on its balance sheet, it is supposed to be limited to about $10 in loans. The problem for the banks is that when the process is reversed, the 10 to 1 rule can work the other way: taking a dollar of bad debt back on a bank's books can reduce its lending ability by a factor of 10. As explained in a BBC News story citing Prof. Nouriel Roubini for authority:

"[S]ecuritisation was key to helping banks avoid the regulators' 10:1 rule. To make their risky loans appear attractive to buyers, banks used complex financial engineering to repackage them so they looked super-safe and paid returns well above what equivalent super-safe investments offered. Banks even found ways to get loans off their balance sheets without selling them at all. They devised bizarre new financial entities - called Special Investment Vehicles or SIVs - in which loans could be held technically and legally off balance sheet, out of sight, and beyond the scope of regulators' rules. So, once again, SIVs made room on balance sheets for banks to go on lending.

"Banks had got round regulators' rules by selling off their risky loans, but because so many of the securitised loans were bought by other banks, the losses were still inside the banking system. Loans held in SIVs were technically off banks' balance sheets, but when the value of the loans inside SIVs started to collapse, the banks which set them up found that they were still responsible for them. So losses from investments which might have appeared outside the scope of the regulators' 10:1 rule, suddenly started turning up on bank balance sheets. . . . The problem now facing many of the biggest lenders is that when losses appear on banks' balance sheets, the regulator's 10:1 rule comes back into play because losses reduce a banks' shareholder capital. 'If you have a $200bn loss, that reduced your capital by $200bn, you have to reduce your lending by 10 times as much,' [Prof. Roubini] explains. 'So you could have a reduction of total credit to the economy of two trillion dollars.'"10

You could also have some very bankrupt banks. The total equity of the top 100 U.S. banks stood at $800 billion at the end of the third quarter of 2007. Banking losses are currently expected to rise by as much as $450 billion, enough to wipe out more than half of the banks' capital bases and leave many of them insolvent.11 If debtors were to deluge the courts with viable defenses to their debts and mortgage-backed securities holders were to challenge their securities, the result could be even worse.

PUTTING THE GENIE BACK IN THE BOTTLE

So what would happen if the mega-banks engaging in these irresponsible practices actually went bankrupt? These banks are widely acknowledged to be at fault, but they expect to be bailed out by the Federal Reserve or the taxpayers because they are "too big to fail." The argument is that if they were allowed to collapse, they would take the economy down with them. That is the fear, but it is not actually true. We do need a ready source of credit, so we need banks; but we don't need private banks. It is a little-known, well-concealed fact that banks do not lend their own money or even their depositors' money. They actually create the money they lend; and creating money is properly a public, not a private, function. The Constitution delegates the power to create money to Congress and only to Congress.12 In making loans, banks are merely extending credit; and the proper agency for extending "the full faith and credit of the United States" is the United States itself.

There is more at stake here than just the equitable treatment of injured homeowners and investors in mortgage-backed securities. Banks and investment houses are now squeezing the last drops of blood from the U.S. government's credit rating, "borrowing" money and unloading worthless paper on the government and the taxpayers. When the dust settles, it will be the banks, investment brokerages and hedge funds for wealthy investors that will be saved. The repossessed will become the dispossessed; and unless your pension fund has invested in politically well-connected hedge funds, you can probably kiss it goodbye, as teachers in Florida already have.

But the banking genie is a creature of the law, and the law can put it back in the bottle. The imminent failure of some very big banks could provide the government with an opportunity to regain control of its finances. More than that, it could provide the funds for tackling otherwise unsolvable problems now threatening to destroy our standard of living and our standing in the world. The only solution that will be more than a temporary fix is to take the power to create money away from private bankers and return it to the people collectively. That is how it should have been all along, and how it was in our early history; but we are so used to banks being private corporations that we have forgotten the public banks of our forebears. The best of the colonial American banking models was developed in Benjamin Franklin's province of Pennsylvania, where a government-owned bank issued money and lent it to farmers at 5 percent interest. The interest was returned to the government, replacing taxes. During the decades that that system was in operation, the province of Pennsylvania operated without taxes, inflation or debt.

Rather than bailing out bankrupt banks and sending them on their merry way, the Federal Deposit Insurance Corporation (FDIC) needs to take a close look at the banks' books and put any banks found to be insolvent into receivership. The FDIC (unlike the Federal Reserve) is actually a federal agency, and it has the option of taking a bank's stock in return for bailing it out, effectively nationalizing it. This is done in Europe with bankrupt banks, and it was done in the United States with Continental Illinois, the country's fourth largest bank, when it went bankrupt in the 1990s.

A system of truly "national" banks could issue "the full faith and credit of the United States" for public purposes, including funding infrastructure, sustainable energy development and health care.13 Publicly-issued credit could also be used to relieve the subprime crisis. Local governments could use it to buy up mortgages in default, compensating the MBS investors and freeing the real estate for public disposal. The properties could then be rented back to their occupants at reasonable rates, leaving people in their homes without the windfall of acquiring a house without paying for it. A program of lease-purchase might also be instituted. The proceeds would be applied toward repaying the credit advanced to buy the mortgages, balancing the money supply and preventing inflation.

LOCAL AND PRIVATE SOLUTIONS

While we are waiting for the federal government to act, there are also private and local possibilities for relieving the subprime crisis. Chris Cook is a British strategic market consultant and the former Compliance Director for the International Petroleum Exchange. He recommends getting all the parties to settle by forming a pool constituted as an LLC (limited liability company), in a partnership framework that brings together occupiers and financiers as co-owners under a neutral custodian. The original owners would pay an affordable rental, and the resulting pool of rentals would be "unitized" (divided into unit interests, similar to a REIT or real estate investment trust). Among other advantages over the usual mortgage-backed security, there would be no loans at interest, since the property would be owned outright by the LLC. Eliminating interest substantially reduces costs. The former owners would be able to occupy the property at an affordable rental, with the option to buy an equity stake in it. For the banks, the advantage would be that they would be able to find investors again, since the risk would have been taken out of the investment by insuring full occupancy at affordable rates; and for the investors, the advantage would be a secure investment with a dependable return.14

Carolyn Betts is an Ohio attorney who served in Washington as issuer's counsel for MBS trusts formed by various federal governmental entities, and represented Resolution Trust Corporation in its auction of defaulted commercial mortgage loans during the last real estate crisis. She proposes a squeeze play by the states, in the style of that brought against the tobacco companies by a consortium of state attorneys general in the 1990s. She notes that at the end of 2007, at least 20% of the funds held by the Ohio Public Employees' Retirement System (PERS) were in mortgage backed securities and similar investments. That makes Ohio public money a major investor in these mortgage-related securities. Ohio governments have an interest in not having homes foreclosed upon, since foreclosures destroy local real estate markets, contribute to lower tax revenues and losses on PERS investments, and cause a strain on state and local affordable housing systems. A coordinated series of actions brought by state attorneys general could eliminate the culpable banker middlemen and return the properties to local ownership and control.

Andrew Jackson reportedly told Congress in 1829, "If the American people only understood the rank injustice of our money and banking system, there would be a revolution before morning." A wave of private actions, class actions and government lawsuits aimed at redressing injurious banking practices could spark a revolution in banking, returning the power to advance "the full faith and credit of the United States" to the United States, and returning community assets to local ownership and control.

1 Sean Olender, "Mortgage Meltdown," San Francisco Chronicle (December 9, 2007).

2 See Ellen Brown, "The Subprime Trump Card," webofdebt.com/articles, June 26, 2008.

3 Greg Morcroft, "Massachusetts Charges Merrill with Fraud," MarketWatch (February 1, 2008).

4 Henry Gomez, Tom Ott, "Cleveland Sues 21 Banks Over Subprime Mess," The Plain Dealer (Cleveland, January 11, 2008).

5 Ibid.

6 Marc Dann Resigns as Attorney General," NBC24 (May 14, 2008).

7 E. Scott Reckard, "California Atty. Gen. Jerry Brown Sues Countrywide," Los Angeles Times (June 26, 2008).

8 Cathy Moran, "And the Truth (in Lending) Shall Set You Free," mortgagelawnetwork.com (June 11, 2008).

9 Gina Keating, "Mortgage Ruling Could Shock U.S. Banking Industry," Reuters (June 30, 2008).

10 Michael Robinson, "City of Debt Shows US Housing Woe," BBC News (December 30, 2007).

11 "Is the Latest Liquidity Crunch in Remission?", NakedCapitalism(March 26, 2008).

12 See E. Brown, "Dollar Deception: How Banks Secretly Create Money," webofdebt.com/articles (July 3, 2007).

13 For more on this funding solution and why it would not inflate prices, see E. Brown, "Waking Up on a Minnesota Bridge: How to Solve the Infrastructure Crisis Without Selling Off Our National Assets," ibid. (August 4, 2007).

14 Chris Cook, "Peak Credit and a Flight to Simplicity," Asia Times (April 3, 2008).

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In "Web of Debt," her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://www.webofdebt.com and http://www.ellenbrown.com Her eleven books include the bestselling "Nature's Pharmacy," co-authored with Dr. Lynne Walker, and "Forbidden Medicine."

What UK Summer?

The past two months have produced record amounts of rain in the United Kingdom. If you look out to your back garden now, it is very likely to still be raining, and will likely still be raining for the foreseeable future. The summer floods in the UK have been a phenomenon that have produced unheard-of levels of damage as the British isles are bombarded with storm clouds. Indeed, it is thought to continue up until the summer Olympics and perhaps even beyond. The storms have minimized what should be hot and humid summer days and generated flash floods across the nation that will likely only increase in size and frequency.

While some western areas of the nation have been spared from the heavy flooding, most have not been so lucky. The low-pressure fronts produced by Atlantic currents of warm air have produced the equivalent of wringing out a sponge above the UK, with more rain falling than almost any other time in human memory. Southern England has been hit particularly hard, with some areas reporting nearly eight centimeters of precipitation in a single night. Flood alerts for the rivers Bride, Axe, and Yealm kept Devon County on notice for evacuation when the water flow reached peak levels. Those who left the area returned to find their homes and belongings drenched in a meter of standing water.

While June has been the wettest month on record, July is not likely to be any brighter. The Atlantic jet stream produces much of the weather conditions across northern Europe, pushing air from west to east across the ocean. Under normal conditions, not much of the moisture accumulated in this jet stream falls on Britain; most passes over into Scandinavia and Russia. As the jet stream experiences changes in speed and water vapor, however, it puts the UK square in its cross-hairs and unleashes torrent after torrent. The first week of July gave little reason for optimism, as the monthly average for rain had been surpassed in the first twenty-four hours.

What is affecting the jet stream and creating summer floods in the UK? Climatologists and meteorologists do not agree on the causes. While global warming is a likely culprit, it may be more complicated than saying the increase in temperature leads to greater water evaporation. It could be that the Arctic sea ice diminished, which in turn kept the poles from their usual moisture transfer during the winter season. This made the winter drier, affecting the jet stream's movement of temperature and water.

Could this be a permanent fixture in the UK's future? The increased levels of water vapor in the global atmosphere suggest that it might be. Water vapor is a more heat-conductive greenhouse gas than carbon, meaning that it could accelerate regardless of how carbon emissions are handled. The difficulty in coordinating the vast amount of data covering such a huge range of geography and weather, however, give no concrete answers.

As it stands, some two hundred different warnings have been given for the summer floods in the UK. Some venues, such as the British Grand Prix, had to be relocated from the threat of flooding. The Association of British Insurers believes this flooding will cost the nation some tens of millions of pounds before it is over.

Article published on behalf of Steve Caunce Ltd of St Helens, Merseyside. Steve Caunce are commercial drain specialists providing professional drain repairs and drainage solutions throughout the united kingdom. Visit http://www.stevecaunce.co.uk for more information.

Mergers & Acquisitions Can Result from Strategic Alliances

Alliances frequently result in mergers and/or acquisitions. Partnering relationships, such as joint ventures or strategic alliances, can sometimes lead to a merger or acquisition situation. After companies work together for a period of time and get to know one another's strengths, weaknesses, and synergistic possibilities, new relationship opportunities become apparent. One could argue that a joint venture or strategic alliance is simply the getting to know each other part of a courtship between companies and that the real marriage does not occur until the relationship has been consummated by a merger or acquisition.

To make the point, Dan McQueen, president, at Fluid Components International (FCI) built a Partnering relationship with Vortab, a small technology company. Vortab produced static mixers, a technology suitable for flow conditioning that complemented FCI's product offering. While Vortab also had three other distribution partners in addition to FCI, FCI's volume with Vortab continued to grow to the point that Vortab's technology became an important part of FCI's total sales volume. After about three years into the relationship, FCI acquired Vortab.

Because of the close relationship between Vortab and FCI, when the Vortab was put up for sale McQueen knew its true value. Resulting from his knowledge, FCI was able to purchase Vortab at a much more realistic price than Vortab's asking price. The Vortab technology integrated well with FCI's core competency technology and today FCI also distributes Vortab through some of its non-direct competitors.

The following list demonstrates some of the specific values created or developed from the various organizational blending methods:

· Operational resource sharing

· Functional skill transfer

· Management skill transfer

· Leverage (economies of scale)

· Capability increases

Mergers

Mergers occur when two or more organizations come together to blend or link their strengths. Also in the deal is a blending of their weaknesses. The hopeful result is a new more powerful organization that can better produce goods and services, access markets, and deliver the highest quality customer service. Mergers offer promise for synergistic possibilities. This is achieved by the blending of cultures and retaining the core strengths of each. In this scenario, a new and different organization generally emerges. The goal is a sharing of power, but usually the strongest rise to the top leadership.

Exxon - Mobil

The Federal Trade Commission gave Exxon and Mobil the green light On November 30, 1999 for their $80 billion merger. The next day the transaction was completed. The merged organization officially became Exxon Mobil Corp. The merger actually brings "the companies back to their roots when they were part of John Rockefeller's Standard Oil empire. That company was the largest oil firm in the world before it was busted up by the government in 1911."

At the 1998 announcement of their intention to merge, Mobil chairman, Lucio Noto made a comment about the need to merge. He said, "Today's announcement combination does not mean rhat we could not survive on our own. This is not a combination based on desperation, it's one based on opportunity. But we need to face some facts. The world has changed. The easy things are behind us. The easy oil, the easy cost savings, they're done. Both organizations have pursued internal efficiencies to the extent that they could."

While part of the deal was the selling of a Northern California refinery and almost 2,500 gas station locations, the divestiture represents only a fraction of their combined $138 billion in assets. Lee Raymond, Exxon chairman, now chairman and chief executive of the merged company said, "The merger will allow Exxon Mobil to compete more effectively with recently combined multinational oil companies and the large state-owned oil companies that are rapidly expanding outside their home areas."

Exxon Mobil is now like a small oil-rich nation. They have almost 21 billion barrels of oil and gas reserves on hand, enough to satisfy the world's entire energy needs for more than a year. Yet, there is still the opportunity to cut costs. The companies expect their merger's economies of scale to cut about $2.8 billion in costs in the near term. They also plan to cut about 9,000 jobs out of the 123,000 worldwide.

AOL - Time Warner

On January 10, 2000, Steve Case, chairman and chief executive of America Online (AOL), sent an e-letter to his 20 million members. He said, "Less than two weeks ago, people all over the world came together in a global celebration of the new century, and the new millennium. As I said in my first Community Update of the 21st Century, all of us at AOL are extremely excited by the challenges and prospects of this new era, a time we think of as the Internet Century.

I believe we have only just begun to see clearly how the interactive medium will transform our economy, our society, and our lives. And we are determined to lead the way at AOL, as we have for 15 years--by bringing more people into the world of interactive services, and making the online experience an even more valuable part of our members' lives.

That is why I am so pleased to tell you about an exciting major development at AOL. Today, America Online and Time Warner agreed to join forces, creating the world's first media and communications company for the Internet Century. The new company, to be created by the end of this year, will be called AOL Time Warner, and we believe that it will quite literally change the landscape of media and communications in the new millennium."

The next day newspaper headlines read, "America Online, Time Warner Propose $163-Billion Merger." The Los Angeles Times said, "In an audacious deal bringing together traditional entertainment and the new world of the Internet, America Online and Time Warner Inc. on Monday announced they will merge in the largest business transaction in history."

The story later revealed the value comparisons of the companies. While AOL earns less than Time Warner, the stock market thinks AOL's shares are worth more. "America Online is valued by the stock market at nearly twice Time Warner--$173 billion, compared with $101 billion as of Friday's [1/7/00] market close--even though it has one-third Time Warner's annual revenues." The article also stated "AOL earned $762 million on $4.8 billion in sales in the year ended Sept. 30 [1999]."

AOL chairman, Case wants to move fast. The Times article stated, "Case said the two chairman began discussing a combination this fall [1999], he has tried to impress upon Levin [Gerald Levin, chairman at Time Warner] the need to operate the new company at Internet speeds." (We all know the rest of the story...nothing is forever.)

The prophets of gloom are always ready to point out the down side to deals. In UPSIDE magazine, Loren Fox reported some of the challenges to the marriage. They are:

· "The holy grail of strategic synergy has been elusive in the media world."

· "In the offline world, it's notable that Time and Warner Brothers have continued to run fairly independently despite a decade as Time Warner."

· "'From any standpoint, this has not been a success to date,' says Yahoo President and COO Jeff Mallett."

· "When you buy the company, you get things you don't need."

· "Warner might make these deals easier, but it might also bring new risks--even for AOL, a veteran of 25 acquisitions over the last six years. Employees might flee to pure dot-com companies, ego clashes could stymie plans or financial gains may never cover the large premium paid for Time Warner."

· "You don't need to own everything to do what AOL and Time Warner are doing."

Warner-Lambert

Merger mania can make strange bedfellows, let alone promises unfulfilled. Alliances can lead to mergers. Warner-Lambert is an example of all the above. This is corporate soap opera at its best.

· June 16, 1999, Warner-Lambert Company announced that it has signed a letter of intent with Pfizer Inc. to continue and expand its highly successful co-promotion of the cholesterol-lowering agent Lipitor (atorvastatin calcium). The companies, which began co-promoting Lipitor in 1997, will continue their collaboration for a total of ten years. Further, with a goal of expanding their product collaborations, the companies plan to explore potential Lipitor line extensions and product combinations and other areas of mutual interest.

· November 4, 1999, newspapers across America report on "one of the biggest mergers of any kind, ever." The Wall Street Journal said, "Now, American Home is set to merge with Warner-Lambert Co. in a stock deal that is valued at about $72 billion. It stands as the biggest deal in drug-industry history and one of on the biggest mergers of any kind, ever." Also reported, "Warner-Lambert held talks with Pfizer Inc. at the same time it was negotiating with American Home."

· November 4, 1999, The New York Times runs a story titled, "Can a Strong-Willed Chief Share Power in a Merger?" The article lead with, "The planned merger between American Home Products and Warner-Lambert once again raises the question of whether John R. Stafford, American Home's famously strong-willed chairman and chief executive, is capable of sharing and, perhaps more important, letting go of power."

· January 13, 2000, Warner-Lambert Company indicated that, as a result of changing events, it is exploring strategic alternatives, including meeting with Pfizer, following Pfizer's recent approach. In that regard, Warner-Lambert said that its Board of Directors has authorized management to enter into discussions with Pfizer to explore a potential business combination. The Company stated that, in light of changing circumstances, its Board had concluded that there is a reasonable likelihood that Pfizer's previously announced conditional proposal could lead to a transaction, reasonably capable of being completed, that is better financially for Warner-Lambert shareholders than the proposed merger with American Home Products.

Lodewijk J.R. de Vink, chairman, president and chief executive officer of Warner-Lambert, stated, "It has always been the Board's objective to secure the best possible transaction for Warner-Lambert shareholders and we will now pursue discussions with Pfizer to determine if a combination with them to achieve that goal is possible." The Company emphasized that there can be no assurance that any agreement on a transaction with Pfizer, or that any other transaction, will eventuate.

· January 24, 2000, in response to inquiries, Warner-Lambert Company said that it would continue to explore strategic alternatives, including discussions with Pfizer. The Company's unwavering goal is to provide the greatest value to Warner-Lambert shareholders. Warner-Lambert officials emphasized that there can be no assurance that any transaction will be completed and offered no further comment.

Was American Home Products the bride left at the altar? The Wall Street Journal didn't think so, in fact they called American Home the Runaway Bride in their November article. Additionally they listed several companies that American Home has them selves left at the altar.

· Early November 1997, American Home Products and SmithKline Beecham begin merger talks.

· January 30, 1999, Talks break off.

· June 1, 1998, American Home and Monsanto announce agreement to merge.

· October 13, 1998, American Home and Monsanto cancel plans to merge.

· November 3, 1999, American Home and Warner-Lambert Co. in talks to merge.

Acquisitions

An acquisition is basically the function of one company consuming and digesting another. The result is that the acquiring company shores up core weaknesses or adds a new capability without giving up control, as might occur in a merger. Added capabilities, rather than synergy is usually the reasoning behind acquisitions. In this situation, the acquiring company's culture prevails. Frequently one company will acquire another for their intellectual property, their employees or to increase market share. There are numerous strategies and reasons why one company acquires another, as you will soon discover.

Guardian Protection Services has been acquiring alarm companies within its northeast region of operation to supplement its internal growth. Russ Cersosimo, president says, "This is just another way for us to satisfy our appetite for growth. Our desire is to expand our opportunities in the other offices. That is another reason why it is attractive for us to look to acquire companies, to get their commercial base and commercial sales force that is in place in those offices. We wanted to make sure that we can digest the new accounts without putting strain on our paper flow and the systems we have in place."

Who does R&D acquisitions well? Electronics Business recently answered, "Cisco Systems Inc., San Jose, the networking equipment company, which boasts many success stories among its 40 acquisitions of the past six years." None of their acquisitions were in mature markets, rather all were leading edge, allowing Cisco to broaden its product offering. Cisco hedges its acquisition bets through volume. Ammar Hanafi, director of the business development group at Cisco says it counts on two out of three acquisitions succeeding and the remaining third doing just okay. Acquiring people, intellectual properties and specialized skills is important to companies like Cisco. They think that even if the acquired technology does not pan out, they have the engineers. Generally, any fast growing company like Cisco cannot hire people fast enough and the acquired personnel are a boon to the company's progress. Retention of acquired employees is at the heart of their acquisition strategy. "If we're going to lose the people who are important to the success of the target company, we're probably not going to have an interest," says Cisco controller Dennis Powell.

"Cisco doesn't do big acquisitions, the cultural issues are too huge," Hanafi says. Cisco buys early stage companies with little or no revenues. While they often have paid extremely high prices for the acquisition, they seem to do better than most with their selection. Between 1993 and 1996, Cisco bought cutting edge LAN switching technologies for a total of $666 million in stock. More than half was spent on Grand Junction Networks Inc., which developed fast Ethernet switchers. At the time of purchase, it is estimated that Grand Junction's annual revenues were $30 million. "Today, the four LAN switching acquisitions account for $5 billion of Cisco's $12 billion in annual revenues." "We acquire companies because we believe they will be successful. If we didn't believe in their success, we would not acquire them," says Powell.

Little known West Coast Texas Pacific Group (TPG) has been acquiring at a feverish pace. Their semiconductor and telecom buying spree includes, GT Com in 1995, AT&T Paradyne (from Lucent Technologies Inc.) in 1996, Zilog Inc. in 1997, Landis & Gyr Communications SA in 1998, ON Semiconductor (from Motorola Inc.), Zhone Technologies Inc., MVX.COM and Advanced TelCom Group Inc. in 1999.

TPG banks heavily on intellectual capital. Many believe that by being part of TPG, their single biggest advantage is access to broad pool of talented and well-connected people. CEOs can take advantage of TPG's contacts in other industries around the world. "TPG has this ability to build a virtual advisory board...that they don't even have to pay for," says Armando Geday, president and CEO of GlobeSpan Inc.

Lucent Technologies, Inc. has also been rampaging through the same market as Cisco. Lucent's 1999 (January to August) acquisitions as listed in CFO magazine include:

· Kenan Systems for $1 billion

· Ascend Communications for $24 billion

· Sybarus for $37 million

· Enable Semiconductor for $50 million

· Mosaix for $145 million

· Zetax Tecnologia, $ N/A

· Batik Equipamentos, $ N/A

· Nexabit Networks for $900 million

· CCOM, Edisin, $ N/A

· SpecTran for $99 million

· International Network Services for $3.7 billion.

An advantage that Lucent has over its competitors is access to its 25,000-employee Bell Labs idea factory. As such, they are more likely to purchase technology rather than R&D. Still, Lucent continually reviews the comparative advantages of technology and R&D in relationship to its own projects in reviewing acquisition possibilities. Lucent executive vice president and CFO Donald Peterson says, "In every space in which we have acquired, we have had simultaneous research projects inside. It makes us knowledgeable, and lets us have a build-versus-buy option."

Lucent wants their units as a hole to do well and if acquisition helps that cause, they acquire. Peterson also says, "We view acquisition as a tool among many that our business units can use to advance their business plans. We evaluate acquisitions one by one, in the context of the business strategy of the unit."

Tyco International Ltd. is a diversified global manufacturer and supplier of industrial products and systems with leadership positions in each of its four business segments: Disposable and Specialty Products, Fire and Security Services, Flow Control, and Electrical and Electronic Components. Through its corporate strategies of high-value production, decentralized operations, growth through synergistic and strategic acquisitions, and expansion through product/market globalization, Tyco has evolved. From Tyco's beginnings in 1960 as a privately held research laboratory, it has transformed into today's multinational industrial corporation that is listed on the New York Stock Exchange. The Company operates in more than 80 countries around the world and had fiscal 1999 revenues in excess of $22 billion.

In the mid-1980s, Tyco returned its focus to sharply accelerating growth. During this period, it reorganized its subsidiaries into the current business segments listed above. The Company's name was changed from Tyco Laboratories, Inc. to Tyco International Ltd. in 1993, to reflect Tyco's global operations more accurately. Furthermore, it became, and remains, Tyco's policy to focus on adding high-quality, cost-competitive, low-tech industrial/commercial products to its product lines that can be marketed globally.

In addition, the Company adopted synergistic and strategic acquisition guidelines that established three base-line standards for potential acquisitions, including:

1. A company to be acquired must be in a business related to one of Tyco's four business segments.

2. A company to be acquired must be able to expand the product line and/or improve product distribution in at least one of Tyco's business segments.

3. A company to be acquired that will introduce a new product or product line must be using a manufacturing and/or processing technology already familiar to one of Tyco's business segments.

Tyco also developed a highly disciplined approach to acquisitions based on three key criteria that the Company continues to use today to gauge potential acquisitions:

1. Post-acquisition results will have an immediate positive impact on earnings;

2. Opportunities to enhance operating profits must be substantial;

3. All acquisitions must be non-dilutive to shareholders.

FASB Accounting Rule Change

The rules of the game are changing. Some of the accounting benefits of acquisition will soon disappear. Spending some extra time with your accounting and legal departments could prove beneficial in the long-term.

George Donnelly, in his article in CFO magazine writes, "The current state of accounting rules is clearly a factor in the frenetic acquisition activity at Cisco Systems and Lucent Technologies Inc. Like many high-tech companies, the two giants can acquire with little drag on their finances, because pooling-of-interest accounting enables them to avoid onerous goodwill charges that otherwise would ravage earnings.

But because of the death sentence the Financial Accounting Standards Board has levied on pooling, companies must use straight-purchase accounting after January 1, 2001. Then buyers will have to amortize goodwill for no more than 20 years."

Consolidations and Rollups

Bill Wade in Industrial Distribution said: "The basic premise couldn't be any simpler. Take a highly fragmented industry--like distribution--facing technological change, customer upheaval or chronic financing difficulties. Add in a few well-healed foreign firms or, worse, a couple of previously unknown competitors from outside the business. Since the industry leaders are probably family-run businesses with limited succession strategies, the next step to protect profit and continue growth is clear: consolidate."

A consolidation or rollup, as it's frequently called, generally occurs when an organization or individual with deep pockets sets out to buy several small companies in a fragmented industry and rein them in under a new or collective pennant. In 1997 the National Association of Wholesale-Distributors reported that 42 of the 54 industries they studied had been significantly affected by consolidation. Frequently a professional management and buying strength create economies of scale that allows the consolidator to pluck the low hanging fruit in the industry. They will invest significantly in systems to eliminate the duplication of effort and inefficiencies that exist within the industry being consolidated.

While some call it smoke and mirrors, many consolidators are yielding outstanding results. In 1997, at 39 years old, financial whiz Jonathan Ledecky pulled off a bold deal. As reported in CFO magazine, He went to the public equity markets and raised half a billion dollars for his company, Consolidation Capital Corp., in a brazen initial public offering. Without revenues, assets, operating history or identity (name or industry), he raised the capital in a blind pool on the strength of his reputation alone.

U.S. Office Products (USOP) is the result of 220 acquisitions. Sharp Pencil was one of six privately owned office-supply companies that Ledecky put together. But he didn't stop, after two years, and 220 acquisitions later, USOP was a member of the Fortune 500, with $3.8 in revenues. "It was crazy," says Donald Platt, senior vice president and CFO at USOP. Platt did rely highly on outside resources, including a team of lawyers and accountants to get the job done (the 220 acquisitions). "We restricted then to well-managed, profitable companies. At worst, we would still be making money," says Platt.

H. Wayne Huizenga is the owner of the Florida Marlins baseball team. He is also the king of consolidators. He pioneered his technique by rolling-up trash-truck businesses to create Waste Management Inc., the nation's largest waste company. He went on to create the largest video chain, Blockbuster Video. With AutoNation, Huizenga, now struggling, is attacking the retail automobile industry. In mid-December 1999 AutoNation had 409 retail franchises but announced the closing of 23 of their used-car superstores.

Michael Riley learned about consolidations while serving as personal attorney for Huizenga. In July 1999, Riley's company, Atlas Recreational Holdings Inc., paid $14 million to purchase controlling interest in the only publicly traded RV dealership chain in the United States, Holiday RV Superstores Inc., in Orlando, Florida. Riley's avowed intention is to grow the company from $74 in annual sales in 1998 to $1 billion by 2003 by acquiring other dealerships.

Riley says, "Consolidations really will help. We can bring advantages to sales and service. We can make a difference in warranty. There is a real value added when you put these companies together."

Same Industry, Different Strategies

In mid-1997, roll-ups, United Rentals and NationsRent were formed. They are in a race, but are using different strategies to achieve their results. After two years of ravenously gobbling up companies, United had 482 locations while NationsRent had accumulated only 138 stores. NationsRent has been developing a nationwide identity with stores that look-alike and have the same signage and layout. United Rentals presence is virtually unknown since the stores retain their previous appearance.

Motivations for Consolidators

There are several good reasons why consolidators attack a particular industry. The following list provides some of the rational that assist them in their decision making process. As you look to profit from the trend, keep these elements in mind as you make your selection on whom to acquire.

· Confidence by the players that they can capture significant and highly profitable additional market share by implementing the cutting edge management, procurement, distribution and service practices that will give them a competitive edge over smaller players.

· Gain national customers through increased capabilities in delivering the highest levels of standardized service and national geographical coverage.

· Larger customers of independent distribution channels are seeking broader geographic coverage and networks of locations that allow for greater service capabilities, and the smaller customers want a high level of customer service and response.

· Customers' desire for more product sophistication.

· Insurance and financing synergies.

Fragmented Industries Are Ripe for Consolidations and Rollups

Some industries that are ready for consolidations or rollup examples include heavy-duty truck repair, office products, recreational vehicle dealerships, rental stores (equipment, tools and party) and distribution. Consolidation does not just happen. It is triggered by shifts in supplier and customer expectations. Consolidation in a supplier base or customer pool often alters the economic rational for the structure of an industry. Functional shifts are accompanied by serious margin shifts among channel participants.

Take notice of the speed in which an industry can experience consolidation. If you are a consolidator, pick the low hanging fruit before another beats you to it. If you are fighting consolidation, take notice of the state of your industry and make adjustments (like strategic alliances) to your business plan if your industry is highly fragmented.

· TruckPro, the $150 million sales creation of Haywood and Stephens Investments, was sold in May 1998 to AutoZone, the $3 billion distribution king of do-it-yourself auto parts.

· In June 1998, nine heavy-duty distribution companies with volumes of $6 to $37 million, simultaneously merged and raised $46 million from the public for their brand new $200 million company, TransCom USA.

· Brentwood Associates, a venture capital company, during Spring and Summer1998, created HAD Parts System, Inc. a $145 million operation, by acquiring three companies in the Southeast.

· In July 1998, Aurora Capital's QDSP acquired majority interest in nine heavy-duty companies from FleetPride, a $200 million parts and service operation.

Stated in Truck Parts & Service, "Here the independent suffers a staggering disadvantage to roll-ups. Consolidators have access to large amounts of capital. The independent businessperson, however, must primarily finance his growth by earnings retains from current operations. New high efficiency service bays, significant and growing training expenses, data processing and communications technology all clamor for increased working capital. The large players' acquisition cost advantage eventually will win him all the mega-fleet business and the vast majority of business from mid-sized fleets.

Supplementing his parts acquisition cost advantage, the consolidator will be able to lower many overhead costs through centralized management and volume discounts...Combined savings in parts acquisition cost and overhead reduction should easily exceed 4% of sales."

Some of the indicators that an industry (any industry) is poised for consolidation are listed below. If you notice your industry has similar issues, it is just a matter of time. Plan now for what is coming. Where do you want to be when the train arrives?

· A high degree of fragmentation with numerous smaller companies and few, if any, dominating players.

· A large industry that is stable and growing.

· Multiple benefits for economies of scale.

· Synergies that can be achieved by consolidating companies.

· Infrequent use of advanced management information systems.

· Limited access to public capital markets and somewhat inefficient capital structures among companies.

· Lack of opportunities, historically, for owners to liquidate their businesses if they wish to leave the industry.

Reasons for Business Owners Selling to Consolidators

The reasons for a business owner to sell his or her business are as varied as there are people. Usually it is not one reason but several combined reasons that influence a seller's decision. The following list provides you with the general areas that might drive a selling decision:

· First generation owner, without heirs, nearing retirement.

· Lack of capital to make necessary technological and capital improvements to compete, within an industry, and with new competitors.

· Flat growth rate in industry.

· Better profitability as part of a larger organization.

· Centralized buying.

Ed Rigsbee, CSP, for over two decades has frequently been referred to as the Renaissance Man. He helps business individuals and organizations of all sizes to grow their market through smart alliance relationships. He is the founder and executive director of a non-profit public charity. He frequently publishes articles and blogs on personal relationship development. He administers a Facebook group; Relationship Glue and a Linkedin group; Member ROI for Associations & Societies.

Ed has served as adjunct professor for two California universities and is the author of Developing Strategic Alliances, PartnerShift-How to Profit from the Partnering Trend, and The Art of Partnering. He has over 1,500 hard-copy published articles to his credit and is a regular keynote speaker at corporate and trade association conferences teaching North America how to access their Collaborative Advantage.

He shares his proprietary Member Value Process globally with trade associations and professional societies-the corner stone for grass roots member recruitment and retention campaigns.

Ed has been a professional member of the National Speakers Association since 1988 and received the coveted Certified Speaking Professional designation in 2000. He also holds membership at the American Society of Association Executives. For additional resources that will assist you, visit http://www.rigsbee.com/wow.htm

Are You Risking Dollars to Save Pennies?

Money is the root of all evil, the saying goes.

It seems to be no different in the repossession industry. I have been a recovery professional for almost ten years. Three years ago this month, I opened my own business because I was convinced that I could compete with a quality product in an industry where quality was hardly important any more.

This was the worst time in the history of our industry to open a shop. You will likely recall that loan volume was decreasing; banks were beginning to fail; 'forwarders' and franchisers had exploited the market and consolidated most of the existing providers.

BUT, I started anyway.

Without the risk of failure victory just isn't the same.

In developing a business plan, my major concern was to separate this company from the 'herd', offering a quality product with exceptional customer service. I believed I could achieve this through staff training and experience; associating with the best insurance providers; owning and offering the best, most modern equipment; and affiliating with the best and brightest associations and operators in the business. These things, I believed, would help me to rise to the top and ensure survival. I invested an extraordinary amount of time, research, analysis and money... convinced that this would differentiate our operation from the reality TV "repo rangers" and appeal to clients who understood the risks associated with employing sub-par agencies.

I couldn't have been more wrong...

It seems that, for most clients, the major concern when selecting a repossession professional is none of these things, it is my rate. Granted, it is a bit higher than the average recovery operator you might find in the 'phone' book. For some folks, this is a reason to shop on... Perhaps I can explain why this is a mistake.

As a business owner, I understand the need to protect the bottom line. I have made many efforts to reduce my costs. We run a very lean and efficient crew; we operate hybrid spotter cars to save fuel; we operate a paperless office, track marketing expenses, and constantly follow up with clients to learn how we can improve service. We also have a PhD economist on staff who works for free.

But, we have not cut costs where we would expose ourselves or our clients to any of the risks involved in a recovery operation.

Remarkably, the small banks, credit unions, and BHPH dealers that we serve recognize the value of using a professional and appreciate our investment. Contracting with a professional is not a preference, it is a necessity. These folks cannot afford the risk associated with working with someone who is not fully insured and experienced in asset recovery. Defending a lawsuit would bankrupt them.

Risk mitigation is what we do.

Our clients understand that our quoted rate is much different from the ultimate cost of a repossession gone wrong.

Many large lenders have moved their collection operations to national forwarding companies. While consolidation makes sense at many levels, it rarely makes sense when lives are at risk.

But it seems "risk" does not concern some of the larger lenders. When there is news coverage, the story is almost always about a guy with a truck and a gun who tried to take a car. Professional association members rarely appear on the news explaining why they had to block a car in and draw firearms to effect the repossession. It just does not happen!

Incidents like these that show up in the press almost always the tell a story of the actions of individuals that have no place in the recovery industry. They are adrenalin junkies that have watched one too many TV shows. These are the agents that national forwarders and major lenders are hiring... sometimes to save money or out of ignorance.

How does this make sense? Why would a major lender choose to use an agent like this? There is only one answer, money.

My company and others like us have spared no expense to protect ourselves and our clientele. We have A+ insurance, a state of the art storage facility, the finest equipment, membership in one of the finest associations in the industry, TFA, which screens all applicants. We also have a $5,000,00.00 bond, protecting our clients and us. These are expenses that have a direct impact on the cost of doing business and the fees that we charge.

How can other operators afford insurance through a carrier that could sustain a wrongful repossession claim? Do they have a bond to protect clients against you employee theft or bad acts? In reality, they can't. These amateurs are able continue to operate and make a profit at these rates because they have chosen to omit a piece of the 'puzzle'. Without all of the pieces, someone suffers.

So, where is the advantage in conducting business as a professional?

Honestly, I am having a hard time answering that question these days. Why should I have the best insurance? Why do I employ trained professionals? Why should I invest in a secure storage facility?

Sometimes I wonder if these are attributes have value any more.

Savings that large banks and forwarders realize come at the cost of the general public. The short-term benefit to their "pocketbook" implies a long-term cost to safety and well being. Many of these entities are the same banks that received Federal bail-out money; your money; and they are using sub-par recovery agents to generate even more revenue.

Try some simple math. Assume a lender contracts for 30,000 vehicle repossessions a year. If we charge $395.00 a repossession, but the lender can find a less qualified agent who will work for $275.00, the $120.00 difference over 30,000 repossessions works out to 3.6 million dollars. $3.6 million... I wonder what the other $120.00 would pay for. Are those few dollars worth the expense over the long run: personal injury, lawsuits for wrongful repossession, property damage, reputation damage, loss of life?

I cannot tell you how many times the first two questions I hear from a potential client are,

"How much do you charge" and

"How many days free storage do I get?"

These should be the last questions you ask.

I believe you should be asking:

1. Do you have wrongful repossession coverage?

2. Do you have a secure vehicle storage facility?

3. Do you employ felons?

4. Do you have bond coverage if I choose to remarket my vehicle at your location?

5. Can you produce a loss run report from your insurance carrier?

6. Are you a member of a trade association?

These are just a few of the many questions that can save your money AND reputation in the long run. A few extra dollars invested now can save millions later.

The business plan for Texas Hide and Seek anticipates that we will be here to serve you for many years in the future. Do you plan to be there with us?

Why Should the Government Assist US Auto Manufacturers?

As a lifelong resident of Michigan, I was raised with the belief that we must purchase only those automobiles produced by an American car company (yes, even if some parts were made in foreign countries). To this day, I still hold that belief due to the fact that I find it incomprehensible to allow my own selfish desires to affect the employment outlook of my family members, friends, neighbors, acquaintances and my community as a whole.

Yes, Detroit built its share of lemons in the 70's, 80's and 90's, but quality has much improved since then. Here's an example; I am a self-described car nut, and my enthusiasm happens to get the best of me when that awesome, latest and greatest "wow" car design is introduced. As a result, I don't wait for rebates or incentives; I just go for it as soon as my dream car hits the showroom. The first time I could afford to do so was over ten years ago, when the '97 Ford F150 was introduced. I loved it, leased it and never had a single problem with it. Then came the '99 Chrysler 300M. Again, I leased this beauty and loved driving it. Unfortunately, it was not as trouble-free as my Ford, but it was okay. I figured it still looked good, was fun to drive and the lease would be up soon. So, the next best thing came out, and again it was a Chrysler product, albeit the Dodge line - the 2004 Dodge Durango. I leased this vehicle for four years and didn't want to chance a potential lemon, so I purchased the extended bumper-to-bumper warranty. Of course, I never had to use it; this vehicle was abused by my family, pushing the towing capability to the limits, and during our four-year lease we never once required service. Even at its lease end, this vehicle drove beautifully. So, it is my opinion that Detroit's automakers made a 100% improvement in quality in the short span of just five years, from the late '90's to the year 2004.

Some might wonder why I would have chosen an American car, after recently experiencing problems with a previously leased American car. Well, the answer is simple, my friend. If more people had my attitude, Michigan would not be where it is today. You see, Michigan has been in a recession for five years, and it hurts to know that my decision, combined with all of the others who might choose foreign cars, will deeply affect others.

While I agree that the business model of U.S. auto companies needs drastic change, I also have a clear understanding of what's ahead for the entire country if the government does not lend these manufacturers the necessary funds to see them through this very difficult period; we're living it already here in Michigan, and the rest of the country will experience what we've gone through for several years. Michigan lost 330,000 factory jobs since 1999, and as a result many others have been affected:


My husband is an energy center operator for a manufacturer directly tied to the auto industry. He's been laid off at least five times in as many years, and the threat is always lurking.

My dentist has lost 27% of his business due to the fact that people who don't have insurance simply do not go to the dentist.

My OB/GYN found it necessary to eliminate 20% of her staff - again, because women's "female problems" are placed on the back burner when they don't have insurance and can't afford an office visit.

A close friend has taken a 10% pay cut in order to keep his job. As a result, his home has been in a near-foreclosure status twice within the past year.

My sister, a medical biller, lost two jobs in the last five years due to our economy. She now works two part-time jobs, just trying to make the mortgage payment.

My close friend, a vice-president of the mortgage department for a local bank, lost her job when the bank was absorbed by a larger national bank.

Beautiful neighborhoods are left with abandoned homes because people have had to move just to find work. Of course, there are few people who can afford to buy homes, so these homes sit unoccupied.

Municipalities are eliminating police and fireman jobs because they're not collecting the taxes required to pay the employees' salaries.

School systems are eliminating teachers, resulting in higher class sizes.

My nephew, a packaging engineer, moved to Pennsylvania because there are no such jobs here in Michigan. The affect of our economy is also starting to hit Pennsylvania, and he's not sure if he'll have a job in six months.

The list goes on and on, and the loss of another 2.5 million jobs in this country will be absolutely devastating; entire cities will go bankrupt and recovery will take years. The government didn't waste a moment deciding the fate of AIG, who employs 100,000 people worldwide. Why are they so hesitant to save 2.5 million jobs here in the United States? Probably because they believe auto workers are overpaid - and they are. The UAW needs to voluntarily take a 20% pay cut, and the company executives need to do the same. Perks need to be eliminated, and survival has to be priority number one. Each car company should be required to produce small, fuel efficient vehicles within 18 months of obtaining government assistance, and do everything in their power to develop alternative energy for their vehicles - even if it means joint ventures. Executive greed needs to be a thing of the past; the auto company leaders could learn a thing or two from talking with Lee Iacocca, who generously offered to bring Chrysler back from the brink of bankruptcy for a yearly salary of just $1.00 back in early 1980's. Now, that's a true leader, and a man dedicated to seeing results. Perhaps Steven Feinberg, owner of Cerberus, which purchased Chrysler in 2007, should do a little something to help with the U.S. manufacturing sector, rather than just looking to make a quick profit.

If the auto industry in this country is going to survive, and ultimately keep the United States from entering a depression, everybody needs to give. Consumers need to take a second look at American cars, the UAW members need to take a 20% wage cut, as well as start paying for a portion of their health insurance, and CEOs and executives need to put an end to their greed. And most importantly - the key to the auto companies' survival - the United States government needs to lend the money these companies need so that manufacturing and its jobs remain a vital and stable factor of this nation's economy.

Marie Megge is a consultant in the credit services industry. Over the past several years she has assisted many individuals in resolving their debt-related matters. For more information on Marie's work, visit http://www.DonaldsonWilliams.com