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You’ve probably heard by now, that there is a piece of malicious software going around that is supposed to “come alive” tomorrow and do bad things to computers running on a microsoft operating system.  No one knows whether this is a viable threat or just another Y2K type situation where everyone is getting worked up about it, but nothing happens.  Either way, make sure that your anti-virus software is up to date, your windows firewall is turned on, and it would probably be prudent to not do any online banking first thing in the morning tomorrow.  Not sure, why I even posted this.  If you read blogs, you probably have heard about it by now.  Either way, slow news day, so take it or leave it!

Earlier this month, I wrote a blog post that addressed the AIG bonuses.  Somehow, Harvard Business School did a slightly better job than I did explaining what could or should have been done.  This article was written by Columbia Business School professor, Rita McGrath, who is much more qualified than I am to talk about it!  AIG:Why the facts don’t matter

Isn’t the only way to defraud the worker’s comp system.  The state of California District Attorney has assigned a task force to battle the rise in fraud since the economy took a downturn.  So if  you’re not faking an injury, how would one go about defrauding a worker’s comp carrier?  An employer can start paying his or her employees partially in cash.  Since cash payments can conveniently be left off of a payroll sheet, they won’t add to the overall payroll, which in turn drives the insurance premium down.  Works pretty well as long as the IRS doesn’t find out too.  Another way is to fudge the classification of your employees.  A worker who spends most of his time on the roof of residential structures will pay a heck of a lot more money in worker’s comp premium than a worker who spends his time working from ground level.  This post is by no means meant to be a tutorial on how to save money by defrauding insurance companies, but these are several of the ways that the CA task force have been successful in finding frauds and punishing them.

Hypothetically, let’s say that you as the unscrupulous employer, is successful at fleecing the insurance carrier you have your worker’s compensation insurance written with.  You have several employees that spend the majority of their day working in trenches.  On your insurance policy, they are classified as yard NOC.  Meaning they are supposed to be spending their days in your supply yard, not in 7 foot deep holes in the ground.  One day, since you are already proficient in cutting corners, you send your guys out into the field to do some excavation work but don’t bother setting up a trench box. Less time in the hole, more time to make money right? Wrong.  The trench collapses, and luckily no workers were killed, but several of your “yard workers” are severely injured.  You call your agent or broker to put the claim through.  They submit it to the carrier.  The carrier looks at it and wants to know why several yard workers were in a trench box installing a water line.  Claim denied.  OSHA fines you for not putting a trench box up.  The insurance fraud task force fines you $10,000 and you are still responsible for paying for your injured workers.  Out of pocket.  This is a pretty broad generalization of what could happen if everything went wrong.  Do a truthful job of classifying your employees and paying them over the table.  Do you really want to have to close up shop because an intentionally misclassified employee is injured on the job?  Just so you could save money on your insurance premium?  Might not be worth it.  For more info on the San Bernardino Fraud Task Force, click this LINK.

And in case you didn’t read the article, it also mentions that the task force shows up unannounced, the fine is a mandatory 10K, and you as the employer could face a year in jail on top of the fine.  That would be a pretty lousy ROI on a few thousand dollars savings on your insurance premiums.

If you’re one of the people that read this blog, you probably are a person that also follows the financial news in the US.  If I’m right, and you do, you probably saw the email that AIGFP’s Jake Desantis sent to Edward Liddy yesterday.  If you didn’t, check it out here Resignation Letter.  Following the newswire discovery of this gem of an op-ed piece, the collective media crapped their pants over this man’s whining in the face of disclosing that he got a 700K bonus(after taxes).  Yes, that’s a lot of money.  More than the majority of the world will ever see in their lifetime.  More than the large majority of us make in a year’s worth of work.  However, it seems like this man may have earned it.  He doesn’t seem like an entitled AIG employee.  He had the prudence and foresight to put enough money aside for his family so that in the face of a recession, they would be alright.  He also put himself through MIT, which last time I checked doesn’t take slackers.  Believe it or not, he didn’t even major in finance.  I found this on his LinkedIn profile

I know you know what I’m talking about…the person driving in front of you makes an abrupt right hand turn without using their blinker, they’re using one hand to drive and one hand to talk, and no hands left to use the blinker.  The driver next to you on the highway is swerving slightly.  It’s the middle of the day so the assumption would be that they are not drunk.  Then you inevitably pass them in the slow lane, because they forgot to accelerate because they were texting on their cell phone.  You’ve seen this before and it may or may not frustrate you as much as it frustrates me on a regular basis.  I live in a state, Connecticut, which was one of the forerunners to ban cell phone use while driving, unless you use a hands-free device.  Despite this law being on the books for almost 4 years now, nobody seems to pay attention to it because every call they get is much, much more important than the laws prohibiting it.  It still amazes me how we were ever able to leave home or drive a car without a cell phone for so many years.  If you didn’t catch what I did there, please turn up your sarcasm meters.

New York also has a ban on using a cell phone without a hands free device while driving.  I believe they were the first state to adopt this law, but prior to last week, hadn’t “cracked down” on it.  The man power just isn’t there to pull over every Tom, Dick, and Harry who can’t wait 5 minutes to get to their destination to make a call, so violators are rarely prosecuted for breaking this law.  So back to last week, in one day, throughout the 5 boroughs, 9000 people were ticketed for using cell phones while driving.   LINK

Looks like New York’s finest are ready to put an end to behind the wheel chatting, and I for one, am 100% for this.  Hang up and drive.

Oh ya, let’s tie this into insurance and risk management real quick.  Remember the train conductor that crashed a train last fall?  Remember when he killed 25 people?  Remember when it was found out that he was on his phone when the crash happened? Train Crash Linked to Cell Use The technology is there to trace when any calls/texts are placed and received.  If one of your employees hits and kills a pedestrian while driving a company truck, during business hours who do you think picks up the tab?  You, the employer will through your GL and Auto policies.  The precedents are out there.  Contractors have been successfully sued for neglect when their employees cause accidents, and the accident is caused by inattention by the driver due to cell phone usage.  Your agent or broker should be able to explain this to you with a few examples.  If they can’t give me a call at the office(860-618-1116 ask for Dan) and I can walk you through the steps you need to take, to put in place a successful “no cell phone usage” clause in your employee handbook.  If your employees know that they will be picking up the bill for injuring someone because they were on their phone, it might make them think twice before answering their phone the second it rings next time.

Was doing a little after lunch reading today about what’s going on with the stimulus package, and whether any of these “shovel ready” projects that everyone has been talking about are actually underway.  Didn’t really find the answer I was looking for, but it was a pleasant break in the hourly updates on which of the AIG guys decided to relinquish their bonus checks they received for ruining their company.  But I digress…

Wisconsin just began construction on a $1.9 billion highway modernization project.  Rhode Island, a little closer to home,  has the shovels fired up for $150 million worth of sewer and drinking water projects.  And the new Governor of Illinois,  Pat Quinn, is urging lawmakers to pass a bill that will use 26 Billion on a statewide reconstruction project.

Not sure about you guys, but I’m enjoying reading about positive things in the news again.  Also found that it’s pretty nice to share good news with friends, co-workers, bloggers, and anybody else that doesn’t spend their days spitting doom and gloom.

To read more about the shovel ready projects going on around wherever you are, swing on by http://www.agc.org/

And if somehow, you are a contractor, and are reading this…make sure to do you due diligence when hiring new workers.  I know it can be hard to think about doing background checks when you have had 25% of your workers laid off for the last few months, but the last thing you want, is for an untrained/unqualified/unsafe worker to have a worker’s comp claim that follows your insurance program, and experience modification factor around for the next few years.  Dollars spent preventing injuries now will bring the biggest ROI in the long run.

For the 20th month in a row, US construction jobs have been on the decline.  Some people are putting the total number of construction workers that are unemployed right now at or around 20%, the highest for any industry.  There are plenty of places to place blame for this, but a growing number have put the fault on the bid lists.  A few years ago, most contractors would see 3, maybe 4 other bidders on a specific non-residential job, now that number has grown to an average of 25-30!  Basically, cheapest price wins.  Except now, the bottom has fallen out on what “cheap” used to mean.  Various contractors I’ve spoken with have said they’ve seen bid lists recently with quotes so low, the company would be losing money on the deal!

So what does this have to do with fraudulent work comp claims?  The answer is a lot.  Unemployment checks dry up in CT after 26 months(1/2 a year), while work comp payments, depending on the severity and permanancy of the injury, can last a lifetime.  Does this mean that we will see a spike in contractors jumping off roofs and running eachother over to go out on comp? NO.  But it does mean that we should anticipate seeing a spike in sprains, soreness, and myriad back “injuries”.  As an owner, or the person who handles finance and insurance for construction companies, it is your duty to be vigilant.  If any sort of injury reeks of suspicion, it is probably fraudulent.  I have covered the “monday morning quarterback” issue here before, but the new trend in fake injuries is to go out on comp rather than go out on unemployment.  If the worker senses unemployment is coming, it can be a “good” pre-emptive strike on their part to “pull their back”, which in this case is not to have the comp system pick up their medical bills for a softball injury over the weekend, but more so to pay their bills while they are unemployed.  And if they have been reading the same industry publications I have, no one is predicting the construction draught to be over until early 2010.  Be watchful folks, even the most honest and loyal employee will do things you don’t think they would be capable of if it means the difference between feeding or not feeding their family.

insurance cat

After seeing this picture, the marketing pholks at Phish.com have a little better idea of who they should market hard to.

Dudes.  Those little red triangles are over the heads of the ladies in attendance.  Some rough estimates have put the male to female ratio at around 72:1.  So besides the knowledge that no man should try to pick up a girl at a phish concert, it gave the people that market to phish fans a very cut and dry example of what sex the majority of their fanbase is.  It has been known for quite some time that most “jam bands” have a much larger male following than female, but little has been done to market directly to the male fanbase.  Before touching on that, it makes sense to consider why the fanbase shakes down like this.  For arguments sake, I’m going to throw out a few very broad generalizations on this.

1.  I know very few girls who would drive or fly 9 or 10 hours to see a concert

2.  Girls typically have more sense than to sit in front of a computer and refresh livenation.com for 3.5 consecutively in hopes of getting a single ticket, to a single concert.  They’re much smarter with their time!

3.  Guys, in my humble opinion, are a lot more willing to see the same band three nights in a row.  Phish doesn’t play the same songs on back to back nights, and it is rare that they will repeat a single song over the course of 3 concerts (which is a big reason why people will try to see them multiple times in a row).

Anyways, phish now has hard evidence that their fanbase is predominantly male.  So why not make their concerts/products more guy friendly?  How can they do this?

-Convert a few extra ladies bathrooms to men’s rooms.

-Come out with more “guy specific” merchandise items.  IE sporting goods, golf balls, frisbees, coolers, gas grills, etc with the phish logo on them.  Despite it getting away from their hippy roots, if they took a few cues from professional sports teams, they could tap into a large market of untapped revenue.

Now I’m rambling on like a 25 minute phish song.  Basically phish marketing guys, you did a great job on twitter by live-tweeting the songs as they were played at the last 3 concerts you put on.  Your whole fanbase appreciates that you gave away the MP3′s of the complete concerts for free the morning after the concert.  And yesterday when I pre-ordered tickets for some of your upcoming concerts, I had the ability to pre-order the MP3s of the shows I want to attend at the same time I bought the tickets.  Those MP3′s by the way, are also cheaper than what phish’s jamband contemporaries charge for theirs.  You had 75,000+ people try to get tickets to a venue that held 14,000 for three nights in a row.  If that doesn’t tell you something about the demand for your “product” and how hard your fanbase will try to acquire your product, than you haven’t been doing your homework!  You know they’re out there, and you know who they are, and what they will do.  Change the game, give them a product they have yet to see.

Ok AIG, this is getting a bit ridiculous.  I understand how some of your key executives had specific bonuses figured into their salaries and contracts, but come on.  Your company has already been bailed out by the US Taxpayers to the tune of 173 billion dollars and posted a 67.1 BILLION DOLLAR LOSS IN A SINGLE FISCAL QUARTER.  Yet somehow you still have people working for you that feel they deserve a bonus because it was in their contract? Call me a whiny uninformed taxpayer, but typically people receive bonuses for a job well done, not for driving a company into financial ruin.   Let those bonuses be paid retroactively to those who help AIG get back on their feet, not to the ones who take their bonuses, retire and are never held accountable to the American taxpayers.  This goes double for you London derivative traders.

On a somewhat unrelated note, check out this link that shows what a trillion dollars worth of 100 dollar bills looks like, and put that in the context of what the American public gave to AIG.

http://www.pagetutor.com/trillion/index.html

Unfortunately, I can’t take credit for that pun,  yet somehow Madoff is planning on taking “all the credit” for the ponziest of ponzi schemes.  At this point, the court proceedings are a few hours away from starting, and Mr. Madoff is going into it as the only named defendant.  I in no way endorse his actions of fleecing people out of all their hard earned savings, nest eggs, and whatever else he stole from them, but it is somewhat noble that he is taking the entire fall for everyone involved in his scheme.  Yes, I know that he was the mastermind behind it, but it is unfathomable that one man would be able to scam, trick, and misallocate FIFTY BILLION dollars without a little help.  I mean come on, it took at least 11, 12, or 13 people to pull of the heists in the Ocean’s 11 movie series!  Mark Cuban wrote an interesting post right after the Madoff news broke about the software that made the whole scam work.  Breaking Down Bernie Madoff.  Haven’t seen anything come of this theory yet, but it raises a very interesting point IMO.

I can’t help but chuckle when you read things like “his family had no idea”.  I know he was an extremely wealthy individual well before executing this scheme, but to play the ignorance card in this case is extremely unbelievable.  I mean what’s the point of embezzling that much moolah if you’re not going to buy some extravagant yachts, gold plated toilets and a couple of waterfront properties in Dubai?  Somebody had to know what was going on.  I can imagine at this stage of the game, that Ol Bernie knows that he’ll be spending the rest of his life in jail, but it still begs the question of where is this 50 billion?  It isn’t hidden in shell companies anymore and according to the recent testimony, his wife and kids haven’t seen it either.  What I’m getting at, is that he had to have some end game to this whole scheme.  What would be the reasoning behind doing something on that scale if you had no intention of cashing in on it?  It wasn’t like he was a nobody that was running some chain letter scam, he was the former-chairman of NASDAQ!  Even if he never spills the beans on who were his partners in crime, it will be interesting to watch him go down in flames and hopefully return some of his assets to the people he stole from.  Where do you think the money is, and do you think we’ll ever see any of it turn up?