Tag: Corporate Security

Avoid Unnecessary Real Property Taxes

Recently posted in the National Law Review an article by Richard B. Tranter and Sarah Sparks Herron of Dinsmore & Shohl LLP regarding valuation pitfalls involved with the purchase of an on-going business that owns real estate.

When Buying an On-Going Business that Includes Real Estate in Ohio

Beware the valuation pitfalls involved with the purchase of an on-going business that owns real estate. A buyer can accidentally cause its real property taxes on the newly purchased property to increase dramatically if it fails to allocate values properly between personal property and real property. Fortunately, a few preventative measures can be taken at the closing to prevent an unnecessary real property tax increase and litigation.

Imagine the following scenario: Company ABC decides to buy a hotel. The purchase includes the real estate on which the hotel is located, the personal property, including the furniture, fixtures and equipment (“FF&E”) within the hotel, and the goodwill associated with the hotel franchise. The purchase price for everything is $3,600,000. Neither the purchase agreement nor the settlement statement allocates this purchase price between the real estate, FF&E and goodwill. After the closing, a title agent goes to record the deed for the real estate at the local recorder’s office. The agent is asked to fill out a “Real Property Conveyance Fee Statement of Value and Receipt” (a/k/a “Conveyance Fee Statement”). The agent fills-in the purchase price as the consideration for the real property. Shortly thereafter, Company ABC receives a notice that the County Auditor will be increasing the value of the real property to reflect the $3.6 million purchase price, and the real property taxes will be going up to reflect this new, higher value. Company ABC objects because the $3.6 million price reflects the combined value of the real property, FF&E and goodwill. Now, to challenge the property valuation, Company ABC must file a complaint with the county board of revision and prove that the purchase price, as stated on the Conveyance Fee Statement, does not reflect the fair market value of the real property.

This is exactly what happened in a recent Ohio Supreme Court case, Hilliard City Schools Bd. of Educ. v. Franklin Cty. Bd. of Rev., 128 Ohio St.3d 565, 2011-Ohio-2258, 949 N.E.2d 1. The buyer in that case, K.D.M. and Associates, L.L.C. (“KDM”), purchased an 80-room, fully operating hotel for $3,600,000. Shortly thereafter, the Franklin County Auditor increased the value of the real property from $2,240,000 to $3,550,000. KDM filed a complaint, and the Franklin County Board of Revision reduced the real property value by $800,000 for FF&E, $60,000 for inventory, and $500,000 for goodwill for a final real property valuation of $2,240,000. The local school board appealed to the Board of Tax Appeals (“BTA”), which disallowed the $500,000 allocation to goodwill and the $60,000 allocated to inventory. Thus, the BTA concluded that the value of the real estate was $2,750,000. On appeals by both KDM and the school board, the Supreme Court valued the real estate even higher. The Court decreased the deduction for FF&E from $800,000 to $280,000. In addition, the Court refused to permit the deduction of $500,000 for goodwill. Thus, approximately six years after the plaintiff purchased an operating hotel for $3,600,000, the Ohio Supreme Court determined that the value of the real estate involved was $3,320,000.

What could KDM have done to avoid years of litigation and an additional $1.1 million in real property tax value? First, KDM could have completely filled out the Conveyance Fee Statement. Section 8(E) of this form asks what portion, if any, of the total consideration paid was for items other than real property. After every sale, the auditor will evaluate whether to increase or decrease the property’s valuation. This determination is made, in part, based on the Conveyance Fee Statement. If the new property owner allocates the purchase price on the Conveyance Fee Statement and the auditor accepts the allocation at this stage, then the new property owner does not have to challenge the auditor’s valuation. Further, if the local school board challenges the property valuation, the school board has the burden of proving a higher valuation. Thus, a fully completed Conveyance Fee Statement can head-off potential valuation disputes.

Second, KDM could have documented the allocation between real property, FF&E and goodwill in the closing documents. Notably, the settlement statement for the hotel purchase did not provide an allocation to personal property. In addition, the bill of sale for personal property was incomplete. The bill included “inventory, equipment, fixtures, assets used by seller in the business in the attached ‘Exhibit A’”, but there was no Exhibit A, nor any value assigned to that property. Thus, KDM had little evidence from the closing to support its conclusion that $800,000 of the purchase price was for FF&E, $60,000 was for inventory, and $500,000 was for goodwill.

The Supreme Court ultimately concluded that the FF&E was worth $280,000 based on a financing appraisal conducted in anticipation of the purchase. The Court pragmatically concluded that an operating hotel clearly included personal property, and this personal property clearly had value to be allocated as part of the purchase price. Thus, the Court rejected the school board’s argument that the sale price, as set forth in the Conveyance Fee Statement, reflected the fair market value of the real property. The Court, however, rejected KDM’s representatives’ testimony about the value of the FF&E and rejected an unauthenticated, 2005 year-end financial statement showing FF&E of $800,000. With no allocation on the Conveyance Fee Statement or in the closing documents, the best evidence available to the Court was the financing appraisal which presented an estimation of value relied upon by KDM’s lender at the time of the sale. The Court utilized such appraisal evidence.

In conclusion, the purchase of an on-going business can have multiple moving parts. If you are contemplating a purchase that includes real estate, remember to document the purchase price allocation between real and personal property in both the Conveyance Fee Statement and closing documents. These simple steps can avoid unnecessary real property taxes and litigation.

© 2011 Dinsmore & Shohl LLP. All rights reserved.

Federal Authorities Warn of Terrorism: Three Steps Toward Comprehensive Risk Management for the Hotel Industry

Recently posted at the National Law Review by Richard J. Fildes of Lowndes, Drosdick, Doster, Kantor & Reed, P.A. – news about a recent federal government terror alert involving hotels and resort properties: 

Quality service, prime amenities, ideal locations and excellent accommodations are the repertoire of successful hotels. In light of a recent warning issued by federal authorities to the U.S. hotel industry, that checklist may need to expand, according to the American Hotel & Lodging Educational Institute. Though Mumbai-style attacks have thankfully not come to fruition on American soil in recent years, the need for vigilance is ever-present. Based on intelligence reports gathered by the U.S. government, terror plots on the hotel industry are a looming threat;however, a panic-free plan for potentially devastating crises can easily be developed.

Attacks of terrorism and natural disasters can often share the same elements of surprise, chaos, structural destruction and health-related concerns. Just as hotels should plan for before, during, and after a storm (more details), there should be a similarly structured program for staff and guests when dealing with terrorist attacks. Combining the consideration of both events can streamline the process of training employees and increasing familiarity with risk management in the aftermath of such events. Some considerations are as follows:

• Lobbies tend to be the most dangerous part of hotels because they are typically unsecured open areas where guests congregate. If finances permit, have plain clothed security personnel in the lobby. The presence of uniformed security guards can create a perception of safety; however, non-uniformed guards can be more attuned as the eyes and ears of hotel security.

• Staff should be trained to spot potentially dangerous activities. All employees who may have contact with guests, including housekeeping, maintenance, front desk, guest services, food and beverage, transportation, and parking should be given detailed instructions on what types of activity should be reported to hotel security.

• Staff should also have equally detailed instructions on panic control and ways to manage the turmoil of natural disasters.

• Record keeping is also vital, especially with health related issues. Knowing which employees have medical ailments or potential concerns will help reduce health risks stemming from natural disasters and terrorist attacks. Though some guests may not want to disclose such information, consider asking guests whether they have any heart conditions, diabetes or other issues that would be necessary for the staff to know in case of an emergency. Such inquiries should be phrased “as non-intrusive” inquiries geared toward providing the best possible customer care and service in the rare chance that something may happen.

• Keeping both paper and electronic copies of records, including which guests are checked into the hotel at any given time, is also key to minimizing confusion and chaos when responding to an emergency.

• Develop specific evacuation plans. The standard “in-case-of-a-fire” evacuation route may not be helpful during a chemical weapon attack, bombing or hurricane.

• Have designated evacuation areas equipped (or readily able to be equipped) with vital supplies. Back up energy sources, medical supplies and non-perishable foods, and bottled waters are all necessary to keep guests safe and calm.

• Make the evacuation routes easy to follow, and ensure that the staff knows exactly where guests should be located during the different emergencies.

Being vigilant, heightening security efforts, and ensuring staff preparedness will help reduce the stress, commotion and devastating aftermath of natural disasters and terrorist related incidents.

* Tara L. Tedrow is co-author of this article. She is a rising third year law student and has not been admitted to the Florida Bar.

To read the press release issued by the American Hotel & Lodging Association, please click on the following : AHLEI PR_TerrorWarningReinforcesNeedVigilanceTraining.pdf

© Lowndes, Drosdick, Doster, Kantor & Reed, PA, 2011. All rights reserved.

New York’s Highest Court Reinstates $5 Billion Lawsuit By Big Banks Against MBIA

Posted recently at the National Law Review by Michael C. Hefter and Seth M. Cohen of Bracewell & Giuliani LLP news about New York’s highest court reinstating a $5 billion lawsuit brought by a group of banks, including Bank of America and Wells Fargo, against MBIA. 

New York’s highest court yesterday reinstated a $5 billion lawsuit brought by a group of banks, including Bank of America and Wells Fargo, against insurance giant MBIA. ABN AMRO Bank, et al. v. MBIA Inc., et al., — N.E. 2d –, 2011 WL 2534059, slip op. (June 28, 2011). The Plaintiffs-banks sought to annul MBIA’s 2009 restructuring, which separated the insurer’s municipal bond business from its troubled structured finance unit, on the grounds that the transactions left the insurer incapable of paying insurance claims in violation of New York’s Debtor and Creditor Law. The Superintendent of Insurance in New York approved the transactions that effectuated the split of MBIA’s business in 2009. 

The Court of Appeals’ decision represents a victory for Wall Street banks in one of the many battles being fought in connection with the collapse of the financial markets. Those banks saw their fraudulent transfer claims against MBIA dismissed earlier this year by the Appellate Division, First Department. The intermediate appellate court determined that the banks’ fraudulent transfer claims were a “collateral attack” on the Superintendent’s authorization of the restructuring and that an Article 78 proceeding challenging that authorization was the sole remedy available to the Plaintiffs. The banks’ remedies under Article 78 – a procedure entitling aggrieved parties to challenge agency decisions – would be limited compared to those remedies available in state or federal court under a fraudulent transfer theory. 

At issue for the Court of Appeals was whether the Plaintiffs-banks had the right to challenge the restructuring plan in light of the Superintendent’s approval. Plaintiffs argued that the restructuring was a fraudulent conveyance because MBIA Insurance siphoned approximately $5 billion in cash and securities to a subsidiary for no consideration, thereby leaving the insurer undercapitalized, insolvent and incapable of meeting its obligations under the terms of the respective insurance policies. MBIA countered that, as held by the First Department, Plaintiffs’ claims were impermissible “collateral attacks” on the Superintendant’s approval of the restructuring. 

In a 5-2 decision, the Court of Appeals modified the First Department’s decision and reinstated the Plaintiffs’ breach of contract, common law, and creditor claims. In an opinion authored by Judge Carmen Beauchamp Ciparick, the Court held that NY Insurance Law does not vest the Superintendent with “broad preemptive power” to block the banks’ claims. MBIA Inc., 2011 WL 2534059, slip op. at 16.

“If the Legislature actually intended the Superintendent to extinguish the historic rights of policyholders to attack fraudulent transactions under the Debtor and Creditor Law or the common law, we would expect to see evidence of such intent within the statute. Here, we find no such intent in the statute.” Id.

Critical to the Court’s holding was that Plaintiffs had no notice or input into the Insurance Department’s decision to approve MBIA’s restructuring. “That the Superintendent complied with lawful administrative procedure, in that the Insurance Law did not impose a requirement that he provide plaintiffs notice before issuing his determination, does not alter our analysis,” Judge Ciparick wrote. “To hold otherwise would infringe upon plaintiffs’ constitutional right to due process.” MBIA Inc., 2011 WL 2534059, slip op. at 21. Moreover, the Court noted that Plaintiffs’ claims could not be properly raised and adjudicated in an Article 78 proceeding. Id.

The Court’s decision re-opens claims by multiple financial institutions that MBIA instituted the restructuring in order to leave policyholders without financial recourse. 

The case is ABN AMRO BANK NV. et al., v. MBIA Inc., et al, 601475-2009 (N.Y. State Supreme Court, New York County.)

© 2011 Bracewell & Giuliani LLP

An Ounce of Prevention – The Importance of Periodic Corporate Audits

Posted this week at the National Law Review by James M. O’Brien, III and David R. Krosner of  Poyner Spruill LLP – a good overview of the many reasons managed care organization should perform periodic corporate audits:  

Most, if not all, long term care providers operate their business in an entity form, such as a corporation or limited liability company.  Many use multiple entities – for example, one entity to own the real estate (or a separate entity to own each parcel of real estate) and another to operate the business.

Although the type of entity (or entities) used in your business was likely selected based on an evaluation of the benefits and drawbacks of each type of entity (including tax considerations and management structure), one of the principal benefits of both a corporation and a limited liability company (LLC) is limited liability, which is often referred to as the “corporate veil” or “corporate shield.” The corporate veil refers to the concept that the owners of the corporation or LLC are generally not liable for the debts and obligations of the entity. Rather, the “corporate veil” protects the owners from that personal liability and places responsibility for the entity’s debts and obligations on the entity.

As we all know, for every rule, there are exceptions, and that holds true with respect to the corporate shield. Some of these exceptions are created by statutes and others by case law. For example, under federal statutes, employees who are responsible for the entity’s payroll or financial affairs may be personally liable (and also subject to penalties) for willfully failing to collect and remit required federal withholding or employment taxes. Similarly, under certain federal environmental laws, corporate officers who have authority and control over the disposal of hazardous wastes can be held personally liable for the corporation’s failure to comply with certain environmental laws.

In the category of case law type exceptions, generally an individual will always be liable for his own wrongdoing. For example, if I get frustrated at work and punch my partner in the nose, the corporate shield will not protect me from liability to my partner! We all understand (and can’t legitimately complain about) those types of exceptions to the corporate shield. But there is also a broader set of case law that creates additional exceptions that allow plaintiffs to “pierce the corporate veil.” Under this concept, a judge may decide that the facts of a particular case warrant piercing the corporate veil and, thereby, holding the owners of the entity personally liable for the matter being litigated. Generally, the courts examine a laundry list of factors, including, most importantly whether the facts suggest that a refusal to pierce the corporate veil would result in fraud or similar injustice.

Generally, to succeed in a veil piercing case, the plaintiffs would have to prove, among other items, that the owners of the entity so dominated its finances, policy and business that the entity had no separate mind, will or existence of its own. In determining whether that level of control exists, a court looks to several factors (none of which are typically decisive in and of themselves). These factors include (i) inadequate capitalization of the entity, (ii) noncompliance with corporate formalities, (iii) excessive fragmentation of a single enterprise into multiple entities, (iv) absence of company records, and (v) siphoning of funds from the company by the dominant owner.

Although the case law rules for veil piercing vary somewhat from state to state, the good news is that courts are typically very reluctant to pierce the corporate veil. The perhaps better news is that there are steps you can take to make it less likely that the veil of your entity will be pierced. So what can you do to lessen the risk of a successful veil piercing claim? For one, be sure your entity complies with appropriate corporate formalities and maintains appropriate corporate records. For example, if your entity is a corporation, each year the corporation should hold a shareholders’ meeting to elect its Board of Directors and the directors should appoint the officers. All major corporate actions should be approved by the Board of Directors and records of those approvals should be maintained. If money is distributed to the owners or there are multiple entities and money flows between the entities, all of this should be approved in writing by the directors and properly documented. Generally, these types of records are kept in the entity’s minute book. If the last entry in your minute book dates from 1982, your entity is not keeping proper records!

As a service to our clients, we often conduct legal reviews of a client’s corporate/LLC records, including, as applicable, minute books, shareholders’ or operating agreements, articles of incorporation/articles of organization, bylaws, annual reports, stock transfer ledgers, foreign qualifications, good standing certificates, tax clearance certificates, etc., to ensure the records are up to date, reflect the current operations of the company, comply with current law, and generally reflect compliance with the governing documents and formalities applicable to the company. To the extent we find deficiencies, we propose a course of action and help our clients implement corrections. This is an easy and inexpensive way for you to eliminate one of the factors associated with piercing the corporate veil and help protect owners from personal liability.

© 2011 Poyner Spruill LLP. All rights reserved.

 

2nd Social Media Legal Risk and Strategy Conference Jul 19-21 SanFrancisco

The National Law Review would like you all to know about the upcoming 2nd Social Media Legal Risk and Strategy Conference:  Minimizing Legal Risk for Corporations Engaged in Social Media July 19-21 in San Francisco, CA.  

Key Conference Topics Include:

  • Insights and updates on the changing legal landscape for social media
  • Practical strategies to develop robust and compliant social media strategies
  • The role and involvement of legal in the social media initiatives
  • Overcoming the various legal risk from IP, Employment Law to Privacy when organizations engage in social media engagement
  • Analyzing emerging trends and potential legal risk in social media

Key Conference Features Include:

  • Pre-Conference Workshop A (July 19th): Uncovering Current and Emerging Social Media Trends and Applications To Forecast and Minimize Potential Legal Liabilities
  • Pre-Conference Workshop B (July 19th): Monitoring And Tracking Online Activities To Mitigate Legal Risk
  • For More information and to Register Please Click Here:

Attendees are eligible to receive up to 20 CLE credits!

 

6th Anti-Corruption and FCPA Compliance Conference Set for June 22-24, 2011 in Washington, DC

The National Law Review wants to bring your attention to the following upcoming event(s): 

Building on our past successful FCPA conference series, marcus evans invites you to attend the 6th Anti-Corruption & FCPA Compliance Conference in Washington, DC, June 22-24, 2011, co-located with the Life Sciences Strategies for Anti-Corruption and Compliance Conference.  The event will bring together Government officials and industry leaders in FCPA, Anti-Corruption and Compliance to share best practices, strategies and tools on executing, monitoring and auditing a strong and effective anti-corruption / FCPA compliance program.

Now more than ever organizations need to pay close attention to their anti-corruption compliance programs and ensure robust internalcontrols are in place especially in countries with high corruption to ensure their business transactions are compliant with the FCPA as well as  global anti-corruption laws.

Hear From Leading FCPA Compliance and Anti-Corruption Experts Including:

Jay G. Martin, Vice President, Chief Compliance Officer, Senior Deputy General Counsel, Baker Hughes

C. David Morris, Senior Counsel International, Northrop Grumman Corporation

Melissa Chia, Executive Director, Morgan Stanley Investment Management

Debra Kuper, Vice President, General Counsel and Secretary, AGCO

Stephen Donovan, Chief Counsel, Global Compliance, International Paper Company

Why You Should Attend

1. Learn how to embrace a global anti-corruption compliance program
2. Analyze recent regulatory updates and proposals
3. Understand best practices in effective due diligence and management of third parties
4. Discover ways to monitor and disclose FCPA violations
5. Gain insights on how to tackle upcoming regulatory changes and how to best implement updated policies and procedures into your organization
6. Identify possible violations by examining recent enforcement against companies for committing corrupt practices

With a one-track focus, the 6th Anti-Corruption & FCPA Compliance Conference is a highly intensive, content-driven event that includes case studies, presentations and panel discussions over two full days. This conference targets industry leaders from a variety of top industries in order to provide an intimate atmosphere for both the delegates and speakers.

This is not a trade show; our FCPA conference series is targeted at a focused group of senior level executives to maintain an intimate atmosphere for the delegates and speakers. Since we are not a vendor driven conference, the higher level focus allows delegates to network with their industry peers.

marcus evans has requested CLE accreditation from all appropriate states. marcus evans certifies that this conference has been pre approved for CLE credits by the Pennsylvania, California and West Virginia State continuining legal education authorities and also approved for New Jersey and Colorado CLE credit via reciprocity.

 For more information on this conference or to get a complete list of speakers, sessions or past attendees, visit http://www.marcusevansch.com/NLR_FCPA.

Privacy Protection and Data Breaches: HR Tip of the Month

Recently posted at the National Law Review by Trent S. Dickey , David H. Ganz, and Jill Turner Lever  of Sills Cummis & Gross P.C.  – some important things for employers in New York and New Jersey to consider about identity theft of their employees’ information as well as their customers information:  

Identity theft is a major concern for employers who are routinely entrusted with private information of employees and customers, especially in the electronic age, where improper use of such data can have widespread ramifications.  According to the Federal Trade Commission (FTC), each year as many as 9 million Americans have their identities stolen. Is your company prepared to address a data breach?

Federal law and many state laws require employers to safeguard private information.  For instance, the Fair Credit Reporting Act requires companies to take appropriate measures to dispose of sensitive information derived from consumer reports.  If a company becomes aware of a data breach, the FTC also instructs it to immediately report the breach to the local police department, the local office of the FBI, or the U.S. Secret Service, and then to provide notice to individuals whose information was compromised to allow those individuals to take steps to mitigate the misuse of their personal information.  Many state laws also require that notice be provided upon discovery of a breach.

New Jersey has enacted the Identity Theft Prevention Act (ITPA), which requires any business that lawfully collects and maintains computerized records to disclose to the New Jersey State Police and to any New Jersey customer (broadly defined to include an individual who provides personal information to a business, including employees) when that customer’s personal information was or may have been accessed by an unauthorized person.  In the case of a large scale breach, businesses are also required to report to consumer reporting agencies.  In addition, the ITPA regulates the use of social security numbers as identifiers, prohibits the display and usage of social security numbers on printed materials except where required by law, and requires the destruction of records containing personal information when no longer needed.

Similarly, the New York State Information Security Breach and Notification Act requires companies who own or license computerized data to provide prompt notification following the discovery of a breach to any New York resident whose private information was, or may have been, acquired without authorization. The New York State Social Security Number Protection Law regulates the handling of social security numbers and requires covered persons and entities to provide safeguards “necessary or appropriate” to preclude unauthorized access to social security account numbers and to protect the confidentiality of such numbers.

Employers must be prepared to continuously protect information.  Best practices dictate that employers prepare guidelines for safeguarding private information.

This Alert has been prepared by Sills Cummis & Gross P.C. for informational purposes only and does not constitute advertising or solicitation and should not be used or taken as legal advice. Those seeking legal advice should contact a member of the Firm or legal counsel licensed in their state. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. Confidential information should not be sent to Sills Cummis & Gross without first communicating directly with a member of the Firm about establishing an attorney-client relationship.    

Copyright © 2011 Sills Cummis & Gross P.C. All rights reserved.

Anti-Money Laundering Strategies and Compliance Conference May 9-11 New York, NY

Anti-money laundering officers, professionals, and in-house counsel should attend this conference to better understand the changing environment of the financial industry, learn how companies are adapting to these changes, and to identify new measures in which criminals are laundering money through the United States financial system. With technological advancements and the introduction of money laundering into new financial entities, it is important that anti-money laundering professionals and in-house counsel who oversee anti-money laundering compliance to stay abreast of current AML issues and best practices for preventing money laundering and suspicious activities from occurring in their organizations.

The Anti-Money Laundering conference is a highly intensive, content-driven event that includes case studies, presentations, and panel discussions over two full days. This conference targets industry leaders in AML, and Financial Compliance roles in order to provide an intimate atmosphere for both delegates and speakers.

key conference topics include:

Explore the Office of Foreign Assets Control Sanctions Program and updates to the Iranian Sanctions

  • Evaluate the increasing correlation between fraud and money laundering
  • Discuss potential risks that emerging technological products pose to the financial industry
  • Investigate the increase in money laundering through the US from Narcotics Trade and Human Trafficking

 Registration, Location & Details…..

  • May 9-11 Doubletree Metropolitan, New York City, NY, USA
  • To Register and for More information – please click here:

The Six Biggest Mistakes Law Firms Make When They Upgrade Technology

Recent featured blogger at the National Law Review –  Ben M. Schorr of Roland Schorr & Tower – provides some great insights into common mistakes made by lawfirms when upgrading technology.   

As an information services professional I’ve spent the past two decades helping law firms with their technology. Over that time I’ve come to identify 6 major mistakes that they tend to make when they install or upgrade new technology.

#1. They Don’t Have A Goal.

It’s important before you even consider upgrading your technology to ask this question: What problem are we solving? Too many firms forget what business they’re in and run around installing fancy new systems that don’t address any specific needs. Sometimes they’re talked into it by vendors or consultants; sometimes it’s the brainchild of a computer-savvy associate or staff member. Far too often the result is a lot of money spent for new systems and no increase in productivity. If you don’t have a goal, you’ll never reach it. Back home in Indiana folks say “If you don’t know where you’re going, pull over and stop ’cause you’re there.” This is rarely truer than in technology where you are constantly bombarded with possible routes – in the form of cool toys – but unless you have a destination it makes no sense to even start the car.

How can I avoid making this mistake?

Start by identifying the problem. Write it down. Write down the proposed answers. Review the problem (and proposed solutions) with the users and with your information services people (or consultants). Once you have a clearly defined (and agreed upon) problem and solution, set a timetable. Make it realistic. This can be one of the hardest parts of this step because you don’t want to rush things and end up with a hastily implemented, and poorly constructed, solution.  But at the same time you can’t drag your feet too much or the technology will change right out from under you and you may find that your preferred solution has been discontinued in favor of a new and improved (read that “more sophisticated and expensive”) solution.

#2. They Don’t Talk To Their Users.

Too many firms get a great idea for a new technology, throw the switch and roll it out to their users without even much warning to the users that it’s going to happen. As a result there is confusion, resentment, fear and a LOSS of productivity.

How can I avoid making this mistake?

Don’t just impose change from the top down or you’ll end up with users who resent and are intimidated by the new technology. Ask them what they need. Ask how they will use it. Have them compose a “wish list”. Observe their procedures. You’ll find that the users will accept the new systems much faster and easier if they have some input into its selection/creation. If you’re in a large firm consider putting together a users group of various staff members. Try to include at least two members of each category (partners, associates, paralegals, support staff, accounting, etc.) and don’t just pick the ones who know a lot about technology. Oftentimes the most valuable input will come from that partner or secretary who is awkward with the computers. Have them meet each month and ask them to talk about how the technology is (or isn’t) working for them. Have them suggest improvements. It’s important that you listen to their input and let you know that you value their contributions.

#3. They Don’t Do Their Homework (Or Pay The Smartest Kid In Class To Do It For Them).

I often see firms that buy a solution they don’t understand. What is it? How does it work? Why do we need this again? Many times they see a flashy ad or get a presentation from a salesman and sign the papers in the excitement of the moment.   They don’t clearly understand the problem or how this solution solves it.

How can I avoid making this mistake?

Do your research. Visit the Internet sites for the products you’re interested in. Visit the sites of some of their competitors. Read the trade magazines and try to keep a handle on what’s happening in the industry. Talk to the users (see #2) and vendors. Attend demos and seminars. You’ll probably have to start learning about the technology at least 3-4 months before you plan to upgrade or the hill will be too steep to climb. If you can’t (or don’t want to) do the research yourself, find a consultant that you feel comfortable with. Get recommendations from other firms in your area of people they’ve enjoyed working with. Ideally the consultant should be familiar with the solutions you’re interested in, but shouldn’t sell those solutions themselves (that way he has no financial interest in selling you something you don’t need). Never hire a consultant that you don’t trust completely. Your consultant should be able to explain the basics of the relevant technology to you in language you can understand and, most importantly, should be able to clearly explain the expected benefits to you.

#4. They Don’t Document Everything.

At one firm I worked for, I discovered that they had an entire floor of the building wired for network cabling but didn’t have a map or any other documentation about the cabling. All they had was plugs in the walls and loose wires in the computer closet. As you can imagine troubleshooting cabling problems became quite an adventure. It’s far too common to ask what kind of hardware is in use and have firms not know for sure.   Documentation failures go well beyond cabling – system configurations, numbers of licenses, software in use…oftentimes goes unrecorded and when it’s time to troubleshoot or upgrade there is not enough information available to make good decisions or accurately foresee potential problems.

How can I avoid making this mistake?

The solution is easy, but can be tedious. Insist upon complete documentation from your vendors. Maps of cabling. Labels on everything. When you deploy new equipment keep a file that indicates serial numbers and specifications (RAM, hard drive, processor, operating system, etc.). Often you can get that information from the invoice you received for the machine. Keep a list of what software you have in use, how many licenses you own, and what versions you’re running.  Document the date that the system or application was deployed and from where it was purchased. This documentation can make troubleshooting MUCH easier down the road.

#5. They Skimp On Training.

This is a VERY common error. It never fails to surprise me when I see a firm that will spend $50,000 on computer equipment but won’t spend $500 to train the users.

How can I avoid making this mistake?

The most important part of your system is the user – upgrade them! Would you fly an airline that advertises that “All of our pilots have driver’s licenses and we have a copy of “Big Planes for Dummies” in every cockpit!” I doubt it…yet many of you are flying your firms with crucial personnel who haven’t had even 20 minutes worth of training in the products that you depend upon to get your work done. Even long after the installation training can be productive. You may think that your assistant knows the ins & outs of your word processor, but what if a 2-hour class could teach him or her new tricks or secrets to get things done faster? If these new tricks saved them just 12 minutes a day that would be an entire HOUR each week that they’d gain. In a month they’d have recouped all of the time invested in the class, twice over. This goes for executives as well, by the way…

Consider bringing in an outside trainer (or even an inside resource) to do a 1-hour lunchtime training in your conference room.  Try producing an internal e-newsletter with tips and tricks for the products you use (ProLaw, Word, Excel, WordPerfect or whatever).  Encourage your users to have interest and discussions about technology.

Consider creating a “Trick of the Week” award where the person in your firm who submits the best new trick or tip for using your systems wins some prize – maybe a prime parking space in your lot for the week, an extra-long lunch break on Friday or a box of chocolates.

#6. They Don’t Follow-Up.

This comes back to talking to your users. If you don’t look out the window how do you know if you reached your destination? Don’t find out 6 months later that the staff hates the new software or that the new printers don’t work properly.

How can I avoid making this mistake?

After the upgrade is in place you need to contact your users and ask them if they’re happy. Try to be there when they first use it to get their initial reaction. Check in with them again the following day. Check in again the next week…and again weekly or bi-weekly for the next month or two. Look back at your written “goal” from #1 and see if you’ve solved your problem. If you didn’t, figure out why and make adjustments. Users will often forgive you if you find and fix problems quickly they often won’t forgive you if you give them a “solution” that doesn’t work and then leave them to deal with it on their own. Many times you’ll find that the problems are really “pilot error” and can be corrected with more (or better) training. Sometimes the problems will be equipment or software problems and finding them in the first days or weeks can mean the difference between getting your vendor to replace the inadequate product with something more suitable and getting stuck with it for the long term.

Preventing these mistakes takes a little effort but it’s not expensive. What’s expensive is making these mistakes and ending up with a system that you paid considerable money for and that leaves your users frustrated and your productivity down.

Copyright ©2011 Ronald Schorr

Search and You’ll Be Found – Two Recent Lawsuits Allege that ISP's Violated Privacy by Sharing Referrer Data.

From the National Law Review’s Featured Guest Blogger(s) this week  Damon E. Dunn and Seth A. Stern of Funkhouser Vegosen Liebman & Dunn Ltd – some interesting insight on some recent lawsuits pending against Google and Facebook:  

Two recent lawsuits allege that internet service providers violated users’ privacy by sharing “referrer data” containing potentially identifying information.

A former technologist with the Federal Trade Commission filed a privacy complaint(link via WSJ) against Google with his ex-employer.   The complaint alleges that Google does not allow users to easily prevent transmission of information that allows website operators to determine the search terms used to access their sites.  It claims that this constitutes a deceptive business practice by Google because “if consumers knew that their search queries are being widely shared with third parties, they would be less likely to use Google.”

According to the complaint, Google search URLs contain the user’s search terms, and when users click on a search result the webmaster of that site can see the terms used to access it.   The complaint alleges that this conflicts with Google’sPrivacy Policy and cites to Google’s court admissions that search queries may reveal “personally identifying information” and that consumers trust Google to keep their information private.

Google has allegedly tested products that deleted search terms from the referrer data visible to webmasters but discontinued them after receiving complaints and posted reassurances that search terms would remain visible. Apparently Google now offers an SSL encrypted search engine at https://www.google.com which protects search terms from being intercepted, but the complaint notes that this is not the default setting and it is not linked from the regular Google site.  It also notes that Google provides search term protection to Gmail users searching their inboxes.

The merits of the complaint may hinge on whether search terms should be considered “personal information.”  The complaint notes that the New York Times was able to indentify supposedly anonymous AOL searchers in 2006 when AOL leaked a dataset of search queries.

The second suit alleges that, from February through May, Facebook transmitted referrer information to advertisers about users who clicked on their ads.  It alleges violations of the federal Electronic Communications Privacy Act and Stored Communications Act as well as California computer privacy and unfair competition laws and common law claims of breach of contract and unjust enrichment.

The suit claims that “Facebook has caused users’ browsers to send Referrer Header transmissions that report the user ID or username of the user who clicked an ad, as well as the page the user was viewing just prior to clicking the ad . . . For example, if one Facebook user viewed another user’s profile, the resulting Referrer Headers would report both the username or user ID of the person whose profile was viewed, and the username or user ID of the person viewing that profile.”

As in the Google complaint discussed above, the plaintiffs allege that Facebooks actions violate its privacy policy (which allegedly states “we never share your personal information with our advertisers”) and other representations to users as well as state and federal privacy laws.   The amended complaint may be stronger than the suit against Google because referring Facebook pages, unlike Google searches, are often highly personalized and contain the Facebook user’s name.  Facebook allegedly stopped embedding referrer data in May after media accounts exposed the practice.

Although some tech executives have been quick to sound the death knell for online privacy, consumers – even those who are products of the Internet generation – continue to disagree.   A recent poll shows that 85 percent of teens believe social media sites should obtain their permission before using their information for marketing purposes.

Excerpted from FVLD’s blog, http://www.postorperish.com, which regularly discusses these and other issues facing online publishers.

© Copyright 1999-2010, Funkhouser Vegosen Liebman & Dunn Ltd. All rights reserved.