Applied Underwriters (AU) followed through on their threats to file suit against me for my posts, claiming they were defamatory. I hired an attorney who filed a motion to dismiss the claims, asserting among other things, that my statements were opinion and were protected by the First Amendment. However, the Court found that the manner in which my statements were made “could” be considered statements of fact and not mere opinions. As a result, the Court ruled that the case could go forward and denied my motion. I am happy to report, however, that AU and I have resolved our differences and the case is being dismissed. In the meantime, I have worked and will continue to work with AU on trying to better understand the program. While I continue to believe that the terms were not clearly explained to me during the sales process and that there is an unknown factor regarding my deposits that AU decides, I do have a better understanding of my program and my hope is that it will continue to work as they claimed. I still do not know when I am going to get the return of my deposits, if at all, but I will wait and see as it depends on my claims during the life of the program. But, more importantly, they provided me with workers’ compensation insurance when no other alternative was available, which allowed me to stay in business. My final word on this issue is that whenever you are procuring insurance, regardless of whether it is from AU or another company, take the time to understand the program and get a broker who will work with you to answer any questions you may have.
Posts tagged ‘compensation’
Why Don't Progressives Use Their Power as Hedge Fund Customers to Challenge Hedge Fund Compensation?
Kevin Drum observes that the top 25 hedge fund managers earned $13 billion in total, including one hapless dude who made $250 million despite losing money and shutting down the fund.
I will say that I have always scratched my head over asset manager compensation. The tradition is that they get paid as a percentage of assets managed, sometimes with a percentage of the profits as well but never taking a percentage of the losses. Perhaps this made some sense with smaller pools of money, but today with huge pools of money, the same old percentages yield ludicrous compensation results. I certainly understand why the managers would defend this compensation scheme, but why do customers accept it?
This reminds me of real estate broker compensation. The tradition when I grew up is that the seller paid 6%, about half of which went to the seller's broker and half to the buyer's broker. For years that 6% was etched in stone and no one broke ranks -- the agents were pretty good at maintaining the cartel, and the government helped by putting the force of law behind broker licensing that helped keep the agent supply down. But as home prices kept increasing, people started noticing that while 6% of $100,000 may have made some sense as reasonable compensation, 6% of $2 million was absurd, especially since a $2 million home was not even close to 20x harder to sell. So people, initially savvy high net worth folks, and later everyone, began negotiating the 6%. I have negotiated this number on every home I have sold since the mid-1990s.
I am not really knowledgeable about the asset management business -- in some sense I have negotiated my commission by choosing to put all my money in low-fee Vanguard funds. How does the asset management business hold the line on fees, particularly when they are in a business where it is so easy to measure their relative performance, and presumably pay them based on this performance?
Which got me to thinking about the customers of hedge funds. Aren't many of these customers progressive or controlled by progressives? Hedge funds have been very successful marketing to university endowments, non-profit foundations, and public pension funds -- aren't these institutions often controlled by progressives, or at least left-liberals? Aren't a disproportionate share of the very high net worth Hollywood and billionaire types who invest in hedge funds also progressive or liberal? Heck, Hillary Clinton's son-in-law ran a hedge fund until recently. So why don't these folks get together and instead of worrying about whether their portfolios are invested in Israel or Exxon or some other progressive bette noir, why don't they agree to a set of principles as to how they are going to pay for their asset management services in the future, and stick to these? I say that progressives should get together, because they are politically passionate about this, but I can't think of any good reason why good libertarians or conservatives wouldn't happily join in to reduce their fees.
I understand that to the extent that there are black swan hedge funds that beat the market year in and year out, these folks will be hard to challenge as they can probably write their own terms. But for the other 99% of hedge funds, why not use the power progressives already have as customers before we start talking about various government hammers.
PS- I will put my two cents in. I think the new Mother Jones site design is awful.
If your business is like mine, a lot of folks to whom I owe money are insisting on the ability to automatically remove the money I owe them each month from our checking account (via an electronic process known as ACH, which is slower but much cheaper and easier to use than the old wire transfer method). At first, any loan I took out insisted that the lender be able to automatically withdraw my payments. Then my workers compensation company. Then certain vendor accounts. And of course my merchant processing companies are constantly shoving money in and out of my bank accounts.
In retrospect, I was far too sanguine about this situation. What finally caused me to abandon my sense of security was a libel lawsuit filed by one of my vendors over a bad review I wrote of their product [I won't mention the name here but I am sure anyone can figure it out with a simple search]. Anyway, I realized that this company, who was suing me for untold bazillions of dollars, actually had the right to freely jack whatever they wanted out of my checking account. What is worse, this same company is being sued by many companies for trying to take an arbitrarily high final payment out of their accounts at contract termination. Eeek! And this does not even include the possibility of outright fraud. I have ACH tools where if I have your bank's name and your account number, I could pull out money from your account without your ever knowing about it until you see it missing. I presume criminals could do the same thing.
Something had to be done, and it turned out that my bank, Bank of America, has something called ACH positive pay wherein nothing gets ACH'ed out of my accounts without my first approving the payments. I check a screen each morning and in 60 seconds can do the approvals for the day. They also have a very easy to use rules system where one can set up rules such that payments to certain vendors or for certain amounts don't need further daily approvals.
I presume most major banks have a similar product. It cost me some money but I feel way safer and encourage you to look into it if you are in the same situation.
I was doing a radio interview and was reminded of this article I wrote in response to the famous Obama "Life of Julia" piece extolling the virtues of government in our lives. Since I spend so much of my time in the last few years finding ways to comply with ever more onerous regulations (rather than actually improving my business or customer service) I thought I would offer a different view. When I argue that free market proponents need to talk about taxes less and regulation more, this is what I am thinking about.
Since it has been several years since this went up at Forbes, I want to reprint it here in full:
Last week, the Obama Administration released a campaign piece about the life of Julia, showing how Julia benefited from taxpayer largess and oversight by the state at many points in her life. But the campaign piece was incomplete, and missed the part where Julia attempted to start her own business. Long before she started a web business out of her home, she tried to start a retail business.
Julia always liked the outdoors — remember that taxpayers helped her retire from productive work so she could work in a community garden. Well, as she was growing up, Julia loved to camp outdoors. For years she camped at a lovely lakefront public campground until it was forced to close — unfortunately, the government agency that ran the campground had operating costs that were so much higher than the fees charged to visitors that they couldn’t afford to keep it open any longer.
But Julia had an idea. After forming a corporation (a surprisingly easy task with lots of private companies competing to help one complete the proper legal steps), Julia approached the public parks agency about the possibility of her leasing the campground and reopening it under private management. She was surprised, though, at the tremendous opposition she encountered in the agency. Despite the fact that she was willing to adhere to operating standards and restrictions set by the public agency, she initially encountered tremendous resistance. She had assumed a parks and recreation agency would welcome the opportunity to reopen a park to the public, be she had underestimated the near universal opposition to private enterprise she found among the agency’s employees.
Eventually, though, with a lot of hard work and some help from a local TV station that rallied park users to her cause, the public agency agreed to a one-year pilot of her idea.
So the hard part was behind her, right? Probably not. In fact, Julia expected entrepreneurship to be tough. She was worried about the challenges of hiring good employees, getting financing for new equipment, and marketing her new campground. As it turned out, though, she would have little time for any of these concerns.
Before she could even think about hiring employees, she had to get a federal tax ID number, or FEIN, for her company. This identification number allows her to collect and pay her employee’s Social Security and Medicare taxes, as well as withhold and submit the Federal income tax obligations of her employees. In addition to these reports, she also learned that she had to file a separate report each quarter on her employee’s earnings in order to file and pay Federal unemployment taxes.
But her state has its own income tax, so she had to register for a separate ID number to report and pay employee state tax withholding, and then had to fill out yet another registration for another ID number to file another regular report to pay state unemployment taxes. Her state also has a public rather than private workers compensation system, so she registered for another number so she could fill out another monthly report to pay state workers compensation premiums.
And of course, since Julia intends to make retail sales, she needed to register with the state (yet another number and report) to collect and pay sales tax — though her state calls it a “privilege” tax rather than a sales tax because, as the state’s web site explains, conducting commerce is a privilege that can only be exercised with the state’s permission. She is momentarily encouraged when she finds out her state sales tax does not apply to camping, only to eventually find out this is because the state has a completely separate system (yes, another registration number and monthly report) for collecting and paying lodging taxes. So sales in her campground store will be at one tax rate on one report while campsite rentals in the same park will pay a different tax rate on a different report. Which seems overly complicated until she finds out her county also has a separate sales and lodging tax that are added to the state’s, and must be reported separately under a different registration number to the County. Thank goodness she is not in a city, or she could easily have had to file and pay three separate sales taxes and three separate lodging taxes (city, county, state). If she ever decides to rent boats on the lake, she will have to get another state registration to pay a special state boat rental tax, the percentage of which varies based on whether a boat is motorized or human-powered.
Whew. Julia thought she had finally tracked down all her tax registrations, but she was wrong. Her corporation is an S-corporation, so she files and pays her corporate income taxes on her individual return. But it turns out her state also has a franchise tax on corporations she must pay separately, based on her total revenues. In addition, it turns out that each year she must produce a complete list of all her businesses personal property, from lawn mowers to computers to radios to chairs, and submit this list to the County so she can pay property taxes on all these items. Unfortunately, in her state the property tax bill does not end there. When the public agency was running the campground, the county was not allowed to charge another government agency property taxes on the assets. The agency still owns the property — it is just leasing it to Julia so she can operate it — but the county has a mechanism called the Leasehold Excise Tax to make Julia pay the property taxes the agency doesn’t have to pay.
So twelve registration numbers and 12 monthly/quarterly/yearly reports later, surely Julia has fulfilled all her obligations to the government. Unfortunately, no, because she has not even begun to address licensing issues. To begin, the County will require that she get an occupancy permit for her campground, which must be renewed annually. This seemed surprisingly easy, until someone from the County noticed she had removed an old rotting wooden deck from the back of her store that had been a safety issue and an eyesore. It turns out she was in violation of County law because she did not get a removal permit first. She was required to get a permit retroactively, which eventually required payments to seven different County agencies and at one point required, for a reason she never understood, the collection and testing of a soil sample.
Because she will be selling packaged foods in her store (e.g. chips and pop-tarts), she also has to get a health department license and inspection. She had originally intended to keep some fresh-brewed coffee for customers in the store, but it turned out that required a higher-level health license and eight hours training in food handling. She might have been willing to pursue it, but the inspector told her that to make coffee, she would need to install a three-basin stainless steel wash-up sink plus a separate mop sink in her store, and she decided that coffee would have to wait.
Once through the general health licensing process, she then needed to obtain licenses for individual products. She wanted to sell aspirin, so she had to get a state over-the counter drug sale license. She knew that customers would want cigarettes, so she had to obtain a tobacco sales license. One day as she was setting up, a state inspector noticed she had a carton of eggs in her cooler, and notified her she needed a state license to sell eggs (as Dave Barry would say, I am not making this up). And then there was the problem of beer.
She knew that selling beer would require an alcohol license. In addition to requiring a long, tedious application, getting such a license required that she be finger-printed at the local Sheriff’s office, that she measure the distance in feet to the nearest three stores that sold alcohol and the nearest school and church, and that she attend eight hours of special alcohol sales training. The whole application process took many months — at one point her application was kicked back to her because she included a computer CAD drawing of the store when the instructions require the drawing be made by hand (I repeat, I am not making this up). She finally thought she was home-free, when she found her state requires a public hearing as a final step to determine if the market really needs another liquor retailer. At that hearing, several large, powerful local liquor businesses testified that the market was already saturated and that they already had plenty of competition, thank you very much, and her application was denied.
By the time Julia called it quits, she still had multiple applications pending. She hadn’t yet figured out how to create the stormwater runnoff management plan needed for her stormwater permit. She hadn’t been able to satisfy the state air resources board in permitting her small above-ground fuel tank. And she was still going back and forth with the state department of water resources for her drinking water sampling and testing plan.
Julia gave up her dream of working outdoors, and spent the rest of her life closeted in a room staring at a computer screen. It wasn’t what she really wanted to do, but web design does not require a license (yet) and she could avoid the hassles involved with having employees. The public never got its park back, and the campground still sits closed, the facilities falling apart from neglect. But a few months after Julia gave up, a park agency employee wrote a scathing editorial in the local paper, citing Julia’s failure as a great example of how private enterprise has failed and the need for public agencies to do more.
Julia’s experience is a composite, but is based entirely on my personal, real experiences. Every tax, registration, report, inspection, and license mentioned is a real one my company has had to obtain at some point in our expansion to new states. The only difference is in the story of the liquor license, where after my local competitors initially blocked the license I had the wherewithal to fight and eventually get it issued.
Rising minimum wages are bad enough, but generally we can offset them with price increases (remember that, though, next time you get ticked off about your camping fees going up). As an aside, not every business is in a competitive position that they can do this.
But the new Obama Administration rules greatly scaling back on our ability to have our managers be exempt employees is far, far worse. Because its not just money, but it changes the entire relationship between me and my managers. Most of my managers don't want to be hourly employees (you should see the complaint emails I am getting since I announced that this is likely coming) and have pride they have moved beyond timeclock punching. Also, I think a lot understand they are not going to make more from this, and they may even make less. To the extent they are working overtime today (and they all are) they will not be allowed to work overtime in the future. So I will have to hire someone else to do those extra tasks, and that person's salary is likely to come in part from what the managers are making now.
These next few months I am having all of my salaried managers fill out time sheets just for analytical purposes. I need to know how bad this is going to be. If you run a business, you shouldn't be waiting for next year to do something, you need to be thinking and analyzing right now how you are going to handle these rules.
In McCutchen's view, the administration fails to understand that "it's still the same pot of money that's available to compensate the employee," whether a worker is classified as exempt or nonexempt. So if overtime pay is required, a likely result will be to strictly limit overtime hours worked, despite the adverse effect on productivity, rather than—as the administration expects—to increase the employee's annual compensation.
While many non-executive employees view themselves as professionals and react negatively when shifted to hourly compensation, "the DOL wants nearly everyone to be nonexempt, and to sign in and clock out as do unionized workers," McCutchen contended. "They don't believe that some employees prefer to be salaried, with guaranteed pay and the flexibility to adjust when they do their work."
Postscript: I guess I just don't understand the vision that is in the head of Progressives. How does it help their stated goal of empowering the average Joe to convert him from a valued, up-and-coming junior manager to a 40 hour a week timeclock puncher? How will people ever be able to migrate from lower end jobs to management positions if there are not junior manager positions in which they can demonstrate their energy and dedication? I suppose they must believe that junior managers will still be doing the same things and working the same hours, but just earning lots of extra overtime with these new rules. If that is really what they think, they are completely divorced from reality.
Six of the 10 highest-paid CEOs last year worked in the media industry, according to a study carried out by executive compensation data firm Equilar and The Associated Press.
The best-paid chief executive of a large American company was David Zaslav, head of Discovery Communications, the pay-TV channel operator that is home to "Shark Week." His total compensation more than quadrupled to $156.1 million in 2014 after he extended his contract.
Les Moonves, of CBS, held on to second place in the rankings, despite a drop in pay from a year earlier. His pay package totaled $54.4 million.
The remaining four CEOs, from entertainment giants Viacom, Walt Disney, Comcast and Time Warner, have ranked among the nation's highest-paid executives for at least four years, according to the Equilar/AP pay study.
More power to 'em, as long as their shareholders are happy. But I am tired of these self-same individuals attempting to bring regulatory pressure on the rest of us in the name of high CEO pay.
After my article last week identifying costly aspects of Applied Underwriters' workers compensation insurance policies that are unusual, hard to predict, and totally undisclosed in the market/sales process, I have gotten a lot of feedback.
The first, of course, was from the lawyers at Applied Underwriters who have threatened me with a libel suit unless I take down my comments. While my blog article wills stay up, Applied Underwriters have apparently managed to get Yelp to hide my reviews in the secret purgatory they maintain for reviews that displease corporate lawyers.
More recently, I have had calls from not one but two different attorneys who are representing Applied Underwriter customers. The one this morning was especially evocative -- he had years of experience as an attorney and litigating over contracts like this but thought he was crazy because he could not figure out the math on the Applied Underwriters statements until he read my post. I had had the exact same issue, almost in tears because I could not figure it out, until an industry insider explained to me that the numbers don't add up. After pages of step by step calculations, there is one step where they simply pull a number out of the air, essentially rendering irrelevant all the calculations that went before. I will respect their client confidentiality but say that the issues involved were very parallel to those I discussed in my article.
Feel free to contact me if you need help or are considering a policy with Applied Underwriters and I will lend you what knowledge I have.
About a week or so ago I wrote a long and detailed post (with frequent updates as I discovered new information) about my extreme dissatisfaction with my workers compensation insurance from Applied Underwriters, a Warren Buffet-owned insurance company. I also wrote a shorter, parallel review on Yelp** (where Applied Underwriters already has an abysmal rating). For reasons I will guess at in the next post, Yelp keeps marking my post as "not recommended" despite the fact that it is one of the few that is not just a rant of the sort "this company sux" but actually has real details. There is a tiny almost invisible link at the bottom to see other reviews not recommended.
Yesterday, I received a letter from Applied Underwriters (Letter here (pdf)) demanding that I take down the Yelp review and my blog post or else they will sue me for libel. Based on my understanding of libel law, the content of my posts (which are all legally protected opinion), and recent court cases, Applied Underwriters has essentially no chance of ever winning such a suit. But my guess is that this is not their intention. I presume they are hoping that the fear of legal action, and the expense of legal defense, will cause me to stop my perfectly valid public criticism of their product.
I am seeking legal advice from a well-known First Amendment attorney, so Applied Underwriters will get my final response after I have had advice of counsel. But here are a few thoughts:
You can read the attorney's letter in full if you are a fan of such things, but if you read sites like Popehat much, you can pretty much predict what you will see.
The gist of their complaint, from the only paragraph of mine quoted in the letter, seems to be the word "scam". By the text of their letter, they seem to believe that "scam" is libelous because their company is well-rated financially and that they provide reasonable claims service. I concede both these facts. However, I called it a "scam" because there is a big undisclosed cost to their product that was never mentioned in the sales process, and that could only be recognized by its omission in the contract I signed -- that there is nothing in the contract committing them to any time-frame under which to return deposits and excess premiums I have paid, which may well amount to hundreds of thousands of dollars. This fact about the contract is confirmed by their customer service staff, who have said further that the typical time-frame to return such over-collections and deposits is 3-7 years after the contract ends, or at least 6-10 years after the first of the deposits was made.
If I had gotten any descriptions of their service terms wrong, I would have been happy to correct them. Hell, given that apparently Applied Underwriters will hold over $200,000 of my money for as many as ten years before they maybe return it to me, I am hoping I somehow have misunderstood. Unfortunately, their staff is pretty adamant that I understand these terms perfectly, and you will see that the letter sent by the attorneys does not attempt to refute any of the specific issues that drive my negative review. And of course none of this was ever disclosed in the sales process. The company attorneys point to the fact that I read the agreement and signed that I understood, but in fact this issue is only in the agreement by its omission. In its 10 pages of arcane boilerplate, the agreement never includes any clause giving them any legal obligation to return your deposits and excess premiums in an defined timeframe. It is that omission that I missed. Would you have caught it? Is this a substantial enough issue that you would expect disclosure in the sales process?
So is this a "scam"? I believe that this issue is costly enough, and hard enough to detect, and far enough outside of expected business practices to be called such. You may have your own opinion, but ask yourself -- When you enter into, say, a lease and have to put down a security deposit, is it your reasonable expectation that the landlord has the right in your lease to keep your deposit for 3-7 years (or more) after you move out? Oh, and by the way, how might your evaluation of something as a "scam" be affected by the knowledge that the company is threatening to sue anyone who writes a negative review?
Anyway, I take responsibility for my own failure as a consumer here. But in a free society it is perfectly reasonable to communicate issues one has with a product or service to help others avoid similar mistakes. Which is what I have done.
** I have problems with Yelp as well. What is linked is not my original review. My original review linked to my blog post. Yelp took it down. I will tell that saga in a future post.
My absolute favorite example of corporations using social causes as cover for cost-cutting is in hotels. You have probably seen it -- the little cards in the bathroom that say that you can help save the world by reusing your towels. This is freaking brilliant marketing. It looks all environmental and stuff, but in fact they are just asking your permission to save money by not doing laundry.
However, we may have a new contender for my favorite example of this. Via Instapundit, Reddit CEO Ellen Pao is banning salary negotiations to help women, or something:
Men negotiate harder than women do and sometimes women get penalized when they do negotiate,’ she said. ‘So as part of our recruiting process we don’t negotiate with candidates. We come up with an offer that we think is fair. If you want more equity, we’ll let you swap a little bit of your cash salary for equity, but we aren’t going to reward people who are better negotiators with more compensation.’
Like the towels in hotels are not washed to save the world, this is marketed as fairness to women, but note in fact that women don't actually get anything. What the company gets is an excuse to make their salaries take-it-or-leave-it offers and helps the company draw the line against expensive negotiation that might increase their payroll costs.
Postscript: Yes, I understand the theory of negotiation and price discrimination, as used by auto dealers. One can make an argument that setting prices high (or wages low) and then allowing negotiation by the most wage or price sensitive is the best way to optimize profits, and that Pao's plan in the long-term may actually raise their total compensation costs for the same quality people. I don't think she is thinking that far ahead.
At first, the link I followed told me this story was from CBS. I found it astonishing that a major news network would challenge a previously agreed on Obama Administration narrative, and sure enough I found that this was not actually from the people at CBS who are paid to write the news (they are too busy reprinting White House talking points) and is actually from one of their financial bloggers.
Never-the-less, it is a great post that gets at why every serious academic study tends to debunk the 77% gender pay gap myth. All of it is good but the consistently most powerful point that I tend to use if I am only given time in an argument to make one point is this one:
Despite all of the above, unmarried women who've never had a child actually earn more than unmarried men, according to Nemko and data compiled from the Census Bureau.
Women business owners make less than half of what male business owners make, which, since they have no boss, means it's independent of discrimination. The reason for the disparity, according to a Rochester Institute of Technology study, is that money is the primary motivator for 76% of men versus only 29% of women. Women place a higher premium on shorter work weeks, proximity to home, fulfillment, autonomy, and safety, according to Nemko.
It's hard to argue with Nemko's position which, simply put, is this: When women make the same career choices as men, they earn the same amount as men.
One would think that this quote from Obama's own Department of Labor would be enough to kill this meme:
"This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers."
We just worked with an attorney to rewrite our California employee handbook. For your enjoyment, here are all the state-mandated leaves of absence we are required to provide employees (most unpaid, but some paid) and for which we must write detailed rules in our employee manual. We'd likely provide most of this stuff anyway if asked, but the administrative hassle of having this all be a point of law (backed with the threat of expensive litigation if we make even the smallest mistake) is expensive and irritating.
- Family/medical leaves (including more restrictive California Family Medical Leave Act)
- Pregnancy disability leave
- Organ donor and bone marrow donor leave
- Military leave of absence
- Military spouse’s leave of absence
- Civil air patrol leave
- Drug/alcohol rehabilitation accommodation
- Time off for adult literacy programs
- Time off for required attendance at school of suspended pupil
- Time off for attending activities at child’s school or licensed day care facility
- Time off for duty as election official
- Time off for jury and witness duties
- Time off for victim of domestic violence, sexual assault or stalking – obtaining relief for victim and children
- Time off for victim of domestic violence, sexual assault or stalking –additional time for victim’s participation
- Time off for victim of certain felonies
- Time off to attend court proceedings for certain crimes
- Time off for volunteer firefighter, reserve peace officer or emergency rescue personnel duties
- Time off for volunteer firefighter, reserve peace officer or emergency rescue personnel training
- Time off for voting
- Workers' compensation leave
PS- this is not necessarily a comprehensive list and it is published at the risk of having a California lawyer see it and say "aha! They have forgotten time off for the death of a beloved hamster. Let's sue him."
By the way, there is a reason for this choice (from an article on why unions are worried about the PPACA)
The second problem is that the 40 percent excise tax on especially expensive plans — the so-called Cadillac tax — is going to hit union plans especially hard. Unlike most people negotiating compensation, union negotiators make an explicit trade-off between wages and other benefits, and the benefit that they seem most attached to is generous health plans. Union plans are made more expensive still because union membership is heavily skewed toward older workers. They are thus very likely to get hit by the Cadillac tax, which takes effect in 2018.
The preference for health benefits over cash compensation makes some sense for tax reasons (as it shifts taxable income to nontaxable income). And at some level it is typical of union thinking, which is often driven by seniority and by benefits for older workers over younger workers. But there is another reason for this that is almost never stated -- the unions themselves run many of these health plans. And because it is priced as a monopoly, the unions often earn monopoly rents on these plans, and use management of large health plans to justify much higher compensation levels for union leaders. In Wisconsin, ending public union strangleholds on health plan management immediately saved the state and various local school districts millions of dollars when they were allowed to competitively bid these functions for the first time.
Why Do We Manage Water Via Command and Control? And Is It Any Surprise We Are Constantly Having Shortages?
In most commodities that we consume, market price signals serve to match supply and demand. When supplies are short, rising prices send producers looking for new supplies and consumers to considering conservation measures. All without any top-down intervention by the state. All without any coercion or tax money.
But for some reason water is managed differently. Water prices never rise and fall with shortages -- we have been told in Phoenix for years that Lake Powell levels are dropping due to our water use but our water prices never change. Further, water has become a political football, such that favored uses (farmers historically, but more recently environmental uses such as fish spawning) get deep subsidies. You should see the water-intensive crops that are grown in the desert around Phoenix, all thanks to subsidized water to a favored constituency. As a result, consumers use far more water than they might in any given year, and have no natural incentive to conserve when water becomes particularly dear, as it is in California.
So, when water is short, rather than relying on the market, politicians step in with command and control steps. This is from an email I just received from state senator Fran Pavley in CA:
Senator Pavley said the state should consider measures that automatically take effect when a drought is declared to facilitate a more coordinated statewide response.
“We need a cohesive plan around the state that recognizes the problem,” Pavley said at a committee hearing. “It’s a shared responsibility no matter where you live, whether you are an urban user or an agricultural user.”
Measures could include mandatory conservation, compensation for farmers to fallow land, restrictions on the use of potable water for hydraulic fracturing (“fracking”), coordinated publicity campaigns for conservation, increased groundwater management, and incentives for residents to conserve water. Senator Pavley noted that her hometown Las Virgenes Municipal Water District is offering rebates for customers who remove lawns, install rain barrels or take other actions to conserve water.
Pavley also called for the state to create more reliable, sustainable supplies through strategies such as capturing and re-using stormwater and dry weather runoff, increasing the use of recycled water and cleaning up polluted groundwater basins.
Note the command and control on both sides of the equation, using taxpayer resources for new supply projects and using government coercion to manage demand. Also, for bonus points, notice the Senator's use of the water shortage as an excuse to single out and punish private activity (fracking) she does not like.
All of this goes to show exactly why the government does not want a free market in water and would like to kill the free market in everything else: because it gives them so much power. Look at Ms. Pavley, and how much power she is grabbing for herself with the water shortage as an excuse. Yesterday she was likely a legislative nobody. Today she is proposing massive infrastrure spending and taking onto herself the power to pick winners and losers (farmers, I will pay you not to use water; frackers, you just have to shut down). All the winners will show their gratitude next election cycle. And all the losers will be encouraged to pay protection money so that next time around, they won't be the chosen victims.
Faulting the IRS for attempting to “unilaterally expand its authority,” the D.C. Circuit today affirmed a district court decision tossing out the agency’s tax-preparer licensing program. Under the program, all paid tax-return preparers, hitherto unregulated, were required to pass a certification exam, pay annual fees to the agency, and complete 15 hours of continuing education each year.
The program, of course, had been backed by the major national tax-return preparers, chiefly as a way of driving up compliance costs for smaller rivals and pushing home-based “kitchen table” preparers out of business. Dan Alban of the Institute for Justice, lead counsel to the tax preparers challenging the program,called the decision “a major victory for tax preparers—and taxpayers—nationwide.”
The licensing program was not only a classic example of corporate cronyism, but also of agency overreach. IRS relied on an 1884 statute empowering it to “regulate the practice of representatives or persons before [it].” Prior to 2011, IRS had never claimed that the statute gave it authority to regulate preparers. Indeed, in 2005, an IRS official testified that preparers fell outside of the law’s reach.
Perhaps a first indication that the Obama Administration strategy to pack the DC Circuit with Obama appointees may not necessarily protect his executive overreach.
PS - you gotta love the IJ.
PPS - The IRS justified its actions under "an obscure 1884 statute governing the representatives of Civil War soldiers seeking compensation for dead horses"
The other day, Kevin Drum wrote a post wondering why we had so few doctors per capital in the United States and observing, reasonably, that this might be one reason to explain why physician compensation rates were higher here than in other countries.
He and Matt Yglesisus argued that this smaller number of doctors and higher compensation rates were due to a physician-operated cartel. This is a proposition I and most libertarians would agree with. In fact I, and many others apparently, wrote to him saying yes there is a cartel, but ironically it owed its existence to government interventionism in the economy and health care. In a true free market, such a cartel would only have value so long as it added value to consumers.
Drum seems to have missed the point. In this post, he reacts to themany commenters who said that government power was at the heart of the cartel by saying no, it's not the government because doctors control the nuts and bolts decisions of the cartel. Look! Doctors are in all the key positions in the key organizations that control the cartel!
Well, no sh*t. Of course they are. Just as lawyers occupy all the key slots in the ABA. But neither the ABA nor these doctors cartels would have nearly the power that they have if it were not for government laws that give them that power (e.g. giving the ABA and AMA monopoly power over licensing and school credentialing). I had never heard of the RUC before, which apparently controls internship slots, but its ability to exercise this control seems pretty tied to the billions in government money of which it controls the distribution.
Let's get out of medicine for a second. I am sure Best Buy wishes it had some mechanism to control new entrants into its business. Theoretically (and it may have even done this) it could form the Association of Bricks and Mortar Electronics Retailers (ABMER). It could even stake a position that it did not think consumers should shop at upstarts who are not ABMER members. Take that Amazon! Of course, without any particular value proposition to do so, consumers are likely to ignore the ABMER and go buy at Amazon.com anyway.
Such cartel schemes are tried all the time, and generally fail (the one exception I wonder about is the Visa/Mastercard consortium, but that is for another post). Anyway, the only way the ABMER would really work is if some sort of government licensing law were passed that required anyone selling consumer electronics to be ABMER members. And my guess is that the ABMER might not invite Amazon.com to join. All of a sudden, Amazon is out of the electronics business. Or maybe it just gets forced to deliver all its product through Best Buy stores, for a fee of course.
Crazy stupid, huh? The government would never write licensing laws to protect a small group of incumbent retailers, right? Well, tell that to Elon Musk. Tesla has been trying for years to bring its cars to consumers in innovative ways, but have time and again run up against state auto dealership laws that effectively force all cars to be sold through the state dealer cartel. Or you can talk to California wine growers, who have tried for years to sell directly to consumers in other states but get forced into selling through the state liquor wholesaler cartels.
All these cartels are controlled and manned by the industry, but they are enforced -- they are given their teeth -- by the government.
Here are a few off-the-top-of-my-head examples of cartel actions in the medical field admittedly initiated and supported and administered by doctors, that are enforced by state and federal law:
- Certificate of need laws prevent hospitals from expanding or adding new equipment without government permission. The boards in this process are usually stacked with the most powerful local hospitals, who use the law to prevent competition and keep prices high. This is a great example where Drum could say that the decisions are essentially being made by hospitals. Yes they are, but they only have the power to do so because the government that grants them this licensing power over competitive capacity. Without this government backing, new hospitals would just laugh at them.
- Government licensing laws let the AMA effectively write the criteria for licencing doctors, which are kept really stringent to keep the supply low. Even if I wanted to only put in stitches all day to busted up kids, I would still have to go through 8 years of medical school and residency. Drum and Yglesias focus on the the number of medical schools and residencies. I do not know if these are an issue or not. But what clearly is an issue is the fact that one has to endure 8 expensive years or more just to be able to hand out birth control or stitch up a skinned knee.
- Government licensing laws help doctors fight a constant rearguard action against nurse practitioners and other less expensively trained folks who could easily do half or more of what doctors do today.
- The FDA and prescription drug law not only helps pharma companies keep profits up, but also increases business to doctors as people have to have a prescription for certain drugs they could easily buy on their own (e.g birth control pills, antibiotics).
- The government limits immigration and thus labor mobility, reducing the ability of doctors from other countries to move here.
I am sure there are more.
There is no denying that in the middle of every industry cartel are insiders who are maneuvering to increase the rents of the incumbent players. In fact, I am sure that every industry has participants who dream about getting off the competitive treadmill and creating a nice industry cartel, and would be the first to sign up. But none of these dreams are ever going to happen unless they are enabled by the coercive power of government.
Of course, the consistent answer is, well, we just have the wrong guys running things. If we had the right guys, it would work great. But this kind of co-option always happens. Look at taxis and liquor license holders and the entire banking sector. Five years ago I would bet that progressives thought they finally had that right guy in the administration. And look what has happened. Banking cronyism is as strong as ever. Obama's signature health legislation is full of crony giveaways. In 6 months the health insurers are going to be running the entire PPACA infrastructure to their own benefit.
update: This post is verging on the "is cronyism capitalism's fault" argument. Rather than go into that again, it is here.
Arkansas orthodontist Ben Burris was hauled in front of the state dental board in September after dentists in northeast Arkansas complained that he was offering dental cleanings to the general public in his Braces by Burris orthodontics clinics. The price for dental cleanings was $98 for an adult and $68 for a child, which Burris has said is about half of what dentists in northeast Arkansas typically charge.
Burris said most of the patients who need cleanings don’t have a dentist, but are checked by one of the three orthodontists in his clinic. Also, Burris said he offered the service because it was good for his business and good for the public. Some of his competitors “have gone absolutely ballistic” over the price and complained to the board, Burris said.
MP: Of course, the Arkansas dental cartel has no basis to complain directly about the low prices for dental cleaning at Braces by Burris clinics, so they are instead complaining that the clinic’s low-cost teeth cleaning services violate the states Dental Practice Act, which prohibits orthodontists and other specialists from practicing “outside their specialty.”
In New Mexico, Forced Government Anal Probes are Way Better than Having Even One Person Smoke A Joint
Or so I am led to believe by the fine folks in Deming, New Mexico, who forced a man to undergo two forced X-rays, two anal probes, three enemas, and a colonoscopy under anesthesia because they worried that he might be hiding a smidge of illegal narcotics in his nether regions. Oh, and they made him pay the hospital bills for these procedures as well, sort of like billing someone's estate for the electricity used to execute them in the electric chair.
Update: Orin Kerr has a legal anal-ysis of the case (sorry, couldn't resist). His conclusion seems to be that the victim may be sh*t out of luck (sorry again) in seeking compensation. From reading it, he may even be stuck with the medical bills. I have come to expect cops to display this kind of excessive behavior. What is particularly disappointing is to see a doctor so eagerly cooperate and even, apparently, take the lead in escalating the intrusiveness of the search. It is depressing that Kerr believes the doctor may well enjoy qualified immunity for his actions. Thousands of doctors every day are successfully sued for malpractice over honest mistakes and differences in judgement, but this guy is going to walk?
The New York Times has a long article on Harvard Business School's effort to change its culture around women. Given that both my wife and I attended, albeit 25 years ago, I have a few thoughts.
- I thought the article was remarkably fair given that it came from the NYT. Men who are skeptical of the program actually are allowed to voice intelligent objections, rather than just be painted as Neanderthals
- I would have abhorred the forced gender indoctrination program, as much for being boring as for being tangential. I am fortunate I grew up when I did, before such college group-think sessions were made a part of the process everywhere. I would presume most of these young folks are now used to such sessions from their undergrad days. I would not have a problem having an honest and nuanced discussion about these issues with smart people of different backgrounds, but I thought the young man they quoted in the article said it really well -- there is just no payoff to voicing a dissenting opinion in such sessions where it is clear there is a single right answer and huge social and even administrative penalties for saying the wrong thing.
- I went to HBS specifically because I loved the confrontational free-for-all of the classes. It was tailor-made to my personality and frankly I have never been as successful at anything before or since as I was at HBS. I say this only to make it clear that I have a bias in favor of the HBS teaching process. I do think there is an issue that this process does not fit well with certain groups. These folks who do not thrive in the process are not all women (foreign students can really struggle as well) but they are probably disproportionately women. So I was happy to see that rather than dumb down the process, they are working to help women be more successful and confident in it.
- It is interesting to see that the school still struggles to get good women professors. When I was there, the gap between the quality of men and women professors was staggering. The men were often older guys who had been successful in the business and finance world and now were teaching. The women were often young and just out of grad school. The couple of women professors I had my first year were weak, probably the two weakest professors I had. In one extreme case our female professor got so jumbled up in the numbers that the class demanded I go down and sort it out, which I finally did. I thought it was fun at the time, but now I realize how humiliating it was.
- To some extent, the school described in the article seems a different place than when I was there. They describe a school awash in alcohol and dominated by social concerns. This may be a false impression -- newspapers have a history of exaggerating college bacchanalia. At the time I was there, Harvard did not admit many students who did not have at least 2 years of work experience, such that the youngest students were 24 and many were in their 30's and 40's. A number were married and some even had children. To be there, they not only were paying a lot of money but they were quitting paying jobs. The school was full of professionals who were there for a purpose. I had heard that HBS had started to admit more students right out of college -- perhaps that is a mistake.
- The fear by the women running the school that women would show up on Halloween wearing "sexy pirate" costumes represents, in my mind, one of the more insidious aspects of this new feminist paternalism (maternalism?) aimed at fellow women. Feminism used to be about empowering women to make whatever choices they want for their lives. Now it is increasingly about requiring women to make only the feminist-approved choices.
- I actually wrote a novel where the protagonist was a confident successful female at HBS. So I guess I was years ahead of the curve.
Postscript: Below the fold is an excerpt from my novel. In it, the protagonist Susan describes how an HBS class works and shares my advice for being successful at HBS.
In this case, the USDA imposed on the [raisin farming] Hornes a “marketing order” demanding that they turn over 47% of their crop without compensation. The order—a much-criticized New Deal relic—forces raisin “handlers” to reserve a certain percentage of their crop “for the account” of the government-backed Raisin Administrative Committee, enabling the government to control the supply and price of raisins on the market. The RAC then either sells the raisins or simply gives them away to noncompetitive markets—such as federal agencies, charities, and foreign governments—with the proceeds going toward the RAC’s administration costs.
I have seen estimates that a Medieval serf had to pay between 30 and 70 percent of his crop to his master. The RAC seems to be right in line with these numbers.
The story the other day that AIG was considering suing the taxpayers because the taxpayers did not give them a nice enough bailout was so vomit-inducing that I did not even look much further into it.
A couple of readers whom I trust both wrote me to say that the issues here are a bit more complex than I made them out to be. The Wall Street Journal sounds a similar note today:
Every taxpayer and shareholder should be rooting for this case to go to trial. It addresses an important Constitutional question: When does the federal government have the authority to take over a private business? The question looms larger since the 2010 passage of the Dodd-Frank law, which gave the feds new powers to seize companies they believe pose risks to the financial system.
That vague concept of "systemic risk" was the justification for the AIG intervention in September 2008. In the midst of the financial crisis, the federal government seized the faltering insurance giant and poured taxpayer money into it. The government then used AIG as a vehicle to bail out other financial institutions.
But the government never received the approval of AIG's owners. The government first delayed a shareholder vote, then held one and lost it in 2009, and then ignored the results and allowed itself to vote as if the common shareholders had approved the deal.
In 2011 Mr. Greenberg's Starr International, a major AIG shareholder, filed a class-action suit in the U.S. Court of Federal Claims in Washington alleging a violation of its Constitutional rights. Specifically, Starr cites the Fifth Amendment, which holds that private property shall not "be taken for public use, without just compensation." The original rescue loans from the government required AIG to pay a 14.5% interest rate and were fully secured by AIG assets. So when the government also demanded control of 79.9% of AIG's equity, where was the compensation?
Greenberg is apparently arguing that he would have preferred chapter 11 and that the company and its original shareholders likely would have gotten a better deal. Perhaps. So I will tone down my outrage against Greenberg, I suppose. But nothing about this makes me any happier about bailouts and corporate cronyism that are endemic in this administration.
This is a highly instructive story about Wal-Mart dropping health coverage for part-time workers (hat tip to a reader -- I always forget to ask if they are OK having their name used). The writer is amazed at unintended consequences that were so hard to envision that complete non-experts like me predicted them days after the law's passage.
- The writer is amazed that Wal-Mart would support Obamacare and then try to evade its provisions. This is how the corporate state works. Wal-Mart was an enthusiastic supporter of Obamacare NOT because it believed the law made any sense, and not because it had any intention of complying with its spirit, but because it knew that its size, political clout, and infrastructure would allow it to duck the new costs of Obamacare more easily than its competition.
- We see unintended consequences run wild. Wal-Mart was guilted into providing some health care coverage of part time workers because of tear-jerker news stories about these folks having no other alternative. But under Obamacare, they do have an alternative (Uncle Sam) so the pressure on Wal-Mart to provide the care to avoid bad PR is removed.
- I am amazed that we seem to naturally assume that providing health care is an employer's obligation. This is just bizarre, and applies to none of our other needs. Employers pay us money, we spend it according to our preferences to fulfill our needs and caprices (a great phrase I stole from Agatha Christie via Hercule Poirot). “Walmart is effectively shifting the costs of paying for its employees onto the federal government with this new plan". I would have said that Wal-Mart is shifting the choice of how to spend their total compensation back on the employee.
- The cat is almost out of the bag on the story I have promised to be the biggest economic story of 2013: "Several employers in recent months, including Darden Restaurants, owner of Olive Garden and Red Lobster, and a New York-area Applebee’s franchise owner, said they are considering cutting employee hours to push more workers below the 30-hour threshold." These guys are just being coy in public if they are saying "considering." I know insiders in the restaurant industry and they have been working on definite plans to part-time their entire work force for well over a year. By mid-2013, the service worker who works more than 30 hours a week will be a dinosaur
- Some time in the past, we really screwed up the whole concept of health care "insurance." One person complains in the article: “The packages Walmart is providing for low-income people aren’t offering very much coverage except for catastrophes." Gee, I could have sworn this is exactly what insurance is supposed to be. Her statement is like saying "my home insurance isn't offering much coverage except in the case of major damage to my house."
- Every extra dollar Wal-Mart pays for its employee's health care costs is another dollar added to the shopping bill of the lower income people who shop there.
1. On the lighter side, a customer came into our establishment in California the other day with a horse. Claimed it was a "therapy animal" and therefore it would be a violation of the ADA to not allow the horse in. Not knowing the law but with some experience with California, my managers rightly let the animal in, then researched it later. It appears that we are safe denying entry to animals that are not licensed service animals, but this is an evolving part of the law, apparently. Since it costs us about $25,000 a pop to get even the craziest suits dismissed in California, we will continue to err on the side of caution.
2. Perhaps even crazier, we recently were forced to institute an HR policy in California that working through lunch is a firing offense. One warning, then you are gone. Why? California has a crazy law that allows employees to collect substantial ex post facto compensation if they claim they were denied a 10 minute break every four hours or a thirty minute unpaid lunch break after five. Suffice it to say we have spent years honestly trying to comply with this law. The 10-minute break portion is less of a compliance hurdle, but the lunch break portion has caused us no end of trouble. Theoretically, under the law, the employee has a choice - work through lunch paid, eating at the job post (e.g. in a gatehouse of a campground) or leave the job post for 30 minutes for an unpaid lunch break. As background, every one of our employees have always begged to have the paid lunch because they are from a poorer area and need the extra 30 minutes of pay.
Unfortunately, it does not matter what preferences the employee expressed on the job site. In the future, the employee can go to the labor department and claim he or she did not get their break, and even if they did not want it at the time, and never complained to the employer about not getting it, the employer always, always, always loses a he-said-she-said disagreement in a California Court or review board. Always. Sure, it takes someone utterly without honor to make this claim in Court, but there seems to be no shortage of those. So, we took a series of approaches to getting people on-paper, on-the-record as having asked to work through lunch. Unfortunately, one court case after another has demolished each safe harbor we thought we had.
A few weeks ago I was advised by a senior case-worker at the California Department of Labor that the only safe harbor left for employers is to FORCE employees to take an unpaid lunch. This means they clock in and back out, this means they have to leave the job site (because if a customer happens to ask them a question, then they are "working"), and this means we have to ruthlessly enforce it. Or we are liable for scads of penalties. So, we find ourselves at the bizarre crossroads of making working through lunch a firing offense, and employees who generally want to work an extra thirty minutes each day to earn more money are not allowed to do so. Yet another example of laws that are supposed to be "empowering" to employees actually ending up limiting their choices.
...for the first time that I can remember, this means that I have a personal stake in the election. It's not just that I find one side's policies more congenial in the abstract, but that one policy in particular could have a substantial impact on my life.
You see, I've never really intended to keep blogging until I'm 65. I might, of course. Blogging is a pretty nice job. But I'd really like to have a choice, and without Obamacare I probably won't. That's because I'm normal: I'm in my mid-50s, I have high blood pressure and high cholesterol, a family history of heart trouble, and a variety of other smallish ailments. Nothing serious, but serious enough that it's unlikely any insurance company would ever take me on. So if I decided to quit blogging when I turned 60, I'd be out of luck. I couldn't afford to be entirely without health insurance (the 4x multiplier that hospitals charge the uninsured would doom me all by itself), and no one would sell me an individual policy. I could try navigating the high-risk pool labyrinth, but that's a crapshoot. Maybe it would work, maybe it wouldn't.
But if Obamacare stays on the books, I have all the flexibility in the world. If I want to keep working, I keep working. If I don't, I head off to the exchange and buy a policy that suits me. No muss, no fuss.
So yes, this election matters, and it matters in a very personal way. It does to me, anyway. It's not just about gridlock as far as the eye can see.
I usually have a pretty thick skin for this type of stuff, but this got to me. I wrote:
Great. Those of us who are comfortable actually, you know, working to support ourselves look forward to subsidizing your future indolence.
Sorry, I am not usually that much of a snarky jerk, but really, that is what you are celebrating. You are not celebrating some medical or scientific breakthrough that allows you to stay healthy at a lower cost. You are celebrating a system to force other people to pay for your body's maintenance. All so you don't have to support yourself for over a quarter of your life.
If you were to say that, "wow the health dice really rolled against me and I need help," few would begrudge you the help. But this notion of an indolent retirement is radically new. It is a product of our century's and our country's great wealth. Retirement is a luxury good. I have no problem with anyone consuming this luxury good out of their savings, but consuming it out of mine, and then crowing about it to my face, is highly irritating.
If I were a Republican, or if I had one iota of trust in them, I might write that this is what the election is about. Since I don't have such trust, I will instead merely highlight Drum's thoughts as a good representation of modern entitled thinking. For God sakes this guy is not even trying to use my money to escape, say, a coal mine early. He wants my cash to escape blogging early, perhaps the cushiest job there is (as indicated by the fact that many of us do it for no compensation what-so-ever).
The government commandeers a company's driver and truck for a drug smuggling operation without the company's knowledge or permission (and without any compensation). The innocent and apparently overly helpful driver then dies in a hail of bullets that also riddle the truck as authorities screw up the bust. In the process, police are wounded when they end up shooting at each other. What a mess.
I will admit, I can get angry, especially when I believe someone has done me wrong. But over time, I have learned to distrust this anger. About twenty of twenty of the actions that I have most regretted in life or that have backfired on me have been undertaken during such periods of anger -- from yelling at innocent airline employees to writing scathing business letters that only make a situation worse. I have learned to impose on myself a sort of count-to-ten rule, where if I am really ticked off about something, I force myself to wait 24 hours before I respond. It works for me.
Attorney Charles Carreon needs to figure out a parallel strategy, or else he needs a business partner or family member who can perform an intervention for him. Because last week, he totally lost it.
As you might remember from our last episode, Carreon was representing a web site called Funnyjunk where people post content strip-mined from other sites. One of those sites, the Oatmeal, got mad about their cartoons ending up on this site without compensation, and called them out online. No lawsuit, nothing unnatural, just good old American criticism.
I don't know enough about copyright law to know if Funnyjunk was in the right or wrong. The Oatmeal could have tied it up anyway in copyright suits, but chose not to. So of course Funnyjunk responded in asymmetric fashi0n by hiring Carreon to threaten the Oatmeal with a $20,000 lawsuit. Apparently they were really sad and hurt by the Oatmeal's criticism, and argued that the Oatmeal abused their copyrighted name by using it online in the criticism (a hilarious charge given how the whole thing started). By the way, in case anyone is confused about this, though this approach is tried constantly, courts have routinely held that there is no such copyright that bars someone from criticism or comment using one's name.
At this point, this all constituted irritating but fairly normal (unfortunately) behavior of people and lawyers online who don't really understand the First Amendment.
On Friday, he apparently sued not only the Oatmeal (for criticizing him online, causing other people to hate him, and for violating his copyright in his own name) but also, get ready for this, the National Wildlife Federation and the American Cancer Society. Why? Because when the Oatmeal first got Carreon's demand letter, its proprietor said he would raise $20,000 for charity instead, and send Funnyjunk a picture of the money. To date, nearly $200,000 has been raised for the two charities by Oatmeal fans who wanted to show their support.
Apparently, according to Carreon's suit (I still can't believe he actually filed this), the money that was raised for these charities was tainted because it was raised in the name of making him look like a doofus. Which, by the way, is exactly right. I am not a huge fan of either charity (they use too much money in both cases for political activism rather than solving problems), but I gave $100 just to help hammer home the point that Charles Carreon is an idiot.
Perhaps this guy has no friends. But if he does, one of them needs to be grabbing his collar and shoving him up against the wall and explaining in one syllable words how suing two prominent charities is NOT a path to success in the war to reclaim his reputation. The guy basically kneecapped himself with his opening shot. He will soon learn that while it may be increasingly against the law on college campuses to hurt someone's feelings with your speech, it is not illegal in the rest of America. And he will also soon learn all about California's tough anti-SLAPP law, as he finds himself headed to Bank of America to take out a second mortgage on his home so he can pay the legal bills of those he has sued with the intent to suppress their speech.
Update: Mr. Carreon, welcome to the Streisand effect. Last Thursday, none of his first page Google results mentioned this incident. Today, there are five.
Update #2: Mr. Carreon claims his web site has been hacked. Maybe. But I will observe that for the web NOOB, "buying the cheapest Godaddy hosting account that is fine for my normal 12 visitors but crashes when I get 50,000 hits in an hour from Reddit" and "hacking" often look the same.
Update #3 and irony alert: If you want to see something odd, check out the web site he and his wife run. The site is full of very raw critiques that would easily land a desk full of lawsuits in the Carreon mailbox if the legal system routinely accepted the type of censorious lawsuits he himself is attempting to initiate. If he takes the linked site down, the screenshot is here. As an aside, I am constantly amazed at how liberals, including those who claim to be feminists, seem so obsessed with the sexuality of Conservative women and couch so much of their criticism in terms up to and including rape images (particularly oral sex).
It would be impossible to trace all the ways taxpayer money ends up in the coffers of solar manufacturers like First Solar. Most of First Solar's money has been made selling panels in Germany to solar plants that, by law, can rape electricity customers with prices 10-15x higher than the market price for electricity. First Solar also benefits more directly from direct subsidies, loan guarantees, "retraining" subsidies and even government Ex-Im Bank loans to sell panels to itself. While First Solar vehemently denies it is a subsidy whore, it is telling that when Germany began to cut its solar feed-in tariffs, First Solar's stock price fell from over $300 to around $20. Just watch day to day trading of First Solar stock, it does not move on news about its efficiency or productivity, it moves on rumors of changes in government subsidies.
Let's look at one subsidy. In 2010, the Obama administration gave First Solar a subsidy of $16.3 million, ostensibly to help open a new plant in Ohio. But it is interesting that this private company, which apparently could only raise the $16.3 million it needed by taking it by force from taxpayers, had plenty of money to pay its CEO. In the 13 months leading up to its $16.3 million taken from taxpayers, First Solar paid its new CEO $29.85 million!
Rob Gillette, the ousted CEO of First Solar Inc., earned more than $32 million in compensation from the struggling company for his two years of service, according to a regulatory filing Wednesday.
Gillette came to First Solar from Phoenix-based Honeywell Aerospace in October 2009 and was fired by the Tempe-based solar company's board of directors in October 2011....
Most of his compensation came in the three months of 2009 that he worked, when his total compensation, including salary, bonus, stock and options awards and other perks, reached $16.55 million. In 2010 his total compensation was $13.3 million, and last year he earned $2.46 million, which consisted of $763,000 in base salary and a $1.7 million severance.
Yep, they can't scrape up $16.3 million of their own money for a factory but they can find $30 million to give to an unproven CEO they eventually had to ride out on a rail.
By the way, I don't know Mr. Gillette, but I was once an executive at Honeywell Aerospace for several years. I can tell you that it's a great place to find an executive who is focused on process to manage large complex organizations in a relatively stable business where manufacturing, logistics, and schmoozing large buyers is important. It is a terrible, awful place to seek an executive for a fast growing business that needs to rapidly shift business strategies and where grinding through the process gets the wrong answer 12 months too late.