News Letter 2005 12

YOUR HEALTH

The "bird flu," aka H5N1, has killed millions of birds and about 65 people, so far. H5N1 is a serious threat and its continual spread around the world increases the chance it will mutate, pass to humans and cause a pandemic.

For more information on H5N1, Google "bird flu" or read up on it in the October issue of National Geographic.

THE HIGH COST OF DRUGS

A significant percentage of drugs sold in the US contain active ingredients ("AI") made outside our country. An independent study of profits made by drug companies garnered interesting results. Two examples are:

Claritin, 10mg, costs $130.27 for 100 tablets. Cost of the general AI is $0.71; a markup of 30,306%.;

and

Xanax, 1mg, costs $136.79 for 100 tablets. Cost of the general AI is $0.024; a markup of 569,958%.

GENERIC PRICE GOUGING

Steve Wilson, investigative reporter, for Channel 7 News in Detroit, reported on generic drug price gouging. He found some generics are marked up as much as 3,000 percent.

Say you have a prescription for a brand name drug priced at $100 for 100 tablets. The druggist says if you get the generic equivalent, it will only be $80, letting you believe you "save" $20. What you are not being told is the 100 tablets may have only cost the pharmacy $10.

Mr. Wilson went on to report Costco pharmacy consistently charged little over their cost for generic drugs.

Not a Costco member? No problem. Drugs are federally regulated so you do not have to be a Costco member to use their pharmacy. Tell them at the door you are only going to the pharmacy and they will let you in. Thanks Dave S.

PRIVACY

Privacy is the great American assumption but it is NOT guaranteed in the US Constitution. Although not printed, lawyers find its "spirit" in several of the Amendments and the US Supreme Court insists the Constitution "brims" with the right to privacy. The issues we face today did not exist two centuries ago. Were the Constitution drafted today, its reference to privacy would be explicit.

Congress is debating whether privacy should warrant a different priority in this post-September 11 world. As the notion comes under revision, the problem of keeping confidences could disappear one computer click at a time, with everything from e-mail to medical records being vulnerable.

The Bible and Quran recognize privacy. The ancient Greek and Chinese civilizations are said to have protected privacy. Younger democracies routinely cover privacy as a fundamental right in their Constitutions. The UN's Universal Declaration of Human Rights defends the right to privacy of "family, home [and] correspondence." Australia has adopted a charter declaring, "Privacy is a key value which underpins human dignity."

The national expectation of privacy is routinely being revised by judges, contested by politicians and imperiled by technology.

I DON'T KNOW!

The three hardest words in the English language to say are not I love you but "I don't know." And, judging from the bluster that seems to be a requirement for government and business executives today, being a leader means never having to say, I don't know. However, the best leaders confess they do not have all the answers.

In today's society, there is a great amount of pressure to appear all-knowing. It may be scrutiny from living in our media-drenched age or a result of increasing job insecurity for people to think any display of doubt or weakness might cost them their job.

Either way, despite the many uncertainties in business, the habit of projecting certainty in an uncertain situation can be harmful, to everyone. Not admitting to yourself (and others) what you do not know eliminates the opportunity of asking for help, advice and even relevant information.

IDENTITY THEFT, AGAIN

In May, 2004, Bob Bitz received a call from the County Sheriff who was looking for him on behalf of Citibank; they suspected fraud on Bitz's credit card. But Bitz, owner of a small business in Canton, GA, did not have a Citicard. Several inquiries had been mailed to Bitz at the address listed on his credit card statement but no response had been received. Bitz said the address was not his, although it sounded familiar. Then he recognized it. It was his bookkeeper's address.

The bookkeeper and her husband (who plead guilty to three counts of identity fraud and one of theft-by-taking) were running a scam on Bitz. In early 2002, the bookkeeper filled out a change of address form for Bitz's Citibank card without his knowledge, diverting all future mail about the card to her home. She and her husband then racked up almost $70,000 in charges. She paid the bill with money from the company's line of credit, doctoring the records to cover her tracks.

In order to get his finances and business back on track, Bitz had to hire two attorneys and a fraud examiner, pay thousands in late fees to vendors, cancel his health insurance, mortgage his house and reexamine the way he manages his business.

According to the Association of Certified Fraud Examiners ("ACFE"), companies with less than 100 employees who experience employee fraud suffer a median loss of $98,000; more than midsized businesses and close to the $105,500 loss typical in companies with 10,000 or more employees.

It is imperative for business owners to take steps to safeguard their business; from thinking twice about where those blank checks are stored to making sure everyone takes a vacation. Then, if in spite of your best efforts you encounter fraud, handling the situation prudently may help in recovering your loss and assist in winning in court, with minimal disruption.

Embezzlement occurs, usually as a matter of opportunity. Here are some steps to take to keep theft opportunities down:

1. Set up computerized bookkeeping (ask your tax preparer about the best program for your company) which generates cash flow and financial reports. Make sure YOU, as owner, read them. Carefully.

2. Hire an outside accountant, or CPA, if at all possible. At the very least, train different employees to read the reports and watch for discrepancies.

3. Keep checks, account statements and other financial information locked up, with YOU being the only one having access to them.

4. Train at least three people on the accounting system. Make sure everyone, including the financial types, take their vacations, and when they do, have different employees cover for them.

5. Use mystery shoppers to make purchases that will let you test your cash flow system.

6. Opening mail and depositing checks is a mundane job but it allows employees free access to account information. Owners should countersign all checks and make all bank deposits. Look into the possibility of Internet banking to cut down on the number of eyes viewing account information, although this may not be feasible for your company. See privacy article above.

If you suspect an employee of stealing, have your accountant or CPA help determine what happened and how much may have been taken. Be sure to include amounts beyond moneys stolen, i.e., interest payments and-or late fees. Ask your insurance carrier about coverage for employee dishonesty.

Most importantly, do not "accuse" anyone before you know exactly what happened and can prove your position. If you do, the thief could disappear, cover up tracks and-or destroy evidence. And, if you are wrong, you could be sued for slander.

HAPPY BIRTHDAY

Celebrating a birthday this month?

_ Happy birthday to you! _

WORD OF THE MONTH

The word for December is holiday which The American Heritage Dictionary defines as:

1. A day free from work, esp. one on which custom or the law dictates a halt to ordinary business to commemorate or celebrate a particular event. 2. A holy day. 3. Chiefly Brit. A vacation.

The Happiest of Holidays to you and your family.

COMMENTS OR SUGGESTIONS?

Call Paula at (626) 357-1177 or e-mail her at paulasmith1000@hotmail.com. We’d love to hear from you.