X-Message-Number: 1323
Date: 22 Oct 92 22:08:06 EDT
From: STEPHEN BRIDGE <>
Subject: Answer to Eric Klien
>From Steve Bridge, Alcor Director, but speaking for himself.
October 22, 1992
Regarding Message #1307 - Re: Alcor Business Minutes (Eric Klien)
I want to reply to Eric's message in a careful way. Eric has been
launching missiles against the Alcor Board and against President Carlos
Mondragon for some time now. Properly Eric should have posted #1307 on
0014, the subsection of files for Alcor politics. Unfortunately, since
he posted it on the open net, my reply needs to be there also.
While Eric has great concern for the welfare of Alcor, he expresses
that concern in inappropriate ways. In several messages, Eric has accused
the Board or Carlos of taking actions which are "criminal," "fraudulent,"
"libelous," "lying and innuendo", and supporting someone "who is doing his
best to ruin Alcor's finances." The relevant quotes are below. Since they
are pulled away from their context, I have included the message numbers for
each one so readers may look at the full message. A line of asterisks *** is
used between messages. A line of pluses +++ separates quotes taken from the
same message.
Several of us on the Board have been in disagreement with how the
investments were being handled, and arguments exist among the membership
as well. To point out two extremes of disagreement between several
business and investment leaders who are members of Alcor: one person is
angry at Carlos because Alcor doesn't invest enough in stocks but
another is very upset that we invest in the stock market at all. One
person wants Alcor to place most of its assets in foreign banks; while
another points out that our only experience in foreign investment in the
past resulted in a large loss of money through fraud. The Directors
have heard many contradictory opinions from people they respect; but
unfortunately the level of financial knowledge on the Board has been
extremely low. I must point out that we cannot expect all nine
Directors to be financial experts. There are many kinds of decisions
that a Board of Directors has to make and many of those do not involve
investments. It is true, however, that the individual Directors should
have worked harder to gain at least some rudimentary knowledge of
investment terms and strategies. Several of us are doing so now.
I would characterize this problem as "neglectful" rather than
"criminal" and "fraudulent." Eric has claimed to exercise great
patience in his dealings with Carlos and the Board as part of the
Endowment Fund Advisory Committee and the Patient Care Trust Fund
Advisory Committee. Eric's definition of "patience" is apparently at
odds with my own. I agree that some of the facts that Eric has
presented are cause for concern, and the Board is actively trying to
address those problems. But others of Eric's "facts" are from his own
misinterpretation or are generalizations from insufficient information.
A better approach for Eric, rather than posting accusations of illegal
behavior on an open network, would have been to remain more patient and
continue to educate the Board and to speak directly with individual
directors as the other members of the Advisory Committees have done.
Especially harmful are Eric's frequent implications that Carlos is
somehow purposefully "doing his best to ruin Alcor's finances." While
Carlos and I disagree on many specifics, I see no reason to believe that
somehow Carlos would intend to damage Alcor. Rhetoric like this has no
place in the discussion of Alcor's financial decisions and especially
does not belong on the net. No good is done that way.
The effect of Eric's approach and his argumentative public style
have been to lead even Directors who might have agreed with many of his
opinions to distrust them. I was hoping that a recent apology
(unspecific and mild though it was) posted by the Committee might begin
some steps toward cooling off these postings; but Eric's recent message
(#1307) leaves some doubt.
Several steps ARE being taken by the Board of Directors to gain
information, to increase the value and return of our investments, and to
increase member confidence in Alcor's ability to handle its finances.
Many of these steps were certanly stimulated by the criticism of Eric,
Courtney Smith, and Bob Krueger, and by the comments of others on this
network.
1. At the most recent meeting, most of the committee's
recommendations were finally passed, with several reasonable exceptions
proposed by Carlos. Personally, I still have reservations about a
couple of remaining investments; but they were ones that Carlos was
authorized to make and could turn out well. The changes which WERE made
should increase Alcor's investment income significantly. I agree that
many of these changes should have been made earlier, but I fail to see
any kind of plot there. As we keep learning, we will handle these
situations better and more rapidly. For me the WORST mistake was that
the September meeting became so disorganized that NO decision, pro or
con, was made on the investment proposals at all.
2. Michael Riskin did voluntarily do an audit of the books of the
Endowment Fund. While he found some sloppiness in the handling of a
couple of items and a failure of will or of organization on the part of
the Board in its inability to establish clear policy on use of the
Endowment Fund; he found no evidence that money was missing or
unaccounted for. THERE IS NO MISSING $100,000. He also said that the
books were in pretty good shape and easy to examine.
3. A committee organized by Director Allen Lopp is currently
raising money to hire an independent auditor to do a full audit of our
1992 accounts. This will require an estimated $20,000 to accomplish;
but it should show us if there are any other problems.
4. A fairly detailed budget for 1993 has been established. There
are obvious imperfections in this budget and modifications are likely;
although working with this one should lead to a more accurate and
complete budget for 1994. We may revise the 1993 one several times
during the next year to reflect new knowledge.
5. A business plan is in the works, although I don't know how
detailed the first incarnation will turn out to be.
I would suggest that Eric could better serve Alcor (and, in the
long run, himself) by keeping his next set of criticisms both polite and
private. Therefore, I would like to formally request Eric to:
1. print a retraction of his use of the words "criminal," "fraudulent,"
"libelous," "lying and innuendo", and "doing his best to ruin Alcor's
finances," and avoid using such "hot" words in the future. I learned in
the '60's that one cannot change someone's mind by calling him names or
attacking him. It makes the accuser feel better, but it does not
accomplish real change.
(I would ask my fellow Directors and other members to use similar
discretion in their language, especially in public.)
2. keep his suggestions to the Board of Directors comparatively private
to the Directors for the next six months. I do not mean he should not
show or discuss these suggestions with other people, but that he should
refrain from wholesale or random distribution of those suggestions,
including keeping them off of this or other open networks. Such open
statements are harmful of Alcor's reputation without resulting in the
cooperation necessary to solve the problems.
3. make his suggestions pertain to specific actions and refrain from
attempting to guess the motivations and purposes of individual Directors
or of the Board as a whole. This includes remaining patient with the
Directors and seeking to educate them rather than using the verbal
equivalent of body slams.
I hope that individuals who are close to Eric will make similar
(but private) appeals to him or will second these.
****************************************************************
Below are the "offending" quotes from Eric,including one quote from
Carlos for context. Following that, I have a couple of more specific
comments on Eric's most recent posting.
****************************************************************
.rm74
Message: #1142 - Re: Money Update
From:
Message-Subject: re: Money Update
Date: Fri, 14 Aug 92 01:37:56 PDT
++++++++++++++++++++++++++++++++++++++++++++++++
Carlos's insinuation that I thought that a blue chip utility stock
would appreciate in price 43.09% per year is an example of the quite
fraudulent behavior that I can not tolerate in the leader of Alcor.
+++++++++++++++++++++++++++++++++++++++++++++++++
I should point out that our Committees will generate returns that are
easily double or triple what Alcor was earning in the past. We are
not talking about increasing Alcor's rate of return by 1% or so. The
returns that Alcor was earning were criminally low. These low
returns are the main reason that Alcor employees get paid so
pitifully little today.
********************************************
From:
Message-Subject: Please post to 0014. (This is still part of 0014.29.
It is in response to several letters on the regular Cryonet, however.)
Date: Thu, 20 Aug 92 13:06:30 PDT
From: Carlos Mondragon
> Subject: Reply to Eric Klien, re finances
++++++++++++++++++++++++++++++++++++++++++++++
>Carlos's insinuation that I thought that a blue chip utility stock
>would appreciate in price 43.09% per year is an example of the quite
>fraudulent behavior that I can not tolerate in the leader of Alcor.
You are the fraud, Eric. And now everyone can see that, because your
original memo makes exactly that assumption. You calculated the
gains, multiplied by twelve, and then tried to tell the board that a
total of $82,609.20 of "potential gains" was lost by not instantly
following your advise. You even did the arithmetic for us.
+++++++++++++++++++++++++++++++++++++++++++++++++
***********************************************************************
Message: #0014.31 - Aug. 27 increment for Alcor Board Politics
From:
Message-Subject: re: Money Update
Date: Wed, 26 Aug 92 20:56:47 PDT
(continued on next page)
It is with considerable reluctance that I will reply to our current
President's tirades against the Patient Care Trust Fund Advisory
Committee and Endowment Trust Fund Advisory Committee. The
reluctance is caused because I don't think Carlos is interested in
arguing using facts and figures. Instead he likes to argue using
lies, misrepresentations, and libelous statements. It is very
tiresome responding to someone who is unconcerned about the
difference between truth and lies, hard work and fraud, and the
difference between good and evil.
+++++++++++++++++++++++++++++++++++++++
While it is highly unlikely that these people or I will sue
Carlos for such libel, such outrageous behavior on Carlos's part
could cause the Committees to get tired of this endless barrage of
negative comments and consider quitting this obviously thankless job.
++++++++++++++++++++++++++++++++++++++
Here Carlos shows how he has refused to listen to complaints about
him that have built up over the years. Again and again, people have
complained that instead of presenting issues to the board, he polls
them one at a time, until he can say that the majority went along
with him. Often, individual board members don't even know that an
issue was discussed. This polling method is highly criminal as it
prevents one board member who knows something important about a
matter from discussing it with other board members before they vote
on an issue. This polling method basically ruins the whole idea of
having a board in the first place.
+++++++++++++++++++++++++++++++++++++++++++
Carlos, admits to polling the Investment Committees not ONCE, but
TWICE! We have only submitted two suggestions to the board so far,
to give you an example of how often he commits this horrible crime.
++++++++++++++++++++++++++++++++++++++++++++++
Fifth, he admits to polling the Investment
Committees twice in an attempt to breakup the Committees. Sixth, he
has engaged in a war of lying and innuendo to stop all progress of
the Investment Committees, even going so far as to try to push off
the board the wife of one of the Investment Committee members.
+++++++++++++++++++++++++++++++++++++++++++++++++
Why the board would support someone who is doing his best to ruin
Alcor's finances is beyond me. If Alcor isn't financially stable
then it has no chance of a long term existence. Alcor should try to
find a president who would do his best to HELP Investment Committees
do their job, not one who is doing his best to HURT them.
+++++++++++++++++++++++++++++++++++++++++++++
****************************************************************
END OF QUOTES SECTION.
Now I have some answers to Eric's last posting:
(Lines beginning with > are quotes from Eric.)
----------------------------------------------------------------------
>Message: #1307 - Re: Alcor Business Minutes
>From:
>Message-Subject: CRYONICS Re: Alcor Business Minutes
>Date: Wed, 14 Oct 92 18:38:28 PDT
[introduction omitted]
>Point One: If Alcor was really running a surplus as was promised the
>infusion of cash would give us a total of 500,000 in our Endowment Fund,
>not 400,000. This 100,000 that we missed out on will prove to be sorely
>missed in the near future as Alcor wishes that it had the interest on
>100,000 to work with.
Apparently we still did not make it clear that the word "surplus"
was a misstatement for "ahead of projections." At the time that statement
was made (by Carlos, I believe), the Board knew that projected income was
short of projected expenses; but at least the income side of the ledger
was running higher than had been predicted. Two major reasons for the
high expenses were the sudden demand by the State of California that we
IMMEDIATELY pay extremely high Workman's Compensation fees (something in
the neighborhood of $40,000, I think) and the requirement for us to pay a
large legal bill before the crucial case against the California Department
of Health could be completed.
At that time, if I understand correctly, the Board decided to take
our guaranteed share of a large disputed bank account (some money left in
the Dick Jones estate -- the dispute is whether we own 50% of the assets
or 100%) and label that as part of the Endowment Fund. This account was
originally projected to be used as Operating Expenses and was not (as far
as I know) previously designated to the Endowment Fund. Once that was
done, an equal amount of more easily liquidated funds that had been part
of the Endowment Fund were switched to the Operating Fund to pay the
bills.
This action may not have been well understood or well communicated by
everyone at the time (I was not on the Board at the time and I certainly
didn't understand it), but it was a legitimate use of funds.
>Point Two: Since Alcor is only back to where it started after getting
>the 100,000, this means that Alcor is running a substantial deficit.
>This deficit is large enough to be a major concern to Alcor. I predict
>that thanks to the smaller Endowment Fund than expected, Alcor will have
>a hard time maintaining a balanced budget in the near future.
Yes, there was a substantial deficit (earnings vs. expenses) this
past year. There is no getting around that, and we were darn lucky that
account was available for us to use when the emergency crunch hit.
Because of the extremely high expenses on the Boston transport and a lower
level of donations than last year, we are still sailing behind; but we are
far from shipwrecked. Membership completions are on the rise again (Derek
Ryan appears to be earning his keep) and I am hoping that Ralph Whelan's
new duties as (among other things) Fund Raising Coordinator will allow us
to increase income from donations. I think we can complete a makeable
budget for 1993; but we will still be short of any real cushion to protect
us from major emergency expenses, legal disasters, or losses from unusual
suspensions. We have to be VERY careful.
>Point Three: There is no question that monies were taken from the
>Endowment Fund before the Dick Jones money was decided by the board to
>be part of the Endowment Fund. By violating Alcor's word that only the
>Endowment's fund interest would be spent, Alcor has misled its members.
>Particularly the ones who donated money to that fund. Like me.
>Point Four: By not treating the Endowment Fund as an Endowment Fund, and
>spending the principal as well as interest, Alcor has strongly
>discouraged members from donating to that fund.
As far as I can tell, any money removed from the Endowment Fund on an
emergency basis was BORROWED and then repaid with appropriate interest as
rapidly as possible. Principal has not been lost. I agree that ideally
this is not the way to handle an Endowment Fund, and as that Fund grows
and as our ability increases to predict expenses, I hope that we can live
totally within our budget. I also understand that paying ourself interest
is more of a bookkeeping trick than a financial correction. We can only
make money from outside investments, not from ourselves.
The primary barrier to keeping the use of the Endowment Fund pure is
a severe cash flow problem that may be a natural problem of cryonics. I
am told that most of the membership dues come in at the beginning of the
year, with smaller influxes at quarterly intervals. A large percentage of
the donation income arrives toward the end of the year, as people want to
decrease their tax bill. (HINT: It's time NOW, friends!) Emergencies
during the middle of the year will cause problems for some time to come.
Better cash flow management in the future should help this (assisted by
increased computer capability) and allow us to project times of the year
when Ralph has to work especially hard at fund-raising.
Several Board Members (as well as Michael Riskin) have expressed a
concern that we explain our use of the Endowment Fund more clearly to the
members (and to ourselves!), and that we clarify the rules for its use.
This will be a major topic of discussion over the next few weeks (one of
MANY major topics which a Board has to worry about).
>These four points are very important. Michael Riskin's findings mainly
>showed that the controls over the Endowment Fund were poor, including a
>check being written out to cash. While the controls are important, the
>overall picture is even more important.
>In conclusion, I accused Alcor of doing everything wrong to its
<Endowment Fund but embezzling it. I believe that my accusations have
>proven to be correct. I hope the current board does all it can to
>correct these problems.
> Eric Klien
I do not believe Eric has been proven to be correct. There has been
no raid on the Endowment Fund. Some of Eric's concerns are legitimate, as
I have said, and the Board will be working to lessen these problems and to
eventually solve them. I cannot guarantee that we will run Alcor's
finances to the exact specifications of Eric or anyone else; but we will
be very careful to be as clear and consistent as possible on what we
decide. I hope Eric will be willing to cooperate in the ways I have
suggested above.
Finally, I do commend Eric for, as he says, "putting his money where
his mouth is" in donating $1000 toward the full audit. I hope other
concerned members will contribute also.
I would suggest that further commentary on Alcor funding be sent to
Board Members privately or, at the very least, sent to the 0014 section of
CryoNet.
Steve Bridge
[ We somehow stopped using the CRYONICS.POLITICS (0014.*) thread
awhile ago, but this would be a good time to start using it
again for any of these Alcor Board Politics - related messages.
Also, I encourage *long* messages to be only announced or
summarized in the main mailing list digest rather than being
directly mailblasted to everyone. Then anyone who wants to see
the entire message can retrieve it via CRYOMSG email to me. - KQB ]
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