X-Message-Number: 1359
From: 
Subject: CRYONICS Reply to Keith Henson
Date: Thu, 26 Nov 92 13:49:31 PST

Since Keith mentioned my name quite often in his latest message, I am 
responding to his most interesting posting: 

">First, who did you hear this from?

Indirectly from Michael Riskin"

What do you mean by indirectly?  Do you mean he told you off the 
record?  Do you mean that you heard from someone else that Michael 
Riskin said this?  Or do you mean that you just figured that Michael 
Riskin was thinking this?  Please be more specific.  My conversations 
with Michael Riskin never had him saying anything like this.

And didn't you notice that in our final report we said that the 
Endowment Fund was not an Endowment Fund and that the Patient Care 
"Trust" Fund was not a Trust Fund?  Don't you think that these facts 
would be more relevant as to why the investment committees resigned?  

"If not embarrassment, might you have considered the other 
liabilities of being associated with Mr. Klein?" 

I'm a bit confused why Keith Henson would think that the investment 
committee members would be embarassed by someone who is doing his
best to do his job.  Instead, they would be embarassed by Keith 
Henson's earlier postings that implied that investment advisors were 
lower life forms.  If Keith doesn't remember writing this, I would be 
glad to look up the previous cryonet posting where he implied this.

"Would you willingly show a copy of his published (in the Venturist 
newsletter) "investment advice" to the SEC?"

I'm a bit confused why Keith Henson does not think my investment 
advice published in the Venturist is worthwhile.  I get a lot of 
complements for running that column.  As to the SEC, one of the 
reasons for the investment committees resigning *WAS* a SEC problem.  
The problem was that since the board did not punish Carlos and Hugh 
for their attempt to take Cryovita away from its shareholders, they 
were worried that similar problems could occur with the Endowment 
Fund and Patient Care Fund.  The SEC could then blame them for these 
problems.  

"I can explain this in more detail if you want it discussed in 
public." 

Oh yes, please explain what you mean.

"What you are calling a "cavalier attitude" is simply the fact that 
there are other consideration competing for our time besides 
squeezing the last dime out of the Alcor investments."

Didn't Keith read my numerous memos asking that the board not be 
involved in the day-to-day operation of Alcor's investments?  If this 
suggestion was followed then there would be no problem of time.  
Also, more time was spent fighting the committees' decisions than it 
would have taken to implement them in the first place.  

">Information was not forthcoming to the Committee

Partly because Eric Klein did not ask for it,"

This is an outright lie.  I started asking for information the moment 
the first investment committee was formed.  And I didn't stop asking 
until our resignations.

"and partly because the arrogant and obnoxious way he asks for 
anything." 

This is an outright lie.  I was courteous when I asked Joe Hovey or 
others for information.  

"If you thought information was missing or not forthcoming, why didn't 
you ask for it?"

The answer is that Courtney and others *DID* ask for more 
information.  Are you suggesting that Courtney has complained all 
this time about a lack of information while at the same time not 
bothering to ask Alcor for it?  I hope you have more faith in 
Courtney's cognitive abilities.  
 
"Courtney, I don't believe the delays involved averaged more than a 
month or two at the most.  Do you advise your clients to take any 
advice they get without thinking it over for a while?  If these long 
term investments are a good idea this month, are they not a good idea 
*next* month?"

The answer is that just because you are investing for the long term 
doesn't give you the ability to ignore short term events.  For 
example, Courtney recommended that Alcor buy the TCW fund at a 
discount.  Alcor did this.  Then, a short time later, the TCW fund 
was trading at a large premium.  Over the *LONG* term this premium 
will disappear.  Therefore the fund should be sold now before the 
premium disappears in a month or so.  Unfortunately, Alcor refused to 
listen to Courtney and didn't sell the TCW fund.  

"Re the obvious truth about compounding, you are right.  But if you had 
an investment which was growing at 10 percent vs one which was growing 
at 50 percent, where would you put *your* attention?"

Keith has provided no evidence that managing Alcor's money well would 
reduce its growth rate.  In fact, it is logical that if Alcor's money 
was managed well that this fact would attract even more new members 
to Alcor.  

"and the average cost per patient has gone way down due to economies 
of scale." 

I would like Keith to remember that he wrote this statement which I 
agree with.  The cost of maintaining our patients has dropped 
significantly.

"a few percentage points difference in the investment yield gets 
swamped out if you assume continued growth" 

Keith has yet to provide evidence that achieving a reasonable rate of 
return on Alcor's investments would slow down growth.  He has also 
continued to call the rate of return that Alcor was actually 
achieving on its investments as just "a few percentage points 
difference".  Actually, Alcor has been achieving 1/3 to 1/2 the rate 
of return it should have been receiving.

"One lawsuit from a disgruntled 
>relative or one RICO lawsuit from the government could cause ALL of 
>Alcor's assets to be seized thus throwing the existence of Alcor and 
>its patients into question. 

Utter bs."

Here Keith claims that one lawsuit couldn't destroy Alcor.  Considering
that all our money is in one place without any protection via trusts
this is a fairly incredible statement for Keith to make.

">To date, this major chink in Alcor's armor continues to exist. 

Courtney, I don't think this even rates in the top dozen concerns of 
Alcor.  And, no, I won't list these concerns here."

Here Keith claims that the fact that one lawsuit could destroy Alcor 
isn't even one of the top dozen concerns of Alcor.  Amazing.

"I have *complete* confidence in Carlos's personal integrity and 
dedication to Alcor.  And when these might possibly come into conflict, 
I trust Carlos to make the correct decision.  I can't think of any 
particular examples where I know that Carlos lied,"

Here Keith claims that Carlos only lies when it would protect Alcor.  
Therefore Carlos would never lie to cover up the fact that he hasn't 
accomplished something that would protect Alcor.  Right, Keith?  I 
would suggest that Keith reread Paul and Saul's book and reconsider 
his opinion on this matter.

"(It would have been utter foolishness to have let them lock the 
doors and shutdown Alcor's ability to suspend our members with 400k 
available.)" 

What Courtney was saying was that it was foolish to allow Alcor to be 
in a situation where it needs to borrow from its Endowment Fund.  It 
was sad that only a couple months after the Endowment Fund was formed 
that we had to borrow from it.  Hasn't Keith ever heard of fund 
raising?  We should have fund raised money in the months leading to 
the $30K crisis.

"The plan adopted (it was at least the third business plan Carlos 
wrote)"

I was unaware that Carlos was so productive in writing business 
plans.  Could you please post the three business plans that he has 
written so far.  Thank you.

"there has only been a tiny contribution to the fund besides the 
1k that Eric Klein put into it while perhaps as much as 100 times that 
much money was given for other Alcor projects."

Could this be because money was borrowed from the Endowment Fund 
within months of its formation?  This would have a negative impact on 
people considering donations to it.

"The change was an over 60% increase 
>and ALL employees now have some portion of their salary paid by the 
>PCF! I think that this is a significant enough policy issue to be 
>brought to the Board's attention. 

It is justified."

First Keith correctly says that Patient Care costs have dropped due 
to economies of scale.  Now he says that a 60% increase in Patient 
Care expenses is justified.  Need I say more?  

"If it is paying a little more now, it is in good shape compared to 
the operating fund and can afford it." 

Ah, what Keith is saying is that if the Patient Care Fund has some 
money there is no problem in taking it whether or not the expense is 
really the Patient Care Fund's.  This explains how he can both say 
that expenses are dropping while a 60% increase is justified.

"Come on, Courtney, do the math!  Income from the PCTF is not critical 
to keeping the doors open."

Keith admits that all 7 Alcor employees are receiving income from the 
PCTF and then says that the PCTF is not critical to keeping Alcor's 
doors open.  Go figure.

"By the way, there is a *reason* we call it, and treat it, as a trust 
fund, so please refer to it as the PCTF."

Keith, the Patient Care Fund is *NOT* a trust fund.  We don't even 
put the name "Trust" on its checks!!!

"Get me a legal opinion that the trust fund is seriously vulnerable 
to reasonably likely kinds of actions like you have in mind," 

Here Keith is saying that Alcor is *NOT* vulnerable to lawsuits and 
challenges Courtney to prove otherwise.  Interesting opinion of 
Keith's.

"Now, understand I am not attacking the *idea* of people being 
dedicated to cryonics which might lie behind this purple prose"

It is obvious that Paul meant that the employees at Alcor should at 
least be working 40 hours a week.  Paul seems worried that some Alcor 
employees are coming in late and leaving early.  Perhaps if Alcor 
released some time charts of when employees come into work and when 
they leave, this would reassure Paul that Alcor is managing its 
employees correctly.  Please post such time charts to cryonet as soon 
as possible.  Thank you.  

"Please post comments and tell Courtney and me how you react."

I hope you appreciate all the comments that I have now written.

">You admit to violating member confidentiality. 

[deleted]

Courtney, I discussed this in detail in a letter to the board.  I 
don't want to go into it here."

Keith, are you now ashamed that you violated member confidentiality?  
If not, why won't you discuss your actions on cryonet?

In conclusion, I believe that a board member who believes that the 
fact that one lawsuit could destroy Alcor isn't one of our "top dozen 
concerns" is a valuable board member who should never be let go.

Eric Klien
 

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