X-Message-Number: 29194 From: Date: Mon, 26 Feb 2007 16:26:44 EST Subject: Re: 29190 Mr. Platt has replied to my earlier comments about cryonics financial matters. There are a couple of points that will benefit from further clarification. Please see below my comments preceded by &&&&. Michael Riskin Message #29190 Date: Mon, 26 Feb 2007 03:24:38 -0500 (EST) From: Charles Platt <> Subject: Response to Michael Riskin I'm glad that Michael RIskin has spelled out some financial details which are known among a small number of people but are not widely discussed. I certainly was not qualified to examine this material, although I did make it clear that Alcor patients are better funded than the patients at CI. Michael writes: "Alcor keeps all of its pre-funded membership moneys in a separate liability (as a debt due to the member) account . . . these funds are segregated from operating funds, to be only used for future services due a member or for a member refund if so requested. CI takes pre-funding moneys into current assets to use for overall operating expenses in the hope that future revenues will cover such pre-funding needs." If I understand this (which I may not), it means that someone who prefunds cryopreservation with cash or a similar method, instead of insurance, will find that CI uses the money in much the same way that a bank uses my bank deposit. The bank doesn't just keep the money in a safe for me, in case I need it later. It loans it to someone else and makes interest. This works fine so long as there is not a run on the bank, with too many people asking for their money back. In cryonics, according to Michael, if all the people who have prepaid CI decided they wanted their money back, the organization would have to go and round it up somewhere. At Alcor, the money is still on hand and has not been reused for any other purpose. &&&& A bank takes Mr Platts and other depositor's funds and invests it in income producing assets such as loans and mortgages. Nevertheless, the original amount of the depositors funds continue to be kept on the banks records as a debt due the depositor. This debt is backed up not necessarily by cash but other assets the bank may purchase. The failure to record and keep the debt to the depositor on the books makes the banks financiall statements look artificially much better than it really is. That is the case with the financial statements at CI. The net worth is exaggerated by the amounts due pre funded members and patients and not recorded as debts to these folks. Several comments come to mind, if I have this right. 1. How many prefunded members does CI actually have? I doubt there are many. Even if there are, CI's minimums are so much lower, I doubt that a large sum could be involved. &&&& The main concern is not the pre funded members but the patients in long term bio stasis. CI has around 80 of these and this represents a lot of money necessary to care for both current and longer term expenses for these people. It is my ( and many other professionals) opinion that the correct thing to do is segregate and keep safe these funds for people who cannot control their money due to their present circumstances. 2. The presence of cash-on-hand belonging to an Alcor member does of course create its own problem, since someone may be tempted to steal it. This happened; as I recall, at Alcor: a $100,000 prepayment disappeared. Paradoxically, if the money had been used for other purposes, it would have been safer! &&& It is not cash on hand as such. It is funds in banks and other financial institutions just like CI has. Anyone is subject to embezzlement of any asset. 3. By keeping a lot of cash and not doing anything with it, one could argue that Alcor is not making the most productive use of the money. &&&& Alcor is in fact doing something with the money. It is invested in either interest bearing Certificates of Deposit, equities, or assets such as the building. This generates funds and asset growth that is sufficient to cover current patient needs and provide asset growth at the same time. 4. On the other hand, by conforming with GAAP one could argue that Alcor should only proceed in this fashion. But are there other comparable examples of conservatively run institutions which have reached the opposite conclusion? &&&& Not really. If they do so they are intentionally or through ignorance overstating the company's value and misleading the interested members or investors. Michael also points out that Alcor has a patient trust to protect patient funding. I should have mentioned this, because it is a significant asset. I do wonder, though, how well the Alcor trustees would resist attempts at raiding the money which they have been charged to protect if Alcor was in a real financial crisis. As I recall, there are only three trustees, all of them Alcor members, and one of them is an Alcor director. That leaves two supposedly independent from Alcor politically, but just one of them would be the swing vote. In the past, I have seen attempts to reclassify some expenses so that they become trust expenses, lightening the load for Alcor. Thus, we know the temptation exists. &&& There are five trustees, one a board member and the others suspension members with close relatives (spouses and children) in long term biostasis. That tends to reduce temptation to raid trust funds. Of course this just means that the CI system makes me feel even more insecure. I appreciate this opportunity to get into the details. I must add that currently, I am not a member of either organization. &&& I have told Mr Platt personally that I hope he reverses that decision quickly. Rate This Message: http://www.cryonet.org/cgi-bin/rate.cgi?msg=29190 <BR><BR><BR>**************************************<BR> AOL now offers free email to everyone. Find out more about what's free from AOL at http://www.aol.com. Content-Type: text/html; charset="US-ASCII" [ AUTOMATICALLY SKIPPING HTML ENCODING! ] Rate This Message: http://www.cryonet.org/cgi-bin/rate.cgi?msg=29194