Fraud Carries a Heavy Price Tag

It doesn’t take much these days to incite worry in the business world. Phrases like “recession” and “tax increases” have enough of an impact right now to leave everyone biting their fingernails.

But there is one word that pops up (far more often than you’d like to think), that can cause as much damage as the global economy or the bills that Congress passes.

That one little word causing all the stress: Fraud. 

Basically, it’s the crime of cheating people. And it can be costly. About 5% of a company’s annual revenue is lost to occupational fraud and the median loss by all companies due to fraud is $160,000, according to the Association of Certified Fraud Examiners (ACFE) in its 2010 Report to the Nations on Occupational Fraud & Abuse.

And, while those figures are high, the manufacturing and mining industries see an even bigger increase in their median fraud losses. In manufacturing, that number is $300,000. But mining takes the cake with fraud losses costing around $1 million.

The report, which includes findings from the 2008 and 2009 calendar years, shows that for manufacturers, corruption was the leading fraud scheme and represented nearly 49% of the cases.

Additional findings reveal that 10.7% of the total fraud cases came in manufacturing industries, ranking it second overall. The total number of fraud cases reported by manufacturers is 193, also the second highest.

Switch to mining, and the number of fraud cases reported is 12, which is the lowest total. Those numbers, specifically in the mining industry, show that a large number of cases are unreported and money continues to go right out the door.

It’s not all doom and gloom, though. Thanks to agencies like the ACFE, there are plenty of tips and information available for companies to curtail fraud in the workplace. Some of the first guidelines for battling fraud include setting an ethical tone at the top, establishing a proper code of ethics and carefully screening job applicants.

While the potential for fraud exists wherever there is money to be had, instituting some new policies and being proactive in the approach to company fraud can end up costing less in the end, and benefitting the employer, employees and customers.

Third Party Candidates Shaking Up Elections

If you’re a moderate or just someone who’s not too enthused about either of the two main political parties, you may find this interesting. According to an article on Stateline, third party candidates are making serious impacts on races around the country. Granted, some of these candidates are former senators and office holders so they’re hardly outsiders, but it is rather noteworthy. (Oh, and the full article also discusses Jesse Ventura, so that alone is worth a few minutes of your time):

In this volatile election year, third-party and independent candidates are making serious bids for governor in a diverse array of states. Most of them won’t get many votes, but a fair number stand to influence the results and it’s possible that at least one may make it into office.

In Rhode Island alone, a handful of independents are running. The most prominent one is former U.S. Senator Lincoln Chafee, who served in Congress as a moderate Republican until his defeat in 2006. Polling has showed Chafee either leading the race for governor or modestly trailing Democratic nominee Frank Caprio.

In Massachusetts, state Treasurer Tim Cahill broke with his Democratic roots to run as an independent against incumbent Democratic Governor Deval Patrick. Recent polls show that he could get as much as 10 percent of the vote, which is greater than Patrick’s current margin over Republican nominee Charles Baker.

In Minnesota, Tom Horner is running under the banner of the Independence Party, the successor to the party once led by Jesse Ventura. Horner, a moderate with a Republican pedigree, is hoping to draw Democrats who see their party’s nominee, former U.S. Senator Mark Dayton, as too liberal, and Republicans who see GOP candidate Tom Emmer as too conservative. Horner has been polling at about 14 percent, which is much more than Dayton’s four-point lead over Emmer.

And in Colorado, former Republican U.S. Representative Tom Tancredo, who has been an outspoken opponent of illegal immigration, may end up outpolling the official Republican nominee, Dan Maes, a Tea Party activist who inherited the nomination after the leading GOP candidate stumbled in a plagiarism scandal. Current polls show Tancredo taking 18 percent of the vote, about the same percentage by which Democrat John Hickenlooper, the mayor of Denver, is leading over Maes.

Given the number of these credible outsider challenges, it seems appropriate to look back at recent third-party governors to see how they fared once they won office, given that they lacked a major-party infrastructure and fellow partisans in the legislature.

Health Care Reform Still a Hot Topic

If you’re still struggling to determine exactly how recent federal health care reforms will impact your business, you should probably join the Indiana Chamber for the Oct. 14 Health Care Reform Seminar, presented by Ice Miller.

The Patient Protection and Affordable Care Act (PPACA) – also known as “health care reform” – sets forth a number of coverage reforms that apply to group health plans, beginning January 1, 2011, for calendar year plans. "Grandfathered" group health plans are exempt from many – but not all – of these coverage mandates. The regulatory agencies have now issued several significant pieces of guidance relating to these early coverage mandates, including what changes to a group health plan will result in loss of grandfathered status. Employers, therefore, have available to them most of the information they need to make plan design decisions for the upcoming plan year and to ensure timely compliance with the PPACA mandates.

Topics to be addressed include:

  • What plans are subject to PPACA coverage mandates
  • The significance of being "grandfathered"
  • What should employers be doing now to comply
  • Tips on handling open enrollment and employee communications
  • Penalties individuals and employers face in the future
  • Impact on health care providers

See conference details and register here.

Movie Displays Education Heartbreak

Sure, I could insert some clever references here to kryptonite or various villians faced by one of America’s favorite comic book, TV and movie characters. But Waiting for Superman is too serious and too important to become a laugh line.

The David Guggenheim film has the education community (and hopefully soon many others) abuzz. It is, in the words of a National Review Online column, a "stabbing review of teachers’ unions and a plea for more charter schools."

Yon can check out the movie trailer and learn more. But below is a condensed review that does a good job of letting you know why you should be paying attention.

Bianca, Daisy, Emily, Anthony, and Francisco come from diverse locales — Harlem, L.A., Silicon Valley, D.C., and the Bronx — and are black, Hispanic, and white, but they share the same basic problem: Each is consigned by geography to an inadequate public school. Each wants a choice. 

The stories are heartbreaking. But the real message of the movie is revealed in the scenes of the adults who produce this heartbreak. Superman’s most memorable episode is the cartoon illustration of the “lemon dance,” in which school principals waltz their “lemons” (teachers who just can’t teach but can’t be fired) from school to school. The musical number would be hilarious if it weren’t so devastating. So, too, for the shots of the infamous “rubber rooms,” where middle-aged teachers sit in school kids’ chairs, playing cards or laying their heads on their desks to sleep, collecting full pay and pensions.

Guggenheim chooses one champion and one villainess. Michelle Rhee, the chancellor of D.C. schools, is energetic and assertive. She bluntly admits that D.C. students “are getting a crappy education right now,” she fires a couple hundred incompetent educators, institutes some incentive pay, and starts to turn D.C.’s schools around. Randi Weingarten, president of the American Federation of Teachers (AFT), and Rhee’s foil, is on the defensive. “It’s in vogue to bash teachers and unions rather than celebrate the work they do to help kids,” she said, responding to Superman. “That being said, I’m a big girl.”

Weingarten, obviously, can take the criticism, but she hasn’t rebutted it. Perhaps it augurs victory that the only thing she can find to fault is her opponents’ tone of voice. For now, though, Weingarten still has the power and the money. Weingarten’s AFT funneled over $1 million to defeat D.C. mayor Adrian Fenty (who appointed and supported Rhee) in the recent Democratic primary. The winner, Vincent Gray, used his victory speech to announce his desire for “a strong, empowered chancellor who works with parents and teachers.”Translation: Rhee is out. This is part of a pattern. Guggenheim, whose political sympathies are normally liberal, admits that the Democratic party is, on education policy, a “wholly owned subsidiary of the teachers unions.” The AFT and NEA — combined, the biggest campaign contributors in the U.S. — send more than 90 percent of their donations to Democrats.

New York City education chancellor Joel Klein was emotional as he explained the difficulties school reformers face. The important division, he said, shouldn’t be between Republicans and Democrats, between public schools and private, or between any one ideology or another — it’s about kids versus adults. “Right now, our kids aren’t getting educated because it’s all about the adults. We’ve put adults’ comfort before kids’ education. It’s not going to change until it becomes about the kids. The education monopoly wants to keep its monopoly.  The way things are now works just fine for the unions, many of the politicians, and others — that’s why it keeps going. So if we don’t rock this boat, we’re going to under-serve kids, mostly poor kids and kids of color.”

Waiting for Superman, with all the noise and buzz it’s generating, with the acclaim it’s received from diverse political circles, might be just the thing to start the boat rocking.

Election Preview

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Jeff Brantley, VP of political affairs for the Indiana Chamber, offers his thoughts on the upcoming statewide election. Brantley believes Hoosiers’ concerns for their families’ financial well-being could create turmoil for legislators this election cycle.

For a more detailed look at the current political climate in Indiana, see Tom Schuman’s article, "State of the Statehouse," in the current edition of BizVoice.

Let’s Talk Politics

Looking for a quick yet comprehensive guide to Indiana and federal elections?

Let’s Talk Politics 2010 is your complete resource. Produced by the Indiana Chamber for more than 35 years, this non-partisan guide covers all facets of Indiana’s electoral process and informs Hoosiers about their candidates at both the state and federal level. This booklet is ideal for:

  • Teachers, professors and other educators
  • Libraries
  • Business leaders
  • Political groups and campaign committees
  • First-time voters
  • Neighborhood and civic groups
  • Nonprofit organizations
  • Any citizen interested in the future of our state and our nation!

Copies are very affordable, and bulk discounts apply. See more information and order here. This book is sponsored by Indiana State University and Hoosiers for Higher Education.

10 Keys to Entrepreneurial Success

Jay Goltz of The New York Times offers 10 reasons for entrepreneurial success. If you’re thinking of starting a business, or just want to separate your small business from the competition, these thoughts might help you:

  1. Look for opportunities to do something better than just about everyone else.
  2. Accept risk as a necessary evil. It makes for much less competition.
  3. Act responsibly to customers, employees and vendors.
  4. Goals aren’t enough. You need a plan. You need to execute the plan.
  5. You need to fix the plan as you go. Learn from your mistakes. Most people don’t.
  6. Do not reinvent the wheel. Learn from others — join a business group.
  7. Make sure the math works. I know plenty of people who work hard and follow their passion but the math doesn’t work. If the math doesn’t work, neither does the business.
  8. Make sure that every employee understands and works toward the mission.
  9. There are going to difficult times and you need to be resilient; whining is a waste of time.
  10. There will be sacrifices. Work to find a balance so that you don’t become a financially successful loser. It’s not about the income, it’s about the outcome.

Leading the Way for the GOP is ???

Agree or disagree with his policies, it’s clear that the primary occupant of 1600 Pennsylvania Avenue is the leader of the Democrat party. But what about the Republicans? There is no face of the GOP — at least in the eyes of the American people.

Sounds like a problem for the GOPers. Or is it? Maybe a new torchbearer will emerge. Here’s the current status, as reflected in a couple of different surveys.

Sixty percent of respondents either didn’t know or declined to answer who they thought was a leader of the Republican Party. Further, 15 percent offered "nobody" as a response.

A separate survey suggests this might be a problem for the men who lead each chamber’s GOP caucus, House Minority Leader Boehner and Senate Minority Leader McConnell, at least if they want to continue to lead.

Public Policy Polling, a Democratic-leaning outfit, released a survey of GOP primary voters in which roughly one-third of respondents said both men should be replaced if Republicans gain control in November.

In the first poll, Boehner clocked in at 4 percent — within the poll’s error margin — as the leader of the party, behind former Alaska Gov. Sarah Palin and Sen. John McCain, R-Ariz., both of whom got 5 percent.

McConnell was a few lengths back, at 1 percent, behind former House Speaker Newt Gingrich, R-Ga., who got 2 percent, and tied with radio host Rush Limbaugh, Republican National Committee Chairman Michael Steele, TV host Glenn Beck and former Massachusetts Gov. Mitt Romney.

The numbers underscore the disconnect between the grassroots and the party hierarchy in an election year where the bottom-up momentum is coming from a movement almost as disillusioned by their own party as their Democratic opponents.

Republicans contend that having no leader associated with their party is not unusual when a party does not control the White House. But the question of who leads the Republican Party will take on a new urgency if they gain control of either chamber next year and have to shift motives from opposing President Obama’s agenda to moving one of their own. 

Chamber Visits Delegation in D.C.

Approximately 50 members of the Indiana Chamber visited with Indiana’s congressional delegation during the Chamber’s annual D.C. Fly-in event September 14-15. The group, accompanied by Chamber President Kevin Brinegar and other staff, arrived in a city where partisan tensions were ever present and more than a few congressmen were absent, locked in tight re-election fights back in the Hoosier state.

The Chamber delegation visited with both U.S. Sens. Dick Lugar and Evan Bayh, engaging with the latter in an informal Q&A session in the U.S. Capitol’s Visitors Center. Senator Bayh pronounced that it was likely the last time he would be meeting with us as a U.S. senator and further stated that predictions of an active agenda for a post-election “lame duck” session of Congress were overblown. Senator Bayh told the group that there was very little momentum for a broad agenda beyond a fiscal continuing resolution to keep the federal government functioning and perhaps some action on extending the ’01 and ’03 or so-called Bush tax cuts.

Senator Lugar addressed the group during dinner on September 14, joined by Reps. Pete Visclosky, Dan Burton, Steve Buyer (who is retiring) and Mike Pence. The group echoed Sen. Bayh’s assessment about the congressional agenda through year’s end, and tax legislation, the federal budget and the upcoming election were foremost on their minds.

The Chamber participants pressed the delegation on a variety of issues, including pending appropriations bills, reauthorization of the federal surface transportation act and “card check” legislation. Special emphasis was given to extending the tax cuts, as expiration of this tax relief at year’s end would negatively affect the frail national economy and Hoosier small businesses.

On January 1, 2011, Americans will face the biggest tax hike in history. If Congress fails to act, marginal tax rates will increase for every taxpayer, the capital gains rate climbs 33%, and dividend rates jump by as much as 164%. American small businesses, our economic jobs engine, will face marginal tax rates as high as 39.6%. Compounded with the loss of certain itemized deductions and personal exemptions, these small businesses face rates as high as 41.6%. And this increase hits successful small businesses, our job creators, particularly hard: Approximately half of the business income reported on tax returns in 2011 will be subjected to the top two marginal rates.

The Indiana Chamber’s message to the delegation was that outcome is unacceptable and Congress must act before year’s end, but no one in D.C. seems to know when, or if, that debate might occur. In a time of economic uncertainty, raising taxes on businesses and investors would hinder Americans from building individual savings and further investing in the economy.

Extending existing tax rates would, in one bold stroke, boost investor, business and consumer confidence by taking the uncertainty of tax policy off the table. It would leave hard earned income in the hands of the individuals and businesses that earned it and allow them to spur investment, boost consumption, promote economic growth and create jobs.

Now is not the time to increase taxes on all taxpayers, but rather to work together to keep the economy on the road to recovery.

French Lick/West Baden Resort an Indiana Marvel

Earlier this week, the French Lick Resort served as host for the Association of State Chamber Professionals (ASCP) annual meeting. I had the privilege of being asked to attend the conference and speak on social media, so, while I had been to the casino before, this was my first opportunity to stay at the hotel as a guest and truly explore it.

As a fan of history — especially Indiana history — I believe both the French Lick and West Baden facilities serve as living monuments and tributes to the very best of Hoosier history and lore. In fact, I invite you to learn more about both French Lick and West Baden Springs via the resort’s web site and learn some pretty remarkable facts. For example, how many people know this site played such a significant role in FDR launching his candidacy for President in 1931?

What’s more, it should be noted that ASCP generally targets some of America’s most scenic destinations, with the past two meetings landing at Bar Harbor, Maine and Greenbrier, West Virginia. So I pretty overtly asked most of the colleagues I interacted with what they thought of French Lick. I received nary a negative remark, with "amazing" being the most consistent adjective used.

If you live in Indiana or the region and have yet to experience this, take a day or two and indulge in one of the state’s most ornate, yet endearing gems — not to mention an amazing golf destination and concert venue.