X-Message-Number: 1354
From: 
Subject: CRYONICS Reply to Courtney Smith
Date: Tue, 24 Nov 92 21:55:15 PST

In msg 1344 Courtney Smith (not Brenda Peters) writes:

>Let me initially address a point you make that I can categorically 
deny. 

>>According to what I hear, one member of the committee was 
>>embarrassing the others to the point that they quit. 

>First, who did you hear this from?

Indirectly from Michael Riskin after he looked into the allegations of 
fraud and such in Eric Klein's postings and paper distributions in the 
name of the former committee.  He may not have been referring to you.

>Second, this is totally wrong. Each of us quit for different but 
>similar reasons. Being embarrassed by another member was the farthest 
>thing from our minds. 

Well, Courtney, If you were not embarrassed by Eric, you should have 
been.  However, I remember how you and Brenda reacted re Michael 
Paulle, and I suppose you couldn't admit embarrassment if you were 
standing in it up to your neck.  If not embarrassment, might you have 
considered the other liabilities of being associated with Mr. Klein?  
Would you willingly show a copy of his published (in the Venturist 
newsletter) "investment advice" to the SEC?  I can explain this in 
more detail if you want it discussed in public. 

>Instead, I suggest that the lack of progress on the critical items 
>that the Committee were suggesting was of paramount concern to the 
>Committee. It appeared to the Committee that Carlos and other Board 
>members were taking a cavalier attitude toward the financial footing 
>of Alcor. 

Courtney, if you really thought this, you fell into the specialist 
trap.  A house is not only plumbing, though a plumber may see little 
else.  Alcor is not exclusively suspensions, or patient storage, or 
investments or research or training, or paperwork.  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. 

>Information was not forthcoming to the Committee

Partly because Eric Klein did not ask for it, and partly because the 
arrogant and obnoxious way he asks for anything.  If you thought 
information was missing or not forthcoming, why didn't you ask for it? 
 
>                                                 and, more 
>importantly, actions were not taken to increase the yield in the 
>funds. As a result, Alcor's finances were significantly impaired in 
>both the short and long run. (It is important to remember that small 
>increases in income now compound to huge sums in a matter of a few 
>decades.) 

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? 

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?  That *is* 
Alcor's situation!  Take a look at the Patent Care Trust Fund.  Where 
has the increase in that fund come from?  You have the same figures I 
do, but I don't see you working the arithmetic. 

In late 1987, 5 years ago, the fund had 113.5k in it.  Getting a 
phenomenal (and junk bond risky) growth on that money of 20% per year 
compounded over the last five years, the fund would have grown to 
about 336k.  Late in 1992, the fund actually stands at 1,230k, which 
is 3.66 times that much.  The growth in the fund has been a factor of 
10.8+, which is a little higher than 60% per year! 

The average fund performance from investments over most of the five 
years was ok, not spectacular, but very safe and ahead of inflation.  
I have not looked up the numbers, but it was somewhere in the 8-10 
percent range.  So you can easily see that 5/6ths or so of the growth 
in the PCTF came from suspensions (some came in from general 
revenues). 

There are more costs associate with taking care of the larger number 
of patients, but they are relatively small, and the average cost per 
patient has gone way down due to economies of scale.  

If you make a future projection of the fund growth based on past 
performance, a few percentage points difference in the investment 
yield gets swamped out if you assume continued growth in the number of 
patients at the rate we have seen over the past few years.  

Now, if you can make a case for Alcor's membership shrinking down to a 
few, and not doing suspensions very often or at all, then the board of 
such a remnant organization should be *profoundly* concerned with the 
fund to the exclusion of most other considerations.  This is a bit 
like a house where there was nothing left *but* the plumbing. 

>Most importantly of all, Carlos and the Board did not respond to the 
>Committee's concerns about the protection of the money in the 
>Endowment and Patient Care funds. 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.  This was a topic of concern long before I got on the board, 
and was discussed at *great* length recently in my posting re 
splitting patient care off to another organization.  The *real* 
strength behind Alcor is in the living members.  Protection of Alcor 
assets from legal or governmental actions was *not* a charter of the 
former investment committee.  You were stepping out of line for what 
looked like political purposes by raising a troubling issue like this 
which has no clear solutions. 

>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.

>Later in your posting you address Paul's charges of gross incompetency 
>but avoid addressing his charge of "gross lack of personal integrity". 
>Why? Do you believe that Carlos has shown a high degree of personal 
>integrity? Do you believe that Carlos has never lied to the Board, 
>individual Directors, or members? 

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, but I would be very 
surprised if he had not done so a number of times.  If you think 
telling the truth in all cases is the right thing to do, I certainly 
can provide you with several examples where doing so would have been a 
disaster.  Here is one: 

   Bogan (coroner deputy):  "Do you know where Dora Kent's head is?"
   
   Alcor staffer or board member: "No."  (in most, but not all, cases 
a true statement). 

   Bogan:  "Do you know who knows or might know?"

   Alcor staffer or board member:  "No."  (in most cases a false 
statement.)

*I* was asked these questions a number of times by outsiders, and a 
few times by clueless Alcor members.  If you think I told the truth or 
should have told the truth, you are *way* out of your depth. 

>You address the issue of spending the Endowment Fund money by giving 
>examples of the need for money to pay for workman's compensation 
>insurance and the Mike Perry rescue. You then set up a straw man by 
>saying that the only other choice to spending the Endowment Fund is to 
>close up shop or not rescue Mike. This is clearly wrong if you are 
>willing to spend a little time in consideration of alternatives. I 
>suggested a couple at the last Board meeting. 

>But what I have the most problem with is that you don't consider good 
>financial planning to be a viable alternative. 

>Why did Alcor get into the situation where a $30,000 payment could 
>mean the end of Alcor? Less than 2 years ago, Alcor had an excess in 
>its operating fund of, I believe, over $100,000. The problems with 
>workman's comp and Mike's rescue would not have been financial crises 
>if there had been proper financial planning and execution. 

Because we were able to borrow from the endowment fund, (we did not 
"spend" it) these examples were not a financial crisis.  (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.)  
I would have had no problem with borrowing from the PCTF either; after 
all, the patients would not have faired so well without the dewars 
being serviced.  But, I actually agree with you about proper planning. 

Although I was not on the board in those days, I supported the plan 
adopted to *spend* about half the Jones estate money to improve Alcor 
and assist membership growth, and use the rest to generate income.  
The plan was based on the expectation that revenue from membership 
growth after several years would be able to support a larger operation 
on dues alone.  This was a sensible use of the money which helped 
Alcor grow at 30+ percent per year.  There was to be a substantial 
chunk left over for contingency and reserve funding at the time 
revenue caught up with expenses.  After about a year after Alcor 
started getting money from the Jones estate we found out that it was a 
*lot* smaller than it was thought to be, especially after the lawyers 
took their cut.  

When the last major chunk of the Jones money (from the sale of his 
house) came in, the amount involved was enough to complete the planned 
spending, but there would be nothing left at the end of that time.  

The plan adopted (it was at least the third business plan Carlos 
wrote) was to drastically cut expenses (all the staff took a 25% wage 
cut) and put most of the remaining money into an endowment fund.  The 
staff/board erred in putting too much into this "savings" account, not 
enough into a reserve account where they could use it, and made too 
much of a deal out of it, hoping that well off Alcor members would 
contribute to the fund.  

Alcor members did not respond.  They knew that money spent now for 
fast growth is more effective than money earning 6-10%.  Since that 
point, 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. 

I think it was weeks to a few months before they had to borrow from 
the account on an emergency basis.  It was an ok idea to put some 
money in a harder-to-tap endowment fund.  They just overdid it. 
 
>Re: the "overcharging" of the Patient Care Fund, etc. I don't know if 
>the charges are reasonable so I won't comment. However, I have a 
>problem with Carlos changing the amount of salaries allocated to the 
>PCF without the Board approving. 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.  All employees are involved to some extent in patient 
care.  Don't forget, the PCTF was not tapped at all for expenses for 
many years, but was paid for out of the operating fund.  If it is 
paying a little more now, it is in good shape compared to the operating 
fund and can afford it. 

>I agree with Paul that there is "continuing negligence in making that 
>fund a fully independent trust". I believe that it is imperative that 
>Alcor institute some type of protective mechanism to protect the PCF 
>from depredation from governmental or private sources. The seizing of 
>the PCF would either shut Alcor down or come very close to shutting it 
>down.

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

>I think that a trust with Alcor as the beneficiary would be a low cost 
>and generally effective first step in protecting Alcor's assets. What 
>do you suggest as a solution to the asset seizing problem? I know that 
>your solution to this problem in the Endowment fund is to spend it but 
>I have never heard your solution to protecting the PCF. 

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.  Get me a legal opinion that 
the trust fund is seriously vulnerable to reasonably likely kinds of 
actions like you have in mind, and that your method provides better 
protection.  Maybe I can be talked around to supporting your proposal. 

>You say "...if the board were to make any substantial changes now, it 
>would look like they were turning Alcor over to the lunatic fringe." I 
>resent being called "lunatic fringe". Keith, you attack other people 
>for using emotional terms (and I agree with you about this) but you 
>consistently use ad hominem attacks like calling people "lunatic 
>fringe" and attack their ideas as "absolute nutcake stuff" and so on. 
>Please rationally discuss the ideas rather than cause the discussion 
>to degenerate.

Courtney, through the marvels of cut n' paste, I will repost what Paul 
Wakfer wrote as a (secondary) reason he was dropping his suspension 
membership. 

>7)  The absence of staff and volunteers who are passionate zealots,
>    who eat, sleep and breath cryonics, eagerly working day and night
>    seven days a week, and ready to move heaven and earth to thrust
>    cryonics and immortalism into modern society, and to win the
>    battle with deathism.

Now, understand I am not attacking the *idea* of people being 
dedicated to cryonics which might lie behind this purple prose (heck, 
some people might consider *me* kind of dedicated).  I am not even 
attacking Paul.  But I *am* attacking his style.  The way this is 
written, I think "absolute nutcake stuff" is a fair description.  This 
forum is a place where people get to know about the ideas and people 
behind cryonics, and my point was that this paragraph would repel the 
kind of sensible, stable people we would like as members.  If you take 
him at his word, Paul is not coming back until Alcor is full of 
staffers more dedicated than Moonies!  Try replacing "cryonics" in the 
paragraph above with almost anything ending in -ism and read it out 
loud. 

But I am willing to take criticism from the readers of this group.  Am 
I being too rough on Paul's prose?  Or do people here *like* his 
choice of words?  Would it inspire you to join if this guy was in 
charge and had his "zealots" in place?  Please post comments and tell 
Courtney and me how you react. 

>I appreciate the fact that you take the time and thought to respond to 
>most postings but I would take your comments more seriously if you 
>stuck to discussing the facts and ideas rather than the people or 
>changing the subject. 

I am going to change the subject by saying that I would take your 
comments more seriously if you put more numbers in them.


>Re: Mike D. rides into the sunset 

>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.  It was addressed to the board, but 
it is ok by me for Brenda to let you read it.  If you still have 
questions, please put them in private email.

Keith Henson 

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