X-Message-Number: 1360
Date: 26 Nov 92 16:58:10 EST
From: Brenda Peters <>
Subject: CRYONICS Re: Reply to Courtney Smith

To:Cryonet
From: Courtney Smith
Re: Reply to Courtney Smith

Keith, thank you for taking the time to respond to my posting.

>>>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.

I know that he was not referring to me and I doubt he was referring to Bob 
Kreuger. I was involved in virtually all the conversations between myself Bob,
Michael, and Eric and no one has expressed embarrassment. 

Bob and I had asked Eric to delete several phrases in his writeup on behalf of
the Advisory Committee. Specifically: "gutting" and "draining the lifeblood".

The reasons why we wanted to delete them is that we felt that emotionally 
loaded terms had no place in an official communique of the Committee. We felt 
that emotional arguments belonged in personal letters to the Board rather than
over the signatures of the Committee. So, with these minor exceptions (perhaps
a dozen words out of several pages of recommendations), the members of the 
Committee were unanimous in their proposals.

In your response to me above, you perpetrate a misconception. You state that 
the Committee made allegations of fraud in the name of the Committee. You are 
wrong. The Committee never made any such accusations. 

We were concerned, and expressed the opinion, that the situation is conducive 
to fraud. Fortunately, the Board has agreed with us and has instituted several
new safeguards and is exploring other safeguards. I consider it very important
for Alcor to be prudent in its policies in this regard so that we can safely 
go to members and prospective members and be confident that the chances of 
fraud happening at Alcor are remote. Cryonics is a "wacky" idea and one of the
many criticisms is that it is a scam to fleece suckers out of their money. 
Extra safeguards go a long way to answering this argument.

I am particularly appreciative of the Board for its implementation of some of 
the recommendations of the Committee. They are helping to increase the comfort
level of many members.

>>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.  ...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. 

I am not embarrassed by what Eric did for the Committee at all. (I never get 
embarrassed by what someone else does.) He put in a lot of time and energy 
trying to increase the safety and value of Alcor. I laud him in these efforts.

I do regret that he has sometimes used emotionally loaded terms and sometimes 
used strong terms too loosely in his personal communications, just as I regret
it whenever anyone does that. I have often told Eric that I felt that he 
should not do that. 

I may disagree with what someone else does but I do not see why I should be 
embarrassed by other's actions. I disagree with a lot of your comments but I 
am not embarrassed by them even though you are a member of the Board of 
Directors of Alcor. 

Why do suppose you that I couldn't admit embarrassment if I were up to my neck
in it? It seems to me that you are making some amazing assumptions about my 
character in your statement. We have only met on a couple of occasions yet you
are making a very sweeping accusation about my character. 

Once again, I resent you making ad hominem attacks with nothing to back them 
up. 

You made a statement that members of the Committee resigned because Eric 
embarrassed them. I pointed out to you that that is simply wrong and I have 
direct knowledge that your statement is wrong. You then responded not by 
admitting that you are wrong but by changing the subject and attacking me. 

Of course I consider the liabilities of being associated with Eric, just as I 
consider the liabilites of being associated with anyone, including you. My 
business of giving investment counsel is based on two factors, my reputation 
and my abilities. 

I have only seen a couple of his columns in the Venturist newsletter so I 
cannot comment on the content of all of them. I would like to see them.

However, note that the SEC is of little concern vis a vis Eric's writings as 
long as he does not have power of attorney over the accounts or receives 
compensation for directly advising someone. The SEC cannot touch someone who 
is merely writing articles in a newsletter. There are no SEC registration 
requirements.

Feel free to discuss it in public if you wish.

>>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. 

I do really think this or I would not have written it. Do you know something 
about my thoughts that I don't?

I certainly don't think that Alcor is exclusively suspensions, etc. The source
of my concern over a cavalier attitude is that these issues have been raised 
for many months with little attention from the Board. I continue to believe 
that protecting the money in the Endowment Fund and the PCTF should be one of 
the major concerns of the Board. (I am gratified that the Board is increasing 
their attention of these issues and putting into effect some protective 
measures.)

Should the Board drop everything and focus on just this one issue? Of course 
not. But assigning several interested Board members to a Committee to resolve 
this once and for all would be a start. Carlos' discussions with an attorney 
were a good start. 

Also notice that I am not asking for much. 1) Go to attorney, give him or her 
the the objective. 2) Examine the ramifications of the attorney's suggestions.
3) Act. The whole process could be over in a couple of month's.

For example, the setting up of a trust can be accomplished in a matter of 
days. It is a standard legal structure. The key ingredients are naming the 
trustees and naming the beneficiary. In the course of my business, I receive 
many trust documents. They are nearly all boiler plate.

I freely admit to being a specialist. I try to bring to Alcor my speciality. I
have never commented to you or anyone on subjects outside my speciality when I
can see that there are people who know more than me. For example, I have never
made suggestions to anyone concerning suspensions or stabilizations. I know 
very little about these subjects and would only embarrass myself if I spoke 
out. 

Alcor needs more specialists so that the actions of the Board can be more 
informed. The alternative is for the Board to make decisions about subjects 
that they know little or nothing about.

>>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? 
 
We did. Eric and the whole Committee asked for information, as individuals and
as a committee.

The initial requests were very nice and I personally feel Carlos was 
responsive and supportive when the Committee first started. Later, when 
information became harder to come by, the Committee and Eric did stop using 
the word "please" and instead made a pointed request that we receive timely 
information or else the Committee's efficacy was substantially impaired.

>>                                                 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? 

You are correct, the delays were not more than two months.

I have two types of clients: those that I have a power of attorney and those 
that I give advice to. I act without consulting the first class of clients. 
They are paying me to manage their money. For the second class of clients, I 
assume that they will think it over before acting. 

However, the delays that you are talking about have nothing to with thinking 
about the recommendations, so your point is irrelevent. The problem was with 
implementation. The recommendations were voted on by the Board and some 
recommedations were not acted on in a timely manner.

Some of the recommendations were not long term recommendations but required 
relatively quick action. For example, the exercising of the rights on the TCW 
Funds.

>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. 

Just because you don't see me working the arithmetic doesn't mean that I am 
not doing it. I also did not realize that I had to do it for you.

>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! 

(material deleted)

>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. 

You appear to be missing two critical points on the PCTF. 

First, for every suspension that creates an asset, there is a liability. For 
example, at the end of 1991, the assets of the PCTF were $977,999 but there 
were offsetting liabilities of $$941,274. Thus, the net surplus was only 
$36,725. This surplus appears to me to be awfully low and the purpose of 
having a PCTF Advisory Committee was to effectively increase this surplus.

You correctly extol the virtues of growth through suspensions (but don't look 
too eager or else people will accuse you of wanting to have members die as a 
means to boost the PCTF). However, you forgot that there is a concommittant 
increase in liabilities. The growth of liabilites is equal to the growth of 
assets minus investment profits over inflation minus overfunding.

The surplus only grows if investments grow faster than inflation or if people 
overfund their suspensions. Thus, those few percent that compound to huge sums
are critical.

Second, perhaps you are forgetting that the PCTF also has to pay for the 
re-animation of the patients. The greater the surplus, the greater chance we 
have of having enough funds to re-animate. We don't know what it will cost so 
it behooves us to err on the side of being conservative. 

>>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. 

I state that the Board did not respond and you state that there has been a lot
of talk. Talk is cheap. The Committee wanted action to protect the PCTF not 
talk.

I agree that the real strength of Alcor is the living members.

You state that protection of Alcor assets was *not* a charter of the 
committee. Actually, there was no charter. There was nothing passed by the 
Board which did not preclude the Committee from doing such. Also, the 
Committee's first reports addressed such concerns and so, de facto, it became 
part of charter. I don't remember anyone expressing concern about the 
Committee suggesting ways of protecting Alcor assets. Did you?

I therefore reject your assertion that I stepped out of line.

But let me try to understand you correctly. Are you stating that raising 
troubling issues without clear solutions is political? What do you suggest 
that members do if they want to raise troubling issues? Does this mean that 
Alcor members have to be sensitive to the political environment before they 
can speak their minds? What if they are not as attuned to the political 
environment as you?

I also reject your last statement because I personally had raised the issue of
protection of Alcor's assets in 1991 at a Board meeting. I don't view the 
Committee's raising these issues as political but as a continuation of the 
effort to protect Alcor.

I further reject your last statement because the Committee not only raised the
issues but offered solutions. In fact, the vast bulk of the Committee's 
reports were devoted to suggestions and 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.

I'm disappointed. I think that it would be useful for Alcor and its members if
you and other Board members would list what they think the top dozen concerns 
are and what they are doing to address those concerns.

>>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. 

Keith, you avoided my question. 

I did not ask if Carlos has lied to bureaucrats to protect Alcor, I asked if 
Carlos had lied to his fellow members or fellow Directors.

>>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. 

I also believe that it should be possible to borrow from the Endowment fund 
and PCTF is there is a real emergency but that this should be a last resort. I
feel that the two examples you gave could have been handled in better ways.

>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. 

How do you think that the money contributed to fast growth? Using ball park 
numbers ($300,000 spent and an increase of 200 members), I will work the 
arithmetic for you and point out that it cost $6,000 per new member. Each new 
member pays, for arguments sake, $300 per year dues. Therefore, it will take 
50 years before Alcor breaks even on this deal. On a net present value basis, 
the breakeven is more like centuries. Are you suggesting that the value will 
come when the members deanimate?

How do you know that Alcor members did not respond because they knew that 
money spent now for fast growth is more effective than money earning 6-10%?

My experience is the opposite. Members have told me that they would prefer 
that more money be put in the Endowment fund because they see that as critical
to the long term growth of Alcor. They are concerned with the consistent 
operating deficits and would like to see money taken out of the hands of 
Carlos so it won't get spent. In effect, they see this as a means of fiscal 
discipline.

>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. 

You avoid my point. I am not asking if it is justified (I personally don't 
have a problem with taking money from the PCTF to pay legitimate expenses). I 
felt that it was an important enough decision to take to the Board because it 
was closer to a policy issue than a simple expense issue.

>>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.  

You misrepresent my statement. I said nothing about the income from the PCTF.

Please re-read my comments about the liability position of the PCTF.

Seizing of the assets of the PCTF would leave an unmatched liability of over 
$1,000,000. Technically, Alcor would be bankrupt because this would mean that 
the assets were less than the liabilities.

The members would then have to find ways to replace the $1,000,000 to stop 
bankruptcy from taking place. In addition, I think that it would be 
significantly harder to find new members if there was a huge negative equity 
in the PCTF. I also think that some current members would cancel there 
memberships if the assets of the PCTF were seized on a permanent basis. I 
would.

>>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 are right: the name is officially the PCTF and you will note that I have 
changed to this name in this reply.

I take it that you believe that naming an internal accounting entry as a trust
gives Alcor the same protection as a separate legal entity and this is the 
best way that you know how to protect the PCTF.

I have spoken to an attorney and he told me that naming a internal account 
qualifies as a trust under common law but that it would not hold up in court. 
In fact, his statement was that they wouldn't even let it get to court because
the judge would throw it out immediately.

Let me paint you a scenario: a relative sues Alcor for mental anguish that 
their Uncle Harry is in an Alcor dewar and wins a $20,000,000 suit. Based on 
the above comment from the attorney, all of Alcor's assets, including the 
dewars would be seized and sold to pay the judgement.

I do not think this scenario is probable but that the possibility is high 
enough to take some low-cost insurance by making the PCTF a legally separate 
entity so that it may not be attached in a lawsuit.

>>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. 

Thank you for responding to the "nutcake" comment but you avoided responding 
to the "lunatic fringe" and ad hominem concerns. I still resent you typifying 
those who do not share your ideas as lunatic fringe.

I share your concerns over the use of the language Paul used and I tend to 
disagree with his point.

>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. 

This is a good suggestion and a good topic of discussion for Cryonet.

>>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.

Am I doing better?

Am I to take it that you agree with my criticisms since you did not disagree 
with them? 

>>You admit to violating member confidentiality. 

>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.

I will check with Brenda on this. Thank you for giving me permission.

Is there some reason you don't want to discuss it in public?

Once again, let me thank you for taking the time to respond. I hope that 
through this discussion, Alcor will be strengthed. We have too few resources 
to waste them on pointless discussions. 

In line with that, I want to take this opportunity to thank you for your work 
on the stabilization and suspension teams. I often (perhaps more than often) 
disagree with you on Board issues but I do very much appreciate your efforts 
on the technical side of Alcor.

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