Auction house due diligence: What diligence is due?

Friday, April 30, 2010
Bonhams in London just removed a collection of Roman sculptures from its auction when Christos Tsirogiannis and Dr David Gill questioned the provenance surrounding lot 137, a marble sculpture of a youth. David Gill published a photograph persuasively suggesting that the stone figure was linked with a looted item once in Giacomo Medici's possession. Medici was the target of one of the largest modern day efforts by law enforcement to uncover illegal antiquities trafficking.

The statue's appearance at auction raises the question of due diligence. Why was not better diligence used by Bonhams? It is acknowledged that conducting a title history for a large number of objects appearing at auction is labor intensive. However, due diligence to discover the provenance of an antiquity cannot be left to a simple search of the Art Loss Register. Such a register can never produce the history surrounding where an ancient object came from. Attorneys (few that they are) who investigate provenance employ a systematic methodology that covers the bases as best as possible. Auction houses should strive to do the same. Indeed, the diligence due must be meaningful, not superficial.

Those auction houses that employ compliance officers are to be commended for improving their due diligence. While we still have more to do with regard to developing an accepted framework that details what diligence is exactly due, the introduction of a functioning and competent compliance officer inside an auction house can help.

Over The Tree, Close To The Front Of The Green

Saturday, April 17, 2010
I was lucky. My poorly hit tee shot smacked the right tree at the perfect angle and my ball landed in the middle of the fairway. It wasn’t real far from where I had started, and number four at Astorhurst is a dogleg to the left, but I was on short grass and only had one big tree in my path to the green. I wasn’t going to just try to defy the odds with my sand wedge, I called my shot. "Over the tree, close to the front of the green." Good or bad, right or wrong, I always believe that we should call our shots.

What will the new health care legislation accomplish? I have been asked daily for close to a month what I think will happen next. I’ve been working on an answer. The talking heads on TV all seem to know, and oddly enough, the results tie in perfectly with their political persuasion. The Republicans are predicting significant changes in both the House and Senate this fall. They sense real anger. I saw a liberal commentator predict that the Democrats will reap the benefit of the hoards of now grateful constituents, as if Obama and health care is the equivalent of Moses and manna.

So, I think it is time to call my shot. Everyone can be a genius in hindsight. Five years or so from now you will have the opportunity to tell me how wrong I was. I also realize that by taking a particular position and clearly extrapolating results from the recent activities of our President and Congress I will offend, or at the very least, anger, a fair number of my readers. Oh Well. I apologize, in advance, if I anger or offend. Feel free to give voice to your feelings in the comment section. I just ask that you remain civil and to remember that I have readers of all ages.

Rules to live by:
• There are no accidents
• Insurance executives are very smart people
• Insurance companies must balance their books
• Horse-trading is necessary to pass legislation
• If the above is true, then the end justifies the means

It is my belief that the ultimate goal of the Congressional leadership and the President is to have most Americans insured by a government run program and that this legislation is a major first step in that direction. It is also my belief that the major insurance companies are totally onboard.

Is that good or bad? My opinion doesn’t matter. I think the fix is in and our job will be to learn how to game the system.

I know. I know. You’ve seen the political shows where Democratic strategists talked about the insurance company windfall – 32 million new clients. What a bunch of malarkey. The young and healthy can already get cheap health insurance. They don’t need an act of Congress. The young, healthy and lazy can also get cheap insurance. Their moms call my office all of the time. Who we are about to get are the unhealthy. The initial batch have to be both unhealthy and uninsured for over six months. Since the federal government is unprepared, these unhealthy people will be funneled, initially, to the same state high-risk pools they have already avoided. The federal government has set aside 5 billion to help cover them. The insurers, recently forced by states like Ohio, to reduce the premium for their high risk clients, will simply have more losses to be shifted to the healthy population’s policies.

You may have noticed that Massachusetts refused to allow any insurance company price increases. Massachusetts is important. They are about five years ahead of the rest of us. The combination of new taxes on insurance companies, new policy requirements, and the removal of underwriting GUARANTEE HIGHER PRICES. This is very important. There are very few provisions in the legislation to limit or control the cost of health care. Since insurance is nothing more than a middleman, a negotiator, and a paper shuffler, the price of insurance is directly attributable to the cost of care. If the price of care increases unabatedly, the cost of insurance must also increase. Add in maternity and other desirable coverages and you have a hefty jump in price. This is not an accident.

As the price increases, Washington will fan the flames of discontent, blaming greedy insurers for the pain the consumer is feeling. There could be only one solution – The Public Option. If will be at that point that President Obama et al will be forced to create this alternative. Underpriced and underfunded, the public option will gain ground as the insurers reluctantly leave the market.

Why would the insurers, the Anthems and United Health Cares, be in favor of this? What do insurers do well?
• Manage risk
• Shuffle paper

Individual and small group health insurance are crappy businesses. There is lots of exposure, tons of paperwork, and a distribution system that demands way too much service. They are incredibly inefficient. If the eventual public option looks anything like the Swiss cheese we call Medicare, there will be a fortune to be made in SUPPLEMENTS. Low risk, controlled exposure, and sellable from phone units, online, and in the mail, supplemental policies are very profitable.

The federal government would be forced to contract with the major insurers to process a new mountain of paperwork. Pure profit. The contracts would be on a cost plus basis.

The final profit center for the major insurers will be for those people who wish, with the aid of private insurance, to opt out of the government system. This grouping of new products will not be price sensitive and should be particularly profitable.

The final legislation to make all of this happen will mirror the Medicare Part D debacle. Did the Republicans who pushed through Med D really care about doughnut holes or that my clients would be paying more for their medications? Of course not. Did they know that the legislation was a goldmine for the pharmaceutical industry and the major insurers? Probably not. Nor do I think that they cared. The Republicans had a goal, six years ago, to run on a new entitlement for senior citizens. They certainly weren’t going to let a little horse-trading get in the way. Expecting anything different from our Democratic leadership is unreasonable.

The end will justify the means. I am positive that most involved will feign total surprise at the outcome. They may even claim, facetiously, that they were forced by the market to act.

Again, is this good or bad? I don’t know. I am offended by the lack of honesty that I perceive. If this really is such a good idea, sell it. Go before the American people and tell us why we need to go in this direction and how we will pay for it. Since that didn’t happen, I doubt that the outcome will be all that great. Of course, any major political change in the next two years could negate all of this. That wouldn’t guarantee better outcomes, just a different cast of characters and results.

I gripped my sand wedge, swung as hard as I could, and lifted the ball up through the branches. I didn’t quite get over the tree as much as I got through it. The ball landed in the fairway just before the green.

Got to call your shots. Got to tell people what you really believe.


We Can Always Count On Florida

Tuesday, April 6, 2010
Health Insurance Issues With Dave has been on a self-imposed hiatus. Two and a half weeks with no posts. This was my small attempt to lower the noise level. The country appeared to be suffering from health care fatigue and I decided to be part of the solution as opposed to being a part of the problem.

I’m back. I simply can not resist writing about Dr. Jack Cassell and Congressman Alan Grayson. Everything you need to know about the recently passed health care legislation is contained within the story of these two gentlemen. And yes, to tell the whole tale we need both of these otherwise well-educated, bright guys who suddenly turned stupid once they became infected by the health care debate.

Dr. Jack Cassell is adamantly opposed to the recently passed health care legislation. Why? Who knows? Could be on general principle. Could be because Congress failed to “fix” Medicare again last week and specialists, like urologist Dr. Cassell, are facing a 21% cut in reimbursements from the federal government. As I said, who knows. In an effort to share his displeasure, Dr. Cassell posted a typewritten note that read: "If you voted for Obama, seek urologic care elsewhere. Changes to your healthcare begin right now, not in four years."

Tacky? You betcha. A little heavy handed? Sure. But is it really a big deal? I don’t think so. First and most importantly, we still have a secret ballot. He isn’t asking people to tell him who they voted for in the election. He has no way of knowing whether the patient voted for the Democrat, the Republican, or failed to participate in the election process. Sure his waiting room is littered with Republican pamphlets detailing one side of the debate. But, this is still the United States. If you don’t like his politics you have every right to find another doctor.

My daughter Jennifer was born twenty-nine years ago this month in Saint Elizabeth’s Hospital in Youngstown, Ohio. St. E’s was the best hospital in the area and Jen’s mom had had problems in the past. Every single room in this Catholic hospital had a crucifix on the wall. Hope was in there for two days. Frankly, we found the wooden statues on the walls a bit disconcerting. But we didn’t make a fuss and we didn’t ask them to take them down, not even in our room. If you wanted the doctor and the facility, the religious decorations were part of the deal.

Of course, Dr. Cassell couldn’t keep this discussion at that high a level. “I think there’s a real, real problem that’s going on here in this country and unfortunately Obamacare fatally compromises my ability or any doctor’s ability to uphold the Hippocratic Oath.” Not enough hyperbole for you? How about this gem of a sign he posted above a stack of Republican literature describing the bill? "This is what the morons in Washington have done to your health care. Take one, read it and vote out anyone who voted for it."

If you are keeping score, we have doctors who won’t be able to properly treat their patients and the morons responsible. Would the other side laugh at this silliness and let the whole issue disappear within a couple of days? Of course not.

First to weigh in was Dr. William Allen, a professor of bioethics, law and medical professionalism at the University of Florida’s College of Medicine. A man with a great bio but no patients and who will not be immediately impacted by the changes in the law, Dr. Allen is quoted as saying that even though Dr. Cassell hasn’t turned anyone away and hasn’t even quizzed his patients, he is still “pushing the limit”.

Pushing the limit? Our friends on the left were hoping for a stronger rebuke. Who could be counted on to take this to the illogical extreme? The safe bet in Central Florida is Orlando Democrat Alan Grayson. He is remembered for this constructive remark about the Republican’s program from last summer, “If you get sick, America…Die quickly.”

Congressman Grayson appeared on Countdown With Keith Olbermann yesterday evening. I skipped the Duke / Butler game to watch the two of them harrumph over Dr. Cassell’s sign. Grayson did not disappoint. He planned to complain to every medical board and government authority available. In the original Orlando Sentinel article Congressman Grayson is quoted as saying, “Maybe he thinks the Hippocratic Oath says, ‘Do no good.’ If this is the face of the right wing in America, it’s the face of cruelty…Why don’t they change the name of the Republican Party to the Sore Loser Party?”

And that is the whole issue with the other extreme. Those people who disagreed with this legislation, for whatever reason, are relegated to the “right wing”. We should all be grateful that the bill passed. We should get over it and move on. An excellent example would be the way so many of us in the middle and on the left got over it and moved on with our lives after President Bush declared Mission Accomplished and ended the war in Iraq. G-d knows Mr. Olbermann hasn’t mentioned it since. We should all model our future actions after his measured response.

Vice-President Joe Biden was correct. This is a big deal. It is huge. And yet, the details are in short supply and the costs seem to grow daily. The newest exaggeration comes from the Republicans who claim that the IRS needs to hire 16,000 more agents to monitor compliance. It is probably twice more than we actually need, but it really doesn’t matter. One side will use it as a rallying point while the other side will conveniently ignore that they haven’t properly funded any new agents.

And so it goes. We are still in campaign mode. The two extremes are scoring points and wasting our time and millions of dollars of our money. In a perfect world, Congressman Grayson would suffer a mild bladder infection the next time he is back in Florida and you know who would be on call that weekend. Not that I would wish for anyone to be sick, but they deserve each other.

And we deserve better.