Matt McClellan

There is not one single credit policy that will be perfect for each and every company. But, a well thought-out credit policy can help weigh the risks of a customer defaulting and determine whether their business is a risk worth taking.

A company looking to expand its market share may decide to extend credit to just about anyone, besides, of course, obvious bad debts. On the other hand, a company with a more mature and established market position might not be interested in taking any risks at all, and may choose to only extend credit to customers that are completely credit-worthy.

“Receivables are a big part of a company and write-offs hurt,” says Dan Bennett, an associate with Kegler, Brown, Hill & Ritter. “So it’s important to have a handle on the quality of your receivables.”

Smart Business spoke with Bennett about how the collection process works and how tweaking your credit policy can help you with it.

What are some common mistakes companies make in their credit policies?

From a legal perspective, one of the biggest mistakes companies make is not knowing their customers. Literally, you have to know exactly who your customer is. The customer may use a trade name, or it could be an individual and not an entity. Once a matter hits my desk and the client wants to proceed to suit, if I have to spend time researching what entity actually owes the debt, the entire collection process becomes much more difficult, expensive and uncertain. The worst cases I’ve seen are where the customer doesn’t actually exist from a legal perspective — in other words, the entity listed on the credit application is not an actual registered entity.

Another mistake is not maintaining the file properly. This might sound basic, but if a client wants to proceed against a debtor under its standard contract or a personal guaranty, I need to have a fully executed copy. If the creditor is secured and wants to take advantage of its remedies as a secured creditor, I need a signed Security Agreement and the security interest needs to be perfected.

From a business standpoint, the biggest mistake I see is continuing to extend credit when there are red flags associated with the account. An ounce of prevention is better than a pound of cure, and so if an institution is looking to minimize credit risk, the credit managers need to be proactive any time there is a warning sign on the account.

How does the collection process work?

Assuming we’ve done our homework on the debtor and we think collection efforts make sense, we’ll either send out a demand letter or proceed directly to suit. The claims we’ll bring and the entities we sue will depend on the facts of each case.  Is the creditor secured? Does the creditor have a mortgage? Is the debt personally guaranteed? Were sales made pursuant to a contract or on an open account? Has the debtor been doing anything nefarious that might make claims against shareholders or affiliates viable? Is the debtor the type of business where we could seek to have a receiver appointed?

Once a complaint is filed, and assuming we’re unable to work out a settlement, the case proceeds to judgment and then post-judgment collection remedies. We’ll continue to attempt to collect until the judgment has been fully paid, we’re unable to identify assets to collect on, or the debtor files bankruptcy.

How long does the litigation process take?

It varies greatly. It could last a bit more than a month if the debtor fails to even defend the case. If a debtor defends the litigation all the way through trial — which would be rare, almost all collections cases end without a full-blown trial — it could last between a year and a year-and-a-half. After obtaining a judgment, forcible collection could last anywhere from a couple of months to indefinitely. It just depends on the financial health of the judgment-debtor.

Are there any solutions when the debtor has no assets?

No. You can’t get blood from a turnip. Post-judgment collection results are going to mirror the quality of the credit decision the client made in the first place. When a client comes in to us with a potential new case, the first thing we do is gather all the information we can on the debtor to determine the likelihood of collection. If, for example, we see there are four judgments already outstanding, a federal tax lien, no assets to speak of, and a home in foreclosure, the reality is we’re never going to see a dime from that debtor. We’ll advise the client not to proceed — there’s no sense in throwing good money after bad.

A company should know in advance based on how it’s structured its credit policy whether it will experience a high volume or low volume of write-offs. If it’s not matching up with their expectations, they need to revisit their credit policy.

Dan Bennett is an associate with Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5448 or

Many developers struggle to deal with the cost of debt for ambitious real estate projects. But partnering with public and private entities can help reduce the loan required from the bank, allowing the developer to leverage its equity more effectively.

“The projects that require public and private partnerships, a combination of private conventional bank debt supported by quasi-public sources, are typically deals that wouldn’t happen without those subsidies,” says Steven Zickefoose, a Senior Vice President and the Manager of Commercial Real Estate Banking for FirstMerit Bank. “It harkens back to the 1980s, when many urban projects were required to meet the ‘but for’ test for low-interest government loans, or the project wouldn’t happen.”

Smart Business spoke to Zickefoose about how large-scale development projects are made possible by public and private funding.

Why would companies want to involve public or private parties in real estate projects?

Because of the economic challenges facing some of these difficult projects, they just can’t work conventionally. The Flats East development project in Cleveland is a good example, because a public subsidy was needed to deal with the physical challenges of that site. A site may need to be heavily engineered to support development. Perhaps the roadways need to be expanded to improve physical access to the site, or utility infrastructure upgrades (water, sewer, electric) are needed.

When you deal with all those elements, you add costs you wouldn’t find in a simple greenfield development in a suburban location. The necessary upgrades increase the cost of the project, and if you tried to finance in a conventional fashion at, say, 75 percent of the total budget cost, it wouldn’t work. The cost of the debt would make the project unfeasible.

What types of projects are usually financed in this manner?

It’s not always a new site; it could be a redevelopment site. If you’re renovating an 80- to 100-year-old commercial property, you typically have to deal with out-of-date core infrastructure and mechanical systems, and inability to support modern telecommunications. Those are added costs that you wouldn’t have if you were building new. But there is a lot of energy in urban areas to revive our commercial core rather than demolish and build anew.

The cost of a 100,000-square-foot new development is not comparable to an urban redevelopment, but rent is still driving the market. You have to find a way to make the bottom line work because the rents are fixed in the marketplace. So you then have to deal with the cost of debt. That is the overriding challenge.

How do these difficult projects happen?

There is a need for multiple layers of financing. The Flats East project had 37 funding sources, led by two major banks. Another project in the University Circle area of Cleveland had 11 sources of financing. Developing these projects is not for the faint of heart. It requires a lot of cooperation with the many financing sources. The bank, as the lead lender, has to balance being in control without ignoring the issues, concerns, rights and privileges of the other subordinate financing sources.

What are typical sources of financing that can be secured for real estate projects?

Traditional public infrastructure support includes typical municipal bonds and infrastructure or general obligation bonds that go toward public improvements that support the site, like roadway access and public parking garages. Also, there are truly subordinate sources that generate equity for commercial redevelopment projects. There are two particularly prominent funding sources of this type. First, historic tax credits, offered by the U.S. government and available through the IRS, provide tax credit for the eligible amount of investment directed toward upgrading eligible properties. Second, the New Market Tax Credit, another federally designated program, was established to support job creation.

These tax credits are typically earned by the developers and syndicated to an investor, usually institutions such as banks and corporations. Developers could use the credits themselves, but usually the developer is not generating enough income to take advantage of them. So they are sold to corporations, which contribute much-needed equity to projects.

In addition to federally designated tax credits, the state of Ohio now offers historic and New Market tax credits as well. Another source of funding is local foundations, such as the Cleveland Foundation, the Greater Cleveland Partnership and the Columbus Foundation, that support historic or urban redevelopments and job creation.

Typically the final piece in these communities is the urban governments themselves — the cities of Akron, Cleveland and Columbus all offer either redevelopment or economic development grants and low-interest financing sources.

Why are these partnerships becoming more prevalent?

Their increased prevalence is a reflection of the economic times. The last time that significant public/private partnerships were required was the late ’80s and early ’90s, when a lot of our urban cores were redeveloped. Projects like the Short North area in Columbus and Tower City in Cleveland received significant tax credits for historic renovation.

Help was required because economic times were such that market rents wouldn’t support private capital doing it alone, and there was a scarcity of capital. We’re going through that again, as many large-scale projects were stopped when the financial markets crashed in 2008. Slowly, developers have dusted themselves off and government and foundation sources have stepped up in creative ways to support development. In turn, the banking industry has been nudged back to the table.

When times are tough and capital is scarce, everyone needs to come to the table to get these deals done, or else nothing happens in the marketplace.

Steven Zickefoose is a Senior Vice President and the Manager of Commercial Real Estate Banking for FirstMerit Bank. Reach him at (330) 384-7179 or

Nearly all insurance policies contain limitations on the maximum amount of a judgment payable under the contract, and setting these limits is one of the most challenging aspects of insuring your company.

“Honestly, this is one of the hardest questions for people to answer and understand,” says Scott Nuelle, vice president, ECBM Insurance Brokers and Consultants. “For most people, it comes down to what they can afford. In many cases, companies are not buying enough, but they flat-out say they can’t afford to buy any more. So that becomes the key issue.”

Smart Business spoke with Nuelle about why insurance limits matter and how to choose the appropriate amount for your business.

Why is it important to purchase sufficient insurance limits?

In addition to the more obvious need to adequately protect your business and possibly personal assets, an often-overlooked component is the ability to appeal a large verdict against you. If the jury slaps you with a $10 million verdict and you’ve only got limits up to $5 million, the insurance company will post bond for the appeal of $5 million, but you have to post the other $5 million yourself in order to appeal. Otherwise, you lose.

If you don’t have adequate limits to appeal any verdict, you need to have the financial wherewithal to appeal. The lack of ability to appeal a verdict could put you out of business. You may be able to win that case on appeal, but if you don’t have the money to post bond, you’re finished.

What are the keys to choosing the right insurance limits?

First, you want to look at your assets and set limits that are appropriate to protect those.

The next thing you want to look at is your business operations and the likelihood of a large lawsuit. Are you in an industry where multiple people or properties could be damaged? For instance, someone in the hotel industry could have an incident in which many people are injured, a situation in which higher limits would be useful.

Contractors and trucking companies also operate in an environment where many people could be injured. If you are in those types of industries, you should consider the likelihood of large lawsuits, and for liability purposes, you are going to want to consider higher limits.

What can companies do to research appropriate limits for their specific needs?

Have your broker search for settlements and verdicts in your industry. That gives you an idea of common verdict results in those areas.

Verdict results can change by jurisdiction, as well. Some jurisdictions have historically delivered larger verdicts. If you have operations in one of these regions, you’re going to want to carry higher limits than you would if you were exclusively operating in an area that typically does not return higher jury verdicts.

When your broker completes the search, you’re able to see what verdicts are being returned against companies in your industry.

Your broker should also be able to benchmark your company by industry and size while planning and completing the research. Brokers can look at other companies and determine whether the limits you’re carrying are adequate based on what your competition is doing, based on the likelihood of large loss, as well as verdicts and settlements.

You should develop a matrix of where you fall within the realm of these different factors that can determine what limits you should be carrying.

How should companies determine limits for other types of coverage?

For directors’ and officers’ coverage, typically a company would look at its market cap and what its potential loss could be in the event of a lawsuit. As a basic guideline, companies should carry limits of at least 10 percent of their market cap. On employment practices liability insurance, the key issue to look for is how susceptible your company is to a class action lawsuit. If you are in the retail or hospitality industry, you are generally very susceptible to that type of lawsuit and would likely want to carry higher limits than if you were not in one of those industries.

If your company is in the manufacturing or retail sectors, you may have product recall coverage. The keys to determining limits for that coverage start with the likelihood of the chance of a recall. What are the potential costs associated with that, not only in terms of the product but in terms of implementing the recall?

Make sure you include that coverage in your insurance and set appropriate limits based on your analysis of those factors.

Are there ways businesses can keep costs down and still buy the appropriate limits?

The most common method is through the use of deductibles. Deductibles can help you reduce premium as opposed to not carrying enough limits to insure situations that could potentially put you out of business.

You want to set a deductible that will allow you to control costs but won’t interrupt your normal business operations in the event of a loss. It should be a level that you can fund through ordinary income.

Have your broker present multiple options for you to consider regarding the cost for various deductibles and limits. Determine if paying a loss up to the deductible will affect your business operation.

At that point, it becomes a financial measurement more than an insurance measurement.

Scott Nuelle is a vice president with ECBM Insurance Brokers and Consultants. Reach him at (610) 668-7100 or

When UCLA’s Anderson School of Management created an Executive MBA program, its faculty members were concerned.

“The suspicion was that somehow the Executive MBA would be a watered-down degree,” says Carol Scott, faculty director of the executive program and professor of marketing at the UCLA Anderson School of Management. “Some were concerned we would relax our admission standards because people who have been out of school for a while might be a little rusty. Also, this was the university’s first program that was to be fully self-supporting. The faculty was nervous about whether we would deliver a quality education or if we would somehow dilute it to keep the tuition dollars rolling in. We didn’t know if employers would even accept an Executive MBA.”

As it turned out, their fears were unfounded. However, the program has evolved in many ways since its inception.

Smart Business spoke with Scott about how and why the executive MBA program has changed since those early days.

How has the program evolved over the years?

The program has certainly been constantly changed and adapted to students’ needs at this stage of their life and career. UCLA has always had a strong theoretical focus, but it has also had a strong connection to practice.

From the very beginning, one of the capstone requirements was a course where the students do what was called a ‘living case.’ We would invite a company in and the class would take on strategic questions for the company. They would then do presentations for the company. Now, that has evolved into the international business project. As international business became more important to all of us, the executive MBA was leading that charge. The final living case became an international situation, where we would invite companies with an international business issue to participate and have the class work on their problems.

There have also been changes in curriculum. The Anderson school has a strong focus on information technology and its use for business. The curriculum has evolved both that way and with an international focus, giving students the ability to see the organization as part of a larger world. Also, the student body has evolved over time.

How has the student population changed?

The program has a very diverse group of people with a variety of backgrounds. We always have entrepreneurs, as well as professionals like physicians or attorneys. The focus of the program has shifted a bit from people who came for some basic functional knowledge to people connecting the course material to leadership principles. Although the character of the students has changed quite a bit, we still have a very strong component of people with advanced degrees in other fields. That has remained constant through the years.

For example, last quarter I had a student who was an extremely well-known scientific researcher. Now he’s trying to figure out how to bring his ideas to market. Being able to marry those people with the business knowledge they need is just incredible.

Many people find themselves in business without a business background. They might have gotten a degree, even an advanced degree in the sciences or engineering, for instance, and found themselves working their way through their organization, ultimately into managerial roles, but had never gone to business school. Many people return to school for that reason.

How do the Executive MBA students differ from the full-time students?

The EMBA students are ready to take what they’ve learned and run with it the next day. When you teach the full-time program, you know you’re teaching the future business leaders of the world, but there will be a significant time lag. You are giving them the key fundamentals to help them, and hopefully will keep them learning throughout their careers, but it’s going to be a while before you see the true impact.

With EMBA students, that’s just not true. You see it immediately. They come back into the classroom with the excitement of having seen something work. It keeps the engine running. I always say walking into that classroom is like turning the key of a Ferrari. You just start up the class and it takes off. We get together as in a lab to see how we can use business knowledge to make their dreams and ideas come true.

How is a change in curriculum considered and how do you determine which direction to go?

People always say change in a university is like moving a graveyard. It happens very slowly and painfully. In my first few years with UCLA, curriculum changes were tortuous. Any potential changes went through many faculty and committee discussions. By the time we thought about it and went through all the machinations, it was often too late for a change to be effective and keep up with the evolving business world. Over time, we, like other businesses, realized that was not going to work.

There are still times when the faculty is not happy about a change because they get comfortable with what they are doing. But we all appreciate that innovative spirit and the thought that the program needs to evolve.

You don’t think about academics as innovative rebels, but there are a few. We’ve been lucky to have them in the right place at the right time.

Carol Scott is faculty director of the executive program and professor of marketing at the UCLA Anderson School of Management. Reach her at (310) 825-4458 or

Frank Marrone, Senior Vice President and Partner, Millennium Corporate SolutionsThe health care delivery system is broken and costs are spiraling out of control.

Federally mandated reforms have only made the system more confusing. Now, more than ever, you need someone on your side to help you make sense of the mess.

“If your health care consultant doesn’t understand how the system works, then you’re forced to become an expert in health care when you should be focusing on your core business,” says Frank L. Marrone, senior vice president and partner with Millennium Corporate Solutions. “There are qualified insurance advisers out there; investigate, interview and then engage with one that fits your needs.”

Smart Business spoke with Marrone about how a skilled consultant can help you navigate the confusing aspects of the health care system during health care reform and any other time you need a trusted adviser.

How is the health care and insurance system changing?

In our country, health care is a trillion-dollar industry that is driven by Wall Street. Wall Street and medicine are opposite forces. I’m not saying that one is good and one is evil; they just work in different directions. Wall Street exists for profitability. Executives of insurance companies keep their jobs by being profitable.

The health care system is a triangle consisting of the patient, the doctor and the insurance company. When the two most significant players are pulling in opposite directions with the patient in the middle, you have a broken system.

Employers, employees, family members — all patients — need to be able to make sound decisions with what we know to be true. Costs are not coming down, services are being stretched and the realities of health reform are only going to mean increased costs for the currently insured, while offering greater and more timely access to the uninsured or underinsured.

There is good and bad in almost everything. The good in health reform is going to cost a lot more than anyone knows.

Why are costs out of control and how can they be fixed?

The key element to health care reform and pricing is that the delivery system has not figured out a way to compensate doctors for keeping us healthy. Today, there is no incentive for a physician to have healthy patients because the physician will most likely go out of business.

Another reason costs are out of control is litigation. Everyone pays for medical malpractice claims; doctor premiums are passed on to all consumers. In fact, as medical products get priced, it’s necessary to factor in the cost of medical malpractice.

What can consumers do to survive in today’s health care system?

For example, A PPO rate for a family may be $2,300 per month, or $27,600 per year, just to have medical insurance — to prevent the risk of huge personal costs if they get sick. Who can afford that? And, how long can it be afforded?

The one thing consumers can do is ask themselves these questions: Do you exercise regularly? Do you consciously plan a healthy lifestyle? Do you eat proper food? We, as a nation, need to get healthy. If you are an overweight smoker with high cholesterol and hypertension and you want to eat a burrito at midnight, you are more likely to increase your chances of a heart attack.

First Lady Michelle Obama is promoting wellness and fighting child obesity on television, but I’m not sure people understand that getting healthy is a long-term process. Everyone wants to see immediate results, but patience is necessary. Just like no one gains 10 pounds in a week, no one loses 10 pounds in a week.

How can a health insurance broker or consultant help companies navigate the system?

You need someone on your side who understands how the system works. You cannot negotiate simply by telling an insurance company, ‘Give me a better price.’ You have to bring facts to support your claims.

The role of a good broker or consultant is to gather information from insurance companies and use that information to battle for his or her clients. At end of the day, insurance carriers will work cooperatively with good data and research — they want to make the best decisions too, so a good consultant will help develop that story.

For instance, if I let insurance companies know my client has had a good year, I will show them the utilization statistics to support my claim. If the carrier wants to charge my client a higher premium to compensate for other companies that have had a bad year, I will tell the carrier to get that increase from someone else — not from my client.

Frank L. Marrone is a senior vice president and partner with Millennium Corporate Solutions. Reach him at (818) 844-4120 or

Telecommunications technology just keeps hurtling forward, and while we may love the added conveniences and fresh, new features, staying current requires more time and effort than we’d like. Many companies have decided to skip the headache and work with a trusted adviser: someone who knows the industry and stays up to date with the swiftly evolving world of telecommunications.

“Proven telecom specialists will have knowledge of what’s available from the carriers, including detailed information regarding feature, product and pricing differences,” says Ginger Smith, business market manager with Simplify Inc. “From there, they know what questions to ask the business to determine what their real needs are so that they can make the right match.”

Smart Business spoke with Smith about how companies can sort out the differences between telecom products and services.

What makes it so difficult to assess the differences between the offers from different carriers?

The wonderful and the terrible thing about technology is that it is constantly changing.  We all like the improvements, but staying up to date on the differences between the vast array of products offered by telecommunications providers today can be a daunting task. There are so many providers today — global, domestic and regional, and each carrier has multiple products, most that come with their own special marketing name and slew of associated acronyms. Carriers will try to do everything for everyone, but no single carrier can do everything well.

What kinds of products do you see people migrating to for their data networks?

Most companies have abandoned the old private line or frame relay networks for fully meshed data networks using MPLS or some other form of IP VPN. However, even among these products, there is diversity. How do you know which you need? If you need MPLS, do you need Class of Service support and, if so, how much bandwidth per class? If you need IP VPN, should it be IP-Sec based or SSL based? What are the advantages and disadvantages of each technology? What are the security implications? Is one carrier’s MPLS really different from another’s?

The carriers would love to answer these questions for you, but each one has its own obvious bias. While most IT departments have a preference regarding the type of technology they employ, many do not have a full understanding of the difference between, for example, the various flavors of MPLS in the market and the carriers capable of providing it. A knowledgeable, carrier-neutral adviser is invaluable in these situations — someone that can explain that Carrier A charges a hefty fee for Class of Service, while Carrier B includes it for free, or that Carrier X rides the Internet while Carrier Y has a fully private backbone.  Understanding the distinctions between each carrier’s approach to WAN products results in an ability to choose the right product fit for your company’s needs by matching the product characteristics to your internal design specifications.

Are voice products simpler?

Great question. Comparing voice solutions can be equally confusing. One carrier may give great per-minute rates but charge high ‘mandatory fees,’ while another carrier waives these same fees entirely. Some carriers even charge account fees just for the privilege of having an account with them, while others have the audacity to charge a sub-account fee for every location in your enterprise. Those really do add up, and frequently don’t even appear on the proposal provided by the carrier. An experienced telecom specialist knows to look for these things. Getting an accurate bottom line cost comparison of multiple providers will make the true cost of services much easier to assess. Seeing the cost for all of the services you need plus any associated fees is much more valuable than just looking at a line rate or usage rate.

Many companies are now looking at converged voice and data services. How does that impact this process?

This can get even more cloudy when you get to integrated solutions: Voice Over IP, dynamic bandwidth allocation, SIP trunking, concurrent call paths, etc. Every carrier has a different twist on their offer. Comparing the features of these different products across the carriers is time-consuming, but absolutely necessary to determine what carrier/product best suits your needs.

How can partnering with a trusted adviser help companies make the right decision for their specific telecom needs?

Partnering with a telecom specialist introduces an adviser who is able to study your existing system and analyze your present and future needs, and then say, ‘Here are the products that fit your needs, here are the ones that are better or worse and the pricing associated with those.’

It’s a huge advantage to do that as part of a single process with one point of contact and one set of pricing comparisons, as opposed to your company doing the research on its own. You must meet with multiple carriers, get multiple quotes for pricing, and it’s probably still not an ‘apples to apples’ comparison.

When you have a single person handling that for you, getting pricing from everyone and putting it into a format that is ‘apples to apples,’ you have a real basis for comparison on the carrier, the product and the price. Then, you have a better, fuller understanding of how products work and how they are priced before you make a decision.

Ginger Smith is a business market manager with Simplify Inc. Reach her at (972) 393-5322 or

You’re proud of your website. It's your face on the Internet, your online presence, and it may provide a robust suite of services for your customers. But if you aren't careful, cyber-looters may be able to snatch elements of your site for their own use, leaving you without legal recourse.

"Be vigilant about your website," says Sandra M. Koenig, a partner with Fay Sharpe LLP. "Generally there seems to be a thought process that because it's on the Internet it's fair game. It's really not."

Smart Business spoke with Koenig about how to protect your website from copyright and trademark infringement.

How do standard copyright and trademark laws affect websites?

The traditional copyright and trademark rules still apply in the electronic world. So copyright protects copyright owners' rights, and it gives them the right to decide who can copy it. So if you own the copyright for your website, somebody should not be copying your website, or elements of your website, or taking photographs from your website, because that is still an infringement. It's still stealing.

What are some website-related copyright infringement issues companies should be aware of?

Most often, we get calls from clients telling us that someone took a photograph, text or other image from their website and copied it to their own site. Also, sometimes a competitor might emulate the overall look and feel of a website a little too closely.

There are a lot of relevant  trademark issues  that end up in legal battles, as well.

Perhaps unique to the Internet are the use of  someone else's trademark in your website's source code, domain name hijacking, or registering a misspelled version of another's trademark  as a domain name to direct consumers to your site.

How can 'metatagging' be used for copyright infringement?

Sometimes a competitor will insert another person's trademark in their own website's source code. So when people are searching online for that trademark, the competitor's website will show up at the top of the search results.

The trademark is buried in the source code – it's not visible to viewers of the site.

How can a company prevent competitors from copying tangible elements or intangible aspects of its website?

Primarily, companies must be concerned with vigilance. There are mechanisms by which you can lock your website by disabling certain options. That way, people can’t copy and paste elements that you want to keep secure.

Another important step is registering your copyright for the website or  sections of the website that are of critical importance. For instance, if you have detailed photos of your product line, you could register those instead of the entire website. Registration is beneficial  if you needed to sue someone. To ensure you are able to legally retaliate in a copyright infringement matter, it is important to have your registration in place or in the works, if it's not done already.

Keep your copyright and trademark notices visible on each web page. This is particularly useful because hyperlinking can create trouble, too. If a link doesn’t go to a company's home page but goes deeper into the website, the site visitor may not see the copyright or trademark notice. Many companies only put the copyright notice on the first or last page. It's a good rule to put legal notices on every page just in case someone links to a 'middle' page.

What steps can you take if you believe a copyright infringement has taken place?

Depending on the situation, you might begin with a cease and desist letter from your lawyer to try to negotiate a resolution right away, without going through the court process. A C&D letter is more economical, but it is always an option to file suit for copyright infringement. Arbitration is also an option.

Does a letter get results right away?

Surprisingly it often does. It wakes people up. You can request damages or you can just request someone stop using the copyrighted element or infringing trademark.

Aside from sending a nasty letter or filing suit, if the alleged infringement is a domain name issue, there are Uniform Domain-Name Dispute-Resolution Policy (UDRP) proceedings where the two parties go to arbitration over the domain name.

How do you know if you truly own the elements of your website?

There are two parts to a website, the underlying code and the visual images -- what you see on your screen. If you are working with an outside web site developer, ownership rights should be negotiable. They will often want to own the 'building block' code, which allows them to re-use this code without needing to reinvent the wheel. They should however, assign any images and text they might create to you.  Also, any content you are asking them to incorporate into the site needs to be owned by you.  So if you like a particular picture you want to be sure you have title or the right to use the content.  In other words, do not go online and just download content or take content from a book.

One thing to keep in mind is if you create the site internally, the company owns it. Sometimes elements are created by those outside the company. You might hire a photographer or someone to make illustrations. It's important to clear up who owns the copyright for those elements ahead of time because it will become important if someone were to steal one of those elements.

Sandra M. Koenig is a partner with Fay Sharpe LLP. Reach her at (216) 363-9137 or

Here’s a sobering statistic: 70 percent of departing employees, whether they are leaving on their own or have been asked to leave, take confidential information from their employer with them. Not every one of those employees is acting with malicious intent, but that doesn’t reduce the danger to your company.

“Every company has unique ways of operating,” says Jonathan Theders, president of Clark-Theders Insurance Agency Inc. “When we think of trade secrets, we think of top-secret files, but it can just as easily be ways of doing business that are confidential.”

Smart Business spoke with Theders about how data theft can affect your company and how to prevent departing employees from taking your information with them.

What types of data are most commonly taken, and why?

Some of the most popular things that are taken are intellectual property, trade secrets and known company records. This includes prospect and customer contact lists. In studies, when they were asked why they took data, most believed they had a personal ownership of that data. They created it; it was their contact list, so they feel they have the right to it.

How can this harm a company?

Here’s an example. In 2009, The DuPont Co. filed a lawsuit for breach of contract for misappropriation of trade secrets. The company alleged a research scientist stole 600 files by copying them to a portable hard drive. More than 550 files were found on his home computer; DuPont valued that information at $400 million.

Think about the value your confidential documents and files would have to another company, for instance, if competitors knew how you do business, or came into possession of all of the data you keep on your clients, such as when their contracts are up for review and other things of that nature.

How do employees take data?

The nature of where data is today makes it easy. Employees can use CDs or DVDs, USB storage devices, or just e-mail information. The ease of access to and transmission of large documents is so easy.

One area that is being ignored is smart phones. More smart phones were sold in 2010 than PCs, the first time that has ever happened. If your iPhone has 32 GB of memory, that’s larger than many older computers and definitely large enough to store these confidential files.

Smart phones work as off-site computers; companies encouraging people to log in from home and working remotely is becoming more common. People don’t necessarily intend to be malicious, but 70 percent of home computers where people log in remotely have confidential information stored on them.

If you are working on something at home and you save it to your hard drive and upload the finished product, how often do you delete the document from your personal hard drive when you’re done? How many employers ask to see an employee’s personal computer to verify they don’t have confidential information stored there? It’s just not natural to ask those questions.

And it’s not only computer files; it can be paper documents too.

How else can employees unintentionally be sharing a company’s data?

LinkedIn and Facebook profiles can become virtual resumes, on which potential employers can seek out information to see if your employees are a fit for their company. Your employees may be unintentionally using proprietary information, such as department accomplishments, strategic plans, marketing strategies and results, to build their profiles. They are openly sharing these achievements, but at the same time, they could be disclosing to competitors how you do business.

This is tougher to avoid, because fewer companies have developed comprehensive procedures for how social media networks can and should be used by their employees.

How can companies protect themselves from theft of data by departing employees?

The main way is by developing and adhering to policy and through the use of technology. First, you have to realize this is a serious matter and that it really does pose a problem to the company. You have to be willing to devote resources to increasing your security and to outlining the critical issues in your business and focus on those first.

Tighten and/or limit access to data before a layoff or when someone is let go. As soon as people are let go, make sure there is a systematic way to shut down any access that those people had.

Then, look at separation agreements. When you hire people, do you have a statement of what the confidential information is? Do you have exit interviews? Employers should create a list of what employees can and can’t share: ‘Here is what we see as proprietary information. You signed this agreement, and here is a list of things we will and will not allow.’

If people want to commit a crime, whether or not you have a policy or procedure in place, they will find a way. But for the majority of people who take information without the intent of harming their former employer, reminding them of that agreement during the exit interview can stop them from taking your proprietary data.

You also have to have consequences in place. Management must understand the threat. If sharing information could be extremely detrimental to the company’s success, there have to be legitimate consequences. You have to be willing to step out there and tell the violators that they crossed the line, and either remove their access or let them go.

People have to know their violations will be enforced. If not, they will realize it is business as usual and no big deal.

Jonathan Theders, CRA, is president of Clark-Theders Insurance Agency Inc. Reach him at (513) 779-2800 or

Now more than ever, companies are under the microscope, as federal investigators are beefing up the enforcement of regulations.

For instance, although the anti-bribery and public company accounting statutes in the Foreign Corrupt Practices Act were established nearly 40 years ago, enforcement has exploded in recent years. In 2004, the U.S. Securities and Exchange Commission and the Department of Justice brought a combined five FCPA enforcement actions. That number rose to 33 in 2008 and 66 in 2009, as reported by Corporate Secretary, a news service for general counsel and governance professionals.

In addition to increased regulatory scrutiny, the recent passing of The Wall Street Reform and Consumer Protection Act (commonly referred to as the Dodd-Frank Act) is resulting in increased enforcement of a federal anti-bribery law, as reported by Compliance Week, a corporate governance news service.

Created with the intent of preventing another financial crisis, the new law contains financial incentives for whistle blowers to bypass internal corporate compliance protocols and go directly to authorities. The new legislation adds to the risk exposures associated with the decisions made by corporate directors and officers, especially as they act on issues of governance and executive compensation.

“A number of silver-bullet remedies — audits, policies in a box, even software — have been on the market well before the Sarbanes-Oxley Act, which declared specific awards for employees to notify government agencies of any tax fraud committed by their employers,” says Edward X. McNamara, a senior vice president at Aon Risk Solutions. “The conflict is that these solutions are mostly reactive or after the fact, doing little to directly avoid or prevent legal or ethical violations.”

Smart Business spoke with McNamara about the rise in enforcement actions and why establishing a culture of compliance is so important.

Why is an effective compliance program so vital?

Several studies reveal that employers with credible, proactive compliance programs that encourage employees to speak up are most effective at discouraging bad behaviors before they manifest into irreversible actions.

The Association of Certified Fraud Examiners studied 508 companies that had experienced occupational fraud and discovered companies that unearthed troubling activity were more likely to have learned of it from a coworker’s tip than from any internal or external audit. Moreover, organizations that had anonymous reporting systems in place suffered less than half the financial losses from fraud sustained by companies without such systems.

Building a culture of compliance empowers a company to easily mitigate risks and be vigilant about regulatory requirements. It fundamentally influences and shapes decisions made involving the attraction and retention of ethical people. The byproduct of such a culture is an operational framework that is effective, measurable and delivers long-term results.

What are the risks of false accusations?

Increased regulatory enforcement leads to increased claims. Even historically good companies that have invested considerable time and resources establishing robust compliance programs are at risk when incentives to serve as a whistle blower are so rich. Compounding this risk exposure is the requirement that a public company must disclose it is being investigated or has received a subpoena. Increasingly, these announcements are triggering hungry plaintiffs’ lawyers to file shareholder derivative lawsuits. Settlements in these cases are becoming larger and larger, resulting in unpredictable drops in a company’s stock price, which can unleash securities class action suits.

There’s no avoiding such risks, as directors and officers cannot diminish the complexity of the business, legal and regulatory environment in which they operate. A company’s ability to attract good, ethical corporate leaders is only complicated by the threat of unfounded legal action. Solutions do exist, as a great deal can be done to protect the personal assets of directors and officers through a combination of strong corporate governance, broad corporate indemnification and a risk transfer program that includes a customized D&O liability insurance program.

What should companies do going forward?

The days of a ‘see no evil; hear no evil; speak no evil’ approach to compliance are over, because what you don’t know can hurt you. As organizations move from a mentality of erratic compliance validation to one that uncovers and addresses risks head-on, several benefits can be realized: improved planning, cost savings from elimination of redundant programs, increased morale and the attraction of top talent.

Best of all, a culture of compliance allows an organization to invest greater quantities of managerial time and resources on business-critical functions, which can only improve bottom line performance.

Edward X. McNamara is a senior vice president at Aon Risk Solutions, a leading risk management and insurance brokerage firm. Reach him at or (216) 623-4146.

As we are coming out of this recession, companies are hiring again and staffing specialists can utilize their databases of qualified candidates to assist companies with filling critical openings with great candidates more quickly.

“The fact that companies are starting to hire again is a positive indicator for professionals, as well as companies,” says Andrew Devore, managing director of Skoda Minotti Professional Staffing. “For professionals, it gives them the opportunity to explore positions they wouldn’t have considered a couple of months or even a year ago. For companies, they can now look internally and externally for growth. Many companies have the financial resources to start growing their operations by adding new talent. They can add the professionals necessary to take them from where they are today to where they want to be down the road.”

Smart Business spoke with Devore about why a staffing firm might be the right solution for your company’s hiring needs.

Why should companies consider delegating their hiring to an outside staffing firm?

You can narrow this down to saving time, money and effort. Staffing professionals know who the ‘A’ candidates are in the market right now, and can best match them to the needs of a company. Through their day-to-day interactions with professionals, recruiters constantly have a pulse of who’s available and what opportunity will motivate them to make a change. Delegating your hiring can save the internal recruiter or internal HR department time and money because a staffing firm will already have a list of candidates. The firm can quickly identify a list through its own database and research, which helps the company get into the interview process quickly rather than going through countless resumes that came in through job boards.

What can a staffing agency add to the hiring process?

Recruiters have a pulse on what’s going on in the marketplace or within their niche. That is why they are truly subject matter experts in their industry. Many recruiters refer to it as The DIG model — discipline, industry and geography. Also, recruiters look beyond the resume. Often, companies will look at a resume and think a person isn’t a good fit. Staffing specialists understand that many professionals will use bullet points and provide general information in their resumes, so they look for their achievements and the potential benefits they will provide a company. A staffing specialist will ask the qualifying questions to gain a better understanding of what a professional’s daily tasks consist of and their real-life work experience so they can provide a company with a very thorough summary of that candidate’s background that complements their resume.

What should a company look for in a staffing firm?

Companies may consider a recruiter who is specialized in a particular niche, (i.e., manufacturing or IT), or by a certain position (engineer, sales, etc.). It is important for a company to understand how the recruiter conducts their search either through direct recruitment (phone or in-person) or via job board postings. Finally, the company could also consider other ancillary services provided by the recruiter such as background checks, education verification and reference checks.

What criteria should a company consider when selecting a professional staffing firm?

A company should look for a track record of success and ask a lot of questions. For example, ask questions such as: What experience does the recruiter or agency have in placing that particular type of opening? What have they done to successfully fill those positions? How fast have they filled them? What type of companies have they filled those positions for? How do they qualify their candidates?

Another criterion is how recruiters develop relationships with companies. For some companies, this may be their first experience working with a staffing specialist. It is important that they are comfortable with the process and their level of involvement. For example, some staffing specialists will meet with the hiring authority and the internal HR department, very similar to how a company would interview a candidate.

How can a company quantify a track record?

Some companies will send out a proposal or request for information, especially larger organizations. For smaller organizations, they may ask for references. Also, companies may ask for a list of hiring managers the staffing firm has placed candidates with.

How does a staffing firm differentiate great candidates from good candidates?

Staffing specialists look at the whole picture: credentials, real work experience, achievements and potential benefits. For example, if you are looking for a software developer, the recruiter can provide examples of some sample scripts or codes the candidate has written. When qualifying ‘A’ candidates from ‘B’ candidates, it often comes down to how engaged they are with the recruiter and how much information is provided. Have they provided the examples necessary to differentiate them from other candidates?

Staffing specialists look at certifications, degrees, and education. For some companies, a college GPA can make a big difference as they evaluate candidates. Companies often look for applicants with a particular certification, and where that certification was earned.

A staffing specialist can ensure that a candidate is reference-checkable by making sure a direct or previous supervisor can be contacted during the interview process. Timing is everything. The sooner a recruiter can get the candidates into the process and provide the hiring authority with as much information as needed, the sooner the recruiter can solve the problem or alleviate some pain for them.

Andrew Devore is managing director of Skoda Minotti Professional Staffing. Reach him at or (440) 449-6800.