SBN Staff

When it comes to merchant fraud, businesses that accept credit cards as payment often have an “it can’t happen to me” mindset. Unfortunately, it all too often does.

“Security risks are not going to go away,” says Michelle Thompson, vice president, fraud/risk officer for FirstMerit Bank.

Business owners and their employees may be doing things which could put the company at risk, like unintentionally being negligent with sensitive client credit card information. And until you have worked through the process of becoming PCI compliant, you may not have realized that you were at risk for data integrity issues.

Smart Business spoke with Thompson about merchant fraud and how businesses can protect themselves.

What should merchants be aware of in terms of fraud?

Many times, merchants will take a transaction over the phone, and the customer on the other end of the line is someone they’ve never done business with before. If the supposed transaction is fraudulent, oftentimes, the individual posing as a customer will ask that the product be shipped to an alternate or obscure location. Another tactic is to provide multiple credit cards for payment. I have seen this where the credit card numbers were almost identical, and all from the same credit card issuer. A credit card issuer is not going to provide an individual several cards in their name. A frequent tactic used is the individual will create a sense of urgency in order to rush the order. This is a very common fraud pattern, and it’s still working.

Merchants should also be wary of calls through the relay line, oftentimes called the TDD or TTY line, referring to telecommunications devices for the deaf or teletypewriter. This phone assistance line was originally created with an interpreter or someone in the middle to serve people who can’t speak or don’t speak the language. Unfortunately, to-day, 90 to 95 percent of these calls are fraudulent. Criminals use this tool to mask them-selves for anonymity. Beware of misspelled words or a structure that is grammatically incorrect.

There are a large number of merchants, many of which have accepted credit card transactions for many years, who believe that once they receive an authorization number, they are guaranteed payment. All that authorization code validates is ‘At this time, that credit or debit card has availability to cover the cost of the pending transaction.’ That doesn’t mean, however, that the authorized person is the one using the card.

Why do so many merchants fall for these ploys?

Businesses are anxious to sell their product, so they tend to bypass red flags, focusing on making a sale. Fraud is much more prevalent than many merchants think, or would like to admit. In some cases, it’s glaringly obvious, but in others, it’s very well hidden.

Many merchants also don’t understand that a credit card transaction is the same as accepting a check. Many merchants accept cards because the process feels safer and quicker. But if somebody writes you a check, especially if it’s for a large dollar amount, you could wait the standard 10 days to know if that check’s going to come back. It’s the same process with credit card transactions. They provide  provisional credit, just like a check; however, there’s no guarantee it’s not coming back.

What preventive measures can merchants put in place to avoid becoming a victim of fraud

Knowing your customer is key. Many businesses are motivated by the prospect of a large sale; however, it’s important to utilize common sense and good judgment. A busi-ness also needs to be aware of whose hands are in the mix. Is there a person selling on the front line who faxes or emails orders to an accounts payable department? Does that person know this customer? Has someone completed proper due diligence on the credit card being used as payment? It takes everyone working together. The best way to help prevent employees from accepting fraudulent transactions is education. Educate everyone in the company who has any part in the sales process. It’s the best defense for protecting yourself.

What happens when a merchant or its service provider discovers a fraudulent transaction? Is there any way to recover the money that was lost?

If merchants suspect a fraudulent transaction, or are unsure about a customer or trans-action, they should contact their merchant services provider immediately. If the merchant reacts quickly enough, the shipment can often times be tracked down, and there may be the option to engage legal enforcement to attempt to track down the perpetrator.

It’s unfortunate that there are times when a merchant is unable to retrieve their product. This is prevalent with international transactions. Once the product leaves the United States, the likelihood of it being tracked down, even if the transaction is fraudulent and you can prove it, is fairly minimal due to the distance. That’s why it’s essential, when conducting international transactions, for a merchant to ask a lot of questions and look for those ‘red flags.’ When we do confirm that a transaction is truly fraudulent, we simply walk the client through backing out of the situation, and many times that reduces or negates any cost/loss being incurred by them.

What should merchants know about Payment Card Industry (PCI) compliance?


PCI is the unified security standard on behalf of American Express, Discover, MasterCard and Visa, although each of the Card Brands still has its own individual security standards and requirements. If a merchant does not become PCI compliant, and they should experience a breach, the fines and costs associated with it could put them out of business. There should be a partnership between a merchant and its merchant service provider.  Safety and security should be a merchant’s No. 1 concern when processing credit card transactions.

Michelle Thompson is vice president, fraud/risk officer for FirstMerit Bank. Reach her at (330) 849-8937 or For more information on PCI compliance, visit the PCI Security Standards Council official site at

Insights Banking & Finance is brought to you by FirstMerit Bank.

If you operate a business, someday you will find yourself in a dispute, or even embroiled in litigation. Whether you receive a complaint from a disgruntled former employee or you find yourself looking for the best way to recover money that your business is owed, you need another player on your team.

“Many business people believe that the litigator, unlike the transactional adviser, is a lawyer to be avoided until the last possible minute, in order to save money,” says Anne Owings Ford, a member with McDonald Hopkins LLC. “My experience tells me that a different model is better.”

Smart Business spoke with Ford about how litigation attorneys can support business owners and improve the business’s bottom line.

Doesn’t a litigator deal with cases that are going to court, to arbitration or to mediation — in other words, disputes that already exist? Why should I talk with a litigator in the absence of a dispute?

Certainly, an experienced litigator should be familiar with and very comfortable in all of those arenas. But a broader view of the role of a litigator is most beneficial to the business owner, both in terms of peace of mind and cost savings.

For example, several years ago, I had a business client that was keeping me busy defending it in small controversies across the country arising out of its form sales contracts. I handled dozens of these matters, some just at the letter-writing stage, and others in full-blown litigation. My client contact called me one day and said, ‘We’d like you to look at this contract and see what we need to do to improve it, so that we can avoid these issues, rather than having to keep fighting them.’

I spent a few hours reviewing and reworking the contract, with an eye toward the provisions that had generated the most claims. I consulted with a transactional colleague to get her view of the contract.  Then I returned the revised contract to my client, and they began using it right away.  The claims dried up and I turned to other matters.

That was a powerful lesson: Consider whether you can save major attorney fees by spending a few dollars up front to identify problems before they end up in court.

Are there other reasons to talk to my litigation attorney outside the courtroom?

Your litigation attorney can help you deal with some of the least pleasant aspects of your business life.  Consider the following:

* If your business receives a claim letter, your litigation attorney can help gather information, plan a response strategy, interview employees, run interference with your board and communicate with your insurer.

* If your business needs to advance a claim against a competitor, supplier or customer, your litigation attorney can help you frame the claim properly, to take into account not only the value of the claim but also the nature of the relationship and other competing factors. Your litigation attorney also can work with you on the proper approach, from a strongly worded letter on law firm letterhead to a complaint filed in federal court. Different disputes call for different approaches to resolve them.

* If your business is experiencing a high volume of a particular kind of claims, your litigation attorney can help you investigate whether there is a way to change your process to limit future claims.

* If you are experiencing pushback from within your organization regarding a dispute you feel needs to be addressed, your litigation attorney can help air the issues and offer constructive advice to get all players on the same page.

What should I expect from my litigator, in or out of a lawsuit?

You should have high, although realistic, expectations of your litigation attorney. You should expect not only prompt responses to your questions but also periodic updates, even if it’s only a quick email to let you know that the court has not yet issued a ruling. Your litigator knows that you have people looking to you for answers; it is the litigator’s job to provide them.

You should expect your litigator to be available to you when you need help. The kinds of issues that litigators address don’t always arise at convenient times. (Think an explosion at a plant or a confrontation in the office.)  Litigators work hard to be readily available and you should expect to be able to reach them.

You should also expect your litigation attorney to explain to you — and to help you explain to your managers, your board and your insurer — your company’s options, as well as the litigation and dispute resolution process.  The landscape can change quickly when you’re dealing with a litigation issue, and you should expect to be able to ask questions whenever you have them.

Finally, you should expect your litigation attorney to care, not just about a single crisis but about your business and its issues. Your litigator needs to know what’s going on in your world, because he or she can’t know whether one issue is related to another without knowing what they are.

Why can’t the attorney who provides my transactional advice do these things for me?

Your relationship with that attorney is an important part of your business, and no litigator is looking to  interfere with it. That said, the litigator’s focus is different. Your business adviser is looking at the big picture, working to help you maximize your bottom-line profit and minimize costs of doing business. On the other hand, your litigation attorney can help you evaluate whether a specific issue is likely to blow up into multiple, high-dollar-value claims, or if the right approach may help snuff it out.

Litigators are geared toward identifying claims and lawsuits, so that if you talk with that attorney sooner rather than later, you may be able to advance a proper claim in a cost-effective manner, or address a bogus claim with a minimum of fuss. Ultimately, good litigators want to help you address claims — yours or anybody else’s — efficiently.  If you call them, they can do exactly that.

Anne Owings Ford is a member with McDonald Hopkins LLC. Reach her at or (216) 430-2001.

Insights Legal Affairs is brought to you by McDonald Hopkins LLC.

Tuesday, 03 April 2012 14:51

Unmatched client service at BKD Dallas

Led by Managing Partner Tom W. Watson, CPA, FHFMA, BKD Dallas was established in June 2009 when Dallas-based KBA Group LLP joined BKD. The office consists of 95 team members, including eight partners, who offer focused experience in audit, tax, risk management and transaction advisory services for public and private companies in a variety of industries.

BKD Dallas is located in the nation’s ninth largest city and is surrounded by many sites and recreational opportunities, including Six Flags over Texas, SpeedZone — a racing track that includes four kinds of racing, mini golf and other activities — the Dallas Zoo, Dinosaur Valley Park where visitors can hand feed roaming animals and Nasher Sculpture Center that features modern art, in addition to a host of shopping and dining options.

Smart Business spoke with Watson about BKD Dallas and how the organization innovates and impacts its community.

Give us an example of a business challenge your organization faced, as well as how you overcame it.

The Dallas office has a deep history of working with private equity funds and their related portfolio companies. When the economic crisis in 2008 started, many of the funds we worked with stopped doing deals, causing a potential slowdown in our business. We recognized the need to diversify our Dallas practice office to cover more industries. A benefit of being with BKD is lots of experts around the firm in lots of industries. Government/non-profit and health care were two of the areas we knew BKD was deep in but that had not been developed in Dallas. We were able to identify two top BKD partners in each of these niches who had a desire to come to Dallas and build these practice areas. We’ve had great success in these areas, adding multiple governmental and health care clients over the last two years. As a result, we’ve been able grow our business despite the economy and create rewarding career options for our employees.

In what ways are you an innovating leader, and how does your organization employ innovation to be on the leading edge?

There are a number of CPA firms that are technically competent to provide audit, tax or advisory services to companies. We believe that the innovative firm is the one that provides highly technical solutions with unmatched client services. We wrote a book about our client service, which we share with every employee and many of our prospective clients. It’s a big step to put a very high set of client service standards in writing and then tell our clients to judge us on those. By following through, we believe we really differentiate ourselves from other firms, resulting in long-term satisfied clients. Even though our book was written a few years ago, it continues to be time-tested and useful in virtually every business setting.

What is the greatest lesson you’ve learned, and how have you applied it?

It’s funny how the lessons you learn early in life seem to have applicability throughout your professional career. Telling the truth is one of these, and it’s as valid in a business environment as when you are in grade school.

When working with clients, integrity and honesty are paramount. It includes being honest and upfront about meeting deadlines and not setting expectations that cannot be met. It also means addressing issues quickly, whether its good or bad news. Clients expect us to be upfront with them, and as part of our client service standards we practice that every day.

How does your organization make a significant impact on the community and regional economy?

Being part of the community is important for both BKD’s partners and employees. We are active members of the North Dallas Chamber of Commerce, and we regularly support their initiatives to improve the business environment in the north Texas area. We have a number of our partners and staff involved in charitable organizations and community events. We encourage our staff to participate in coordinated charitable activities, such as supporting the North Texas Food Bank.

Through our charitable arm, the BKD Foundation, we’ve initial corporate sponsor of the First Tee of Dallas. This is a great organization that impacts the lives of young people by providing educational programs that build character, instill life enhancing values and promotes healthy choices through the game of golf. We also support numerous other charity activities, including Go Red for Women. The foundation’s main goal is to support causes in the communities in which we work, and we’ve tried to do that.

How have you added “value” to the products and services you provide to customers and clients?

One of our client service standards is true expertise. One way we promote this is having our staff become true experts in a particular industry early in their career. The fact that we have partners, managers and in-charges on nearly every project who have significant industry focus — whether it be energy, banking, health care, manufacturing, government or real estate — brings value to the product.

We also operate under the idea of principled innovation — we bring innovative solutions to clients with a principled base. We do not let innovation lead us into new, untested, unproved or unprincipled solutions; we try to retain true professionalism in the solutions we offer.

What is your philosophy on going “above and beyond” for customer service?

Client service is at the heart of everything we do. We have a service contract with our clients that says we will offer the five core tenets of our philosophy:  integrity first, true expertise, professional demeanor, responsive reliability and principled innovation. While it seems on the surface to be a pretty simple concept, in practice it isn’t executed by very many people as well as it should be. We live those concepts every day, and it shows in our client service.

Tom W. Watson, CPA, FHFMA, is the managing partner of BKD Dallas. Reach him at (972) 702-8262 or

Businesses looking for office space should consider expanding their real estate search to Akron and Canton.

“There was a perception, although totally unfair, that the market was dying,” says Terry Coyne, SIOR, CCIM, an executive vice president with Grubb & Ellis. “However, the numbers clearly show that the vacancy rate has actually gone the other way. Both the Akron and Canton markets are actually on the upswing, and coming back strong.”

Coyne says the Akron and Canton office markets are experiencing a remarkable rebound and businesses that are ready to buy or lease office space would be best served to do it now, as rates continue to decline.

Smart Business spoke with Coyne about what makes Akron and Canton’s markets unique, and how it affects real estate performance.

What should businesses know about Akron and Canton office real estate markets?

Currently, there is a resurgence in the office market for both Akron and Canton. The Akron market offers good office vacancy, because there is no new construction and the service sector is coming back. Also, Akron is benefiting from the rebound in financial services, which explains the nice office market there.

Canton’s office space is tighter than Akron’s because there is no new construction in Canton and Chesapeake Energy and VXI Global Services recently purchased a lot of the previously available space. Between those two companies, you have a remarkable rebound in downtown Canton.

How do Canton’s office buildings compare to those throughout Northeast Ohio?

The average office building in Canton is relatively small, at 29,338 square feet. By comparison, office buildings in the Cleveland area average over 55,000 square feet. So the smaller building size is the first notable trait of Canton’s office market. The average age of a building is 43 years, which is on par with other parts of Northeast Ohio. Price per square foot is lower in Canton than in Cleveland as well. Canton office space has recently sold for an average of $49.11 per square foot, about 14 percent less than Cleveland’s $56.95 per square foot. The vacancy rate in Canton is significantly lower than other parts of NE Ohio; Canton’s vacancy in office property is 12.1 percent, whereas other parts of Northeast Ohio have vacancy rates in excess of 22 percent.

Why is Canton outperforming other parts of Northeast Ohio?

Part of the answer is that Canton did not experience the speculative construction boom caused by increasing real estate prices in the 2000s. Although Canton did see a fair amount of construction in the 2000s and 1990s, the busiest decade for construction was the 1980s.

However, construction alone does not tell the whole story. Because the average building size is much smaller in Canton, a higher percentage of buildings are single tenant and owner-occupied. Building owners taking up their own space effectively limits the supply of space and helps to keep the vacancy rate low.

What should businesses know about the Akron office market?

In the office market, Akron is outperforming much of Northeast Ohio with a vacancy rate of just 13.4 percent. Canton does have a lower vacancy rate, but Canton’s office market is smaller and not comparable to Akron. The average office building in Akron is 58,317 square feet and 42 years old.

Akron’s low price when compared to Cleveland helps to explain the lower vacancy rate. Asking rental rates average around $16 per square foot, and the asking sale price is around $55 per square foot. Akron’s geography is another factor: its concentration of highways make it well-situated for access to Cleveland, Canton, the East Coast and the South. The presence of large occupiers of space is the final piece in the puzzle. Goodyear and First Energy are just two of the many office users in Akron, yet these two companies combine to occupy 9.2 percent of all Akron’s office space. With large users taking almost one-tenth of space off the market, it is more likely that the vacancy rate will stay low.

What market changes can businesses expect in the future?

Canton’s office market is not the largest in Northeast Ohio, but it is certainly one of the best performing. As the local and national economy improve, it seems reasonable to expect that Canton will continue to experience low vacancy rates, and could even see some speculative construction in the years to come.

Like the rest of Northeast Ohio, Akron stands to benefit from the continued growth of manufacturing. As manufacturing companies grow and become more profitable, the infrastructure available in Akron and throughout Northeast Ohio will offer an attractive location for businesses. ‘Onshoring,’ rather than offshoring, is all the rage.

Akron’s significant number of distribution and warehouse facilities can also expect to see an increase in value as the economy recovers and companies require more space to house and ship inventories. The only potential roadblock is presented by energy prices. If the price of gasoline continues to climb, highway distribution will become less attractive as companies turn to more energy efficient methods of shipment, like rail. Natural gas prices have fallen significantly due to the exploration of shale across the country; if these prices continue to fall, it will halt exploration, as it becomes unprofitable to extract gas at such low prices. Though there are potential pitfalls, Akron looks well-positioned to take advantage of the economic recovery.

Terry Coyne, SIOR, CCIM, is an executive vice president with Grubb & Ellis. Reach him at or (216) 453-3001.

Insights Real Estate is brought to you by Grubb & Ellis

Most business owners are not in the real estate or contracting business. So, when they’re relocating, building or renovating, they probably have limited resources or knowledge when it comes to managing this time-consuming process. They have a choice: go it alone or align with a professional that has the technical expertise to manage the delivery of the project within clearly defined scope, schedule and budgetary requirements.

“Whether it’s a ground-up new building construction project or the renovation and remodeling of space, project managers are subject matter experts that can drive value in their ability to identify opportunities and mitigate potential project risk events,” says Eric Verh, director of Project Management at CBRE, Cleveland. “They can properly manage and coordinate teams of multidiscipline design, construction and vendor professionals and provide strategic consulting through all phases of the project’s lifecycle.”

Smart Business learned more from Verh about the value of project management, whether you’re facing a new building construction project, renewing a lease and renovating, or looking for new space and considering landlord turnkey or tenant-controlled improvement projects.

When should a user or owner of real estate hire a project manager to assist in the design and construction process for a proposed project?

The simple answer is the sooner you bring a project management professional in to manage a project the better. During the pre-construction phase, typically where only 20 percent of the project cost is incurred, 80 percent of the value creation can be realized in value engineering, design efficiencies and speed to construction that a project manager can lead if brought on board at the conception of an idea for new space or renovation or contraction. Full-service companies such as CBRE offer strategic consulting through business and conceptual planning stages of a project before the design actually takes place. CBRE Project Management offers clients up-front assistance during their space and building search. By providing comprehensive financial and qualitative analysis of alternative sites or buildings, our clients understand overall budget and scheduling implications associated with each site and, therefore, are better positioned to negotiate more advantageous lease or purchase terms with prospective landlords and sellers.

Further, through proper planning and strategy development early on there are many unforeseen scheduling and budgetary missteps that can be avoided. Understanding roles and responsibilities of those involved in a project and clearly defining the approval process for critical issues are often overlooked. If understood early on, extra time can be planned into the schedule and an expedited process for time-sensitive matters can be developed by a project manager to reduce time and expense.

What types of building owners or tenants are best served to retain the services of a project management professional?

Small, medium and large companies that have single building project needs to corporate and institutional owners and users of real estate on a regional, national or global basis can benefit from the services of a project manager. For example, companies looking to lease or own real estate can focus on their core business while allowing the project manager to oversee their best interests in managing a specific construction project that aligns with the company’s expectations in terms of quality, cost and timing of delivery.

On the other hand, corporations that may be rolling out national rebranding initiatives that either fully outsource or supplement their existing staff with a project management representative can benefit from local market experience and relationships. It runs the full gamut, from small companies to large corporations, whatever their real estate project management needs may be.

Even on small lease renewal projects involving simple renovations of just new carpet and paint, users of real estate may not understand the full implications of what that may mean.  For example, the type of carpet selected can lead to the need to tear down, reinstall and re-cable workstations and the moving of employees and their contents, all of which can significantly add to project costs and employee disruption. Project managers can help companies identify these implications up front and to make decisions for alternative material selections or scheduling adjustments to mitigate such costs and disruption. So even on small projects, it’s beneficial.

Does the value offered by a project manager offset the associated costs for these services?

It is a win-win situation in the sense that a full-service project manager can represent a client’s best interest, while concurrently offering value engineering suggestions and efficient project planning, scheduling and design consultation from project inception through furniture, fixture and equipment selection and move services. For instance, at CBRE, our project management platform often saves our clients on average $2-$3 for every dollar spent on project management fees. It’s our ability to offer up strategic project solutions and best practice methods, as well as our preferred national vendor pricing for building materials and systems that are passed through to our clients in the form of cost savings from day one.

How can a business reduce operating costs through project management?

It comes down to details and aggressive and proactive planning in design early on that the project manager can help manage that process to reduce operating expenses within a tenant space. Selecting appropriate types of construction materials and design, as well as types of finishes, lighting, building controls and water usage can all lead to a more efficient building, which costs less to maintain and operate. Sustainability is big these days. For instance, LEED-certified projects can include environmentally friendly solutions that provide cost savings over time. Project management can not only help clients get into a new building or space, but also going forward have the savings of operational efficiencies.

Eric Verh is director of Project Management at CBRE, Cleveland. Reach him at (216) 363-6455 or

Insights Real Estate is brought to you by CBRE

In a typical office building, utility costs make up about one-fifth of total operational costs. Energy costs in commercial buildings and industrial facilities are consistently rising due to increasing global energy demand, while federal, state and local agencies are mandating increased energy efficiency in new and existing buildings.

Smart Business spoke with Moh Heidari, director of the Energy Solutions Group with Alfa Tech, about how organizations can benefit from investing in energy efficiency in their facilities.

Why don’t companies invest more aggressively in energy efficiency?

It depends on multiple factors like project management methodologies, budget structures and decision-making practices. For example, value engineering is first cost-oriented versus life cycle cost analysis. There is little incentive for an energy efficiency feature to be embraced by a value engineering process if it results in a higher first cost. That is why we need to go beyond value engineering. Another reason is that budgets for construction and operations often come from two different groups. Therefore, there is a tendency for construction to take a ‘not my problem’ perspective on an energy savings measure if it would increase the construction cost. This also happens for existing facilities where the maintenance budget is separate from operating cost. So, when the maintenance team reduces utility costs by implementing energy savings measures, they may not directly get credit for it since the savings will be captured under the operating budget.

Another reason might be that energy costs are lower than costs like employees’ salaries. However, cutting energy costs directly contributes to increasing net profit.

What are the indicators of a good investment in energy systems?

While a retro-commissioning action and energy audit identifies energy saving measures with a simple payback period (SPP) of less than two years, SPP is not sufficient to decide whether a project should be implemented or not. An additional decision-making factor is return on investment (ROI). For example, a three-year simple payback period has around 33 percent ROI and a five-year payback has around 20 percent ROI, which are attractive ROI. In addition, considering the investment security of energy efficiency projects makes them even more attractive investments. Energy efficiency engineers use cost-benefit analysis and life-cycle cost analysis to identify the profitability and to show other advantages like reduction of business vulnerability to energy price fluctuations and increasing productivity.

Who is an energy efficiency engineer and why might an organization want one?

Energy is complex. Everyone thinks they have solutions, but how do you know if a solution is the right one? Companies may benefit from an independent consultant who does not have a conflict of interest and has the specialized training required to fully assess system interaction and integration issues and the overall energy benefit associated with a proposed energy efficiency project. For example, a condensing boiler must operate at condensing temperatures to deliver the highest efficiency. If a condensing boiler is installed in a system that cannot operate at condensing temperatures or installed in a system that could but it does not have the right control sequence to achieve condensing temperatures, then the intended savings will not be realized.

Because of these complexities, energy solutions for different types of facilities need multiple specialties. Energy engineering is an interdisciplinary field with selected expertise in mechanical, electrical, control, chemical and environmental engineering as well as economics and energy market.

What is retro-commissioning?

Existing building commissioning (EBCx), also known as retro-commissioning (RCx), is a detailed tune up using a systematic assessment process to evaluate buildings’ systems functionality, energy performance and energy cost savings opportunities to match the building operations to the owners’ and occupants’ current needs, reducing energy waste and obtaining cost savings. Energy audits, RCx and monitoring based continual commissioning (MBCCx) are the best tools to capture actions that can result in up to 30 percent and even sometimes higher energy cost reduction through retrofits. In energy savings, persistence is key. Without it, a system becomes out of tune and you just keep saving the same energy every couple of years instead of steadily raising the bar. Monitoring-based continual commissioning ensures that energy savings persist and grow over time. In this method, we continuously monitor the critical points of systems, measure their efficiency and address the problems that cause decreases in efficiency.

How do building owners and facility personnel benefit from investing in energy efficiency retrofits and upgrades?

First, they should realize the difference between saving energy and saving money. If you implement an energy savings measure but energy costs escalate, you save energy but may not save as much money. An uninformed owner or a tenant may be disappointed in the results of a project unless they realize where the energy costs would be if they had not implemented the project. It also means that energy savings projects that were not viable may become viable when energy becomes expensive enough.

In addition, as the relative value of energy shifts, the viability of some strategies may need to be reevaluated. For instance, a strategy that recovered energy via heat pump may not look as good as it once did if electric prices go up while gas prices fall.

Finally, persistent energy savings can pave the way for making renewable energy projects viable. The viability of a solar photovoltaic project may hinge on making the load served as efficient as possible. Increasing efficiency of HVAC systems reduce the first cost of an expensive renewable energy technology.

Moh Heidari is director of the Energy Solutions Group with Alfa Tech. Reach him at or (415) 403-3091.

Insights Technology & Engineering is brought to you by Alfa Tech

Saturday, 31 March 2012 21:01

How to manage your energy costs

If your business hasn’t recently evaluated its contract with your natural gas and electricity suppliers, now is the time to do so.

With the introduction of Marcellus Shale, coupled with natural gas from other sources, prices have dropped significantly, making it the ideal time to partner with an energy supplier that can help you navigate the market, says Terry Crupi, director of Natural Gas Marketing and Trading at PPL EnergyPlus.

“Falling wholesale prices are proving a boon to businesses, and if you haven’t recently evaluated your contracts, you may be paying more than you need to,” says Crupi.

Smart Business spoke with Crupi about how partnering with an energy supplier can benefit your business.

What has been the impact of Marcellus Shale gas development on natural gas prices?

The introduction of Marcellus Shale, and natural gas from other sources, has contributed to a significant drop in natural gas prices to levels we haven’t seen in more than a decade. The increase in available natural gas supply, coupled with the economic recession, has caused prices to tumble by about $2.50 cents per million BTUs over the last 12 months.

These low prices have saved Pennsylvania businesses about $1.4 billion in natural gas costs, and created an opportunity for businesses to lock in their natural gas price and to evaluate switching to natural gas to power systems and processes.

The drop in natural gas prices has also affected wholesale electricity prices because power plants that run on natural gas often set the price for electricity in the competitive wholesale market. In the last 12 months wholesale market prices for electricity have decreased by about $1 billion in savings in electricity costs for Pennsylvania consumers.

As we see an increase in the development of Marcellus Shale, other benefits will become evident, such as the creation of jobs in existing businesses and enticing new businesses to the state. Marcellus Shale gas provides many long-term benefits to consumers and taxpayers beyond just the direct price impact for this important energy resource.

How do natural gas prices affect electricity prices?

Natural gas is a leading indicator for electricity prices, so as the increase in supply of natural gas decreases its price, the prices for electricity are driven downward as well. We are also seeing that, as natural gas becomes more available with the development of Marcellus Shale, power plants that run on natural gas are becoming more competitive on a cost basis with power plants that run on coal.

Historically, coal has been the lowest-cost source of electricity generated with fossil fuels. As the cost equation changes, and coal-fired power plants are faced with managing the uncertainty of new natural gas supply and new environmental regulations, natural gas will continue to gain prominence as a power generation fuel.

In addition, plentiful amounts of natural gas — or any commodity — generally result in lower prices, which provides lower costs (savings) and helps businesses and consumers meet or improve their bottom line. Low energy prices present opportunities for businesses to expand, increase production, or, at a minimum, switch fuels. In fact, many large industrial customers are now considering or converting to natural gas supply.

In some cases, co-generation with natural gas-fired generators may help reduce costs and improve reliability. These are options smart businesses will want to explore in the current energy situation.

What is the long-term view of natural gas prices? Will they stay low?

Our experience in the natural gas market and our analysis of the trends lead us to believe that low, more stable natural gas prices will be with us for a few years. It’s important to keep in mind, however, that natural gas prices are cyclical. At some point, due to increased demand or reduced supply, natural gas prices will trend upward once again. This is why it’s so important for smart businesses to evaluate their energy usage and monitor energy markets.

Many customers do this on their own while others receive assistance from an energy partner or supplier that has the knowledge and experience to understand when conditions are changing and can advise businesses on the best ways to manage their energy costs — or more important, advise them on an energy strategy.

How can businesses take advantage of the current low energy prices?

Partnering with an energy supplier that understands the nature of energy prices, external effects from government regulations and industry trends such as Marcellus Shale will help your business take advantage of current market conditions while assisting you in navigating the market in the future. Businesses now should be evaluating their current contract with their natural gas and electricity suppliers and asking how they can benefit from today’s low energy prices.

There are also ways to optimize a business’s energy usage to gain even more savings. The retail energy market provides other products and services that help you more efficiently and effectively procure and use energy.

The key is to proactively find an energy partner that you are confident will help you successfully navigate the energy landscape.

Terry Crupi is director of Natural Gas Marketing and Trading for PPL EnergyPlus, a competitive gas supplier serving industrial and commercial customers in Pennsylvania, New Jersey, Maryland and Delaware. Reach him for wholesale and retail inquiries at          or (610) 774-2310.

Insights Energy is brought to you by PPL EnergyPlus

Saturday, 31 March 2012 21:01

How to avoid business litigation

There is a time and a place to fight for an important principle. Yet, business litigation is rarely about principle. After all, you are in business to make a profit. Often this is something business owners need to remind themselves of.

Monte Mann, partner at Novack and Macey LLP, urges owners to think long and hard about the costs and distractions of business litigation, which can be severe.

“As a business litigator who makes a living in the courtroom, it may be surprising to learn that I also spend a great deal of time in the boardroom — working with clients on ways to avoid litigation well before it arises,” he says.

Smart Business spoke to Mann about the six items that come up most frequently when he is working with clients on avoiding litigation.

What are some common ways that litigation arises for a business?

Many companies find themselves in litigation with their own minority shareholders. Yet, surprisingly few shareholder agreements have ‘buy-sell’ provisions, which provide the company with the right to buy out a minority shareholder based on a stipulated price formula.

Disgruntled minority shareholders are a big source of litigation, and these buy-sell provisions can be used to remove the complaining shareholder and, consequently, eliminate the likelihood of litigation.

Partnership agreements may also include these useful provisions. Business owners should check their shareholder or partnership agreements to ensure that they have  these buy-sell provisions. If their agreements lack provisions, they should make efforts to include them as soon as possible. It’s very difficult, if not impossible, to negotiate later when something goes wrong.

How can owners avoid employee-related litigation?

Your employees are another big source of potential litigation. You must  have an employee handbook that sets forth policies on issues central to the employer-employee relationship, such as confidentiality, discrimination and harassment, employee absences, sick leave, vacation time, and other employer rights and employee benefits.

Policies should be simple and clear, and all managers should be intimately familiar with them. Moreover, these policies must be applied consistently. While it will not totally eliminate them, operating your business in a way that is consistent with your handbook will greatly reduce the likelihood of employee-initiated lawsuits.

What other practices and policies should be reviewed to help companies avoid litigation?

Terms and conditions of buying and selling should be an area of focus. Your purchase and sales order forms should be reviewed and revised by counsel periodically to ensure that your terms and conditions give you critical advantages if a dispute arises with a customer. At a minimum, the terms and conditions that you want to review include terms on payment, risk of loss and warranties.

In addition, requiring that the other side litigate all disputes in your jurisdiction (a ‘choice of forum’ provision) will likely reduce lawsuits against your company. Even better, require that all disputes be resolved in an expedited arbitration in your jurisdiction, with strict limits on pre-trial discovery. This should reduce: a) the number of claims against you; b) the costs of each claim; and c) the amount of time each claim will take until resolution.

Finally, if you have to pursue amounts owed to you, make sure that your forms allow you to recover your costs of collection, including, but not limited to, attorneys’ fees.

How else can a business ensure that it is protected?

Pay close attention to protecting intellectual property. You do not get the right to do business under a particular name just by incorporating or filing a name registration in your state. The only way to properly select and protect a name is through a trademark search and registration with the U.S. Patent and Trademark Office. This is not for the uninitiated. An outside search and legal review may cost less than $1,000.

Your company’s name is not likely its only valuable intellectual property. Patents protect those who invent or discover new processes, machines, manufacturing methods, or any new or useful improvement thereof. Trademarks protect words, names, symbols, sounds and even colors that distinguish goods and services from those manufactured or sold by others. Copyrights protect original works of authorship. Patents and trademarks are registered with the U.S. Patent and Trademark Office. Copyrights are registered with the U.S. Copyright Office. Consider the intellectual property your business uses and seek to register it as early as possible to avoid problems.

When should a business owner involve a litigator?

Don’t wait until you are sued, or you want to sue, to involve a business litigator. The time to do so is when you see trouble out on the distant horizon. An experienced business litigator can help you shape the dispute so that it is consistent with your contract terms and conditions — as well as the law — so that you are in a better position to prevail in court. After all, when a dispute arises, one of the best ways to avoid litigation is to convince the other side that you will likely prevail in court.

Monte Mann is a partner at Novack and Macey LLP. He is a business litigator who represents closely held corporations and partnerships in business disputes. Reach him at or (312) 419-6900.

Insights Legal Affairs is brought to you by Novack and Macey LLP

Although there are federal laws that impact employees who are minors, most requirements and restrictions come from state laws, and each state has its own set of regulations that employers must follow when hiring minors, says Holly Dangler, human resources service manager at Sequent.

“Many employers are eager to hire minors to fill part-time and seasonal jobs because of their enthusiasm, energy and motivation,” says Dangler. “However, while there are many advantages to hiring minor employees, these advantages also come with challenges.”

Smart Business spoke with Dangler about what employers need to be aware of when hiring minors.

Before a minor employee begins work, what does an employer need to do to prepare?

There are several things an employer must do to prepare for the employment of a minor employee. First, be aware of what minors can and cannot do.

Ohio law specifically prohibits minors from performing certain job functions, and there are additional prohibited job functions for minors under the age of 16. Employers should verify the job for which the minor is being hired to ensure he or she is permitted to perform the job functions.

Those between the ages of 14 and 17 must also present a valid work permit prior to the start date. Work permits are usually obtained from the minor employee’s school. A work permit may not be required for minors 16 and 17 years of age if they are employed during summer vacation months; however, a signed statement consenting to the proposed employment is required from the minor’s parent or guardian.

The employer must also display, in a conspicuous location at the job site and frequented by minors, the Minor Labor Laws poster and a complete listing of all minor employees. The listing should contain, at minimum, a current list of minor employees’ names, ages, dates of birth and occupations.

Finally, minor employees must complete a minor wage agreement with the employer that confirms the rate of pay he or she will be paid, and the employee must provide proof of age in the form of a birth certificate, baptismal record or work permit.


Are there restrictions on the hours in which a minor employee may work?

Yes. Ohio law restricts the hours when minor employees may work. Those hours depend on the age of the employees, as there are different restrictions for those ages 14 and 15 and those ages 16 and 17.

Minors aged 14 or 15 are not permitted to work during school hours, more than 18 hours a week while school is in session or more than 40 hours a week when school is not in session. However, those prohibitions do not apply if employment is incidental to bona fide programs of vocational cooperative training, work-study, or other work-oriented programs with the purpose of educating students, and the program meets standards established by the State Board of Education.

Those aged 14 or 15 are prohibited from working before 7 a.m. and after 7 p.m. while school is in session. When school is not in session or during any school holiday that is five school days or more, they may work until 9 p.m.

Minors 16 or 17 years of age who are required to attend school are not permitted to work before 7 a.m. on any day that school is in session; however, the minor may start after 6 a.m. if he or she did not work after 8 p.m. the previous night. Those in this age group are also not permitted to work after 11 p.m. on any night preceding a day that school is in session. There are no limitations to the start and end times, nor are there any limitations in the number of hours per day or per week, when school is not in session.


What break periods are required under the law?

Although break periods are not required by Ohio law for most employees, there are requirements for minor employees. Minors working five consecutive hours or more must be granted an uninterrupted rest period of at least 30 minutes. However, the rest period does not need to be included in the computation of the number of hours worked by the minor.


What are the state requirements for compensation and record retention for a minor?

First, wages cannot be reduced for any minor without giving that person 24 hours written notice of the reduction. Employers also may not retain or withhold wages because of presumed negligence, failure to comply with rules, breakage of machinery, or alleged incompetence to produce any standard of merit. Payment for any and all wages must be received by the minor by the next regularly scheduled pay period.

For record retention, the worksite employer must maintain for at least two years time records showing the actual start and end time, and rest periods. Failure to comply with any of the requirements outlined by the State of Ohio could cost your organization up to $1,950 per incident.

Employing minor employees can provide many advantages to your organization. However, these advantages come with several responsibilities, and employers need to make sure that they are following the law.


For Kentucky businesses interested in learning more about these laws, contact Dangler at the e-mail address below.

Holly Dangler is a human resources service manager at Sequent. Reach her at or (888) 456-362

Every employer that has Ohio state-funded workers’ compensation coverage has a Managed Care Organization (MCO) assigned to its policy. However, the medical focus of an MCO’s core function can make it difficult to truly grasp its role in the workers’ compensation system, and evaluate its effectiveness for the employers it serves. We are about to see a flurry of activity in the workers’ compensation service industry related to Ohio employers’ MCO selection, so it makes sense to take a step back to gather some insight into MCOs and how they operate, says Lance Watkins, vice president of client services at CompManagement Health Systems.

What is an MCO and what does it do?

MCOs originated in the Ohio workers’ compensation system in 1997 as a result of the Health Partnership Program (HPP). MCOs are responsible for helping injured employees return to work in a timely and safe manner. They coordinate key details relating to the First Report of Injury (FROI), manage and authorize medical treatment and pay medical bills, as well as organize return to work with the injured worker, employer and the treating medical providers.  MCOs are paid directly by the Ohio Bureau of Workers’ Compensation (BWC) from a portion of the premiums paid by Ohio employers. They are paid based on the activity (FROIs, bills, active employers and active claims) and receive an incentive based on return-to-work metrics. No money exchanges hands between an MCO and its client companies, and no contract exists between the two.

What is open enrollment?

Open enrollment occurs biannually, falling on the even years, and provides employers with the opportunity to change MCOs if they choose to do so. Employers have the opportunity to either select an MCO or have one randomly assigned by the BWC. To stay with their current MCO, an employer does not need to do anything. Open enrollment is generally four weeks in length and typically occurs during the month of May. The 2012 open enrollment period is scheduled for April 30 through May 25.

What differentiates one MCO from another?

There are larger MCOs managing premiums upwards of a few hundred million dollars and smaller MCOs managing premiums in the tens of millions of dollars. There are provider-based MCOs and also those with partner companies that are large third party administrators working with several trade associations. All MCOs have the same responsibilities and the BWC produces a report card every year that focuses on three key factors:

* Degree of Disability Management (DoDM) — an efficiency metric of return-to-work;

* FROI Turnaround — measures the efficiency of an MCO in processing an initial injury; and

* FROI Timing — measures the overall processing of a FROI from the date of injury to the date the FROI is reported to BWC.

DoDM takes into consideration an injured worker’s current diagnoses, as well as the type of job duties that the injured worker performs. For example, an employee with a back injury who works in an office setting should have an earlier return-to-work expectation than an employee with a similar injury who is a construction worker. For comparison purposes, a higher DoDM score demonstrates a quicker relative return-to-work achieved by the MCO.

What factors should an employer take into consideration when selecting an MCO?

An employer might want to determine if the MCO it is considering has experience working with other employers in the field in which it operates. For example, a school district might want to look at an MCO that has many school districts among its clients. Industry experience can come into play when managing return-to-work expectations.

Performance should also be a key factor in selecting an MCO. DoDM is important, as the only published return-to-work measurement the BWC uses to analyze an MCO’s performance. Another key factor is whether an MCO can meet the employer’s individual needs. Is the MCO flexible enough to meet that employer’s expectations? Is it big enough to handle larger employers? Can it provide the personalized attention that the client may be requesting? Are the MCO’s reporting capabilities sophisticated enough to help an employer recognize trends that provide opportunities to improve its overall workers’ compensation experience?

What else should an employer ask when selecting an MCO?

BWC manages MCOs very closely and can penalize MCOs that fail to meet performance standards. One question that can be asked of an employer’s current or prospective MCO is whether they have been placed ‘at capacity’ during the past year or two. Capacity is a form of penalty that BWC will apply to an MCO for failing to meet specific contractual metrics. This penalty entails not being able to take on new clients during the period of time that the MCO remains at capacity. Financial penalties can also be applied against an MCO for missing certain performance metrics. Employers should request information on whether the MCO has had any financial penalties over the past few years.

Many MCOs like to take information from BWC and tweak it in a fashion that might tell a more flattering story. Some may call these MCO marketing myths. A common myth used by some MCOs involves the manipulation of return-to-work statistics to focus only on specific claim types, suggesting inflated success rates. Employers should be aware of these creative statistics and make certain that they fully assess an MCO’s capabilities before making the decision to stay with their current MCO or to select a new MCO.

Also, many trade associations partner with or endorse an MCO that they believe provides the best services for their members. Before making a selection, employers may want to reach out to their trade association and ask which MCO they would recommend.

Lance Watkins is vice president of client services at CompManagement Health Systems. He has 19 years of experience in the workers’ compensation industry. Reach him at (614) 526-2524 or

Insights Workers' Compensation is brought to you by CompManagement Health Systems