Pensioner risk

Two recent cases indicate that age is no bar for criminal activity and indeed the older you are the more likely the scam will be highly skilled and contain some thinking outside the box.

First there was the group led by a 71 year old who managed to sell a property they didn't own to the Candy brothers, two of the most active property developers in London, for several million pounds.

Then the £5 million banknote forgery carried out in the front room of an 83 year old's home. The results were so good that only the ink and the paper gave them away, it was reported. They believed in doing things in some style, the only time the gang met up was in Claridges. It is not recorded whether they paid in dud notes or not.

Whilst these show commendable initiative and no desire for early retirement and may, for all I know be the tip of an iceberg of geriatric crime, there is only one thing seriously wrong with these activities, besides the obvious one that they are illegal- the criminals in question got caught and have been sentenced to spend several of their dwindling years in prison. There is something in having too much form perhaps.

Stauffenberg's heir

Colonel Claus von Stauffenberg limited the details of his assassination plot of July 20th 1944 to a very small group in order to protect those who sympathised with him in the event Hitler was not killed and in the hope that they would carry on with his mission to make peace and restore the integrity of the German Army.

On learning of the failure of the plot, one of those sympathisers, Stauffenberg's good friend and fellow staff officer, Johann Adolf Graf von Kielmansegg, rushed back to his apartment. There he and his wife had to decide very quickly whether to destroy the evidence of their knowledge of Stauffenberg's intentions or whether they should keep some documents to prove they were not Nazi sympathisers to the advancing Allies. The threat of a visit from the Gestapo concentrated their minds and they set about tearing up and flushing the documents they had down the lavatory. The repeated noise of the cistern filling and flushing drove their neighbours to hammer on the ceiling in annoyance.

They had made the right decision because the next day the Gestapo arrived , interrogated von Kilemansegg for several days and held him for 2 months whilst trying to make a case against him. Eventually he was released back, not to a staff position, but into active duty and served on the western front in a panzer division until his capture by the Americans.

In 1950, he was asked to serve as the secretary of a committee planning the framework for a new German Army, the Bundeswehr. In due course he became a general and finally in 1963 he was made NATO Commander Land Forces with 500,000 German, American and British troops under his command. He strongly supported the democratisation of the German Army and its legitimate control by the government. He retired, liked and respected in 1968 and died in 2006 aged 99. Through him and others like him Stauffenberg's hopes for the restoration of the German Army's integrity were significantly realised.

The night shift

The recent report that working a night shift may put you at greater risk of breast cancer will probably require more research before the link is firmly established, if ever. However having managed three companies which had a night shift I can say that if I could have eliminated the night shift I would have. It is the most undisciplined shift, the one when the mistakes are made and product quality suffers. The communictaion with the day shifts is often poor and adds to the confusion. The workers have domestic problems from working when their families are sleeping which adds to the difficulties they face.

If a link is proven then will all night shift workers who develop cancers be able to claim for an industrial disease, despite the fact that they are paid a higher rate for the inconvenience of working nights.? The case of Denmark where compensation for those with breast cancer has been paid could be the shape of things to come across the industrial world, with implications for workers' compensation insurance. This could be a very, very big iceberg.

The mouse behind the curtain

Having an mid morning meeting in one of the railway hotels in London, I look behind me at the window sill and see a mouse walk out from behind the curtain, sniff around, cool as you please, almost Beatrix Potteresque in its audacity, and then disappear.

They say that the explosion of rubbish has meant an equivalent increase in the rodent population with all the risks that brings with it. Clearly ratcachers will be in demand even in a recession, but will we be cutting back on rubbish collection because of the state of government finances?

"The long run has run away"

At the time of writing my January 21st blog advising of Peter Bernstein's 90th birthday I also sent an email to the Editor of the Financial Times drawing attention to the great man's anniversary and suggesting that they get him to write something on the present economic situation.

The FT did not reply,there was nothing to reply to I suppose, but in today's issue there is indeed an article by Peter making the point that the long run is a misleading guide to investors, in his view it has always beentoo unknown for it to have any value and that its demise is to be welcomed because it will always be an impenetrable mystery.

Centuries of risk management

An educational trust, started in 1748, with current reserves of £50,000,000 and an annual disbursement of £1.3 million must be doing something right.

Interesting that when the founder, Sir John Cass, died, his will was not complete and it took 30 years of legal wrangling before the trust was established. It has supported and continues to invest in schools and education requirements for individuals in the City and the east End of London and in 2003 was a major benefactor for the establishment of the Cass Business School.

Over such a long time and with many different trustees the opportunities for feckless or reckless investment decisions would have been considerable, so the success and continuing existence of the Sir John Cass Foundation says a great deal about the wisdom with which the original trust was established and the care with which it has been administered. Human beings do not always have to be ruled by markets.

Sir John Cass's birthday in February 20th. He was born in 1661.

At least equal stature with the trading desk

Yesterday in the FT, from an article on risk by Lloyd Blankfein, Chief Executive of Goldman Sachs

"Risk and control functions need to be completely independent from the business units. And clarity as to whom risk and control managers report to is crucial to maintaining that independence. Equally important, risk managers need to have at least equal stature with their counterparts on the trading desk: if there is a question about the value of a position or a disagreement about a risk limit, the risk manager's view should always prevail."



Now today we have a report in the Timesonline which shows that HBOS had been warned by Mr. Moore, their Risk Officer between 2002 and 2004, who had then been sacked and replaced by someone with no risk experience. The Times report goes on:

"Mr Moore, a former KPMG financial services expert, said in a previous interview that HBOS had been chasing sales too aggressively and with little regard for risk as early as 2002.
In his written submission to the Select Committee Mr Moore said: “I signed a gagging order at the time in our settlement agreement.”

Mr Moore gave an interview to the BBC in October criticising the approach to risk taken by HBOS.
"I think a concern everybody had [was] whether or not the business was under control," he said, claiming that the bank's priority was switched from risk management to growth under the former chief executive Sir James Crosby, who was subsequently appointed by the Government to lead a review of the mortgage market.
"The retail bank was going at breakneck speed and an internal risk and compliance function feels like a man in a rowing boat trying to slow down an oil tanker. I'm not saying that there were any bad intentions in that but it was difficult to slow things down," Mr Moore said. "

So there you have it - unless the Risk Officers have the clout and the support of the CEO, and the CEO has the support of his shareholders ( not a problem for Goldman Sachs) the momentum that builds up is hard to manage. Perhaps Risk Officers should also have to report directly to the FSA to justify their decisions and to provide more rigour and support in what can be a very lonely and unpopular role.

Innovator liability

Imagine you have created a pharmaceutical drug which, after lengthy testing you spend money on marketing and explaining to doctors what the benefits and side effects are and they come to rely on your information. You pass all the FDA tests and start making sales and then when your patents expire you are faced with competition from manufacturers who supply generic drugs. Tough, but that is the way of the world, no one gets an intellectual monopoly forever.

Now imagine that one of the customers for the generic drug sues the manufacturer and your company because of the side effects. Does the Court find against the manfucturer and decide that your company is not culpable?

In a recent case a court in California has decided that you, as the Innovator, are culpable, and the generic manufacturer is not.

The court stated:
"The common law duty to use due care owed by a name-brand prescription drug manufacturer when providing product warnings extends not only to consumers of its own product, but also to those whose doctors foreseeably rely on the name-brand manufacturer's product information when prescribing a medication, even if the prescription is filled with the generic version of the prescribed drug. "

As lawyers Mayer Brown LLP explain one of the consequences of the court's decision is that it " threatens to create an insurance system under which name brand manufacturers absorb the liability of their competitors: competitors that, in many instances, not only enjoy greater market share, but are also relieved of research, development and advertising costs. This system, in turn, threatens to drive up the costs associated with the development and marketing of new drugs, which could chill innovation of new products and undermine the policy goal of preventing future injury to patients. "


This would make generic drug manufacturer even more attractive as insurance costs would be reduced. Perhaps generic drug manafacturers should be made pay for the insurance of the innovator as they are clearly getting a benefit. Don't hold you breath though.

Hoax exposed - one less risk

It has just come to light that a painful condition called " cello scrotum" that was supposed to affect male cellists and which was written up in the British Medical Journal in 1974 was a hoax. The author was Dr, now Baroness, Elaine Murphy who did it as a riposte to what she saw as another spoof medical condition " guitar nipple" which had been reported in the BMJ.

It is only recently when she saw that the condition was being referenced by other researchers that she decided to come clean. At least one risk manager I know used to show a photograph of a cellist in his presentations and ask his audience to identify the risk.

So there's one risk that risk managers of orchestras will be able to discount. Did male cellists take out insurance cover and if so were there any claims? Were any dissuaded from taking up the instrument and have the sales of cellos been depressed as a result? What other diseases are spoofs? The mind boggles.

Airhead

Great letter in today's FTonline from Takashi Ito pointing out that John Thain, late of Merrill, late of Bank of America is a prime example of the Japanese phrase "kuuki-yomenai" or KY for short.

KY means "cannot read the air " , the nearest English phrase is perhaps "not knowing which way the wind is blowing", but that doesn't quite capture the willful disregard of what is happening to others and the refusal to accept any blame. KY seems an addition, like schadenfreude, to our range of expressions.

John Thain, buying $1064 waste paper baskets, spending over $1 million on an office re-design, arranging for his staff to get million dollar bonuses at this time of global belt tightening and when Merrill was just about to announce a $15 billion loss, is not alone in his inability, Sir Fred Godwin is reported to have argued fiercely to be compensated for loss of office.

This total focus on self reminds me of Leona Hemsley's comment "I don't pay taxes, only little people pay taxes."

The Athenians used to have a vote, written on clay tablets, ostrakos, on whether to send into exile those people who had become too arrogant and powerful to be retained in the city. Perhaps we should bring back ostracism as the punishment for those who cannot read the air.