A Website A Day Keeps Ignorance at Bay

Biggest Fraud, Classic Fraud

The Glass Border

A Little Extra Startup Oomph

Corrections or additions?

These articles were prepared for the March 13, 2005

issue of U.S. 1 Newspaper. All rights reserved.

U.S. 1 Survival Guide

Top Of Page
A Website A Day Keeps Ignorance at Bay

Sreenath Sreenivasan, more commonly known as Sree, is a self-styled

guru of the Internet, with the imprimatur of Columbia Graduate School

of Journalism, where he is associate professor of professional

practice. "My work is to find ways to make the Internet more useful to

people," he says. That he does, by way of his web site, www.sree.net,

his appearances on WABC-7’s "Tech Guru" segment, his weekly Web Tips

column for Poynter.org, and his "Smarter Surfing: Better Use of Your

Web Time" workshop. He has taught the workshop worldwide to more than

9,000 journalists, lawyers, bankers, diplomats, management

consultants, public relations professionals, students, and others.

Sree presents his workshop on Thursday, March 17, at 7 p.m., at the

West Windsor Library. The event is sponsored by PWA, a networking

group for professional nonfiction writers. Admission is free, although

reservations are recommended. Call Laura Muha at 609-758-6533. For

information on PWA, contact Robin Levinson at 609-584-9330 or E-mail

RobinL@optonline.net.

Growing up as the child of an Indian diplomat may have given him the

knack of finding his way around exotic places like the Internet. He

was born in Tokyo, went to kindergarten in Moscow, moved to New York

at age nine, where he attended P.S. 6 on the East Side, went to high

school in Burma and then Fiji, and attended St. Stephens College in

India. At 15 he had his first byline in the Fiji Sun newspaper, and he

eventually got a master’s degree in journalism at Columbia University.

Sree observes that on the Internet, "everybody is in the same confused

boat." He likens the Internet to New York City, a destination that

many people find scary. But Manhattan has changed a lot, he says, "and

people should go out and explore it more." Who would have ever

imagined that Times Square would have a Disney store? "You used to put

your windows up and drive fast through 42 Street," he remembers.

Similarly, many people find the Internet an overwhelming melange of

scary places. What Sree wants people to realize is that once you can

find your way around, the Internet is a great resource and one that

people should start exploring immediately. At his upcoming workshop

Sree aims to provide tools to make the most of time spent on the ‘Net:

Find facts and data. Sree observes that researchers often depend on

"online sources that aren’t accurate." He recommends an online

encyclopedia as a place to get the facts. But, he warns, "you get what

you pay for," and each reference site has a different billing scheme.

Britannica.com gives away a couple of paragraphs, but charges a

monthly or yearly fee for full articles. Encarta.com gives away some

articles but charges for the rest. Encyclopedia.com is free but offers

only short items.

A different kind of informational site is statistics.com, which offers

links to statistics in a variety of subject areas, including

government, marketing research and demographics, health, business and

others. If your kids are doing a report or you are planning an

international vacation, you can try a site like worldinformation.com.

It offers key facts, visitor’s information, key economic indicators, a

country profile, and about 18 other categories. To search 24,200 free

public record databases, try searchsystems.net.

Get more out of Google. Google is a great search engine and the one

that Sree recommends, but its capabilities go far beyond standard

searches. At toolbar.google.com/deskbar/, for example, you can

download software that allows you to search Google directly from your

word processor, as long as you are connected to the Internet. Through

Google News, you can search and browse 4,500 news sources that are

updated continuously.

Google also has a word definition function. For example, if a user

types "define:palliative," 14 different definitions are displayed from

different locations on the Internet. Google’s "scholar" option allows

a search of just academic journals and related publications. You can

also find recipes, innovative maps, and calculator functionality

through Google.

Discover useful web sites that you didn’t even know you needed.

Freetranslation.com translates between English and a number of other

languages. Howstuffworks.com does exactly what it says. For example,

under "electronics stuff," you can find out how a cell phone works.

Among the categories are also travel, science, computers, and health.

Bartleby.com offers full-text access to thousands of literary works

whose copyrights have expired, as well as to some contemporary

reference volumes like the Columbia Encyclopedia (2001), the

Encyclopedia of World History (2001), Roget’s Thesaurus, and

Bartlett’s Familiar Quotations. Www.hoovers.com offers profiles of

businesses.

For journalists Sree offers useful information on his website,

www.sree.net/stories/web.html, including how to find sources

quickly in a variety of subject areas, reporting tips, writing tips,

and ways to track news effectively, and find transcripts of speeches

and TV shows.

Sree promises attendees at his workshops that they will come away with

at least 10 new websites, and he suggests that users try a new website

once a week. Like New York City, he concludes, "the web is pretty

harmless, and it has a lot of interesting places that can make life

better."

– Michele Alperin

Top Of Page
Biggest Fraud, Classic Fraud

What is the biggest source of consumer fraud in New Jersey? No, it is

not identity theft, but you were close. Back in 2003 identity theft

had cost America $37 billion annually. New Jersey was bilked of $5

billion. In two short years identity theft has sprinted ahead, up to

$50 billion nationwide, and $7 billion statewide. Despite these

impressive numbers, identity fraud comes in second to home

repair/remodeling scams. Auto repair finishes third.

When six homeowners in the posh suburb of Upper Saddle River were

defrauded of over $1 million, they were asked, "Why didn’t you call

the New Jersey Department of Consumer Affairs?" Their unanimous answer

was "Who?" The education coordinator of this department, Dave

Biederman, is laboring hard to make sure no one ever asks "Who’s

that?" again. On Monday, March 21, at 1 p.m. at Princeton’s All Saints

Church, Biederman gives a free talk, sponsored by the Women’s College

Club of Princeton, on all the major types of fraud, how consumers can

protect themselves, and the far-reaching recourses available through

New Jersey’s Department of Consumer Affairs. Call 609-924-2958.

"This is my retirement job," says Biederman. He grew up in North

Arlington and graduated from Rutgers in l954 with a B.A. in history

and philosophy. After earning a law degree from Yale, he joined the

U.S. Army "for three years of which I loved every minute." Staying on

in South Carolina, Biederman taught history briefly before returning

to New Jersey and to government service.

Biederman immediately got behind the Richard Hughes gubernatorial

campaign in l962. From there he served as chief of staff for the state

highway department, before taking a 37-year hiatus from government

service, working with Jeryl Industries in its real estate development.

After retiring, he returned to public service at the Newark office of

New Jersey’s Department of Consumer Affairs. Biederman’s advice:

Been defrauded? If you suspect a consumer fraud or have been the

victim of consumer fraud, call the Consumer Affairs Action Line:

973-504-6260. To learn the record of a specific company, call

800-242-5846.

Want to learn more? Biederman and his team of experts are always

willing to come and talk with your group about the ways in which

consumers can protect themselves. Call him directly at 973-424-8110.

There exist almost as many scams as there are scammers, Biederman

admits, but he does offer a few cautionary modes of defense for the

major categories.

Household repair. Biederman has 1,001 tales about both predators and

prey. "One individual householder in Wayne recently was defrauded of

$1.5 million on a single home," he says. "It is difficult to believe

he could get in so deep without a little foreknowledge of his

situation."

The defense mechanisms when dealing with contractors are few and

simple, but mostly ignored by the average homeowner. First, when

interviewing any contractor, get three references. It’s best if you

can inspect the site of his previous handiwork. While talking with the

reference slip in a few questions to find out if he is a shill or a

legitimate customer, for example: "So, how long have you known Andy,

the contractor?" Also be sure to ask each reference how thorough was

the contractor’s cleanup job.

Check your local building inspector to see if this contractor is

licensed in this town and if he has received all the proper permits

for the job. While you’ve got the inspector on the line, informally

inquire into this contractor’s history. The Department of Consumer

Affairs and the Better Business Bureau will acquaint you with any

judgments or legal complaints made against the contractor.

Finally, Biederman says, every job of more than $500 in the state of

New Jersey legally requires a written contract. Make sure it specifies

a beginning work date, an end date, permit responsibilities, and any

warranties.

Identity theft. A 35-year-old CPA from Livingston lies sick in his

bed. The phone rings. It is his friendly local banker. "Now,

Phillips, I’m going to have to scold you. You moved and never told us

that you now live in Elizabeth…and by the way, the bank has just

okayed your $20,000 personal loan." Fortunately, "Mr. Phillips" (not

his real name) was quick on the uptake. After explaining to the banker

that it was not he who lived in Elizabeth nor he who had requested a

$20,000 loan, he called each of the major credit reporting agencies.

"There are only three of them (TransUnion, Experian, and Equifax),"

says Biederman, "and this is the right first move." The goal here is

to stop immediately any further crimes.

Your next step should be to try to catch the crook. Fortunately, the

Livingston CPA nipped the crime in the bud. The local police turned

the case over to the FBI, who turned it over to the Secret Service.

They discovered that the theft of Phillips’ identity was just one of

series of thefts by a gang running up and down the East Coast using

stolen identities to make quick loans. When they caught the gang,

Secret Service agents were led to a Jersey City warehouse containing

250 folders full of stolen identities.

"The Mafia – of every nation – loves identity theft," says Biederman.

"They don’t have to kill anybody, the theft is easy, and the profit is

enormous." The average bank robber nets between $2,500 and $3,500. But

stolen identities are currently considered cheap at $25,000 each.

One seldom-used recourse for the individual experiencing credit card

or similar theft is to swear out an affidavit of loss and send it to

the Federal Trade Commission. The FTC will pass your affidavit to the

Superior Court and you can be legally declared a victim, absolving you

of the fraudulent debt. "When you show up in court," says Biederman,

"no one – certainly not the thief – will show up to contest it." One

interesting defense against a consequence of identity theft is to sign

your credit card on the back not with your signature, but with "Ask

for Photo ID."

Auto repair. "There is no safety in size," warns Biederman. Recently

Sears Auto Centers were found out. For years their mechanics had been

charging for four-wheel alignments when only two-wheel alignments were

needed. One knowledgeable individual suspected this scam, and

complained to the Department of Consumer Affairs, which sent an

investigator and uncovered the fraud. Sears paid $500,000 to New

Jersey in fines and made full restitution for more than 3,000

alignment jobs.

The defense mechanisms for auto and home repair are similar, but

trickier. You can always get your estimate up front and ask your

mechanic to call with an exact figure before work begins. But the

state does not license and inspect service stations. If you plan to

use a repair service frequently, ask for references and make a few

calls. While references are not typical in this trade, beware of

anyone not forthcoming.

Comparing prices for a set job, a muffler replacement for example, may

get you the cheapest, but not necessarily the most honest, repair

person. Short driving an ailing car from station to station and asking

for bids, you may just have to gauge the content of an individual’s

character, and examine the results of your trust afterward.

As Biederman watches all forms of fraud rise dramatically, he wonders

if we have become too fast and loose with our money. "None of the

people in our fraud detection department buys anything over the

Internet," he says. Perhaps if we are a little more circumspect in

spending, we might be less likely to become victims. It is possible to

cheat an honest man, but it’s a lot tougher to cheat a smart one.

– Bart Jackson

Top Of Page
The Glass Border

Today over $1 billion worth of goods will cross the U.S.-Canadian

border. Tomorrow, another $1 billion and so on. Nearly one quarter of

all New Jersey’s exported goods go to Canada’s 32 million people. Yet

despite this already high rate of traffic with our nearby neighbor,

New Jersey businesses are fighting to tear down the increased

post-9/11 security strictures and create even more trans-North America

partnerships. The fight is important enough to bring New Jersey’s

acting governor and Canada’s former deputy prime minister, John

Manley, to Princeton to talk trade.

In hopes of bolstering this desire for continental unity, Canada’s New

York Consulate is hosting an elaborate, if slightly mis-named, "New

Jersey Canada Day." This two-day event begins on Tuesday, March 22, at

5:30 p.m. at Princeton University’s Prospect House with an impressive

list of speakers, including Pamela Wallin, Canada’s Consul General to

New York; New Jersey Acting Governor Richard Codey; Virginia Bauer,

New Jersey secretary of economic growth and tourism; and Princeton

University president Shirley Tilghman.

On Wednesday, March 23, at 8:30 a.m. at the Nassau Inn, Canada Day

continues with panel discussions and a luncheon. The first panel, "Why

Open trade with Canada is Important to New Jersey Business," features

Leslie Schweitzer, senior trade advisor to the U.S. Chamber of

Commerce; Chris Padilla, trade representative for Intergovernmental

Affairs and Outreach; and Perrin Beaty, president of Canadian

Manufacturers and Exporters.

The second panel, "A Practitioners Guide to Doing Business in Canada,"

features Schweitzer, along with William Lash of the U.S. Department of

Commerce; and William Spear, international trade specialist for the

New Jersey State Commerce Commission. Former Deputy Prime Minister

Manley is keynote speaker at the 12:30 p.m. luncheon. For details and

registration call 212-596-1625.

Profitable links. Tab Borden has kept the trans-North American trade

light burning in Princeton’s window for several years. As head of the

Canadian Government Trade Office, a micro-mission from Canada’s New

York Consulate, Borden labors to connect New Jersey and Canadian

partners in the field of biotechnology – a New Jersey natural.

Born in West Saskatchewan and having grown up in every part of Canada,

right up to Nova Scotia, Borden graduated with a business degree from

the University of Dalhousie in Halifax (Class of 1979). After working

in several charter banks, he joined government service, where he has

remained. Borden began his four-year post at this mission in August,

2003.

Borden’s task at the Princeton trade mission is to find American

distributors for Canadian manufacturers. Typically this entails

partnering large new Jersey pharmaceutical firms with smaller Canadian

manufacturers to bring goods to market. This past winter Borden

connected a small Canadian company, which needed capital to bring its

product onto American shelves, with New Jersey-based Novartis. "Not

only do you get an increased flow of funds into the new product," says

Borden, "but you get governmental cooperation." The FDA and its

northern equivalent, Health Canada, work to allow overlapping clinical

trials.

For the smaller and mid-size firms seeking a Canadian distribution

platform, Borden connects with his American counterpart, Dina Volpis,

an international trade specialist. (To work with Borden, call

609-333-9940; or visit his Princeton office on 10 Skyfield Drive. To

work with Volpis, call 973-645-4682.) Issues they deal with include:

Drug smuggling. Ever since the current U.S. administration pushed

through medical reform bills last year, it has been illegal for a poor

American granny to receive affordable Canadian pain killers for her

crippling arthritis. If she can’t afford big pharma’s markup, she is

supposed to go without. However, enforcement being kinder and gentler

than the law in this case, no one is throwing granny in the slammer

when she receives her pills.

As a result, this unpopular law has rebounded like Prohibition.

Busloads of Americans seeking remedies for high blood pressure,

diabetes, high cholesterol, and depression routinely cross into

Canada, Canadian Internet prescription drug sales boom, and now an

increasing long list of American governors, cowed by seniors and their

pesky tendency to vote, refuse to enforce the international ban. There

are even Asian Internet drug store companies claiming to be Canadian

to attract American buyers.

"We in Canada," says Borden very calmly, "see this as strictly an

American domestic trade issue. We keep our hands out." Interestingly,

on the international drug price scale, Canada is in the middle. Europe

has even cheaper drug prices, with France at the bargain end. The U.S.

drugs are the priciest.

American pharmaceutical firms are understandably irked when they see

Canadian firms, blessed with huge demand, fill their orders by buying

American drugs wholesale and then selling them back to Americans at a

rate below what the American companies charge.

Pouring oil on the waters, Borden reassures all American pharmas by

stating the simple fact that his nation has neither the desire nor

ability to handle the pharmaceutical needs of both its own citizens

and those of a nation with eight times its population.

Cutting the glass. Even with post-9/11 security measures, the

Canadian-U.S. border remains remarkably open. Goods flow easily and

financial transfers are no more involved than they are in transactions

with, say, Ohio. Actually, this is not all good. Many businesses have

grown relatively lax in assembling documentation, with the attitude,

"Oh, it’s only Canada." But, says Borden, "If you don’t review all

required documentation and have it in order, your goods won’t be

allowed to cross the border. It’s not a long process, but it entails

more than most businesses think."

Borden recommends that American traders invest in an experienced

customs broker to shepherd the goods through. For firms with a

Canadian partner, it is a good idea to have that company send an a

representative to help speed the import process.

Yes, rules have to be adhered to, and tensions over drug imports

eased, but all-in-all trading with Canada affords Garden State

companies an easy first step into international commerce. The barriers

are few, the distance is relatively small, and the markets are hungry,

making it an ideal trade partner.

– Bart Jackson

Top Of Page
A Little Extra Startup Oomph

This past year, the Small Business Administration (SBA) facilitated

over $602 million in loans to 2,800 businesses in the Garden State.

The key word is "facilitated." There is a common misunderstanding that

the government agency shells out the money, but that is not the way it

works. The SBA does not examine a start-up’s books or drop checks in

its mailbox.

In point of fact, you will probably never see a loan official from the

SBA. You will only notice his signature at the bottom of your bank’s

loan as a co-signer. Don Swartz, economic development specialist with

the SBAs explains the loan process in "How to Get Financing for Your

Business," a seminar, sponsored by SCORE, the service corps of retired

executives, and taking place on Tuesday, March 22, at 7 p.m. at

Merrill Lynch, at 7 Roszel Road. Cost: $25. Call 609-926-7559.

Sponsored by SCORE, this event also features Laura Washington of

Sovereign Bank and Bob Small, partner with the Ressler & Small, a CPA

firm with offices at 1540 Kuser Road in Hamilton and 36 South Broad

Street in Trenton. The panel explains bank requirements and SBA aid

for both beginning entrepreneurs and owners of existent companies.

Swartz grew up in Scranton, Pennsylvania, entered the Navy in l967,

and completed his combat tour in Vietnam as a Marine in l968.

Returning home, he entered Scranton University, earning a B.A. in

business, followed by several graduate courses in finance.

Upon his graduation in l975, flooding from Hurricane Agnes wrought

enormous flood damage throughout the Scranton area and Swartz joined

the SBA to help businesses get back on their feet. He continued in SBA

service with only one break: as director of a Vietnam Veterans

Outreach Center in Wilkes-Barre, Pennsylvania. "It was," he recalls

wryly, "eight very interesting years – but eight was enough. I was

glad to return to the more hopeful SBA." Swartz has served as a

supervisory loan officer for the entire northeast. Today he handles

the offices for southern New Jersey. The Mercer/Middlesex region are

serviced both by his southern office in Gloucester County, at

856-415-2283, as well as the northern office in Newark, at

973-645-2434.

Banks drop all their loan applications into three baskets. Those that

meet all the standards, fall in the "YES" basket, and the applicants

receive the check. Those wholly outside the standards, for example,

those indicating bad credit, fall in the "NO" basket and the applicant

gnashes his teeth. The third basket is marked SBA. Those who fall just

a bit short on one criterion, maybe collateral, may get their

applications sent to SBA loan officials.

If the SBA reviewer smiles upon the application, the entire power of

New Jersey’s taxpayers and government gets behind the loan and

guarantees a certain percentage of it. It is returned to the bank with

the SBA’s blessing – and the loan goes through. The applicant himself

did not ask for this SBA review. In fact, he couldn’t ask for it. The

entire process is the lending bank’s call.

Why banks nix. Loan applications generally miss the YES basket for

four reasons. The first and swiftest cut comes to those with bad

credit. If this is your problem, not even the SBA can help push it

through. But on the remaining three criteria, the SBA can provide some

wiggle room.

An equity injection of 20 to 25 percent is demanded by most New Jersey

banks. Lenders want the entrepreneur to put up this stake to cut down

on the chance that he will walk away. Coming up with this initial

capital has proved a towering wall to many otherwise prepared

entrepreneurs, but the banks rarely bend on this potential deal

breaker.

Another hurdle involves the repayment schedule. The return schedule

must fit the lender’s risk requirement, not, alas, the borrower’s

ability to repay. "If, for example, you are investing in inventory,"

explains Swartz, "that is material that should be turning over

quickly. The bank may want repayment in as short as three months. Yet,

if it is evident that will not work, they will refuse the loan."

A real obstacle for many new business is the universal bank

requirement for collateral. The bank requires some tangible asset

against which it can fix a lien. If those tangible objects are in the

form of improvements to a building the business does not own, they are

not collateral. Patents and intellectual property that are not yet

bringing in income are not collateral, but accounts receivable are.

Banks can draw on their value long after a firm has folded.

Your home, car, stock portfolio, and baseball card collection may also

be considered collateral if the lender so deems.

What the SBA can do to help. Typically institutional lenders turn over

to the SBA applications that fail narrowly in only one aspect. At that

point a SBA loan official reviews all the paper. Perhaps the business

is short 15 percent of the required equity injection, but it seems

otherwise strong. The SBA will not pony up the remaining 15 per cent.

Instead, it will return the application to the lender with an SBA

approval, which entails a positive guarantee for the major percentage

of the loan. With this guarantee, the bank has the peace of mind to

put the loan in the YES basket – and cut the check.

Bank loans get backed on a sliding scale. Notes of under $150,000 are

guaranteed up to 85 percent. For $150,0000 up to the $2 million

maximum, the SBA stands behind 75 percent. Additionally, the SBA

charges both bank and borrower a fee of 2 percent of the guaranteed

portion of the loan.

Legally, the SBA cannot turn down a loan for want of any collateral.

"But that law can be quite misleading," says Swartz. He explains that

if a man applies for a business loan and has no home as collateral,

the SBA will consider his application. But the man who owns his home

and has not included it as collateral gets turned down. "We are

risking the taxpayers’ money," says Swartz. "I’m certainly not going

to have them stand behind a venture in which the company owner himself

is hedging his bet."

Where else to look for help. "The SBA should never be considered the

final word for the entrepreneur trying to link up with a bank," says

Swartz. He points to the increasing support afforded by urban

enterprise zones, empowerment zones, and county-based loan programs.

Each of these will often take a second lien position and give the

business the added cash to meet bank standards. The SBA also has its

own Microloan Lender Program that will find second lien lenders for

amounts up to $35,000.

So, skeptics wonder, is the SBA playing riverboat gambler with my tax

dollars, guaranteeing all these rejected loans? The annual default

rate on commercial loans runs usually about .04 percent. Only four out

of every 10,000 businesses end up sticking the bank with the hassles

of foreclosure. The rate of SBA-guaranteed loan defaults is actually

slightly less than the average bank rate. This means that New Jersey

may get called to financial task for one or two businesses a year. On

the credit side, the Garden State gets another 2,798 solid, tax-paying

businesses that provide goods, services, innovations, and jobs.

– Bart Jackson


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