UTAH’S BUSINESS JOURNAL www.slenterprise.com
THIS WEEK Fetzers' to double size of West Jordan plant Expansion will bring warehousing in-house. See page 4.
• Industry Briefs • See page 6.
July 11-17, 2011
Volume 40, Number 50
Industrial gases firm Textile recycler picks Utah to launch 'radical' new as location for new tech plant in Tooele carpet recycling plant
DesignMatters Matters Legal
By Barbara Rattle The Enterprise Air Products & Chemicals, an Allentown, Pa.-based firm that is one of the world’s largest producers of industrial gases, has leased the former Conestoga Cabinet property in Tooele and plans to turn it onto a plant that manufactures ceramic modules that are key to a new technology that shows promise for clean energy applications. The 115,000 square foot building is located at 600 N. Industrial Loop, will employ roughly 55 and should be fully functional by mid-2013, said Ted Foster, director of business development for Air Products. In the meantime, the company will be procuring, installing and constructing process equipment at the site, he said. Salt Lake City-based
Ceramatec, an advanced ceramic technology research and development firm, is partnering with Air Products at the Tooele facility. Ceramatec will manufacture the extremely thin ceramic membranes that a crucial component to a new oxygen separation technology. “Ceramatec has been working with Air Products for many years now to develop a radical new way to make high-purity oxygen by extracting oxygen from the air,” said Ceramatec vice president Dale Taylor. “In this case, it uses a ceramic membrane that is highly selective to oxygen — only oxygen will transport through the
Executive Lifestyle Executive Lifestyle Legal Matters Legal Matters Legal Matters Matters Legal
Legal Matters See page 7.
• Calendar • See page 16.
see AIR page 2
Report: Utah foreclosure data needs to be interpreted
Leigh Fibers will be taking over the 66,000 square foot former Alumatek building in Woods Cross. pounds of carpet annually. By Barbara Rattle The facility will be owned The Enterprise Leigh Fibers Inc., a Wellford, and operated by a new subsidiary, S.C.-based global processor of Leigh Carpet & Plastics Recycling textile waste and fiber byproducts LLC, and will be the Leigh Fibers’ serving the automotive, fifth location. Others are situated construction, erosion control, in South Carolina, Massachusetts, home furnishings and other Montreal and California and are industries, has chosen Utah as the engaged in all types of textile site for its first facility dedicated recycling. Leigh, which is close to solely to carpet recycling. The firm has leased the turning 100 years old, estimates former Alumatek facility at that over the lifetime of the 1173 W. 2425 S., Woods Cross. company, it has kept roughly Company spokesperson Parris 14 billion pounds of textiles out Hicks-Chernez was unsure when of landfills. The Environmental the 66,000 square foot plant Protection agency estimates that would open or how many it would carpet and textiles, which are not employ, but did say it will have see LEIGH page 4 the capacity to recycle millions of
StaffingMatters Matters Legal
Top court tackles underinsured motorist coverage issue
Real Estate Matters Legal Matters
Misleading conclusions can be drawn about the extent of Utah foreclosures unless the data is interpreted. Recent news report about for foreclosure filings, with one the Great Recession resulting in in every 322 households in Utah a record number of foreclosure receiving a foreclosure notice filings require that foreclosure data in April. That amounts to 2,725 be interpreted in order to avoid foreclosure notices statewide in misleading conclusions, according April. to the head of the Bureau of This is an extraordinarily Economic and Business Research high number, much higher than a at the University of Utah. local source — Newreach — of In a report created for Salt foreclosure data as well as the Lake City-based Commerce Real results of a Mortgage Bankers Estate Solutions, Jim Wood notes Association survey, according to that recent data from RealtyTrac Wood. For the first quarter of 2011 ranks Utah fourth in the country see FORECLOSURE page 4
Insurance companies that provide lower limits for underinsured motorist coverage than for liability coverage can comply with Utah law so long as they satisfy the consumer notification requirements contained in the Underinsured Motorist Statute, the Utah Supreme Court has held. Because notification requirements differ depending on when the insured’s policy was issued, a court must first determine whether a “new” policy exists on or after Jan. 1, 2001. The justices found that a “new” policy exists on or after that date when the insurer and the insured enter into
HR Matters Legal Matters
a new contractual relationship or if changes are made to the terms of an existing insurance contract that materially alter the levels of risk contained in the contract. For such “new” policies, the law requires that the insurer obtain either a written waiver from the insured or provide underinsured motorist coverage in an amount equal to lesser of the limits of the insured’s motor vehicle liability coverage or the maximum underinsured motorist coverage limits available from the insurer under the insured’s motor vehicle policy, the court found. see COURT page 2
July 11-17, 2011
from page 1 membrane — leaving nitrogen and other things in the air behind. Its value is that it reduces the cost of making that oxygen by more than a third.” The U.S. Department of Energy is particularly interested in the project, and is helping to fund it, because it could be of great importance to making clean electrical production from coal
realistic. “You sometimes hear in the news about the idea of capturing all the CO2 that goes out when you burn coal,” Taylor said. “To capture all the CO2 and to sequester it into the ground is economically impractical if the CO2 is swamped with all this air that’s mixed in with it. You need to have it concentrated, and the only practical way to do that is to, instead of burning the coal with air — and air is 80 percent nitro-
gen — to burn it with pure oxygen, essentially. Then all of your combustion products coming out of the exhaust stack become CO2 and water, and that’s very easy and inexpensive to separate.” The Tooele plant, Foster said, will manufacture ceramic modules for oxygen separation, which has “lots of applications, a lot of clean energy applications like integrated gasification combined cycle. Burning coal with pure oxygen rather than air enables high levels of CO2 capture. Our intention is to expand it commercially. This is a whole new radical innovation in technology that has broad application in our markets. We’re very enthused.” Air Products leased its Tooele facility with the assistance of Jim Sheldon of NAI West.
THE ENTERPRISE [USPS 891-300] Published weekly by Enterprise Newspaper Group Inc. 825 N. 300 W., Suite C309, Salt Lake City, UT 84103 Telephone: (801) 533-0556 Fax: (801) 533-0684 Web site: www.slenterprise.com. For advertising inquiries, e-mail david@slenterprise. com. To contact the newsroom, e-mail barbara@ slenterprise.com. Subscriptions are $52 per year or $1.25 per copy. Opinions expressed by columnists are not necessarily the opinion or policy of The Enterprise Copyright 2011 Enterprise Newspaper Group Inc. All rights reserved Periodicals postage paid at Salt Lake City, UT 84199. POSTMASTER: Send address corrections to P.O. Box 11778, Downtown Station, Salt Lake City, UT 84147
COURT from page 1
The case involved a couple who were insured with State Farm Mutual Insurance Co. for more than 20 years, purchasing a number of policies, each with a different policy number. At one point, they changed the principal driver on one their policies to their son, increasing their premium significantly. In February of 2007, State Farm sent the couple a renewal notice with an insert that informed them of the costs and benefits associated with uninsured motorist and underinsured motorist coverage. The company sent the couple the same insert in their next four renewal notices in 2001, 2004 and 2005. In 2003, the couple added a PT Cruiser as an additional vehicle to their coverage, and State Farm issued a new policy number to reflect it. At no point during their 24-year insurance relationship with State Farm did the couple submit a written waiver from either the son or the mother that affirmatively authorized State Farm to issue the couple underinsured motorist coverage. In July 2005, mother and son were killed in a head-on collision with an underinsured motorist while driving the PT Cruiser covered by their policy. The personal representative of the couple’s estate asked that State Farm provide underinsured motorist coverage in an amount equal to the liability policy limits of $50,000 for one person and $100,000 for two or more. State Farm instead offered $20,000, the limit under the couple’s policy as written for underinsured motorist claims. The personal representative then sued State Farm, claiming the company was required to obtain a written waiver, pursuant to state law, before it could provide underinsured motorist coverage in an amount less than the liability policy limits because the changes made to the couple’s policy since Jan. 1, 2001 made that policy “new” under the Underinsured Motorist Statute. State Farm didn’t dispute that it never obtained a written waiver from the couple, instead claiming that a written waiver was not required because it never issued the couple a new policy. Utah’s federal court referred
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to the Utah Supreme Court the question of whether provision of lower limits for underinsured motorist coverage than for liability coverage complies with state law. The justices concluded that the meaning of a “new policy” includes not only new contractual relationships but also material changes that are made to existing policies. The language of the 2000 and more recent versions of the Underinsured Motorist Statute is clear, according to the justices: insurance policies existing before Jan. 1, 2001 trigger different coverage notification requirements than do policies written on or after that date. According to the law, new policies written on or after Jan. 1, 2001 must provide underinsured motorist coverage with limits equal to the lesser of the limits of the insured’s motor vehicle liability coverage or the maximum underinsured motorist coverage limits available by the insurer under the insured’s motor vehicle policy — unless the insured purchases coverage in a lesser amount by signing an acknowledgement form that waives the higher coverage. Without the waiver, the law mandates the underinsured motorist coverage of these policies must be equal to the lesser of either the policy’s liability limits or the maximum limit the insurer provides under the policy. In contrast, another section of the law provides that written waivers aren’t required for insurers to provide underinsured motorist coverage with lower limits than the policy’s liability limits if the policy is not “new” as of Jan. 1, 2001. Because the consumer notification requirements differ depending on whether a “new” policy was created on or after Jan. 1, 2001, the definition of “new policy” becomes central to determining insurers’ obligations under the statute. The statute contains no definition of “new” policy. Ruling unanimously, the justices concluded that the legislative history and policy considerations underlying the law support a definition of “new” policy that includes not only new contractual relationships but also material changes to existing policies that alter the risk relationship between the insurer and the insured. Statements made during the discussion of the law, they said, reveal the law was designed to affirmatively inform consumers about uninsured/ underinsured motorist coverage by allowing them to sign a waiver saying, “I recognize I am taking a lesser amount of underinsured coverage.” The broad view of “new” policy is supported by the changing nature of insurance policies over time and by public policies, the justices said.
July 11-17, 2011
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Fetzers' to double size of West Jordan plant Fetzers’ Architectural Woodwork, Kearns, will double the size of its facility in West Jordan this year. The company currently operates a 45,000 square foot manufacturing plant at 5360 Dannon Way that will be expanded to 90,000 square feet in order to bring warehousing in-house, said chief operating officer Erik Fetzer. Currently, the company warehouses its product off-site in Salt Lake City. “We have the ground and the opportunity to double the size of the [Dannon Way] building,” he said. “We did the math and it’s just cheaper in this market to actually build and own than to pay rent. We’re already paying for storage
Fetzers' expansion will bring warehousing in-house. facilities of about 60,000 square feet. We’re going to consolidate our warehousing into 45,000 square feet. Construction costs are
favorable and we’ll actually come out ahead by building it.” Dan Baugh Construction will design and build the addition. Fetzers’ traces its roots back to 1909, when German immigrant Kaspar Fetzer launched a cabinet shop in Salt Lake City. One of his early jobs was the addition of the two wings on either side of the Mormon Tabernacle organ in Salt Lake City. During the war years, Fetzers’ made wooden ammunition boxes, airplane propellers and toboggans to aid the war effort. Today, the firm employs nearly 200 people.
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July 11-17, 2011
FORECLOSURE from page 1
the Mortgage Bankers Association reported foreclosure notices running at about 1,700 per month statewide. “RealtyTrac’s foreclosure estimates are typically very high and have been challenged in some states,” Wood writes. One of the advantages of the Mortgage Bankers data is the tally of the total inventory of loans in foreclosure. In other words, according to Wood, a total of the actual number of foreclosure properties, not just the number of new notices in a specific month. The most recent Mortgage Bankers data show that the inventory of foreclosure filings totaled 12,659 in the first quarter of this year. This amounts to 2.91 percent of the 435,000 mortgage loans in the Mortgage Bankers Association’s Utah database. By this measure, Utah ranks 33rd among all the states in the percent of mortgage loans in foreclosure. But perhaps most significant, according to Wood, is the recent decline in the number of foreclosure properties in Utah reported by the Mortgage Bankers Association. Compared with the fourth quarter of 2010, the number of foreclosure properties has declined by 1,500. When compared to the first quarter of 2010 the number is down by 2,250. Some of the decline may be due to foreclosure processing delays, but it’s “important to note that the first quarter decline in Utah was three times greater than at the national level,” according to Wood. It’s also important to note that not all homeowners have mortgage loans. The Census Bureau reports in 2009 that more than 160,000 Utah homeowners — one in four — has no mortgage loan. Including the homeowners without a mortgage in the foreclosure equation changes the conclusions, according to Wood. Rather than a recently reported one in 10 Utah homeowners struggling to make
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house payments or already losing their property, that number drops closer to one in 16. Furthermore, a significant share of the struggling households — 25 percent — are those only 30 days past due. Many in this group often recoup with a late payment. This is shown by the significant drop — nearly 60 percent — between the percentage of homeowners 30 days late versus 60 days late. Generally, according to Wood, the severely threatened homeowner is defined as “seriously delinquent,” which includes homeowners 90 days or more delinquent plus those in the foreclosure process. The percent of mortgage loans seriously delinquent in Utah is 5.95 percent of all loans, which totals 25,900 homeowners. Utah ranks 27th among the states in the percent of mortgage loans seriously delinquent. “It is fair to say that 3 to 4 percent of Utah homeowners are suffering through a financial nightmare; nevertheless the financial incentives of homeownership — mortgage interest deduction, property tax deduction, capital gains exclusion and some future equity — combined with other non-economic advantages will continue to preserve and prolong the American Dream for most Utah households,” Wood concludes.
LEIGH from page 1
biodegradable, compose about 6 percent of the nation’s landfills. Blue Ridge Recycling, based in Charlotte, N.C., will collect carpet throughout the West for recycling at the Woods Cross facility, where workers will shear off the carpet’s fibers and bale them for use in a variety of products, ranging from composite decking to automotive products, Hicks-Chernez said. “Every ton of carpet we can recycle saves 198 gallons of oil and prevents the emission of two metric tons of greenhouse gases,” said George Martin, executive vice president of marketing and sales for Leigh Fibers. “Our goal is to reduce the over six billion pounds of post-consumer carpet waste that goes into landfills each year, while giving customers the high-quality materials they need to mold new products. Not many U.S. companies have the capability to separate the face fibers from the carpet backing and sort them by type. And fewer still can turn those fibers into pellets, ready for [plastics] molders to use. Leigh Carpet & Plastics Recycling has the equipment and experience to do both.”
July 11-17, 2011
Utah 27.2 percent higher than national average in technology jobs per capita, according to report Utah is 27.2 percent higher than the national average in technology organizations per capita, according to data compiled from the 2008-2009 Workforce Data Report, according to the Utah Technology Council. The state is 20.9 percent above national average for tech employment per capita, according to UTC, as compared with other western states and with the U.S. overall. In 2009, Utah’s technology firms produced more than $4.5 billion in wages for the state; information technology accounted for more than $3 billion in Utah wages while life sciences accounted for $1.5 billion in wages. The growth of technologyrelated businesses as defined by 61 selected national NAIC codes from 2009-2010 was modest — .9 percent. However, during a period marked by extreme recession, Utah has fared better than most U.S. states, said UTC founder and
chairman Richard Nelson. “Utah’s tech industries employ more than 76,000 Utahns with an average salary that is 62 percent higher than the average non agricultural wage,” Nelson said. “In 2010 we exported more than $1.8 billion in computer and electronic parts and more than $564 million in medical device products. Clearly, our technology companies continue to be the lifeblood of our state.” Legislative actions were a huge priority for 2011, Nelson said, with UTC taking direct involvement in more than 15 high priorities to protect and grow the industry, with 14 of 15 achieved. Nelson also noted that Forbes recently ranked Utah the No. 1 state for business and careers, a characterization that he believes is heavily influenced by Utah’s technology companies and skilled technology workforce. Utah is home to nearly 6,000
JC Smedley’s Tex Mex and Barbecue is slated to open this month at 305 N. Main St., Bountiful, in a structure built in 1893. It will replace the Sego Lily Cafe, which, according to JC’s co-owner Christine Healy, closed after it lost its chef. JC’s will have seating for 75 inside and 75 outside and will serve lunch and dinner, she said, eventually expanding to serve Sunday brunch. A daily lunch special costing $5.99 will be on the menu. JC’s will be open Monday through Saturday and will open with a beer license. A full liquor license is being sought from the state; there will be a beer garden on the property’s north side. The name JC’s was
chosen not only because of James Smedley, who constructed the building, but also because the eatery’s chef is named James Davison and Healy’s ﬁrst name is Christine. She and her husband Jack have owned the building, in partnership with Richard and Alice Smith, for a number of years. Alice Smith, the granddaughter of James Smedley, was raised in the historic structure.
technology companies. These firms reside most strongly in Salt Lake County, with 53.9 percent, followed by Utah County with 20.3 percent and Davis County with 8 percent. Some of the most surprising changes UTC notes in the 2010 data are that while the total number of technology companies in Salt Lake County has declined slightly (1.8 percent) from 2009, Utah County’s tech presence has continued to grow, with an increase of 5.1 percent, Davis County increased by 3.6 percent and Washington County, much smaller in its total numbers, recorded an increase of 10 percent in 2010. The U.S. Census Bureau ranked Utah No. 1 for computer ownership, while the Center for Digital Government has ranked the state as the No. 1 most technologically advanced state in the nation. TechAmerica Ranked Utah No. 1 in the nation for fastest high-tech growth during 2007-2008.
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• The Utah Association of Certified Public Accountants (UACPA), a nonprofit organization for certified public accountants in Utah, is gearing up for its annual golf tournament at Fox Hollow Golf Club in American Fork on Aug. 25. The tournament raises funds to support financial literacy programs offered by the Utah CPA Foundation. To register,
July 11-17, 2011
• Industry Briefs •
visit www.uacpa.org and search the course catalogue for “golf.” The cost is $350 for a team of four or $90 for an individual. Continental breakfast, green fees, cart and lunch are included.
ECONOMIC INDICATORS/ DEVELOPMENT
• EDCUtah, an investorbased public/private partnership
working to promote the state of Utah, has made additions to its staff. Todd Brightwell has been promoted to senior vice president of business development. Brightwell will lead the business development team and manage the recruiting process with clients. EDCUtah has also hired Beth Colosimo for the position of business development manager and Timothy Loftis as Salt Lake City
economic development manager. Colosimo will manage multiple projects that will include planning site visits, facilitating research and needs assessment for corporate real estate representatives and national site selectors pursuing interest in Utah. Loftis’ primary responsibility will be to sell downtown Salt Lake City.
Utah State University Research Foundation’s Energy Dynamics Laboratory, a company that develops and deploys transformational energy systems, headquartered in Logan, operated the first highpower, high-efficiency wireless power transfer system capable of transferring enough energy to quickly charge an electric vehicle. The system demonstrated 90 percent electrical transfer efficiency of five kilowatts over an air gap of 10 inches, proving that electric vehicles can be efficiently charged with wireless technology. The wireless power transfer technology will be discussed with industry leaders from around the world and demonstrated during the Conference on Electric Roads and Vehicles, Feb. 27-28, 2012 in Park City.
• VentureCapital.org and the Wayne Brown Institute, sponsors of the 2012 Investors Choice Conference, are accepting early bird submissions from startup companies that are preparing to raise money to grow their businesses. The event will be held at Zermatt Resort and Spa in Midway on Feb. 9, 2012. Companies selected will be screened and mentored through a number of sessions with teams of professionals throughout the angel and venture capital field. After practice presentations, the companies will then make their pitch at the conference in hopes of raising capital with investors. Deadline for early bird submissions is Sept. 30. For submission information, visit venturecapital. org.
• Spectra Management, a provider of health insurance, savings and retirement plans, Salt Lake City, has hired Deb continued on page 9
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July 11-17, 2011
Legal Matters Legal Matters Matters Legal Raising capital: overview of securities laws A company attempting to raise funds by issuing securities needs to comply with federal and state securities laws. Securities laws regulate the manner in which all securities, including stock and debt instruments, can be sold. Securities laws may also dictate the amount of securities that can be offered and the persons to whom securities can be offered in a particular offering. Securities laws are Nate exceedingly complex and technical. To add to the complexity, federal and state securities laws are not completely consistent with each other, and compliance with federal securities laws does not assure compliance with applicable state securities laws. In addition, a particular transaction may require a business to comply with the securities laws of several states, all of which may be different from each other. Compliance with applicable federal and state securities laws is important even
with respect to sales of securities to friends or family members, which are not uncommon at the start-up or development stages of a business. A failure to comply with these securities laws can result in significant penalties for both a company and its directors and officers. Some of these penalties include imprisonment, monetary fines, refund of amounts paid Brower by investors and prohibition on conducting future sales. This article has been prepared to provide entrepreneurs and other business owners with a general understanding of securities laws. Businesses interested in raising capital should seek competent professional advice, both legal and financial, prior to commencing any capital raising activities. What is a Security? Companies are often surprised to learn that they have sold a security without complying with
securities laws. This surprise is attributed to a lack of understanding of the term “security.” Most people think a security is a share of stock. However, the definition of security for purposes of federal securities laws is quite broad, and includes, in addition to stock, any note, bond, evidence of indebtedness, option or investment contract. This broad definition of security means that virtually any type of instrument in which the investor has a reasonable expectation of profit solely as a result of the investment of money will be subject to the rigor of the federal securities laws, regardless of the structure of the investment. For example, a company that sold investors strips of land in an orange grove and then entered into contracts with the investors to cultivate the land and harvest the oranges on behalf of the investors was found to have engaged in the sale of a security. Another consequence of the broad definition of a security is that a company that borrows money and issues a
promissory note as evidence of indebtedness has engaged in the sale of a security for purposes of federal securities laws. This example illustrates how a company can unwittingly run afoul of securities laws which, as alluded to earlier, can have significant adverse effects on the company and its officers. Other common types of securities that newly formed companies often sell to raise capital include common stock, preferred stock, promissory notes, convertible notes, options, warrants, units and limited liability company interests. Registration or Exemption In order to comply with federal securities laws, a person selling any security, must either “register” such sale with the SEC or identify a specific exemption that allows such sale to be conducted without registration. Because the cost of registration is prohibitively expensive for most companies, most companies seek an exemption from registration. The most common exemptions used
for early-stage capital raising are the “private placement” exemptions. Private placement exemptions are often utilized when a relatively small amount of money is being raised from a limited number of investors. The private placement exemptions consist of Regulation D and Section 4(2) of the Securities Act. Regulation D The substance of Regulation D is contained in three separate rules of the Securities Act, Rules 504, 505 and 506. Each of these rules allows a company to raise different amounts of money, and each contains different requirements that must be complied with when conducting an offering under such rule. A key definition embodied in Regulation D is the term “accredited investor.” An accredited investor is generally an individual who meets certain minimum requirements with regard to their net worth. The concept of an “accred-
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July 11-17, 2011
SECURITIES from previous page
ited investor” is important for two reasons. First, both Rule 505 and Rule 506 allow sales to be made to an unlimited number of accredited investors. This is particularly noteworthy for offerings made under Rule 506, which has no limitation on the offering amount, because by targeting a large number of accredited investors, a substantial amount of money can be raised. Secondly, if securities are sold to a non-accredited investor under either Rule 505 or Rule 506, the investor must be furnished with specific information about the business. The amount of information that must be furnished is dependent upon the size of the offering. However, regardless of the size of the offering, some audited financial information will need to be provided to the non-accredited investor. The cost of preparing audited financial statements can be prohibitively expensive for businesses. Therefore, most businesses conducting an offering under Rule 505 or Rule 506 will sell only to accredited investors. It is important to note that Regulation D does not provide an exemption from anti-fraud, civil liability and other provisions of the federal securities laws. Accordingly, regardless of the requirements of any particular exemption, businesses should always consider the appro-
priateness of full and complete disclosure of all material information regardless of the requirements of Regulation D. If there is some materially adverse information about a business that has not been made public, such information should be disclosed to investors prior to a sale of securities. If such information is withheld, a purchaser may be able to rescind the transaction at a later date. Section 4(2) Under Section 4(2) of the Securities Act, a transaction by an issuer “not involving a public offering” is exempt from registration. Unfortunately, Section 4(2) does not provide any guidelines as to what does and does not constitute a “public offering.” While a company can assure itself of compliance with federal securities laws by following the specific rules set forth in Regulation D, a company that avails itself of an exemption under Section 4(2) cannot look to a set of requirements that must be followed to assure compliance with federal securities laws. A company seeking to determine whether an offering will be exempt from registration under Section 4(2) will need to evaluate a number of factors which, although routinely addressed by courts, seldom lead to a definitive answer as to whether an offering is a “public offering” under Section 4(2). Different courts emphasize different factors critical to the Section 4(2) exemption, no single one of which
will necessarily control. These factors are simply used as guidelines. The five factors given the most weight in this determination are the sophistication of the offerees; whether the company engaged in advertising or other promotional activities; availability and accuracy of information, including financial information, given to offerees and purchasers; number of offerees and number of purchasers; and absence of intent to redistribute the securities. Generally, the fewer offerees and the more current the information available, the more likely it is that an offering will not be considered a “public offering.” Due to the uncertainty about whether any particular offering will constitute a public offering, most companies prefer to rely upon Regulation D instead of Section 4(2) when conducting a securities offering. Nathan G. Brower is an attorney at Strong & Hanni Law Firm. His practice focuses primarily on corporate and securities law for businesses of all sizes. He has significant experience representing clients with private equity transactions, mergers and acquisitions, SEC reporting, private placements, public offerings and other business transactions. He can be reached at nbrower@ stronandhanni.com or (801) 5327080.
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6/29/11 9:47 AM
from page 6
July 11-17, 2011 Rosenhan as the firm’s chief operating officer. Prior to joining Spectra, Rosenhan worked at Altius Health Plans in Salt Lake City as vice president of sales and marketing. Her previous work includes sales management positions as well as account services and regional manager positions with Intermountain Healthcare. • Kristen Cox, executive director for Utah’s Department of Workforce Services, received the “UI Integrity Award” from the National Foundation for Unemployment Compensation and Workers’ Compensation. The Integrity award is given to an individual who has demonstrated commitment to preserving the unemployment system. Utah is recognized as a leading state in the nation for administering the Unemployment Insurance Program. The National Foundation for Unemployment Compensation and Workers’ Compensation helps individuals from industry, government, associations and other professions gain an understanding of
the nation’s unemployment insurance and workers compensation laws.
LAW • Scott Sabey, attorney
with Fabian Law, a law firm based in Salt Lake City, has been elected chairman of the Sandy City Planning Commission. Sabey practices real estate and business law and related litigation. He is also a lobbyist for the MPAA, Aflac and other national organizations. • Matthew Anderson, an attorney with Fabian Law, Salt Lake City, has been appointed to serve on the Kaysville City Planning Commission. Anderson represents clients in commercial litigation matters, including real property, secured lending, bankruptcy and complex collection actions. He also assists clients in transactional matters including real property conveyances, secured lending agreements and debt restructuring.
MEDIA/MARKETING • C&S Creative, Park
City, an advertising and strategic communications firm, has hired Micheala Kerr as account manager and Web designer. Kerr graduated from the University of Utah in 2009 with a bachelor’s degree in public relations. Additionally, she completed an extended program in Web design and development.
NATURAL RESOURCES • David Houghton,
Price, has been named director of the Utah Office of Coal Mining Safety (OCMS). The OCMS exists to maximize coal mine safety, prevent coal mine accidents and provide for effective coal mine accident response in the state. Houghton has been employed in the coal mining industry in Utah for 36 years and has worked in many of the coal mines in the Carbon and Emery county areas. • Kennecott Utah Copper’s Bingham Canyon Mine is offering free admission to its visitor center through July 17. The visitors center is opened daily from 8 a.m to 8 p.m. Tour buses and mini-tour buses remain
at their fee rate throughout the season and require an entry form. Outside of the free days, the regular rate for passenger vehicles is $5 per car.
PHILANTHROPY • DesignBuildBLUFF, a
group of graduate students that choose a Navajo family in need of a home each semester, has created a program called Design Build Buy to raise funds for houses by partnering with businesses in Park City. Every week during summer months in Park City and Salt Lake City, a new partner will donate proceeds of sales to DesignBuildBLUFF. Partners of the program include Mary Jane’s, High West Distillery, Park City Coffee Roasters the Paisley Pomegranite and the Exchange. Interested partners can contact DesignBuildBluff at email@example.com, or (435) 649-0780.
REAL ESTATE • International Paper, a
Lake City-based industrial real estate firm, to market their facilities as a result of the consolidation of their its brands — Xpedx, Western Paper and Zellerbach — into one 277,000 square foot facility in the Landmark Industrial Park. Of the four facilities, two will be subleased and two will be sold. International Paper plans to move into its new facility later this year. The four former facilities, totaling more than 300,000 square feet, continued on next page
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10 from previous page will become available at that time and are currently being marketed by Michael Jeppesen and Jeremy Jensen of IPG Commercial. • KBS Capital Advisors has signed four long-term new and renewal leases totaling more than 78,000 square feet at South Towne Corporate Center in Sandy. Constituting more than 30 percent of the 248,352 square foot building, the leases bring total occupancy of South Towne Corporate Center to more than 93 percent. The Class A, two-building office property was acquired in 2007 as part of the KBS REIT I portfolio. The four leases are with Ampian Staffing , a staffing organization headquartered in Salt Lake City that inked a new lease for 3,810 square feet in Building I; SecureAlert , an international provider of electronic monitoring systems, case management and services, that finalized an expansion agreement of 3,356 square feet in Building I, bringing its total building presence to 11,462 square feet; Moreton & Co. of Salt Lake City, the largest privately owned insurance brokerage firm in the Intermountain West, which signed a lease extension and expansion from 3,356 square feet to 5,658 square feet in Building II; and E*TRADE Financial Corp. , a financial services company based in New York, which renewed a lease totaling 65,388 square feet in Building II. Scott Wilmarth of CBRE in Salt Lake City represented E*TRADE Financial Corporation and Moreton & Co. Cody Black of Coldwell Banker in Salt Lake City represented Ampian Staffing in the lease agreement. Nadia Letey of CBRE’s Salt Lake
July 11-17, 2011
The Enterprise City office represented KBS in all four transactions. • Home sales in Salt Lake County in May were down, but pending sales for the month were up 58 percent, according to the Salt Lake Board of Realtors. In May, there were 1,026 closed home sales, a 20 percent drop compared to 1,278 closed sales in May 2010. However, pending sales (signed purchase contracts on a home) rose to 1,135 contracts in May, up 58 percent compared to 720 pending sales in May 2010. The median home sales price (all housing types) in May declined to $186,200, a 6.9 percent decrease compared to a median price of $200,000 in May 2010. Based on sales trends over the past year, there is an 8.8-month supply of housing inventory in Salt Lake County, up slightly from an 8.3month supply of inventory in May 2010.
• Fifty of Utah’s chefs and restaurants will participate in Share Our Strength’s Taste of the Nation Utah, the state’s most popular culinary benefit, at Solitude Mountain Resort on Aug. 7 from noon to 4 p.m. Taste of the Nation utah will raise funds to support Share Our Strength’s efforts to end childhood hunger in Utah and across the nation. Guests can enjoy live music, a silent auction and dining experiences. One hundred percent of ticket sales go toward the Share Our Strength’s program. Tickets are $75 for general admission and $125 for reserved seating, if purchased in advance. Purchase tickets online at www.TasteOfTheNation.org/ utah.
SPORTS • Utah’s “Life Elevated”
brand will be featured during the Larry H. Miller Tour of Utah, scheduled for Aug. 9-14. The Governor’s Office of Economic Development, The Utah Office of Tourism and the Utah Sports Commission partnered to sponsor the cycling event, which will be nationally broadcast and available to a worldwide audience. Television spots and vignettes highlighting economic development will air on FOX Sports Network, ROOT Sports and KJZZ-TV. Host cities and venues for the 2011 Tour of Utah include Salt Lake City, Utah Olympic Park at Park City, Ogden City, XANGO headquarters near Provo, Vivint headquarters at The Shops at Riverwoods in Provo City, Snowbird Ski and Summer Resort and Miller Motorsports Park in Tooele.
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TRAVEL/TOURISM • Christopherson
Business Travel, Salt Lake City, is the largest travel management company in the western U.S. in air ticket sales, according to Business Travel News’ annual business travel survey. Surveying travel agencies since 1984, BTN ranks participating companies based on annual air ticket transaction and sales data. Christopherson increased 2010 air sales over 2009 by 23 percent to $121,367,106. Ranking second in the West in 2010 air transactions (number of tickets sold, excluding refunds, exchanges and voids), the firm saw a nine percent increase over 2009 to 212,841. Embarking on third quarter, the company’s overall bookings for 2011 are up 14 percent, signs of positive market-share gains.
Scott A. Newman Business Skills Program Director LDS Business College
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July 11-17, 2011
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There are fireworks everywhere, except in the sales profession By the time you read this, rather gripe. the holiday will be over. This par- Rather than griping that no ticular holiday was the Fourth of one is available, why don’t you July. take a few days off yourself and But it doesn’t matter which renew your attitude? Why don’t one it was, all holidays carry with you take a few days off and revive them the same sales stigmas: your attitude, so when you come • No one is in the office. back to work you’re in high gear • Everyone is on vacation. and high frame of mind? • Everyone left early. And please don’t think this • People aren’t willmessage is specificaling to meet with me until ly about the Fourth of after the holiday. July. It’s the same for • I can’t get anyone Christmas, New Years, on the phone. Thanksgiving, Labor • It’s a slow time of Day, Super Bowl, the year, I’d rather wait President’s Day and any until ____. (You can fill other day deemed by the in the blank.) government or you as a • It’s taking longer “holiday.” Jeffrey to get a decision made You, as a salesperson, Gitomer because of the holiday. already know the holi • Customers aren’t in days are coming. Your the mood to buy. job is to prepare your pipeline in • Blah, blah, blah. Puke. advance of the holiday so one day All of these excuses create after the holiday you are full of a frame of mind for salespeople meetings and full of activity that somewhere between, “I’m not is directly related to your sales going to make any sales,” and and your success. This way, when “I’ll just wait until the holiday is you do go away, you’ll feel great over.” Both of these thoughts are about leaving and great about recipes for sales disaster. coming home! NOTE WELL: Many deci- It never ceases to amaze me sion-makers stay in their office how many salespeople grumble until the day before the holiday. about “what isn’t” — The guy When there is no activity, execu- isn’t in. The guy isn’t calling me tives can get personal work done. back. Yadda, yadda — rather than Many business owners (like embrace and take advantage of me) stay in the office through “what is.” the holiday because all of their The fact is holidays are NOT employees want to take a well- a surprise. They’re are on the caldeserved extra day off. And some- endar years in advance. Everyone one has to be there to guard the knows when the Fourth of July business. occurs — it’s on July 4! Oftentimes, companies are in If your mindset is still “no the middle of important deals or one’s in their office. Everyone’s circumstances that preclude them on vacation,” take off the third, from taking extra time off around take off the fifth, go somewhere a holiday. to relax and come back to a full REALITY: calendar. • Every day is a sales day if Oh, and while you are on you believe it to be a sales day — vacation, read a book. and vice versa. • Everyone will return your call if you believe they will return Jeffrey Gitomer is the author of Social BOOM!, The Little Red your call. Book of Selling and The Little Gold • Everyone will return a Book of YES! Attitude. President favorable decision if you believe of Charlotte, N.C.-based Buy they will return a favorable deci- Gitomer, he gives seminars, runs sion. annual sales meetings and con When you’re lamenting your ducts Internet training programs fate, what you are really saying is, on selling and customer service “Based on the actions I’ve taken, at www.trainone.com. He can be and the results I’m getting, I really reached at (704_ 333-1112 or don’t believe strong enough in my firstname.lastname@example.org. © 2011 All Rights Reserved company, my product or myself.” If you would spend as much time strengthening your belief, taking better actions, and improving your value offerings as you did complaining that someone won’t return your call, or isn’t in their office, you could make a fortune. But most salespeople would
July 11-17, 2011
Six secrets for making your ads more effective If you haven’t figured it out by now, there is etc. a lot more to creating good ads — or marketing 5. Is the message in BENEFIT language? It’s projects of any kind for that matter — than merely one thing to have benefits, but if you put them in throwing something together and spending your feature language, you reduce their impact. On the hard-earned resources on media. other hand, you can put features in benefit language In my role as a marketing speaker, I have point- and improve their effectiveness. ed out many times how message trumps media time For example, a typical claim would be, “Our and time again. high-efficiency furnace saves you money.” Well, But people don’t like to spend their resources saving money is a benefit, but this statement is in on message. They think they need to spend them on FEATURE language. It talks “us” instead of “you.” media. Better said would be, “You’ll save money with our My point is, an investment in what you say can high-efficiency furnace.” That’s benefit language. be a tremendous multiplier of your media budget, By the same token, “Choose from three easy payeasily one worth investing either time or money in, ment plans,” is a feature. But we’ve made it sound or both. and feel like a benefit by starting the sentence with a If you create your own ads, these six criteverb (choose), which makes it sound like ria will keep your writing on target. If you hire a result, which is a benefit. somebody to create the ads for you, judge their 6. Does it have a compelling work by these six to make sure you’re getting OFFER? Maybe I should have put this in the best for your investment. the No. 2 position. Because offers come 1. Is there a good headline? Nothing is close behind headlines in importance for more important. Headlines MUST accomplish making your ads effective. In fact, with 50 percent of the work of all ads. That’s not the right headline and the right offer, you an arbitrary number. It is exact. The headdon’t have to have very good copy. Not line MUST capture attention AND CONVERT Jim Ackerman that you shouldn’t, but headlines and attention into interest. That is precisely half offers are so important to the success of the work of any ad. (The other 50 percent is your ads that if you get them right, you cultivating desire and inspiring action.) The headline may only need to make sure your body copy doesn’t MAY do more than that first 50 percent, but not less. get in the way. And don’t forget, since the headline is responsible Your offers are made of CONDITIONS and for the FIRST TWO functions of the ad, which hap- APPEALS. The conditions are the price of the prodpens before the “meat” of the message is delivered, uct and the terms or limitations. In other words, the and because if it fails, the meat never gets tasted, we things about the offer the prospect would just as soon say that the headline accounts for up to 80 percent of do without. But structured properly, they can provide the success of your ad. real incentive for the prospect to act now rather than It stands to reason, a lot of time should be spent delay. For example, offer ends Saturday or only 27 coming up with the right headline. units available are conditions that would discourage 2. Is the UPA — the UNIQUE PURCHASE delay. APPEAL in there? The UPA is one sentence to one Appeals are the pot-sweeteners that prospects paragraph that describes how your business is dif- like. Bonuses, premiums, free samples and guaranferent from the competition in a way that appeals to tees. your target customer. It must include a POINT OF Look at the ads that come to your mailbox, that ONLY-NESS. There may be a lot of ways to say it, you see on TV, hear on the radio, read in papers or but like the sauce, it’s gotta be “in there.” If you fail magazines or see online. Practice analyzing them to differentiate yourself from the competition, one of with these six criteria and your skills at creating and the consequences it that your ads may actually help evaluating your own ads will increase, your results your competition almost as much as it does you. And will improve and you’ll be rich by Tuesday. you certainly won’t be able to justify higher prices. 3. Are the BENEFITS clearly articulated? Jim Ackerman is a Salt Lake City-based marketing Typically, they’re not. It is dismaying that so many speaker, marketing coach, author and ad writer. For businesses are so focused on the features of their his speaking services, go to www.marketingspeakproduct, service or company that they forget the erjimackerman.com or contact him directly at mail@ ascendmarketing.com. Subscribe to his VLOGS at WIIFM (What’s In It For Me) that the prospect is www.YouTube.com/MarketingSpeakerJimA, where exclusively interested in. you get a video marketing tip of the day, and at www. Remember, there are two kinds of benefits. YouTube.com/GoodBadnUglyAds, where Ackerman Primary benefits are emotional in nature, appealing does a weekly ad critique and lets you do the same. ©2011, Jim Ackerman to our needs to feel important, to love and be loved, All Rights Reserved for variety and convenience. They are not immediately recognizable — unless you point them out — to your prospects, because they’re feelings-based. Secondary benefits are cognitive in nature. Less compelling normally, but easily recognized because they are immediately recognizable results. Like save money, save time, better fuel economy, greater control, etc. 4. Are the features featured? Just because benefits are the most important doesn’t mean there is no place for features. Your features provide the believability for your benefit promises. You’ll save money BECAUSE our car gets 35 mpg, or you’ll enjoy maximum health benefits because our brown glass bottles keep your supplements fresh longer. There are three kinds of features: Physical features are the physical characteristics of the product or service. A 6.2 liter engine, graphite frame, etc. Credibility features are often overlooked and very important. Thirty-five years experience, 97 percent customer satisfaction, etc. Deliver features are HOW you deliver your products or services. Twenty-four hour service, three easy payment plans,
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Austerity — the concept of ration and production technology a nation living within its means should help keep prices under conwill spread across Southern Europe trol over the longer-term horizon. as European authorities, the IMF At the same time, what happens in and global financial markets demand Northern Africa and the Middle East change. The Greek people hate it. still counts big-time. Banks (European) — one of Politics — a number of major the major incentives for German and nations have moved to the “right” in French leadership to throw hundreds recent elections, with an eye toward of billions of euros at Greece, Ireland reversing some of the massive govand Portugal? G&F banks own mas- ernment expansion of prior years. sive amounts of bonds issued by the The U.S. in ’12? smaller nations. Quagmires — as before, China — government efforts to there never seems to be a shortkeep inflation and excessive age. Today’s list includes lending under wraps, while Afghanistan, Chechnya, also avoiding a real estate Iran, Iraq, Libya, the Sudan bubble, should see this jugand the Middle East. gernaut’s growth pace slow Russia — corrupsomewhat. tion, crime and questions Dollar — with no shortabout whether Medvedev age of critics, the American or Putin will be “minding currency will remain the the store” in coming years global community’s “primary Jeff Thredgold make life a challenge. currency” for years to come. Saudi Arabia — Europe — here’s whether the tens of billions thinkin’ the Germans and the French of dollars the Saudi king is throwing wish they had never heard of the at unemployed young people will “European integration” concept. keep social unrest under wraps will Financial System — the U.S. be a key factor in oil prices in comand global financial systems emerged ing years. from the Great Recession bruised Travel — spending on globand battered, but still largely viable. al tourism remains solid, even as The eventuality of a Greek default in visitors largely avoid political “hot one form or another could challenge spots.” Those visiting the U.S. are it again. BIG spenders. Global Economy — slow- U.S.A. — nearly three times ing down a bit as the U.S., China, the size of China’s $5.5 trillion and India downshift.�� Europe will annual economy, with one-fourth as be sluggish (with the exception of a many people. In my book that says solid German economy.) American workers are roughly 10 to Hunger — a child starves to 12 times more productive. death every six seconds somewhere Volatility — pick any descripin the world. Can’t we work together tor — economic, financial market, to stop this travesty? political. Inflation — higher oil and food Wallets — lighter these days prices have hurt hundreds of millions for millions of people around the of people around the globe. world after the Great Recession led Japan — very sluggish eco- to the loss of more than 50 milnomic growth (at best) over the past lion jobs globally. Hits to retirement 20 years, after powerful performance funds and housing values globally in the ’60s, ’70s and ’80s. Tens of hasn’t helped either. millions of Japanese citizens won- eXports — a bright spot of der, “what happened?” overall sluggish U.S. economic Korea (North) — massive fail- growth of the past 12 months, with ure of this centrally planned econ- nearly a 20 percent annual rise. Like omy leads to frequent “saber rat- it or not, a modestly weaker dollar tling.” Meanwhile, the South Korean has helped. economy continues to prosper. Young People (around the Latin and South America world) — facing a rising tax bur— growth prospects from mild den in coming decades to finance to strong, with Brazil leading the the retirement years of baby boomway. Excessive government bureau- ers (and boomers’ parents) if minor cracy and corruption in the region changes are not soon made. will limit gains. Zones (trading) — as before, Mexico — even as drug cartel Asian, European and North American violence dominates the headlines, trade zones will dominate trade economic growth has been the best flows. in 10 years. Greater employment opportunities at home are most welJeff Thredgold is the only economist in come. the world to have ever earned the CSP Neighbor to the North — (Certified Speaking Professional) Canadian economic growth has international designation, the highest slowed in recent months. Still, by earned designation in professional most measures, this nation is outper- speaking. He is the author of econAforming its southern neighbor. merica, released by major publisher Oil — major advances in explo- Wiley & Sons, and serves as economic consultant to Zions Bank.
July 11-17, 2011
If you're dialing a 1 or a 9 before you make a phone call, something's wrong Recent developments in technology have businesses efficiently and effectively. rapidly changed the way companies are commu- SIP is no longer in its infancy. According nicating to their employees, customers and busi- to Frost & Sullivan, SIP trunks will increase ness partners. How can you tell? Try dialing an from 950,000 in 2006 to about 14.52 million in outside line beginning with the area code or the 2012. The early majority is beginning to see SIP’s number first. Those calls that go through are uti- value, and adoption is increasing at an acceleratlizing today’s voice and data transport of choice, ing rate. The core reason SIP is here to stay is Session Initiation Protocol (SIP). because it’s simple. Rather than having to track, If you have to dial a 1 or a 9 before you make analyze and spend money managing several difa phone call, you might as well be using smoke ferent streams of communication, SIP gives busisignals to communicate. Now ready for prime nesses a single transport to focus on. A few years time, SIP has opened the floodgates for ago the market didn’t have the capability small to mid-sized businesses to bento properly support SIP, but technology efit from greater business applications, has evolved. reduced costs and enhanced efficiency. For most companies, the transition to SIP is an Internet-based protocol that SIP will come with all new technology, is enabling an unseen level of flexibility including a phone system containing to end-users. Similar to the way Apple’s all of the latest applications that drive iPhone redefined what we expect from Jay Brown profitability, employee productivity and our cell phone’s functionality, SIP is on competitive advantages. By eliminatthe leading edge of unified communicaing traditional phone lines and turning tions. The convergence of voice and data onto the to SIP, the ROI for new equipment comes in a same network has forced the demand in the mar- matter of months rather than years. With a recent ketplace for a single solution. SIP is the “missing AT&T statement advising the federal governlink” required to connect these two networks and ment to move away from “plain-old telephone the cost justifications are supporting this transi- service”, known in the industry as POTS and the tion. Public Switched Telephone Network (PSTN), SIP What makes SIP so special? is eventually inevitable for all businesses. So the In simple terms, SIP supports any form of question becomes why not benefit from SIP now real-time communication regardless of whether and gain a leg up on the competition, instead of the content is voice, video, instant messaging waiting for the train to pass you by later? The SIP or a collaboration application. Additionally, SIP train is here ... all aboard. enables users to inform others of their status, their availability and how they can be contacted before communication is even initiated. Due to Jay Brown is president of Murray-based TriTel the nature of IP communications, these benefits Networks Inc., a telephone and data communicaoften cost justify and provide business owners tions company established in 1984 He can be the return on investment they need to run their reached at (801) 2656-9292.
READ THE ENTERPRISE ONLINE
Everything in this issue — plus much, much more — is now available online, but you must establish an account with us to view it. To set up your account, e-mail Sarah at email@example.com.
July 11-17, 2011
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• Calendar •
• July 14, 11:45-2 p.m.: Utah Valley Entrepreneurial Forum “Top 25 Under Five” awards. In a tradition that goes back 12 years, UVEF grants the award to the best emerging companies (five years or younger) based on revenue growth and job creation. This year’s Top 25 created a combined 800 jobs and brought in nearly $190 million in revenue in 2010. Emcee will be Omniture co-founder John Pestana. Free to UVEF members, nonmembers pay $25. Register at http:// uvef.net. • July 19, noon-1:30 p.m.: “Selling and Licensing Technology in Emerging Markets,” a Utah Technology Council international clinic. David Rudd, chair of the International Practice Group at Ballard Spahr, and Barbara Bagnasacco, vice chair of the International Practice Group, will discuss legal considerations in selling and transferring technology in foreign markets and strategic tips on how to minimize risks. Location is the offices of Ballard Spahr, 201 S. Main St., Suite 800, Salt Lake City. Free to UTC members, nonmembers pay $30. Register at www.utahtech.org. • July 29, 1-3 p.m.: “Tips and Tactics for Using Even A Little PR for Maximum Business Results,” sponsored by the Utah Technology Council. The team from Snapp Conner PR will lead
July 11-17, 2011
this PR clinic with information on how companies of all sizes — even without a PR agency or the ability for a formal program engagement — can be savvy about creating PR opportunities that can put their organizations on the map. Location is Argosy University, 121 West Election Road, Room 328/329, Draper. Free to UTC members, nonmembers pay $30. Register at www.utahtech.org. • Aug. 11-Sept. 8, Thursdays from 8 a.m.-4 p.m.: Supervisory Skills Program-Five-Day Certificate Program, sponsored by The Employers Council. The program is designed to provide participants with thorough knowledge of contemporary skills to be effective in the workplace. Instructor will be Dr. Brent Soffe. Location is the Salt Lake Community College Downtown Campus, 231 E. 400 S., Salt Lake City. Cost is $640 for council members, $799 for nonmembers. Enrollment is limited to 30. Download the registration form at http://ecutah.org/ssp.pdf. • Aug. 18: Seventh Annual Utah Manufacturers Association Best Practices Expo. Location is Weber State University, Ogden. Cost is $30 for UMA members, $40 for nonmembers, including breakfast and lunch. RSVP to Teresa Thomas by Aug. 14 at (801) 363-3885 or firstname.lastname@example.org.
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July 11-17, 2011
Four trillion for war — and rising
Anyone paying attention to Research Project, a group of scholthe costs of U.S. military action ars, diplomats and other experts in Iraq and Afghanistan must based at Brown University’s have known that the president Watson Institute for International badly underestimated those num- Studies. The Eisenhower study bers on June 22, when he told doesn’t scant the human damage, which its authors say has the nation that we have been underestimated as spent “a trillion dollars” badly as the fiscal costs. waging war over the past According to them, “an decade. For well over two extremely conservayears, we have known that the total monetary cost of tive estimate of the toll in direct war dead and those wars will eventually wounded is about 225,000 amount to well over $2 dead and about 365,000 trillion, and might well rise higher, according to Joe Conason physically wounded in these wars so far” — Nobel economist Joseph Stiglitz and his associate Linda including those in Pakistan, which is embroiled in war just as lethally Bilmes. What we didn’t know until as Afghanistan. The American military dead this week is that the expense in constant dollars — leaving aside in all three countries now total the horrific price paid by the dead, more than 6,000, a figure that does wounded, displaced and ruined in not include another 2,300 in U.S. every country — will likely reach military contractors; the American well over $4.4 trillion. wounded, military and civilian, are That is the conclusion of a well over 100,000, which doesn’t study released by the Eisenhower include the psychological destruc-
July 11-17, 2011
tion wreaked on those who served and their families. The most obvious indicator is the exceptionally high suicide rate among the million or more returned veterans. The Eisenhower study’s authors concede that they cannot readily estimate the full value of the economic and social damage we have sustained as a nation — in lost years of work and wrecked families, as well as huge interest costs on the money borrowed to finance these interventions. Nor can they fully account for the growth and investment forfeited because such a great proportion of the nation’s resources was squandered on war rather than pressing needs in infrastructure, energy, education and health. For less than 5 percent of what we have spent on war -to consider one example among many — we could have completed an American high-speed rail system and repaired most of our crumbling infrastructure, too.
Even if the current war could somehow be concluded instantly, however, the moral and fiscal obligations incurred so far will continue for decades. Beyond the mandatory disability payments, medical and psychiatric care, and additional benefits to which our veterans are entitled, we will face the prospect of increasing military budgets to restore the equipment and readiness of the battered Army and National Guard. And those costs in turn will subtract from the scant dollars left for domestic programs — as President Eisenhower himself observed when he said, “Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed.” It is sobering to revisit the question of what war has cost us in this generation at a moment when the debate over the nation’s
finances is so furious and yet so often frivolous. But it is ever more important to remember how we arrived at this dead end, especially as we listen to the braying Republican leaders who refuse to consider any tax increase. Our fiscal woe is the legacy of their policy, waging war at enormous expense, while sharply reducing taxes on the rich. What we live with now is what “conservatism” has wrought. Joe Conason’s articles have been published in Harper’s, The Nation, The New Republic, The Guardian (London) and The New Yorker, among many other periodicals in the United States and abroad. He also appears frequently as a commentator on television and radio programs. A winner of the New York Press Club’s Byline Award, he has covered every American presidential election since 1980. Copyright 2011 Creators Syndicate
July 11-17, 2011
Politics versus reality It is hard to understand poli- for the rich” to continue — show tics if you are hung up on reality. not the slightest interest in the hisPoliticians leave reality to others. tory of what has actually happened What matters in politics is what when tax rates were raised to high you can get the voters to believe, levels on “the rich,” as compared whether it bears any resemblance to what has actually happened to reality or not. when there have been “tax cuts for Not only among polthe rich.” iticians, but also among As far as such peomuch of the media, and ple are concerned, those even among some of the questions have already public, the quest is not been settled by their for truth about reality but talking points. Why for talking points that fit a confuse the issue by vision or advance an agendigging into empirical da. Some seem to see it as evidence about what has Thomas a personal contest about actually happened when Sowell who is best at fencing with one policy or the other words. was followed? The current controversy over The political battles about whether to deal with our massive whether to have high tax rates on national debt by cutting spend- people in high income brackets ing, or whether instead to raise or to instead have “tax cuts for tax rates on “the rich,” is a classic the rich” have been fought out in example of talking points versus at least four different administrareality. tions in the 20th century — under Most of those who favor sim- Presidents Calvin Coolidge, John ply raising tax rates on “the rich” F. Kennedy, Ronald Reagan and — or who say that we cannot George W. Bush. afford to allow the Bush “tax cuts The empirical facts are there,
but they mean nothing if people don’t look at them, and instead rely on talking points. The first time this political battle was fought, during the Coolidge administration, the taxcutters won. The data show that “the rich” supplied less tax revenue to the government when the top income tax rate was 73 percent in 1921 than they supplied after the income tax rate was reduced to 24 percent in 1925. Because high tax rates can easily be avoided, both then and now, “the rich” were much less affected by high tax rates than was the economy and the people who were looking for jobs. After the Coolidge tax cuts, the increased economic activity led to unemployment rates that ranged from a high of 4.2 percent to a low of 1.8 percent. But that is only a fact about reality — and, for many, reality has no such appeal as talking points. The same preference for talking points, and the same lack of
interest in digging into the facts about realities, prevails today in discussions of whether to have a government-controlled medical system. Since there are various countries, such as Canada and Britain, that have the kind of governmentcontrolled medical systems that some Americans advocate, you might think that there would be great interest in the quality of medical care in these countries. The data are readily available as to how many weeks or months people have to wait to see a primary care physician in such countries, and how many additional weeks or months they have to wait after they are referred to a surgeon or other specialist. There are data on how often their governments allow patients to receive the latest pharmaceutical drugs, as compared to how often Americans use such advanced medications. But supporters of government medical care show virtually no interest in such realities. Their
big talking point is that the life expectancy in the United States is not as long as in those other countries. End of discussion, as far as they are concerned. They have no interest in the reality that medical care has much less effect on death rates from homicide, obesity, and narcotics addiction than it has on death rates from cancer or other conditions that doctors can do something about. Americans survive various cancers better than people anywhere else. Americans also get to see doctors much sooner for medical treatment in general. Talking points trump reality in political discussions of many other issues, from gun control to rent control. Reality simply does not have the pizzazz of clever talking points. Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His Web site is www.tsowell.com. Copyright 2011 Creators Syndicate
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