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Welcome
Welcome to the
November 2002 edition of The Riser Report. The Riser Report is a
periodic publication covering issues and opinions related to
asset protection and estate and tax planning. The Riser Report
is published by Christopher M. Riser, of
Axius Risk Consulting LLC
(http://www.axiusgroup.com)
an international tax and asset protection planning consulting
firm with offices in Atlanta and London and
The Riser Law Firm PLLC (http://www.riserlaw.com),
with offices in Atlanta, Georgia and Highlands, North Carolina.
The Riser Report
is sent by electronic mail to subscribers of our companion
publication, The Adkisson Analysis,
and vice versa. If you aren’t already a subscriber to The Riser
Report, please subscribe at
www.riserreport.com/subscribe.htm. Please subscribe to The
Adkisson Analysis at www.falc.com.
Beginning in
November 2002, subscribers of The Riser Report will receive the
in-depth online periodical (like this one, i.e., with in-depth
feature stories) and weekly e-mail news briefs and tips related
to tax and asset protection planning. If you are familiar
with past editions of The Riser Report, the new weekly e-mail
briefs will contain information and stories such as were
formerly covered in the "Briefly Noted" section of The Riser
Report. Additionally, the new weekly e-mail briefs will
contain asset protection and tax planning tips and information.
The future for tax
planning and asset protection planning with tax-qualified
retirement plans looks bright. I provide
an overview of the Section 412(i) defined benefit plan, a
particularly useful tax and asset protection planning tool.
However, in the spirit of "if it sounds too good to be true, it
probably is" I also give some warning signs of a potentially
abusive 412(i) plan.
The IRS recently
issued Private Letter Ruling 200244001 dealing with private
placement variable life insurance. I
review the ruling and its implications for planning in this
area.
More and more
people from around the world, whether driven by tax motives,
privacy motives or otherwise, are seeking second passports.
Read on as I review the second citizenship
program offered by the Caribbean country of Dominica.
Winding up this
issue is a review of Philip Kaplan's F'd
Companies: Spectacular Dot-Com Flameouts.
Reading
F'd Companies is sort of the businessperson's equivalent
of watching the Jerry Springer Show, but it's such a wickedly
fun, quick and entertaining read about the spectacular greed and
audacity of a hundred internet Dot-Bombs.
Oh - and last, but
certainly not least, not in my house anyway - there's
an important family announcement regarding
a little future offshore planner.
Comments and
suggestions are always welcome. Email them to
comments@riserreport.com or use the feedback form on The
Riser Report Web site at
www.riserreport.com/feedback.htm.
Section 412(i) Plans for Tax and Asset
Protection Planning
Contributions made to a tax-qualified retirement plan are
tax-deductible to the employer, and are not taxable to the
employee at the time of contribution. The investment
growth in the plan is tax-deferred. When the employee
retires and begins withdrawing funds from the plan, the
withdrawals are taxed as ordinary income.
There are
two basic types of tax-qualified retirement plans:
-
Defined
contribution plans; and
A
defined contribution plan specifies an amount of
contribution (e.g., 10% of salary, up to some maximum
amount) that will be made during the participant’s time in the
plan. However, the amount of the retirement benefit that the
employee will receive can vary greatly depending on the amount
of future contributions, time, and investment performance.
A defined benefit plan specifies the amount of benefit
the employee will receive at retirement It is the
"old-fashioned" pension plan, like those often (or that used to
be often offered) by very large corporations. The defined
benefit might be a specific dollar amount (e.g., $3000 per month
for life starting at age 62). It might be a percentage of
salary (e.g., 60% of your last month's salary).
Because a
defined benefit plan is designed to provide certain plan
balances of specific dollar amounts for participants of varying
ages, most defined benefit plans require complex actuarial
calculations to be performed by the plan administrator in order
to ensure that the plan meets the requirements for a
tax-qualified plan and is not underfunded or overfunded.
On the other hand,
the value
of a defined contribution plan at retirement simply is
what it is. If it is less than the participant hopes to
have to meet his lifestyle needs, then the participant has to
work longer, hope for better investment performance, or
reconsider his lifestyle.
A
“412(i) plan” is a type of defined benefit plan. As
with any other qualified plan, the employer gets a deduction for
contributions made to the 412(i) plan and the employee is taxed
when plan benefits are paid. A 412(i) plan is different
from other qualified plans only in the requirements for funding
the plan.
To meet
the rules of Section 412(i), the plan must be funded
exclusively with annuity contracts or a combination of life
insurance and annuity contracts issued and guaranteed by a life
insurance company. The plan must provide for level
annual premium payments that start when the employee begins
participating in the plan and are reduced by any policy
dividends paid (i.e., policy dividends don't increase the amount
of funding - they simply decrease the amount of premium
payable). Finally, a 412(i) plan must prohibit policy
loans and must prohibit an employee from granting a security
interest in plan assets to secure a third-party loan.
I can hear
future readers groaning as I type -- so what’s so great about
412(i) plans – they have to be funded with life insurance and
annuities?
OK, then,
here’s what’s so great about them:
-
There
are no limitations on contributions other than the
amounts required by the insurance and annuity policies to fund
the plan. So, for example, if the particular insurance
and annuity contracts used to fund the plan require $400,000
premiums, the allowed contribution and attendant deduction is
$400,000. This generally means that MUCH larger
contributions are allowed than with traditional defined
benefit plans, and MUCH MUCH MUCH MUCH MUCH (get the idea?)
larger contributions are allowed than with defined
contribution plans.
-
There
can be no possible overfunding or underfunding of the plan
as long as it stays a 412(i) plan. The plan will be
adequately funded for retirement and won't be subject to IRS
penalties to which other types of defined benefit plans might
be if overfunded.
-
The
assumptions underlying the plan funding are those guaranteed
by the insurance company, so the plan should hold up to IRS
scrutiny with no trouble. Beware, however, of abusive
plans with assumptions that simply don’t make sense (such
as a plan to which $1,000,000 in premiums have been
contributed over three years, but which has a cash value of
$100,000 at the end of the third year (part of a design to
allow a “roll out” the policies to the participant at a low
tax cost). Does that make economic sense to you?
It doesn’t to me. It won’t to the IRS either.
The IRS is actively looking for abusive 412(i) plans.
Stick to an economically sound plan.
-
The plan
is protected from the claims of creditors under the
Employment Retirement Income and Security Act (ERISA), one of
the strongest means of protecting assets. Normally,
ERISA qualified plans are of limited utility in short-term
asset protection planning because of funding limits.
412(i) plans can be
excellent asset protection vehicles because because 412(i)
plans can often allow for quick funding with large amounts of
cash.
-
Benefits
are guaranteed
by the insurance company, which means:
-
The
insurance company bears the investment risk.
-
The
benefits are not affected by market fluctuations.
-
The
guaranteed rates of return are almost always conservative,
which means that high premiums likely will be required in
the early years of the plan, which also means high
deductions and the ability to protect large amounts of
assets from creditors' claims.
-
It is
possible to completely fund in a short period of time
all of the benefits under the plan. If for example, a
doctor who made relatively little money in the first several
years of practice begins to make considerably more money in
the later years of his practice and wants to fund a guaranteed
retirement plan completely as quickly as possible, the 412(i)
plan would be an excellent choice.
The ideal
candidate
for a 412(i) plan generally would fit the following profile:
-
High
income - $200,000+/yr
-
Age 40
to 75
-
Few
employees
-
Stable
income
-
Wants or
needs to maximize tax-deferred income
-
Wants or
needs strong asset protection that can be implemented as
quickly as possible
Of course,
nothing is perfect. The 412(i) plan has a few potential
drawbacks, including:
-
No
investment control by the participant (although the plan
assets can later be rolled into a self-directed IRA)
-
There
is no flexibility in the amount or timing of the premiums
which fund the plan; and
-
No loans
are allowed.
The
maximum retirement benefit for any qualified plan is limited to
$160,000 per year (for 2002). There are limitations on
maximum lump sum payments as well, which are based on age and
current long-term interest rates. 412(i) plans usually are
designed to fund for the maximum annuity amount, despite the
fact that the plan will accumulate excess assets that cannot be
paid as a lump sum. This maximum funding continues
until the contract values projected at an actual expected rate
of return (as opposed to the guaranteed rate) would grow to be
equal to the lump sum maximum at retirement. Then the
annuity and life contracts in the plan could be continued as
paid up policies or surrendered. In any event, the plan
would cease to be a 412(i) plan and would become a traditional
defined benefit plan. Later, the plan can be “unfrozen”
and the defined benefit formula increased to use up the excess
value in the plan. Also, because the maximum amounts
allowed as lump sum payouts are increased by an annual cost of
living adjustment, what were once excess assets may become
allowable over time.
Another
approach is to fund a 412(i) plan at the maximum level for a
limited number of years and terminate the plan before retirement
while the assets do not exceed the lump sum limit. Then
the
412(i) plan assets could be rolled over into an IRA or to
another qualified defined contribution plan.
Planning
Example:
Dr. Jones
is a 60-year old physician in a solo medical practice. He
consistently earns $400,000 to $500,000 per year. Until now, he
has been contributing the maximum amount to a defined
contribution plan. His after-tax discretionary income is
invested in a portfolio of stocks and fixed income securities
held in a brokerage account. In today’s litigious climate and
in an era of skyrocketing malpractice premiums, he fears that he
may soon be unable to afford or even find any suitable
malpractice insurance. He fears that his salary -- both in the
years it is earned and while sitting exposed in a brokerage
account -- may be subjected to the claims of a judgment
creditor.
Certainly,
there are a number of potential asset protection tools Dr.
Jones’ advisor may suggest (a family limited partnership or LLC,
proper ownership of real estate, awareness and utilization of Dr. Jones’ state
law
exemptions, customized insurance solutions, etc.). One of the
most useful tools in his situation, particularly if there may be
imminent claims, would be the use of a 412(i) plan. The 412(i)
plan would allow Dr. Jones to shelter from tax and from
creditors perhaps as much as $350,000 or more this year and similarly
substantial amounts for the next several years until retirement.
For more
information on how a Section 412(i) plan might improve the tax
and asset protection situation for you or your clients, please
contact Chris Riser at
criser@axiusgroup.com or (404) 942-3553.
IRS Issues
Ruling on Private Placement Life Insurance Arrangement
The issue of who is considered the
owner, for income tax purposes, of assets held in the subaccounts of a
private placement variable life insurance policy was addressed recently in
Private Letter Ruling
200244001. The ruling was the result of a request (by the Bermuda and U.S.
subsidiaries of a large publicly traded life AA+ rated insurance company) to
rule specifically on a private placement variable life insurance arrangement
where the subaccounts of the life insurance policies would be invested in
hedge funds organized as partnerships the interests of which were offered in
exempt securities offerings to 100 or fewer accredited investors. This was to
be the first entry into the private placement market for this family of
insurance companies.
Variable life insurance
Variable life insurance is a type
of permanent life insurance that provides flexibility of premium payments and
death benefit coverage along with a rate of return on the savings portion of the
policy that varies depending on the performance of the underlying investments
(held in "subaccounts" for each policy). Tax-qualified variable life
insurance policies allow for tax-free buildup of investment value inside the
policy. Depending on the type of policy issued, the policyholder may have
tax-free access to the investment value by means of policy loans, and at death,
the beneficiaries of the policy receive the death benefit proceeds (less any
outstanding policy loans) free of income tax.
Among the requirements for a
variable life insurance policy to achieve tax-deferral on the buildup of
investment value, the Treasury Regulations interpreting section 817(h) of the
Internal Revenue Code (the section requiring adequate diversification of
investments) require that insurance companies not invest variable account assets
alongside the public in publicly available mutual funds. If an insurance
company wants variable account assets invested in mutual funds, the fund manager
must carve out a special "life insurance policy only" fund.
What the IRS said
In short, the IRS held in the
letter ruling that because the hedge funds in which the policy subaccounts
would be invested are available to the public and are not funds in which only
life insurance company subaccounts, then too much "investor control" exists and
thus the policies fail the
diversification rules of section 817(h) of the Internal Revenue Code. The
result is that the owner of such an insurance policy would be deemed to be the
owner of the underlying assets in the policy subaccounts and would be
taxable on the income thereof. Ouch.
What's odd about it
What first struck me as
particularly odd was not the IRS's position. Large variable life insurance
policies, particularly private placement policies which offer customized
investment choices, save policy owners billions of dollars in income tax on
policy investments each year. Congress allows them under the Internal Revenue
Code. The IRS doesn't like them. That's simple enough to understand.
What is more difficult to
understand was why the ruling was issued at all. Negative private letter
rulings are rarely issued. Private letter rulings are IRS rulings requested by
taxpayers and directed solely at the requesting taxpayer. Typically private
letter rulings are negotiated by the requesting taxpayer's counsel and IRS
counsel. If the IRS's position appears immovably contrary to the taxpayer's
position, and the taxpayer knows he is not going to get a favorable ruling, then
usually the taxpayer simply withdraws the ruling request and no ruling is
issued. However, that did not happen here. Why not?
First, we can rule out ignorance.
The firm that represented the insurance companies in this ruling is a
well-respected Washington D.C. firm with a great deal of experience in the
taxation of investment and insurance products and investment and insurance
product design. The insurance companies had to have wanted the negative ruling
to be issued.
A more cynical group believes that
the insurance companies allowed the ruling to be issued in order to sabotage other insurers who had already entered the private
placement market. If the ruling caused a stir in the high net worth client
estate planning and offshore planning community -- which it indeed has -- then
the insurers offering private placement life insurance might look foolish and
the companies that requested the ruling, now firmly on the other side of the
fence having never entered the market, would look brilliantly conservative to
potential clients and advisors.
The less cynical among us believe
that perhaps the insurance companies and their counsel wanted the ruling issued
because it would force the IRS to stake out a position which the insurance
companies could then pick apart in future litigation.
What might the ruling mean?
In any event the ruling was
issued. So, what does it mean? There appear to be three views:
Could it
mean the end of private placement policies?
How might the ruling mean the end
of private placement variable life insurance? Well, the ruling clearly calls on
insurers to require fund managers to create separate life-insurance-only mirror
funds for variable life insurance policy subaccounts. There aren't many
private placement variable life insurance policies out there. There may not be
enough demand for fund managers to agree to supply mirror funds. If not, the
market for private placement policies as hedge fund investment vehicles may dry
up.
I don't believe that this will be the case. I have talked to several small fund managers who have indicated a willingness to establish insurance-only
mirror funds for variable life insurance policies.
It might mean nothing
How could it be that the ruling
means nothing? There is a very credible argument that the whole notion of
"investor control" is inapplicable to variable policies and that only the
mechanical objective diversification rules found in the applicable treasury
regulations should apply to variable life insurance policies. The following
summary is based on the work of two prominent attorneys in the field of the
taxation of private placement life insurance products, Robert Colvin, of counsel
to Chamberlain Hrdlicka White Williams &
Martin, in Houston, and Jay Walker of J.A. Walker & Associates, P.C. in
Atlanta.
The IRS's "investor control"
argument is primarily based on the common law doctrine of "constructive
receipt." The IRS has stated in published
revenue rulings that a policy owner will be considered the owner of subaccount
assets if the owner possesses incidents of ownership in those assets.
Generally, under these revenue rulings, in order for the insurance company to be
considered the owner of the assets in a subaccount, control over individual
investment decisions must not be directly or indirectly in the hands of the policy owner.
There were a few revenue rulings
issued in the early 1980s and another in 1999 in which the IRS staked out its
argument. In the one case (Christofferson) dealing with the issue
(in the context of a variable annuity) in 1984, the IRS won its argument that
the taxpayers had enough control over the policy to render the income in the
subaccount taxable to them.
There is, however, a fundamental difference between
a
life insurance policy and an annuity. In order for a policy owner to
realize the full value of the investment subaccount under an insurance contract
before death, he must give up the right to a substantial death benefit. In contrast, the owner of an annuity
policy can surrender it
and receive the full value of the investment subaccount (less surrender
charges), but without having to give up any substantial rights other than the
right to receive income beyond his life expectancy; however, that right is
practically fungible - he can purchase that right again at any time from any
insurer. On the other hand, if he gives up insurance coverage, he may not
be able to get that coverage again for reasons of health or age.
Since the mini-flurry of activity in the early
1980s, Internal Revenue Code Section 817(h) was enacted and accompanying
regulations were issued. Code Section 817(h) and the Section 817
regulations provides that the investments of each subaccount underlying a
variable life insurance contract must be adequately diversified in accordance
with Treasury regulations in order for the policy to qualify as an annuity or
life insurance policy. There are fairly simple mechanical rules that are
applied to determine if a subaccount is adequately diversified.
Following the enactment of Section 817(h) and
the issuance of the 817 regulations, investor control rules may be applicable no
longer for the following reasons:
- Congress intended that the Section 817
regulations would address issues of diversification and investor control; the
regulations do address diversification, but do not address investor control
(in the explanation to the temporary IRC Section 817 diversification
regulations, Treasury noted that it would issue guidance under Section 817(d)
on investor control issues in final regulations. Final regulations have
never been issued under IRC Section 817(d)).
- Section 817(h)(2) provides that a subaccount will be considered "diversified" if it satisfies the diversification requirements applicable to regulated
investment companies (RICs) which permit the taxpayer to
invest up to 50% of the assets of a segregated account in companies controlled
by the taxpayer as long as no single investment in controlled companies exceeds
25% of the total value of the segregated account. Therefore, a certain degree of
investor control appears to be expressly permitted by Congress.
- The partnership look-through rules found in
the Section 817(h) regulations expressly refer to permitted investment in a
partnership "if the partnership interest is not registered under a Federal or
State law regulating the offering or sale of securities."
Indeed, the Code and regulations practically
invite
investment in private partnerships and in other investments over which the
policy owner may have some control.
However, in Rev. Rul. 99-44 the IRS
reasserted its view that investor control is still an issue, and clearly, in PLR
200244001, it is staking out that position once again. So, even if the
argument seems like a good one - and it is quite logical and sensible given the
current state of the law - one must be prepared to do battle with the IRS.
Although the IRS has not litigated the investor
control issue since 1984 (despite the explosive growth of variable annuity and
variable life insurance products), the issuance of PLR 200244001 may be the
harbinger of litigation to come.
It simply might mean proceed with caution
So, is there a middle ground that allows us to
use private placement variable life insurance in planning for our clients and
that allows us all to sleep well at night? I think so.
The IRS has issued a favorable ruling (PLR
9433030) on a private placement variable corporate-owned life insurance ("COLI")
arrangement in which, among other things, no employee would communicate directly
or indirectly with the insurer or investment advisor about the investments, the
owner could not select the investments to be made and the owner could not change
the pre-established investment guidelines. Quite conservative, but it
worked.
Furthermore, the IRS has ruled in the past (PLR
9839034 and PLR 9851044) that variable contracts can invest in public mutual
funds under "fund of funds" arrangements (as contrasted with direct investment
in otherwise publicly available funds, such as the privately offered hedge fund
partnership interests involved in PLR 200244001). Shares of such funds of funds
must be offered solely to insurance company subaccounts. A variable
contract that invests in such a fund of funds should not fail for investor
control issues merely because the fund of funds invests in publicly available
funds. Unless a policyowner is prepared to do battle with the IRS on this
issue, the solution will have to be that investment advisors associated with the
subaccounts will have to establish mirror funds solely for variable subaccounts.
Because the amounts invested in most private placement policies are substantial,
the annual costs incurred by an investment advisor to set up and run a mirror
fund (perhaps $5,000 to $10,000 annually) should not dissuade an advisor from
participating in a private placement arrangement.
So, within specific parameters, private
placement policies are acceptable to the IRS, even when the issue of investor
control is accepted as a given. PLR 9433030 provides a reasonable set of
guidelines for private placement policy structures and PLR 9839034 and PLR
9851044 provide guidelines for achieving specific investment objectives using
funds of funds to access publicly available funds.
If any reader has specific issues with an
in-force or contemplated policy with regard to investor control or
diversification, I would be happy to refer you to highly competent counsel in
Houston or Atlanta. Please contact me at
criser@riserlaw.com for further
information.
Second Citizenship:
Dominica's Economic Citizenship Program
| Dominica lies
in the center of the Caribbean Windward Islands, between
Guadeloupe and Martinique. It is a very scenic and wild
island with mountains, rivers, waterfalls, and even a
boiling lake. Dominica is fairly large as Caribbean islands
go - nearly 300 square miles. The island's population
is just over 70,000. |
 |
 |
There are two
major towns in in Dominica. The busy capital of Roseau
on the southwestern coast, is the island's commercial and
government center. Portsmouth on the northwestern coast is a
scenic smaller town which is the local cultural center for
the mostly American students, faculty and staff of the Ross
University of Medicine. Dominica is a democratic
republic with a parliamentary system of government. As
a former British colony, its legal system is based on
English common law. Dominica has an independent
judiciary with appeals being heard by the Eastern Caribbean
Court of Appeals and finally by the Privy Council of the
British Parliament. |
Dominica's economy
is predominantly agricultural, with bananas as the country's
principal export. The preferential treatment of Dominican
banana exports by the U.K. has come under attack in the World
Trade Organization. As a result, recent governments have
been attempting to diversify Dominica's economy into tourism and
financial services.
Part of this
diversification effort, Dominica's second
passport and economic citizenship program, was launched in 1993.
Dominica's program has been through numerous changes over the
last several years, most recently in 2002 when the required
investment amounts were substantially increased. The
government of Dominica sees this program as a significant source
of revenue, with several hundred economic citizenships being
granted since the program's launch. The revenue from
the program is directed toward public sector projects such as
schools, health care, a national sports stadium and promotion of
the offshore financial services sector. Private sector
projects are also being funded with an emphasis on tourism,
information technology and agriculture.
Since the Dominica
Labour Party gained power in 2000, the government of Dominica
has wavered on the issue of continuing its economic citizenship
program. Questions over whether to continue the program
resulted largely from the failure to complete a major hotel
project which was funded by the economic citizenship program.
However, in 2002, realizing that the revenue was too important
to lose, the government affirmed its support for the
continuation of the program.
Acquisition of
Dominican economic citizenship confers nearly the same rights as
citizenship by birth in Dominica. Dominican economic
citizenship allows the passport holder visa-free travel to
dozens of developed countries around the world.
Under the old program, a contribution to the Government of
US$50,000.00 would secure Dominican second citizenship for the
applicant, the applicant's spouse and two children under 18
years of age. Each additional child under 18 years of age was
required to pay US$10,000.00 and each additional child between
the ages of 18 and 25 was required to pay US$15,000.00.
Now, there are two options for obtaining economic citizenship
in Dominica: the family option and the single option.
The Family Option
-
The applicant
invests US$150,000 which qualifies for citizenship:
-
An additional
US$25,000 per child is required for each child under 25 years
old.
The Single
Option
In addition to the
total investment required, the following fees apply:
-
A non-refundable
application fee of US$200
-
A non-refundable
agent fee of US$1,000
-
A Registration
fee of US$1,000; and
-
A Stamp fee
US$50 per application.
The application
process can be expected to take about 90 days. A considerable
portion of this time is consumed by a background checks on the
applicant which is handled by a private investigative agency.
Furthermore, the applicant must travel to Dominica for an
interview.
Finally, as of
July 2002, all applications for economic citizenship in Dominica
must be made through a licensed agent, who need not be in
Dominica. Axius Risk Consulting LLC can make introductions
to qualified agents in Dominica.
The paperwork involved in the application process is extensive,
including:
-
Two completed
and notarized copies of the application form
-
A letter of
recommendation from the head of the school for children
between 16 and 18 years old
-
A professional
reference
-
A letter of
employment or, for self-employed persons, an audited financial
statement
-
A letter of
recommendation from the applicant's banker
-
Two personal
references
-
A declaration of
the source of the applicant's funds
-
A copy of the
applicant's most recent income tax return
-
A police report,
with fingerprints, from the applicant's country of birth and
country of residence (if different) for each applicant age 16
and over
-
Four passport
size photos for each applicant
-
Birth
certificate
-
Marriage
Certificate/Dissolution of Marriage
-
Medical
certificate attesting that the applicant is free of
communicable diseases
-
A letter
addressed to the Minister of Legal Affairs requesting
citizenship
-
Detailed
business background reports and a personal resume
-
Notarized copies
of university diplomas
-
A notarized
personal information disclosure form
In the next
issue of The Riser Report, we will examine the second
citizenship program of St. Kitts and Nevis.
Readers
interested in pursuing second citizenship programs are invited
to contact Chris Riser at
criser@axiusgroup.com
or by telephone at (404) 942-3553.
Book Review: F'd Companies: Spectacular Dot-Com Flameouts
 |
F'd Companies:
Spectacular Dot-Com Flameouts
by Philip J. Kaplan
Hardcover, 224 pages
Simon & Schuster
ISBN: 0743228626
Publisher's List Price: $18.00 |
The fact that I
bought and read this book on a business trip to San Francisco
made it that much more entertaining. Reading about the
internet flameout right smack in the middle of Dot Bomb Ground
Zero made for a wickedly fun couple of hours. We've all
heard a handful of stories about bad internet business ideas
gone -- well, bad -- but Philip J. Kaplan's F'd Companies,
published earlier this year, provides dozens more examples.
This quick read bluntly assesses the pretensions and audacity of
the founders and backers of one hundred internet business
disasters.
Sure, most of us
knew about the high-profile implosions of Webvan and Pets.com
(remember - we dog owners were supposed to jump at the chance to
pay $25 to order online and have a bag of dog food delivered a
week later even though we could buy the same bag at the corner
grocery store on the way home from work today for $15).
However, it's still fun to read the pithy truths (e.g, Webvan is
"a classic example of PAYING more for products than they were
SELLING them for") Kaplan drops on his readers. But Kaplan
doesn't just retell the big stories, he relates scores
of truly ridiculous ideas about which most of us never heard but for
which tens of millions of dollars of capital were raised to be
burned through in spectacular fashion, sometimes in a matter of
months. Kaplan's concise, irreverent analysis is often
laugh-out-loud hilarious and nearly always on the money (pun intended).
Kaplan's
F**kedCompany.com Web
site is where this all started a few years ago as a
participatory rumor mill project among dot commers who were
beginning to see the writing on the wall. It's a must-read for modern
businesspeople. You'll read about rumored layoffs and other
impending corporate doom, company failures, and sometimes funny,
sometimes tragic internal memos. However, just because it
is funny, cynical and sometimes downright bitchy, don't think
it's not one of the most relevant sites on the web. It is. Unfortunately for many
investors caught up in the internet frenzy of the late 1990s,
much of the history of The New Economy©
now can be found on F**kedCompany.com.
Order F'd
Companies from
The Riser Report
online bookstore at http://www.riserreport.com/store.
Future Offshore Planner Arrives
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My wife Betsy
and I are proud and happy to announce (if a little late...)
the arrival, on February 26 2002, of William Everett Riser.
As you can see, we've already started Everett on his due
diligence tour of the major offshore jurisdictions, these
pictures having been taken poolside at the Elbow Beach
Resort in Bermuda during some down time at the Insurance
Distributors International (IDI) forum on offshore private
placement life insurance.
Readers interested in
Everett's offshore travels are invited to contact him at
everett@axiusgroup.com. |
 |
View or download
The
Riser Report November 2002 issue in Adobe Acrobat
Format
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