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CMM-Flexible Cyber Alert: Spoof Email

Posted: May 10th, 2018

“There are only two types of companies: those that have been hacked and those that will be. And even they are converging into one category: companies that have been hacked and will be hacked again.”

Former FBI Director

We’re pleased to introduce a newly created strategic partnership between Campolo, Middleton & McCormick, LLP and Flexible Systems to fully service the business community’s legal and technological needs when it comes to cybersecurity. We seamlessly work together, and with you, to help you recover from an attack and plan for remediation; assess your unique legal risk, obligations, and reporting requirements; reduce your risk of falling victim to a cyber attack in the first place; and give you valuable peace of mind.

Learn more about how we work together to handle critical cybersecurity matters in this real-life case study.

Method of attack: Spoof email

How they did it: A client fell victim to a phishing attack by unknowingly downloading malicious software from a spoof email. The software allowed the attacker to penetrate the client’s system and access all incoming and outgoing emails. Eventually, the hacker came across emails calling for a wire transfer of significant funds to be made in connection with an upcoming transaction. The hacker then sent an email – which appeared to come from one of the client’s senior executives – to the company that was supposed to wire the funds to our client. The email contained fraudulent wire transfer instructions in an effort to trick the company into wiring the funds to the hacker’s account rather than our client’s account.

The damage: Fortunately, the company who had received the fraudulent wire instructions sensed something was off and contacted our client before wiring the funds. While the loss of significant funds was averted, the client’s sensitive corporate materials had still been in the hands of the hacker for months.

The response: The client called CMM immediately upon discovering the attack. As a strategic partner, CMM contacted Flexible right away and entered into agreement whereby the parties would work in concert in response to the attack, with CMM directing Flexible with regard to the legal issues involved. (Such an arrangement can help preserve attorney-client privilege should the attack ever become the subject of future litigation.)

Flexible deployed a response team the very same day to ensure the client’s systems were locked down, mitigate against further data breaches, and analyze the attack vector to create a timeline and investigation report detailing exactly what happened, how, and when.

This investigative information was crucial for CMM to then analyze and advise the client on what, if any, legal reporting obligations exist.  CMM determined that the client would need to inform its primary regulator of the breach and worked with the client to meet their legal obligations without causing undue alarm.

The takeaway: Many business owners and executives believe they are “too smart” to be fooled by spoof emails and other ploys that hackers use to gain control of your data. Others believe that data breaches affect only major public companies with millions of customers, or small mom-and-pop businesses with owners too naive to properly safeguard their data. But in this case, the victim of the cyberattack was a sophisticated, mid-size technology company led by some of the most brilliant minds in the industry – demonstrating that no one is immune to a cyberattack and that businesses must remain vigilant and proactive.

After the dust settled in this case, CMM and Flexible continued to work with the client to conduct a more thorough risk assessment and strengthen their cyber defenses from both a technical and policy standpoint.

Contact us today to see how we can help you. 

CMM Spotlight: The Sexy Salad

Posted: May 8th, 2018

It would be fitting for John Robertson, owner of an eatery featuring delights such as the Earth Angel Salad and the Basket of Sexy Egg Sandwiches, to add an eye-catching title to his business card. “Millennial Keeper” and “Outsourced Chief Culture Officer” are both fitting descriptions of a business owner who entices prospective corporate catering customers of this unique spot – the Sexy Salad in Hauppauge – with an offer that’s hard to resist: “Let me use my art to help your business.”

A long-time member of HIA-LI, Robertson recently welcomed CMM Managing Partner and HIA-LI Board Chairman Joe Campolo to the Sexy Salad’s newly expanded space on Adams Avenue in the heart of the Hauppauge Industrial Park (HIP) for a tour and discussion about the ways forward-thinking companies use catering to attract and retain top talent.

In the nearly 15 years since Robertson first opened his doors, the Sexy Salad has morphed from a hip lunch spot (which it remains today) to part of the solution for local businesses seeking to appeal to talent in the face of changing employee preferences and expectations. Reflecting on the common narrative that Long Island is hemorrhaging its young people who leave for the city or elsewhere, Robertson said that instead of fueling this “hysteria” over millennials, employers need to become part of the solution to keep our ambitious young people here. How? A critical step is to become an employer of choice by taking care of employees with food.

Robertson’s focus has therefore shifted from how to get hungry office workers in the door for lunch (though they are still welcomed with delicious food and terrific service) to expanding his catering services as a tool for Long Island businesses to keep their best and brightest workers happy and productive. Robertson knows this idea works because it’s how he’s grown his own business over the years with very little turnover. Each employee enjoys free lunch every day, despite ever-increasing costs. He hosts a summer barbecue for staff with a grab bag of gifts employees actually want. He sends new employees home with dinner for their families on Day 1. “Food is such an effective way to convey your appreciation,” Robertson said. “It’s a great way to take care of employees who work hard.”

Fellow business owner Campolo, who is in the trenches with Long Island’s business community every day and is working to modernize the HIP – the second largest industrial park in the nation after Silicon Valley – pointed to the gourmet cafeterias now commonplace in West Coast offices. When there’s high quality food in the office for the taking, employees not only feel valued, but they also save time – which means more productivity for employers. Robertson agreed that these non-monetary benefits are now critical to employee retention: “Food can be viewed as an expense, but forward-thinking companies use it as a tool, a benefit, an incentive.”

Robertson has always been an entrepreneur, selling lemonade to motorists waiting on line in his neighborhood during the 1970s gas crisis. He explained that he “worked a lot for a little in hopes of eventually working a little for a lot,” toiling away in hotels, NYC executive dining rooms, and food service companies before opening the Sexy Salad in 2003. Last year, he took advantage of the opportunity to double his footprint when the neighboring space opened up, creating Build a Burger adjoining his well-known eatery. His current involvement with the prestigious Goldman Sachs 10,000 Small Businesses program has encouraged him to think even bigger, giving him the opportunity to get “re-motivated” to keep growing.

The Sexy Salad has already grown into a critical role helping successful Long Island businesses attract and retain employees in the most delicious way possible. Think about that the next time you sample a Sexy Salad Platter.

John Robertson, owner of the Sexy Salad on Adams Avenue in Hauppauge, recently welcomed CMM Managing Partner Joe Campolo for a tour and discussion about the ways forward-thinking companies utilize catering to attract and retain top talent. Next photo: Robertson takes great pride in the quality ingredients and exceptional service that are hallmarks of the Sexy Salad experience.

After the lunch rush! Next photo: Salad not your thing? There’s still plenty to choose from at the Sexy Salad.

No regular omelets here (“sexy” omelets are offered for breakfast). Next photo: Food for thought. How does your company boost employee morale?

The unique Sexy Salad logo adorns everything at the eatery from the cups to this wall clock. Next photo: Robertson opened the Sexy Salad in the heart of the Hauppauge Industrial Park in 2003. Last year, he seized on the opportunity to expand when the neighboring space became available, opening an adjoining Build a Burger and doubling his space.

A look at the seating area in the Build a Burger section. Next photo: Campolo and Robertson both credit HIA-LI with being a major driver of business.

Robertson is a longtime supporter of HIA-LI.

CMM Spotlight: The Argyle Theatre

Posted: May 3rd, 2018

There’s no shortage of lofty reasons to eagerly await opening night at the state-of-the art Argyle Theatre in Babylon Village, namely: the positive impact of arts and culture on a region’s vitality. Millennials want to live and work in places where they can also play and find entertainment. The arts and culture sector often outranks other sectors in U.S. spending. Entire communities are planned around cultural spaces and the arts.

Not to mention, live theater is just SO GOOD!

The Argyle Theatre opens this month with a full schedule of Broadway-caliber shows, from Guys and Dolls to The Producers, featuring professional equity actors, at the newly renovated 1920s movie house that most recently housed Bow Tie Cinemas until closing in 2014. Joe Campolo, CMM Managing Partner and a lifelong patron and supporter of the arts on Long Island, was thrilled to receive a behind-the-scenes tour of the Argyle Theatre in April as construction crews completed the last phase of renovations.

The Argyle Theatre’s grand opening this month is the culmination of a lifelong dream for father and son co-owners Mark and Dylan Perlman, who purchased the building in 2017. The Argyle is set to become a regional destination: it is the second year-round professional equity theatre on Long Island and offers a convenient, right-in-my-backyard alternative to NYC for Long Islanders seeking a night out featuring live entertainment with the quality and style of Broadway. Only a five-minute walk from the Babylon LIRR station and surrounded by the vibrant Babylon Village downtown restaurant and shopping scene, the venue is sure to attract theatergoers beyond Long Island as well. A shuttle to and from the train is planned, and a bike rack is going up outside the building. (For those coming by car, the Argyle’s website will list nearby lots where parking is permitted during showtime.)

“We’re looking to make people think and feel,” said co-owner Mark Perlman of bringing professional, live theater to Long Island’s South Shore. “We’re incredibly excited to bring the Argyle Theatre to the public after a very long process.” The beautifully renovated single-theatre space features 250 seats at orchestra level and an additional 250 at mezzanine level, as well as top-of-the-line lighting, sound, and rigging systems.

Season tickets are available as well as single-show tickets for an inaugural season that also includes Hairspray, Peter and the Star Catcher, The Hunchback of Notre Dame, and Spring Awakening. Marty Rubin, the Argyle’s Director of Sales, has also put together corporate event packages for businesses looking beyond the boardroom for a unique venue that transports visitors to different time periods and places. Classes, summer programs, and children’s programs are also planned.

CMM is excited to welcome the innovative Argyle Theatre to Long Island and support its role in keeping our island a vibrant cultural destination. Check out these photos of our private tour in the weeks before the Argyle’s grand opening, then head over to https://argyletheatre.com/ or call 844-631-LIVE for tickets.

 

Pictured: Argyle Theatre co-owner Dylan Perlman, sales director Marty Rubin, and co-owner Mark Perlman invited CMM Managing Partner Joe Campolo to the 1920s-era former movie house on Main Street in Babylon Village during the last phase of construction in April. The Argyle Theatre’s inaugural season begins this month. Next photo: The iconic “Babylon” fluorescent sign will shine once again in Babylon Village.

The space has been completely renovated from its most recent past life as Bow Tie Cinemas. This state-of-the-art facility will now offer year-round professional equity theatre. Next photo: The 500-seat Argyle Theatre now seats 250 at orchestra level and 250 at mezzanine level.

The new single-theatre space features an orchestra pit, balcony, and top-of-the-line lighting, sound, and rigging systems. Next photo: Inside view of the front doors during construction. These posters advertise the last movies screened at the former movie theater before closing in 2014.

 

Marty Rubin and Joe Campolo check out the balcony. Next photo: Center and right, owning and operating the Argyle Theatre is a dream come true for father and son team Mark and Dylan Perlman. On the left is sales director Marty Rubin, who has reconnected with Mark, his former baseball teammate at Queens College.

Enter stage left: the view from the stage. This stage will feature productions of Guys and Dolls, Hairspray, Peter and the Star Catcher, The Hunchback of Notre Dame, Spring Awakening, and The Producers in its grand opening season. Next photo: The Perlmans paid careful attention to every detail during the restoration. Here, a view outside from upstairs.

The Perlmans honored the theatre’s past, as well as their own journey to making their dream a reality, by including period furniture with a personal twist. This couch belonged to Mark Perlman’s parents. Next photo: Just one of the many dressing rooms backstage being readied for opening night.

State-of-the-art lighting awaits installation backstage. Next photo: This box office is now open! Single show and season ticket packages are on sale now – call 844-631-LIVE.

Tax Cuts and Jobs Act – How Are You Going to React? Part 2 – International Provisions

Posted: April 20th, 2018

Tags: ,

Alan R. Sasserath, CPA, MS
Partner, Sasserath & Zoraian, LLP

As discussed in a previous article, the Tax Cuts and Jobs Act (“TCJA”) is here to stay and our challenge is to understand how to react to it to minimize our taxes.  This article will focus on the international provisions of the TCJA and how US companies with foreign operations and foreign companies with US operations should react.  It’s a worthwhile read if you own all or part of a foreign company or are thinking about expanding your business beyond the US.

Below is a discussion of some of the international provisions that affect controlled foreign corporations (“CFCs”).  CFCs are generally foreign entities owned more than 50% by a US “person” (individual, partnership, corporation, etc.) or persons.  Of course, we will also discuss what the US owners of CFCs should think about to minimize the effect of such provisions.  (Please keep in mind that this is a high-level discussion of the Federal tax provisions and you should consult your tax advisor regarding such planning.)

1. Transition Rules to the Modified Territorial System: The new international tax system under the TCJA is known as the Modified Territorial System (“MTS”).  The TCJA was signed into law on December 22, 2017 and went into effect on January 1, 2018.  At the time the law was signed, there were large amounts of previously untaxed income that were retained in foreign countries under the pre-TCJA international tax system.  Accordingly, there wasn’t a lot of time to plan for this provision of the TCJA for calendar year entities.  Under the transitional rules, such previously untaxed income will be taxed to the U.S. owners at either 15.5% or 8%.  This provision applies to US C corporations that own more than 10% of a foreign entity and other US owners, other than S corporations, of a CFC.  S corporations are permitted continued deferral.  Again, calendar year taxpayers had nine days to plan to try to do what they could to get to the 8% tax rate or avoid the tax in its entirety.

However, fiscal year taxpayers do have time to plan since the tax relates to the last fiscal year beginning before January 1, 2018.  Accordingly, if your fiscal year end is September 30 and you have $250 billion in previously untaxed, overseas profits (think Apple), then you have until September 30, 2018 to plan a way to decrease the tax rate from 15.5% to 8%.   The main driver of the difference in tax rates is whether the untaxed overseas profits are sitting in cash and similarly viewed assets (15.5%) or harder assets like inventory or fixed assets (8%).  Again, if you have a fiscal year, whether you have $250 billion or $1 million in overseas profits, you should be doing whatever you can to reduce the tax rate from 15.5% to 8%.  One last item to note is that this tax can be paid over eight years with a timely election.

2. Global Intangible Low Taxed Income (“GILTI”): If you ever wondered what our elected officials thought of U.S. companies with foreign operations, please see this acronym: GILTI (pronounced “guilty”), and you will learn everything you need to know.  GILTI relates to the global minimum tax that the US now charges on US CFCs.  It is possible that majority owned foreign entities/minority owned US entities get dragged into these rules as ell.  Under the pre-TCJA rules, if a CFC owned an active foreign entity, then that foreign entity’s earnings were not taxed in the US until such funds were repatriated to the US.  Now, under TCJA, practically speaking, if a US person owns an active CFC, then they are required to calculate the amount of tax on such foreign income (known as GILTI) after certain adjustments are made to the foreign income.

The calculations of the tax on GILTI for a US C corporation and an individual, either directly or via a pass-through entity, are very different.  For a C corporation, the effective tax rate is 10.5% of GILTI before foreign tax credit.  Also, if the foreign corporation paid 13.125% or more of tax to the foreign country, then the tax on GILTI  would be zero for that year due to the allowance of the foreign tax credit.  For an individual, the effective tax rate is 37% of GILTI.  That’s right: there is a 26.5% difference in tax rate and potentially 37% difference with the inclusion of the foreign tax credit in tax rate between owning a CFC via a C corporation and an individual since individuals are not permitted to utilize the corporate foreign tax as a credit against US individual tax in this situation.  However, there is an election that an individual can make to be treated as a C corporation for the purpose of this tax effectively lowering their rate to that of a C corporation.  Since the election has been in the law for many years and GILTI is a new concept, we don’t know if an individual will be entitled to all the benefits afforded to a C corporation.  We are waiting for further guidance on this.

If you own a foreign entity that will be subject to GILTI either directly or through a pass-through entity, then you may want to contribute such ownership into an LLC ASAP.  With an LLC, you are permitted to make an election to be treated as an S corporation, C corporation, partnership or disregarded entity.  While such election is generally required to be made within 75 days of formation, that period can be extended if there is reasonable cause.  I would hope that the IRS would accept “ambiguity of the tax law” as reasonable cause to file a late election.

3. Foreign Derived Intangible Income (“FDII”): FDII generally relates to property sold or services provided by a US C corporation to a non-US person. The tax calculations are similar to the GILTI tax calculations; however, the effective tax rate on this income is 13.125% as opposed to the 10.5% tax rate on GILTI.  One of the strategies to get the benefit of the 13.125% FDII tax rate would be for a company that is a pass-through entity to drop their non-US sales into a separate C corporation to take advantage of the low tax rates on such income.  However, this planning strategy would more likely apply to entities that were not eligible for the pass-through entity 20% deduction under the TCJA.  Also, foreign corporations that set up a US C corporation would be eligible for this benefit as well for sales via the US C corporation.  Could the US become a tax haven for foreign companies in high tax jurisdictions?  Finally, DISCs are still available as well to be used in conjunction with this planning opportunity.

In addition to the provisions above, there are many others.  Also, there is a fair amount of confusion surrounding several provisions, some of which were mentioned above.  In addition to the suggestions above, here are a few others, in general, as they relate to the international provisions under the TCJA:

  • Revisit any “check the box” elections that you made or decided not to make in the past. Based on the changes resulting from the TCJA, you may come up with a different answer.
  • As you can see with GILTI and FDII, C corporations are favored under the TCJA. As mentioned above, there is an election available to individuals to, potentially, get the same benefits as a C corporation with regards to GILTI.  Don’t be so quick to convert your pass-through entities to C corporations.  Once you convert to a C corporation, there is a five-year waiting period to be able to elect S corporation status again without IRS consent.  Also, once S status is elected again, there is an additional five-year waiting period to get all of the benefits of S corporation ownership back.  That five-year waiting period is measured from the time you decide to revert to an S corporation.  It is not unheard of that the TCJA will be “reversed” depending on the results of future elections, but such a reversal would be unlikely, especially in the near term.
  • If you plan and are successful to avoid the CFC rules, then you must be wary of the Passive Foreign Investment Company (“PFIC”) rules. As onerous as the CFC rules above are, the PFIC rules can be even worse.
  • If you are going to go the C corporation route, try to restructure to get a potential future benefit in the way of section 1202 stock. The benefit of section 1202 stock is that shareholders can avoid all Federal and potentially State income tax on up to $10 million of gain in the event of a future stock sale.
  • The discussion above relates to Federal income tax changes. Please note that state taxes will apply as well and can be equally or more complicated.
  • Some of the provisions discussed above sunset at pre-determined dates. For example, the effective tax rate related to FDII increases from 13.125% to 16.41% for tax years beginning after December 31, 2025.

The bottom line: if you own a foreign entity, then you should consult with your tax advisor immediately if you have not already done so.  Once the technical corrections to the TCJA are deployed as we hope/expect later in 2018, we should have more clarity on the provisions that are unclear at the moment.  At that point, you should re-confirm that you are maximizing your opportunities from the tax perspective.

This article does not necessarily reflect the views of CMM and does not constitute legal or tax advice. Please consult with your accountant about your particular tax situation.

 

Hiding and Seeking Information During Litigation: Disclosure of Information Contained in Private Social Media Accounts

Posted: April 20th, 2018

Hide and seek. It’s a cute game when kids play, but what about in the context of a contentious litigation? The cute game transforms into a cutthroat endeavor to seek any information to sabotage the opposition’s case. Given the prevalence of social media (even Grandma has a Facebook account nowadays), the first point of attack to collect necessary intelligence tends to be the opposition’s social media accounts. The instantaneous nature of social media provides a window into the opposition’s everyday life. They share where they are, what they are doing, and who they are with. Some social media users try to ensure the privacy of their information by taking advantage of certain privacy settings, which raises the question: is hiding certain information (by making the contents of a social media account private) enough to avoid disclosure during litigation?

The Court of Appeals recently answered this question in Forman v. Henkin, No. 1, 2018 WL 828101, at *4 (N.Y. Feb. 13, 2018), where the Court held that information contained in a Facebook account, whether public or private, must be disclosed so long as it is relevant to the claims at issue. Eager for the instant gratification we receive with each like or comment on a post, we sometimes lack the foresight to consider how the information we post on social media may ultimately be used to verify facts, or, even worse, to impeach credibility. Say a salesperson is accused of soliciting customers in violation of a non-compete agreement, or an employee claims entitlement to overtime wages, or, most commonly, an individual sustains personal injuries—you can be sure that the defendants are scrubbing the plaintiffs’ social media accounts for evidence disputing the credibility of the plaintiffs’ claims. Especially considering the recent decision in Forman, even if the plaintiffs try to hide such information by making their accounts private, the defendants will now be entitled to seek it.

In Forman, the plaintiff fell from a horse and alleged that she suffered severe spinal cord and brain injuries. The plaintiff claimed that her injuries resulted in cognitive deficits, memory loss, difficulties with written and oral communication, and social isolation. During her deposition, she testified that she had a Facebook account that she deactivated approximately six months after the accident and that before the accident she posted “lots” of photos of her “active” lifestyle.

Unsurprisingly, based on the plaintiff’s claims, the defendant requested an authorization to obtain the contents of her Facebook account. The plaintiff refused to provide an authorization, arguing that the defendant failed to establish a basis for access to the plaintiff’s private portion of her account because the public information contained on her profile included only one picture, and that picture did not contradict her claims. In opposition, the defendant contended that just because the public information viewable on plaintiff’s Facebook profile did not contradict her claims did not mean that the postings on the private portion of the account might contain something relevant to the defense.

Prior to Forman, parties avoided disclosing private information on social media accounts by relying on precedent that required the party seeking disclosure to identify relevant information contained in the social media account before seeking disclosure. However, the Court in Forman keenly noted that requiring a party to identify relevant information before seeking disclosure effectively permits the disclosing party to manipulate privacy settings to avoid disclosure. This is not to say that parties are now entitled to unfettered access to social media accounts simply by virtue of commencing a lawsuit. Disclosure still must be narrowly tailored to the claims at issue in the case. Nonetheless, the most important takeaway from this case is that parties can no longer hide behind the veil of privacy to avoid disclosing information that may be detrimental to their case.

We all get the urge to share information on social media, but once litigation commences, plaintiffs are well advised to consider the potential ramifications of each post and how it could be used against you. When all is said and done, litigation involves people, which means it necessarily entails emotions and the impulse to make your story heard. However, during litigation, social media is not the proper forum to share your personal thoughts, feelings, and photographs. Let your attorney advocate on your behalf to avoid having your case debilitated by contradictory posts on social media that impugn your claims and credibility. Remember—even if you try to hide them, your adversary will be permitted to seek them.

CMM Spotlight: Cerini & Associates Presents the Imagine Awards

Posted: April 20th, 2018

Tax season may be behind them, but the team at Bohemia-based Cerini & Associates isn’t coming up for air just yet: after tax season comes Imagine season.

Six years ago, this full-service accounting firm, under the leadership of Managing Partner Ken Cerini, introduced the Imagine Awards to the Long Island nonprofit and business community. The program has quickly gained momentum. This year, the program received 177 applications and on May 1 will bestow awards on five nonprofits, recognize an additional 15 finalists, and bring over 400 Long Island business leaders together for an evening to celebrate and elevate the Island’s vibrant nonprofit sector.

Considering that servicing nonprofit organizations is a marquee component of Cerini & Associates’ DNA, it’s fitting that its visionary founder, Ken Cerini, first had an epiphany for the Imagine Awards about 15 years ago. “Things weren’t in the right place then, but six years ago, the pieces fell into place. The sector needed it,” Cerini recently told Campolo, Middleton & McCormick Managing Partner Joe Campolo, who stopped by to catch up in the hectic weeks before the event. “The NFP world can find itself in a tough spot with a storm happening due to changing government regulations, cutbacks in funding, and an increase in the demand for services – so we were looking to create a silver lining. We want to make sure the business community sees the work these organizations are doing.”

The Awards are a way of giving back to a sector that exists to give back, recognizing nonprofits in the categories of Social Impact, Innovation, Rising Star, Leadership, and, for the second year, Arts & Culture. “Collaboration is key to keep the not-for-profit sector vibrant,” Cerini explained. “The Awards encourage organizations to work together by educating them and the business community about what other organizations are doing.” Winning organizations (initially vetted by the Awards Committee and ultimately selected by a panel of high-profile judges whose identities are revealed at the event) receive a monetary prize, exposure, a professional promotional video, and opportunities to collaborate after the Awards on panels and other events.

This year, News 12’s Doug Geed will emcee the program, which raises funds through sponsorships and ticket sales. “The money we raise is then reinvested into the event and the community,” Cerini said. “Imagine, coming from the John Lennon song, is symbolic … Imagine is what nonprofits do every day; Imagining how to make a difference, change lives, and make Long Island a better place.”

Cerini & Associates’ mission to shine a much-needed spotlight on the nonprofit sector mirrors their relentless pursuit of value for their clients, which include not only major nonprofit organizations (C&A is one of the top 10 accounting firms in the New York metro area serving the nonprofit sector) but also the education sector (public school districts as well as private, special education, and charter schools) and for-profit businesses in the healthcare, technology, real estate, and construction industries. The firm, with four partners and about 50 employees, is known for its efforts to educate and provide training for their clients through seminars and publications. Not surprisingly, their clients become their ambassadors, accounting for the firm’s organic growth over the past 25 years.

CMM Live host Joe Campolo will welcome Ken Cerini to the show on May 15 for a special episode focusing on the nonprofit sector. We’re excited to hear more from this innovative leader who saw a void in the nonprofit world and filled it with an extraordinary event that empowers organizations to maximize their impact.

 

Joe Campolo of Campolo, Middleton & McCormick and Ken Cerini of Cerini & Associates compete in Ken’s dungeon-themed office. Next photo: Intricate designs adorn the door, chairs, and walls of Ken Cerini’s office. Who said accountants are boring?

A look at Ken’s sword collection. Next photo: Joe Campolo will welcome Ken Cerini to a nonprofit-themed episode of CMM Live on May 15.

 

 

Kim Roffi, a partner at Cerini & Associates, smiles in anticipation of the end of tax season! Next photo: At Cerini & Associates, employees are encouraged to personalize their workspaces.

 

Fun and games: jerseys and sports memorabilia line the walls of the office.

Imagine Awards materials past and present. In only six years, the Imagine Awards program has become a must-attend event woven into the fabric of Long Island. Next photo: Registration closes soon for the Imagine Awards! Don’t miss out – head over to http://ceriniandassociates.com/long-island-imagine-awards/ for tickets.

CMM Spotlight: Pride Products

Posted: April 12th, 2018

How do you transition from distributing paper products stored in your mother-in-law’s garage using an old van to owning a 150,000-square foot facility and becoming one of the leading distributors of general merchandise and food throughout the world? According to David Emrani, co-founder and president of Pride Products based in Ronkonkoma: “a lot of hard work.” An engineering background, comfort conducting business across the globe, and supportive colleagues who are also family don’t hurt, either.

Joe Campolo, Managing Partner of Campolo, Middleton & McCormick, recently sat down with CMM clients and friends David and Roya Emrani, the husband and wife team behind Pride Products, and their son Dustin, the company’s VP of Operations, to learn more about their unique American success story.

Today, Pride Products operates a major warehouse and showroom on Veterans Memorial Highway near MacArthur Airport, catering to over 5,000 stores nationwide and exporting to countries worldwide. But to follow the careers of the trailblazers behind the company, you’ll need to venture beyond Long Island.

Born in Tehran, Iran, David came to the United States at age 19 and earned a B.S. in electrical engineering from the University of Texas at Arlington and an M.S. from Southern Methodist University. He began his career at Texas Instruments designing and manufacturing airport surveillance radar systems. Feeling homesick, he eventually returned to Tehran and went on to serve as a Second Lieutenant in the Iranian army. But as relations between the U.S. and Iran soured as Ayatollah Khomeini came to power, David returned to his adopted country in 1979, this time to California. He worked as a senior engineer at Litton Industries in Los Angeles. One week after closing on his house in the Golden State, his cousin invited him to Long Island to work in paper manufacturing. David took the chance.

Meanwhile, Roya had emigrated from Iran in 1976 to enter 12th grade in the U.S., and then studied medical technology at C.W. Post. She and David later met at a party. The couple didn’t have much capital, but after working with family in New York, their entrepreneurial nature led them to strike out on their own in 1983.

Out of Roya’s mother’s garage in Plainview, the couple started selling toilet paper and tissue to restaurant suppliers and eventually to retailers, which prompted them to add health and beauty products to the mix. By 1990, they were wholesaling to retailers nationwide – notably, becoming one of the earliest local businesses to establish a direct link to China – and operated six Dollar King stores on Long Island. But as David explains, expanding national chains eventually pushed many of the mom and pop dollar stores out of business.

The entrepreneurial Emranis therefore shifted their focus to supplying to those discount stores rather than operating them, as well as wholesaling to a wide range of grocery, variety, party, and gift stores. Today, Pride Products is the best friend that retailers can hope for – supplying the best quality products for the best price. They focus on good value, high quality paper and plastic disposables, health and beauty aids, home and office supplies, housewares and hardware, and seasonal products, offered to an ever-growing list of independent retailers at a good price. The Emranis currently employ 80 people, and David estimates that he has hired an astronomical 5,000 people in his lifetime.

That’s not to say there aren’t challenges. Trucking and freight costs are high, which David predicts will force many distributors to become regional rather than national. Even ten years after the recession, consumers are still very money-conscious. Government regulation and red tape also lead to delays and expense. But there are expansion plans in the works: Dustin is working on a new division of Pride focused on selling goods directly to consumers. And going against the tide, David predicts that online shopping for value priced consumer goods will actually decrease in popularity in the next five years, as people realize they are getting a better price at brick and mortar stores. Always seeking to diversify, the Emranis are also pursuing real estate investment opportunities.

Pride Products is a fitting name for an incredible operation that started out so unassumingly, and to describe the motivating force behind a family who came to America for its entrepreneurial promise. The American dream is thriving at Pride Products.

 

 

Family affair: Dustin, Roya, and David Emrani of Pride Products in their Ronkonkoma warehouse; David Emrani, president and co-founder of Pride Products, poses with CMM managing partner Joe Campolo in Emrani’s office on Vets Highway.

 

Merchandise lines the shelves of the 150,000-square foot facility. These products are destined for supermarkets, discount stores, drug stores, independent retail stores, and the shelves of your home. Originally operated with one van out of a Plainview garage, Pride Products now buys in bulk, providing customers with the highest quality merchandise at the most competitive prices.

 

Another look at the warehouse. David Emrani was one of the first business people from Long Island to establish a direct link to China. It’s not hard to imagine the job creation spurred by a warehouse this size. Pride Products currently employs 80 people, and Emrani estimates that he has hired an astronomical 5,000 people in his lifetime.

Left: Business owners Roya and David Emrani stand proudly by a sign showing the breadth of their product offerings. Right: Born in Tehran, David Emrani came to the United States at age 19 and earned electrical engineering degrees from the University of Texas and Southern Methodist University. He returned to Iran in the mid-1970s and served as a Second Lieutenant in the Iranian armed forces. Returning to the U.S. in 1979, Emrani settled in California. He came to New York in 1981 and worked in business ventures with extended family before starting Pride Products with his wife, Roya, in 1983.

Left: Roya Emrani emigrated from Iran in 1976. Right: A group of Long Island business leaders: David, Roya, and Dustin Emrani, with Joe Campolo.

 

Malafi Elected to Board of Directors of American Red Cross on Long Island

Posted: April 6th, 2018

Ronkonkoma, NY – Campolo, Middleton & McCormick, LLP, a premier law firm with offices in Ronkonkoma and Bridgehampton, is pleased to announce that partner Christine Malafi, Esq. has been elected to the Board of Directors of the American Red Cross on Long Island, the preeminent nonprofit organization providing no-cost emergency and disaster relief to those in need.

The American Red Cross on Long Island serves more than 2.8 million peChristine Malafiople in Nassau and Suffolk counties. The organization, which celebrated its centennial anniversary in 2017, responds to emergencies and disasters across the region—home fires, floods, building collapses—providing shelter, food, clothing, and emotional support. The Red Cross strives to prevent and relieve suffering in our community and around the world through five key service areas: disaster relief, supporting America’s military families, blood donation, health and safety services, and international services.

“We are so happy to welcome Christine to our team of leaders,” said Neela Mukherjee Lockel, Chief Executive Officer of the American Red Cross on Long Island.

Malafi’s credentials include chairing CMM’s Corporate department, one of the most robust teams in the New York region. Her practice focuses on mergers and acquisitions, corporate governance, and labor and employment matters, as well as municipal, insurance coverage, and fraud issues. She represents buyers and sellers in multimillion dollar transactions and serves in a general counsel role for many of CMM’s internationally-based clients.  Prior to joining CMM, Malafi made history as the first woman and youngest person to serve as Suffolk County Attorney.

In addition to her new role with the American Red Cross on Long Island, Malafi serves on the Boards of Family Service League, Girl Scouts of Suffolk County, and Natasha’s Justice Project, as well as the Board of Governors of Touro Law School.

CMM Spotlight: Flexible Systems

Posted: April 5th, 2018

What’s the sign of a successful day at Flexible Systems? When clients don’t call.

“Our goal is to service our clients so well that they don’t need to call us,” said Marty Schmitt, one of Flexible’s three founders and partners. “When they don’t have IT problems to call about, that’s how we know we’re doing our job.”

Flexible Systems is a longtime HIA-LI member and good friend of Campolo, Middleton & McCormick, LLP, collaborating with the firm on cybersecurity panels to educate the business community, as well as servicing mutual clients. Joe Campolo, CMM Managing Partner and HIA-LI Board Chairperson, recently spoke with Schmitt about Flexible’s story, the company’s vision for the future, and the decision to call the Hauppauge Industrial Park home.

Founded in 1984 by three friends who met at Stony Brook University, Flexible is an IT support and technology consulting powerhouse based in the Hauppauge Industrial Park. The company works with clients on Long Island and beyond to help them choose the best technologies for their unique needs. Flexible also offers world-class IT support to keep networks up and running and fix any issues that may arise, but it’s their role as their clients’ tech advisors that truly sets them apart.

“We’re not just responding and reacting to problems – we’re their IT partners,” Schmitt explained. “We strategize with them about which technologies are worth the investment and help them use technology to increase their efficiency.”

Today, as cyber criminals can take down the computer systems of entire cities and major organizations seemingly at the push of a button, Flexible Systems also offers critical cybersecurity services to help businesses of all sizes keep their data safe. They work with clients to reduce the risk of falling victim to cybercrime, and also help businesses with remediation if they’ve already experienced a breach.

Flexible business development executive Kevin Edwards added, “Even the savviest companies are not always aware of the many regulations that affect their businesses and how to remain compliant.” Therefore, as part of their information security compliance services, Flexible helps clients navigate the increasingly complex web of regulations, from the household names (HIPAA) to the lesser known (the Gramm-Leach-Bliley Act, which regulates how consumer data is shared and safeguarded). “For smaller clients that may not have an in-house compliance or privacy officer, Flexible fills that role,” Edwards explained. Edwards participated in CMM’s series of cybersecurity seminars for the business community co-presented last year by BNB Bank, and works regularly with CMM’s cybersecurity team on compliance and remediation issues.

An active member of HIA-LI, Flexible credits the organization for fostering critical relationships and building referral networks. Flexible also appreciates HIA-LI’s extraordinary focus on supporting the businesses in the Hauppauge Industrial Park (HIP). In the “good problem to have” category, Flexible, with over 125 employees, has now outgrown the Oser Avenue facility that it moved into in 2014. In need of more space, Flexible has worked with the Suffolk County IDA to purchase a 40,000-square foot facility on Motor Parkway – double the size of its current headquarters.

It was a no-brainer for Flexible to stay in the HIP, Schmitt said. “It just makes sense for us to be near like-minded businesses of similar size – there are a lot of synergies, not to mention that the park is centrally located.” This location has helped them attract top talent from Stony Brook University and Farmingdale State College, whose graduates have impressed Flexible’s leadership team.

For those occasions when clients do have to call Flexible, “our response needs to be immediate,” Schmitt said. The company therefore always has extra headcount and continues to bet on growth. It’s a business model that’s obviously working.

Learn more about Flexible Systems at https://www.flexiblesystems.com/.

A training session underway; co-founder and Rangers fan Marty Schmitt.

Flexible’s colors feature prominently in their logo and their hallways.

College friends and business partners Joe Saggio and Marty Schmitt (not pictured: co-founder Seth Belous); Joe Saggio, Marty Schmitt, and Joe Campolo.

Kevin Edwards, Joe Saggio, Marty Schmitt, Joe Campolo.

Flexible’s outdoor patio, pictured here in warmer weather. Employees enjoy barbecues and music outdoors on Fridays during the summer – a forward-thinking approach to recruit talent and show employees how much they’re valued.

Middleton’s Approach to Jury Selection Featured in “Tough Seats to Fill”

Posted: March 30th, 2018

Scott Middleton and Suffolk County Commissioner of Jurors Lawrence Voigtsberger. Photo by Judy Walker

 

By Adina Genn
Long Island Business News
March 30, 2018

In a pool full of prospective jurors, trial attorneys have lots to assess. Who’s biased? Who’s empathetic? Who can think for themselves? Those determinations can make or break a case, and mean the difference in a winning a case for a client.

That’s why prosecutors, defense attorneys and judges need to quickly evaluate jurors by studying body language and facial expressions to gain insights as to how they think.

They also consider the profession that jurors might align with, depending on the case and client. In a criminal case, for instance, an attorney might not want a juror who is related to someone in law enforcement, or in a medical malpractice case, someone related to a physician.

“I want six people who see things my way,” said Scott Middleton, a partner at Campolo, Middleton & McCormick, a law firm with headquarters in Ronkonkoma.

But, Middleton pointed out, “the other side is doing the same thing.”

Business lesson

A jury summons might spark dread for the recipient, but Suffolk Commissioner of Jurors Lawrence Voigtsberger pointed out that serving is a “civic duty.”

“It’s a constitutional right to have a trial by jury whether civil or criminal,” he noted. “Jury duty is mandatory, but it’s typically a very good learning process. Hopefully, no one gets involved in the court system as a victim, but at least you have an idea of what the process will be.”

And while businesses on Long Island may see jury duty as disruptive to their organizations, Voigtsberger said, most trials last two to three days, though “there are always exceptions.”

Jurors not only see the justice system up close, but also gain insights into the flaws of a contract that prompted litigation.

“All that is brought out in evidence,” Voigtsberger said.

Level playing field

Ultimately, Middleton noted, trial attorneys want jurors and alternates that are “impartial to listen to your case and decide what should occur at the end.”

That can mean understanding that the person on trial doesn’t have to testify – and a juror shouldn’t hold that against someone.

And to the untrained civilian, some of the questions might seem surprising.

Consider, for example, Judge Joan Azrack, who at federal court in Central Islip, reportedly asked about the favorite TV shows of potential jurors in the Ed Mangano, Linda Mangano and John Venditto trial.

That’s par the course, attorneys said. These kinds of questions garner “how analytical” a person is, and, for instance, in a case where the evidence may be complex, help an attorney understand who might quickly grasp the elements.

High profile cases

Experts say local jurors can be impartial, even when the case is a high profile one.

With the case against the Manganos and Venditto, for instance, attorneys said they would not necessarily second guess the ability of prospective jurors to serve even if they were unfamiliar with the case.

It’s not surprising that some potential jurors have not been paying attention to that case, experts said.

“Put yourself in the general population – a lot of people just don’t care,” Middleton said. “Even if they have an interest in politics, [people] going to work have real issues to deal with. The Mangano situation doesn’t really affect them at their level.” And a juror from say Queens, or Brooklyn, may have very little awareness of political leaders in Nassau County, he added.

Timing

Jury selection can take as little as one day, to about three days.

The time allotted for a jury selection is tied in with the time a judge offers.

And a group of prospects can be dismissed quickly.

The questions asked can scope out not only bias, but also whether people have a planned vacation, a medical issue, a language barrier and other concerns.

Once they’ve completed jury service, they can breathe easy, at least for a while.

“They won’t be summoned again for six years,” Voigtsberger said.

Quick decisions required when attorneys make their choices

Voir dire – Merriam-Webster defines this legal term as a “preliminary examination to determine the competency of a witness or juror” – takes a certain skill.

Experts say observing a prospective juror’s whole being come into play.

“What we try to do is think of what backgrounds, life experiences, cognitive styles, opinions, and values jurors might have that would make them less receptive to our case,” Jeffrey Reynolds, director of the jury research division of the National Legal Research Group, and author of “Mastering Voir Dire and Jury Selection” told the online publication MentalFloss.

And while body language, gender, lifestyle choices, race and even social media may seem to fall into play, that view may prove limited.

And while social media searches on jurors may offer insights into those sitting on a jury, not all states, courts and judges approve. The New York State Bar Association, for example, has cited ethics concerns. For instance, it states that attorneys conducting research on a juror cannot communicate with that individual without running into professional conduct conflicts.

And there may be no hard and fast rules, with each case having its own set of idiosyncrasies – for example, whether it’s a criminal or civil – or its venue.

And there may be instances where a prospective juror may not seem to like you. The person sits with arms folded, offers single-word replies, smiles or laughs at times. But these signals may have nothing to do with the attorney. Perhaps the person is nervous, or appears cross but is actually hungry.

So what’s an attorney to do?

One attorney put it this way: “Go with your gut, and try to get people who will be open, honest and fair, and will listen to the facts.”

Read the full article on LIBN.

How to Lower the Cost of Construction in New York? Demolish New York’s Scaffold Law

Posted: February 20th, 2018

It is absolutely time to revisit and revise New York State’s absolute liability standard imposed upon contractors and owners for construction-related accidents. New York Labor Law Sections 240 and 241, colloquially referred to as the “Scaffold Law,” impose a strict liability standard on contractors and owners for elevation/gravity related accidents.  Unlike other personal injury matters, the Scaffold Law does not allow for any consideration of the comparative fault of the injured worker for causing and/or contributing to his/her accident. As a result, facts such as the injured worker’s decision not to wear personal protective equipment (“PPE”) that is provided by his/her employer and readily available at the jobsite are not considered in evaluating liability or the award of damages.

Having worked in the construction industry for the past twenty years, and having overseen the Safety, Risk Management, and Loss Control Departments for contractors with a New York (as well as a national and international) presence, I’ve seen beyond dispute that New York’s Scaffold Law is among the primary reasons for the soaring cost of construction.  It drives up the value of settlements and verdicts which, in turn, increases the cost of insurance.  In fact, many insurance carriers have stopped writing policies in New York as a result of this antiquated and imbalanced law. And those carriers that have kept writing programs in New York have dramatically increased their premiums as well as the deductibles and self-insured retentions that the insured contractors are required to carry.

The net effect is an ever-increasing cost to build.  Further, it has forced many contractors and subcontractors to seek projects outside of New York, price shop insurance programs with carriers that are not admitted in New York State, and purchase policies that contain numerous exclusions that do not provide any actual coverage. These increased costs are then passed along to consumers on private sector projects and taxpayers on public sector projects.

This is not to say that injured workers should not be compensated for elevation-related accidents on construction sites.  Nor is it intended to endorse contractors that curtail spending on training, safety, PPE, and supervision that the workforce needs to perform their work.  But, when the Occupational Safety and Health Administration (“OSHA”) investigates an elevation-related accident and determines that the injured worker caused or contributed to his/her accident by not using available PPE, rushing/cutting corners, failing to follow proper procedures and/or the employee’s own training, but the contractor/employer cannot use OSHA’s findings to mitigate or cut off the worker’s entitlement to compensation for his/her own negligence, which is precisely what the Scaffold Law does, then it is time for some major reform.

Until New York State addresses this inequity, contractors and subcontractors should do the following:

  • Read your insurance policies very carefully. Be careful of endorsements that exclude coverage for elevation-related work.
  • Engage experienced insurance brokers, advisors, and other professionals who specialize in the construction industry. With insurance premiums being among the top three annual expenses for most contractors (along with payroll and brick & mortar costs), it is imperative to work with specialists who understand your business, the types of coverage that are needed, and how to put together a program that provides real coverage.
  • Spend money on training, upgrading PPE, and supervision. In this era of increasing deductibles, think about how much it costs to proactively address safety issues vs. how much you spend on claims within your insurance deductibles.

New York’s construction industry cannot move forward and realize its full potential if antiquated laws keep it tethered to the past.

ADA Accessibility for Websites

Posted: January 22nd, 2018

By Christine Malafi

The Internet has become a necessity for the marketing and promotion of businesses, services, and merchandise. An evolving legal issue is website accessibility to those with disabilities and the applicability of Title III of the Americans with Disabilities Act (“ADA”). Accessibility of public websites and compliance with the ADA in connection with public websites may cause issues for some time to come, given the lack of governmental regulations and guidance in this area. Nevertheless, it’s important for businesses to know where the law currently stands.

The purpose of the ADA is to provide equal opportunity to individuals with disabilities. Title III of the ADA specifically prohibits discrimination of individuals with disabilities “in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.” While the ADA is silent on the specific issue of website accessibility, case law has made it clear that the ADA applies to public websites, and businesses must accommodate individuals with disabilities and make their websites ADA accessible. However, the extent to which websites must be made accessible has not been definitively determined. Questions remain as to whether all websites fall under the ADA and whether a website must also be tied to a physical location before it falls under the ADA, among other questions.

In December 2015, the Department of Justice (“DOJ”) announced that it would not issue private sector website ADA accessibility regulations until fiscal year 2018. However, a recent Presidential Executive Order cut regulatory resources, and may subsequently freeze the DOJ’s public accommodations website rulemaking.

In the absence of DOJ regulations, what should businesses do? Many settlements approved by the DOJ have implemented the World Wide Web Consortium’s Web Content Accessibility Guidelines 2.0 (WCAG) on how to make a website more accessible. At the most basic level, an ADA accessible website should provide these (and other) types of features:

  • Text alternatives for any non-text content;
  • Alternatives for time-based media;
  • Content that can be presented in different ways without losing information or structure;
  • Be easy to see and hear, including separating foreground from background;
  • Permit all functionality from a keyboard if needed (as opposed to a cursor);
  • Permit sufficient time to read and use content;
  • Not be designed in a way that is known to cause seizures;
  • Include ways to help users navigate, find content, and determine where they are;
  • Include text content that is readable and understandable;
  • Operate and appear in predictable ways;
  • Help users avoid and correct mistakes; and
  • Compatible with current and future user agents, including assistive web technologies.

The best option for business owners to not fall victim to a successful Title III suit is to comply with these WCAG guidelines.

However, it may not always be deemed “reasonable” for businesses to create a fully ADA compliant website. As is stated in the ADA: “A public accommodation shall make reasonable modifications in policies, practices, or procedures, when the modifications are necessary to afford goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the public accommodation can demonstrate that making the modifications would fundamentally alter the nature of the goods, services, facilities, privileges, advantages, or accommodations. “ 28 C.F.R. § 36.302 (2012).

If making your website fully compliant with the WCAG is too costly for your company, other options may be available. Although New York courts have yet to address this specific issue, others have. In National Federation of the Blind v. Target Corp., Target was sued because its website did not enable visually impaired persons to directly purchase products, redeem gift cards, or find stores.  The court ruled against Target, as Target failed to show that the information on its website was available in another reasonable format. The court acknowledged ADA defines discrimination to include a failure to take such steps “as may be necessary to ensure that no individual with a disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the goods, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden.” 42 U.S.C.S. § 12182(b)(2)(A)(iii). The court specifically noted the following examples of accessibility: “if a menu cannot be read by a blind person, the restaurant need not make the menu available in Braille; the restaurant could ensure that waiters are available to explain the menu”; and “while a bookstore must ensure that it communicates with its customers in formats which accommodate the disabled, a bookstore is not required to stock books in Braille.” Courts therefore recognize that there may be significant limitations on the possibility of making a website completely or fully ADA accessible.

In a more recent case, Robles v. Domino’s Pizza LLC, a blind plaintiff claimed that he could not order pizza from the Domino’s website because it was not accessible using a screen reader. The court found that although Domino’s website was not in compliance with the WCAG guidelines, their 24-hour toll free phone number, where live agents provided assistance with using the website, was enough to meet its obligations under the law.

Absent further guidance, businesses and individuals with public business websites are urged to ensure accessibility. At CMM, we are available to assist and guide you on this issue.