June 2017 CMM Newsletter: Don’t Confuse Empathy with Sympathy in Negotiation
Posted: September 28th, 2017
News (All)
Softheon’s Million-Dollar Pledge Ensures Bright Future for Tesla Science Center and Solidifies Long Island’s Role as a Technology Powerhouse
Posted: September 26th, 2017
Whether you’re a self-described science nerd or simply love Long Island, there’s a lot to be excited about at the Tesla Science Center at Wardenclyffe, home to the only remaining lab where Nikola Tesla (the inventor of alternating current electricity and neon lighting) conducted research. The Shoreham facility is being developed into a science-focused Center, housing both a museum about Long Island’s rich scientific opportunities past, present, and future, and a business incubator for fledgling companies engaged in scientific research.
The business community recently enjoyed cocktails and networking at a CMM-hosted celebration of the Tesla Science Center, as attendees explored a special exhibit at the Ward Melville Cultural Center dedicated to Nikola Tesla’s work. At the event, CMM Managing Partner Joe Campolo announced that Softheon, Inc. will make an unprecedented donation of one million dollars to support the Tesla Science Center and solidify Long Island’s spot in scientific history.
Softheon ranks among Long Island’s most innovative companies, meeting the complicated challenges of healthcare delivery with seamless technology. For the past 15 years, under the leadership of its Founder and Chief Executive Officer Eugene Sayan, Softheon has provided turnkey Software-as-a-Service (SaaS) and Business Process as a Service (BPaaS) solutions for end-to-end tracking, monitoring, and reporting of business activities pertaining to individual and small group enrollment, financial management, and customer relationship processes. Softheon is trusted by 37% of healthcare payers participating on public exchanges, managing 24% of their membership. Learn more at softheon.com.
“It’s an honor to support the Tesla Science Center and its celebration of the important work of Nikola Tesla,” Sayan said. “His work and innovation have made an impact on my life, and I’m very happy that Softheon is supporting such an important initiative on Long Island.”
At the fundraiser, it was also announced that Joe Campolo has been named the National Chair of Fundraising for the Tesla Science Center. CMM attorney Marc Alessi serves as Executive Director. To learn more or make a donation, visit teslasciencecenter.org.
Review and Revise Your Revocable Trusts
Posted: September 26th, 2017
Tags: elder law, estate planning
I’ve been practicing elder law and estate planning for about 20 years now. Many of the revocable trusts dating back to that time were created for estate tax reasons. But with changes in tax laws, those old trust protections can create new problems today.
The tax issues that my clients feared in the 1990s were quite real. The top federal estate and gift tax rate was more than 50% and an estate could only claim a $600,000 exemption. That was a real problem for clients with $2-$3 million.
The typical plan that attorneys drafted back then was two trusts, one for each spouse with the assets being approximately split between the two. Upon the death of the first spouse, the maximum amount based on the current exemption was put into a restrictive trust out of the estate of the surviving spouse called a “credit shelter trust.” The remaining amount in the deceased spouse’s revocable trust was passed to the surviving spouse, either outright or into a marital trust.
The idea was for both spouses to use their exemption, allowing them to pass twice the exemption, or $1.2 million, estate-tax free.
But times have changed. The federal estate tax exemption has risen to $5.49 million in 2017 and New York’s to $5.25 million. So now, only very wealthy people need tax planning to avoid or minimize such taxation. Most people have more modest wealth and do not need such restrictive estate plans. However, many people still have estate plans designed to fight taxes that no longer threaten their wealth.
I’ve seen two problems develop as a result. Let’s use the example of Mr. and Mrs. Smith, who have a total estate of $4 million. Everything is split so that there is about $2 million in each of their revocable trusts. Then Mr. Smith dies. In the plan described above, everything in his trust will go into a credit shelter trust since it’s less than $5.49 million, with severe limitations on Mrs. Smith’s access. Without this plan, Mrs. Smith would have gotten it all and would still be estate-tax free.
The smarter way of doing this is to use disclaimer provisions. This means that Mrs. Smith would get it all unless she disclaims or says that she doesn’t want any part of her inheritance from her husband. Then that disclaimed part, and only that disclaimed part, goes into the credit shelter trust. This works nicely if they think that their estate might grow past the exemption or if they fear that the next president might lower the exemption.
The other problem is when a surviving spouse needs nursing home care. Federal law says assets in Mr. Smith’s trust count as the surviving spouse’s assets for Medicaid nursing home benefit eligibility purposes regardless of trust provisions that restrict the surviving spouse’s access to the assets. That means they don’t care if it was moved into a credit shelter trust. So Mrs. Smith would have to spend down not only everything in her trust, but everything in his also. This is true whether the disclaimer provisions were in his trust or not. If there truly is no reason for the credit shelter provisions, Mr. and Mrs. Smith would probably be better off revamping their trusts for asset protection from long-term care and not worry about estate taxes.
These issues demonstrate why it’s advisable to review your estate plan at least every five years with an experienced trust and estate attorney to ensure that the plan still works under current laws and financial circumstances. Those people who made estate plans with wealth greater than $500,000 in the 1990s or more than $1 million in the early 2000s probably have unnecessarily restrictive trusts today. Remember, it’s relatively easy to update an outdated estate plan while you are healthy, but it’s virtually impossible to fix it after you die.
Preparation in Negotiation
Posted: September 26th, 2017
Published In: null
Tags: negotiation
“Why do today what you can put off until tomorrow,” or even “why put off to tomorrow what you can put off to the day after tomorrow,” go some oft-quoted and well-loved maxims about procrastination. I’ve pulled as many all-nighters as the next guy, but when it comes to negotiation, it’s preparation – not procrastination – that’s your friend. Preparation is key to effective negotiating and is the number one factor that will give you a competitive edge.
Here, the negotiation prep steps you can’t skimp on:
- Flesh out the issues in writing. Perhaps the most overlooked yet most critical piece of negotiation prep, carefully identifying the issues before you begin will set you up for a good result. The harried negotiator often doesn’t want to “waste time” outlining issues that seem obvious. Negotiating a shareholder buyout? Value is of course vital to the discussion, but it’s not everything. What about the perks or a title that the departing party doesn’t want to give up? Similarly, if you’re negotiating a lease, price isn’t the only factor. Other issues that may make or break the deal might include exclusivity or default provisions. Writing down the issues during negotiation prep makes them become real and helps you focus on them when it counts.
- Gather information. Whoever said “ignorance is bliss” was probably not a strong negotiator. Gathering and analyzing information is the only way to identify and make sense of the issues in a negotiation. If you’re buying a new car, arm yourself with a competing dealership’s best offers to negotiate a lower price. If you’re making your case to a potential new customer, be prepared with specific examples of how your product improved the bottom line of other customers in the same industry. This type of preparation takes time and research – if you’re googling things in the parking lot before heading into your negotiation, it’s too late.
- Ways to create value. In their classic negotiation treatise Beyond Winning: Negotiating to Create Value in Deals and Disputes (Belknap Press of Harvard University Press, 2000), Robert H. Mnookin, Scott R. Peppet, and Andrew S. Tulumello offer a great example of this concept. Say you’re moving across the country for a terrific job opportunity, but your new employer balks at paying your moving expenses out of concern it will set a precedent for other employees. Perhaps instead of paying your moving expenses, the employer can offer an interest-free loan or a signing bonus that would meet your needs while also meeting the company’s. The negotiator who always employs a “take it or leave it” approach will never arrive at this type of win-win (or at least win-not lose) situation.
- Determining your BATNA – and theirs. In their bestseller Getting to Yes¸ Roger Fisher and William Ury coined the term “BATNA,” or Best Alternative to a Negotiated Agreement, to describe what is essentially a Plan B: the option that best meets your goals and that you will most likely take if the negotiation doesn’t go your way. Knowing your BATNA – and your adversary’s – empowers you to know whether to keep negotiating or walk away from the table. (Learn more about BATNA from the Program on Negotiation at Harvard Law School.)
Tempting as it may be, don’t look at your next negotiation as another task to cross off your to-do list. If you invest the time and effort into thorough preparation, you will unquestionably achieve a better result.
Joe Campolo is the Managing Partner of Campolo, Middleton & McCormick, LLP, a premier law firm with offices in Ronkonkoma and Bridgehampton. Prior to starting the firm, Joe served in the U.S. Marine Corps – 1st Battalion, 5th Marines, based at Camp Pendleton in California. Contact Joe at jcampolo@cmmllp.com.
Cybersecurity Due Diligence in Mergers and Acquisitions
Posted: September 26th, 2017
By Christine Malafi
There is no doubt that effective due diligence is essential in any merger or acquisition of businesses. Conducting a complete and through investigation of a target company is critical to a potential buyer’s decision to purchase a company, at what price, and subject to what terms, conditions, representations, and warranties. Proper due diligence will cover the target company’s strategic position, financial data, operational assets, and legal matters. Too many companies, however, overlook cybersecurity matters as a key component of their assets (or liabilities) and of a comprehensive due diligence program, especially on smaller acquisitions.
The importance of cybersecurity due diligence can affect not only the purchase price (for example, Yahoo’s breaches in 2013 and 2014, when discovered in 2016, caused a substantial discount in Verizon’s purchase price—reportedly a $350 million-dollar reduction), but can also affect a company going forward. An acquiring company does not want to import cybersecurity breaches into its own secured system.
Cybersecurity incidents cause tremendous financial, legal, and reputational risk. Possible target companies must have detailed privacy and data security policies, programs, and procedures in writing and enforced regularly to maintain the highest company value. Possible acquirers must conduct specifically targeted cybersecurity due diligence to determine whether a transaction should proceed and at what cost. Cybersecurity issues or security breaches can undermine the value of a target, delay investment return, or even kill a deal. The potential costs of remediating cybersecurity vulnerabilities, infections, breaches, lax controls, and insurance coverage at the target company may not only lower the value of the target, but may also make the potential buyer walk away from the deal. If the deal proceeds in the face of such issues, the due diligence process can provide the acquirer with an estimate as to the costs and expenses needed to remediate, as well as the timeline to integrate the target company’s IT and cybersecurity infrastructure, which can cause significant expenses and delays if not properly handled.
Due diligence can vary from deal to deal, but any preliminary inquiry will include the breaches, losses of data, or other cybersecurity incidents the target company previously suffered. In conducting due diligence, the buyer of a company will want to uncover any systemic security failings, determine how the company has responded to cybersecurity incidents, and look to see whether the target company remains vulnerable to attack.
The next area of inquiry is whether the company is a high-risk target. The due diligence team will need to determine the scope of client or customer data on the target company’s servers, bank account records, or other sensitive information often targeted by hackers. You will also want to assess a target company’s governance—what is the current state of the target company’s cybersecurity program, policy, procedures, compliance, and enforcement? How does the target company manage its IT security? Does the company have written cybersecurity policies and are employees trained to recognize cybersecurity threats? Does the target company have mobile device use or password policies, and if so are they enforced? Does the target even have a data security team? Are there audit records for review? Is the target proactive in preventing breaches, detecting malware, updating security certificates, storing information, and protecting its assets, or does it merely react to attacks?
Next, the acquiring company must research the target company’s regulatory and compliance obligations. The type of business being acquired is important. Banking, financial, and healthcare institutions are highly regulated with respect to security and safeguarding information. Additionally, companies regulated by the New York Department of Financial Services are subject to the agency’s new cybersecurity regulations and reporting obligations, which can be both time-consuming and costly. Defense subcontractors are also subject to rigorous reporting standards. An acquirer should gain a complete picture of the additional regulatory and compliance burdens it is assuming in the deal.
Finally, due diligence should look at the security of the computing infrastructure, vendor or third-party relationships, identification of critical and sensitive data, employee training, employee access to systems, thefts, and the social media presence and policies of the target. Looking at these areas can help to determine whether the target company is at greater cybersecurity risk than normal. A company’s network is only as secure as its weakest link, and any outsourcing of security or IT services can open a back-door into systems if the third party is not chosen wisely or if a disgruntled employee can get into confidential system areas.
In a world where cybersecurity incidents are ubiquitous and do not discriminate among sectors, cybersecurity due diligence must be part of any good M&A checklist. Companies should integrate specialized cybersecurity teams, including counsel, into their due diligence process to ensure that they are asking the correct questions and reacting to discoveries properly. Carefully reviewing a target company’s cybersecurity posture not only identifies potential risks, but can also justify specialized representations and warranties to be included into purchase agreements to protect the value of an investment.
Exploring Cybersecurity in Healthcare
Posted: September 26th, 2017
Tags: cybersecurity, healthcare, technology
Are you tired of seeing the word “cyber” inserted in front of everything? I know I am. Cybersecurity in healthcare requires security implementation to the modern methods in which we communicate (email and texts), store information (databases and computers), and diagnose and treat disease (medical devices, wearable technology). The computing power each person now has available, combined with global interconnectivity, makes healthcare cybersecurity a complex topic.
In the past, communication and records seemed much more secure. A doctor could mail a test result to a patient with little worry that someone would open an envelope sent via U.S. Mail. A hospital employee might take home a couple of patient charts to catch up on work at home. A provider simply had to put a lock on the door to an office or file room to keep unauthorized people out.
Now, it seems email gets read by myriad individuals or bots along the route to its recipient. Likewise, an employee can bring home hundreds of thousands of patient records on a personal laptop or thumb drive. If a patient records database is not secure, the electronic Personal Health Information (“ePHI”) can be accessed by a teenage hacker in Russia, or by a nation-state’s military, like North Korea. The consequences associated with each vulnerability are daunting.
Strictly speaking, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created standards for the electronic exchange of health information, and it provided data privacy and security provisions for safeguarding medical information. In 2009, it was supplemented by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), which primarily updated the Privacy and Security Rules and created monetary penalties for noncompliance. The last major update to the HIPAA regulations came in 2013 under the HIPAA “Omnibus Rule.”
The main characters under HIPAA and its regulations are “Covered Entities” and “Business Associates.” Covered Entities are defined as a health plan or provider providing medical care or transmitting identifiable information about a patient. Business Associates are third parties who receive, store, transmit, or use ePHI on behalf of a Covered Entity. HIPAA requires Business Associates to sign Business Associate Agreements (“BAA”) with the Covered Entity agreeing to keep the ePHI it receives, stores, or transmits under a certain level of security, and the BAA must define how ePHI shall remain available to the Covered Entity, and it must establish the breach notification protocol between the Business Associate and the Covered Entity should any breach occur.
Cloud Computing Vendors
Almost as ubiquitous as “cyber” in our modern vernacular is talking about the “cloud.” Most people are now familiar with the cloud through using iCloud, Dropbox, OneDrive, and more. As we have learned through news reports, the cloud consists of thousands if not millions of networked computers that store and share data in massive datacenters.
The benefit to moving operations to the cloud is decreased storage cost, and for most small businesses it helps relieve tasks such as updating firewalls or data backups. However, moving ePHI to the cloud means that, except in the most sophisticated hacker attacks, a user password is all that protects the ePHI from potential cyberthieves.
The Department of Health & Human Services has acknowledged the increased use of cloud computing services and encourages providers to gain a further understanding of cloud offerings. If your medical practice or small business stores protected health information, it is critical to consult with an experienced professional about your obligations and to put a plan in place to minimize risk.
Malafi featured in LIBN’s “Ones to Watch in Law”
Posted: September 14th, 2017
Christine Malafi
Partner
Campolo, Middleton & McCormick
Christine Malafi chairs the corporate department at Campolo, Middleton & McCormick, which has offices in Ronkonkoma and Bridgehampton. She focuses on mergers and acquisitions, corporate governance and complex transactions, and also maintains a busy labor and employment practice, serving in a general counsel role for many of the firm’s internationally based clients. Prior to joining CMM, Malafi earned the distinction of being the first woman and youngest person ever to serve as Suffolk County attorney. She was recognized by her peers for inclusion in Best Lawyers in America for 2018.
October 10 – CMM Business Breakfast: Labor & Employment Update featuring Irv Miljoner of U.S. Department of Labor
Posted: September 14th, 2017
Event Date: October 10th, 2017
Labor & Employment Update: What Businesses Need to Know
Wage and hour updates, paid family leave, social media in the workplace, and enforceability of non-compete agreements, to name a few: evolving practices and policies pose a challenge to employers trying to stay ahead of the changes. Join us for our annual Labor & Employment Update to hear from a panel of experts about new laws and regulations affecting the workplace, and learn the specific steps your business should take to prepare for compliance. Don’t miss the opportunity to hear directly from the Department of Labor as well as representatives from the legal, accounting, and human resources fields about the critical labor and employment updates that affect your business.
Moderator: Joe Campolo, Esq., Managing Partner, Campolo, Middleton & McCormick, LLP
Panelists:
- Irv Miljoner, District Director – U.S. Department of Labor, Wage & Hour Division, Long Island District Office
- Arthur Yermash, Esq. – Campolo, Middleton & McCormick, LLP
- Christine Ippolito, SPHR, SHRM-SCP – Principal, Compass Workforce Solutions, LLC
- Thomas Walsh, CMI – Director, Citrin Cooperman
Date: Tuesday, October 10, 2017
Location: Hilton Long Island/Huntington, 598 Broadhollow Rd., Melville, NY 11747
Agenda:
8:00 – 8:30 a.m. – Registration, continental breakfast & networking
8:30 – 10:00 a.m. – Panel discussion and Q&A
Sponsored by:
Malafi Recognized by Peers for Inclusion in The Best Lawyers in America
Posted: August 29th, 2017
Ronkonkoma, NY – Campolo, Middleton & McCormick, LLP, a premier law firm with offices in Ronkonkoma and Bridgehampton, proudly announces that partner Christine Malafi has been recognized by her peers to be featured in the 24th edition of The Best Lawyers in America© 2017 in the category of Employment Law – Management. With this distinction, Malafi ranks among the top five percent of private practice attorneys nationwide as determined by a rigorous peer-review process.
For over three decades, the legal profession and the public have turned to Best Lawyers® as one of the most credible measures of legal integrity and distinction in the United States. Inclusion in Best Lawyers is based on more than 7.4 million confidential evaluations by top attorneys. The Best Lawyers’ founding principle forms the basis of this transparent methodology: the best lawyers know who the best lawyers are. No fee or payment to participate is permitted.
Recognition by Best Lawyers symbolizes excellence, which Malafi embodies in her professional and personal pursuits. Malafi chairs the Corporate department at CMM, where she focuses on mergers and acquisitions, corporate governance, and complex transactions, and also maintains a busy Labor & Employment practice, serving in a general counsel role for many of the firm’s internationally based clients. Prior to joining CMM, Malafi earned the distinction of being the first woman and youngest person ever to serve as Suffolk County Attorney, where for eight years she focused on obtaining jury verdicts in favor of the County, enforcing anti-discrimination laws, and protecting children from harm.
In addition to her legal work, Malafi focuses on advancing the interests of women and girls. She serves on the Boards of Directors of the Girl Scouts of Suffolk County and Natasha’s Justice Project, and is also a longtime Girls Inc. volunteer. A resident of North Babylon, Malafi also serves on the Board of Governors of Touro Law School and the New York State Pro Bono Scholars Task Force.
About CMM
Campolo, Middleton & McCormick, LLP is a premier law firm with offices in Ronkonkoma and Bridgehampton, New York. Over the past generation, CMM attorneys have played a central role in the most critical legal issues and transactions affecting Long Island. The firm has earned the prestigious HIA-LI Business Achievement Award and LIBN Corporate Citizenship Award, a spot on the U.S. News & World Report list of Best Law Firms, and the coveted title of Best Law Firm on Long Island. Learn more at www.cmmllp.com.