Hey, Mark Warner, don’t you really want to be governor again?

Virginia Republicans and Democrats alike must be wondering, “Is there a Plan B for this governor’s election?” 

Their consternation is the result of what could be called the “April Fools’ Week Massacre.” A string of news reports appearing from March 30 through April 5 punctured the gubernatorial campaigns of Republican Attorney General Ken Cuccinelli and former Democratic National Committee Chairman Terry McAuliffe, the unopposed candidates for their parties’ nominations, while tarnishing the reputation of Gov. Bob McDonnell.

The first blow was a March 30 report in The Washington Post detailing ties between Cuccinelli and Glen Allen-based Star Scientific, a former tobacco company that now sells dietary supplements.  Cuccinelli owned more than $10,000 in Star Scientific stock in 2011 when the company sued the state over a tax assessment. A campaign spokesman said the stock, bought in 2010 and 2011, wasn’t reported until last year because Cuccinelli didn’t realize its value had exceeded the threshold for financial disclosure. Cuccinelli has reported receiving $13,000 in gifts from Star Scientific CEO Jonnie R. Williams Sr., including a brief stay at Williams’ Goochland County home in 2010.

Star Scientific’s suit involves a $700,000 sales and use tax assessment on tobacco curing barns it owns in Mecklenburg County. If it loses the suit, the company could owe the state $1.7 million. Star Scientific, in turn, is a defendant in lawsuits filed by two shareholders stemming in part from a recently disclosed federal investigation into the company’s securities transactions.  Star Scientific says the suits are without merit.

On the same day the Cuccinelli story ran, The Post also reported that Williams paid $15,000 for catering at the wedding reception for McDonnell’s daughter in 2011.  McDonnell called the payment a wedding gift to his daughter and refused to reveal any other gifts, which he claimed did not have be reported under state law. That news caught the eye of every parent in Virginia who ever footed the bill for a wedding.  (Williams is going to be getting a lot of wedding invitations.)

Reacting to a barrage of criticism, Cuccinelli on April 5 appointed former Attorney General Stephen D. Rosenthal and former state Solicitor General William H. Hurd to handle the Star Scientific case at no charge to the state.

In a statement, Brian Gottstein, the attorney general’s spokesman, stressed that “there was absolutely no conflict of interest with the attorney general’s office” and noted Cuccinelli has not been personally involved in the case. Outside counsel was appointed “in an abundance of caution and to move past what has become an unnecessary distraction for the office and the attorney general.”

On the same day that Cuccinelli recused his office, McAuliffe also was making news. The website Politico disclosed that the Democrat, best-known as a prolific fundraiser for Bill and Hillary Clinton, had quietly resigned as chairman of GreenTech Automotive in December. McAuliffe had bought GreenTech, a maker of small electric cars, from the Chinese government in 2009.

McAuliffe had been expected to locate GreenTech in Virginia to solidify his claim as a jobs creator. Instead, the plant sites wound up in Mississippi, home of McAuliffe’s good friend, former Gov. Haley Barbour. McAuliffe said he did not locate in Virginia because the Virginia Economic Development Partnership had shown little interest in the project. PolitiFact Virginia determined that claim was false. Emails, however, showed VEDP had concerns about GreenTech, including its proposed use of a federal program offering visas to foreigner investors who create U.S. jobs.

Republicans pounced on McAuliffe’s resignation as proof that the GreenTech deal has gone bust.  According to news reports, GreenTech has produced few cars at a temporary factory in Horn Lake, Miss., and little progress has been made on plans for a 300,000-square-foot permanent plant In Tunica, Miss. GreenTech also was late in paying taxes in Tunica.

Before March 30, polls showed Cuccinelli and McAuliffe were in a virtual dead heat, with many voters saying they didn’t know much about either candidate. Political observers said the situation gave each contender an opportunity to “define” his rival, meaning pummel him with negative ads. Instead, Cuccinelli and McAuliffe now have been defined by bad press on their business ties. Not a good start for campaigns that planned to make the state economy their top issue.

The gubernatorial contest already was suffering from a heavy dose of voter dissatisfaction.  After dropping out of the race for the Republican nomination last year, Lt. Gov. Bill Bolling briefly flirted with the idea of running as an independent. In addition, Politico says Republican moderates in Northern Virginia have urged former U.S. Rep. Tom Davis to make a bid, so far with no success. The hearts of Democrats, meanwhile, were aflutter when popular U.S. Sen. Mark Warner, frustrated with the glacial pace of Washington, pondered running for a second term as governor before deciding to seek re-election to his Senate seat.

If the race remains a two-horse field, neither candidate looks likely to inspire widespread enthusiasm among the electorate. In Virginia, a low voter turnout typically favors Republicans, giving Cuccinelli the advantage. In this demolition derby, however, there probably will be no winner, just a survivor. 

Stephen Fuller, director of the Center for Regional Analysis at George Mason University, predicts the automatic federal budget cuts that went into effect March 1 will eliminate 154,118 jobs in the Old Dominion. That figure is 26 percent lower than the 207,571 job losses Fuller predicted in a study released last July.

Fuller’s original figure has been widely quoted, including a Virginia Business cover story on sequestration last October and an editor’s column in the April issue.

Fuller’s latest report, released March 27, still shows Virginia and California bearing the brunt of job losses caused by sequestration, 20.4 percent of an expected 1.58 million jobs nationwide. Fuller had earlier predicted U.S. job losses to total 2.14 million.

The new report says sequestration will reduce the nation’s gross domestic product (GDP) this year by 1 percentage point, $158 billion, and decrease personal earnings by $80.5 billion this year.  The original estimates were a $215 billion drop in GDP and a $109.4 billion decline in personal earnings.

The economist’s revised forecast results in part from the delay in implementing sequestration, from Jan. 1 to March 1, caused by Congress’ passage of the American Taxpayer Relief Act at the beginning of the year. In addition to delaying the budget cuts, the law also continued Bush-era tax cuts for taxpayers except those earning more than $400,000 a year. For that group, the top marginal tax rate rose from 35 percent to 39.6 percent.

Fuller’s new report says that the budget cuts that went into effect on March 1 totaled $85.4 billion, less than originally expected. Cuts will be greater in the next fiscal year, $110 billion, the report says.
The revised analysis also takes into account the fact that federal agencies plan to furlough employees rather than terminate them in order to accommodate budget cuts. 

Doomsayers have been quick to point out uncertainties around things like health- care reform.  During the run-up to last year’s presidential election, concerns were raised about tax rates.  The question over who would be elected president loomed large.  After the election came the fiscal cliff, then sequestration, the federal debt-limit ceiling, and now the federal budget. All told, there were lots of supposed reasons to do — well, nothing.

The certainty of uncertainty has become too familiar.  In fact, there never has been a time when all was certain.  Have we totally forgotten that business investment is predicated on the idea that with risk comes reward?

When it comes to politics, it is often said that government should be more like business.  Whether that is true or not, most would probably agree that we ought to avoid making business more like government, especially if that means moving at the speed of politics, which of late has been maddeningly slow.

Let’s take a moment to rescript this paradigm:  The Great Recession came and went.  In the process, jobs that had been wrung out of the economy by more efficient technologies were eliminated, never to return.  Working from a lower cost basis, business earnings now are exceeding expectations.  Elections have taken place with little change to political norms.  Housing prices are on the rise.  The S&P 500 recently hit an all-time high.  Companies have cash-heavy balance sheets.

For those willing to go forward in business, the difference between these two worldviews is an OPPORTUNITY writ large.  Those waiting for perfect conditions with certain returns will see little or no reward, while those willing to move forward with plans to build their businesses can realize significant future gains.  As a banking friend once told me, only a compliance officer can stay safely on the payroll for saying, “No.”

In fact, the art of business is getting to “Yes.”  We want to be able to say yes to hiring people, yes to investing capital, yes to marketing programs and to all the other things that lead to business growth.

Let’s try to advance the positive paradigm a little farther forward.  What will business results be like for leaders versus followers in this economic recovery?  When others are still sitting on the sidelines, isn’t this absolutely the best time to invest?

Years ago, a publisher friend of mine informed me that he had let go a mutual acquaintance.  I asked what the problem had been, and he said “Well, the fella thought he was an intersection, and what I needed was a highway.”  Closely examined, this comment isn’t as cryptic as it seems.  It summarizes a lot of what we know about leadership.

The real job of leaders isn’t to play traffic cop, blowing whistles and pointing out stop signs.  That’s what happens at intersections, and it is a lot more akin to the role of a manager than the role of a leader.  After all, if we are making good hiring decisions, our people already have enough talent to drive the car and know the difference between red lights and green ones.

The role of the leader is to be more like a highway, encouraging as many people as possible to travel safely in the same direction, to look out for one another and to arrive at their destinations with efficiency.  There is a certain grace to the flow of traffic, and the bigger the highway the greater the results. Fundamentals like collaboration, cooperation, encouragement and establishing a shared sense of purpose are the hallmarks of leadership.

Take a little time to assess what you are to your organization.  Are there stop signs where you’d actually like to see traffic merging?  Are feet hovering over the brakes, instead of applying a bit more pressure on the accelerator?  Leaders encourage people to take some risks; without them there won’t be much reward. 

However, insureds cannot lose sight of the fact that they need to provide notice to the appropriate insurance carriers and know what other deadlines are in play as part of their insurance policy.  Many insurance companies have denied coverage to an insured for missing deadlines mandated by the policy.

The most obvious and litigated provision in policies is the requirement to give the insurer notice of a loss or claim.  Both first- and third-party insurance policies mandate such notice, which is a condition precedent to securing coverage in many instances.  The classic language from policies is that notice is to be given “as soon as practicable.”  Courts can interpret this language as very short time periods.  But some policies use the term “immediately,” or even list a deadline after the event, such as 60 days.  The reason for this provision is to allow the insurer to conduct a timely investigation of the loss in order to exercise its other contractual rights, adjust the claim as needed and determine if there is coverage.  These needs are interrelated and the insurer likes to be involved before decisions are made that may increase the dollar amounts involved, or hinder a defense in liability cases.  In some states, late notice is late notice.  The insurer in these states does not have to be prejudiced by the late notice in order to deny coverage.  Thus, it is critical for policyholders to understand their policy’s requirement, the case law interpreting the language and have a plan in place to ensure the notice requirement(s) are met in a timely manner.

Giving notice of the loss or claim is not the only pitfall lurking within your insurance contract.  For example, most states, if not all, have laws on the books setting out the statute of limitations for bringing a contract action.  If an insured believes a claim has been wrongfully denied and wishes to pursue a case against its insurer, a contract action is at the heart of such a lawsuit.  But do you know if your policy has contractually reduced the legal statute of limitations period?  In a recent matter for a Virginia-based insured, where the statute of limitations is five years on a written contract, the commercial property insurance policy reduced that period to just two years.  Reducing statutory periods in contracts is permitted.  Thus, it is imperative to determine whether the policy reduces a statutory period to sue on the insurance contract.

The list of deadlines continues in other ways.  In property policies there are usually conditions requiring the insured to elect how it plans to proceed on its claim: repair/rebuild or demolition of the property.  In this instance, failure to elect within the time period will usually result in a default selection.  You can be sure the default does not benefit you.  In one recently analyzed policy the time period was 180 days.  The problem is that adjusting the loss and determining the best course of action may take more than six months.  Submitting a proof of loss to the carrier may also be required within a certain time period.

In a “claims made” policy it is critical to ensure all claims are submitted to the insurer in a timely manner since the policy covers only those claims made within the policy period or any extension.  This is very different than an occurrence policy.  As the end of the policy period approaches with a claims made policy, it is critical that the insured provide notice of all claims, and potential claims in many instances, to the carrier(s). 

The only way to truly be aware of these types of contractually imposed deadlines is to thoroughly analyze the language in the insurance policies.  Premiums have been paid, and you want the insurance policy limits to be available; that is core function of insurance as part of a risk management program.  Having insurance available is subject to many conditions imposed by the policy, including various deadlines.  Take the time to either review the policies yourself or seek guidance from coverage counsel.  As Benjamin Franklin so aptly said, “an ounce of prevention is worth a pound of cure.”

Collin Hite is the practice leader of the Insurance Recovery team in Hirschler Fleischer’s Richmond office. He handles insurance recovery and coverage litigation nationally in the areas of business interruption, cyber/data breaches, construction, business torts, products liability, directors’ and officers’ liability, employee dishonesty, intellectual property, environmental and bad faith matters. He can be contacted at (804) 771-9595 or chite@hf-law.com.

If left unchecked or untreated, obesity will affect 43 percent of adults by 2018 and will add nearly $344 billion in that year alone to the nation’s annual direct health care costs, accounting for more than 21 percent of health care spending. The estimated cost of diabetes in the United States has increased 32 percent — or $8 billion a year — since 2002, reaching $174 billion in 2007. Both are illustrative of trends that are simply unsustainable and highly undesirable.

Reversing these trends, and building a healthier Virginia, requires collaboration across the broad spectrum of stakeholders — individuals and families, employers, physicians and hospitals, insurers, government policymakers, and pharmaceutical and life sciences firms — to serve the public’s health care needs in the most practical, innovative and impactful ways.

Two initiatives that are taking practical, collaborative health care innovation to the next level are the Virginia Health Innovation Network (VHIN) and the Virginia Chamber of Commerce’s Blueprint Virginia. VHIN, a project of the Virginia Center for Health Innovation, is a groundbreaking online community that will enable those on the front lines of health care to identify, generate, evaluate, spread and sustain innovative, value-driven models of wellness and health care. By developing innovations that are feasible today and scalable tomorrow, we can make it easier for consumers to access quality care and resources; connect patients and clinicians in ways that break down traditional barriers to care; encourage informed decisions at the point of care; and promote affordability.

Transforming the delivery of quality, affordable health care is also one of several guiding principles of the Virginia Chamber of Commerce’s Blueprint Virginia initiative. Blueprint Virginia seeks to create a long-term statewide economic development strategy to ensure that Virginia remains competitive in the global economy. Achieving this goal will require Virginia to attract and retain the best talent, and keep them healthy. The discussions that will take place around Blueprint Virginia deserve the full participation of health-care stakeholders across Virginia to establish a health-care framework that serves Virginians in the best way possible.

The goals of VHIN and Blueprint Virginia are consistent with the United Health Foundation and UnitedHealthcare’s commitment to practical, collaborative health-care innovation; improving the quality and cost effectiveness of medical outcomes; expanding access to health-care services for underserved individuals; and enhancing the well-being of the local Virginia communities where our employees live and work. As the nation’s largest health insurer with a network of 500,000 members, 12,000 physicians and 100 hospitals in Virginia, UnitedHealthcare has amassed one of the largest collections of clinical data in the world, and is dedicated to converting it into valuable information that can help people in Virginia live longer, healthier lives.

The United Health Foundation and UnitedHealthcare are proud to support VHIN and Blueprint Virginia, respectively, and look forward to working with Virginia’s health-care community to encourage collaborative conversation, project development and action. Both efforts have the potential to engage Virginians in wellness and health-care innovation; strengthen coordination and utilization of critical health-care resources; and ultimately empower consumers to take control of their health. Together, with the support of Virginia’s health care industry leaders, we can modernize Virginia’s health care system and improve the quality of life for all Virginians.

Based in Reston,  Christopher J. Mullins is executive director of UnitedHealthcare of the Mid-Atlantic and a member of the Virginia Center for Health Innovation’s Demonstration Project Advisory Group.

To the Editor,

Expanding our company from two employees here in Virginia to a global operation with 180 associates reflects the American Dream for our shareholders and for our employees.  This is the same dream that my immigrant grandfather realized, having built a successful wholesale business within a generation of coming to this country as a child.

The ability to start and to grow a business and to participate in growing our nation’s economy lies at the heart of the American enterprise. However, failure to address our unsustainable national debt hinders future opportunities. Our inaction jeopardizes the future of the economy and the prospects for our children and grandchildren.

Every day our debt grows by $3 billion. If we continue to allow our debt to grow in such a manner economic growth will sputter while the rates of interest, inflation and unemployment will all rise. There will be no money left to pay for the legitimate functions of government.  Even Medicare and Social Security will become insolvent.

Anyone who manages household or business finances can understand a simple truth: too much debt chokes off financial well-being and leaves one on a treadmill of debt service at the expense of any kind of savings or investment in the future.  How can our elected representatives in Washington fail to act when confronted with such an obvious truth?

I joined the Campaign to Fix the Debt in order to call on those elected representatives to show genuine leadership in addressing our nation’s debt problems. Our ballooning debt is one of the greatest threats to our economic well-being and to our national security. Policymakers need to focus on what’s best for the country and to do their jobs, rather than focusing on scoring political points and demonizing the opposition.

It is time for Washington to move from crisis management driven by short-term “solutions” to crafting a plan that puts our debt on a downward trajectory as a share of the economy. The continued finger pointing and false rhetoric has to stop. This is the time to take responsibility for our actions and to ensure that our nation’s economy is strong for generations to come.  

Scott Hamberger
CEO of Fortessa Tableware Solutions LLC, Sterling

The first question: “Are we there yet?” A question most parents have certainly entertained and one that I myself have all too often answered my kids with, ‘No, we are not there yet, and I will tell you when we get there.’

The second question: “Is it fair yet?” I had a client ask me this question during a post “fiscal cliff” tax planning seminar last month. The thought of it has intrigued me ever since. 

It is fair to say Congress held the spotlight as we rang in the New Year. The political drama regarding the “fiscal cliff” was a constant in nearly all news mediums. The coverage chronicled us going over the cliff at the stroke of midnight on Dec. 31, 2012, then, averting the cliff when the American Taxpayer Relief Act of 2012 (ATRA) was passed by Congress on Jan. 1, 2013, and signed into law by the president the next day.

ATRA addressed the expiring Bush-era tax cuts and delayed the activation of the automatic Federal spending cuts. To hit the high points, 99 percent of Americans’ income tax rates were permanently extended at the lower Bush-era income tax rates, while the remaining 1 percent of higher-earning Americans will pay the Clinton-era income tax rates. As most of us know, the Bush-era tax cuts were temporary, a result of legislators’ inability to garner enough votes to enact a permanent reduced rate structure. Accordingly, the Bush administration income tax rates were set to expire on New Year’s Eve, and income tax revenues were projected to increase almost $3.7 trillion over the next 10 years.

In addition, ATRA established a 20 percent maximum capital gains and dividends rate, a 40 percent estate and gift tax rate, made the Alternative Minimum Tax (AMT) patch permanent (a significant benefit to millions of middle class taxpayers) and extended enhanced education credits as well as numerous other business tax extenders. 

All of which equates to an estimated $3 trillion tax cut. So in an attempt to tackle the nation’s fiscal woes, leaders from both political parties squandered an opportunity to agree to a “grand bargain” to reduce spending and generate revenue. Instead, they significantly reduced tax on a permanent basis with zero offsetting spending reductions. Can you start to gather the answer to my first question, are we there yet?

Of course, there are some who project the tax cuts will stimulate the economy and actually increase revenue in the long run. Others contend the tax cuts will further add to the debt problem.

Some argue that ATRA has closed the revenue side of the equation and focuses attention on expenditures. This is why we focused on the March 1 deadline, but again, the legislators’ inability to reach an agreement has now triggered automatic spending cuts, also known as “sequestration.” We will have to continue to wait and see if Congress and the Obama administration can agree to enough spending cuts to balance the budget or, if raising taxes (or closing loopholes, depending on your perspective) will be needed.

Looking beyond the “spin” that both parties use to fuel their debate for spending cuts versus raising taxes, the chart below makes a compelling argument that both are needed to truly balance the budget. 

Mandatory spending (Social Security and Medicare) make up 62 percent of the annual budget. Adding the military spending of 18 percent and the interest on our national debt of 7 percent to the 62 percent entitlements totals 87 percent of the entire Federal budget. It’s painfully clear that all of the other Federal agencies combined make up only 13 percent of the funds available. In other words, Congress could eliminate the entire
Federal government and still not put a dent in the $16 trillion debt.

Yes, we could abolish the Departments of Transportation, Labor, Agriculture and Commerce, the State Department, the Federal Bureau of Investigation, the Border Patrol, the U.S. Marshal Service, the Federal Bureau of Prisons, the Environmental Protection Agency, the Nuclear Regulatory Commission, the Department of Veterans Affairs, the U.S. Postal Service and on and on and on and still not fix our long-term fiscal woes.

Now to answer my question: “Is it fair yet?” As the former British Prime Minister Sir Winston Churchill once stated, “Americans can always be counted on to do the right thing…after they have exhausted all other possibilities.”  It is my opinion that we are still evaluating possibilities, and it is my hope that we will do the right thing. So, as I tell my kids; “No, we are not there yet, and I’ll let you know when we get there.”

Adrian U. Taylor, CPA, is a manager in the Tax Department of Yount, Hyde & Barbour, P.C.