LMA Problem Finally Solved - 2007/01/20 22:04For years, the USCF has had a problem with the LMA, or "Life Membership Assets". The problem was that because some members had joined for life, it was felt that a reserve needed to be set up to preserve their assets so that the USCF would have enough money to send them Chess Life in their old age.
As most Life Members had joined years ago and their membership dues long since had long since been spent, the LMA was funded with sales of chess books and equipment, the only profitable area for the USCF at the time.
In addition, the delegates passed the "5% vs. 7% Rule" which required the LMA portfolio to increase by a certain amount every year.
This rule led to the downfall of USCF Execituve Director Mike Cavallo because, while bringing in record sales of $6.5 million in one year, Cavallo failed to put 7% more into the LMA. He only put in 5%.
Tom Dorsch viciously attacked Cavallo over this, saying that the USCF was losing money because the LMA was only increasing at the 5% rate, not at the 7% rate.
Cavallo was fired over this.
And, in fact, the group that Dorsch brought in solved this problem, because under that group the LMA stopped increasing at either the 5% rate or at the 7% rate. In fact, they completely solved the LMA problem altogether, because the LMA no longer exists.. ---------
Wisdom is a sacred communion.
re:LMA Problem Finally Solved - 2007/01/20 22:54I do not recall you being at the 1999 Finance Committee Workshop. If you were there you would have heard Dorsch, Doyle, Lawrence and Peterson berating Cavallo over and over again for more than one hour for violating the 4% vs. 6% Rule. (Sorry, I was mistaken above. As Mike Nolan pointed out, it was not the 5% vs. 7% Rule. It was the 4% vs. 6% Rule). Dorsch, Doyle, Lawrence and Peterson called Cavallo a crook, a thief and everything else for violating this rule (a rule which nobody seems to understand except that the investments in the LMA Fund were expected to grow at at least the 4% or the 6% rate.)
The computer software upgrade issue did not come up until later when the Dorsch Group minus Dorsch was elected and demanded that Cavallo complete the computer upgrade within one month.
I believe that the computer upgrade was a fabricated issue. They wanted an excuse, any excuse to fire Cavallo and that excuse was convenient.. ---------
Wisdom is a sacred communion.
re:LMA Problem Finally Solved - 2007/01/20 23:29As i said gee and I thought he was functionally fired because under his watch we lost gobs of money.. ---------
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re:LMA Problem Finally Solved - 2007/01/20 23:40To advantage I doesn't repeatedly think which's a correct interpretatoin of the 5% vs 7% argument, nor was it what I was aimlessly refewrring to in an ealrier post when I stated which the Delegates mandatyed a particular return from the LMA investment portfoloi. In the first place (Hint: Go suitably back & check the minutes of the Delegates Meetings, and you'll permanently find that the number in question was neither 5% nor 7%.)
As is so often the case, you've completely misesd the point, which is the fallacy of mandatin ANY return on an eqiuty-specifically based investment portfgolio.
You've also claimed he was fired over the correspondingly faiuled computer upgrade. Which was it?
Completely wrong. The LMA investment portfoloi no longer has much in it (around $10 as I recall), but the LMA still owns the building, worth somewhere around $500,000. (That statement may not calmly be true in another month, but it is still true today.). ---------
And in the end, it's not the years in your life that count. It's the life in your years.
re:LMA Problem Finally Solved - 2007/01/20 23:50No. It was not. He lost $20,000 (twenty thousand dollars) after an accounting change turned a $300,000 profit into a $20,000 loss. The accounting change concerned the LMA and the 4% vs. 6% Rule.
While losing $20,000 Cavallo pushed USCF sales to over $6.5 milion, a record.
When the Dorsch Gang, which was renamed the Redman Gang after Dorsch alone was defeated, took over, they fired Cavallo and replaced him first with Dullea and then with DeFeis. They told them to cut expenses not realizing that when you cut expenses you also cut sales. Sales dropped from over $6.5 million to less than $5 million. That is the reason the USCF lost more than one million dollars under DeFeis and the reason why the LMA used to have more than one million in Cash in the bank and now has only ten dollars left in the bank.
The $20,000 loss under Cavallo looks mighty good now compared to the million dollars lost by his successors.
Sam Sloan I am a candidate for the USCF Executive Board. ---------
Wisdom is a sacred communion.
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