AME's who are thieves Part Duh

[DonutHole]

No, there isn't. Not sure if you remember Marsh
Insurance or not - COPA used to use them - but
they got caught taking kickbacks, and there was
talk of jail time, and huge fines.

http://www.guardian.co.uk/business/2005/feb/01/8

Marsh & McLennan, the world's biggest insurance broker, yesterday agreed to pay $850m (£450m) to settle allegations that it rigged the market and took kickbacks from insurance firms for directing business their way.

The cash will be used to reimburse the broker's clients who were forced to pay inflated prices because of the alleged fraud. Marsh issued an apology for "unlawful" and "shameful" behaviour.

In the past three months, six executives from three insurance firms - AIG, Ace and Zurich Financial Services - have pleaded guilty to criminal charges relating to the original suit filed against Marsh in October.

The suit alleged that Marsh had steered its clients towards insurance firms with which it had lucrative pay-off agreements, instead of seeking the best policy and price for clients. It also claimed Marsh had solicited fake bids from insurers to drive up prices.

Your lack of ethics and morals is scary, sir.

Thank you for the personal attack. I actually like you and respect you, and I also agree with you on the majority of your posts. I personally, have never taken a kickback, nor would I because I like to do the best thing for my customers, and if that means finding them the best value for their money then bonus, the less money they spend on maintenance the more they spend on flying, which in the end leads to more they spend on maintenance, legitimate maintenance.

If you are putting your labor into arranging a service for a third party, is it unethical to expect to be paid for that service?

I agree that entering an agreement with a third party service provider to send people their way, and then receive a kick back off of the third party service providers inflated bill is ethically and morally wrong, but, is expecting somebody to arrange for a service that benefits you without paying for that persons time ethically and morally wrong as well?

You have consistently argued over the years (to my disagreement) that labor is a commodity. IF that is the case, the only difference between a kickback, and product markup is the stage at which the price is modified pre-consumer. If you buy a remanufactured brake master cylnder from napa, is it morally wrong for them to provide markup on that master cylinder or is it wrong for them to charge no markup on the cylinder but make their profit by accepting a kickback from the remanufacturer of the master cylinder. On paper, the master cylinder might cost the consumer the exact same price whichever way the final price of the unit is determined, but one manner of marking the product up is morally wrong and the other isn't.

[Colonel Sanders]

You can't possibly be this dense.

But I will try to explain your business to you.

Let's say you spend 4 hrs of your time phoning
around and talking to various engine shops to
find the best one for your owner, and the shop
is going to charge $25k.

If you invoice the customer for 4 hrs of your
time and the $25k, that's legit. The customer
is paying you directly for the service that you
provided him.

However. Let's say you tell your customer
that the best deal is at the same shop, which
invoices $27k, which you pass onto the owner,
and the shop kicks back $2k to you. You might
unethically think that since you were too dumb
to invoice the owner the 4hrs you spent on this,
that the $2k is morally yours.

And, that's how you end up in jail, like a Montreal
politician.

Do you see what a kickback is now?

[crazy_aviator]

A product mark-up ( and that includes labour mark-up ) is a necessary part of being in your own business ,,,An employee is protected and cared for , cradle to grave. A person in their own small business MUST take care of ALL the additional costs an employee hasnt even got a clue about. How many small AMO owners are driving around in a hummer? have a 200 thousand dollar aircraft ? NONE !

[Colonel Sanders]

Where did I say that you shouldn't invoice
an owner for the services that you provided him?

Pick up a newspaper, and start reading about
what happened in Montreal, Laval, and Mascouche.

I simply cannot believe the arguments here,
that kickbacks are bad in the public sector,
but ok in the private sector. Scary.

[DonutHole]

You can't possibly be this dense.

But I will try to explain your business to you.

Let's say you spend 4 hrs of your time phoning
around and talking to various engine shops to
find the best one for your owner, and the shop
is going to charge $25k.

If you invoice the customer for 4 hrs of your
time and the $25k, that's legit. The customer
is paying you directly for the service that you
provided him.

However. Let's say you tell your customer
that the best deal is at the same shop, which
invoices $27k, which you pass onto the owner,
and the shop kicks back $2k to you. You might
unethically think that since you were too dumb
to invoice the owner the 4hrs you spent on this,
that the $2k is morally yours.

And, that's how you end up in jail, like a Montreal
politician.

Do you see what a kickback is now?

I see what a kickback is. I have *NEVER* nor will I *EVER* conduct business with a kickback model.

I'm just exploring the ethics of various situations. I am not a business major and I appreciate being enlightened by those with more experience in the nuances.

Would it be morally wrong to take that four hours of time you invoice and add it to the invoiced price for the engine, without the labor time of four hours appearing separately on the invoice?

I'm not trying to find a loophole which makes kickbacks moral. As this conversation has progressed, through your posts, and my research I have come to a better understanding of the issue, which is an issue I have never really explored as the conept is so foreign to me I had never given it much thought.

If you want to be a belligerent prick and make me feel like a jerk for trying to actually learn something, that is your prerogative. My opinion on anything is never set in stone and I like to use the resources around me to learn. I am not afraid to admit when I am wrong and rarely make the same mistake two times. I was wrong about kickbacks being 'okay' in the private sector and I can admit that, but thankfully for my customers I have never been the type of person to even consider the practice... and if I had, I would hope that somebody would have set me straight before I did.

[Colonel Sanders]

There is another serious problem with kickbacks
that I have neglected to bring up, in a futile attempt
to keep things simple and easy to understand.

In the scenario where the engine shop charges $27k
and quietly hands you $2k in cash, you sure as hell
aren't going to declare that illegal kickback as taxable
income.

Not many criminals declare their income to RevCan.

But when, sooner or later, the kickback comes to
light, RevCan is going to come after you for income
tax evasion. Fines, penalties and interest.

[DonutHole]

Due to this thread, through my research I have learned that in the USA only three types of kickbacks are actually illegal and there are defined processes to declare income derived from legal (if unethical) kickbacks.

Interestingly enough, in the USA, the example of the engine shop we have discussed here falls outside of the defined illegal kickbacks... though every article I have read has stated that this type of practice is unethical.

[Colonel Sanders]

I will try to explain this. It sounds stupid when you
try to put it into words, but here goes.

The most valuable thing you have is your integrity.
Rather fascinatingly, no one can give it to you. It
is your gift, to yourself.

Every time, I will take integrity over genius.

Rather depressingly, most people's integrity can
be purchased for as little as $10 or $20.


Here's a situation for you. Walking down the street,
you see a wallet. You pick it up. No one is around.
Inside the wallet is a considerable wad of cash, some
government ID, and some credit cards. What do you
do?

1) contact the owner and return the wallet "as is"
with the cash and credit cards, or

2) contact the owner and return the wallet with
the credit cards, but minus a little cash for your troubles, or

3) contact the owner and return the wallet with
the credit cards, but minus all the cash which
went into your pocket, or

4) don't contact the owner, but pocket the cash
and sell the credit cards to the local thugs, for them
to run up some sales before the credit card companies
cancel the cards.

Discuss.

[DonutHole]

Here's a situation for you. Walking down the street,
you see a wallet. You pick it up. No one is around.
Inside the wallet is a considerable wad of cash, some
government ID, and some credit cards. What do you
do?

1) contact the owner and return the wallet "as is"
with the cash and credit cards, or

My friends had come back from university for christmas a few years ago. We spent an evening out dancing and drinking, we had a great time.

On the walk home I found a wallet. It had about three hundred dollars in it.

The next morning I took the drivers license and 411'd the guy on the license and gave him a call. He was apparently out the night before doing the same thing as I was and hadn't even noticed he had lost his wallet. When I delivered his wallet he thanked me, and gave me the three hundred dollars in it... which I gave back to him. Damn, I needed the money too, but at the time, when the option was right there in front of me it just didn't seem right to accept anything for doing what I hoped others would do if the situation was reversed.

I have had a few wallets returned to me since then, and sometimes they come back with cash, and sometimes they don't. One guy phoned me up and when I went to pick it up, I gave him the fifty bucks that was in the wallet, which he promptly gave back to me.

I personally would never expect to be payed for returning a wallet, nor would I take the money out of the wallet and return it empty. I would however be the first to offer up a reward to a good semaritan for taking time out of his day to find me and contact me to return the wallet to me.

It's just what decent people do.

I found five dollars on the street one time and kept it. Another time, in a foreign country, I found about twenty bucks on the street... I gave it to the legless hobo on the corner. Another time I found fifty cents (ugandan shillings) on the street, I picked it up, and gave it to the next kid who came up and asked me for money, it made his day. As I walked away I heard screams and looked back to see a gang of older boys beating the younger kid I had given the money to, they took the money and left the kid in a bloody pulp...

[cgzro]

.
A buddy of mine has a AMO, and I know he does very good work. If I recommend this AMO to an aircraft owner, and my buddy gives me a small gift in appreciation, this makes me sleazy and lacking in moral fibre? I'm scratching my head on this one...

Where this logic falls apart is when you start referring more and more work to this AMO despite poor workmanship because it benefits you financially. Also if the work is not done properly are you sharing in the legal responsibility? Collusion leads quickly to poor quality work, avoids taxes, inflates prices and confounds responsibility.

Now here is a situation for you to consider. Imagine one of your apprentices has a welding buddy. Your apprentice takes kickbacks from his buddy in exchange for having your shop give him work. Your apprentice pockets the kickback not you.... Im reasonably certain you'd fire him....thats how we feel.

[brownbear]

I view the referral kickbacks under a different term.

The AME/AMO is working as an agent for a shop and being paid commission for referring this work.

It should be upfront that this partnership is in place. I see nothing wrong with this.

A mayor or such getting a kickback is different. You have a person of approval making decisions with a conflict of interest.

The owner of the airplane can shop around themselves, as they are the approval of where the work goes.

An AME/AMO doesn't just make money on labour. They have to mark up parts to also make a living and keep their business going. Just like every other fuc.ing business that fixes your cars, installs toilets in your house etc.

If the mark up is too high, find someone else.

And 30k to for an annual, the plane must have been a piece of shit and it doesn't take long for the bill to add up with parts. We use the term annual, but I bet this plane needed maintenance throughout the year. Private guys are great to let it all go to shit then bring it in and be shocked about it later.

If I have to buy a part on my credit with my money to install on your airplane, then to invoice you and wait for payment, there will surely be a decent markup. It's called retail. We are not just in this to make labour.

A smaller $ part might be doubled. Maybe on a $5000 dollar part I only take $500.

There is fair people in the world and crooked people. If you are a dummy the crooked people will find you.

[BeaverFixer]

Brown bear, I like you.

[CD]

While not a kickback scheme, here is an interesting article that made the news this week:

Ex-mechanic pleads guilty in airplane inspection fraud case

Posted: Mar 27, 2013 11:01 AM EDT
Updated: Mar 27, 2013 11:01 AM EDT
By Myles Snyder

PHILADELPHIA (WHTM) - An Elizabethtown man has admitted in federal court that he took part in an inspection fraud scheme at a former airplane mechanical repair business in Marietta.

Joel Stout, 32, pleaded guilty Tuesday to seven counts of conspiracy and mail fraud charges.

Stout was an airplane mechanic at Flying Tigers, Inc. and performed annual inspections on aircraft between October 2006 and October 2009, even though his inspection authority certification had expired on March 31, 2006, according to federal prosecutors.

His father, Jay Stout, the president of Flying Tigers, and Howard Gunter, a retired FAA examiner, are also charged in the scheme.

Prosecutors said Stout and his conspirators forged the signature of a certified mechanic as having performed inspections, and arranged for Gunter to sign off annual inspections despite the fact that he did not perform the inspections.

The fraud also included billing customers for the inspections that were not properly certified, prosecutors said.

Joel Stout faces a possible statutory sentence of 20 years in prison for each mail fraud count and five years in prison for the conspiracy, plus a fine of up to $1.75 million, when he is sentenced June 24.

[crazy_aviator]

Kickbacks are a way of life and often LEGAL in the American political sphere ! Thankfully, Canada frowns upon such fraudulent corruption ( Political "donations" )

[ruddersup?]

KICKBACK -------BAD
MARKUP -------GOOD GOOD GOOD

[Jonathan Goldsmith]

Repair shops should not be marking up prices on parts above the normal market price. The profit on parts should come from them negotiating a discount from the suppliers. Charging full retail +40% only makes them look unintelligent to owners who know how to open a catalog.

[CID]

Saunders, you don't have a clue. Finders fees, handling charges, mark-up and the like are NOT "kickbacks". They are how business is done in most of the world and very legally, thank you very much.

What you are comparing perfectly legal charges to are payments that are either a conflict of interest or true kickbacks to elected officials who are not in the "business" of "business". Politicians are not supposed to accept payment or fees or any other monies from the public for their service. That is a kickback.

If anyone, anyone at all fails to report income to the government then that's illegal. But why would you automatically make that assumption? There are plenty of legitimate companies out there that wouldn't risk their entire business for such a stupid reason.

Do you understand now the difference between a kickback and a legitimate charge for goods and services??

Owners/operators like you feel that AMEs would work for minimum wage and not be eligible for ANY type of mark up or additional legitimate handling fees etc. I bet you don't do anything "at cost". Why do expect an AME to do so? Ever buy a pair of jeans? Ever wonder how they start out at $2 to make but sell for $100??

[photofly]

If an AME recommends I use an engine shop they have to tell me the reason for the recommendation.

If they tell me it's because they're going to get a kickback, you can bet I'm going to negotiate to deduct the value of that kickback from what I'm prepared to pay the AME. Any sane person would do likewise. Otherwise it's simply extra money from my pocket into the AME's for no extra work done or value added.

That rather removes the incentive for the AME to tell me that's why he or she is recommending the engine shop; in other words it's in the AME's best interests to lie to me and tell me that he's recommending the shop because they do the best work or offer the best value.

And that disincentive to be truthful with the customer is why kickbacks are unethical: if they're transparent then they can't happen, and if they happen it's only because they're not transparent.

On the subject of markup: I was charged a 33% markup for the privilege of having an AME ship a rubber fuel bladder to Hartwig for repair instead of shipping it myself. (Carriage was charged on top, too.) When I spoke to Hartwig (I had spoken to them previously about the repair, even before the AME was involved) and got the price for the repair from them, I got an earful from the AME for "going behind his back" since he felt he was Hartwig's customer and not I. If he hadn't been ashamed of the secret markup then there would have been no reason to be annoyed.

My decision never again to use or recommend that AME was actually made easier by the fact that they did such shoddy work I had them pay to have another AME correct it.

Markups for retail are different: stocking multiples of an item and selling it in small quantities has value, and deserves to be paid for. If you have a rare part on your shelves for four years just waiting for me to come along and buy it the week I need it, then fill your boots. You're doing me a service by having it ready for the four years before I knew I needed it, and you can fairly expect to be paid for that service. But when I ask you for a part and the only service you provide is to call up Aircraft Spruce and have them send it then the service you're providing is limited and the markup needs to be small.

[Shiny Side Up]

I will try to explain this. It sounds stupid when you
try to put it into words, but here goes.

The most valuable thing you have is your integrity.
Rather fascinatingly, no one can give it to you. It
is your gift, to yourself.

I'm not sure what's the more depressing fact about the world, that a) everyone has a price, or b) how low the price usually is.

[CID]

And that, photofly is why anyone who is thinking of becoming an AME who intends on maintaining private aircraft is nuts. For some reason, people will allow mechanics at Canadian Tire charge them flat rates and mark up every single part they pull out of stock but when it comes to airplanes, they suddenly feel that the AME should make minimum wage and supply parts at cost.

Call out a heating specialist to come fix your furnace and for some reason it's OK to charge retail for that flame sensor and charge 3 hours minimum call-out. But get a guy to fix an airplane, the thing you strap your ass into as you hurtle through the sky and it's an outrage!

My personal advice to AMEs, steer clear of private operators. Unless of course you want to be witness to people who really can't afford to own an airplane and try to take it out on you by nickel and diming every single aspect of maintenance on their pride and joy.

Yes, there are dishonest people out there on the operator side and on the maintainer side but the odds are stacked against the AME in GA. in Canada.

[photofly]

And that, photofly is why anyone who is thinking of becoming an AME who intends on maintaining private aircraft is nuts. For some reason, people will allow mechanics at Canadian Tire charge them flat rates and mark up every single part they pull out of stock but when it comes to airplanes, they suddenly feel that the AME should make minimum wage and supply parts at cost.

Respecfully, I think you missed the point I was making.

Canadian Tire spends a lot of money maintaining a logistics infrastructure and stocks, so that when I have need of a tire, they have it ready on the shelf.

If an AME does the same (some do) then I don't object (and haven't ever objected) to a reasonable markup.

If an AME doesn't spend money on maintaining stocks but just orders them from Aircraft Spruce then the markup belongs to Aircraft Spruce. I object to paying both Aircraft Spruce for maintaining the stock and an unreasonable markup to the AME in addition, merely for carrying out the very difficult task of picking up the phone.

I very strongly object to paying a very large premium for sending my fuel bladder to a repairer that I personally a) selected b) contacted c) made all relevant enquiries as to which sort of repair suited me best d) exchanged emails with involving technical enquiries from them that my AME had given stupid wrong answers to and e) followed up personally on the progress of the repair, several times, and which involved no input of time, effort, or money by the AME which would justify the some hundreds of dollars charged.

CID, I think you want to make me (and other private owners) out to be some kinds of unreasonable monsters who are out to screw you. I promise you, I'm not. But if you can't make a living fixing private aircraft without unreasonable business practices then yes, do something else instead.

[DonutHole]

When I was in retail and a customer brought me parts to install rather than buying the parts from me he payed more for labor for the install.

Why? Because the other retailer made the markup but I'm on the hook for servicing those parts once I install them.

Many retailers have a policy against installing parts sourced and provided by the customer for this reason.

Is that unethical?

[photofly]

When I was in retail and a customer brought me parts to install rather than buying the parts from me he payed more for labor for the install.

Why? Because the other retailer made the markup but I'm on the hook for servicing those parts once I install them.

Many retailers have a policy against installing parts sourced and provided by the customer for this reason.

Is that unethical?

It's not unethical, if you're open about it.

If my fuel bladder had sprung a leak because of shoddy work by Hartwig (it didn't) there is no way the AME would have fixed it on his own dollar, despite the outrageous markup. It was hard enough to get him to fix his own shoddy work in his own time, let alone (hypothetically) someone else's.

[DonutHole]

When I was in retail and a customer brought me parts to install rather than buying the parts from me he payed more for labor for the install.

Why? Because the other retailer made the markup but I'm on the hook for servicing those parts once I install them.

Many retailers have a policy against installing parts sourced and provided by the customer for this reason.

Is that unethical?

It's not unethical, if you're open about it.

If my fuel bladder had sprung a leak because of shoddy work by Hartwig (it didn't) there is no way the AME would have fixed it on his own dollar, despite the outrageous markup. It was hard enough to get him to fix his own shoddy work in his own time, let alone (hypothetically) someone else's.

Oh, I would not service the parts on my own dollar, but it is hard to explain. It's a pain in the ass to service third party parts with a vendor you may or may not have a relationship with. If I install a part and it is a defective part, the relationship I have built with the supplier is essential in expedient service. I don't have to jump through hoops to prove that I wasn't the problem they just send out a new part and it is over. Also, I am a lot more apt to help somebody out who is a consistent customer, purchasing their labor and parts from me goes a long way to build a rapport and this rapport is usually beneficial to both parties.

However, outrageous markup is just that, outrageous. I was always up front about why they were being charged extra for installation of third party parts and mostly people understood, those who didnt I gladly turned away. Some customers are not worth the hassle no matter how much money will be made by taking their jobs.

[photofly]

I can see that installing customer-supplied parts can be a headache.

I'm happy to have found an AME who will let me help with the work, and who's happy to work either with parts I supply or order them in himself at minimal markup. I don't necessarily expect him to be so accomodating, and I'm grateful for it. Finding and ordering parts myself I consider to be part of my self-education as an aircraft owner.

It obviously works for this AME too; he has a constant stream of regular (private owner) customers, he's booked up some weeks ahead, and tells me he has a good standard of living.