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Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985.  Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand (which is now part of PricewaterhouseCoopers).  She attended the University of Michigan and Wayne State University.


Borrowing money from your boss...good idea or bad?

03-22-2014 10:56 AM


image from blog.financialsecurity.org

Let's say you have an sudden financial crisis. Your car needs an unexpected, major repair...or your dog needs a few thousand dollars worth of surgery--and you don't have the cash. If you can't reasonably take on (additional) credit card debt, if you don't have family members to ask, or you don't have a major asset such as a house to borrow against, where can you turn for a loan?

Well, there's the "workplace loan." At first glance, it might seem like a good idea. Get a cash advance from your employer and pay it back as a payroll deduction. The "messy" part of setting up the loan contract can now be handled by middlemen, such as Think Finance's product called "elastic." Through this vehicle, loans of $200 to $1000 can be made...with a fee of 5% of the loan amount, plus interest.

Another company, FairLoan, offers a similar service...at interest rates ranging from 18% to 30% plus a 5% loan origination fee.  This sounds pretty pricey to me.  The set-up is starting to remind me of historical "company towns," where employees seemed to be taken care of by companies that built housing around coal mines or factories and provided stores and short term credit.  But what resulted over time were employees that became so indebted to their employers that they could not move or take any stand against company policy.

Also, the employer controls the interest rate and fees. The only other source of emergency loans for those with limited credit resources is the "payday lender," which often charges up to 300% on an annual basis.


image from forums.debtcc.com

Source:  "Take Out A Loan--From Your Employer," by Gigi Douban, Marketplace American Public Media, March 21, 2014. 

Follow up:

  • What is a "payday loan"? What are the pros and cons of this type of loan?
  • What unforeseen consequences might be the result of an employee owing money to its employer, in terms of workplace events? How can a third-party facilitating the loan mitigate these possible consequences?

Posted by teri.bernstein

Toyota criminal penalties: Are fines a real punishment? Why isn't Toyota in jail?

03-20-2014 11:33 PM


image (of a Prius that had accelerated to 90 mph on a mountain road) from the Colorado State
Patrol, published in the Los Angeles Times

Toyota recently entered into an agreement to pay a multi-billion dollar settlement as a result of a known problem that caused deaths.  The documented problem was that of sudden, unexplained acceleration. Last week, Toyota settled a criminal case brought against it by the Justice Department. Various lawsuits remain, but costs to this point include:

  • $1.6 billion settlement of civil claims in a class-action lawsuit on this issue
  • a $1.2 billion payment to the Justice Department, a criminal penalty, relating to wire fraud issues
  • National Highway Traffic Safety Administration fine, which is capped by law at $35 million
  • an agreement that Toyota will not be allowed to deduct its criminal penalty on its tax returns, which means that the American taxpayer will not lose out because of this settlement

Part of the Justice Department agreement also stated that no individual executives will be prosecuted for these injuries and deaths related to the sudden acceleration problem. “The rules of evidence sometimes do not allow you to use certain kinds of evidence and certain documents against individuals, although they might be admissible against the company itself. Although there is an admission that they were individuals who engaged in conduct which provides for a basis to bring a case against the company, they are not charged here,” explained Preet Bharara, the U.S. attorney for the southern district of New York.

Toyota can afford these penalties, as its current year profits total about $19 billion.

If an individual person had committed these crimes, it is unlikely that they would get off without any jail time. Here are some mandatory minimum sentencing guidelines for individuals:


Mandatory sentencing guidelines, Federal, from Wikipedia

But Toyota is still allowed to operate. Toyota's stockholders continue to make money. According to the doctrine of "Corporate Personhood," corporations have many of the rights as individuals.  But if a corporation has the benefits of a person, should it also not be subject to the same criminal penalties?

Source:  "Toyota sudden-acceleration suit is ratified," by Tina Susman and David Hirsch, The Los Angeles Times, March 20, 2014.

"Toyota admits deceiving consumers; $1.2-billion penalty is record, " by Jerry Hirsch, The Los Angeles, Times, March 19, 2014.

Follow up:

  • What do you think? Is manufacturing a car when you know a defective part will cause deaths a punishable crime? Is it better to charge money penalties or to give the corporation the same penalty a "person" would receive: inability to work for a time period. What are the pros and cons of shutting down a corporation the same way an individual would have his or her business life shut down by incarceration?
  • Should individual executives be prosecuted? Discuss the pros and cons.
  • Comment on the agreement that Toyota cannot deduct its penalties from its taxes. Can individuals deduct fines such as parking tickets on their tax returns? Discuss the reasons for tax deductions and how criminal penalties fit into that logic.

Posted by teri.bernstein

Coffee convenience bad for the environment (and expensive)

03-20-2014 11:31 PM


image from www.coffeemarvel.com

As a committed coffee enthusiast, I periodically pine for a Keurig single-service brewing machine. The problem is, the little cups that that machine requires are not only expensive--they are bad for the environment. Still--the convenience and the visual artistry of it all does speak to me.

I have to admit that the first time I tried to use this machine--at a motel--I had no idea how to manage it, and I made every mistake, creating a colossal mess. Now, however, I am an expert, and each morning--as I am either making my pot of home brew or walking the 1/2 a block to my neighborhood coffee house--I fantasize about what it would be like to have one of those splendid little single-brew machines.

I'm not alone. In 2008, single-pod coffee sales were $132 million; in 2013, they were $3.1 Billion.

But there are issues.

First, to properly recycle the remains of the pods means separating the aluminum top, from the plastic pod, from the wet coffee. Do users really do that? Probably not. Moreover, the #7 plastic that almost all of the K-cups are made from is not recyclable.

In addition: there are a lot of tiny cups to recycle. To put it in perspective, the 8.3 billion cups produced last year by Green Mountain for Keurig machines would circle the earth more than 10 times.

For now, I'm sticking to home-brewed or my Tall red-eye half-caf dark in a personal cup at my local coffee place.

Source:  "Your Coffee Pods' Dirty Secret," by Maddie Oatman, Mother Jones, March 19, 2014. 

Follow up:

  • Make a chart comparing the cost of a cup of coffee, 5 cups, 10 cups, 20 cups, 100 cups and 365 cups brewed vs. K-cup. What can you conclude from this analysis?
  • What are all of the environmental and health issues of these cups, according to the article?

Posted by teri.bernstein

The "Income Upshot" tool--what does it say about Homer Simpson and one of the Two Broke Girls?

03-16-2014 4:36 PM

 


the income upshot tool link

This article specifically addresses two fictional incomes--that of Homer Simpson and that of one of the "two broke girls" living in Brooklyn. It is fascinating to adopt several different personas to see what "big data" might say about some basic demographic data.

I input my personal data and found myself to be riding with the majority on all parameters that were reported. Am I deceiving myself to think that I would NOT have been with the majority on other parameters?

Source:  "Income Upshot: Homer Simpson Edition," by Jolie Myers, Marketplace--American Public Media, September 12, 2013. 

Follow up:

  • Did you use the link to fill in your income? Is the assessment of this tool relevant to your personal situation?  What do you think this link is trying to sell or monetize?
  • What information can "big data" analyzers provide? What are the most relevant parameters, in your opinion, to marketers of various products?
  • What other parameters might be important to marketers? Do you think the selected parameters were relevant and appropriate?

Posted by teri.bernstein

How to Sell a Box of Frozen Seafood

03-16-2014 4:31 PM


from article linked below, by Primary Hughes

This is one person's story of his first job in Sales.  The product? Boxes of seafood and steaks. The territory? Cold-call door-to-door sales in the San Francisco Bay area.  The interview and training? Ride around with another salesperson in their truck until you had 6 sales in one day--then you get your own truck and got to work purely on commission. 

Here is a brief account of the young salesperson's experience:

  • His first "trainer" was "high on confidence" even though he did not look the part of a successful salesman.
  • He got to witness some failed attempts by his trainer; he had some failed attempts on his own.
  • He witnessed his trainer's success when the trainer was smiling, relaxed and assertive.
  • The trainer had sold everything in his truck, but the new salesperson had sold nothing. The trainer said, "You're a real college boy."
  • Trainer #2 was charming, British, and got traction with customers by lying. The new salesperson managed to get qualified for his own truck with this trainer.
  • Things went well for a few weeks, but in the subsequent weeks: 1)$250 of merchandise (taken home over the weekend) spoiled; 2) The British salesperson sold the new salesperson a list of "sure things" for $300; and 3) the new salesperson brought home some shrimp and started an electrical fire in his landlady's kitchen when frying it.
  • The new salesperson quit...turned in the truck and was $300 short of enough money to pay for the damage for the fire. He hit up his father for the damage.
  • The young salesperson met up with Trainer #1 after he quit, and took a "big picture" view: Trainer #1 was having a good time...but the young salesperson had been dreading to go to work.

What does this all mean?

My guess is that "cold call" Sales are tough to finalize. Still--cold-call sales are where-it's-at in terms of drumming up new business, one of the keys to success. Would you have the grit to do this job?

Source:  "A Man, a Truck and a Load of Stuffed Shrimp," by Matthew Sharpe, New York Times, March 15, 2013. 

Follow up:

  • What did "high on confidence" really mean in terms of the sales day?  How did this work out? What was the most successful technique?
  • What do you think the "takeaway" is from this tale, regarding the Sales profession? Does the price of these goods compared to the price that could be obtained in a storefront impact your opinion?
  • Comment on the story-form delivery system of this tale vis a vis a talk about Sales that might typically be held at a Sales convention.
  • What does "cold call" mean?

Posted by teri.bernstein

China wants U.S. milk

03-16-2014 4:23 PM


image from www.trust.org: powdered milk produced by Fonterra, and were part of a bribery scandal.

Above is a picture of a shopping aisle in China--fully stocked with powdered milk. In the above photo, however, the milk is being removed because of a bribery scandal involving a foreign company that paid to have its product stocked on these shelves.  The market for non-domestic milk product in China is particularly high for two reasons--breastfeeding is unpopular, and the 2008 melamine-tainted Chinese milk that poisoned over 100,000 infants is still on the minds of parents.

Responding to this demand are tiny farming towns in the United States.  The town of Fallon, Nevada, has built huge processing plants to convert milk into powdered milk for shipping overseas--since shipping to nearby California has been thwarted by "Real Milk from Real California Cows" advertising campaigns.


image from Fallon, NV production plant from the article linked below

Because U.S. milk consumption has plateaued, the new Chinese market represents a growth opportunity.

Source:  "China's thirst for milk gives dairy farmers a boost," by David Pierson, The Los Angeles Times, March 15, 2014. 

Follow up:

  • What might happen to domestic milk availability and prices as a result of factories being built to process powdered milk for overseas shipment?
  • Is this production and sales system sustainable? Why or why not?

Posted by teri.bernstein

"How to Rob A Bank" sung by Willy Porter

03-10-2014 3:15 AM

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I was at a concert this past weekend at my local guitar shop. What a surprise it was to hear this song about the benefits of white collar crime over the "driver, a Nixon mask and a gun" version of bank robbery. Some of the song's narrator's suggestions for success:

  • Secure a seat on the Board of Directors
  • Run with the country club set
  • Get a foundation to donate to his schemes
  • Get Congress to subsidize any failing business
  • Blackmail government by threatening layoffs
  • Unchecked greed

The benefits:

  • Respect from family, who love receiving gifts
  • Bonuses even when you've been accused of wrongdoing
  • Lawyers to bail you out of trouble

Of course the song is done for humor, but there is certainly truth in the message that "white collar crime" often does pay.

Source:  "How To Rob A Bank" by Willy Porter, YouTube, and live at McCabe's, March 8, 2013. 

Follow up:

  • What is "white collar crime"?
  • What recent legislation has tried to increase penalties for financial crimes? How successful has it been? What has been the response of the business community to this legislation?

Posted by teri.bernstein

Whistleblower gets shafted by agency shift

03-10-2014 3:12 AM


from Chris Slane's cartoon portfolio

In 2010, the Dodd-Frank law created 10% to 30% rewards for whistleblowers who filed complaints with the Securities and Exchange Commission (SEC). Under this law, a former mortgage underwriter filed a complaint against SunTrust, alleging that SunTrust did not disclose that "tens of billions" worth of loans sold to Fannie Mae and Freddie Mac "had fallen outside of the buyers’ quality guidelines."

The complaint was filed in 2012, and the SEC did not take direct action on it.  Instead, it passed the complaint on to the Justice Department. Under Dodd-Frank, the whistleblower can't collect if the complaint is not resolved within the SEC.
Congress probably did not anticipate this loophole when they passed the law. The attorney for the whistleblower is arguing that the Justice Department action is based on the evidence in the original complaint filed with the SEC, but it remains to be seen whether the substance of the whistleblower's actions will be rewarded at all.

The intent of the Dodd-Frank legislation was to uncover and prevent events that led up to the financial collapse triggered by over-valued mortgage instruments in 2008, and it seems as though the government got the benefit of the inside knowledge, but has proceeded in a way that will probably side-step the anticipated compensation. 

Source:  "A Whistle That's Lost in the Crowd" by Gretchen Morgenson, New York Times, March 8, 2014.

Follow up:

  • Have you ever been in a situation where you witnessed wrongdoing by those who ranked above you at work? Describe the situation and the courses of action you considered.
  • What are the risks associated with being a whistleblower? Are there any rewards other than monetary rewards? Would you bring a complaint to the SEC, knowing what happened in this case? Should Congress take action to amend the law?

Posted by teri.bernstein

GM auto defects ignored for years; deaths mounted

03-10-2014 3:02 AM


Kelly Ruddy's Chevy Cobalt from the NYT article linked below

Here is the problem with several low-to-mid-priced General Motors (GM) cars: suddenly--even at freeway speeds--the car stalls out, totally losing power to the engine, steering, power-assisted brakes, and air bags. 

When did GM first become aware of these problems? Since 2003 an average of two complaints per month have been filed with the National Highway Traffic Safety Agency (NHTSA)  about these random "shut-downs." Who knows how many complaints were lodged with GM, but didn't make it as far as the NHTSA?

What was done? Even when former Congressman Barney Frank intervened on consumers' behalf in 2010, the NHSA responded: “At this time, there is insufficient evidence to warrant opening a safety defect investigation.” By this time, there had been at least 78 deaths and over 1500 injuries due to the sudden ignition failure problem.

The NYT analysis shows that the NHTSA as well as General Motors seemed to ignore data relating to this problem. The vehicle recall now in place involves 1.6 million vehicles. 

Source:  "Auto Regulators Dismissed defect tied to 13 Deaths" by Hilary Stout, Danielle Ivory and Matthew L Wald, New York Times, March 8, 2014.

Follow up:

  • With whom does the responsibility for car defects lie? The manufacturer? Government regulators? The consumer who buys the less-than-top-of-the-line car? Who should "pay" for damages and why?
  • Do you think that government regulation takes the responsibility off the shoulders of the manufacturer?
  • When a manufacturer becomes aware of a defect, what communication, financial, production, and legal procedures should kick into place? Are the issues only "civil" or are they possibly "criminal"?

Posted by teri.bernstein

Picture this (in one photo): your own small business

03-08-2014 5:54 PM

Perma-Link to slideshow at NYT.com Capturing the soul of a small business in one photo

The Small Business blog arm of the New York Times, "You're The Boss," asked readers a while back to submit photos of their small businesses. These photos were to capture something meaningful and over-reaching about the essence of their business, or the rewards or heart-aches involved in building the business. The short slideshow linked on this page illustrates five central images from five different businesses:

  • Pumbaa, a "very lucky pig" from the WhyNotFarm business in Snow Creek, North Carolina
  • Digging out from a snowstorm at Perrault Spring and Equipment (fifth generation family business in Connecticut)
  • Dozens of boxes in a warehouse waiting to be shipped during the high season at Lowrider Sunglasses in Exeter, CA
  • Dedicated--and multi-tasking--service people at DC Home Buzz, a real estate brokerage
  • A blank wall at Ugallery.com an online art gallery in San Francisco.

Maybe these photos can inspire you to take a photo with a similar "core" feeling about whatever it is that is of primary importance in your life right now. Maybe it is a business or a new job. Or your accounting class....

Source:  "Capturing the Soul of A Business in a Single Photograph" by You're The Boss Editors, New York Times, March 13, 2013.

Follow up:

  • Really: What does capture most of your attention right now? Can you boil it down to its essence--a single photograph? Pick five to ten photos and mull them over for a few days, then post (in whatever medium you see fit) the photo that really captures the essence your "life's work" at this point in time.
  • Which of the images in the slideshow speaks to you the most--both in terms of communicating the essence of a business, or inspiring you to want to know more about (or have dealings with) that business)?

Posted by teri.bernstein

Foreign shoppers in the United States

03-08-2014 5:47 PM


image from internetretailer.com

When American shoppers choose to shop in one state vs another--it is probably only the tax rate they are looking to get a deal on, as most product prices are similar. Moreover, this price dodge will even out in the end, as state taxes have to be paid in the state the product is going to be USED, anyway.

But product prices between countries can change a lot. Here are some examples:

  • Slingbox 350:  When it goes on sale in Mexico it will cost $75 more than it costs in the U.S. This is possibly because of the way things are taxed, but also because there is less competition among electronics dealers in Mexico.
  • Apple computers: These can cost $500 more in the United Kingdom than in the U.S. And iPads can cost $160 more.
  • Car tires: Black Friday sales on car tires brought Canadians over the border for bargains.
  • Adobe software: According to the article it is "cheaper to fly to the U.S. and back to buy Adobe's software than it is to buy it in Australia" Some products, such as Photoshop, cost $1700 more overseas.

Middlemen try to create other buying opportunities for foreigners:


image from info.opas.com


Source:  "Why Foreign Consumers Shop In the U.S," by Jeff Tyler, Marketplace Morning Report on American Public Media, March 7, 2014.

Follow up:

  • What products are cheaper for Americans overseas?
  • What international laws may be violated in some of the travel-and purchase transactions? Can the workarounds be justified ethically?

Posted by teri.bernstein

Jobs added in February: what does it mean?

03-08-2014 5:43 PM

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Link to video from Bloomberg, via LA Times.

How can the number of jobs increase by 175,000 in the last month...at the same time the unemployment rate ALSO goes up by .1%?
And is this news good or bad?

Part of analyzing labor reports is looking at what had been predicted...so since 150,000 new jobs had been predicted by economists, the increase of 25,000 more than had been predicted is a positive outcome. 162,000 of the new jobs were private sector jobs and 13,000 of the new jobs were government jobs.

The unemployment rate was expected to stay flat at 6.6%, but it did increase to 6.7%. Is this because more people than were expected to look for work were entering the job market? Is it because the bad weather decreased job opportunities or eliminated some part time jobs?

The Labor Report is filled with statistics, but not many answers. Other factors measured include:

  • The percentage of people in the workforce
  • The length of the average workweek in hours
  • Average hourly earnings (which were at $24.31/hr in February)

Source:  "Economy adds 175,000 jobs in February; unemployment rate up to 6.7% " by Jim Puzzangherra, Los Angeles Times, March 7, 2014. 

Follow up:

  • How much has the bad weather affected the employment rates, according to the video?
  • What employment sector LOST jobs in February? How would you explain this loss?

Posted by teri.bernstein

The Samsung Selfie

03-05-2014 11:03 PM

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video of original selfie from YouTube

One of Oscar host Ellen DeGeneres' trademarks is her ability to make everything look casual, impromptu, and unplanned--as though the next event was just an outgrowth of her natural curiosity. But it seems as though the "impromptu" selfie that was taken at the March 2nd Academy Awards was planned...and the smartphone that Ellen handed to Bradley Cooper (which he used to take the photo) was no accident.

According to the Wall Street Journal, and as reported in US Weekly, "As part of its sponsorship and ad pact for the Oscars with ABC, the TV network airing the show, Samsung and its media buying firm Starcom MediaVest negotiated to have its Galaxy smartphone integrated into the show." Samsung also arranged for a group of young film makers who were touring Disney as part of the Oscar broadcast to have Samsung phones. In addition, Samsung trained Ellen in how to use the phone prior to the broadcast. Samsung had placed at least $18 million of ads in this year's telecast.


image from phandroid.com

 

Sources: "Ellen DeGeneres' Oscar Selfie Part of Samsung Phone Product Placement: Report," by Rachel Mcrady, US Magazine Weekly, March 7, 2014. Follow us: @usweekly on Twitter | usweekly on Facebook

"Behind the Pre-planned Oscar Selfie: Samsung's Ad Strategy; Marketer Spent Nearly $20 Million on Ad Time and Got Product Placement of Galaxy Phone," by Samantha Vranica, Wall Street Journal, March 3, 2014.

Follow up:

  • Did you watch the Oscar broadcast? Were you aware of the Samsung Galaxy Note during the broadcast? What effect has the subsequent social media reaction and press had on your awareness of this product?

 

Posted by teri.bernstein

Bank Fraud and Seniors

03-05-2014 11:02 PM


image from www.exploitationelderly.com

A study done by the Pew Research Center and evaluated by Go Banking Rates has determined that senior citizens are not getting the discounts available to others or advertised as being available for them. In addition, they are being exploited in other ways by banks, primarily through excessive fees or unneeded services. For example, a $25 account maintenance fee was established at one bank for accounts with balances under $1500.  For seniors, however, a balance of $5,000 had to be maintained to avoid this fee.

I recently had a questionable experience with a bank I will call "Seaside Bank" in Florida. In the course of their dealings with my step-parents (who are ailing and aged 83 and 94), the bank told my parents "someone" had been writing improper checks out of their account, pressured my parents to fire their attorney of more than 20 years, and attempted to have my parents assign check-writing authority to the bank's designee, which was going to cost "a pretty penny" according to my stepfather. But when clear action was taken in defense of these seniors, the bank was quick to back down. This perhaps provides a cautionary tale to those who might be laissez-faire regarding oversight of bank transactions.

Source:  "Study: More than One Fifth of Banks Ripping off Senior Citizens" by PR Web, PRWeB.com, October 3, 2012.

Follow up:

  • Have you ever had a situation where the bank made an error which you found and brought to their attention? How were things resolved? If there was an explanation provided for how the situation arose, what was it?
  • What other demographic group do you think may be targeted by banks for exploitation? Why? How can this be overcome?

Posted by teri.bernstein

Substance vs. form: who you are versus how you look

02-28-2014 11:36 PM


image from www.bubblews.com

 

Which is more important:

  • Who you ARE? or How you LOOK?
  • What you CAN do? or What other people THINK you can do?
  • Whether personal gain influences the decisions you make for others? or Whether it looks as though you could benefit financially from the decisions you make for others?

In the current social environment of Twitter and Instagram--where one picture or fewer than 140 characters can communicate information in isolation--without context or the opportunity for rebuttal or additional information, it seems as though "form" may have the upper hand. One bad review on Yelp can unfairly effect the reputation and revenue stream of a restaurant.

When it comes to making life choices--about where to live, what to own, who to hang out with, and where to work--form and substance can guide your decision-making process in very different ways. Choices based on how things look to others might bring you a different kind of security of satisfaction than choices based on how you feel and what is important to you--regardless of the opinions of others. According to Peter Vadja, "Substance is the inner you. Substance is your true, authentic self. It's the 'you' who shows up with the conscious intention of doing and being the very best you can be in every area of your life... Substance focuses on truth-telling, not elaborate stories, rationalizations and excuses for avoiding the truth. Substance focuses on integrity, not tap-dancing around honesty, sincerity and self-responsibility. Substance focuses on conscious self-management, not on controlling others."

Peter Vadja is the author of "Becoming a Better You: Who You Are vs. Who You Think You Are."

The issue of substance vs. form also arises in accounting and auditing relationships and in determining whether certain investments are properly held when political figures are part of decisions that affect the profit margins of companies in which investments may be held.

Source:  "Substance vs. Form," by Peter Vadja, Management Issues.com, October 21, 2013.

Follow up:

  • Pick an arena (for example--choosing a person to "date"--but don't pick this one, pick your own). What factors influence your choice of who to "date" in substance? What factors influence your choice in form?  (That is, how does the person look to you and to others.) How do you decide which to value?
  • How do issues of form and substance affect hiring decisions? What about discrimination issue, in various Human Resources decisions?
  • How do issues of form and substance affect performance reviews and management decisions?

Posted by teri.bernstein

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