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Sale of beach house to help pay back McGinn, Smith investors

Wednesday, February 9, 2011

This month brings a new development in the court case against Timothy McGinn and David L. Smith, two New York security alarm industry investors the SEC has charged with defrauding investors of more than $80 million in a Ponzi scheme. On Feb. 1, a judge ruled that a vacation home in Vero Beach, Fla. that Smith and his wife bought 10 years ago be sold to help benefit investors.

It turns out the monthly mortgage of $6,188 on the home, worth an estimated $1.7 million to $1.9 million, hasn’t been paid since April of last year, when the SEC filed charges against McGinn and Smith and their assets were frozen, according to the judge’s order. The two were principals of McGinn, Smith & Co., an Albany-based investment firm that conducted investment dealings in the alarm industry. The SEC contends that from 2003 to 2009, the pair diverted funds into financially troubled entities and also into their own pockets, and to pay for exotic dancers on McGinn’s You Only Live Once cruise ship business.

Various other expenses for the Smith home at Orchid Point Way have gone unpaid and upkeep hasn’t taken place, according to the ruling by Magistrate Judge David Homer in U.S. District Court in the Northern District of New York.

In his order, the judge said those included landscaping at $475/month; pest control at $100/month; pool cleaning at $86/month; utilities at $530/month; insurance at $796/month; taxes of $1,875/month; monthly dues of $1,375, and various additional assessments totaling $1,060. Including the mortgage payment, the monthly costs for the house exceed $13,000, the judge said.

The judge wrote he was concerned that the value of the property could diminish with the place not being kept up. The judge said the mortgage holder also might foreclose on it because the mortgage isn’t being paid. He ordered the sale of the property “to halt the diminishment of its value and to realize the greatest possible return.”

Although Smith and his wife, Lynn, bought the house together in 2001 as a second vacation home, the property in 2009 was transferred into the name of Lynn Smith alone, the judge noted. Lynn Smith plans to seek a stay on the sale while she appeals the judge’s decision, according to court records.

Another place that might be a source of assets for investors is a security company that McGinn, Smith & Co. ran called Alarm Traders, according to a recent blog item in the Albany Times Union newspaper.

That paper reported that Alarm Traders, a buyer and seller of alarm monitoring accounts to security companies, remains operating and owns thousands of contracts. The court-appointed receiver overseeing McGinn's and Smith's assets said it was possible that company could be sold to help pay back investors, according to the paper.

In another recent ruling in the case, Judge Homer found McGinn, who served as CEO of IASG from 2003 to 2006, in contempt of court for his involvement in a new investment venture started this past summer. The judge said the new venture, Security Alarm Credit, appeared "remarkably similar" to the prior offerings that got McGinn in trouble with the SEC.



ESX announces keynoter for 2011 show in Charlotte

Wednesday, February 9, 2011

ESX on Tuesday, Feb. 8 announced its keynote speaker for ESX 2011. ESX 2010  in Pittsburgh introduced me not only to Verizon sniffing around security (and we all know how that story played out...), but to football great Rocky Bleier, as well. Seriously, I'm not a sports guy, so I'd never heard of him, but I was impressed with his presence, humor and ability to relate his old football yarns to business intelligence.

Perhaps hoping to cash in on that same magic formula from 2010, this year, ESX has announced football coach and NASCAR team owner Joe Gibbs as its keynoter for the show in Charlotte, N.C. from June 6-10.

From the ESX release:

This former NFL football coach and NASCAR Championship team owner, is well known for his work ethic, transforming the average NFC Washington Redskins team into Super Bowl titans and taking drivers Bobby Labonte and Tony Stewart to the finish line with NASCAR Cup Series Championships.

'I think all industries require solid relationships and hard work to thrive. I believe very strongly in these core values and I think many people connect with that message," said Joe Gibbs. "I'm looking forward to sharing my story at ESX.'

This game plan constructing legend will address security integration and monitoring companies as they revitalize their own profitable business plans at the only show organized exclusively for their needs.

It's a neat tactic to take someone who acts kind of as a Rosetta Stone to explain business principals in an atypical yet not uncommon language.

It will be interesting to attend the keynote address and see how it compares to last year.

ESX chair and dedicated security luminary George DeMarco seems excited about the choice of keynoter.

I am thrilled that Joe will be with us, delivering his perspective on the world of football, NASCAR and life outside of sports. He has inspired NFL football teams and NASCAR drivers alike. I believe his leadership skills and unique blend of energy and experience will take this year's keynote address to an entirely new level.

Gibbs’ keynote address luncheon will be held at the Charlotte Convention Center on Wednesday, Jun. 8 at 11:45 a.m.

Don't forget to register for ESX ASAP. It's an important show and I hope to see you there.

Breen on ADT's numbers, Pulse, & the telco incursion

Thursday, February 3, 2011

ADT's parent, Tyco reported its earnings on Jan. 27 and "beat Street estimates." Here's a nice tight synopsis from Rueters:

Tyco International Ltd's quarterly earnings more than doubled, beating Wall Street expectations amid sharply higher profits at the industrial conglomerate's security business, which includes the former ADT Worldwide service.
Net earnings rose to $659 million, or $1.34 per share, in the first quarter ended December 24, from $302 million, or 63 cents per share, a year earlier.
Earnings from continuing operations before special items were 75 cents per share, 7 cents ahead of analysts' estimates, according to Thomson Reuters I/B/E/S. That marked the 10th consecutive quarter that Tyco beat Wall Street forecasts.
Revenue rose 5 percent to $4.38 billion, slightly ahead of forecasts of $4.34 billion.
Sales in Tyco's biggest segment, security solutions, rose 10 percent, helped by increased demand from commercial customers. The segment was the only one to increase operating income or margins.

During the subsequent earnings call, Tyco CEO Breen noted that ADT's commercial orders were "surprisingly positive ... double-digit in all regions." And on the fire side,  SimplexGrinnell’s orders were up 15 percent, he said.  In both cases, the increase is not due to new construction (not surprisingly) but to an increase in retrofits and upgrades he said. “People are upgrading their electronic panels because there's a lot of new features and software capability. You know, technology, it's got a five year life cycle to it, so in the last three years no one's done anything ... [now, it’s] a lot of retrofit and upgrades."


On ADT’s new interactive product, called Pulse,   Breen said ADT is signing up customers they believe may not have signed up for a traditional security account. Pulse is currently being sold by ADT's direct sales team now, and Breen said "about 15% of our customers are taking Pulse, and about 85% of them are taking the first tier of the package." After more dealer training, those numbers will pick up, he surmised.

Breen had some interesting comments on the telco incursion into the space. He is not worried. In fact, he thinks it will result in more advertising, which  will "lift all boats" and if anyone suffers it will be the smaller companies rather than a giant like ADT. When Brink's Home Security changed its name to Broadview and hit the airwaves with its new commercials, ADT picked up business, he said. He predicts the same effect from other telcos and cable companies entering the business. 

While, he said, it won't happen immediately, "I think if a couple of these cable guys or phone guys markets more security than they are now, I think over time it's at the expense of the smaller, local players and the big, branded players will do very, very well in that environment. You have to remember that only 19-20% of the homes in North America are penetrated with security. My belief, and again this is multiple years, is that this is about a 40% penetrated service and I do think interactivity helps that percentage get there eventually because to a question earlier I think more people are going to be attracted to the service because of the opportunity to do more things. We have 25% North America market share with thousands of others having the other 75%. I've always been a believer this industry will consolidate. If it consolidates around a few players, I think we do very, very well in that environment. I would also point out that this is not that easy to do for everybody because one of the reasons the local, little player actually does well is that they have a sales force like we have a sales force. Between our dealers and our direct sales team, we have almost 9,000 sales people in North America, and 90% of the sales that we close we sit in the home with the homeowner to close the sale. It’s not like cable, it's not like getting a phone service, where it's an automatic "you're going to get it." It's a utility. This you have to go in and market it. So there's a lot of nuances here and I think we do very well in that environment."

The direct quotes above are courtesty of

CSAA and IAFC do some myth busting

Thursday, February 3, 2011

The Central Station Alarm Association worked with the International Association of Fire Chiefs over the past year as the IAFC came up with some proposed NFPA code changes to combat the problem of frequent false alarms in commercial facilities. Now the two groups are fighting claims they’re “in bed” together and that the proposals are dangerous.

Since the IAFC submitted the proposed changes to NFPA 72 in the fall, there has been “considerable misinformation and distortion of the facts at issue,” according to a statement issued by the CSAA in January. That’s why the CSAA is referring the industry to a fact sheet produced by the IAFC to counteract what that group describes as “myths” regarding the proposals. The groups are also urging a national-level discussion on the issue.

The fact sheet, which can be found at, says that among the untruths are claims that a proposed change for a 90-second verification delay is dangerous and that the IAFC is “in bed” with the CSAA because the alarm industry will gain from the changes.

But the IAFC says the 90-second validation delay, for which an AHJ can opt out if it determines it cannot accept such a wait, actually would add to the safety of the public and responders if implemented properly.

The group says such a change would be identical to existing alarm codes for residential properties, where the IAFC says the majority of fire deaths actually occur because homes generally don’t have the fire protections found in commercial facilities.

Also, the IAFC says, a 90-second notification delay to avoid sending responders out to chase a false commercial fire alarm is safer.

“Abandoning a response area for such a low statistical probability (that a false alarm is a real emergency) while medical and other fire responses require resources at a higher percentage actually results in lower reliability and longer response times to statistically higher risk and demand events,” the IAFC states.

As for being “in bed” together, the IAFC strongly refutes that claim in its fact sheet.

“The IAFC knows that partnering with industry to create knowledgeable and realistic solutions benefits the fire and emergency service,” the group said.

It added: “The goal in our relationship with CSAA is not to build solutions that benefit either them or us, but build a better way of working together for the benefit of the fire and emergency service. Language was carefully crafted to ensure that the proposal offered more flexibility for fire chiefs in determining what is best for their community. There are no requirements in these proposals that would directly benefit central station alarm providers over the fire service.  In fact, the proposals would put additional burden and responsibility on those monitoring and maintaining commercial alarm systems.”

I’ll be talking more to the CSAA about this issue and why it’s so important for the industry, as well as the status of the proposed changes … stay tuned to our web site!



Article 6-E comment deadline is here--get your voice heard!

Thursday, February 3, 2011

I've been doing a lot of coverage of Article 6-E. I first wrote about it last year, when it starting causing a stir among users of the ACCENT listserv. I followed the initital story up with another story and a blog post and an edition of ssnTVnews.

Last time I wrote about 6-E I told you that the NYBFAA was looking for input and would hold a discussion forum at its board of directors meeting on Feb. 10. They asked interested attendees to RSVP and said if you couldn't make it, your voice could still be heard by submitting your opinion in writing by the deadling... which is today.

Dale Eller, executive director of the NYBFAA told me that interest was pretty high so far.

Currently, the NYBFAA is preparing to hear arguments pro- and con- at its Feb. 10 board of directors meeting. Dale said that as of the Feb. 3 deadline for submission of written comments on Article 6-E there were 20 RSVPs to attend the Feb. 10 board of directors meeting and open discussion forum. He also said right now there were a dozen concerned security industry members who had voiced their opinion to him in writing.

“The best thing that has come from this experience is the fact that it got everyone talking about what was best for the industry,” Dale told me. “And how everyone could work together proactively to benefit the consumer, public safety and the dealers and monitoring companies.”

Now, most recently over the weekend, I got another letter to add to the ones I've received from Russ MacDonnell at Rapid Response and John Doyle at Doyle Security. This letter was from Jim McMullen at C.O.P.S. Monitoring. They've got four central stations now, and what that means--especially with their technique of active load sharing--is that if 6-E gets passed, they may have to license every single central station operator in all four centrals in the state of New York. Obviously not something that's that cost effective.

From the lettter:

As a general statement, we believe that the services our industry provides are of principal importance to consumers and C.O.P.S. supports all relevant and meaningful regulatory efforts that effectively protect their best interests. In reading the proposed language in article 6E, it is evident to me that the objectives of the legislative review committee are also of this intent and we appreciate your position.

Our experience with state level licensing has been nothing short of interesting. As a national monitoring company, we have amassed a great deal of knowledge from every state that requires licensing. We have encountered strenuous compliance requirements, testing material devoid of any monitoring-related materials, and mandates that we run criminal background checks for our employees in states 3,000 miles away from their homes. The sum of this experience has helped us realize that, even with good intentions, adopted standards do not necessarily protect the consumer the way they intended - nor in a way that even truly makes sense.

With that being said, it is the position of C.O.P.S. Monitoring that alarm dispatcher licensing should be pursued at the national level and not handled on a state-by-state basis. It is on this front that we plan to focus our greatest resources. I am hopeful that the potential exists to make significant progress on this endeavor in the coming months. We respectfully believe that a national standard for dispatchers that focuses on monitoring-related details would ultimately be in the best interests of all concerned parties – including consumers. We would like to see what unfolds by the end of this year resulting from our national efforts before putting any further energy into pursuing implementation of this particular bill.

CSAA president Ed Bonifas has also said that he feels the best route to take is for the industry to focus its energies on a national bill, rather than fight the battle out state-by-state.

Whatever your opinion, fire off an email to Dale Eller over at NYBFAA and get your voice heard.

UK security industry calling for unification under one leader

Tuesday, February 1, 2011

I'll admit it, when I first saw the headline "Leading security industry bodies call for single industry representative" in my inbox this morning, I was pretty tickled. See I wrote a story a while back examining the notion of a single industry body/person to be a representative to the world and the government.

Upon reading the story, I quickly realized it wasn't what I thought and was focused on the UK security industry. I don't pretend to understand how the industry works across the pond, but I have reached out to someone I know in the UK security industry and am hopeful that she'll be able to explain to me the finer nuances of what's going on over there.

Regardless of not understanding all the particulars, it seems clear that the industry over in the Old World is looking for consensus, unification and a single voice with the aim of promoting "a major uplift in the performance of the private security industry, supported by government through UKTI and other agencies, she stated that the aim should be to ensure that UK expertise and innovative security solutions are marketed more effectively both at home and overseas."

That sounded interesting to me, even if they're not calling for Merlin Guilbeau to be the face of the industry the way I did... So just what is the UKTI?

UKTI, or UK Trade & Investment, is an agency that  "works with UK-based businesses to ensure their success in international markets, and encourage the best overseas companies to look to the UK as their global partner of choice."

Hmmm... Sounds like the UK security industry is trying to become more consolidated, more unified, more focused so that they can expand more effectively and more efficiently--both at home and abroad...

I also wrote stories recently about what the US security industry can learn from the UK and about UK security players moving into the US market...

Puline Norstrom director of worldwide marketing for the UK's AD Group, which owns Dedicated Micros among other security interests, in a May interview with me advised the US video monitoring industry to learn from what they had already done in the UK.

Norstrom said her company, along with the British Security Industry Association had developed a video monitoring standard that could easily cross the Atlantic. “The standard—BS 8418—was originally created by the BSIA and it was written around the code of practice that RemGuard was using. That formed the basis of the document,” Norstrom said. “They took it to the British Standards Institute during which time there was a public consultation and lots of industry input, and after about two years the standard was ratified and published in the UK. The standard has been adopted by the police and they issue a URN—unique reference number for a site that is accredited for 8418. What that gives to the user is a guaranteed first level response.” Norstrom said level one meant police respond immediately. Anything other than level one means the police respond “when they get around to it, or they don’t respond at all.”

Now they've formed a whole UK security industry association called the Security Alliance to try and get things done.

This whole thing might merit some close watching...

Vivint, Verizon and the home automation wars

Tuesday, February 1, 2011

UPDATE: I talked to Sam Lucero, ABI Research practice director, about Vivint's entrance into the home automation market. He actually includes Vivint in the same category as telcos like Verizon Wireless in that it provides managed home automation services and is positioned to take advantage of the mainstreaming of the home automation market. Read my story on the SSN web site.

A new ABI Research report says traditional security companies are facing new competitors, such as telcos like Verizon Wireless, in the home automation market.

The report, released yesterday, bases its analysis on what it describes as three ways to offer home automation. But with the announcement I wrote about today that APX Alarm has rebranded as Vivint to better reflect its expansion into the home automation market, I’m wondering if that company’s approach is a new fourth way to offer such home automation services such as automatic door locks, video surveillance, and lighting and small appliance control.

That's because Vivint says its home automation offering is unique in that it won’t cost homeowners much upfront and the company will service and maintain the systems for customers. "Simple, affordable whole-home automation for the average Joe," is how the company describes its offering.

The company’s announcement comes at virtually the same time as the release of the new ABI report describing home automation systems as traditionally falling into two categories: “the economical do-it-yourself model, and the expensive custom-designed installation.”  Because the first requires a homeowner to have technical expertise and the second alternative is expensive, that limits the market, the report says.

However, the report says, an emerging “third way … promises to fuel tremendous market growth:  home automation as a managed service provided by the homeowner’s cable broadband provider or telco.”

According to a statement from ABI practice director Sam Lucero: “Traditional security firms such as ADT will increasingly be joined in the mainstream by these new providers offering managed home automation services.”

Among a number of newer interactive home security products, ADT introduced its Pulse product last fall, and Honeywell has a Total Connect product.

Earlier this month, Security Systems News wrote about Verizon Wireless launching its new home automation bundle offering at the Consumer Electronics Show in Las Vegas. Also, according to ABI, Comcast currently is conducting a trial of a home automation offering in the Houston, Texas area.

I’ll be talking to Lucero later today about the report and how Vivint’s new offering fits into ABI’s analysis of the market. Does the fact that the company is offering a less expensive home automation alternative to homeowners that comes with Vivint’s technical service and maintenance know-how create “a fourth way” to market home automation? That’s what I would like to know.


See Vivint's new logo

Tuesday, February 1, 2011

This morning's announcement that APX Alarm has changed its name to Vivint follows a big celebration at the Provo, Utah headquarters yesterday, I'm told.

Now, if you're trying to keep a lid on something, telling hundreds of staffers isn't generally the best strategy. It is a good way to get buy-in from employees, however. And if you're asking those employees to go out and bang on doors all day long, their buy-in is key.

When Brink's Home Security changed its name to Broadview in June 2009, and then again when Tyco announced it would purchase Broadview, many Broadview dealers were taken by surprise. And, while they wouldn't say it on the record, several I spoke with didn't like the surprise. Of course, the fact that Brink's and Tyco are public companies makes these kinds of announcements much more complicated. There are many things that a private company like Vivint is free to do that public companies just can't.

My point here, however, is that involving the employees in a major way is just plain smart politics. COO Alex Dunn, who knows a little something about political strategy, having spent some time as an operative in Massachusetts government, told me that employees were actively involved in the rebranding process all along the way.

“Rebranding is as important for our employees as it is for anyone,” he said. “We’ve had a tremendous amount of internal communications and meetings. And the name change itself is not the point, the point is expanding our focus.”

And interestingly, even though they had a big party in Provo yesterday, and staffers have known the new name for weeks, word didn't seem to leak outside of the Utah Valley in a big way anyway. Here's a link to their website, where you can see their new orange logo.

Show some customer love with free classes

Monday, January 31, 2011

A new tip from the Security Industry Alarm Coalition made me think about Valentine’s Day, which is right around the corner. That’s because SIAC’s suggestion—to offer free alarm system classes to customers—is all about getting closer to your customers and the police department, and helping your business to boot.

According to SIAC, offering such classes has a host of benefits.

“Your state or local electronic security association (or your company) can get great visibility from such a program, and build a better relationship with the police department. In the process, you’ll help customers operate their systems more effectively, reduce calls for police dispatch and create a closer relationship with your customers, leading to sales growth,” according to SIAC’s blog on its web site.

If your company or association doesn’t want to take the lead on this, suggest it to your local police department, SIAC suggests.

The group said that the police department in Casa Grande, Ariz. is launching such a free class to the public to reduce the number of false alarms demanding police attention there.

The new class will show what to do if an alarm goes off, and how to obtain an alarm permit, a requirement to operate the system in the city, according to SIAC.

As incentive, the city offers a $50 waiver certificate good for one year toward outstanding cost recovery fees, SIAC said.

“It’s a good plan. Those of us in the electronic security industry should take heed,” SIAC said.

Valentine’s Day is coming up. Maybe it’s time to show a little more love to your customers, local police, and your business, by offering some free alarm know-how.


PrivateBank, Pinnacle and Kratos people

Thursday, January 27, 2011

My inbox this morning included a couple interesting "people moving to new jobs" news items.

First, PrivateBank officially announced today that Jennifer Holloway, formerly in charge of M&A for Protection One, is their new managing director for the Security Industry Group. Before she took the job with PrivateBank, Jennifer provided some great analysis for SSN on several transactions, most recently on the Monitronics sale. She won't be as free to comment on stories now, we know, but look forward to continuing to work with her.

From the release: "We are thrilled that Jennifer has joined our group at The PrivateBank. She brings over 15 years of experience providing financing to the security industry.  She is a perfect fit for our team and will help us better serve our clients,” said Mark Melendes, managing director of the Security Industry Group.

And speaking of PrivateBank, I only learned a couple months ago that Sean Forrest, who formerly was with PrivateBank as a managing director of the Securty Industry Group, moved to Pinnacle Security to become their CFO. That actually happened in the fall. Seems like quite a switch, but working for a security company isn't new for Sean, who worked as CFO for Tim Whall (now CEO of Pro One) when Whall was at HSM. Sean's going to be presenting at the Barnes Buchanan Conference in a couple weeks.

The security industry is a tangled web indeed.

In another, unrelated people move, I saw that  Kratos Defense & Security announced today that Fred Thomas has been promoted to VP of Operations for its Public Safety and Security (PSS) Division. He'll report to Ben Goodwin, president of the Public Safety and Security Division and be responsible for overseeing all operational, programmatic, and customer overall development aspects of the PSS Division. From the release: "Mr. Thomas' promotion supports Kratos' broader corporate strategy to expand its presence in the critical infrastructure, homeland security, surveillance and public safety market, which also included the recent acquisition of Henry Brothers Electronics in December 2010."