Legal 123s with ByrdAdatto (Whiteboards: A Picture is Worth 1,000 Words)
Knowing when to ask for help is important to the success of any business, so why do many of us not realize we need help until it’s too late? Frequent guest and partner Jay Reyero joins us to share a client story where a whiteboard was utilized to simplify the moving pieces of their complex business. Tune in as we discuss the importance of asking for help, whiteboards, and health care compliance.
Listen to the full episode using the player below, or by visiting one of the links below. Below is the episode’s transcript which has been edited for readability. If you have any questions or would like to learn more, email us at firstname.lastname@example.org
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real world experiences. Creating simplicity in three, two, one.
Brad: Welcome back to another episode of Legal 123s with ByrdAdatto. I’m your host, Brad Adatto with my cohost Michael Byrd.
Michael: Thank you Bradford, as a business and healthcare law firm, a client call is usually a request for help, but sometimes the clients don’t recognize they even need help. Instead, it’s an advisor they are working with who makes that call. Today’s story is one of those examples where the clients weren’t the ones looking for help, but their CPA saw the red flags and knew that a call needed to be made to bring us in.
Brad: Hey Michael, before we get to today’s episode, I want to talk to you about something that’s been bugging me. Do you own a television? [00:01:00]
Michael: Brad is this another not- so- subtle dig at my age? Yes, Brad actually, I’m own more than one.
Brad: Okay. Mr. Richie Rich, no need to show off to our audience about your plethora of TVs that you have. Do you watch them?
Michael: That’s actually a pretty fair question. Because I actually don’t think I’m watching enough TV. This adulting thing is really not good for what I would want for my relaxation time with the TV. And my kids watch TV on their computer, so I think we need to have a home initiative to get that thing going more often, or the multiple TVs going more often.
Brad: Well, I asked this question because, you probably don’t know this, but the 1950s, when television first started, there were only three big channels known as the big three, which is ABC, CBS, and NBC.
Michael: You would [00:02:00] know. But where are you going with all this?
Brad: Well, let’s fast forward to 2021. Now, do you know how many TV stations there are in the U.S now?
Michael: Let me check with my assistant Siri and see. Wow. That question is crazy. This is shocking, but it looks like there are over 77,000 broadcast stations according to the FCC.
Brad: Yes. My same assistant found that information before this podcast. And a little over a half a century shot past the big three. And we have obviously more channels than we know what to do with. And now people have more options about how to consume the TV. You know, obviously the old antennas don’t really work anymore. So you have cable or satellite or as in your case, straight off the internet onto their laptops. And the reason is that humans, unlike many animals, they’re visual creatures. While a dog might use their smell as their main sense or bats with hearing, [00:03:00] we prefer to use our own eyes.
Michael: Yeah, the old adage: a picture’s worth a thousand words.
Brad: Right. And there’s been a ton of studies that demonstrate that our brains are wired to gather information through all our senses, but we rely almost 90% of that from our visual learning. Plus apparently we process visual concepts 60,000 times faster than actual texts. Hence why we have over 77,000, as you said, options on any given day on television.
Michael: That was really persuasive, Brad. I mean, it’s almost like you went to the internet or something to find all this out.
Michael: So today’s story. I know that there’s a connection here. Why were you making this detour on TV and the power of visual. So let’s get into today’s episode, bringing our multiple time guest, our partner, [00:04:00] Jay Reyero, and he needs at this point no introduction. I think he’s been introduced multiple times on this, and I think we finally stopped the last time he was on. So Jay, welcome back.
Jay: Thanks guys, love being here and looking forward to the story today.
Brad: Glad to have you with us, Jay. So, Michael, this story actually starts with me getting a call from a CPA who is meeting with some prospective new clients of his own.
They are entrepreneurs in labs and pharmacies and device manufacturing and all kinds of other kind of healthcare businesses. And they were doing things on their own. The CPA was meeting with them to go over what they had in place, accounting and tax issues that they typically would work through. But he asked if I could join because he believed they would need some legal counsel and we would be a good fit. So naturally, first thing I said was, yes. And then I told you I couldn’t make the meeting. [00:05:00]
Michael: And as you know, Brad, I love context. So I remember talking to you to get some background about this meeting and the first few words out of your mouth were federal anti-kickback. And at that point I’m like, well, the people in our firm that do that, Brad or Jay, and Brad, you’ve decided that you needed to go to Mardi Gras and ride in a float. So you’re out. And so I knew that we needed to bring Jay in to go to this meeting.
Brad: Yeah. And I would say going to Mardi Gras was a good defense.
Michael: Not a valid defense, especially because you didn’t invite me that year. And since you couldn’t be there, Jay and I were there to pick up the meeting.
Brad: Jay. Do you remember how that meeting went?
Jay: Yeah, the CPA had initially scheduled it so that everyone else had met for just a little bit before Michael and I got there. So by the time we walked in, [00:06:00] I remember walking into a conference room and they had already mapped out all these entities and relationships. It was all over the board, and it reminded me instantly of one of those scenes in a movie where there’s a detective who’s driven mad cause he can’t catch the killer. And so you walk into a room and covering the walls are all these different pictures and strings or pins connecting everything. To the audience and to his partner and everyone else, you look at it, you can’t make heads or tails of it, but it really makes sense to that person.
And that’s how I felt when I walked in there. It’s like we just walked into this kind of scene.
Michael: Well you know I felt the same way, Mr. Context guy. It was extremely overwhelming. And I knew we needed to take a step back and have them walk us through it step by step to understand all the moving pieces. And we kind of turned the meeting into a white board.
Brad: Okay. Michael, for some concepts, we’ve talked about this [00:07:00] before, but can you briefly explain, what do you mean by a whiteboard?
Michael: Sure. So one of our signature things we do with our clients are whiteboard meetings, and essentially they’re interactive strategic meetings where we walk through a particular issue that a client’s facing. And the goal is to map out the strategy to solve the problem. And in this case, we’re walking through issues from a healthcare regulatory and compliance perspective, and then trying to map out a plan moving forward.
Brad: So did that clear things up?
Jay: Really, the only thing it cleared up was that they really needed more help and we needed to spend a lot more time with them. And we would barely get started understanding what had been drawn or where we were at a point in time, and then a new entity or a new relationship would be mentioned for the first time, Oh yeah, we also have this and it does this. And I think Michael and I both knew, okay. We need to really [00:08:00] set some more time with these guys to kind of figure things out.
Michael: It was definitely one step forward and then three steps back.
Jay: And it wasn’t even immaterial information either. I mean, each time it was a critical piece of information that really created real healthcare regulatory consequences. And it was also clear that some of the planning that had taken place before Michael and I got there didn’t even think about these implications. So there were red flags everywhere from the beginning. And I remember I left the meeting with my head spinning, not knowing exactly where to start.
Michael: Yeah. I mean, they had this chaotic serial killer map that you mentioned on the board with no legal counsel, and it’s healthcare. And so I remember waiting for the elevator and you and I just looked at each other with this same “what just happened?” look on our faces. And when I followed up to start the engagement process, the first thing I did was request [00:09:00] all the corporate documents, the agreements, basically anything that dealt with the movement of money, or the flow of funds as we call it. Then we could at least start mapping it out ourselves to see what the documents were saying were happening, and use that to fill in some of our blanks.
Brad: Yeah. And that’s key when we’re getting started with new clients and we’re trying to conduct our own due diligence. But once I did come back from Mardi Gras and dried out, I did decide, since I missed the meeting, just to pick up the phone and call the CPA to check in with them and see how he thought the meeting went. And during the call I learned about another investor being involved with these healthcare entrepreneurs. When I asked both of you guys about it, neither of you were aware of this person. And then when we went back and looked at the drawings from the serial killer maps that y’all had taken pictures of, it didn’t even reference who this investor was. So I knew the only place to start was with another whiteboard at our office. We needed to bring them in and start from scratch, mapping everything out. We could use the [00:10:00] documents they provided us to get some basic understanding of their actual model, and this should help us with the white board being more efficient, but really focusing on the questions they had and the gaps that needed to be filled.
Michael: So how did this go?
Jay: Well, the problem was that, as was mentioned before, these were entrepreneurs. So before we had even been engaged, they were asking us to help with different legal needs they had, putting together deals, drafting contracts, all of which, of course as everybody always says, were needed yesterday. And they had no idea how incredibly difficult it can be to put together a single deal in healthcare given all the compliance requirements. And yet here they were asking us to put multiple deals together at the same time, without really any context.
Michael: So Brad, what do you remember about that whiteboard session?
Brad: Well, it was good and bad. So what do you want to hear first?
Michael: Let’s start with the bad.
Brad: Okay. Fair. Well, our goal with this whiteboard was to draw out their entire corporate [00:11:00] structure and all the relationships involved. This would allow us to identify the regulatory red flags and a strategy going forward to ensure compliance. That’s the whole reason why they wanted to work with us. Then we would be in a better position to analyze potential new deals, because then we can understand how it fit in this larger puzzle. However, they were so laser-focused on this new potential shiny object, this new deal that they had. And then we spent the entire time drawing it out, walking through those compliance issues, and actually never addressing the actual purpose of that whiteboard.
Michael: Well, Jay, what was the good?
Jay: Well, I think the main thing that Brad and I wanted to communicate to them was that in healthcare, everything matters. So for us to properly counsel them and give advice on how to be compliant, we needed to know everything. And while we ended up being focused on the one particular deal, we kept coming back to that theme of transparency. And so by the end of the whiteboard, we had what we thought was a pretty good [00:12:00] picture of all the moving pieces because they kind of understood why we were asking the question we were asking.
Michael: Well, that may be good, but there’s also just like a hint of ominous there when you say you thought you had a good picture.
Jay: Yeah. So we took all the information from the whiteboard feeling good about what we had accomplished and learned everything that we needed to learn. And we work to put it together in a detailed analysis and looked at all the healthcare compliance issues and we developed safeguards that needed to be in place. The client had reviewed it, we did the analysis, we talked to them about it, and they seem to understand it. And the moment we were ready to start kind of putting the deal together, drafting the agreements, it was only then that we learned of a new entity that was not only already in existence that we had never heard about, but it was also operational and would actually be heavily involved in this deal. So just a little bit of critical information there that we probably should have learned about [00:13:00] during the whiteboard.
Michael: Just a minor detail, right?
Brad: Yeah, I mean, minor if you get your car out to about 155 miles per hour on the Autobahn and then pull the parking brake, that’s probably minor like that. This potentially could have changed everything. More concerning was the fact that we were very specific during this whiteboard that we need to know all the moving pieces and that did not happen.
Jay: So when I learned that I immediately reached out to them and let them know just how massively important this information was to everything that we were doing. And the only way we were going to be able to move forward from that point was to have another whiteboard.
Brad: And so when they came in for this third white board, we spent the first about 15 minutes discussing with them the importance of transparency with their healthcare council. And this would only work if they completely opened up to us of all the good and bad of the current model. We really wanted to make it clear upfront that we needed to know [00:14:00] everything, no matter how big or small, like an entity that was in existence, whether or not they thought it was relevant or not. If they couldn’t do that, this just wasn’t going to work and we weren’t going to be a good fit for them. And we know that any mistake they may have made, there are ways in which we could take corrective actions. And they’re entrepreneurs, don’t be embarrassed about what you did when you didn’t know you shouldn’t have done it. Embrace the fact they were doing really well, and that we were here to help them make them more fully or fully compliant. That’s the whole reason why we’re in that room.
Michael: Nice. Just created a little judgment free zone, Brad. I like it. You should try that at the office. So how did they react? Did it work?
Jay: Eventually, I mean, we started from scratch and by the end we had drawn out the entire organizational chart and business model. At the beginning of the whiteboard, there were points where something just didn’t make sense to Brad or me, and we would have to kind of press them to [00:15:00] disclose a little bit more, whether they were intentionally holding back or just falling in the trap of thinking, well, that’s just a minor detail, it’s not relevant. But as we went along, they began to kind of start providing unsolicited information or circling back and filling in some gaps that they may have left off all on their own. And, by the end, we had a fairly complete picture and I felt like from transparency, they understood at that point really that they needed to be completely open with us.
Brad: Yeah. And for context, for those in the audience who have never been to our office, our conference room is covered from wall to wall with one giant white board. And we had covered every inch of it. By the end of the whiteboard, we were all on the same page, which is important, and we had a strategy to move forward. Now our client, they could visualize their model and see the holes in it. Jay and I felt this excitement and energy from our client because they found some [00:16:00] relatively easy solutions to their deals. And so we took this complicated concept that they had that was sitting in front of them, just seemed too difficult to figure out, and then we were able to kind of prove to them the ways in which we could find ways for them to work in this new model.
Michael: Y’all found the serial killer. That’s awesome. Well, normally we don’t have three white boards, which is probably why it’s part of this episode, but I guess they say, third time’s a charm. Let’s take a break. And when we come back, we can discuss the strategy for helping clients in similar situations.
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Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host, Brad Adatto with my cohost Michael Byrd. And we’re still here with the guy we can’t get rid of, Jay Reyero, who’s been I think our special guests more times than I can count.
Michael: Yeah, Brad, this season’s theme is: when should I ask for help? But before we answer that question, we talked about the whiteboard sessions and you had suggested a second whiteboard after the initial one at our office. So the third whiteboard. Why do you think a whiteboard was the right strategy in this case?
Brad: White boards allow us to simplify things by breaking down all the moving pieces into easily understandable parts in real time. We don’t move onto the next part until everyone in the room clearly understands and we’re all on the [00:18:00] same page. The client in this story had a very complex structure and also was looking at doing complex deals. We need to make the complex simple and draw it out with the client in the room. And that was the best way for us to do it.
Michael: Yeah. Also we know you love white boards because number one, everyone’s looking at you. And number two, it gives you an excuse to use all the different markers available to draw things out. I’m pretty sure if they made a Crayola box of markers with 128 colors, you would have one and bring it to every white board.
Brad: You know, my birthday’s coming up. So just saying. I do know that I love every color in the rainbow when it comes to whiteboards, you know, mostly I want our clients to really visualize the flow of funds or the agreement between the parties. Or of course spotting the red flags. And for me, by using [00:19:00] these different colors, it helps demonstrate the nuances of their model. But what I found and what worked with this client is that they were visually showing what it is that you are talking about and making things simpler because it breaks down a communication barrier. You know, attorneys tend to use technical terms while clients use generic terms and the whiteboard uses a language we all can understand.
Michael: So Jay, how is this the case with our clients?
Jay: So for example, in our client’s situation, they had many different legally distinct entities, but consistently they were referring to them all under one identity. And they’re really treating them more like different service lines. So to them, their common ownership meant there really is no difference, but to us as attorneys, especially in the healthcare space, this is an important piece of the puzzle to understand. And so you can see how this can create that kind of disconnect and misunderstanding. Especially [00:20:00] in healthcare where it’s heavily regulated, this can also create big problems. So during the whiteboards, we would use shapes and colors to better keep everyone on the same page and talking in that same language that Brad mentioned.
Michael: And Jay, you were there for all three white boards: the impromptu white board, when we walked into the crime scene, plus the two at our office.
Brad: Poor guy.
Michael: So, you know, why did you find the whiteboards were helpful with these clients?
Jay: So Brad and I joke all the time, about many questions that we get during calls about healthcare regulatory compliances. Well, what if I did it this way? Followed by some new idea and we would walk through it and well, what if we did this instead? And those questions can be very difficult to answer without any kind of context. And so our clients in the story were fast moving entrepreneurs, and they were looking for answers and asking these questions constantly. [00:21:00] And so the whiteboards gave us that ability to kind of, in real time, identify their issue, discuss potential solutions, and then help them make decisions. And even though it took them three whiteboards to completely to become invested and open to the idea of transparency during each whiteboard, we navigated their complex issues. We answered their questions in real time. We came up with real solutions and all the while we were working from that same basic understanding, that same language, the same context, everything that was drawn up on the whiteboards. And so we were able to keep the momentum, always moving forward, which the clients appreciated.
Michael: Yeah. And what makes it dynamic is this isn’t a legal nuts and bolts question and answer session, this isn’t us just going up there and interpreting the law and teaching the law. There’s business strategy and talking through the strategy, the impact that has [00:22:00] from a legal business and compliance perspective. And so it’s really multi-dimensional.
Brad: Yeah absolutely. And during our whiteboards with these clients, we could come up with various scenarios that would work from a healthcare regulatory perspective. And then we could dive deeper into the model. We were able to speak to them on potential hurdles they could face and how that would help them navigate it. Sometimes we would all agree that this particular option identified, unfortunately, wouldn’t make any business sense. So we just start on over. All we needed to do was erase and begin this new drawing, and start putting together the next part of the model.
Jay: And that’s not uncommon in healthcare deals when we’re going through these whiteboards and we constantly face situations for clients, and that occurred frequently with these clients, where the best model from a compliance perspective doesn’t necessarily mean it’s the best model from an economic perspective.
Michael: Well talk a little more Jay, about what that means.
Jay: So, what I mean is sometimes a client’s [00:23:00] expectation of the financial arrangement, and this could be because they’ve already negotiated it or it is what others in the industry are doing, the debt doesn’t become a hundred percent aligned with the compliance rules. So as you begin to remodel the deal to match the compliance rules, sometimes the financial arrangement can be negatively impacted. Kind of an inverse relationship. And we kind of fall within a sliding scale on a risk reward type of analysis. So during the whiteboards with these clients, we were helping them navigate this in order for them to make an informed decision based on all these factors and really make the decision that they felt most comfortable with, both from a regulatory perspective, but also from a financial perspective.
Brad: And I think we can all agree, Jay that these whiteboards are successful strategies for our clients, especially in this particular story. But going back to our theme, “when should I ask for help?” I think we can all also agree that at the beginning is the easiest answer.
Michael: [00:24:00] Yeah, Brad, I agree. It’s an easy answer, but it is more nuanced than that, you know, to some clients they don’t realize it, like defining or identifying what is the beginning can be difficult. As attorneys, we would love to be with the client from the absolute beginning, we have a complete clean slate and we have certainty, but practically we recognize this isn’t going to be the case, just like in this story. And if I had to define it in a simple way, I would say the answer should be before the deal switches from internal to external.
Brad: Explain to the audience what you mean by that.
Michael: What I mean is before discussions involve a third party or funds start flowing in or out of the model, you create more flexibility and encounter less problems when help is sought before talking to external sources. You avoid misaligned expectations when help is out before the revenues begin [00:25:00] to flow. And this is why many of our white boards with clients take place during this internal planning phase or the strategy phase.
Jay: I agree with Michael, especially in healthcare, this is critical. It is so highly regulated and it’s a familiar saying, the things you can do in any other industry are illegal in healthcare. So because of this, it’s very easy for clients to trip up without even realizing it. So now you face the issue of having operated in a way or done something that was non-compliant. And as I’ve had a counsel tell me once before, you can’t un-ring the bell. It doesn’t mean you can’t take steps to mitigate the situation, but sometimes it can be hard.
Brad: Jay why don’t you explain how so?
Jay: So there are some situations where you create an obligation to disclose to the government that you did something wrong. And obviously this puts you on the radar, which I think everyone agrees is the number one thing to avoid. Even if there isn’t an obligation, you find yourself having potentially created that skeleton that can cause issues in the future. [00:26:00] I know I’ve worked with clients before where multimillion dollar deals fell through because of past compliance concerns and issues. And for some clients, it just creates a real internal struggle because we can’t undo it completely, all we can do is mitigate it. They may find themselves looking over their shoulder worrying about, is this ever going to come up? Who’s going to find out? What’s going to happen if it does? And it can create some real stress.
Brad: Yeah. And I think from a business perspective, it can create potential issues too. We’ve been in situations where a client comes to us with an idea, we identify the health care regulatory issues immediately, but unfortunately we’re the last ones that get involved. The client has already had multiple discussions with another party, and they’re ready to go out and sign and close a deal. And now we’re having to slow things down because of, obviously, important compliance concerns. And this is challenging. Now the client has to go back to the other side and explain why the deal has to change. And Jay for our audience, maybe we should let them [00:27:00] know what happened with our client at that third whiteboard.
Jay: Well, for better or worse, they actually became addicted to whiteboards. They love coming to our office to model out the newest idea they had or the deals that they’re thinking about, whether they were imminent or five-year plans, and we would talk about what the impact would be on their overall model. And often they would end up spending an hour and a half with us and then asked if they could continue to use our conference room for another couple of hours. They would just stick around and add more content to the wall and brainstorm other ideas. Sometimes they’d even come back to my office and asked me to come see something and talk through it. Sometimes it felt like they were in that conference room more than you and I Brad combined, but it really allowed them to visualize their model, and began thinking in a way that we all needed them to be thinking. And so the next time we met, it was a much more productive meeting because we’re all on the same page from [00:28:00] the beginning.
Michael: Or, maybe they were just sitting there watching the TV.
Brad: Well, if they were, they had plenty of channels to choose from. Join us next week for our episode, Hope Is Not a Plan with Jessica Nunn, where the founder and partner of Skytale Group will tell the story where a client failed to ask for help when they first started their business.
Outro: Thanks again for joining us today. And remember, if you liked this episode, please subscribe. Make sure to give us a five- star rating and share with your friends. You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com. ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney- client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Please [00:29:00] consult with an attorney on your legal issues.