There’s a story about successful designer Kenneth Cole in Fortune. Some of you may enjoy this anecdote about how Cole creatively interpreted city rules and regulations to help himself out:

I designed shoes, made prototypes, and committed to ordering 40,000 pairs of shoes. There wasn’t a mechanism to get trademarks researched and registered quickly, so I used my name as the company name.

Back then, shoes were previewed at Market Week. You either took a room at the New York Hilton, where the trade show was, or you had a big fancy showroom. I didn’t have the money for either. So I called a friend and said, “If I can figure out a way to park your 40-foot trailer across the street from the Hilton, will you lend it to me?”

He said yes, so I contacted the mayor’s office and was told we couldn’t park the trailer unless we were a utility company servicing the streets or a production company shooting a film, thus promoting New York City. So I went to a stationery store, and $14 later I had a new letterhead that changed our name to Kenneth Cole Productions, Inc. I used the letterhead to apply for a permit to shoot The Birth of a Shoe Company, and on Dec. 2, 1982, we opened a 40-foot mobile showroom just north of the Hilton.

We had shoes, klieg lights, stanchions, and a cameraman. Sometimes there was film in the camera and sometimes not. The buyers came, and I used a telephone booth outside the trailer to periodically adjust the orders by color and size.

I sold 40,000 pairs of shoes in 3½ days and was off and running. We had $5 million in sales that first year and made a profit of $1 million. Today the company is still named Kenneth Cole Productions to remind us of the importance of storytelling and resourcefulness.

 

I like to occasionally touch on how people game the system in venues other than points, miles, and credit cards. Italy’s hookers-and-blow scheme comes to mind, as does the guy who worked over arcades. And now, thanks to Zero Hedge, I’ve learned how California public employees exploit the rules in pension schemes to make a lot more money than everybody (except for Tahsir and a few others, of course) makes from manufactured spending.

The source is this two-year-old LA Times story about what they call ‘salary spiking’. Here’s how it begins:

Approaching retirement, Ventura County Chief Executive Marty Robinson was earning $228,000 a year.

To boost her pension, which would be based on her final salary, Robinson cashed out nearly $34,000 in unused vacation pay, an $11,000 bonus for having earned a graduate degree and more than $24,000 in extra pension benefits the county owed her.

By the time she walked out the door last year, her pension was calculated at $272,000 a year — for life.

Who needs the Chase Sapphire Reserve (besides a cat, of course) when you’re pulling down an extra 50 grand per year by working the system? And this guy did even better:

Former Undersheriff Craig Husband added nearly $92,600 in unused vacation time, resulting in a $257,997-a-year pension, nearly 30% above his working pay.

What prompted ZH to dig up this old article was a recent state appellate court ruling that some of these pensions can be cut back retroactively:

The case in Marin County, a community north of San Francisco that’s among the wealthiest in the U.S., centers around the formula for calculating retiree payouts. Empowered by state law that sought to prevent “pension spiking” — which involved boosting compensation at the end of one’s career in order to elevate pension checks — the county in 2013 barred elements such as payments for waiving health insurance from being included in the formula that determines how much retirees receive. It was one of the first to implement the state law, the court said.

The union sued, saying such factors are considered part of workers’ regular pay and that the county violated legal precedents known as the California rule. Established through court decisions, the guideline prevents benefits for current employees from being decreased unless they received an offsetting advantage.

Clawbacks: they’re not just for Amex anymore!

At any rate, this followed the same trajectory as what we’ve seen in our hobby. When things are great, the people getting gamed don’t care. But when budgets tighten or too many people jump on the gravy train, the powers that be start clamping down.

An interesting story out of Florida:

ST. PETERSBURG — It was the glitch that kept on giving.

That’s how Choice Hotels International, one of the world’s largest hotel chains, portrays a flaw in its online reservations system in a lawsuit accusing a St. Petersburg man of fraudulently redeeming gift cards worth $48,500 in a rewards program for loyal customers.

Robert Chat, 38, discovered the Choice Hotels booking system didn’t erase his rewards points when he canceled a reservation, the suit said. So Chat began making, and quickly canceling, hundreds of reservations from October to January, then redeeming gift cards earned as a “reward,” Choice Hotel alleges. Chat denies wrongdoing.

The gift cards could be used at a wide variety of stores and restaurants, including Dunkin’ Donuts, Home Depot, Target and Applebee’s.

Chat defends himself thus:

Chat, 38, who said he had not been aware of the lawsuit until a reporter asked him about it, wrote in an email to the Tampa Bay Times that he received less than 10 percent of the $48,500 in gift cards alleged in the lawsuit.

“I’ll be hiring a lawyer tomorrow to fight the suit as there was nothing done illegal nor was anything done in malice,” Chat said late Tuesday. “I stayed at over 1,100 Choice hotels in the last five years … I worked with their bonus structure to obtain points.”

Fascinating stuff! I wonder who else knew about this? Chat couldn’t have been the only one. And it’s hard to say for sure, but from the way they’re describing the glitch I’m surprised this wasn’t discovered earlier. Or maybe it was and I just haven’t heard about it?

As for the question of who’s right and who’s wrong, here’s how Choice puts it:

The lawsuit said the rules of the program make it clear that customers earn the points for “actually staying in a Choice Hotel room and paying for the room in full.”

“Frequent stay programs are common throughout the industry and neither Choice nor its competitors offer rewards for frequent reservations,” the lawsuit said.

Regardless of who’s right and who’s wrong, I’m glad this is being settled with a civil suit rather than a federal criminal court case.