What's up with Cal First? by Christopher Menkin
Many lessors and brokers know when they are not current with financial statements and other information with their "funders," they take the chance of being "cut off" until they comply. Many funders are getting tougher about this, as regulators are getting tougher with them, which a good part may be due to Sarbanes-Oxley. It is no secret banks and other publicly held companies have rules and regulations that require more severe compliance than ever before, especially in Sarbanes-Oxley requirements . With the recent trend of problems with large companies, such as Fannie Mae and Enron, to name a few, the short- staffed regulators are both overwhelmed and getting tougher. Maybe they have run out of patience, or maybe they are hitting home runs and like winning. Certainly obtaining fines and penalties does increase “income,” but is not really their incentive as they don't work on a commission basis. It appears the jury verdicts in the last few years are much more in favor of the prosecutors. The peer groups are fed up with the shenanigans and behavior. The prosecutors are motivated to enforce the current laws. They are getting headlines, convictions, and they like why they chose their profession. CalFirst Bancorp (CFNB) announced it is not in compliance with The Nasdaq Stock Market regarding filing its Form 10-Q for the period ended March 31, 2006. The Orange County, California based corporations with stockholders' equity of more than $185 Million as of December 31, 2005, stated it basically is an "accounting issue" with Cal First Leasing. The NASDAQ notice stated that due to such noncompliance, CFNB's common stock will be subject to delisting. Calfirst Bancorp requested a NASDAQ hearing on the matter. It appears they have hired a new accounting firm whom the auditors believe will follow their "viewpoint." This company can trace part of its heritage to Amplicon and several other Orange County leasing companies, and has been known as. California First Leasing Corporation (CalFirst) a subsidiary of California First National Bancorp, University Lease ,(www.universitylease.com) Amplicon Financial, American Techologies Credit, Inc., Working Capital Technologies of America, according to various sources. Many of the principals of leasing companies today in were former sales personnel who learned the business from this mother. According to the Cal First web site, California First Leasing Corporation leases and finances “just about any equipment" in the $25,000 to $5 million range: "Broadcasting and CATV Equipment http://www.calfirstbancorp.com/leasing/calfirstleasing/whatcan.htm
Cal First, "...notified PricewaterhouseCoopers LLP ("PwC") that it had been dismissed as the Company's independent registered public accounting firm, effective immediately. The decision to dismiss PwC was made by the Audit Committee." "...Audit Committee were reviewing the Company's accounting for lease extensions booked as sales-type leases. This review is still in process and the Company has not yet determined if any change to the Company's previously reported results is required, or the amount of any adjustments, if any. Based on its review since filing the 5/16/06 Form 8-K, management believes that certain lease extensions classified as sales-type leases should have been accounted for as operating leases, and is evaluating the impact of the reclassification. The difference in lease classification would primarily result in different timing of income recognition within a typical twelve-month extension term, and a change in classification of such leases on the balance sheet from Net Investment in capital leases to Property on operating leases and of some income from Direct finance income to Operating and sales-type lease income." A spokesperson for Cal First told Leasing News they did not "fire" their accountants, and when asked what the dollar amount was involved, stated Cal First would not comment further than their official SEC filing statement. Asked if it was a lot of money involved, meaning if it were $50,000, most likely they would have "written it off," but if $100,000, maybe more, but it seems more serious than that. There was the same "motor boating" about the SEC filing information, making no more comment, although the press release gave a telephone number and name if more information was needed. Asked if the matter was serious received this response: "I would say it was serious as Cal First has never had a notice for dismissal," was the response. Several certified public accountants who specialize in leasing stated the income would appear as "unearned income" and maybe even with another category, such as "discounted" or "broker." Issues regarding "use tax" in California were not addressed in the SEC filing, nor the "residual value" asset category, or how it might also be accounted for in "income," such as "interim rent" or "extra income or gain or loss regarding "residual income." Perhaps the issue regards a FASB (Financial Accounting Standards Board) ruling, such as recently the Equipment Leasing Association has been addressing directly and through the news media about "off sheet balance" and other matters. Certainly Leasing News readers will learn more when NASDAQ responds and holds a hearing as requested by Cal First Bank on the matter. Here is the Cal First SEC filing: http://www.sec.gov/Archives/edgar/data/803016/000080301606000013/ Equipment Leasing Association FASB White Paper: More information on Sarbanes-Oxley: |
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