Wednesday, February 9, 2011
Today's Equipment Leasing Headlines
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American Screw…and they really did!
In the recent failures with the fraudulent vendor invoices one of the most obvious was the literally hundreds of UCC filings as reported by Leasing News in the cases of Allied Health Care Services--$87 million, CyberNet-- $114 Million, Equipment Acquisition Resources-- $175 million, and Wildwood Industries--- $220 million.
Dun & Bradstreet has 343 UCC’s (South Carolina records 146, the following email says over 160) on American Screw & Rivet Corp., Anderson, South Carolina. According to www.independentmail.com, the company is closed with all property to be auctioned. There were an estimated 15 employees. The total debt owed has not been completed as all creditors have not filed to date, but by the list of creditors, it will be high.
"American Screw & Rivet Corporation engages in the production and supply of rivets in the United States and internationally. The company was founded in 1964 and is based in Anderson, South Carolina. As on November 8, 2010, an involuntary petition for liquidation under chapter 7 was filed against American Screw & Rivet Corporation. On December 28, 2010 the involuntary petition was approved by the Court."
This was brought to Leasing News attention by a reader as another example of the lack of due diligence, particularly regarding UCC filings as an indication of much debt:
"I was first introduced to a company in South Carolina nearly 10 years ago, and called them periodically seeking equipment financing opportunities. The owner, Nancy Stein, would send financial statements from time to time and this company was on my radar as a very decent middle market credit.
"I was approached by Nancy in late 2009 for about $350,000 of new equipment financing, but with the stipulation that we had to agree that we wouldn't sell our paper in the secondary market. This seemed like a strange request, but I pursued the deal and asked for updated financial statements. Nancy sent me the statements, along with a four page explanation. Once I saw the length of her explanation, I thought to myself, ‘The financials must have gone downhill’. You can imagine my surprise when in fact the financials looked pretty good. Of course, this combination sent my radar buzzing, and I re-read her 4 page explanation to try to ascertain why a "decent" middle market borrower would go to the effort to provide such a detailed explanation when none was necessary. I started looking for trouble, and it didn't take long to find it.
"In about one minute, we found that South Carolina has a free search engine that lists UCC-1's against specific debtors. We quickly learned there were over 160 UCC-1's filed (we couldn't see the actual filings without running a full search, and I didn't feel like paying for one). I noticed the names of MANY known equipment lenders, as well as a number of local banks in the Carolinas. I called a few of the lenders I knew on the list, and quickly ascertained that the company had millions of dollars outstanding with just these lenders. The financial statements indicated the company had only $1 million in debt, and possible another $1 million could be accounted for if I guessed at the original value of off balance sheet leases. But I knew immediately that we couldn't account for the millions I had personally uncovered, and there were probably 40+ more lenders to call if I had wanted to know more.
"Once I confirmed a problem, I told the lenders (that were involved with this credit that I knew personally) of a possible fraud going on. All lenders told me the account always performed well. In some instances, I felt like I was being told to keep my nose out of this situation. So much for trying to be helpful.
"I couldn't understand why other creditors hadn't run a lien search and tried to tie back the UCC-1's against company financial statements. Any lender that had taken this simple step could have uncovered a major problem. When I approached Nancy with my findings, she had a number of ‘excuses’, and while at the time I couldn't prove the fraud I knew in my heart that this situation wouldn't end well."
Forced into Bankruptcy
Aquesta Bank, Cornelius, North Carolina, U.S. Bancorp Equipment Finance, Inc., Portland, Oregon, American Bank, Bethesda, Maryland, U.S. Bank, Portland, Oregon, Palmetto Bank, Laurens, South Carolina, and the Huntington National Bank, Cannonsburg, Pennsylvania on November 8, 2010 filed a Bankruptcy Petition for Chapter 7 against the appropriately named company “American Screw & Rivet Corporation,” Anderson, South Carolina claiming a debt of $4.9 million. None of them are subscribers to Lease Police, nor did it seem did they pay attention to the number of UCC filings recorded by Dun & Bradstreet or by a search on South Carolina UCC filings for American Screw & Rivet. Were they dumb? You betcha’.
Other creditors include All Points Capital, Alter Moneta Corp., Bank of Anderson, Bank of Ozark, Carolina First bank, Capital Bank, Central Carolina Bank, CIT Group/Equipment Financing, Community First Bank (closed last week), First Reliance Bank, JP Morgan Chase, OFC Capital, Omni National Bank Regions Bank, UPS Capital Business Credit to name a few. All stupid! Again, none subscribe to Lease Police.
The latest in the Chapter 7 filing is an examination of Nancy M. Stein, who the web site states is the treasurer of the company "since 1981," to be held Wednesday, February 23, 2011.
U.S. Bank, successor to Park National Bank, sued the company November 20, 2009 naming the corporation along with William L. Stein and Nancy M. Stein with a summary judgment made on August 19, 2010 by Matthew F. Kennelly, United States District Judge, regarding $867,400 plus interest. There were many other default judgments in the $500,000 range, most of them equipment finance agreements or capital leases with $1.00. The exhibits on file did not show invoices nor mention the seller of the equipment. Several law suits also names William L. Stein, Jr. None of the parties seem to have filed personal bankruptcy at this time.
The company is on Facebook.com with such announcements as producing 100,000 cots for Haiti and shows many products it produces besides rivets. (A litigation filing with Bank of America over loan defaults and lease agreements states they were suppliers of “several bed-frame manufacturers and La-Z-Boy.”
Leasing News received the same reaction as the party who sent the email, especially on the Allied Health Care Services as to how could we question such a fine company and client, and almost for three years Leasing News was alerting readers about Sheldon Player and his past, and let's mention IFC Credit where Rudy Trebels had the presentation of the Leasing News Person of the Year Award to Randy Brook cancelled due to his influence as a National Equipment Finance Association sponsor (not to mention the Leasing News Bulletin Board Complaints) and there are others.
Alphabetical Update---the Bad Boys
by Kit Menkin
Perhaps this should be added to the "Bad Boys" group in Leasing News.
The up-date on Charles K. Schwartz and Allied Health Service Center brought many emails about other cases: asking what was happening? In the Allied case, the trustee is in the process of deposing the assets and the up-date showed which ones, as well as Schwartz attempt to get out of jail on bail before his trial starts. It appears he doesn't have the assets to do so. Many have called saying they have heard from attorneys Schwartz has money hidden overseas, but that is just "talk" or perhaps a wish from creditors who most likely will not only wind up with a loss from the transaction, but attorney and court fees, plus a lot of time wasted by they and their staff. Many of the loans were made after both Lease Police and Leasing News made alerts about the company.
(This was on his web site selling his new bottled water
Perhaps the most emails and telephone calls are about Sheldon Player of Equipment Acquisition Resources: why isn't he in jail. Yes, he is an ex-convict, who has had parole problems, according the court records. And you have to understand because he has been through this; he knows how to play the game. Speaking of that, it is amazing how the three officers spent so much time and lost so much money at the casinos. Perhaps they did win from time to time, but then why did they need so much money wired from E.A.R. to the various casino's the bankruptcy trustee is trying to get the money back (he is claiming it was company money as from E.A.R. and not from their personal bank accounts; meaning, if the money went to their personal accounts and then from there to the casino, it would be personal money and he could not claim the money back.) We're talking about more than $5 million so far, too.
Those that saw the assets say they were a warehouse full of junk piled on each other, and eventually all sold, as well as other equipment from another warehouse. Much of the transactions then were “ghost.” It is complicated as there is a vendor involved, several leasing companies who also sold equipment as if it was there's to sell and then have leased to E.A.R. And no one has told tales. There are about seven active brokers who sold the deals, all orchestrated primarily by one independent who was also on E.A.R. payroll. She got two to three points from E.A.R. and whatever she could from the leasing company or broker. Talk about the Russians and Afghanistan’s and the way business is done overseas, we had the collusion right here in the River City with everyone getting a piece except for the funder (he got the shaft.)
This one is similar to Allied, but two years earlier when we informed Leasing News readers in an alert to watch out about Player, even quoting him from an interview about his past going to jail for exactly what it appears he did again. Paul Weiss had left Icon Capital, and if he had stayed, I know he was reading Leasing News and would have saved his company $30 million. Paul is out of leasing in the United States now, heavily involved in Japan and China. The man has a touch of gold.
One reader told me Paul was planning a leasing venture in the large ticket and middle market arena in the United States with substantial backing from unknown sources. I tried to reach him, and had to leave a message on his cell phone as the time zone indicated he may be out of the country.
The latest at Allied finds the settlement with the IRS as he paid $4.7 million in federal taxes on ghost income to fool the creditors with his tax returns. All the parties had to agree, and the trustee did the best he could with the IRS (they kept a good portion.) It was a lot of paperwork, according to the court action records. Once all the income is brought in, then expenses settled, what's left goes to the creditors (not that easy as they have to all basically agree). As long as this is going on, looks like they want to keep Player cooperating, so as stated earlier, he knows how to play the game to stay out as long as he can, plus work the system to his best advantage. Also, look at the positive side, he's keeping the economy going by getting so much work for attorneys and their staff.
The saga of John Otto and HL Leasing has been going on since his suicide May 12, 2009. Supposedly the FBI began its investigation before his untimely death. Alleged claims of $132 million in leases to investors, primarily reported to be American Express Leases purchased from Key Corp., who took over the business leasing division.
At one time the HL Leasing blog was very active with many testimonies of suffering and complaints. It has become very quiet with not much activity, which seems to reflect the FBI office in Fresno and Palm Springs, California. The wife and president of the company are still alive, but no one has turned states evidence and certainly by the time the FBI should have realized there were no leases and thus no UCC filed and it was a Ponzi scheme. Right now it is still alleged. Calls to the FBI office about what the status is have gone unanswered. It seems no one cares.
(Rudolph Trebels, people who have seen him say
IFC Credit is perhaps the most involved and most complex as part of it involves a bankruptcy suit of 72 Injunctive relief and 91 Declaratory judgments. It also involves Len Ludwig with First Portland and that portfolio he is also trying to get off the ground as well as many of the creditors taking over existing accounts with incorrect payments made, wrong purchase options, what happened to the security deposits, and a couple of cases against the individuals behind the company with a “Status hearing to be held on 2/24/2011 at 10:30 AM at 219 South Dearborn, Courtroom 619, Chicago, Illinois 60604."
There is another case with the latest on February 7, 2011 "Application for Compensation with Coversheet for James E. Coston, Special Counsel, Fee: $164,692.50, Expenses: $1,026.07, for Coston & Rademacher, P.C., Special Counsel, Fee: $164,692.50, Expenses: $1,026.07. Filed by Karen Newbury."
Coston is only one of the attorneys. This doesn't mention the other costs, as well as the various suits against IFC Credit that involve Rudolph Trebles, who is back in the leasing business, made a member in good standing by the Equipment Leasing and Finance Association. Suits by the bankruptcy proceedings as well as by CoActive Capital Partners. It is one BIG mess! If you have a son or daughter who wants to go to college, tell them to study to become a leasing attorney. It’s where the big money is.
Operation Lease Fleece. It is funny there has been no mention of Jay Callaghan, who was the insider from Citicapital, according to Adam Zuckerman, one of the key players awaiting sentence. He has evidently “walked.” It was a Citicapital audit that caught the scheme and brought it to the attention of the FBI. This has been going on for almost three and a half years. There have been a few more indictments, and certainly both the FBI and US Attorney's office are getting tired of the case, but the fact remains the same people, the same judge, have been following this and it appears the postponements, in my opinion, no one has told me this, is because they want to get the Vartanian Brothers, vendors still in business, who's trial has been postponed as they continue to want to make a plea deal as the rest. The hold-up to the other sentencing is once brought before the judge, the sealed records are open, at least to other attorneys and to the media as public information, and obviously the prosecutors don't want the other side to know what they told the FBI. Unless the FBI brings them to the Vartanian trial, the records stay sealed and any plea dealings are also kept private. They certainly want the Vartanians! By the way, they are reportedly very good friends of Brian Acosta, top salesman for CapitalWerks for over five years.
So the whole case drags on, although some have been sentenced. In reality, those named are no longer in the leasing or finance business, so they have been punished, perhaps not enough, but that is up to the courts to decide.
The Vartanian Brothers Trial was continued to April 5, 2011 at 09:00 AM before Judge Cormac J. Carney
Leasing News Bad Boys:
$87 Million & Criminal Case continued against Schwartz
E.A.R.---Sheldon Player stories:
HL Leasing Stories
IFC Credit Stories
Leasing Brings Resource American to a serious loss
Resource America (NASDAQ-Rex) reported a loss of $567,000 for their first fiscal quarter ending December 31, 2010, but that was after the gain of $6.5 million in the sale of assets, according to their "Consolidated Statement of Operations."
It may be a little more involved, but going back to the numbers as you see above, the revenues of the same period in 2009 were $25.4 million compared to $16.7 million, primarily because of the loss of "commercial finance" going from $8.8 million to $1.5 million. Expenses were similar for both years. The bottom line is an operating loss of $5.6 million."
RESOURCE AMERICA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(Please note commercial finance numbers, look at commercial finance expenses, see “operating loss,” then gain of sale and the rest are numbers which Resource America takes advantage of, so you really don’t know what is happening. This is like the old joke of hiring an accountant and asking him how good is he, and he answers I can make it look as good as you want.)
The Resource American Press Release states, "The GAAP net loss attributable to common shareholders for the first fiscal quarter ended December 31, 2010 was primarily the result of losses generated from LEAF Financial Corporation ("LEAF"), the Company's commercial finance operating segment, and deferred tax asset adjustments. Schedule I reflects the removal of these items to derive adjusted net income attributable to common shareholders."
Jonathan Cohen, CEO and President, is quoted as making "substantial growth in management fees generated from real estate products...During the quarter, we re-capitalized LEAF and are no starting to grow the business..." (with Guggenheim investment money. Cmenkin.) As PT Barnum said, “There’s a sucker born every minute."
What was sold to change the loss line, the operating statement states: "The aggregate purchase price of the assets sold by REM and RFFM was approximately $11.1 million, net of transaction costs, and as a result of this transaction, the Company recorded a net gain of $5.1 million."
Looks to me like LEAF is bleeding $$ badly. Revenue is way down. Since we know Leaf has no equity, as a standalone company it would seem that they are now upside down.
Note, this is the Press Release filing with SEC (the actual filing will have more “factual information”):
(This ad is a “trade” for the writing of this column. Opinions
Sales Makes it Happen---by Steve Chriest
Rethinking Customer Loyalty
Customer loyalty is a major concern for everyone in business today, perhaps because there appears to be so little loyalty among so many customers. At best, loyalty is fleeting among many customers, and at worst, it simply isn’t part of their thinking.
I am always amazed at how many books are written each year on the subject of customer loyalty. These books are written and read, I think, because we don’t want to face the reality of pervasive disloyalty in the business world. We do a good job for our customers, we treat them fairly, our pricing is competitive and we remain loyal to our customers. So why aren’t they more loyal to us?
At the risk of sounding cynical, customer loyalty really is a simple concept, and for me can be boiled down into the following statement: Customers are loyal so long as the rewards of loyalty outweigh the rewards of disloyalty! Approached from this understanding, the challenge of gaining customer loyalty may not become easier, but surely comes into clearer focus.
To make matters more challenging, providing good service to customers today will not guarantee continued loyalty. I was shocked to discover that 80% of customers who switch vendors rate the service of their previous vendors as “satisfactory to good.” Good service is no longer good enough to guarantee customer loyalty!
Keeping customers loyal continues to be more challenging than ever for most businesspeople. Next week we will explore some ways to promote customer loyalty in highly competitive industries, like equipment financing.
About the author: Steve Chriest is the founder of Selling UpTM (www.selling-up.com), a sales consulting firm specializing in sales improvement for organizations of all types and sizes in a variety of industries. He is also the author of Selling The E-Suite, The Proven System For Reaching and Selling Senior Executives and Five Minute Financial Analyst, Basic CREDIT & Analysis Tools for Non-Accountants. He was the CEO of a very successful leasing company and executive at a major company. You can reach Steve at email@example.com.
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Leasing Industry Help Wanted
Please see our Job Wanted section for possible new employees.
Saluting Leasing News Advisor Shawn Halladay
The Leasing News Advisory Board does not participate in editorial decisions, meaning reviewing or choosing stories or subjects. Their role is to participate with policy and business advice as well as contribute in discussions on matters brought up by the publisher in a private internal blog.
Shawn Halladay has been a frequent contributor of articles, particularly regarding accounting, changes to FASB rules, tax ruling, as well as covering several of the Equipment Leasing and Finance Association events and conferences. He joined the Leasing News Advisory Board on April 17, 2006.
Shawn D. Halladay
Shawn is Managing Director of The Alta Group's Professional Development practice area and has authored or co-authored eight books on equipment leasing, including "A Guide to Equipment Leasing," “A Guide to Accounting for Leases" and "The Handbook of Equipment Leasing."
His professional expertise stretches across all leasing sectors and around the globe. Based in Salt Lake City, Utah, he has served lessors throughout North and South America, Asia, and Europe, providing training in all aspects of equipment leasing and consulting services supporting best practices and benchmarking studies, strategic planning, litigation support, accounting, and quantitative analyses.
He likes to travel as an excuse to attend soccer games, one of his passions.
#### Press Release #############################
Inland Return Preparer Sentenced to Serve
Tax Returns Claimed More Than $3.6 Million in Fraudulent Refunds
Riverside – A tax return preparer who operated a return preparation business in Apple Valley, California was sentenced in United States District Court to spend 66 months in federal prison after pleading guilty to charges that he conspired to defraud the United States and that he aided and assisted in the preparation of false tax returns.
Robert Dean Larsen, of Riverside, was also ordered by United States District Judge Virginia A. Phillips to spend three years on supervised release and pay to the Internal Revenue Service restitution in the amount of $204,099.93.
On August 26, 2010, Larsen pleaded guilty to conspiring to defraud the IRS and two counts of aiding and abetting in the preparation of a false tax return. Larsen, who operated Larsen’s Tax Pros at various locations in San Bernardino County and operated Laza’s Tax Service in Apple Valley, admitted in his plea agreement that, from 2002 to 2006, tax return preparers at his businesses filed at least 1,162 tax returns with the Internal Revenue Service that were false and that the tax loss based upon the false returns was more than $3.6 million.
According to his plea agreement, Larsen admitted that he operated Larsen’s Tax Pros from 2002 through 2004. In 2003, Larsen hired Christopher Daniel Laza to assist him in the preparation of tax returns. In 2004, Larsen and Laza began to operate their tax preparation business through a partnership, Laza’s Tax Service.
As a part of their scheme to defraud the IRS, Larsen admitted that he and Laza prepared income tax returns for clients that contained one or more false statements. The items on the returns that Larsen and Laza prepared for clients that contained false statements included taxes paid, mortgage interest paid, charitable contributions, unreimbursed employee business expenses, business losses, and investment losses, among others.
The falsified or inflated items listed on the tax returns prepared by Larsen and Laza were not provided to them by their clients during the preparation of the clients’ tax returns. When a client asked either Larsen of Laza about the falsified items listed on their tax returns, the client was sometimes told that Larsen possessed specialized knowledge in tax preparation with regard to deductions or that receipts could be obtained to justify the expense in question.
Additionally, Larsen admitted in his plea agreement that he willfully aided and assisted in the preparation of two materially false and fraudulent tax returns for his clients for tax years 2002. Specifically, Larsen admitted that he knew that deductions he claimed on client’s returns for real estate taxes, mortgage interest, charitable contributions, employee business expenses, and miscellaneous deductions were false.
At the conclusion of today’s sentencing hearing, Judge Phillips ordered Larsen to begin serving his sentence on April 4, 2011.
Larsen’s co-defendant, Christopher Laza, is scheduled to be sentenced before Judge Phillips on May 31, 2011.
The investigation of both Larsen and Laza was conducted by IRS-Criminal Investigation’s Los Angeles Field Office in conjunction with the United States Attorney’s Office for the Central Judicial District of California.
#### Press Release ##############################
California Bank & Trust Announces Philanthropic Performance for 2010
SAN DIEGO, CA –--California Bank & Trust (CB&T) (www.calbanktrust.com) is pleased to announce its philanthropic performance and charitable activities in California for calendar year 2010. The bank contributed monetary and in-kind support of more than $800,000 to hundreds of charities that reside in the California communities where CB&T has branches. Of that total, $272,975 was allotted to community development, including affordable housing projects, community facilities and neighborhood projects throughout California.
“We are very proud of CB&T’s tremendous spirit of generosity,” said Steven Herman, Vice President and Manager of California Bank & Trust’s Community Reinvestment Department. “CB&T’s culture of giving encourages our associates as well,” he added. “Last year, our associates stepped up to donate more than 6,528 volunteer hours to numerous non-profit organizations and also contribute an excess of $200,000 in support specifically for the United Way.”
“Many people are facing difficulties in this economic slow-down and so many families are desperately in need,” Herman continued. “As a community bank, CB&T and its associates have a strong connection to our local residents and we’re honored to support the organizations who serve them.”
About California Bank & Trust
#### Press Release ##############################
ICBA Victory: Final FDIC Rule Establishes Parity
Assessment Base Change Keeps Money Where It Belongs
Washington, D.C. The Independent Community Bankers of America (ICBA) lauded the Federal Deposit Insurance Corporation (FDIC) board of governor’s decision today to approve a final plan that imposes parity between small and large banks within the deposit-insurance system by basing the assessment base on average consolidated total assets minus average tangible capital instead of domestic deposits. ICBA has long advocated for the change, which was one of the association’s key priorities in the Wall Street Reform Act.
“ICBA led the charge throughout the Wall Street reform debate to create fairness within the deposit insurance system so that Main Street community banks, which are the lifeblood that drive economic stability and prosperity in thousands of communities across the nation, can continue to serve their customers and keep money where it belongs—in the community,” said James MacPhee, ICBA chairman and CEO of Kalamazoo County State Bank, Kalamazoo, Mich. “ICBA thanks the FDIC for approving this pivotal final rule, which will ultimately benefit the communities we serve.”
Under the current system, banks with less than $10 billion in assets pay approximately 30 percent of total FDIC premiums, even though they only hold 20 percent of total bank assets. Updating the system will lower assessments for 98 percent of these banks, saving community banks roughly $4.5 billion over the next three years, allowing them to reinvest those savings in their communities.
To learn more about this ICBA victory or to speak with an ICBA staff expert, please contact Aleis Stokes at 202-821-4457. For more information, visit www.icba.org.
#### Press Release ############################
Anderson, South Carolina -- Adopt-a-Dog
"She is about 1 year old. She was kept outside in a fenced yard. She is friendly with kids. She will chase cats and livestock. Very friendly and outgoing girl.”
Anderson County Animal Shelter
Adopt-a-Pet by Leasing Co. State/City
Adopt a Pet
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This Day in American History
1773—Birthday of William Henry Harrison, the 9th president of the United States ( March 4-April 4, 1841). His term of office was the shortest in our nation's history-32 days. He was the first president to die in office (of pneumonia contracted during inaugural ceremonies). John Tyler assumed the presidency and historians state his administration was characterized by bickering and frustration, primarily caused by Henry Clay and Daniel Webster over political issues in their own "Whig" party.
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