Tuesday, February 14, 2006
Headlines--- Archives, Feb 14, 2001--Amex/SierraCities
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Archives, Feb 14, 2002 American Express to buy SierraCities.com for $107.5 MM
"Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed...every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn't matter whether you are a lion or a gazelle...when the sun comes up, you'd better be running." NEW YORK, Feb 14 (Reuters) - American Express said on Wednesday that it would buy equipment financing company SierraCities.com Inc. (NasdaqNM:BTOB - news) for $107.5 million, in order to expand American Express's small business lending. New York-based American Express said its American Express Travel Related Services Co. unit would pay $5.68 cents per share for about 18.9 million shares outstanding. SierraCities shares rose 3/8 to $4-7/16, or more than 9 percent, from Tuesday close of $4-1/16 on the Nasdaq. The stock has a 52-week trading high of $22-7/16 and low of $1-1/8. (Leasing News had predicted before Vertical Net that American Express Business Finance was not only interested, they would be the suitor to win the bride. To their obvious dismay, after they took over management, they discovered many problems, and in turn filed a law suit against RW Professional Leasing for $20,000,000. (Ironically on February 14, 2002, Leasing News:” A well informed source tells Leasing News that one of the portfolio's sold to American Express by First Sierra has a loss of $16 million now. This is getting large enough to be footnoted in the Security Exchange report. Or will it be buried. Stay tuned as we find out more. We hope to have the full story soon.” (Here is the full story, co-written with Charlie Lester: http://www.leasingnews.org/articles.doc/newsletter3.htm (October 22, 2004 American Express Business Finance was sold to Key Equipment Finance. (October 25, 2004—News on Depping new venture: Main Street National Bank. The former leader of SierraCities/First Sierra, with a group, purchased control in Texas on a bank now called Main Street National Bank, where he started a leasing division. Catherine Ross, one of those who was reportedly instrumental in the formation of the bank, also well-known in the leasing industry, in 2005 filed a suit against the bank, specifically naming the gazelle. Leasing News has been gathering information on the story, including information from 189 th division court public records. The key is see if the trial coming up soon will be delayed. Ms. Ross has told us her attorney has advised her not to make any public comment at this time. editor ) -------------------------------------------------------------- Classified Ads---Operations
The first Olympic Winter Games were held in Chamonix, France, January 26, 1924. Above are the Austrian speed skating pair winners Helene Engelmann and Alfter Berger. The first event to be decided in Chamonix was the men's 500m speed skating with the first gold medal going to Charles Jewtraw of the United States with a speed of 44 seconds.
Orange County, CA East Windsor, NJ. Resume New York, NY. Wayne, NJ For a full listing of all “job wanted” ads, please go to: http://64.125.68.91/AL/LeasingNews/JobPostings.htm To place a free “job wanted” ad, please go to: http://64.125.68.91/AL/LeasingNews/PostingForm.asp -------------------------------------------------------------- Where is Charlie Lester on Valentine's Day?
Of all things, Charlie yesterday went into the North Fulton Regional Hospital. He had a two and a half hour operation on his knee. The good news, it was successful. The bad news, looks like he is staying there until Friday and then a lot of physical therapy. We were hoping to give him another journalism assignment. If you want to send Charlie Lester a card, flowers, or give him a telephone call to let him know what is going on: 1-770-751-2500, room 107. Address: North Fulton Regional Hospital , 3000 Hospital Blvd.,Roswell, GA 30076 It might make his day. --------------------------------------------------------------
-------------------------------------------------------------- Einhorn also pays $1,031,034.35
Leasing News has been writing about Victor Einhorn since his arrest on April 4, 2001, with many charges, including creating a network of non-existent companies ranging from real estate agencies and computer software companies, to a medical clinic, in order to establish equipment leases, order electronic or computer equipment and obtain corporate credit accounts. He also posed as the owner of a non-kosher restaurant that allegedly catered a bar-mitzvah and charity benefit dinner for members of the Hasidic community in a scheme to defraud Diners Club International, as well as members of his own community. He was eventually found guilty of these charges. "I remember you; hope your news service is doing well. A check was just turned over to the Court for restitution in this case to victims who had filed claims for restitution. (Way back when I was a Postal Inspector, I had asked you to help me locate victims who had not responded to letters, phone calls or who had been acquired by other leasing Cos. and get them to file claims - which you did). “This particular money came from cash Einhorn had and proceeds from his real estate that was sold for restitution and was being held in a trust account prior to sentencing/restitution Orders being entered by the court." J.R. Goodman, Criminal Investigator Securities & Commodities Fraud Task Force Department of Justice U.S. Attorney's Office, Room 521 1 Saint Andrew's Plaza New York, NY 10007-1701 "On 10/3/05,Judge Judge Barbara Jones sentenced him to a period of incarceration of 84 months (7 years) which is in the range of what he pled guilty to, before the Federal Sentencing Guidelines were declared unconstitutional and, therefore, merely advisory, last year," Criminal Investigator J.R.Goodman notes." Restitution was ordered to be paid by him (and previously, his co-defendants) in the amount of $8,175,306. Assets that were seized by myself and the USPIS were ordered to be turned over to the USMS for liquidation to supplement the funds from the sale of Einhorn's real estate holdings, and cash that was voluntarily forfeited by Einhorn." At this date from the liquidations, a check was written to the US District Court on February 7, 2006 for $1,031,034.35. In addition to the time he will serve, and the personal cost of defending himself for over four years, all assets found to date have been liquidated. The debt continues, should the court find more, and they do pay a "finders fee." Copy of order: Copy of check: List of assets forfeited: An early story about Mr. Einhorn: --------------------------------------------------------------
MAEL No More—Cady owed $200,000? by Christopher Menkin
After almost twenty years, the Mid-America Association of Equipment Lessors (MAEL) has disappeared, perhaps owing more than $200,000. The web site bill was not renewed. In the last billing of members, out of 250, only 20 renewed, according to one highly reliable source. Originally the group was formed as one of the "special interest groups," who belong to the Equipment Leasing Association (ELA.) The former website stated the organization consisted of members of the industry from the upper Mid-Western states, including Illinois, Ohio, Iowa, Wisconsin, Michigan, Indiana, Kentucky, Missouri, Minnesota, Tennessee, North Dakota, South Dakota, Nebraska and Kansas. In recent years, Leasing News wrote about their popular annual golf tournament. They also often had lunch and from time-to-time other meetings in Chicago, Illinois. Clyde D. Cady, President, Facility Capital Corporation, Chicago, Illinois, was on the board of directors from 1990-2003, President from 1997-2003. He declined to comment on the status of MAEL or what happened, but Leasing News was able to trace the events from other directors, who did not want to be quoted. We discovered the demise of the organization in trying to up-date our leasing association section. When Cady was president, reportedly he and his staff primarily did all the work, promotion, telephoning, organization, actual physical work, and the golf tournaments were well over 250 each year. Several former directors told us he was the force behind the main event. When he resigned, the next golf tournament in 2004 had only 70 people (72 paid, two were no show.) Reportedly all vendors were paid. Several noted that Cady was the key organizer, and as with many board of directors, the old saying that “20% do 80% of the work was true here.” The plan was to sign up new members, selling one table for the annual meeting, four foursomes and $1,000 of sponsorships for the golf outing. Each director was assigned to bring in approximately $7,000 of event revenue “80% didn't and that is why there was never enough money to pay for the administration of the association,” Leasing News was told by one former director as the main reason for the demise of MAEL. Another former director, well-known in the industry, told Leasing News: “How is it possible that executives who promise to do so can't find a way to achieve $7,000 per year? Four of us routinely were responsible for more than $100,000 collectively, but when the other 13 do almost nothing it just doesn't add up.” The former president of MAEL, who was described as a “one man band” at the last tournament, actually ran the computer program, printing labels, licking envelopes, putting sponsor signs together, commenting to Leasing News “all volunteer associations really don't work.” He gave Clyde Cady a lot of credit for the success of the former golf tournaments. Another former director of MAEL, summed it up, by saying,” Once Clyde decided at the end of 2003 that he was no longer willing to have his company shoulder virtually the entire responsibility of running the association, a group was selected to attempt to carry on MAEL. There were two major obstacles: 1) Industry shrinkage, and the lack of an available core of individuals to lead the organization and do all of the work in organizing membership, a major golf outing and an annual diner, and (to a much lesser extent) 2) Clyde's position that his company was entitled to a substantial sum as compensation for the work of his staff over the years for doing all of the work.” The demise of MAEL is evidently the reason ELA (and the United Association of Equipment Leasing, who also ran into a similar problem in the 1990's), ended the regional programs. After a strong attempt, they found “the majority of the local meetings couldn't pay for themselves.” Allegedly MAEL owes Facility Capital Corporation $200,000, a claim made by Clyde Cady to the board of directors for four employees in his company who actually did a lot of the work during his four year term as president. Leasing News has verified in 2005 a group of ten was to resolve the bills and “take care of business.” Right now none of the former friends are talking with each other, and the once very popular golf tournament is another vessel that hit the “Perfect Storm.” -------------------------------------------------------------- Leasing Association 2006 Member Up-Date by Christopher Menkin
This is a synopsis of the top six, followed by their “page” up-dated on the Leasing News web site, including the full listing of all related non-profit leasing/financial organizations. As reported in the previous story, one leasing association no longer exists, but another grows to 40 members, the brokers' association hits 751 with more joining every day, while four veteran associations hold their own. There are several other financial associations, but these are the key equipment leasing groups. They are all quite different. Don't let the member count judge which is “best” or the one you should join. They serve a different membership. It should be noted that by our Leasing News count, over 100 funders belong to three or more of the associations. There are 25 “broker/lessors” who belong to two and twelve who belong to three or more by our count. Yet the personality and mission of the six may have similarities, but they are each quite distinctive. The Equipment Leasing Association (ELA) is the largest, up-scale membership dues, with a full-time professional staff of 25. It is also the most influential in every aspect from representing the industry in Washington, DC, to state and local governments. They also produce more educational conferences, meetings, publications, plus excellent listserves in several categories, in addition, in our opinion, the best daily news in the equipment leasing industry: ELTnews. In addition to having the full support of the major bank and financial industries who conduct business here and abroad, members also include smaller companies, one man offices, service and independent companies who are successful, have their own niche, and have the time, money, and desire to improve their profession. Notably the organization is attempting to expand their “captive vendor” members, many who previously were not active in any of the other organizations. This group consists of manufacturer and distributor leasing entities. Another example of the diversity of ELA membership. Their president, Michael J. Fleming, is retiring after 40 years of service in July. He joined the young association in 1966. (ELA started in 1961 as the American Association of Equipment Lessors .)
Michael J. Fleming, CAE Contrast this with the second least expensive membership dues, the National Association of Equipment Brokers (NAELB), $295 for brokers, a relatively young organization who have no employees, but a very active board of directors and independent management company. They presently number 751, whose members are mostly independent equipment leasing brokers. Only brokers have a vote and sit on the board of directors, except for their legal counsel. This contribibution has been a main stay since the start of the organization, where both Joseph Bonanno, CLP, and Barry Marks, Esq., at one time alternatively served as “legal counsel" each year. Both should be credited for their involvement from the very beginning, one of the main reasons for the growth of this association of brokers.Marks is now retired from the NAELB position, saying, "Joe is the only legal counsel NAELB has or needs." Funders are invited to join, in fact, the Bonanno question is “Is the funder a member of NAELB?” If they are, they abide by the ethics of the group or may be dispelled or censored for inappropriate action after a confidential hearing by the full board of directors. To the advantage of all parties, these confidential hearings have resulted in “settling” many disputes.
Joesph Bonanno, CLP, NAELB legal counsel. NAELB have many members who have been involved for over ten years, yet strive to bring in those new to the broker business to help educate and up-grade the ethics of the industry. Their numbers have brought more programs, sponsored by funders, which have enabled the organization to do more for their members, keeping all costs down to enable everyone to join. The United Association of Equipment Leasing (UAEL) began as a “West Coast” group in the late 1960's, got off to a rough start, was disbanded until In the fall of 1974, luncheon meetings were set up in Los Angeles and San Francisco to see if enough people would come forward to rejuvenate what was called the Western Association of Equipment Lessors. Brokers were not allowed to join until the 1980's. The group grew into a national organization, changed its name, was up to over 500 members, then decided to “re-invent” itself back to the core purpose and has remained at 300 members for several years due to the work of past presidents who now are officers: Joe Woodley, CLP, executive director and Bill Grohe, director membership and marketing. The group has an equal number of east coast and west coast members. They are primarily composed of funders and lessors, but also have many service and broker members. As with the demographics of all the associations, most have been members for more than ten years with many over twenty years or longer. Their two leasing conferences are well attended each year, always more than the total of their membership. At the end of 2005, the Eastern Association of Equipment Lessors (EAEL) had 180 members, according its president Nancy Pistorio.
Nancy Pistorio EAEL is primarily a regional association with 67% in the Northeast (NY, NJ, MA, CT), an additional 10% in PA and MD, and the remainder in 25 states. One important distinction in EAEL membership recruitment is that they do not solicit Brokers/ Lessors west of the Mississippi River." Members share information, have a close bond, and while it may not be as large as the others, the atmosphere is very "family" and being of as much help to each other. There has been talk for years that this association would merge with another, but there is a closeness among members that would be lost, and as important, the membership dues overall are the lowest of the other three leasing organization who would be their suitors. The association is in a re-building phase under the leadership of President Nancy Pistorio, Madison Capital. The Association for Government Leasing and Finance (AGLF) was founded in 1981 to serve municipal leasing industry. Publishes Bi-monthly newsletter; sponsors two annual conferences; 50-state leasing survey; federal leasing survey; and conducts numerous industry projects. Membership at the beginning of the year was 255. The group was at more than 400, had a set-back, and several years ago brought in Graham Hauck as Executive Director. He has brought the numbers up, particularly in light that the group exclusively works on municipal and federal funding and many of their members are also members of ELA, who also has a very active municipal-federal funding group. Conferences bring funders, brokers, and lessors together and as with the other associations, many members have belonged for over ten years and longer. The smallest, youngest, with the least expensive dues of $25 a year is the Arizona Equipment Leasing Association (AZELA). Membership is 40 today. http://www.leasingnews.org/items/azela.gif This state has grown tremendously, plus with the use of the World Wide Web and overnight delivery, leasing companies can work almost anywhere. Without sounding like the chamber of commerce, the area has also attracted larger leasing companies, such as CIT, which has an office in Tempe. Evidently the group has felt left out of the other leasing association, although many of their members belong to one or more, and get-together often to network, have educational programs, share information, and to socialize with their colleagues. Up-dated Leasing Association listings: AZELA
http://www.leasingnews.org/associations.htm#azela AGLF
http://www.leasingnews.org/associations.htm#aglf EAEL
http://www.leasingnews.org/associations.htm#eael ELA
http://www.leasingnews.org/associations.htm#ela NAELB
http://www.leasingnews.org/associations.htm#naelb UAEL
http://www.leasingnews.org/associations.htm#uael All equipment leasing related non-profit associations: http://www.leasingnews.org/associations.htm -------------------------------------------------------------------------
Leasing Foundations up-date There are two non-profit equipment leasing foundations, one originally formed by the United Association of Equipment Leasing, and now separate. The other formed by the Equipment Leasing Association (ELA,) also separate, but mostly supported and promoted still by ELA. Ironically they do not formally support the first one:
The certification program was started by a group a leasing professionals who were members of Western Association of Equipment Leasing, now the United Association of Equipment Leasing (UAEL).The program grew to the point UAEL relinquished all rights to the program and the CLP Foundation was established as a non-profit corporation. The Eastern Association of Equipment Lessors, National Association of Equipment Leasing Brokers, and UAEL now lend their support to the Foundation and the CLP Program. At the beginning of 2006, there were 174 Certified Lease Professionals (CLP's). "The CLP is recognized in our industry as an individual with high ethical standards who has been tested and passed an exam covering every important aspect of our industry," reports Executive Director Cindy Sprudle.
The Equipment Leasing Association (ELA) created the Equipment Leasing and Finance Foundation in 1989. This site is designed for further education at all levels, including an intern/mentoring program, plus both academic and commercial information on the leasing industry. Its Mission: Partners: All products and services development by the Equipment Leasing and Finance Foundation are FREE! The Foundation relies on donations to conduct research to increase the industry's body of knowledge and to provide products. More about the CLP Foundation: http://www.leasingnews.org/associations.htm#clp More information about the ELFF foundation: http://www.leasingnews.org/associations.htm#elff -------------------------------------------------------------- Leasing Association Conferences --- Spring 2006
Eastern Association of Equipment Lessors March 26-29
Great Learning Opportunities
Networking Opportunities:
Beach and Water Fun:
Registration details to be announced soon -- watch for more information!
To register and leasrn more about the conference: --------------------------------------------------------------------
National Association of Equipment Leasing Brokers April 20-22 Guest Speakers
EARLY BIRD Registration Deadline: March 15, 2006 HOTEL Registration Deadline: March 22, 2006 Register on line at: http://www.naelb.org/cde.cfm?event=120803 ------------------------------------------------------------------------------
Equipment Leasing Association April 23-25 ---------------------------------------------------------------------------
Association for Governmental Leasing & Finance May 4-5 -----------------------------------------------------------------------------
At the conference, Leasing News will be presenting Paul Menzel, CLP, with the "Leasing News Person of the Year for 2005" award . Editor/Publisher Christopher "Kit" Menkin and many of the Leasing News Advisory Board will be on hand for the presentation; to salute Paul for the over 30 years he has contributed to the leasing profession. "We hope to see you there." Kit Menkin United Association of Equipment Leasing May 4-7
Register: or download form in PDF -----------------------------------------------------------------------------
National Vehicle Leasing Association June 7-10 ----------------------------------------------------------------------------
Equipment Leasing Association 45th Annual Convention
-------------------------------------------------------------- Top Stories--February 6-10
These are the top ten stories most "opened" by readers last week. (1) Fresno Bee: Kenneth Wheeler, Silver Star Hero (2 ) Marlin $4.4MM 4th Q---Officers Sell Stock (3) Sales Makes it Happen--Terry Winders, CLP (4) Archives: "Let's Get Some Positive News" (5) " Selling In A Down Economy"/Steve Chriest (6) BankFinancial FSB Joins “Funder List” (7) Archives—GE began cutting back w/Tilden in 2001 (8) Gonor Funding Joins “Story Credit” List (9 ) “Funder List” Up-dated (10) Story Credit Lessors List Up-dated
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-------------------------------------------------------------- When is a Lease Not a Lease? Seventh Circuit Adopts "Substance Over" Form Test for True Lease Determination Article by David A. Hatch and Mark Douglas Jones Day As secured financing and leasing transactions involving capital assets become more complicated to account for evolving tax, liquidity, equipment obsolescence and similar considerations, the difference between "true" leases and financing arrangements has become increasingly difficult to ascertain. The similar economic function of these transactions allows for the drafting of "leases" that work like security agreements and secured loans that work like "leases." The distinction between these property interests is an important one, particularly if the owner/lessee of an asset files for bankruptcy. This is so because different rights and obligations apply under the Bankruptcy Code depending on the nature of the debtor's interest in the property. Bankruptcy courts are frequently called upon to determine the exact nature of the debtor's legal interest. The Seventh Circuit Court of Appeals recently examined this issue. In United Airlines, Inc. v. HSBC Bank USA, N.A., the Court of Appeals ruled that a court must consider the substance of a transaction, rather than its form, in determining whether a transaction is a "true lease" or a disguised secured financing. Treatment of Leases in Bankruptcy The Bankruptcy Code itself does not define the term "lease." It broadly defines "security agreement" as an "agreement that creates a security interest" and "security interest" as a "lien created by an agreement." These definitions, however, offer little guidance in distinguishing between financing transactions that involve the retention of a security interest in sold assets, on the one hand, and leasing transactions where the lessor is granted a security interest in leased assets as an added layer of protection, on the other. Why is the distinction important? The Bankruptcy Code confers certain rights, and imposes various obligations, upon a debtor who is party to leases and other contracts that are "executory" as of the bankruptcy filing date. A chapter 11 debtor-in-possession ("DIP") or bankruptcy trustee generally has the right to "assume" (reaffirm") or "reject" (disavow, resulting in breach) such contracts and leases under section 365 of the Bankruptcy Code. Moreover, most assumed contracts can be assigned as a means of creating value for the bankruptcy estate. Pending the decision to assume or reject, however, the DIP or trustee is obligated to remain current on post-petition lease obligations, failing which the leased property must be surrendered to the lessor or the lessor will be allowed to exercise its contractual and legal remedies notwithstanding the strictures of the automatic stay. Different rules apply if a transaction involves secured financing rather than a lease. In this case, the DIP's or trustee's obligation to make payments to the secured lender during the course of the bankruptcy hinge on the value of the collateral relative to the amount of the lender's claim. If the collateral value exceeds the amount of the debt, the DIP or trustee may be required to make periodic interest payments to the secured creditor as a means of "adequate protection." By contrast, if a secured creditor is undersecured because its collateral value is deficient, adequate protection payments are generally not required, and the creditor will hold a secured claim only to the extent of the collateral value and an unsecured claim for the deficiency. The ultimate fate of the collateral depends on the kind of bankruptcy case (i.e., chapter 7 or chapter 11) and the DIP's or trustee's ability to deal with the secured creditor's claims in accordance with the requirements of the Bankruptcy Code. In a chapter 7, the property would either be abandoned to the secured creditor or sold to the highest bidder, with the secured creditor's liens attaching to the proceeds. By contrast, in chapter 11, the DIP could confirm a plan of reorganization under which, among other things, the secured obligation is reinstated with the same collateral, the original collateral secures a new obligation whose terms vary from the original secured debt, collateral of equivalent value is substituted for the original collateral or the collateral is sold, with the secured creditor's liens attaching to the proceeds. Therefore, in addition to the ultimate issue of ownership of the asset in question, much depends on a transaction's characterization as a lease or a secured financing. How to make that determination given the absence of any concrete guidance under the Bankruptcy Code was the subject of the Seventh Circuit's ruling in United Airlines. United Airlines Prior to filing for chapter 11 protection in 2002, United Airlines entered into a series of transactions to fund the improvement of its facilities at four airports. One such lease arrangement involved public financing underwritten by the California Statewide Community Development Authority (the "Authority"). United has been the lessee since 1973 of a 128-acre maintenance base at San Francisco International Airport ("SFO"). The lease expires in 2013 unless the parties negotiate an extension. Rent depends on an independent party's estimate of the property's market value. In 1997, the Authority issued $155 million in bonds to finance improvements to United's SFO facilities (other than the maintenance base). The bonds are without recourse to the Authority and are guaranteed by United. United subleases 20 acres of the 128-acre maintenance base to the Authority for 36 years — the term matches the bond repayment schedule rather than United's lease with SFO. The Authority paid $1 to sublet the premises. The Authority leases the 20 acres back to United for rent equal to interest on the bonds plus an administrative fee. This lease has a $155 million balloon payment in 2033 to retire the principal. United may postpone final payment until 2038; if it does, the sublease also is extended. United is entitled to prepay, in which case the sublease and leaseback terminate. If United does not pay as agreed, the Authority can evict it from the 20 acres. The leaseback includes a "hell or high water" clause requiring United to pay the rent even if its lease from the SFO ends before 2033, the property is flooded, or some other physical or legal event deprives United of the use or economic benefit of the maintenance base. After filing for chapter 11, United took the position that none of the arrangements at the four airports in question is a "lease" for purposes of section 365 of the Bankruptcy Code. Instead, United sought a declaratory judgment that each transaction involves secured financing and that United should have the right to continue using the airport facilities while paying only a portion of the promised "rent." The bankruptcy court ruled that the arrangement at one of the airports is a true lease, but that the other three transactions (including the SFO arrangement) are not. The district court reversed those rulings in part on appeal, holding that all four transactions involved true leases rather than secured financings. United appealed to the Seventh Circuit. The Seventh Circuit's Ruling The Seventh Circuit joined all the other circuit courts of appeal that have considered this issue, ruling that substance rules over form and that only a "true lease" qualifies as a "lease" under section 365 of the Bankruptcy Code. In reaching this conclusion, the Court of Appeals considered the practical meaning of the Bankruptcy Code, the Uniform Commercial Code (the "UCC") and the historical context of the Bankruptcy Code's enactment, including the statute's legislative history. According to the Seventh Circuit, it "is unlikely that the [Bankruptcy] Code makes big economic effects turn on the parties' choice of language rather than the substance of their transaction," because to do so would allow the drafters of contracts to obliterate the distinction between the two types of transactions through creative drafting. This is consistent with the UCC, which, unlike the Bankruptcy Code, contains a detailed description of the distinction between a lease and a security interest, emphasizing that "[w]hether a transaction creates a lease or a security interest is determined by the facts of each case." The Court of Appeals went on to explain that a lease in which "current consumption" (i.e., lease payments at market rates for continued use of an asset) dominates is often called a "true lease," while one in which the asset serves as security for an extension of credit is treated as a security agreement governed by the UCC. Finally, the Court of Appeals observed, the legal community of the 1970s understood that the distinction between leases and security agreements was based on substance rather than form, and looked to the relevant legislative history from the adoption of the Bankruptcy Code, which explains, in relevant part: Whether a "lease" is [a] true or bona fide lease or, in the alternative, a financing "lease" or a lease intended as security, depends upon the circumstances of each case. The distinction between a true lease and a financing transaction is based upon the economic substance of the transaction and not, for example, upon the locus of title, the form of the transaction or the fact that the transaction is denominated as a "lease." Thus, the Seventh Circuit concluded that substance, rather than form, should be considered in determining whether a transaction is a "true lease" or a disguised secured financing for purposes of section 365 of the Bankruptcy Code. The Court of Appeals then examined which law should apply to divine the true nature of any given transaction. Explaining that "nothing in the Bankruptcy Code says which economic features of a transaction have what consequences," the Seventh Circuit concluded that state law is determinative on this issue — in this case California law. California, the Court of Appeals observed, has adopted a functional approach to the question in both the UCC and the common law governing real property transactions. It went on to discuss California court rulings examining various features of lease and financing transactions. The Seventh Circuit ultimately determined that the transaction between United and the Authority was not a "true lease" under California law for the following reasons: (i) the "rent" was not measured by the market value of the property; (ii) at the conclusion of the lease, the Authority had no residual interest; (iii) the balloon payment had no counterpart in a true lease, but was a common feature of a secured financing; and (iv) upon prepayment, the lease and sublease terminated immediately, whereas in a true lease, prepayment secures the tenant's right to use the property for the term of the tenancy. Based upon this conclusion, the Court of Appeals reversed the district court's decision and remanded the case for further proceedings. Analysis The Seventh Circuit's ruling in United Airlines does not represent a departure from the approach employed by most courts, including every circuit court of appeals to consider the issue, in determining what kind of transactions qualify as "leases" under the Bankruptcy Code. Even so, it illustrates the difficulties associated with sorting out the true nature of complicated lease and financing transactions by examining the substance of a transaction rather than the labels that have been attached to it by the parties. In almost all cases, such an inquiry demands painstaking analysis of a laundry list of factors under applicable non-bankruptcy law that have been deemed emblematic of leases, on the one hand, and financing arrangements, on the other. This analysis will only become more difficult as commercial transactions become more complex and exhibit hybrid characteristics that are not readily pigeon-holed in one category or the other. United Airlines, Inc. v. HSBC Bank USA, N.A., 416 F.3d 609 (7th Cir. 2005).
### Press Release ########################### JDR Solutions appoints Zeppenfeld Director-Business Development
JDR Solutions President and CEO John Schaffner announced today that Alan J. Zeppenfeld has been appointed Director - Business Development and Asset Management for JDR's Financial Outsourcing Services. According to Schaffner, "the addition of Alan Zeppenfeld to our senior staff will enable us to accelerate our development and marketing of lease and loan outsourcing services and expand our asset management functions". Zeppenfeld has extensive experience in lease operations, program development and asset management. He developed the lease administration outsourcing business for Xerox Administrative Services and was Director of Asset Management at Lanier Worldwide. JDR Solutions was established in 2001 in Indianapolis, IN as an outsourcing provider for lease/loan back-office administration and accounting applications. Customers include major banks and equipment manufacturers. JDR has a preferred partner relationship with leading leasing industry software provider International Decision Systems (IDS). Further information is available at www.jdrsol.com ### Press Release ###########################
News Briefs---- A Record Snow: 26.9 Inches Fall in New York City Healthy Economic Growth Predicted The government is on the verge of one of the biggest oil and gas giveaways in U.S. history, some $7 billion over five years. American Resigns as Chinese Bank President Economic outlook for China remains benign: World Bank Georgia dog wins Westminster working group Meet a Westminster judge The guys behind MySpace.com MySpace is a suddenly popular website that surpassed the traffic of eBay and Amazon.com based on the number of pages viewed by users.Don't think of MySpace as a Web page, though. It's a universe of hundreds of thousands of personal Web pages created by its users. Users can design their My Space pages any way they want, kind of the same way high schoolers decorate the insides of their lockers. MySpace pages can be adorned with digital photos of their owners or things they think are cool. Users can also list interests, which usually include their favorite bands. http://www.usatoday.com/money/companies/management/2006-02-12-myspace-usat_x.htm ---------------------------------------------------------------
You May Have Missed These allegedly are all the cartoons that have caused the rioting and destruction by Muslim protestors: http://www.humaneventsonline.com/sarticle.php?id=12146 ----------------------------------------------------------------
“Gimme that Wine” California Huge crop is mixed bag for wine industry http://www.recordnet.com/apps/pbcs.dll/article?AID=/20060211/MONEY/602110307/1003 San Francisco Chronicle Editorial on Zinfindel as State Wine The Scientific why behind a wine's bouquet Despite Napa battle over what's in a bottle, Sonoma County vintners remain immune to branding controversy Malbec from France and Argentina---Eric Asimov If you want to know if you got a value for your wine, or what the wine price is today, go to www.winezap.com Type in the vintage (year) and name of the producer with wine type or geographic area, such as 1995 Chateau Lynch Bages Pauillac. Even 1995 Lynch Bages will work, or 1999 Viader ----------------------------------------------------------------
Calendar Events This Day Heart To Heart Day Hug Day Clean Out Your Computer Day Have A Heart Day The goal of this celebration of life is to create a new consciousness concerning the impact of our food choices on the environment, world hunger, animal welfare and human health—especially heart health. A vegetarian lifestyle increases longevity and helps prevent—and even reverse—heart disease. Vegetarians live about 15 years longer than non-vegetarians and they suffer less than one-tenth the heart disease death rate of non-vegetarians . ----------------------------------------------------------------
Today's Top Event in History Valentine's Day in America http://memory.loc.gov/ammem/today/feb14.html ----------------------------------------------------------------
This Day in American History 1760- Birthday of Richard Allen, the first black ordained in the Methodist Episcopal Church (1799), and founder of the African Methodist Episcopal (AME) Church in 1816, was born in slavery in Philadelphia. ---------------------------------------------------------------- Valentine Day Poem The Passionate Shepherd to His Love Christopher Marlowe (the original version in olde English) COME live with me and be my Love, There will we sit upon the rocks There will I make thee beds of roses A gown made of the finest wool A belt of straw and ivy buds Thy silver dishes for thy meat The shepherd swains shall dance and sing
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