Monday, June 21, 2010
Shawn Giffin falls from Building
Shawn Giffin falls from building
1993-Balboa Capital Corporation, VP Finance Shawn Giffin, CLP (left) congratulates
Shawn Giffin, 45, co-founder and former CEO of Balboa Capital Corporation, Irvine, California, fell to his death from the upper level of a five story Irvine parking structure. Orange County Coroners said he died from injuries suffered and labeled it a suicide on Saturday, releasing his name, stating there was no foul play. Reportedly a witness saw him park his car and jump from the building.
"I am deeply saddened by the untimely death," Pat Byrne, told Leasing News. "He was an amazing person. His strong intellect, quick wit, and his ability to connect with all types of people made him many friends and these same qualities attracted me to him as a business partner. He was instrumental in pioneering the direct to the end user leasing model in the small ticket marketplace that is so prevalent today.
“I have many fine memories of building Balboa Capital with Shawn. While I mourn his passing I feel fortunate to have known him and I am extremely grateful for his numerous contributions to Balboa Capital.
“My condolences and prayers go out to his family. May he rest in peace."
Other emailed condolences to Leasing News, expressing sorry for he and his family.
Several close friends told Leasing News Shawn was depressed about financial problems.
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US Bank Manifest Changes---Up-Date
It is not Bob Dole but Robert "Bob" Doyle, Senior Vice President Capital Markets, who is rumored to have taken over the "broker division" or what is labeled by their web site as “Manifest Funding--- www.manfestfunding.com).
Several calls Friday morning from US Bancorp "officers" basically said the story was "inaccurate;" and to learn what was really happening, speak with the US Bank media representative. No calls were returned, but in the afternoon more confirmation from brokers who were told they were “cut off” by Manifest, primarily because the new policy required a very high annual volume. One well-established discounter who many readers would know by name, said they did several million dollars a year with Manifest, but it was not enough).
Several gave dollar minimums, but without confirmation, would prefer not to state. It also may have been different with different brokers. Not knowing the other side of the conversation, cannot qualify the dollar amounts. However, all were told Manifest was going to emphasis their vendor business, cutting back on employees; many are being paid through August (or at work until the end of August, depends, no official word to date).
Some of this may appear confusing as US Bancorp Manifest is not located in one geographic area and has several "departments" or "divisions."
The numbers heard are more rumor than fact, but it is said that "broker division" was being cut to the top 50, who were representing 75% of their volume.
In the "Funder/Superbroker Looking for New Broker Business" this is what was submitted by US Bank:
“US Bank Manifest Funding Services
It should be noted that some of these being retained or cut off are also other leasing companies and including in the “top 50.” Just as in the story about LEAF sending leases to Financial Pacific, many were also sending to Manifest, too. As Paul Menzel, CLP, president of Financial Pacific noted in the story:
"We do business with third party originators all over the country. That may include all types and sizes of operations, including small brokers, independent leasing companies, captives, and banks. LEAF submits applications under the same program and pricing as our other Third Party Originators.
"It is not unusual for them to be selling assets to FinPac as a way to manage portfolio risk. FinPac has a unique niche in the credit funding spectrum and understands how to evaluate and manage higher risks. Many of our clients just do not want to hold those deals in their own portfolio. What LEAF is doing goes on everyday by sophisticated and sound lenders all over the world. It is just good risk management."
Many leasing companies have been doing this for years, including banks, other funders, and for many reasons from having extended too much credit or having too much of the same equipment or the customer wants 60 month terms and the funder only wants to grant 36 or they don't like the equipment.
Leasing News has noted U.S. Bancorp Chairman, President and Chief Executive Officer Richard K. Davis' leadership as well as backing from the board of directors has lead to expansion of the bank as well as stability and his famous quote, "We want to make all the good loans we can at US Bank," no sarcasm here as the time he made the statement banks were being accused of not making any loans at all. He wanted stockholders, bank customers, and potential bank customers to know US Bancorp was not backing away from the marketplace, and at the same time, were making internal changes. (1)
These changes coming to light today actually started with the position of the Portland finance office getting out of the middle market broker business. Earlier, exactly May 13, 2009 Leasing News noted: "Michael J. Rizzo, President & CEO, Business Equipment Finance Group, executive vice president at U.S. Bank, was recently let go by management. March 20, 2009 he told Leasing News he was no longer in charge of the U.S. Bancorp Business Equipment Finance Group). He said Dave Verkinderen is the General Manager of that division. Adrian Hebig is the Chief Operations Officer. Both are considered peers.
"He was given other bank assignments, and in the realignment, a position was not available, Leasing News was told. It was not a performance issue of US Bank Manifest, which reportedly has higher delinquencies and problems than before.
"Cindy Fleck recently left to join MCA Relationship Manager for Channel Partners under her old boss Brad Peterson."
President and CEO of U.S. Bancorp Equipment Finance is still Sal Maglietta. This was originally the Oliver-Allen operation, one of the first companies to specialize in IT: leasing equipment for computer systems, networking, communications, PC connectivity, primarily to middle market clients. They were sold in March, 2000 to US Bancorp."
There were other changes, but not confirmed so will not be noted here.
Others commented to Leasing News, "We knew this was just a matter of time with the way US Bank was allowing Manifest to operate." In actuality, US Bancorp Manifest has been slow in this trend which perhaps started with GE Capital, as well as CIT, Key Equipment Finance, and even LEAF Specialty cutting back and then off as well as others such as Balboa Capital, Direct Capital, Marlin Business Services, Evans, not to mention the companies that got completely out of leasing, such as Pentech that had a special relationship with one of their divisions taking Manifest "turn downs."
While it is true banks are protecting their capital, being perhaps “forced” or “taking advantage” of purchase of smaller banks and branches, there is a paradigm change facing the leasing industry.
What is happening at this time is FASB moving into putting all leases on balance sheets with residuals noted. Many are ignoring this "time bomb" and do not realize it will not only affect larger ticket leasing more than anything else, but other markets, too, including middle-market, and yes, the small ticket marketplace. It will also get banks more out of leasing and therefore lines of credit, warehouse leasing, and perhaps availability for small ticket financing---turning leasing more into "finance." Make deals more "rate conscious".
The trend has been to more "finance" as noted by associations using it in their title (one is now the National Equipment Financing Association" and the Equipment Leasing Association is now the Equipment Finance and Leasing Associations.
There are also changes in the captive lessor marketplace as well as the franchise industry now starting to do their own financing as a "captive lessor." The private label program first jumped to larger vendor operations and has moved to other marketplaces.
In the past, when leasing companies have raised criteria, gotten out of programs, new ones were born as the "C" and "D" marketplace always exists, and even "A" and "B" have small ticket leasing needs that at one time Bank of America or Wells Fargo would jump at, but today much too small for their larger operation, even in the day of computers and wireless communication abilities. What then are being left are many “risky credits” and yields will determine as the more margin in a transaction, the more the risk can be increased (That has not changed nor has “the person with the gold makes the rules.)
(1) US Bancorp 1st Quarter—A Winner
(2) Leasing Companies Out of Broker/Discounting Business
#### Press Release ##############################
Financial Pacific Leasing Announces VendorFlex Program
FinPac has established a new program to help its third party originators (TPOs) to maximize the approval rates for their equipment vendor clients in the small ticket segment. VendorFlex customizes vendor programs with structure, automated processing, branding and pricing that supports "B & C" credit risk lessees in need of productive equipment.
Terey Jennings, CLP, SVP-Business Development, reports that "Approval percentages on vendor programs have dropped substantially in the past two years. Equipment vendors are losing valuable sales opportunities when they now need them the most and it is straining the lessor-vendor relationship. VendorFlex fills in behind other funding sources to widen the credit window and support our TPO's vendor client relationship."
Financial Pacific Leasing was founded in 1975, having always specialized in the second tier credit niche. FinPac is able to serve their unique profile of client by accessing the broader small ticket market through third party originators across the U.S. Their TPO relationships date back over twenty years and comprise of brokers/lessors who serve direct customers and equipment vendors.
Terey Jennings, CLP
### Press Release ###############################
Leasing Industry Help Wanted
Please see our Job Wanted section for possible new employees.
Alert: Trinity Back at It
Whoever came up with the old saying “You can’t teach an old dog new tricks” never met Lee Goff. Lee is the owner of Trinity Corporate Solutions formerly of Farmersville, Texas. Trinity is one of the vendors featured in my article ANATOMY OF A FRAUD which appeared in a December 2007 issue of Leasing News, While the other two vendors mentioned in that article have disappeared, Lee however, changed addresses two times and company name three times. At present his company is located in Sachse, Texas and is again producing troublesome leases for our industry. If you are looking for the personification of sleazy operator, this guy is it. Don’t take my word for it, just look him up on RipoffReport.Com:
“Lee Goff, under any of his corporate entities such as Trinity Corporate Leasing, Your Credit Desk, Group Four Investment, and several others is a classic con-artist. Regardless of what corporate entity he is fronting at the time, he professes himself to be a humble servant of God……Here is how his best known scam works. He represents himself initially as a leasing company, sometimes a leasing broker and works for you, the client, to get your purchased financed. At the same time he is working with by our vendor, advising them that he has you financed and promising that payment for whatever you purchased will be transferred as soon as the transaction closes” (Excerpt from RipOff.com - http://www.ripoffreport.com/loans/lee-goff/lee-goff-yourcreditdesk-com-a6f2c.htm)
In every case, he starts dealing with the customer as a broker/finance consultant, but he then changes the transaction format whereby he is the vendor and removes the real vendors from the transaction. He promises the real vendors payment, and upon funding he retains the full invoice money and never in turn pays the real vendors for the equipment delivered. Eventually the customer is sued by the real vendors who actually delivered equipment as well as the funding companies. It is a double whammy to the lessee. Another source verifying his modus operandi is Complaintsboard.Com:
“Selling leases on equipment he doesn't own title to, Lee Goff and his many corporate fronts have a long and well established record of ripping companies off. These victimized companies are left owing leasing companies hundreds of thousands of dollars while their debts to their vendors are never paid, leaving them on the hook”. (Excerpt from Complaintboard.com - http://www.complaintsboard.com/?search=TRINITY+CORPORATE+SOLUTIONS&everything=Everything)
Now Goff has a new trick. His new scheme starts with the lessee as he poses as a leasing broker. However his company, Trinity Corporate Solutions lists itself as a vendor. He seems to prefer lessees who need new phone systems preferably using mid-sized vendors. He takes the vendor’s invoice and puts a mark-up on top of that and tries to get his company approved as a vendor. If the funder does not find him as an acceptable vendor, he offers the original vendor as his supplier but then presents his invoice as the installer. Lee Goff used this trick on one of our Subscriber last November but was caught “red-handed” when the original vendor said they were installing the equipment. I guess he thought that he could pull the same trick this month to another one of Lease Police Subscribers. He was caught again! We are not talking small-ticket leases anymore as many of the leases are six figure transactions.
I don’t know what his next trick will be. Will he present himself as a leasing broker, vendor or manufacturer? Will he change names and addresses and start again? That is almost a certainty! He frequently passes himself off as a business partner of IBM, Lenovo, CDW and others so beware and don’t be the victim of this OLD DOG’S NEW TRICKS. At LeasePolice.com we track hundreds of scoundrels just like this and our contacts and informants in the field keep us ahead of their activities. Do not get fleeced when the real price to eliminate losses from them is very cheap and readily available.
Anatomy of a Fraud, a short story
((Please Click on Bulletin Board to learn more information))
Top Stories --- June 14-June 18
Here are the top ten stories opened by readers:
(1) US Bancorp Manifest---Changes going on
(2) Leasing 102 by Mr. Terry Winders, CLP
(3) Archives, June 14, 2002 Frechette
(4) Chesapeake Industrial Leasing joins
(5) Bulletin Board Complaint
(6) Ex-con Gary Growden returns to leasing after prison
(7) LEAF Ratings with FITCH and others, including landlord
(8) Super “Broker/Lessor” List
(9) Winthrop Resources/Direct Capital Win Awards
(Tie)(10) 4 factors to consider in car leasing
(Tie)(10) Equipment company officer lists Tiburon 6BD for $5.995M
Tax Depreciation for Leases to Municipal or 501C (not-for-profit)
Depreciation for Federal Income Tax is called “Capital Recovery”, and for GAAP accounting, it is called “the amortization of an expense”. Capital Recovery benefits are only allowed for Lessor’s if they follow the rules, and have a “true lease,” and the lease term is 80% or less of the equipments useful life.
Back in the Thirties the Government recognized that assets depreciate faster in the beginning than they do later on, so ADR depreciation was established as an accelerated form of depreciation with many classifications. In 1991 the Economic Recovery Tax Act established ACRS depreciation which decreased the categories of equipment and increased the acceleration. In 1986 they “modified” ACRS and it became MACRS to slow down the acceleration and the introduction of the Alternative Minimum Tax (AMT) reduced it even more for those required to pay income tax under the AMT.
The tax reform act of 1984 was the first time a reduction in accelerated depreciation benefits were required for leases to a U.S. State or Municipal Government or a not-for-profit entity (501C). Straight line depreciation is all that lessor’s are allowed to take because the “use” of the equipment is in a Lessee organized not to make a profit. The 1984 Act requires the Lessor to take straight line depreciation over the greater of the property’s ADR Class life, or 125% of the lease term. Even though the lessor’s income is taxed in a 501-C and is tax free in a Municipal it is the “use” that dictates the right to take capital recovery benefits not ownership. Capital recovery allows the tax payer to recover the equipments Capital cost over time prior to paying taxes on taxable income.
There are exceptions for short term leases (under three years and the lease term must be lower that 30% of the ADR class life). The class life for computers is Asset class 00.12 with a class life of 6 years, so to quality under 30% the ADR term the lease needs to be less than 21.5 months. Also there are some exceptions for high tech short term assets. A complete review of the qualified high tech assets is required to determine if your high tech asset qualifies.
Municipal lease income is tax free which eliminates the need to take capital depreciation provided the municipal entity has taxing authority and the lease payments are paid from tax revenues. In addition the equipment must be “essential use property” and there “must” be a bargain purchase option or an automatic title transfer. Also leasing generally is paid from the annual budget and requires a non-appropriation clause that allows the municipality to return the equipment if no funds are ear marked for that equipment in the next year’s budget.
It is wise to include a provision in the municipal lease that provides that if the non-appropriation clause is used that the municipality may not replace the equipment with any other equipment or “service” that provides the same benefit that our equipment provided for the balance of the lease term. Many leasing companies have lost, just using the equipment replacement language, as outside contractors take over the task making the equipment obsolete.
Tax free income is attractive so long as you have some taxable income. Without taxable income tax free income is less desirable than taxable income that is sheltered from other activities. Also there is a restriction on bank funding of municipals because they are restricted from taking the interest cost to fund the transaction from other taxable income making them less competitive that non-bank funding.
A lease to a non-profit that is a true lease for Article 2A puts the Lessor in the spot of paying taxes on the revenue stream, just like a standard tax lease, but having to straight line the capital depreciation, there by raising the tax effect and raising the lessee’s payment. Many Lessor’s must chose to take the credit risk and price a bargain option lease with a non-profit or price the additional income tax into the deal to qualify as a true lease to get an Article 2A lease instead of a Article 9 disguised lease.
Tax depreciation is a benefit or a curse depending on the nature of the transaction. Make sure you check with your tax preparer before entering into these type of deals and make sure your pricing is correct taking into account the correct impact.
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty years and can be reached at email@example.com or 502-327-8666.
He invites your questions and queries.
Previous #102 Columns:
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Bank Beat---Umpqua Acquires More Branches
Nevada Security Bank, Reno, Nevada, (also known as Silverado Bank, Roseville, CA) was closed Friday by the Nevada Financial Institutions Division with Umpqua Bank, Roseburg, Oregon, to assume all of the deposits. Umpqua acquired Rainier Pacific Bank of Tacoma, Washington, and Seattle-based Evergreen Bank earlier this year. In 2009, it purchased the failed Bank of Clark County in Vancouver, Washington.
Five branches The bank was established in December 27, 2001 and had one office in Roseville, California (Placer County), four in Reno and one in Incline Village. They had gone from 90 full time employees March 31, 2009 to 78 by March 32, 2009.
The Bank had received a serious FDIC Cease and Desist order June of last year.
Equity had dropped from $53.7 million the previous time period to $12 million while non-current loans rose from $24.9 million to $51.7 million, from a $1 million profit to a $1 million loss after charge offs of $2 million ($1.55 million construction and land development, $267,000 secured by 1-4 family residential property, and $185,000 commercial and industrial loans). Tier 1 risk-based capital ratio 2.85%.
As of March 31, 2010, Nevada Security Bank had approximately $480.3 million in total assets and $479.8 million in total deposits. The FDIC and Umpqua Bank entered into a loss-share transaction on $368.2 million of Nevada Security Bank's assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $80.9 million.
List of Bank Failures
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Today in History
1964- James Chaney, Andrew Goodman and Michael Schwerner left Meridian, MS, at 9AM to investigate a church burning at Philadelphia, MS. They were expected back by 4 PM. When they failed to return, a search was begun. Their murdered bodies were found on Aug 4.
This Day in American History
1731-the birthday of the “first lady,” Martha Dandridge Custis Washington, wife of George Washington, first president of the US. born at New Kent County, VA. Died at Mount Vernon, VA, May 22,1802.
NBA Finals Champions for this Day
1988 Los Angeles Lakers
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