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Monday, June 3, 2013
Today's Equipment Leasing Headlines
Popular Bank to Remain in Commercial US Mainland Market
You May have Missed---
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Popular Bank to Remain in Commercial US Mainland Market
"Popular Community Bank (PCB), remains committed to enabling commercial lending and has materially further enhanced its capabilities through the addition of several new highly experienced commercial banker," a spokesperson for the bank told Leasing News.
"While PCB continuously evaluates its diverse lines of business and product offerings, it was ultimately determined that reengagement in the equipment leasing business was not in line with the bank’s immediate strategic objectives. This could change in the future."
"PCB’s commitment to its customers and communities that we serve has never been stronger, as we continue to provide a broad array of loans and banking services throughout our geographic footprint - 93 branches in five states (CA, NY, NJ, IL and FL).
"Mr. Richard Carrión will continue to serve as the President, Chief Executive Officer and Chairman of the Board of Directors of Popular, Inc. In the event that Mr. Carrión is elected IOC President, he will remain with the Company as Board Chairman and the Board of Directors will appoint a new President and Chief Executive Officer.
“Popular, Inc.’s Board fully supports his endeavor. Mr. Carrión has led the growth and development of Popular, Inc. for more than 30 years. At the same time, he has been a member of the IOC since 1990 and has played key roles at the organization during his time there.
"Furthermore, PCB has been in the U.S. mainland for over 50 years. There has been no announcement made that discusses an exit. PCB continues to invest in its communities, renovating branches, hiring, introducing new services - including mobile banking for businesses and consumers. The bank also invested in a rebranding initiative to continue to attract clients."
"For more facts on Popular’s corporate strategy, (information presented on Investor Day from Q1 2013) it can be found here: https://www.popularcommunitybank.com/us/presentations-webcasts
(These ads are “free” to those seeking employment
Long Grove, Illinois
Financial services professional with a proven track record of positively impacting corporate finances through effective management of cash flow, collections and financial assets. Strategic thinker capable of analyzing financial issues and processes in order to implement changes that improve efficiency and profit margins. Well-versed in all aspects of corporate financial affairs. firstname.lastname@example.org | Resume
Free Posting for those seeking employment in Leasing:
All “free” categories “job wanted” ads:
Lease Police Alerts
Lease Police has been reporting on and following a vendor using several company names, acquiring other company names, credit, and identities, for sale/leaseback and no equipment alleged scams. Names included in the indictment, several noted by Lease Police:
"Between and including February 4, 2011 and April 11, 2012, in the State of Colorado, John Parks unlawfully, feloniously, and knowingly acquired or maintained, directly or indirectly, an interest in or control of an enterprise, namely: Prime Holdings LLC; Global Off Road Engineering, LLC; R&R Global Ventures, LLC; Practice Management Technology Consulting, LLC; Rise Asset Development, LLC; Energy Management Strategies, LLC; Global Alliance Technology Centers, LLC; Asset Management Association, LLC; Astan Energy Solutions, Inc.; Business Management Services, LLC; Managing Global Development Risk, LLC; and/or Human Resource Management Group, LLC, through a pattern of racketeering activity; in violation of section 18-17-104(2), C.R.S...(1)
"Between May 17, 2011 and April 11, 2012, John Parks unlawfully acquired businesses by submitting false documents to the Colorado Secretary of State's office using a computer. False documents dated back to February 4, 2011 were also submitted to Dun and Bradstreet to increase the creditworthiness of the unlawfully acquired businesses. The falsified documents unlawfully used people's personal information without authority, and misstated corporate size and value." (1)
Lease Police President Bernie Boettigheimer, CLP, has been in contact with Ralph A. Gagliardi, CFE, Agent-in-Charge, Identity Theft & Mortgage Fraud Units, Colorado Bureau of Investigation, telling Leasing News:
"Here we have a smart Colorado State Agency which has the 'goods' on a number of firms in other states such as Database Developers, Inc. but was forced to confine their aim on crimes associated or incurred in Colorado. I know that one Funder has over $400,000 on one broker’s input and by the time we are through with other funders and the remaining 49 states the final figure could be $3- $4 Million dollars”.
The attached indictment shows two cases with Marlin Business Bank where they allegedly leases high end technology equipment which was of poor grade and reportedly made off with $32,226 on this one scheme.
Daryl Honowitz, 41, operated a business named Database Developers, Inc. which manufactured computers and provided computer equipment to John Parks, 36. John Parks set up a lease for computer equipment using one or more unlawfully acquired businesses. The computers that Database Developers, Inc. produced and provided were allegedly misrepresented to the financial lender(s) in order to defraud the creditor(s) and acquire money well in excess of the equipment’s value. Daryl Honowitz and John Parks ultimately kept money that was loaned for the computer equipment, and let the loan(s) go into default, according to the indictment.(1)
John Parks and Daryl Honowitz were indicted by a Colorado grand jury May 23rd and arrested in their Florida homes to be extradited back to Colorado. Parks is accused of submitting false documents to the secretary of state's office to acquire 12 businesses.
Their indictment was based on an 18-month investigation conducted by the Colorado Bureau of Investigation and the offices of the Colorado attorney general and secretary of state.
(Leasing News provides this ad “gratis” as a means
June Update --Leasing Schemes’ Court Cases
(Leasing News provides this ad as a trade for investigations
HL Leasing, Fresno, Palm Desert, California
John Otto, the alleged perpetrator of the Ponzi scheme, where money was lent by investors for a rate of return for leases that did not exist, committed suicide. Corporate officers were taken to a class action suit in Fresno where a jury ruled for a judgment against Heritage Leasing, MAC dba Heritage Leasing, Kathleen Otto (wife of John where bookkeeping was maintained at their house in Palm Desert (and Air Fred (small airline where they leased planes) for $114.5 million, plus $46.5 million against both Dan Ramirez and Andy Fernandez; $720,000 on top of that against Dan Ramirez.
Ara Jabagchourian and Aron K. Liang of Cotchett, Pitre & McCarthy, LLP and Donald Fischbach of Dowling, Aaron & Keeler, Inc. began search for the assets. At this time Appellate briefs have been filed for Kathleen Otto's case. Ramirez has not his brief yet. He has "sold" his home to his wife even though Cotchett, Pitre & McCarthy had a lien on it. Kathleen Otto has sold her vehicles and transferred real estate before she filed personal bankruptcy.
Leasing News continues to receive emails from victims who lost retirement, savings for college for their kids, their life savings, as well as were forced to seriously downsize their lifestyle.
IFC Credit--Rudy Trebels
There are six court cases open regarding Rudy Trebels and IFC Credit Corporation. Readers tell me he is still playing golf in Florida, as well as vendors and lessees email Leasing News asking about doing business with him, finding stories written about him in the internet.
An Omnibus Claims Objection Procedure was made on May 23, 2013 for the Chapter 7 Bankruptcy of IFC Credit Corporation field on July 27, 2009, seeking all claims:
"Upon the Motion ('Motion') of David P. Leibowitz ('Trustee'), chapter 7 trustee for the estate of IFC Credit Corporation ('Debtor') and the following substantively consolidated entities: (a) Augusta Mill Acquisition LLC; (b) Augusta Real Estate Owner, LLC; (c) First Portland Corporation; (d) FP Holdings, Inc.; (e) FPC Leasing, LLC; (f) IFC Capital Funding III, LLC; (g) IFC Capital Funding VII, LLC; and (h) Pioneer Capital Corporation of Texas (collectively, the "SubCon Entities"), for an order establishing omnibus claims procedures, after due and proper notice, for cause shown, and statements made on the record, the Court being advised in the premises of the Motion..."
In the only civil case, brought by CoActiv Capital Partners on September 30, 2009, suit is for over $2 million against IFC Credit Corporation, Morton Grove, Illinois, one of their funding groups, and the two main principals, claiming the officers committed fraud as individuals, specifically not paying off leases when the lessee terminated early, and knowing that the company was "essential insolvent" for almost a year. Since Element Financial has purchased CoActive Capital Partners where this will remain in the bankruptcy court is not known.
Omnibus Claims Objection Procedure:
Rudy Trebels Saga
The Aberdeen Kid Yahoo blog has diminished.
No change since filing of bankruptcy and no information on case in Lake Charles, Louisiana regarding Thomas N. Salzano, the mastermind behind the 10,629 leases with over 50 bank and leasing companies. It keeps being postponed.
Operation Lease Fleece--Sentencing
Mark McQuitty of CapitalWerks was sentenced for 24 months starting 12 noon, March 21, 2013, plus three years’ probation and other stipulations (1). He was given a Greyhound bus ticket and took a ride with other "low risk" prisoners to Reeves II Federal Penitentiary, Pecos, Texas.
Prison records show McQuitty as inmate 45507-112 51-White-M to get out 12-15-2014 (Could not find a “mugshot.”) Reportedly 47.2% is drug relational, and they have an excellent 18month alcohol and drug rehabilitation program.
McQuitty blamed his problems on alcohol, he had four DUI's, and reportedly was anxious to get on first both with the sentencing after pleading and then anxious to start serving his time so he could get out.
ISystems President Chant Vartanian signed a plea agreement with the United States Attorney's Office for the Central District of California, represented by Jennifer L. Waier, Assistant Attorney General, who has been the lead on all the "Fleece" cases. He was sentenced to one day and served his time, now out of jail:
"JUDGMENT AND COMMITMENT by Judge Cormac J. Carney as to Defendant Chant Vartanian (1), Count(s) 1, Committed on Count 1 of the 3-Count Indictment to the custody of the Bureau of Prisons to be imprisoned for a term of 1 day, which the Court deems has been served in full. Pay $100 special assessment. Pay total fine of $6,000. 3 years supervised release under terms and conditions of US Probation Office and General Orders 05-02 and 01-05. Count(s) 2, 3, Government's motion, all remaining counts ordered dismissed. (mt) (Entered: 10/17/2012)" (2)
Sarkus Vartanian, vice-president of ISystems Technology and Solutions, brother of Chant indictment was dismissed without prejudice. Reportedly he told assistant US Deputy Attorney Jennifer L. Waier he had cancer (it was never verified, according to court records and attorneys involved).
It seems after the original plea agreements, the next series fought a plea agreement, several wanting jury trials, as does the one waiting now:
Ziya Arik, CapitalWerks/Preferred Lease, sentencing before Judge Cormac J. Carney was continued again to October 1, 2013 for a trial. Reportedly one of the toughest salesmen who was rough on customers, competing with Brian Acosta, CLP, for accounts. There were many complaints about his “performance.”
It appears the “Orange County Weekly” blames U.S. District court Judge Cormac J. Carney “light sentencings.” (3)
In Operation Fleece the sentencing has been light, even for the two with the longest terms, Adam Zuckerman 37 months Jim Raeder 12 months half-way house, one day jail (equals time served). Michael Scott Grayson got one day of probation although stole $1 million, according to the Orange County Weekly.[**Note: Carney officially sentenced Grayson to one day in prison, and then immediately considered it served.] (3)
"Even Assistant United States Attorney Jennifer L. Waier--the prosecutor on Grayson's case and a person not known for advocating tough punishments if she can reach a quick plea bargain that saves her from trial work--argued in her sentencing brief that the interests of justice required that the businessman's huge theft demanded at least a "low end" guideline punishment of 30 months in a federal prison." (3)
In my experience, the judge usually goes with the recommendation of the prosecuting attorney, who in these cases seem to give up against those fighting the charge. According to various attorneys over the course of events, it is the dollar figure that also factors into the sentencing, and most important, the creditors, lessors, banks, financing companies never showed up in the sentencing. They did in the Zuckerman case as well as Raeder, who is still not popular in Colorado where he was living (many telephone calls to Leasing News from his "fans.")
The long waiting, evidently at the direction of Assistant United States Attorney Jennifer L. Waier may be considered a punishment, as they could not work in their profession (nor can they after being sentenced ever get involved in leasing, financing, or the like occupation) as well as those sentenced are all now felons---- and all on probation, most for three years.
In addition, in the “Operation Lease Fleece,” they did not have “victims,” but business owners who participated in the deception of “sales/leasebacks” and/or equipment that did not exist. In reality, they were part of the scam. Not complaining they were not named, due to all the work that would be involved, but the point is the victims were the funders stupid enough to deal with Mark McQuitty and Jim Raeder. But then, there are many like them that funders know about today that they still do business with…
Moreover, if the funders really were concerned, they would have gotten more involved in the cases, including sentencing, instead of just writing it off and going back to business (that’s my opinion.) It seems the almighty buck overrules doing business with people you should not be doing business with.
Leasing News will do a full wrap-up after the case is finalized, although the various sentences are in the collection.
Following the various “Operation Lease Fleece” cases since the beginning, more than any other news media, I give Judge Carney high marks for his patience, ethics, and skill in the entire proceedings.
Kit Menkin, editor/publisher
(1) McQuitty Other Stipulations:
(2) Vartanian Sentence
(3) OC Weekly Criticizes Judge Carney ocweekly.com/navelgazing/2013/04/michael_scott_grayson_verizon.php
Operation Lease Fleece Stories
Sheldon Player—Equipment Acquisition Resources
The Trustee continues to settle claims with the latest May 15, 2013 settlement for Nowlin Excavation to pay $4,000. The bankruptcy was filed 10/23/2009. Sheldon Player has not been arrested for fraud or any other charges. He reportedly has a lot of cash and continues gambling through beautiful escorts he takes to mostly riverboat gambling casinos.
Why he is not in jail, you got me
Creating a LinkedIn and Facebook page
Question: I am creating a LinkedIn Page and Facebook Page and I do not want to insinuate that I am looking for a new career opportunity. Do you have any suggestions?
Answer: There are “good,” “bad,” and “look out for” on social media sites.
These opinions vary, and it also depends on your purpose. Often these social media sites only allow one name, meaning is your intent personal or business? If your goal is to create a professional presence, be careful about what you share and post. If anyone has an existing pages scrub your page and get rid of any questionable posts or pictures. Be forewarned the first thing employers, or potential employers DO look at: your Facebook page, second other professional social media pages, first perhaps being LinkedIn. You can make you Facebook private to family and friends, and I suggest that, as well as test it from time to time by having the password not saved and logging in to Facebook under another email name. If you are using Facebook for “business,” good for you!
Employers and potential employers are aware that LinkedIn is utilized to generate sales leads, network with other like-minded professionals and keep abreast of industry trends. It is an excellent source to network. Many companies use also to contact those in the industry and try to lure them to work for them.
In developing your page, include the following:
Remember you are creating a social presence - one that, virtually, can be viewed globally!
Take the take to develop your page in the most professional manner possible.
The following information is from LinkedIn:
Career Crossroads Previous Columns
Cobra Capital Joins Funder, Story Credit,
A -Accepts Broker Business | B -Requires Broker be Licensed | C -Sub-Broker Program | D -"Private label Program" | E - Also "in house" salesmen
*Sub-Broker Program - yes, but only with full disclosure of all broker names
Minimum Lease Size: $50,000
Story Credit Lessors
Vendor Support Agreements
Usually when a vendor has a high margin and fells strongly about a poor credit risk they will offer recourse to encourage the lessor to fund the transaction. Recourse is a very complex issue and therefore requires proper documentation. There are many types of recourse such as; full recourse, limited recourse, dealer participating non-recourse, and rent to lease/own programs, and remarketing agreements.
Full recourse is a term that means the seller of the equipment guarantees the performance of the lessee, and if the lessee defaults, is prepared to cover the loss of the funding source. Full recourse allows some transactions that would normally be turned down to be acceptable, but the recourse document needs to be carefully drafted. The agreement must cover many points to establish where, and when, the responsibilities of both parties are effective. For instance, when does the vendor cover the loss, and most important how much? Is the recourse to cover all recovery costs or just the net present value of the unpaid lease payments? If late charges are unpaid are they included in the payoff? Who pays for the recovery costs and if a replevin action is necessary who pays the attorney and court costs. Plus who makes the decision on when to pull the plug? In addition, once the equipment is in the possession of the vendor, and it takes some time to remarket, is the balance paid to the lessor upon re-possession or after it is remarketed. If after remarketing, how long is the remarketing going to take and should a time frame be attached?
Good communication about the scope of the recourse is necessary to make sure both parties to the agreement are fully aware of what part each plays, and who has the power to make decisions.
The days of self-help repossession are long gone and it takes a replevin action to get the legal right to go after the equipment. Some States still allow self-help repossession but the risk it represents, if not done correctly, make it a very poor approach. If a Lessee voluntarily surrenders the equipment even then a legal statement, defining the lessee's request you take the equipment with acceptance of continuing responsibilities, needs to be signed to have the right to obtain recover a loss.
Collection costs have raised the bar on the value of recourse today, because if the lessee defaults, the expense of repossession and remarketing add so much to the balance that if it is done correctly, and explained completely, most vendors shy away from it. The equipment must carry a high resale value to make recourse work and a tight reign on delinquency is necessary to avoid letting time slip away. Done with poor documentation a disagreement will always arise with the vendor and it will destroy a good vendor relationship.
Recourse can work if the transaction is a direct finance lease for the lessor so the only consideration is the unpaid balance and the recover costs. If the transaction is a true lease with tax lease considerations then the payoff is larger and makes it almost impossible to come out clean if a default occurs. The best way to reduce the risk is with a security deposit or increased payments in the early years to reduce the balance as soon as possible.
Once in a while the vendor will offer “Limited Recourse” to cover the first two years, or one third of the lease term, to help the lessee prove his ability to pay the lease payments. This is a lessor decision but it still required that you properly document the agreement so if a default occurs, both parties understand their responsibility.
A popular recourse arrangement is one were the vendor receives a commission on each transaction but it is held in reserve against any losses. It is called a dealer participating non- recourse arrangement. A dollar amount, or a percentage of the outstanding portfolio, is assigned so that at the end of each year any funds in the account over the selected amount can be paid out to the vendor. The incentive to the vendor is that with few or no losses he gets the full commission. This puts the vendor in the decision tract on what limited credits are acceptable. If the losses are small then the reserve handles the loss and both the lessor and the vendor are covered. However, a proper document is required just like a full recourse agreement to establish timing and cost allocations.
Rent to lease/own programs place the vendors recourse on a short time frame and the lessee's payment on an elevated payment schedule to cover the risk. These are not done for poor credits but for startups and lessees with short histories. An example is to subtract the wholesale value of the equipment after six months of use from the selling cost. Then create a rent period for six months at a lease payment that will reduce the balance to the wholesale value. The vendor is on full recourse for the six months and then a non-recourse finance or lease program for a longer period of time is offered at a much lower payment amount. The theory is that if the lessee could make the higher payments for six months then the lower payments should be OK and by that time a good equity has been placed into the equipment lowering the risk to the lessor.
The last effort for support is to ask the vendor for remarketing. If they agree an agreement should be drafted to spell out all of the issues such as: commissions paid for the remarketing effort, time in inventory, get ready charges, insurance, advertising costs, and storage. If the commission is not at an equal par with those paid for normal inventory you can expect your equipment to be stored and probably take a very long term to sell.
Vendor support is a good program under the correct set of circumstances but should not be thought of as a way of shifting the burden of risk. Lessors are better equipped to make credit and equipment judgments and sometimes good intentions can lead to loss business because usually bad credits will mean a high degree of loss for someone--- and as my mentor in the business said: “Life is too short to do business with companies of low character.”
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty-five years and can be reached at WindersConsulting@yahoo.com or 502-649-0448
He invites your questions and queries.
Previous #102 Columns:
(This ad is a “trade” for the writing of this column. Opinions
Regional Banks Step in to Lend as Larger Banks Slide
(Edited for length)
Lending slid at most of the nation's largest banks, despite many of those institutions having room to grow loans and claims from smaller competitors that the mega-banks are driving pricing wars in bids to win new credits. Bank of America Corp., for example, saw annualized linked-quarter loan growth decline 3.75%, and Citigroup Inc. reported a 4.75% slide for the same period. Capital One Financial Corp. reported a more substantial slump of 15.72% in loan growth. Capital One CFO Gary Perlin attributed the quarterly decrease to seasonal factors during a May 22 investor presentation.
The greatest declines in the industry, though, occurred at some smaller institutions. Guaranty Financial MHC reported that loan growth fell 83.23% during the quarter. Flagstar Bancorp Inc. saw annualized linked-quarter loan decline of 79.09%. The company, which has struggled with capital and regulatory issues, recently installed a new CEO.
Some of the banks and thrifts with the highest capacity to lend grew loans aggressively during the first quarter.
Miami Lakes, Fla.-based BankUnited Inc. was the largest of institutions with the highest lending capacity, measured by loans as a percentage of assets, according to SNL data, although that may change quickly. The company, whose reported loans were 45.87% of its total assets, grew loans 19.55% during the quarter, compared to the fourth quarter of 2012. BankUnited Chairman, President and CEO John Kanas touted the success of the company's organic growth efforts during a Bloomberg TV interview and also said the company is poised to accelerate that growth now that it has entered the New York market. Kanas estimated that the company already had $200 million in its N.Y.-based loan pipeline after just six weeks of operation.
Kanas had previously said during the company's first-quarter earnings call that the company expects its four locations in New York to match the loan growth of its Florida branch network. "We will start to see tangible evidence of the growth of this franchise in New York by the end of this quarter, without fail," Kanas said during the call, adding "the prospects for growth of loan assets in Florida and New York are stronger than ever."
Another Fla.-based franchise, Bond Street Holdings Inc., was also able to make considerable use of its lending capacity, notching annualized quarter-over-quarter loan growth of 35.31%. The company, whose loans totaled 44.12% of its assets, has plenty of powder left to deploy. At the end of the quarter, the company reported that tangible common equity was 20.96% of tangible assets.
Atlanta-based CertusHoldings Inc.'s 59.32% loan growth was the highest among companies with the most capacity to lend. At the other end of the spectrum, Omaha, Neb.-based Lauritzen Corp. saw loans fall 20.25%, and Greenwood Village, Colo.-based National Bank Holdings Corp. reported a 16.09% drop in loan growth from the preceding quarter.
Wisconsin Banks Raise Capital, but one not enough
The two branches of Banks of Wisconsin, which did business as Bank of Kenosha, Kenosha, Wisconsin, were closed with North Shore Bank, FSB, Brookfield, Wisconsin, to assume all of the deposits. The acquisition of Banks of Wisconsin is their second purchase. September 17, 2010, they acquired Maritime Savings Bank, West Allis, Wisconsin, acquiring $177.6 million in assets and $350.5 million in deposits.
The Bank of Kenosha was established June 26, 2000 and had two offices in Kenosha with 41 full time employees as of March 31, 2013. Year-end 2007, the bank had 71 full time employees.
"With a population of 99,738 as of November 2011, Kenosha is the fourth-largest city in Wisconsin. Kenosha is also the fourth-largest city on the western shore of Lake Michigan, preceded by Chicago, Milwaukee, and Green Bay. Kenosha lies on the southwestern shore of Lake Michigan, 35 miles (56 km) south of Milwaukee and 50 miles north of Chicago.
"The 1902 Rambler was also the first automobile to incorporate a steering wheel, rather than use the then-common tiller-controlled steering. In 1916 Jeffery was purchased by auto executive Charles W. Nash and became Nash Motors. In May 1954, Nash acquired Detroit-based Hudson and the new firm was named American Motors Corporation...Snap-on Tools world headquarters are located in Kenosha.
There are several banks in the Kenosha area were "saved" with the injection of capital as the real estate bubble hit all community banks here. Biztimes.com reports:
"In 2010, a group of existing Southport (bank in Kenosha) shareholders injected $4 million of equity into the bank. Angel investor Guy Cecchini, the uncle of founding shareholder Jim Cicchini, chipped in $10 million...The Johnson family invested $235 million of private funds into Johnson Bank (Racine) in February, while the Lubar family announced plans to invest $20 million in ISB parent Ixonia Bancshares in April..."
June 21,2012 ISB Community Bank, Ixonia, received $12 million: "Members of the Lubar family added $16.5 million in badly needed capital to the bank, and the remaining $4.5 million came from existing shareholders, employees, and some new investors."
Following a FDIC consent order for Bank of Kenosha to increase its financial strength, Gary R Hutchins, President & Chief Executive Officer, in 2010 hit the bricks and was raised more than $4 million in new capital.
"Hutchins noted that Kenosha County has been one of the fastest-growing areas in the state, and Banks of Wisconsin, as a local bank, made construction and real estate loans to help fuel the growth.
" 'Some of our customers have been affected by the downturn in the economy and we have been working with them to help get them through these tough times," Hutchins said. "We remain confident that our local economy will recover from this downturn just like it has from other difficult times in the past.'
"In an interview Friday, Hutchins said his bank also was hit by troubled loan 'participations,' in which the bank joined with other banks to finance construction projects, including a condominium development in Florida."
Real Estate was the number one problem with non-current loans and defaults. Unfortunately non-current loans hit $23.1 million year-end 2010 and charge offs grew from $4 million in 2009, to $4.8 million in 2010, to $5.5 million in 2011, resulting in lower non-current loans by the dollars charged off, but also reducing profit and equity.
(in millions, unless otherwise)
Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.
As noted, non-current and charges offs reduced profit and equity:
(in millions, unless otherwise)
A strong indication of the real estate market is evident in the following---
Single-family new house construction building permits:
March 31, 2013: Tier 1 risk-based capital ratio 2.67%
As of March 31, 2012, Banks of Wisconsin had approximately $134.0 million in total assets and $127.6 million in total deposits. In addition to assuming all of the deposits of the failed bank, North Shore Bank, FSB agreed to purchase approximately $97.4 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $26.3 million.
Bank of Kenosha was the 14th FDIC-insured institution to fail in the nation this year, and the first in Wisconsin. The last FDIC-insured institution closed in the state was Legacy Bank, Milwaukee, on March 11, 2011.
List of Bank Failures:
Letter of Credit’s Interpretation Limited to
Court of Appeals Correctly Follows Law to Only Look at the
There’s an American idiom, which loosely paraphrased says “not to lock the barn door after the cattle are gone.” Applied to documenting deals, it’s pretty ineffective to complain about the language in a deal 4 years after it’s been inked. A Kentucky Bank and a shopping center owner should have probably looked that idiom up before doing this deal involving a Letter of Credit.
I use Letters of Credit on dicey deals all the time. Many lessees simply don’t have the credit to support the lease of a large capital item, and in some instances the capital item may not have the resale value after protracted litigation, foreclosure and resale. It is for this reason that many lessors use Letters of Credit (“L/C”) to as credit enhancements for shaky deals, residuals, or buyouts.
Today’s case is Louisville Mall Associates, LP v. Wood Center Properties, LLC, 361 S.W.3d 323 (Ky. Ct. App. 2012). Banks rarely issue L/Cs for more than a year, but credit deals are generally more than a year. So, as a compromise, the Bank is required to send a notification that it won’t renew the L/C. The failure to the renew the L/C is generally a condition of default. The notification is generally sent about 60 days before expiration, so the Bank pretty much knows that they have 60 days of exposure and the creditor will probably draw against the L/C—that is of course, if the Bank actually sends out the notification.
The Bank failed to send out the notification, and the L/C allegedly expired, and soon after the expiration, the borrower defaulted and presumably thought it could safely do so, because the L/C was presumably gone. Alas, no one knew that the Bank failed to send out the proper notice. The Creditor drew against the L/C, the Bank realized its error, but the fact was that without the notification, the L/C was still in play.
The other issue was the magic language required to be placed on the L/C. Most L/Cs have specific language which simply states “if you give Bank the following pieces of paper that say the following things then the Bank will pay the creditor the stated amount on the L/C without regard to the terms of the underlying agreement with the borrower.” Thus, the Bank is not expected, nor entitled, to look beyond the L/C and the attached pieces of paper to determine whether the statements they contain are true. Typically, the L/C requires the creditor drawing on the L/C to submit a draft, an invoice, and a certification that the amount is owing. Here, the Debtor argued that the Court should look to documents outside the four corners of the L/C to determine if the magic language was sufficient.
Here, the Creditor supplied the necessary magic language on the draft, and the lower court held that (1) The L/C had not expired because there was no notice of expiration, so it was automatically renewed; and (2) the Creditor supplied the magic language required on the draft.
On appeal, the Court of Appeal affirmed holding that only the language in the four corners of the L/C mattered.
The lessons for the equipment lessor here are to consider using Letters of Credit as credit enhancements for bad deals. In the world of leasing they can collateralize a balloon payment or a residual. But if the lessor decides to use a Letter of Credit, the terms of the Letter of Credit must be complete in and of themselves, and a Court will not be able to look at other documents outside the Letter of Credit to decide whether or not to enjoin the payment of the Letter of Credit.
This way, the Creditor will know exactly what it is agreeing to and what has to be on the Draft.
Tom McCurnin is a partner at Barton, Klugman & Oetting in Los Angeles, California.
Previous Tom McCurnin Articles:
Channel Partners Construction Deals Last 30 Days
Top Stories May 28-May 30
Here are the top stories opened by readers:
(1) Another Equipment Lessor Gets Sued
(2) Balboa Capital Continues Accelerated Growth,
(3) Archives---May 30, 2000
(4) "The List" April, 2013
(5) Leasing 102 by Mr. Terry Winders, CLP
(7) Sears-Roebuck Joins "Why Not Lease It?"
(8) New Hires---Promotions
(9) Amelia Earhart's plane found?
(10) How to Text from Your Computer/Tablet
### Press Release ############################
Two Promoters of Tax Fraud Scheme Who Sought Millions
SANTA ANA– Arturo Villarreal-Alba, of Whittier, was sentenced to 96 months imprisonment and three years of supervised release following imprisonment for conspiracy to defraud the U.S. and mail fraud. Restitution will be determined at a hearing on August 30, 2013 before U.S. District Judge Josephine Staton Tucker.
On October 2, 2012, Arturo Villarreal-Alba, 44, pleaded guilty to conspiracy to defraud the U.S. in a fraudulent federal income tax return filing scheme which claimed false federal income tax refunds and pleaded guilty to mail fraud in a vehicle registration “title washing” scheme.
The investigation led to 55 people being indicted by a federal grand jury in the fall of 2011.
To date, the Operation Stolen Treasures investigation has resulted in 26 defendants pleading guilty to charges filed against them (seven defendants have been sentenced and the remaining 19 defendants are awaiting sentencing); 25 defendants are currently scheduled for trial beginning in June; and three defendants have been convicted at trial.
According to court documents, beginning around March 2009, Arturo Villarreal-Alba, an undocumented alien, began to participate, acting as a promoter, with others in a fraudulent OID (Original Issue Discount) scheme that filed false federal income tax returns with the IRS claiming hundreds of thousands, sometimes millions, in false tax refunds.
The OID schemes conducted by Villarreal-Alba were conducted through two companies “Old Quest Foundation, Inc.” in Fontana and “De La Fuente Ramirez and Associates” (DLFRA) in Rancho Cucamonga, both of which became a subject of investigation conducted by Special Agents with IRS Criminal Investigation known as “Operation Stolen Treasures.”
Villarreal-Alba admitted that between 2009 and 2011, he participated in a vehicle “title-washing” scheme in which he falsely told victims that there was a “special program” wherein vehicles could be paid off and victims would end up owning one or more of the vehicles free and clear. Many victims purchased several vehicles by using their good credit to obtain loans from the car dealers. Rather than having the car loans paid, the victim’s signatures on DMV documents were forged to obtain clear title from the DMV, and then he and his co-schemers would either re-sell the vehicles to unsuspecting victims or obtain title liens on the vehicles from vehicle title loan companies.
According to his plea agreement, Villarreal-Alba admitted that he referred various customers to the OID scheme. Villarreal-Alba also admitted he caused at least two false 2009 OID-based federal income tax returns to be prepared and filed. On March 17, 2010, he caused the filing of a fraudulent tax return using fictitious federal income tax withholding in the amount of $668,000, which claimed a false tax refund of $452,572. He also caused a 2009 OID-based tax return claiming a $535,898 refund in 2010.
Villarreal-Alba used the U.S. mail system in the scheme by fraudulently receiving the “cleaned” pink slips from the DMV by mail. He admitted that he failed to file tax returns and report to the IRS between thousands of dollars in income he made 2009 and 2010 from the tax and vehicle title washing scheme.
Earlier, on May 17, 2013, Osman Norales, 35, of Rancho Cucamonga, the owner and founder of DLFRA, was sentenced by U.S. District Judge Josephine Staton Tucker to 87 months imprisonment, three years of supervised release following imprisonment and ordered to pay restitution to the IRS in the amount of $512,471.
On February 22, 2013, after a two-week jury trial, Osman Norales and his fellow defendant, Genaro De La Fuente of De La Fuente and Associates (DLFRA), were convicted of orchestrating a tax fraud scheme that illegally sought millions of dollars in fraudulent tax refunds. The case against Osman Norales and Genaro De La Fuente also stem from the Operation Stolen Treasures investigation.
The evidence at trial further showed that Norales fraudulently told clients they each could receive tax refunds of hundreds of thousands of dollars by accessing “secret government accounts” through a process that included the filing of IRS Forms 1099 OID. In exchange for the payments, he prepared and filed false income tax returns, which routinely sought hundreds of thousands of dollars – and sometimes millions of dollars – in income tax refunds.
The evidence presented during trial established that Osman Norales was involved with every facet of the fraudulent scheme, including recruiting customers and transmitting millions of dollars by filing false Forms 1099 OID to the IRS, including one tax refund in the amount of $815,000 and one in the amount of $760,000. Norales also charged clients up-front fees of approximately $2,500 and a portion of the false refund received by the client.
In addition to preparing and filing false tax returns for customers, Norales filed two false OID-based income tax returns for himself and his wife. On March 11, 2009, he filed a false 2008 OID-based income tax return for himself, which falsely reported $597,631 in federal income tax withheld and fraudulently claimed a $403,648 refund. Norales was notified by the IRS in a letter dated May 8, 2009 that his OID based tax return was frivolous.
In May 2009, Norales filed a false 2007 OID-based income tax return for himself, which falsely reported $109,984 in federal income tax withheld, fraudulently claiming a $100,916 refund. The evidence at trial showed that Norales mailed the 2007 OID based income tax return after he received the IRS notification.
On September 30, 2009, IRS special agents executed a search warrant at his business at which time Norales was interviewed by IRS special agents. While being interviewed, Norales lied when he told the agents that customers do not pay for his services and that he never gave or attended seminars. Evidence at trial established that Norales and other members of the conspiracy made presentations across the Southland and promoted the secret account theory and other frivolous arguments. Norales also attempted to thwart the investigation by responding to the IRS for customers with arguments that had no basis in the law. Norales also sent three threatening letters to the investigating special agents demanding payment of $20,000,000, then $25,000,000 and $35,000,000 to him in attempts to intimidate them. To thwart the investigation, he also instructed witnesses to lie to the grand jury during the grand jury investigation.
Norales further obstructed justice by fleeing to Texas after indictment and attempted to mislead the U.S. Magistrate Court during a detention hearing in May 2012 by providing materially false information during testimony.
The investigation of Arturo Villarreal-Alba, Osman Norales and other defendants in Operation Stolen Treasures are being conducted by IRS Criminal Investigation in conjunction with the U.S. Attorney’s Office for the Central District of California. The California Highway Patrol-Task Force for Regional Auto Theft Prevention (CHP-TRAP) jointly investigated the vehicle title-washing scheme of Arturo Alba-Villarreal.
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THIS PUPPY WILL BE AVAILABLE AT OUR NEXT ADOPTION EVENT: Saturday, June 8th from 11:00 am - 2:00 pm (Or until all of our pups have found homes.) Held at the Petco at Colorado Blvd and I-25. Click for a MAP Do not call Petco. They do not have information on our puppies. Click to visit our website and view our adoption policies, procedures and tips. (Adopt by Owner Dogs will not be at our adoption event.)
THIS PUPPY WILL BE AVAILABLE AT OUR NEXT ADOPTION EVENT: Saturday, June 8th from 11:00 am - 2:00 pm (Or until all of our pups have found homes.) Held at the Petco at Colorado Blvd and I-25. 4100 East Mexico Avenue: 9am - 9pm.
Petco does not have information on our puppies. Click to visit our website and view our adoption policies, procedures and tips. (Adopt by Owner Dogs will not be at our adoption event.)
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