Sales Position available for experienced salesperson to solicit direct business for equipment & vehicle leasing company located in Maryland. Madison Capital provides lease financing nationwide, in Canada and Puerto Rico Call either Nancy Pistorio (800.733.5529 ext 7325) or Allan Levine (800.733.5529 ext 7337) About the Company: We are a direct funding source for most types of equipment and all makes of vehicles. We have brokerage capability and experience for equipment transactions up to $10,000,000.

www.madisoncapital.com

Monday, March 9, 2009

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    US Bancorp Manifest Appeals $59 million verdict
“J’Accuse” by 12 employees of Puget Sound Leasing
by Christopher Menkin, Publisher
    Major Decision: IFC Credit loses SOS Appeal
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[headlines]

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US Bancorp Manifest Appeals $59 million verdict

Franklin County 2nd Judicial Court House

In a case very reminiscent of NorVergence, involving software, Lyon Financial Services, doing business as U.S. Bancorp Manifest Financial Services, a wholly owned subsidiary of U.S. Bank, lost a case to Christopher Rural Health Planning (CRHPC.) An Illinois Franklin County Jury in Benton awarded the plaintiff $59 million.

The suit stemmed from CRHPC's software systems that it leased to obtain electronic medical records and patient data. The suit started in 2005 and it appears the only company with deep pockets to be sued wound up being the lessor.

The leases were all over the country to physicians, and reportedly the software never worked. According to the jury's findings, Lyon was found to have concealed evidence of altered leases, plus concealed their knowledge of problems with the software. The issue of warranty was with the seller, they claimed, but lost their case in the 2nd Judicial Circuit.

[headlines]

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“J’Accuse” by 12 employees of Puget Sound Leasing

by Christopher Menkin, Publisher

Leasing News was the first media to break this story in November receiving inside information from current and ex-employees of Puget Sound Leasing, Issaquah, Washington.

Perhaps one of the most revealing “on the record” documents about “security deposits,” “extra lease payments,” and “purchase options” I have ever seen in print follows this report.

I personally implore every reader to make the time to read the “complaint” from the docket history. It is 32 pages and can be read “on line” or printed to be read later. In addition, the response to the complaint is included with its “exhibits” and should also be read.

This article is not meant as an on line “court case,” but a news story presenting both sides from the many pages filed to date in public court regarding
2:09-cv-00056-TSZ First Sound Bank v. Larasco Inc et al

Secord’s Pizza Party

In the case of January 14, 2009 First Sound Bank vs. Larasco Inc. plus both founders, Defendant Louis A. Secord, Jr., an individual, Defendant, Richard A Secord, an individual, the plaintiffs requested time to review the 32 page complaint as described by their attorney Diana S Shukis, “…dramatically expanded and new allegations, ostensibly supported by 12 declarations of FSB employees, attorneys and hired consultants which contain 80 pages (excluding exhibits) of allegations from accounting fraud to racism
and sexism.”*

Puget Sound Leasing is now part of First Sound Bank, Seattle, Washington, operating, taking on new business, but at the same time filing two suits, the one noted above, and another involving 12 banks (16 attorneys) who purchased leases from Larasco, the parent of Puget Sound Leasing sold to the bank with covenants from the founders, one who as serving on the board of directors and reportedly formally “escorted” out of the bank.

The original complaint was amended and that is what the defendants requested time to respond. There are statements, exhibits, counter statements, flying about at this time; too numerous to reproduce here. While revealing in itself, the Puget Sound Leasing Complaint against Larasco and the Secords regarding the company’s prior practice of residuals, deposits, extra lease payments, purchase options is quite damning. Here, for the first time: from actual employees, sworn under oath to tell the truth, “on the record,” with much courage, explain how the process worked.

A response from Louis A. Secord, Jr. follows with a 39 page response with 93 pages Exhibit “A.” It should be noted there are responses to Mr. Secord, as well as other documents asking for writs of attachments for information, as well as documents that appear to support the original complaint as well as John Deane’s Legal Expert opinion. Due to space limitations, they are not included here but may be in future stories as this case continues.

These are some of the highlights of the 32 page First Sound Bank complaint, starting from the beginning, and then to some very revealing mea culpa “confessions” from employees:

With the Secords absent from PSL’s headquarters for the first time, long-time PSL employees began coming forward to FSB’s Shaughnessy with shocking disclosures about fraudulent and illegal business practices the Secords had ordered them to undertake. See Section II.F, infra. The recently-discovered practices, which pervaded PSL’s accounts, are described in declarations submitted herewith of the PSL employees who conducted the fraudulent practices at defendants’ direction. These practices included: the posting of fictitious payments on PSL’s accounting system and the use of other fraudulent accounting techniques to disguise defaulted leases, see Section II.F.1, infra; the fraudulent forfeiture of customers’ security deposits for the purpose of creating millions of dollars of additional “income” to PSL, even when the customers’ accounts were current and there was no basis for the forfeitures, see Section II.F.2, infra; and tax fraud and the illegal destruction of thousands of tax-related documents, see Section II.F.2.b, infra.
To place PSL’s business practices in context, FSB has retained John Deane (Founding Principle of The Alta Group. Ed), a leading expert in the leasing industry. Mr. Deane has served as CEO of three leasing companies, as chairman of the leasing industry’s national trade association (Equipment Leasing and Finance Association. ed), and has testified on leasing issues numerous times for the United States Department of Justice. Mr. Deane has identified ten separate practices of PSL that he concludes are “fraudulent,” “egregious,” and caused the overvaluation of PSL.

In marketing its portfolios to Investor Banks, including FSB, PSL emphasized that PSL’s delinquency rate was very low. Blair Decl. ¶ 9. On numerous occasions, Louis Secord told FSB executives Don Hirtzel, Steve Shaughnessy and Jan Gould that PSL’s delinquency rate was less than 1%. Hirtzel Decl. ¶ 37; Shaughnessy Decl. ¶ 16; Gould Decl. ¶ 3. In discussions during 2007 about purchasing lease portfolios, Louis Secord provided FSB management with an illustration showing that PSL’s delinquency rate had been below 1% every month since late 2003—an extraordinary record. Shaughnessy Decl. Ex. A (p. 12). Similarly, Louis Secord told FSB on numerous occasions that PSL’s charge offs were “insignificant.” Hirtzel Decl. ¶ 37; Shaughnessy Decl. ¶ 17; Gould Decl. ¶ 3.
Louis Secord also boasted about PSL’s accounting and management practices. Louis Secord told FSB that he and his brother were both former bankers (at Seattle-First National Bank), and that he served on the board of Issaquah Bank. Shaughnessy Decl. ¶ 18. Louis Secord told FSB management that PSL was “run like a bank” and “reported like a bank.”

PSL underwent substantial growth over the period 2003 through 2007. Blair Decl. ¶ 10. In 2003, PSL originated about $30 million in new leases; in 2007 PSL’s new lease originations increased to about $80 million. Id. Over the same period, PSL began looking for a buyer. Id. ¶ 11. PSL discussed a possible merger with, or acquisition by, Banner Bank and Columbia Bank, but neither transaction was consummated.

In a May, 2007 letter accompanying PSL’s 2006 financial statements, Louis Secord stated that PSL’s 2006 delinquency rate was 0.29%, and charge offs for all of 2006 were only $229,000.

In November 1, 2007, PSL upgraded to a lease accounting system called InfoLease, which employs double-entry accounting and other safeguards against fraud. Sutphen Decl. ¶ 6. In its first month under the new system, PSL—which had reported a delinquency rate of less than 1% for 47 straight months—immediately saw its delinquency rate more than triple, from 0.82 % to 2.54%.

Then, in June or July 2008, after a review of the Leasing Division’s performance for its first quarter as part of FSB, Gould made a startling additional discovery: about $2 million of leases on the Leasing Division’s books were more than 180 days overdue and had to be charged off as nonperforming. Gould Decl. ¶ 15. The great majority of these leases had been delinquent at the time of the asset purchase, but PSL had not reported these as delinquent either at closing or in the four months following closing.

The Secords did not dispute that the delinquent leases had to be charged off, and they initially told FSB management that they would take responsibility for the losses. Shaughnessy Decl. ¶ 28, 30. At an FSB board meeting, Louis Secord told the Board that he would “make the bank whole” for these losses

Shortly after FSB removed the Secords, long-term PSL employees began voluntarily coming forward to members of FSB management with startling disclosures of blatant fraud by the Secords in the course of running PSL’s business. These practices, which are summarized below, are thoroughly described in the declarations of employees Jennifer Wright, Theas St. Pierre, Tammy Kady, and Douglas Blair. FSB has also submitted the declarations of John Deane, a leading expert in leasing, and Paul Sutphen, a forensic accountant and fraud examiner. As explained by Mr. Deane, the practices described by the PSL employees are “not consistent with accepted equipment leasing/lending industry

from the repossession were sometimes sufficient to “fund” the lease payments for as long as two years, allowing PSL to prevent the account from appearing to be delinquent for that period of time. . . . PSL’s practice of “paying ahead” leases misrepresented the status of defaulted, unsecured leases by falsely making them appear current.

“Extensions”: PSL also disguised delinquent accounts by giving “extensions” to customers, sometimes without the lessee’s request or knowledge. Wright Decl. ¶ 22. Louis Secord would instruct Jennifer Wright to “extend the terms of the lease by adding the delinquent payments onto the end of the lease.” Id. “For example, if a lease set to terminate in January, 2010 was three months overdue, Louis Secord would instruct me to re-set the term to expire in April, 2010, effectively changing the status of the payment from an overdue payment to a payment due in the future.” Id. This caused a further artificial reduction in the delinquency rate.

PSL’s lease agreements provided that PSL would return customers’ security deposits to them at the end of the lease if the lessee had satisfied its lease obligations. Shaughnessy Decl. Ex F. However, Louis Secord (typically referring to these deposits as “our money”) routinely caused customers to forfeit their security deposits—even where there was no basis for the forfeiture—as a way of increasing PSL’s revenue. Wright Decl. ¶ 13. According to PSL employee Ms. St. Pierre, “Louis Secord’s decision to forfeit a particular security deposit was based not on the status of the account, but on his judgment about how much additional income he wanted to generate in this manner.”

“Louis Secord would ask me or someone in my department to print a report listing all of PSL’s leases and the amount of the security deposit being held on behalf of each lessee. Louis Secord would then go down the list and make checkmarks next to the lessees whose deposits he wanted to forfeit.
After Louis Secord finished making his selections of security deposits to forfeit, he would ask me or Jennifer Wright to add up the total amount of income that would be generated by his selection.

“After we told him the total, he would sometimes ask for the list back and select additional deposits to be forfeited. For this reason, it was my impression that Louis Secord had a goal in mind of the amount of income he wanted to generate through security deposit forfeitures.
Once Louis Secord was satisfied with the amount of security deposits he had selected, he would instruct me or Jennifer Wright to cause the accounting system to forfeit the selected deposits, crediting them to PSL’s income. Before we forfeited a security deposit, the security deposit would appear as a PSL liability because it was money owed to the lessee. After we forfeited the security deposit, the security deposit would show as income to PSL for that quarter.”

“PSL generated a huge amount of income through this practice: forfeitures exceeded $1 million per quarter on multiple occasions, and reached as much as $1.4 million one quarter.” Wright Decl. ¶ 14; St. Pierre Decl. ¶ 16. Ironically, at the same time it was improperly forfeiting deposits of this magnitude, PSL was boasting to Investor Banks that less than 1% of PSL’s leases were delinquent.

“PSL did not notify customers that it had forfeited their security deposits.” Wright Decl. ¶ 15. “Sometimes, however, customers would call PSL at the end of their lease term to find out why the deposit had not been returned. Jennifer Wright explains:

“PSL regularly received phone calls from customers asking why they had not received refunds for their security deposits. Steve Twidwell directed me and other PSL employees to tell the customer that an oversight had occurred and that we would issue the refund. However, Richard Secord, who was responsible for making out the checks, would generally not issue the refund unless the customer called two or three more times (a total of three or four calls) asking for payment.
However, it was my experience that most customers whose security deposits had been incorrectly forfeited never called or otherwise asked for their deposits to be returned. Almost all of PSL’s customers were businesses, and many were small businesses. Often, the representative of the customer responsible for entering into the lease was no longer employed by the customer by the time the lease concluded. For this reason, it was my observation that many of our customers did not know they were entitled to return of security deposits, and others simply forgot about the security deposits.
Wright” Decl. ¶¶ 19-

“PSL and the lessee executed a rider (a “Put Rider”) stating that the lessee would purchase the leased equipment at the end of the lease term. Shaughnessy” Decl. Ex. G (p. 85).” PSL issued two types of Put Riders: “Dollar Put Riders” provided that the lessee would purchase the equipment for one dollar, and “FMV Put Riders” provided that the Lessee would purchase the equipment for fair market value.” Wright Decl. ¶ 24.
“Because Put Riders gave the lessees the right to take depreciation, their existence made it improper for PSL to take depreciation on the leased equipment”. Deane Decl. ¶ 14(e). FSB recently learned that PSL “solved” this problem by ordering that all of the Put Riders be destroyed, leaving no evidence of them in the leasing files in case of an audit. As is explained in the Declaration of Jennifer Wright:

“In about 2001, I was told that PSL was concerned that the existence of the Put Riders could cause tax problems for PSL in the event of an audit. PSL held a “pizza party,” where PSL employees went though all of the leasing files and pulled out the Put Riders. The Dollar Put Riders were destroyed, and the FMV Put Riders were given to Louis Secord, who maintained them in his office. It was my impression that Louis Secord wanted to keep copies of the FMV Put Riders because it was desirable to PSL to be able to require the lessee to purchase the leased equipment at fair market value at the end of the lease term.
In the years following the “pizza party” described above, PSL continued to create and sign Put Riders when the customer executed lease documents. However, after the papers were signed (but before they were scanned and copied) the processing staff was directed to destroy the Dollar Put Riders and give the FMV Put Riders to Louis Secord to keep in his office. However, members of the processing staff were uncomfortable doing so and, without the knowledge of PSL management, secretly maintained the Dollar Put Riders in their desks. I recently collected these riders and provided them to counsel for FSB.

“First, many of these residual payments were owed to brokers, not to PSL. While the residual payment PSL customers owed PSL were generally set at $1, some of PSL’s brokers were authorized by PSL to collect an additional residual equal to 10% of the leased equipment from the customer at the end of the lease.” Kady Decl. ¶ 17. “This receivable belonged to the broker, but PSL accounted for broker residuals as if they were payments due to PSL. Id. FSB estimates that $250,000 of the residuals it purchased belonged to brokers.” Shaughnessy Decl. ¶ 37.
“Second, PSL improperly included “boosted residuals” as receivables. The Dollar Put Riders provided that, if the customer defaulted on the lease, the customer lost its option to purchase the equipment for $1, and that “any option to purchase, if offered by the Lessor, will be based on the fair market value of the equipment.” Shaughnessy Decl Ex. G (p. 85). Under this provision, PSL had no legal entitlement to collect a fair market value residual at the end of the lease, and it was unlikely that it would do so because the lessee was in default.

Louis A. Secord, Jr. responded to the complaint, here are brief highlights and the 39 page response follows:

11.1 Initial Collection and Treatment of Security Deposits
11.1.1 PSL required lessees to place with PSL a security deposit in the amount generally equal to two months’ lease payments. The treatment of these amounts was governed solely by the terms of the lease agreements. See Docket 17-2, p.70. PSL’s leases generally provided language similar to the following:
“7. SECURITY. As security for prompt and full payment of rent, and the faithful and timely performance of all provisions of this Lease, and any extension or renewal thereof, Lessee has pledged and deposited with Lessor the security amount set forth in the section shown as ‘TERMS’. In the event any default shall be made in the performance of any of Lessee’s obligations under this Lease, Lessor shall have the right, but shall not be obligated to apply said security to the curing of such default. Upon notice that Lessor has applied any portion of the security to the curing of any default Lessee shall, within ten (10) days, restore said security to the full amount set forth above. On the expiration or earlier termination of this Lease, or any extension or renewal hereof, provided Lessee has paid all of the rent herein called for and fully performed all of the other provisions of this Lease, Lessor will return to Lessee any then remaining balance of said security. Lessor shall not be required to keep the security deposit separate from its general funds and Lessee shall not be entitled to any interest thereon.”

I did not refer to lessee’s security deposits as “our money.” I likely explained to clerical employees, like Ms. Wright and Ms. St. Pierre, in the event a lessee failed to make a payment or otherwise owed to PSL funds under its lease agreement, PSL would pay from its own revenues the amounts due to Investor Banks, or for personal property taxes, sales taxes, and insurance premiums, even where PSL had not yet received those amounts from the lessees. Each month, PSL would then appropriately apply lessees’ security deposits to these amounts due and owing.

11.1.3 Under the terms of the lease, PSL had the right to apply security deposits to delinquent payments and to a number of other owing costs and fees. The terms of the lease do not require notification to the lessee of forfeiture; however, PSL would often inform customers
of forfeitures and inform them that under the terms of the lease they had 10 days to replenish the deposit amount, otherwise they would be in default of the lease and recovery procedures would
commence, including but not limited to the repossession and sale of the leased equipment.

12.3 Additional Compensation for Brokers. Residual sharing agreements enabled brokers to quote customers whose lease terms would ordinarily end in a nominal residual of $1, a
larger residual purchase price. If the broker was successful in negotiating this larger residual, a secondary agreement was entered into between the broker and PSL providing for the sharing of
this surplus amount, if and when it was paid. This was a convenient method for brokers to earn additional commission-like compensation.
12.4 Post-Booking Residual Sharing Agreements Approved by John Olah. Problems arose when some leases were entered in the lease management and accounting system with a $1 residual, and brokers later submitted to John Olah a residual sharing agreement. Mr. Olah authorized these agreements and kept these unrecorded and unagreed-upon residual sharing agreements in his desk, and no one else at PSL would know about them. These residual sharing agreements were now separate from the lease file and unknown to PSL. Because the lease management and accounting system only showed the $1 residual, this amount would be used to settle the lease at the end of its term. As a result, after collecting the $1 residuals booked on the system from the lessee, brokers would contact PSL seeking payment of the residual amount in the residual sharing agreement that was signed by John Olah. This improper conduct was one of the many reasons John Olah was demoted from his position as Broker Manager. Despite Mr. Olah’s improper conduct, and in an effort to maintain a positive relationship with brokers throughout the country, PSL often honored some of these agreements and paid the brokers. This improper conduct was one of the many reasons Mr. Olah was demoted from his position as Broker Manager at PSL. There were likely only a small number of such agreements out of the tens of thousands of leases PSL has booked, sold, and/or serviced over its 23 year history.
Signed March 2, 2009

* Diana S Shukis, Cairncross & Hempelmann Attorneys
Fifth of March, https://ecf.wawd.uscourts.gov/doc1/19713108479

32 Page Complaint: No. C09-0056 TSZ
First Sound Bank’s Motion for Write of Attachment and Preliminary Injunction freezing assets
http://leasingnews.org/PDF/First_Sound_Bank_Secord.pdf

Louis A. Secord, Jr. Response (39 pages):
http://leasingnews.org/PDF/secord_declaration1.pdf

Secord Exhibit (93 pages, large file, long download
at least several minutes depending on your speed):
http://leasingnews.org/PDF/secord_declaration2.pdf

Previous stories (does not include-“Heard on the Grapevine”):
http://www.leasingnews.org/Conscious-Top%20Stories/First_Sound.htm

[headlines]

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Major Decision: IFC Credit loses SOS Appeal

by Christopher Menkin

This is the famous NorVergence lease case where former IFC Credit Corporation, Morton Grove, Illinois, Vice-President John Estok, CLP, got caught in what the opposing counsel called perjury. IFC Credit was suing their lessee ( and had others) for the full amount owed, although it was revealed the company had over $2 million in holdbacks, according to the revelation by Escot in this specific case ( the opposing counsel had proof of the holdback.)

The case went through several appeals, costing over an additional estimated $50,000 for IFC, and the final appeal results in the original award which may include 18% interest from the date. Attorneys involved estimate the ruling may have cost IFC Credit $250,000 over $11,743 owed.

In this specific law suit, the “Equipment Rental Agreement” is for 60 months at $543.67 or $32,620.20. After testimony, it is learned that IFC paid NorVergence $11,743 for a $28,000 original invoice figure that yielded lease payments of $32,620.20. The original lease factor was .0194, but in “reality” was .0463 on a sixty month term.

This is the first time Estok admits to the holdbacks, which he guesses are over $2 million. The opposing counsel questions whether perjury is involved. By the way, Estok today remains a CLP.

Texas Judge Sally Montgomery County Court-at-Law 3 ruled in "04-04187-C Specialty Optical d/b/a SOS v. IFC Credit Corp.

"SOS properly cancelled the Lease with NorVergence. IFC takes nothing on its counterclaim. SOS shall recover court costs and reasonable attorney fees in the amount of $45,000.00 for trial, $30K for appeal, and $15 K for a petition for review to the Supreme Court of Texas, and $15K for responding to any unsuccessful appeal by IFC to the Supreme Court of Texas in the event the petition for discretionary review is granted per the parties stipulation."

The Supreme Court of the State of Texas did rule against informing by letter all the NorVergence lessees regarding the hold back. This may be a mute point at this time as IFC Credit did "settle" with the Federal Trade Commission on most of the 500 cases remaining. It should be pointed out there are those lessees who did not take the "settlement" and continue in court with IFC over full return of money and court costs.

Paradoxically when IFC credit settled with the FTC, they made the same agreement with the AGs of Missouri and Texas, so you may ask what was this SOS case in Texas all about?

Highlights from the eight page ruling:

Specialty moved for summary judgment prior to trial. IFC filed a response supported by the affidavit of executive vice-president Patrick Witowski. The affidavit stated that IFC took assignment of the Lease by paying the purchase price of $24,723.51, the amount of damages to which IFC claimed it was entitled to recover on its counterclaim for breach of contract. When it was subsequently disclosed that IFC paid only $11,743.67 of the full purchase price for the Lease, Specialty filed a motion for sanctions. The motion requested that IFC be sanctioned because Witowski's affidavit constituted perjury.

At the conclusion of the hearing, the trial court entered an order sanctioning IFC. The order requires IFC to send letters to all lessees against which it has made claims under leases or rental agreements acquired from NorVergence. The letter must explain the precise amount of money paid to NorVergence, the basis for and amount of any holdbacks, the basis for the holdback, and the manner in which the holdbacks were applied in IFC's accounting records. Although IFC is in litigation with many of the lessees, none are a party to this case. IFC is also ordered to provide copies of the letters to counsel for Specialty and to pay counsel for Specialty the sum of $13,600 as reimbursement for the fees to be incurred monitoring IFC's compliance. The order also awards $22,078.25 to Specialty for attorney's fees incurred in bringing the motion, and the sum of $803.92, representing two times the actual costs incurred by Specialty. In its ninth issue,

The record is also silent as to the court's rationale for requiring IFC to contact other lessees in other litigation or for the court's appointment of Specialty's counsel to police the notification process. Without guidance from the court as to the nature of the offensive conduct, we are unable to determine a relationship between the sanction, the conduct, and the abuse sought to be remedied. Accordingly, we conclude the trial court abused its discretion when it awarded sanctions against IFC. We sustain IFC's ninth issue.

III. CONCLUSION

Having resolved all of IFC's issues concerning the judgment against it, we affirm the trial court's judgment. We sustain IFC's issue concerning the award of sanctions, and vacate the trial court's order on sanctions.

Denial of Appeal:
http://leasingnews.org/PDF/Specialty_Optical_Petition_for_Review.pdf

Eight page copy of Supreme Court of Texas ruling:
http://leasingnews.org/PDF/IFC_v_Specialty_Optical.pdf

---Stories regarding S.O.S. and IFC Credit:

IFC to sue Leasing News for “Slander”
http://www.leasingnews.org/Conscious-Top%20Stories/Novergence_156.htm
“SOS v. IFC Credit Corp.” Judge
http://www.leasingnews.org/Conscious-Top%20Stories/Novergence_157.htm
Judge Montgomery Rules
http://www.leasingnews.org/Conscious-Top%20Stories/Novergence_161.htm
Texas Judge Socks it to IFC Credit
http://www.leasingnews.org/Conscious-Top%20Stories/Novergence_163.htm

NorVergence articles:
http://www.leasingnews.org/Conscious-Top%20Stories/Novergence_main.htm

[headlines]

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Leasing Industry Help Wanted

sales

Sales Position available for experienced salesperson to solicit direct business for equipment & vehicle leasing company located in Maryland. Madison Capital provides lease financing nationwide, in Canada and Puerto Rico Call either Nancy Pistorio (800.733.5529 ext 7325) or Allan Levine (800.733.5529 ext 7337) About the Company: We are a direct funding source for most types of equipment and all makes of vehicles. We have brokerage capability and experience for equipment transactions up to $10,000,000.

www.madisoncapital.com

VENDOR SALES SPECIALISTS LEASING SALES PROFESSIONALS Like selling vendor programs and large transactions? Enjoy international financing programs? Prefer the advantages of a commission only environment with the security of health and welfare benefits? CLICK HERE to find out how to have fun again.

Vice President Credit Manager/Funding Operations Hands-on, professional and personable senior management team member to work with small ticket leases from the third party broker marketplace. Click here for more information. About the company: Founded in 1982, we originate all of our leases through an independent network of lease brokers

www.pawneeleasing.com

Please see our Job Wanted section for possible new employees.

[headlines]

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Leasing News Top Stories---March 2-March 6

Here are the top ten stories opened by readers:

(1) Benchmark Financial Group, Aliso Viejo, CA
Bulletin Board Complaint
http://www.leasingnews.org/archives/March%202009/03-02-09.htm#bbc

(2) IFC Credit/Pioneer Up-Date---LEAF, too
http://www.leasingnews.org/archives/March%202009/03-02-09.htm#ifc

(3) Looks like SunBridge has shut down
http://www.leasingnews.org/archives/March%202009/03-04-09.htm#sun

(4) Pioneer--IFC Credit-DZ Bank
http://www.leasingnews.org/archives/March%202009/03-06-09.htm#pioneer

(5) Marlin closes Two Office/28 employees let go
http://www.leasingnews.org/archives/March%202009/03-06-09.htm#mbs

(6) Correction: $2.25 credit reports/$100 site inspections
http://www.leasingnews.org/archives/March%202009/03-06-09.htm#correct

(7) HSBC Finance to continue
http://www.leasingnews.org/archives/March%202009/03-04-09.htm#hsbc

(8) Bank Beat ----Two More Banks Fail
http://www.leasingnews.org/archives/March%202009/03-02-09.htm#beat

(9) Sales make it Happen---by Kit Menkin
“Get off the Telephone”
http://www.leasingnews.org/archives/March%202009/03-04-09.htm#sales

(10) Elaborate leasing scheme leaves truckers out in the cold
http://www.landlinemag.com/Archives/2009/feb09/Features/snow_job.htm

Top Ten Archives:
http://www.leasingnews.org/Conscious-Top%20Stories/Ten_top_stories.htm

[headlines]

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[headlines]

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Bank Beat—One Bank Failure, $500B for FDIC

Christopher Dodd (D-Conn) introduced a bill to permanently raise the FDIC’s borrowing authority from Treasury to $100 billion, plus temporarily increase it to $500 billion through Dec. 31, 2010. The House of Representatives this week passed a measure that would triple the FDIC’s credit line to $100 billion and permanently raise the deposit-insurance limit to $250,000. The move was seen as a response to community and regional banks who stated a 20% emergency insurance fee would seriously cut into their earnings and make their situation of lending worse.

FDIC-insured banks lost $26.2 billion in the fourth quarter, the first loss for a three-month period since 1990. U.S. banks and other financial companies have reported about $800 billion in write downs and credit losses since 2007 in what is being called the worst financial crisis since the Great Depression.

CtW Investment Group has called on Bank of America’s board to remove Kenneth Lewis as chairman and chief executive officer in light of his disastrous missteps.
http://www.bizjournals.com/tampabay/stories/2009/03/02/daily65.html?ana=from_rss

Freedom Bank, in Commerce, Georgia, with $173 million in assets and $161 million in deposits, became the 17th bank to fail this year. Northeast Georgia Bank of Lavonia, Georgia, will assume deposits and the banks four offices. As of March 4, 2009, Freedom Bank of Georgia had total assets of approximately $173 million and total deposits of $161 million. In addition to assuming all of the deposits of the failed bank, Northeast Georgia Bank agreed to purchase approximately $167 million in assets at a discount of $13.65 million. The FDIC and Northeast Georgia Bank entered into a loss-share transaction. Northeast Georgia Bank will share in any losses on approximately $96.5 million in assets covered under the agreement. The FDIC estimates that the cost to the Deposit Insurance Fund will be $36.2 million
http://www.fdic.gov/news/news/press/2009/pr09037.html

M&T, Buffalo, N.Y (NYSE: MTB) will pay $6.4 million in severance to the 521 employees losing their jobs as part of its pending $401 million acquisition of Provident Bancshare, Baltimore, Maryland's largest independent bank.

List of Bank Failures:
http://www.fdic.gov/bank/individual/failed/banklist.html

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Wednesday, March 11 Boston Lunch Open to All

Boston Regional Luncheon
12:00 p.m. - 2:00 p.m.
Hosted by Larry LaChance, Bankers Capital

Owen O'Leary's
Southboro, MA

Cost: $25 Members; $50 Non-Members
llachance@bankers-capital.com
http://www.nefassociation.org/displaycommon.cfm?an=1&subarticlenbr=28

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Leasing 102
by Mr. Terry Winders, CLP

“0” TRAC transactions

I have been asked to comment on the current trend to offer “0” TRAC residuals on TRAC leases. This is a practice of providing a full pay out of the vehicles cost, hence the “0” TRAC and then returning to the lessee whatever the unit brings, when it is sold at termination, as a reduction in rent. Lots of questions can form in your mind as to why would anyone “want” to do this. I suppose it reduces the risk to the Lessor because there is no residual risk and if it stands up to the tax requirements the Lessor will deduct the allowable capital recovery benefits except the rent income will be higher, lowering the value of the depreciation benefits. However the Lessee will get higher tax deductions because of the higher rent.

To begin the discussion let’s look at the IRS approach to TRAC clause leasing.

“Terminal Rental Adjustment Clause” (TRAC ) lease is defined by the IRS as:

1986 Code – Subtitle F, Ch.79
    (3) Terminal Rental Adjustment Clause Defined,
        (A) In General, For purposes of this subsection, the term “terminal rental adjustment clause” means a provision of an agreement which permits or requires the rental price to be adjusted upward or downward by reference to the amount realized by the Lessor under the agreement upon sale or other disposition of such property.

Sec.7701(h)
Motor Vehicle Operating Lease,
    (1) In General, for purposes of this title, in the case of a qualified motor-vehicle operating agreement which contains a terminal rental adjustment clause;
    (A) such agreement shall be treated as a lease if (but for such terminal rental adjustment clause) such agreement would be treated as a lease under this title, and
    (B) the lessee shall not be treated as the owner of the property subject to an agreement during any period such agreement is in effect

(2) Qualified Motor Vehicle operating agreement defined; For purposes of this sub section,
    (A) In General , the term “qualified motor vehicle operating agreement” means any agreement with respect to a motor vehicle (including a trailer) which meets the requirements of subparagraph (B), (C), and (D) of this paragraph.
    (B) Minimum Liability of Lessor, An agreement meets the requirements of this subparagraph if under such agreement the sum of.
        i. The amount the Lessor is personally liable to repay, and
        ii. The net fair market value of the Lessor’s interest in any property pledged as security for property subject to the agreement, equals or exceeds all amounts borrowed to finance the acquisition of property subject to the agreement. There shall not be taken into account under clause (ii) any property pledged which is property subject to the agreement or property directly or indirectly financed by indebtedness secured by property subject to the agreement.
    (C) Certification by Lessee: Notice of Tax Ownership, An Agreement meets the requirements of this subparagraph if such agreement contains a separate written statement separately signed by the Lessee,
        i. under which the Lessee certifies, under penalty of perjury, that it intends that more than 50% of the use of the property subject to such agreement is to be in a trade or business, and
        ii. which clearly and legibly states that the Lessee has been advised that it will not be treated as the owner of the property subject to the agreement for Federal income tax purposes.
    (D) Lessor must have no knowledge that certification is false, Am agreement meets the requirements of this subparagraph if the Lessor does not know that the certification described in subparagraph ( C) (i)
is false.

The rule appears to require the Lessor to dispose of the vehicle to determine its true worth. If the vehicle is sold to the Lessee it appears that it infringes on the statement above 1(A) that it must be a (tax) lease without regard to the TRAC clause. Selling the asset below its FMV to the Lessee would appear to go against the ruling. There have not been a lot of tax cases on TRAC clause transactions but if this program continues I think there will be.

In discussions with many fleet users of TRAC clause leases they say that the original purpose was to reduce the monthly cost of obtaining good vehicles by making the payments match the actual loss in value that the vehicle suffers each month.

By placing a realistic residual on the vehicle that is guaranteed by the lessee it appears to accomplish this requirement. A “0” TRAC does not appear to follow the purpose of the TRAC Clause but at the same time it does not appear to break it. We will have to wait for the challenge in tax court and see the outcome. In any event the vehicle should be sold to an unrelated third party and not sold to the Lessee to avoid the question, is it a true lease without the TRAC Clause.

Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty years and can be reached at leaseconsulting@msn.com or 502-327-8666.
He invites your questions and queries.

Previous #102 Columns:
http://www.leasingnews.org/Conscious-Top%20Stories/Leasing_102/Index.htm

(This ad is a “trade” for the writing of this column. Opinions
contained in the column are those of Mr. Terry Winders, CLP)

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#### Press Release ##############################

Fitch Reports Dell “A”/2010 self funding

--Strong financial flexibility supported by significant liquidity, including $9.5 billion of cash and investments at Jan. 30, 2009 and pressured, but consistent free cash flow, which Fitch expects will exceed $1 billion in fiscal 2010.

Fitch believes Dell's debt financing requirements will increase in fiscal 2010 due to the expiration of CIT Group Inc.'s (CIT, rated 'BBB' with a Negative Outlook) minimum funding right on Jan. 31, 2009. The minimum funding right previously enabled CIT to purchase a percentage of finance receivables originated by DFS.

Beginning in fiscal 2010, Dell will fund 100% of new finance originations via unsecured debt and the sale of finance receivables through an off-balance sheet securitization program. During fiscal 2008 and fiscal 2007, Dell securitized $1.2 billion and $1.1 billion, respectively, of customer receivables. The principal balance of the securitized receivables at the end of fiscal 2008 and fiscal 2007 was $1.2 billion and $1 billion, respectively. Fitch believes the size and timing of any future debt offering is contingent upon the growth rate of DFS' asset portfolio, the amount of finance receivables funded by third-parties via the securitization program and the financial leverage target for retained finance receivables.

Full Press Release:
http://biz.yahoo.com/bw/090305/20090305006167.html?.v=1

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News Briefs----

Pressure may mount to know who got AIG bailout blns
http://www.reuters.com/article/BANKSL/idUSN0725372820090307

Reports name AIG's derivative counterparties
http://www.google.com/hostednews/ap/article/ALeqM5hhVmy7EY5h7_iSk8GzLn
X67mm91QD96PFJOO1

Tough call: Mercer cuts 200 leased truckers
http://www.landlinemag.com/todays_news/Daily/2009/Mar09/030209/030609-02.htm

U.S. should let some big banks fail: Republicans
http://www.reuters.com/article/politicsNews/idUSTRE52715320090308

A Rising Dollar Lifts the U.S. but Adds to the Crisis Abroad
http://www.nytimes.com/2009/03/09/business/09dollar.html?_r=1&hp

A Matrix of News Winners Buoys NBC
http://www.nytimes.com/2009/03/09/business/media/09nbc.html?ref=business

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You May have Missed---

Rare NYC foreclosure auction yields deals, some protest
http://www.usatoday.com/money/economy/housing/2009-03-08-nyc-foreclosure_N.htm

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“Gimme that Wine”

Premier Napa Valley nets $1.5 million for vintners’ projects
http://www.napavalleyregister.com/articles/2009/03/05/wine/doc49a78067af12b579878779.txt

The great wine glass recession
http://www.montereyherald.com/entertainment/ci_11841822?nclick_check=1

Can Napa Wine Prices Stay Up?
http://winesandvines.com/template.cfm?section=news&content=62718&htitle=Can%
20Napa%20Wine%20Prices%20Stay%20Up%3F

Sonoma's Tough New Vineyard Rules
http://www.winesandvines.com/template.cfm?section=news&content=62540&htitle=
Sonoma%27s%20Tough%20New%20Vineyard%20Rules

Wine Prices by vintage
http://www.winezap.com
http://www.wine-searcher.com/
US/International Wine Events
http://www.localwineevents.com/
Winery Atlas
http://www.carterhouse.com/atlas/\
Leasing News Wine & Spirits Page
http://two.leasingnews.org/Recommendations/wnensprts.htm
The London International Vintners Exchange (Liv-ex) is an electronic exchange for fine wine.
http://www.liv-ex.com/

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Today's Top Event in History

1965- Three white Unitarian ministers, including the Rev. James J. Reeb, were attacked with clubs on the streets of Selma, Alabama, while participating in a civil rights demonstration. Reeb later died in a Birmingham, Alabama hospital.

http://www.uua.org/news/2002/selma/inscriptions.html
http://www.uuworld.org/spirit/articles/2358.shtml

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This Day in American History

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SuDoku

The object is to insert the numbers in the boxes to satisfy only one condition: each row, column and 3x3 box must contain the digits 1 through 9 exactly once. What could be simpler?

http://leasingnews.org/Soduku/soduko-main.htm

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Daily Puzzle

How to play:
http://www.setgame.com/set/puzzle_frame.htm

Refresh for current date:
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