You May Have Missed---
Archives--November 29, 2005
It may very well be that IFC Credit, Morton Grove, Illinois, is the largest third party lessor to hold NorVergence "Equipment Rental Agreements." Thus the delays in responding to the Federal Trade Commission and other actions, which may include information on the total dollar amount or actual processing of the leases.
It is estimated that IFC Credit holds as much as $15 million in these NorVergence contracts.
CIT Technology Services in offering settlements via the New York and New Jersey Attorneys General office said it involved $8.56 million.
In New Jersey, Wells Fargo had $4.4 million and GE $3.5 million. Later GE Capital agreed to pardon approximately $9 million in payments from 660 small businesses and nonprofits in a dozen states. If these numbers are the top held by third party lessors, then IFC Credit may have purchased the most from NorVergence.
Two very reliable sources informed Leasing News:
Another told us:
Leasing News communicated with the main leasing account executive for PFF Bank, who responded:
"Sources are not always correct."
"IFC is handling all credit as agreed."
In several e-mails, it was stated that IFC Credit President Rudy Trebels was aware that there was only one piece of equipment named in the lease contracts; this was brought to several people's attention in operations. One source says the yield was 25 percent with very good credits, which Rudy Trebels personally found too good to pass up.
"It is sad to see IFC go through this. There are some talented people there: however, the greed of a three people is going to hurt many others," one insider told Leasing News.
Leasing News has attempted to reach Rudy Trebels for a statement, confirmation or denial on information supplied to Leasing News from inside sources.
((FDIC closed down PFF Bancorp, Inc, Pomona, CA (11/08) sold to US Bank, Minneapolis, Minnesota))
((07/09) IFC Credit files Chapter 7, estimated $150 million owing))
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Lacking Ability for Bail, Schwartz Spends Thanksgiving in Jail
Charles K. Schwartz, President of Allied Health Care Services, Orange, New Jersey spent Thanksgiving in Essex County Jail . Evidently the requirement of $2 million in real estate is not available as all his assets must have liens that do not enable him to use any as collateral. His company is closed, employees let go, company assets to be auctioned, AtHome servicing 100 respirators, and the major supplier turned evidence to the FBI which resulted in his indictment of alleged $87 million fraud.
Most of the leasing companies who were taking him to court before the FBI indictment have closed their cases as both Schwartz and his company Allied Health Care Services are in Chapter 7 Bankruptcy.
As the supplier of the alleged bogus invoices, Bruce Donner of Donner Medical, has been fighting all cases and actions against him, and by the court filing himself has turned "states evidence."
It appears the FBI is working on a arrangement with Schwartz, as the Honorable Madeline Cox Arleo, United States Magistrate Judge, has granted both parties until January 20, 2011: "a continuance of the proceedings in the above-captioned matter for a period of 60 days to allow the parties to conduct plea negotiations and attempt to finalize a plea agreement, and this being the third continuance pursuant to Title 18, United States Code, Section 3161(h)(7)(A), so that the parties could attempt to resolve the matter and thereby avoid a possible trial, and the defendant being aware that he has the right to have the matter submitted to a grand jury within thirty days of the date of his arrest pursuant to Title 18, United States Code, 5ection 3161(b), and the defendant having consented to the continuance and waived such right, and for good cause shown, IT IS THE FINDING OF THIS COURT that this action should be continued for the following reasons:
(1) Plea negotiations are currently in progress, and both the United States and the defendant desire additional time to negotiate a plea agreement, which would render any grand jury proceedings and any subsequent trial of this matter unnecessary; and
Leasing News has been asked by many if those who had referred the leases were being sued by funders in "representation and warranty" issues. No cases have been brought to Leasing News attention as the issue may center around knowledge of the alleged fraud and lack of "due diligence" being so widespread would be difficult to argue.
ORDER FOR CONTINUANCE:
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Bank Beat---Branches bring Deposits
KeyCorp Vice-Chair Beth Mooney when named as the new chairman said, "I think we will have opportunities to buy other banks," indicating her attitude to grow, adding among her goals was to make sure that Key remains focused on being a "relationship-based, community bank." She specifically said the goal was to have more branches and do business in more cities during her tenure.
(Key Corp photo)
KeyCorp Vice-Chair Beth Mooney, Chairman/CEO Henry Meyer
This basically continues retiring Chairman and CEO Henry Meyer mission. In reality, it is the best plan for small, regional, and mid-size banks, and is quite indicated each week in Bank Beat of those banks who are purchasing failed banking operations from the state and federal authorities.
When ATM's first started to appear in the 1970's, Phil Boyce who was first starting Pacific Valley Bank in San Jose, California, that became quite a success, opened in primarily a residential area, and was opposed to putting in an ATM. I asked him why, as it was obvious it was going to be popular for those who could not make it to the bank during banking hours. His attitude was to be open earlier, longer, and on Saturdays. He wanted people to come into the bank, to get to know them, and one of the reasons why everyone's desk was open for everyone to see, including his (he had a large glass window and could close it with a curtain) was not just for security, but visibility to be able to help a customer if the lines got too long or someone had a question that might lead to bank business.
He was after a relationship, more business, and as he said, their deposits. The better his Tier Risk Capital ratio the more money he could lend.
One of his best assets was his board of directors, who brought in accounts, as well as deposits and other business. One was an old Italian who never finished the eighth grade, but he owned land over Highway 101 and many machine shops and smaller units were his tenants. He called on all of them, got them to open an account at the bank, even offered to pay for the printing of the checks if they moved their account ( it appears very few of those who he talked into moving took him up on it.)
He also gave them advice to save cash, as it was the best leverage when it came to getting a loan, even making a forced savings account, and looked over any financing or leasing deals that others presented to their company He expanded his walking into shops all over the area, not just his own buildings, and for several years was the director who brought in the most accounts (and deposits, despite some heavy hitters with bigger accounts.)
One of his ideas was to use an armored vehicle to pick up deposits and also bring cash to those who requested it. He had enough customers so they could do a daily run, making it easier for these businesses not needing to go to the bank and wait in line.
As Phil grew, he changed his mind about the ATM's, as competition forced him to have these conveniences. At one time, it was thought these units would replace tellers and branches, but Phil learned from his older Italian director, like AP Giannini was reputed to do, he knew many of the customers, especially the business customers by their first name. If a customer had a problem, he might not be the one to personally solve it, but he assigned it to someone who did.
When the internet first became popular in the late 1980's, primarily due to Netscape making it easy to find web sites and information, there began the development of banking on line and leasing on line. NetBank was one of the earlier and largest, as many will remember, and of the 25 aggregate lenders, in reality only one remains and it is in a niche as all the others went out of business, some with $10 and $20 million original IPO's (that was a lot of money in those days, before Yahoo and Google and eBay.)
The talk then was the Internet would start banks closing down branches as they were too expensive to maintain. It did the opposite. It pushed them into supermarkets, large retail stores, and a war here in California to grab onto key locations in communities to have not one, but two branches present, even in small towns like Los Gatos, 28,000, where it seems there is a bank branch on each block. Of course, it is a wealthy area and that makes a difference.
The key to banking has always been the deposits. After that, it is consumer and/or business products that the deposits helped the bank develop.
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Basic Lease Issues in Documentation
Yes, I am going to write about “sloppy documentation” again, but this time I want to discuss “sloppy” in terms of the content of the agreement--- not the issue of missing dates or signatures. Many are aware of the common errors created in signing a lease, but overlook the basics until they go to court and lose.
There are four issues in commercial equipment leasing that have to be addressed in our documents and they are:
A lease contract is judged by its content for the Uniform Commercial Code (UCC) that means that substance is more important than form. This was first stated by the income tax rules ---but it applies across the board of all the rules.
A lease agreement that offers a bargain purchase option is in “substance” a conditional sales contract not a lease. The UCC calls it a disguised conditional sales contract. However we call it a lease and most of the content of the lease agreement would lead you to believe it is a lease and it carries the term “lease agreement” on the top of the form. However, you fail to qualify as a lease for UCC purposes.
A lease agreement clearly states that the Lessor is the owner; however, since it does not qualify as a UCC lease, the question then is “who is the owner?”
Why is this a problem about “who is the owner?” Even though the UCC will call it an Article 9 “disguised sales contract,” the document states that ownership remains with the Lessor “until” termination occurs and the Lessee pays the bargain purchase option. In the old lease documentation we use to say that the bargain purchase option was only available if the lease was “handled in a satisfactory manner”. However, that statement was too ambiguous so we added “and all rentals, fees (late) and other amounts outstanding at termination are paid”. Still questions arose when equipment was destroyed during the term and its value exceeded the unpaid balance. Who receives the excess? In Article 9 the Lessee is considered the owner so you would assume the insurance proceeds would go to the Lessee. However, if title has not passed should the Lessor retain the proceeds? Both are correct unless your documents address the issue!
In addition, the requirement is that all assed taxes such as property tax, school tax, fire tax, and local or regional assed taxes are due and payable by the “owner of record” at the time the tax is due. If title does not pass to the lessee until proper termination, then the Lessor is on the hook and owes the tax if the lessee fails to render it as required in the agreement.
You need to understand what part of your lease language is “unenforceable” for UCC purposes if you have an Article 9 transaction. Perhaps you should pass title upon commencement and pay the sales or other taxes up front to avoid the confusion.
While the language in a lease agreement is stronger than a loan document or a conditional sales agreement, it is sometimes wise to use these forms instead of a lease to avoid the servicing requirements that require following all of the tax issues during the lease term. In many cases funding institutions that purchase bargain option leases in states where sales tax may be paid up front usually do not grasp the risk until it is too late.
I have also seen times where a lessee returns equipment instead of purchasing it because the disposal costs are greater that it’s value. You need to be careful when equipment contains or works with hazardous material because you may have a disposal problem on your hands. Your lease agreement should carry additional fees if the equipment is returned requiring extra expenses. Knowing the equipment use is just as important for true risk as it is for residual value.
It is very hard to create specific documentation for each type of equipment you lease but there are many issues that could create a different group of standard documents instead of just one set. I recommend you contact an attorney experienced in the leasing industry to create at least five to seven sets depending on the markets you service and also the laws and customs of your most prominent States. It is not just complying with the UCC that is important, it is the content of your agreement because it can help solve problems with your lessee or it can add to them.
It is important to cut costs in these times and adding to the servicing costs because your documents are to short or do not cover the whole scope of future problems is one of your most important decisions.
In later articles I will address some additional overlooked problems of documentation.
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty-five years and can be reached at email@example.com or 502-649-0448
He invites your questions and queries.
Previous #102 Columns:
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Advanced Property Tax Compliance
(Leasing News asked its long time advertiser to explain how his company works. The banner ads that appear here don't tell the whole story.)
As you know all Lessor’s who own assets in a state that imposes a business personal property tax must file a return declaring those assets (with support information) and pay taxes on those assets. This is a fiduciary responsibility that carries some pretty hefty penalty and interest if not done or done correctly. It is not uncommon to be audited and the county auditor to share information with other counties.
Some say there are over 60 thousand different tax jurisdictions. I don’t know if that number is correct, however each state and many jurisdictions within a state have different rules that need to be adhered to. All Lessors have clauses in their leases that require the Lessee to reimburse them for the taxes and allows them to charge an admin fee to do the Personal Property Tax compliance.
I don’t want to describe exactly how we provide the service. I have an eight page document if you want to read it, but I can tell you that we do it better than anyone else, period. How do I know this? To meet the compliance requirements you really need property tax software. I know the software that is available and the limitations of each. The software packages available not written exclusively for leasing personal property taxes. So you get a vanilla software that will work overall, but without the specialized features that really make a difference. And these “off-the-shelf software packages are expensive and hard to learn. None of the software is as user friendly or has the leased asset capabilities of the software my partner developed over 15 years ago.
Secondly, all my competitors offer other types of tax services, so they aren’t totally dedicated to just personal property tax compliance. Third, when we started the company in late 2004 we designed, developed, and implemented everything with the single purpose of providing personal property tax compliance. The end result was a computer driven systemic process that eliminates most of the possibility for human errors and provides information that directly benefits the Lessors. The end result is that our employees are not stressed out because the software automates many of the tasks and we can do the same amount of work with a third fewer employees.
We also provide a web portal to our Clients that has the information their customer service department needs. This information is easily accessible and can be printed or file-saved and emailed to the Lessee. When the Lessee sees the additional cost for yearly property tax on their monthly statement the first they do is call customer service. The initial question is “Show me how these taxes were computed”. The customer service rep simple enters the lease number into our site and clicks on the “Property Tax Detail Report” which provides a complete breakdown by asset or lease for that Lessee. The report even has the phone number of the assessor so the Lessee can check the numbers and/or verify the assets were filed.
The next question is “I want to see the actual tax bill that was paid”. While in the same report the customer service rep clicks on the tax bill number and the actual scanned tax bill appears. Likewise the bill can be file-saved and emailed or printed and fax to the Lessee. The end result is that the Lessee has no excuses for not paying the invoiced taxes. The customer service rep doesn’t have to go to one system to get the breakdown and another for the tax bill. Nor do they have to go ask someone in the tax department for help. By getting paid faster from the Lessees you affect cash flow.
Because property taxes are paid in arrears, often at lease termination the taxes for that year have not been paid. Many Lessors have a difficult time trying to collect taxes 6-9 months later when they may not have a relationship with that Lessee. We provide a simple tax estimation report on leases which will terminate anytime in the future. Most of my Clients pull the report each quarter and bill the estimated property tax 60-90 prior to the lease terminating. This assures them of collecting the taxes, eliminating a potential loss due to a Lessee going out of business or failure to collect.
The same problem arises when a Lessee wants to buyout the lease early. We provide a “Buyout Estimate Report” so the estimated personal property taxes can be included in the buyout quote. These reports and support information empower the customer service department and reduce the need to contact someone else for the required information.
1) Because we use a third fewer people, our fees are typically 40-200% less than my competitors, and I still make the same or greater profit. Unless you are a very big Lessor ( Key Bank, Dell, etc.) my service will be less than doing the process in-house. In fact many times the cost for my service is less that the 10K it cost to license the off-the-shelf software each year.
2) Next, the Lessor has to “front” the monies and pay the taxes before they get reimbursed by the Lessee, this can be a considerable drain on cash flows. Because my staff is larger and can process tax bills faster than other firms, I provide billing files to the Lessor so they can invoice the Lessee months prior to the tax due dates. This can eliminate cash flow problems. My web portal informs the Lessor when they need to deposit funds into the tax payment checking account so they don’t get confused.
Gary A. DiLillo
Our Quality Service is the result of intelligent direction, superior software, and skillful execution.
Top Stories---November 15—November 19
Here are the top ten stories opened by readers:
(1) Eight indicted in Equipment Finance Scam
(2) Lease Scammer Convicted of $4.2 Million Scheme
(3) Where is New CEO for Main Street Bank?
(4) Leasing 102 by Mr. Terry Winders, CLP
(5) Lease Employment in China
(6) New Hires---Promotions
(7) Union Bank Unveils Small Businesses Loan, Line, Lease Promotions
(8) Cartoon---Can you start right away?
(9) New Key CEO means more community bank branches
(Tie)(10) ELFA MFLI-25 Shows 15.5% Drop in Leasing Business?
(Tie)(10) The average American credit score is 675
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COURTESY POST NOT A SHELTER DOG
This is Rilee - she is a lovely dog. She was born January 1st 2009. She is looking for a good home. She is up to date on her vaccinations, Heartworm tested and on prevention and spayed. She is also microchipped. She is a wonderful dog. She is housebroken in the sense that she will not potty in the house but still is crated when owner not home. She was a rescue dog - the people didn’t want her and literally put her in my arms. They didn’t even have a collar for her. I have taken her in and worked with her. She really is the most loving animal. BUT SHE IS A BORDER COLLIE. She is not hyper active at all but needs daily walks. She is not a dog to take and chain up!!!!
She is a loving dog that plays well with my dogs but needs a home of her own. She should not have small children around because she might knock them over. She will bark at new people but once she knows they wont hurt her she is fine. ..
She is smart - and I would love to keep her but I have another border collie that I am working with. If you don’t have the time for this dog please don’t ask about her. please email for more information or to meet her. She will go to an approved home only
-would prefer a fenced in yard but not 100% necessary. She does like a nice warm bed to sleep in. She would like another dog to play with- does well with other dogs as long as they are not dominant females that will challenge her.
Independence Animal Control Shelter, Independence, OH
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This Day in American History
1644-- The Massachusetts General Court issued a call for local pastors to learn the dialects of neighboring Indian tribes, as an aid toward converting them to the Christian faith.
American Football Poem
Some time . . . when the team is up against it, when things are wrong and the breaks are beating the boys - tell them to go in there with all they've got and win just one for the Gipper. I don't know where I'll be then, . . .. but I'll know about it, and I'll be happy.
spoken by Pat O'Brian about George Gipp, played by Ronald Reagan
Knute Rockne--All American 
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