Alert--- Sale/Leasebacks as New Equipment
The names are changed here as the original party who placed the complaint, later changed their mind. They had sent us by fax all the documents signed and used in the several transactions to back up their claim. Right before we were to print the “alert,” they changed their mind, after talking with the parties involved, who most likely said they were going to sue, if their names were mentioned.
We honor the request to not to use their names, or other names, or locations, but we are printing the original complaint and our findings using fictitious names.
It should be noted that leasing company we are calling Bottomline Leasing in this article already has a complaint on the Leasing News Bulletin Board.
Remember these are all fictitious names in this story, and coincidence to a real name is just that; these are again not the real names of the companies involved:
“I am writing in regards to a recent situation that occurred with Kappa Beta Equipment Sales Corp, headquarters located at **********************. It was recently brought to our attention that some equipment that we financed for clients of Kappa Beta's was not new equipment. The head of Kappa Beta had teamed up with Bottomline Leasing to do sale-leasebacks and pass them off as new equipment sales in order to get working capital for the client.
Head of Kappa Beta would then take money off the top for himself as well as Bottomline Leasing and pay the clients in cash. This was brought to our attention by a funding source that we work with who had cut Kappa Beta off from their vendor programs due to such occurrences.
“I write to you today to caution others in the industry from falling prey to this same plot. This type of fraud is rampant in the industry and we need to work together to prevent it from continuing. If the first funding source had alerted the leasing news, we may not have been taken advantage of. Please send word to all you can. Thank you.”
signed ABC Financial
“This may not be, as you said, illegal, but it is extremely
singed ABC Financial
” We are told Kappa Alpha is forbidden to send deals to GE Capital, American Express and US Bancorp due to him pulling the same with them. They have assist us Leasing in our investigation and forward those other names to help us achieve our information for our legal department. If you require, I can ask for letters from you to substantiate this.”
singed ABC Financial
Leasing News position was to hear from the other sides. We requested copies of the leases and other documents to substantiate their charges. After receiving them by fax, we began sent several e-mails and wound up having a group of conversations by telephone with the parties involved.
The verbal document from the lessee confirms that he received cash and originally he submitted the transaction to Bottomline Leasing, from a mailer. The head of Bottomline Leasing said he submitted “many” deals to Kappa Beta, and they had completed “five or six” of them. The documents we had showed they mostly involved “computer equipment.”
He told us Kappa Beta “does tough credits” and “ is able to do other things as he is a vendor who goes directly to leasing sources as a vendor.” Regarding this specific transactions, the head of Bottomline Leasing said he “made “ full disclosure” to Kappa Beta, as well as the other deals he submitted. He did not “lie” or make “misrepresentations” to the leasing company, as he never was in contact with them directly, he repeatedly said.
Asked specifically, he said the equipment was not “used.” He said when the deal was funded by Kappa Beta, they paid the dealer and he received his commission. He said he saw nothing wrong with working in this manner nor was he “specifically” aware of how Kappa Beta submitted the package to ABC Financial. He stated he was not aware that Kappa Beta claimed they were the vendor, although he again acknowledged that “the original dealer” was paid by Kappa Beta, not by the leasing company who funded the transaction.
He considered Kappa Beta a “broker” where he often received from fifteen to twenty points on deals he submitted.
In the documents provided to us by ABC Financial there are copies of the checks for the purchase of the equipment from Kappa Beta ( without sales tax, assuming sales tax will be charged monthly due to the state ABC Financial is located ) plus a five percent commission for Kappa Beta ( there is an invoice from Kappa Beta labeled ( administrative fee) and checks from ABC Financial labeled “ commission.”
From one of the “verbal checks,” the lessee admits getting “cash back,” and in one conversation, Kappa Beta said it was not uncommon for him to pay fifteen to twenty points to Bottomline Leasing.
One actual invoice is from Kappa Beta, for $47,895 of Dell Equipment ( there is no sales tax on the invoice. ) Dell reports that they sell direct, not to dealers. It is most common for those who install this equipment to have their customer pay Dell direct. While it may be a situation where the “dealer” buys direct from Dell, there was no installation, cabling, or other costs so noted on the invoice.
Another invoice had Samsung 17” inch LCD Flat Panel Monitor at $789 a piece. There were no serial numbers nor model numbers, and a search on the internet found them costing from $319 to $502, depending on the model and seller.
In this invoice, cabling and installation was noted on the invoice, but not cost. The APC Battery back-up model was not noted, In search best buys, they ranged from $200 to $1,000 for a very large “net server.” No model was noted and it was strange here were three “servers,” and three monitors, usually smaller monitors and often one with a three way switch, and not three APC back-ups, but one.
Under the name American Leasing, we asked Dell for a quote on some of the equipment on the invoice that did not include installation and cabling. We assumed a Middle West vendor selling to a company in Florida would have them do the installation, and cabling, if required. We also thought it strange they were not going direct to Dell.
The sales representative we spoke to said they don't sell Samsung and spoke about the Dell 17” flat screen panel on sale for $269 with many features and warranty, and he told us they had the latest Sony for $329. These prices are a far cry from $789 a piece.
In trying to get the quote using the invoice in the funding, the sales representative wanted to know how much ram, raid, and other features in the server, and if software was included, how many users. He said he need more information to make a more accurate quote, so guessed at 20 and made a top configuration.
We then ran into an issue of who the “end user” would be and they would not accept American Leasing, as we have done over $500,000 with them in six months, they said, and in the past orders, needed to get the name, address, and telephone number of the user to get the discount and also find out who would be our sales representative.
Going on line, we found some of the equipment close to some of the invoices, although they were 2.4 ghz and the on line were 3.2ghz, with the most cost $5459, a far cry from $12,875 for four servers costing $51,500.
Searching prices of others named it appeared to us these were older machines not only due to the configuration, but price. It was an easy guess to see the prices were well inflated. Perhaps a George Alpi or Kathy Robb at Bank of the West Leasing or even ex- U.S. marine Bob Fisher would not have wasted this time in smelling this out.
These were sale/leasebacks to the educated and experienced in equipment leasing.
To sum this up, Bottomline Leasing says he was not involved in any deception, although he originated the transaction, and was aware that Kappa Beta "pretended" to be the seller of the equipment. He also admitted while Kappa Beta represented himself as a vendor, he knew he was acting as a "broker."
Both parties who submitted the transaction, one to the other who then sent to the leasing comapny, admitted “commissions” were paid to each other, but never disclosed who the original dealer was (although one lessee admitted he received cash—we do not know about the others as they were not contacted, but most likely there was no “original dealer.”)
It now also appears ABC Financial discounted these leases to another, as in one communication, it was stated, “I want this out in the open. Brokers like this give us "good" brokers a bad reputation. I will not stand for that. “ Certainly now none of the parties want us to disclose their names.
Leasing News has been informed the practice above is becoming more commonplace in the equipment leasing industry.
copy of six Dell invoices with the names of the vendor and lessee removed:
copy of the “adminstrative fee” invoice sent to ABC Financial, names removed from the invoice: