NorVergence--Are We Being "Fair?" from a Lessor: I think you are being biased against the leasing companies in your coverage of the NorVergence story. Allegiant Partners was given the opportunity to purchase NorVergence paper and we were fortunate that we passed on the credit. If we would have purchased the leases we would not have done so as part of an evil scheme to defraud lessees. The companies that purchased the leasing paper did not buy it assuming the company would default. They did not want this mess any more than lessees wanted this mess. Some of the independent leasing company principals who purchased the paper are fighting for their own financial survival or jobs. Caught up in the mix are principals of law important to all leasing companies and attorneys attempting to help the positions of their clients. I feel for the lessees, but I also feel for the lessors. The owners of NorVergence are the ones to blame for this mess. I think you should think hard about covering all sides of the story if you are really going to stay "unbiased" as you claim. Christopher A. Enbom CEO Allegiant Partners Incorporated (There were 48 leasing companies who purchased NorVergence contracts. Leasing News has posted 145 stories on this subject in the last year and a half, not including the complaints and “questions” mentions the year and a half before the bankruptcy. Noted were those who saw the packages and turned them down, as evidently Allegiant-Partners did. Among the leasing companies mentioned were Pacific Capital, Bank of the West, including Financial Pacific who did one, and when the second one came in for the same piece of equipment for a different dollar amount, they said, “no way.” A highly reliable source said the first one was settled favorably to the lessee, once they found out about the service issue in the bankruptcy news. I also think one of the reasons Paul Menzel was chosen as the Leasing News Person of the Year for 2005 was one of his statements: ““The story about the FTC investigation of deceptive practices in the small ticket leasing segment should be given serious consideration by all in our industry. NorVergence has exposed the leasing industry to more regulatory scrutiny than in the past. ” Although there is plenty of blame to spread around to all parties concerned, not the least of which is the fraudulent but now bankrupt vendor, the Enron motivated demand for transparency in transactions has arrived at our shore. It is imperative that we rise to the challenge and self regulate our practices to meet the highest of ethical standards. “The leasing industry is good for the US economy and has provided a good living for those of us who participate in it. Let's not allow greedy practices by a few ruin it for the vast professional and ethical majority.” Collection of NorVergence stories http://www.leasingnews.org/Conscious-Top%20Stories/Novergence_main.htm -- From a Lessee: I have to have something to say as a lessee. I signed my contractual agreement around April. By June, I find out that not only am I not getting any of the services promised, which by the way included two cell phones free of charge, but after numerous attempts at trying to get someone to speak with me from NorVergence, there no longer is a NorVergence!. Unfortunately, I now come to find out that I owe $27,000.00 to a leasing company. The usual question I kept hearing from people was FOR WHAT? How can you be responsible for something you never received? I am however responsible for reading the lease, yes, but NorVergence signed up attorneys too. They certainly knew how to read a contract! That's how convoluted those leases were. I think you've lost sight of the bigger picture. NorVergence fraud was perpetrated on both the leasing companies and the lessee's. The leasing company wants its money, and rightfully so, however, the lessee's contend that none of the leasing companies did “due diligence” prior to handing over their money to NorVergence. Most of the lessee's, to my knowledge, don't have attorney's on retainers, like the large banks and their subsidiaries, so yes, we were stupid to sign, but more stupid than us was the leasing companies. It's nice to know that someone genuinely received some sort of service, but many never received anything but the bill for m the leasing company. Let's face it, the Salzano brothers did it before, and knew just how to do it again! They're probably doing it right now to some poor schmuck. We are all victims here. AND….. Yes, why aren't the Salzano's in jail???? The Salzano brothers are merely a higher class of scam artist simply by doing it on a much larger scale. Jody Nichilo 246 Highway 34 (For readers who say this is an unusual situation let me tell you there were over 500 such customers in the last few months that NorVergence sold to leasing companies. They did the verbal, packaged the leases and sold them off. In none of these cases was the telephone line hooked up and working. There are estimates there may be up to another 500 who only got some of the service and installation, but their contracts were sold as if “complete.” The recent FTC judgment cleared many of these victims from their contracts which were not fulfilled. editor ) -- From an attorney for the defendant in a IFC Credit case: First, let me thank you for your continued unbiased reporting. No other equipment leasing industry publication has fully examined the NorVergence scandal. I am responding to comments made in the February 17, 2006 edition of Leasing News on two issues in the NorVergence scandal. 1. IFC Credit's holdbacks of payments to NorVergence for assignments of equipment rental agreements: The real issue with IFC's holdbacks is the filing of affidavits which lied about the amounts paid for the assignments. IFC filed affidavits in two different lawsuits which alleged that the entire assignment amount was paid, as opposed to the amounts which John Estok recently admitted in a deposition and in trial testimony to have been the amounts actually paid due to the holdbacks. The affidavit testimony was, therefore, perjury. No person or entity is entitled to lie under oath, even with limp-wristed rationalizations, not even the President of the United States of America. (As a side note, Mr. Estok has stated that he will make a statement. Leasing News has asked him many times for a comment. editor) 2. When is a lease not a lease? This question was posed at the article regarding the FTC and state attorneys general. The best answer is that a lease is not a lease when it is actually intended for security. The definition for security interest is provided in Section 1.203 of the Uniform Commercial Code. Under Section 1.203(a), a lease is intended for security when the primary term of the lease exceeds the remaining economic life of the leased equipment. The remaining economic life is looked at as of the date the lease is entered into. The problem with the NorVergence rental agreements and leases of telephone equipments is that even under ideal circumstances the equipment has no value whatsoever after one and one-half years. The NorVergence rental agreements are for five years, and most other small-ticket leases are for at least 36 months. Comment: The above circumstances, and the use and reliance upon “floating” forum selection and choice of law provisions, shows the equipment leasing industry engaged in wishful thinking and self-delusion. Leasing companies are used to winning summary judgments against lessees which lack adequate financial and legal resources. Certain companies have had “victory disease” much like the Japanese had with a series of early victories in the Pacific Theatre of World War II. NorVergence was different. Did the leasing industry already forget about the Recomm fiasco of the 1990's? One supposed difference between humans and other animals is that humans have the ability to learn from their mistakes. However, the leasing industry has an addiction to large volume business with relatively new companies, without background checks of those companies' officers, just like a drug or alcohol addiction. (Now before you say this is a gross exaggeration: New Jersey Record/Star Ledger: The Record, Bergen County, NJ “Running a phone company into bankruptcy is nothing new for Thomas N. Salzano. Before his ill-fated venture, Newark-based NorVergence, folded last month, Salzano headed up a different phone company. “In the early 1990s, after running a freight consulting business, Salzano founded Minimum Rate Pricing Inc. in Bloomfield, a reseller of residential long-distance phone service that eventually hired hundreds of people but ran afoul of federal regulators in 1998 when customers complained that MRP illegally switched their long-distance, a technique known as slamming. “A settlement was reached, and MRP agreed to pay a $1.2 million fine to the Federal Communications Commission. But over the next few months, MRP's business imploded. “The company, which bought its long-distance service wholesale from WorldCom (now MCI), racked up $67 million in debt, according to court papers, and filed for Chapter 11 bankruptcy protection, along with some related companies, in February 1999.” A year later, he is back with "Charity Snack." from Northjersey.com: "From January through June, the Kenilworth-based company collected cash for the American Breast Cancer Foundation using thousands of cardboard boxes, filled with cookies and candy. Printed on Charity Snack's cardboard box is a promise to donate 30 percent of its profits to charity. “The company's sales staff placed an estimated 4,000 to 5,000 boxes in nail salons, auto-repair shops and other walk-in businesses throughout New Jersey, according to former employees. By April, the business was growing fast, bringing in as much as $20,000 a week in cash, the employees said. “Mia Saric, who started work at Charity Snack in February, said 269 of her boxes brought in $2,963 in one two-week period. “Saric said her pay was docked $25 if she was five minutes late to a morning meeting. Former NorVergence employees have described a boiler-room-like atmosphere with draconian work rules including being docked for pay if they were late. “... Salzano scuffled with police after he was unceremoniously booted from his Kenilworth office that housed Charity Snack, his latest venture, for non-payment of rent. “On the surface, the companies couldn't have less in common: NorVergence was a reseller of phone service with hundreds of millions of dollars of leases; Charity Snack raised money for breast cancer by putting cardboard boxes in nail salons. “But the similarities were striking. “Both companies relied on a high-powered sales force working from a script; employees described draconian work rules including docking pay for minor infractions; and when the business soured, some employees say they weren't paid what was owed to them. “And both companies fell hard: NorVergence crashed in a bankruptcy that has spawned a slew of investigations; Charity Snack lost its office and its affiliation with the charity for which it said it was raising money. “Last week, a U.S District Court judge ordered a $181.7 million default judgment against NorVergence in a case brought by the Federal Trade Commission. “And creditors now assert the company owes $550 million. “Of that, former employees claim $6 million in unpaid wages and health benefits. And the IRS says NorVergence went bankrupt owing $6 million in taxes. The company has cash on hand of $520,000, said Michael Holt, a lawyer for the bankruptcy trustee.
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