Wake Up!  Discounters!!! Banks!!! Investors!!!

    by Christopher Menkin

Leasing News has been writing about the potential “jury pool”

for NorVergence customers who leased their equipment. The Telecom Agent Association have started a “legal co-op” and the various state

governments and the federal government are also getting involved.

Their goal is outspoken: breaking the distance of responsibility

of equipment and its financing.

The theme is the leasing company's have responsibility in accepting both seller of equipment and its use, not just the credit or financial

strength of the lessee (debtor). This fundamental breach of capital leases ( not “maintenance leases”) will have repercussions for years to come.

Perhaps as many as thirty leasing companies, not including many

independent banks, are involved.  The money will be much more

than Leasecomm lost in its suit regarding small ATM leasing contracts.

It will be a bigger scandal than OPM Leasing ( “Other People's Money.”) A class action suit will be a “donnybrook” with each attorney representing their “circumstance.” 

Reporters have been calling since NorVergence could not make

payroll ( according to many employees, checks issued to them

are still “insufficient funds.”)  Originally, the estimate was $3

million in debt, then the telephone companies said, “ No, it was $30

million that was owed, so the filing went form #11 to #7

as everyone knew NorVergence could not even make payroll.

The question asked was what did Leasing News think was involved.

From the very beginning, considering there were as many 7,000 lease contract written (they had 11,000 customers, they said in

advertisements,) my guess was “at least $100 million.”  Reporters

were astonished. Today attorneys believe this will grow into a $200 to $250 million scandal.

In the past, small dollar equipment leasing contracts, meaning under $50,000, and especially under $25,000 were too costly for the average lessee to engage in a legal battle. Leasing companies would settle,

write-off, or get simple judgments.   In today's instant internet communication, listserves, bogs, web sites, it is very easy for groups to get together and pool their information and resources.  In this specific case, we have a non-profit organization that has organized a “legal co-op.”

This is very serious to the leasing industry.  What is being said

on the internet sites are from people who most likely will either

be or the jury pool, or their friends or relatives and at worse

is their “point of view.”

Here are some of the comments

” They (this leasing company) partnered with a Company Norvergence) to provide a product, and on-going service. In the case of a small business it is a struggle just to keep the store open-- let alone being an expert on all of the peripheral services you depend on!  Explaining that the customer should have a -"Done their telecommunications Homework"- before they sign a lease for that service doesn't wash with me. You should be able to trust someone...you would think. I would think that with the numbers we had here, maybe the leasing companies should have done some homework.  Why should the leasing business be bullet proof and risk free?”

“Let's let a jury decide if the leasing company had responsibility

as ‘lessor'.”

“Let them end up with the same fate that YOU have deemed appropriate   for many of these small businesses - financial hardship...   Lets have a few leasing companies go out of business,   then maybe the industry will be a bit more ethical in who they enter   into dealings with.”

“Hopefully,   members of the bench (legal that is) agree with me.”

  and from Leasing News readers:

“As a lease professional I certainly understand that the lessor is in no way responsible for the equipment performance, and the lessee acknowledges that in the docs.  But as a consumer, you would a company that is effectively "endorsing" the product by providing a private label program or discounting relationship to have some confidence in the vendors ability to perform.

“ If the lessee secured its own unrelated financing it would be a different story, the lessor could pull the 'buyer beware' card, but since the lessor was working in concert with the vendor - that is going to be tough.  The lessors are going to have a tough time making the case that they never complete due diligence on the vendors they discount from because they are not dependent on the equipments performance.  The lessees bought a 'telecom solution', part of that solution was financing offered by NorV on NorV docs.  Their claim will be that they believed that if the company failed there would be no more service - but also no more payments, regardless of what the docs say.  For all we know NorV salespeople might have been telling them that.....”

There are over 10,000 companies involved.  Even if only 10% get

together, monetarily and politically, they will be a force to be reckoned

with.

http://www.leasingnews.org/#norv