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Leasing News' Position on the NorVergence Scandal by Christopher Menkin As reported earlier, the Leasing News Advisory Board is discussing taking an Editorial stand on the NorVergence matter. It is not that we are afraid of controversy, and as our mission states, we are a “reform” internet trade publication, our discussion centers around what is good for the leasing industry by taking an editorial stand. It is my understanding from talking by e-mail and telephone to perhaps over literally a 1,000 people since the beginning of this year, before the bankruptcy hearing, that the lessees thought they were signing an “Equipment Rental Agreement,” as stated on the top of the “Private Label Contract.” “I for one had no clue I was signing an Equipment Lease, I believed it to be a service contract for telecom similar to a cell phone contract. “It's like we contracted with someone to paint our house once a year & then found out later we signed a second mortgage on the house - and did we use a mortgage broker on the loan? Hell no, if we had known were putting our house on the line we wouldn't have done it.” Very few of the lease contracts were originated by a “lease broker,” and from what I have been able to discern, most contracts were “explained” in “sign this or else” manner by the NorVergence salesmen, who not only made a commission from the “service contract” sale, but often points from getting the lease contract signed. “No one even knew they were signing a lease. A leasing broker sounds like a legitimate business person that sits down and explains the terms of a lease to a customer. They never even gave me a chance to read the contract, just sign here.” Others explained it this way: “Norvergence was very aggressively selling a service at "drastic Robert J. Fine, the former president of the Eastern Association of Equipment Lessors obviously used his position to make connections with leasing entities to set up “private label” and direct financing for NorVergence. He worked under Alex Wolfe, who reportedly was the mastermind of the sales program and its approach, plus the profits coming from “discounting” to leasing company the contracts. Before the Bankruptcy, Leasing News was receiving complaints, which we seemed to resolve, many times talking with the NorVergence public relations person, or to Mr. Fine directly. He never explained the service provision as being part of the lease. In conversations with people close to him, and involved in the corporation, they identified Alex Wolf as the mastermind of the leasing plan, the concept, and experience to implement it. I was told Fine reported to him as did most everyone else. The owners were in the building, but the operation was run by Mr. Wolfe, I was told by many key employees. I have a whole board of directors of the leasing association who are not happy with me, do not speak to me, and the leasing association sends me no notices and does not respond to e-mail ( perhaps I have two, maybe more.) We are on the outs for several reasons, but here primarily because of what Leasing News wrote before and after about Mr. Fine and NorVergence.. We report the facts to the best of our ability (and legality.) I'll give you a sample of Mr. Fine (from May of this year): Kit, “I appreciate you giving Norvergence the opportunity to respond. “As we have discussed before, Norvergence provides a telecommunication solution to small and mid-sized businesses. The solution is comprised of hardware and services, which are billed separately. One of the services we provide(under a reseller arrangement) is cellular phones and cellular access. WE DO NOT LEASE OR RENT CELLULAR PHONES. “While I would love to tell you that we have 100% customer satisfaction, that's not possible with Norvergence, AT&T, Verizon or Sprint. A customer service issue with these companies is not "news" and is no different in this case. “For the record, I did research this customer and all issues have apparently been resolved. The reimbursement referred to in the e-mail is a $63 item.(again- not "news" in my opinion) “As for the insurance issue, our Equipment Rental Agreement clearly states that the Renter is required to provide evidence of insurance or insurance will be provided and the Renter will be charged for this service. This is not uncommon in the small-ticket marketplace. As for the claim the equipment has a replacement value of $300 I refuse to dignify that ridiculous comment with a response. “Once again I appreciate the opportunity to respond and I trust this will provide enough information so that a complaint does not get posted on your website. “Thank you.” Leasing brokers seem to get a bad wrap, but in all the scandals in the last few years, including Commercial Money Center, RW Professional, and others who have filed bankruptcy such as MSM Capital, the leasing brokers were not the culprits---it was the management of the leasing company. The NorVergence example is one where if a leasing broker were involved, not only would they in the field know what they could and could not do, I am sure the leasing companies would have looked at the transactions quite thoroughly, which they obviously did not in this circumstance. Leasing brokers to defend their reputation and purpose in the industry formed an association to represent them: the National Association of Equipment Leasing Brokers. One of the ways Leasing News has been ahead of others on this story is our participation in the various list serves, plus direct e-mail and telephone calls from users who had complaints. In the List serves, Leasing News identifies itself and participates. We advise to keep making the lease payments to not only keep their good credit rating, but if they go to court, it will not be on the defense, but offense, as it is not about not being able to make the lease payments. We answer questions, being as fair and accurate as possible. “ I do question your motivation, and often don't like what you tell us, but overall you have been giving very good advice. I appreciate it,” one list serve person wrote. Another said, “I have to admit, that is the best advice I have heard from you so far. I disagree with you often and I am suspect of your motives, but you do give good advice.” We also get information cleared, such as when there were a series bad mouthing US Bancorp, that they were getting too aggressive, and tear up all your US Bancorp cards ( they write the same about Wells Fargo, et. al.) We were able to clarify to them that US Bancorp was a very reputable company, 6 th largest bank in the United States, the leasing division cares about their customers, wants repeat business, and asked if any policies had changed, meaning were they more aggressive with NorVegence lessees: “Our collection position has not changed -- we are attempting to settle with people that are willing to work with us. The only people I have sued in MN are those that tell us to "take a hike" and refuse to work with us. I have sued about 40 files in MN -- out of a total NorVergence portfolio of 900. Maybe the (the person who said this) is one I sued so in his mind US Bancorp certainly has gotten more aggressive.” John D Docken Mr. Docken basically said he was following procedure. He also appears to give his bank position that they are willing to try and work out of the situation amicably with any lessee. It should be noted, from their web site: “ U.S. Bancorp, with assets of $190 billion, is the 6th largest financial services holding company in the United States. The company operates 2,344 banking offices and 4,578 ATMs providing a full line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions.” When asked, Leasing News position has been to continue making the lease payments, and the best business decision, is to make a settlement. Going to court to find one party who wins and one who loses, is not only a “gamble” in many circumstances, but can be expensive and quite time consuming. Here is one who evidently agreed with us: --- ( This is from a list serve group: ) “I settled with my leasing company (US Express Leasing, one of the last into the fray). I consulted 2 attorneys I keep on retainer. Both said we may well prevail if we sued to void the lease. Both quoted about the same amount of time and money to do so. I offered the lease company the money instead, and kept my time. They agreed. I can't divulge the settlement (a condition of the agreement) but in my opinion it was fair for them and for me. I redirected legal fees to the LC, saved myself the grief and the time, and got to keep the equipment I already had. “I'm p*ss*d at myself for being so gullible as to fall for the scam in the first place, but I'm thrilled I was able to end it amicably with my LC (another "victim" of the Norv fraud, in my opinion). I now have a vendor that will jump through hoops for me on future leases if need be, no more time invested, and no more stress over it. “Wishing all 'a y'all the very best, both for the holidays and in your outcome. -- The listserve group also learns things not reported elsewhere. (This is from a list serve ) “I just spoke to Robert Walton, Esquire. He represents Patriot (attorney's name with held) “All GE agreed to were the financial terms of the settlement, not the premise for it. That is not atypical. Most settling defendants simply state that the settlement is a matter of economics and is not intended by them to admit or deny any of the assertions against them (this is the analogy to a nolo contendre plea ---I do not admit guilt, but simply accept the consequences).” (attorney's name with held ) Strangely, none of the telephone providers, who cut many of them off, have come into criticism, including their involvement with NorVergence by providing the telephone service. They look at the leasing companies, who they call “LC's,” as being part of the conspiracy with NorVergence, and strangely appear to be more the bad guys than NorVergence itself. As soon as we as a group come to an understanding, we may have an editorial stand as the results could boomerang, as one Leasing Advisory director said: I agree you should take a stand and I believe settlement is a valid alternative. If the leasing companies win, and probably will, the political fallout could be disastrous. Go For IT!! Others are more cautious that a position may hunt those leasing companies caught in this apparently “no win” situation. Yes, winning in court may be one thing, but the repercussions and the edification of the various state's consumer fraud division and legislators viewpoint may have many far reaching aspects we don't want to talk about here.
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