More Leasing Companies “Caving In”

by Kit Menkin

While the attitude of the lessor is “caving in,” as it is their money they are losing, and their intention was never to warrant service or maintenance, this is being viewed as an “unforeseen disaster” and the one with the deep pockets must pay. It is off the Basell II accord scale.

The alleged mass fraud has been overwhelming to lessors involved with financing NorVergence “ERA” contracts, including those who entered into the transactions on their own lease documents. Both the lessee and lessors now realize the mistakes they made in perhaps evidently the largest “dealer” misrepresentation in the equipment leasing industry.

Collectors and legal personnel who settled for 50% on the dollar, have lowered it to 30%, and are being instructed “to settle this,” even if we have to “write it all off.” This comes directly from many lessors involved, plus lessees who are communicating with each over several internet list serves.

The funder's reality hit first with the GE Capital settlement, with many at first saying GE had the money to do this, and could “afford

to walk away.” After thinking about it more, reading the news, hearing the radio, and watching growing local television reports, the conclusion was that GE Capital was not only making a very good business decision, but “doing the right thing.” Their leadership on the issue became apparent, if not well liked. None appear happy at the decision, as they know they have been “had,” but the consequences appear worse than proving who is right or wrong and even trying to collect the money owed, when and if they prevail in their local court.

The actions by the New York Attorney General Eliot Spitzer as well as others, such as New Jersey Gerald J. Pappert, suing NorVergence and naming its officers, has also been a great influence to their legal staffs who prepare the costs of defense.

The principals who started NorVergence, the Salzano brothers, are back in business, with the same pitch. This is their third such telecommunications company. Whether they, Alex Wolf, Robert J. Fine, will be found personally guilty will be up to the courts to decide.

New Jersey Attorney General Gerald J. Pappert will have his day in court for justice to all those have broken the law.

In the story below, it is reported the Salzano brothers allegedly took money right before the bankruptcy to start again, as they reportedly saw the writing on the wall

According to a well-known bankruptcy attorney:” It is customary for the bankruptcy trustee to demand the return of all these sweetheart deals. They typically go back at least 90 days and investigate why certain vendors might have been paid and others had not.

“They can then demand the return of any monies disbursed via favoritism. The money can then go into the pool available to settle obligations of the bankrupt corporation.”

There are other provisions where debtors may make claims for monies paid going back as far as twelve months. In the meantime, the trustee overseeing NorVergence's liquidation filed court papers showing the company has $87.3 million in liabilities and $53.6 million in assets. It owes former employees $8 million in unpaid wages.

It should be noted many of the NorVergence lessees have been advised, according to list serve, not to file a claim, while others have questions regarding it. Whether leasing companies who have “settled” may have recourse against NorVergence is another matter.

The latest deadline to file a proof of claim is Feb. 28, 2005.