NorVergence Soap Opera

by Kit Menkin

A “hard line” group has developed a new web site, www.LesseeRights.org, evidently not satisfied with “ www.fightthescam.com. ” They are also planning to picket the Equipment Leasing Association 44th Annual Convention at Boca Raton Resort & Club Boca Raton, FL October 23-25, 2005. A member of the group claims to have received permission for an orderly demonstration from local authorities.

The backers of the first web site have posted disappointment with the announcement of the need for a new anti-leasing company web site, “ We have posted all relevant information to our cause, helped victims, helped ex-employees, lawyers, judges, Attorney Generals, and the list goes on, “ they said. There is talk the new web site will be the “... headquarters of NVAC, Norvergence Victims Action Committee.”

In the meantime, Preferred Capital, Breckville, Ohio, has worse things to worry about than the restoration of its web site or the posting on a new web site against leases they purchased from NorVergence. According to a very well informed source, the leasing company “double dipped” several to many leases to local community and regional banks. To make matters worse, many are the NorVergence contracts where lessees are refusing to make monthly payments as they are not receiving service, which they contend was part of the lease contract.

Preferred Capital will not return telephone calls to Leasing News.

Last Friday, two judges in the Missouri St. Louis County Circuit were requested to add NorVergence, a bankrupt New Jersey telecommunications company to close to 100 cases brought by Popular Leasing of Baldwin, Missouri. Despite the fact the company is no longer in operation, being dissolved with more liabilities than assets, the court is being asked to name the defunct company as co-defendants..

Daniel V. Conlisk, the attorney for approximately 75 of the lessees, argued that his clients need to add NorVergence Inc. of Newark, N.J., even though the company is in bankruptcy proceedings as he claims they were the victims of fraud by NorVergence and perhaps the cause why his clients no longer are making leasing payments.

Randall F. Scherck, a lawyer for Popular Leasing USA, told judges Melvyn W. Wiesman and Barbara Wallace that such an order from them was not necessary as their cause centered around enforcing the "stream of payment" of the leasing contracts.

Scherck acknowledged that Popular Leasing purchased the leasing contracts from NorVergence. This could be the tip of the ice berg for Popular Leasing and other in the same predicament. According to newspaper reports, Popular Leasing has filed closed to 500 lawsuits in St. Louis County alone to collect lease payments from businesses around the country that had signed up with NorVergence. Popular's reportedly has $30 million of NorVergence contracts.

The attorney for the defendants in asking for the enjoinment, said "NorVergence, whose conduct is at the core of these cases, is not here...” Conslisk added, “There is no showing that NorVergence couldn't be enjoined."

He claims his clients are victims of NorVergence's fraudulent claims and therefore cannot be held accountable for damages resulting from the fraud.

One of the arguments centers around the alleged high-tech, next-generation network accelerator called "The Matrix", allegedly costing $1500 new and $500 used. NorVergence salesmen claimed the product was a "spectacular innovation" which would channel telephones, Internet and cell phone service onto single line.

Customers were told they'd get unlimited service if they would sign leases and pay fixed-price bills monthly. When "The Matrix" turned out to be a decidedly low-tech machine - basically a router - charges of fraud were filed and by June of last year, NorVergence was in bankruptcy.

Attorney Randal Scherck does not believe the failure of NorVergence is both “ necessary nor vital” to the cases in court. "We have bought these contracts completely,” he said. “It is analogous to a bank buying a contract from a bank. That is what Popular does. It is not a factory. It buys paper," according to the St. Louis Post-Dispatch.

The effect of a court order adding NorVergence on the industry of "buying and selling of contracts would be devastating," he said. "It sets a dangerous precedent."

Conlisk position is they were fraudulent contracts, adding that the defendants also had the right to examine the relationship between NorVergence and Popular Leasing in the preparation of the lease contracts, evidently as the cause to cease making the “stream of contract” payments.

In the meantime, the bankruptcy court in New Jersey is processing all the claims, including scheduling a hearing for the creditors and debtors. At the time, the “real” number of actual NorVergence leases in the claim will be given. The original claim was 11,000, but indications are the number of actual leases in dispute is much lower.

The New Jersey attorney general has filed a suit against NorVergence and its president, while 13 other attorney generals have made claims on NorVergence leases in their states regarding venue of disputes and many also demanding the leasing companies settle approximately for 15 cents on the dollar.

Lead Federal Trade Commission equipment prosecuting attorney Randy Brook states the FTC is actively pursuing all aspects of the case, viewing it in a civil manner, and any information that may come there way pointing to criminal activity, he says they turn over to the appropriate agency.

“There may be action for the U.S. postal inspectors and various states have their own laws, plus other tax authorities, including the insurance commissions, may consider criminal activities, “he explained. “I assume they would take a hard look into matters . ..

Other that what CIT itself reported publicly in its SEC filing about grand jury subpoenas, I don't know of any specific, current criminal investigations of any finance companies.”

There is no time table to when the FTC will complete his investigation or whether his office will file a legal complaint.

It appears the twist and turns of the plots and characters are more involved than a television soap opera.