Readers Comment: Paul Menzel, CLP Here are readers comments regarding Paul Menzel, CLP, Senior Vice President, Community Lending Group, Pacific Capital Bancorp, November 30,2005 http://www.leasingnews.org/archives/November%202005/11-30-05.htm#clp “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.” None of the people listed originally, and asked to make a comment responded, although none of the companies have a NorVergence lease, to our knowledge. Mr. Menzel's e-mail centered around Leasing News Editorial, which did not single out any specific company, and was in fact, addressed to the entire equipment leasing industry, as Mr. Menzel's comments were also addressed. Leasing News chose other “leaders” who were specifically not involved with NorVergence leases for a comment. We also had direct inside information from several of them that they also were approached by NorVergence, but saw the potential problems, had great reservations, even though it was pointed out the colleagues who had purchased the “Equipment Rental Agreements” they were offering at very good yields for especially very good credits. They did not respond: Patrick Byrne, Balboa Capital Leasing News did hear from: Doug Olson, Executive Vice President GreatAmerica Leasing Corporation “Our company has been a very active supporter of the Equipment Leasing Association for the past 15 years, with various members of our senior leadership team serving as committee members, committee chairpersons and a past board member. In each of these roles we continuously support the principles of ethics and integrity within our industry. We elected not to participate in the Norvergence financing program for various reasons, but recognizing long ago when lease volume is easily obtainable, look out. I couldn't agree more with Paul Menzel's comments that our industry has provided a good living for many us employed in leasing and continued unethical practices could invite government regulation, which as we all know causes more bureaucracy and expense to our industry. “As a company that participates in the small ticket leasing segment we continually see and hear of practices that in our belief are questionable at best. Unfortunately, these practices are not necessarily carried out by only smaller lease companies, but in some instances can be found within larger companies as well. When the "fine print" within a lease agreement continues to surprise lessees, something is wrong. We all understand the fact it is the lessee's responsibility to review the lease before signing, but as we all know most do not take the time and rely upon what they believe to be a straight-forward transaction. Competition has become so intense in certain segments of small ticket leasing that pricing has become irrational in many circumstances. In order to compensate for this, some leasing companies have been forced to resort to finding other ways to make-up the income. When this causes too many surprises for lessees, it may bring on unwanted regulation. Whatever happened to the adage "a fair day's work for a fair day's pay"? “This is a very good industry which plays an important role in our economy. How we choose to conduct ourselves may have important future implications to our industry. I would ask everyone to seriously exam their practices and ask the question -- how many phone calls do we get from a lessee who is surprised by what we are asking them to do?” ---------------- Leo Timmerman Timmerman Leasing Inc. “I agree with Paul, This industry has been very good to me and my family. It has provided a country boy from Iowa, with no formal education except high school, a means to educate 4 children, and a life style that has been very rewarding. Now my wife and I are semi-retired and enjoying everyday to the fullest. Today I turned 67, it has been a great ride. Thanks to the Industry that provided the vehicle for all this. Once we owned 2 companies, one being a super broker and the other vendor /direct, never having a BBB complaint, or a filed complaint, this proves it can be done and you can be successful doing it the old fashion way. Too bad we have to have a few bad apples spoil the entire orchard. Don't put money ahead of success. You can have anything you want if you help enough people get what they want first. Then you will have success. “ -------------- Dale Kluga President Cobra Capital LLC “Regulation is about protecting individuals. To the extent our great politicians and the FTC interpret the Norvergence scam as harming individuals versus businesses, we have a very serious problem in our industry. Sorry - I need to correct that I should say - those of us operating in a non-regulated business have a very serious problem. On the other hand, the primary benefactors of any regulation in our business will be the regulated finance companies and banks who, if they so choose, could completely eliminate the independent leasing company by simply doing one thing. Funding lobbyists. A well funded lobbyist could sponsor a regulatory bill that would make it cost prohibitive for an independent lessor to operate in this business. It seems with every new industry debacle this nightmare fantasy of regulation inches closer and closer to reality. “Materiality is not a concept politicians and the FTC are motivated to follow. The truth is that politicians and the FTC are motivated by emotion not logic. The politicians and the FTC don't care if our industry contributes more to our country's GDP than the collective cost of all of our industry debacles. That fact is viewed by them only as a distraction from their primary goal. “The Norvergence debacle is another novel waiting to be written. Having spent over half of my 24 year finance career in banking with both Continental Bank (now part of B of A) and ABN LaSalle I am intimately aware of how regulation can strangle a business. Unfortunately, regulation is rarely proactive and always seems entirely reactive and often times forces unwise business decisions for the sake of compliance over making a sound business decision. However, in the case of protecting consumer rights, regulation can be a very good thing. “Who should bear the cost of truly egregious business practices, the perpetrator or the industry? The problem is that the vast majority of perpetrators never pay the price mostly due to our own wonderful bankruptcy laws that protect even the worst scam artist from fully compensating those they have harmed. “It is partly our own laws that protect the violator that will inevitably force the politicians and the FTC to throw up their hands and force the cost on the industry. Even politicians and agents of the federal government battle with the same laws they help create.” --------- From a NorVergence Lessee, Jody Nichilo “ I just want to say that I have several leases with some of the other companies attached to the Norvergence fiasco, and have never had a problem with any of them. What would we do without leasing companies to help small businesses with the ongoing cost of office equipment, etc., etc? I don't blame the leasing companies for anything other than not performing due diligence prior to getting in bed with Norvergence. Most of what I've read from your ongoing emails about the leasing industry is all good. It's a shame that a few bad apples have to spoil the whole bunch!” (For the record, Leasing News from the very beginning, in www.leasingnews.org, and all the listserves and blogs, has urged all NorVergence Lessees, often, many,many times, to continue to make their leasing payments to protect their good credit, to let the courts or authorities make final decisions, and to honor their lease contracts whether they believe the company who purchased the lease contracts knew or did not know about the service provisions dependent on making the Matrix box have any value. When the Federal Trade Commission and twenty-three states attorneys generals plus the District of Columbia obtained brought litigation, and in most cases, settlements in behalf of NorVergence lessees against many of the large funders, such as GE Capital, Wells Fargo, CIT, USbancorp, Leasing News continued to highly recommend all NorVergence lessees continue to make their lease payments. In our editorials, we did make a stand, recognizing it was the better business decision to settle the matter than to fight the politics and adverse publicity because the lessor did not perform better due diligence. I think GE Capital, Wells Fargo, CIT, USbancorp, to name a few, got to this point before we did, which we congratulate them, and encourage the rest of the industry to follow their leadership and business acumen. editor)
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