11 Lessors in the rough on Golf Cart Leases
In additional to alleged selling of the same leases to various community banks, plus taking on as many NorVergence “ERA” contracts as they could, the “bad boys” at Preferred Capital along with ten other leasing companies entered into reportedly fraudulent leasing contracts with over one thousand golf courses. The situation has similarities to the NorVergence telecom scandal, but this involves advertising on wine-beer golf “caddies” written on private label lease contracts with the name of lessor as Royal Links USA, Holland, Ohio. These are the eleven leasing companies involved in the alleged fraud with Royal Links. C&J Leasing “Royal Links USA had salesmen call on golf courses to offer free beverage carts. (cold beer, wine, soda's, snacks.) The courses would use them and allow advertising panels to be displayed by Royal Links. Various national merchandisers would pay Royal Links for ads. Royal Links supplied products for free with delivery, and also paid the courses a lump sum (normally $1000) to initially stock the cart with startup merchandise. “Courses entered into an agreement whereby Royal Links paid the course about $300 per month in sponsorship money, which was then sent back to their leasing arm as a lease payment. This arrangement was simply explained as their accounting procedure. “We became concerned initially when it was requested the cart be insured for $12,500. The cost of the cart is most likely less then $1000. “In October 2004, all courses were notified that Royal Links would no longer pay the $300 per month in sponsorship money. Our cart had been delivered about 60 days prior to this notice. The leasing company insisted they were independent and demanded the $300 monthly payment (for 5 years). Preferred Capital quoted a payoff of approximately $15,900.” (name with held) According to their web site at www.ngcoa.org : “The National Golf Course Owners Association has more than 6,000 member courses worldwide and an audience of more than 18,000 through Golf Business magazine, NGCOA is the leading resource for golf course owners and operators looking for tools to assist them in making their businesses more profitable and successful, while promoting a high level of service to partners, customers and members. For more information, visit www.ngcoa.org.” Jay Karen, Director of Membership for the National Golf Course Owners Association web site, summed up the matter: “ Royal Links USA entered into written agreements with over one thousand golf courses throughout the United States, in which golf courses would use Royal Links' beverage caddies to display and sell food and beverage items on the golf course. This “no cost beverage caddy” program involved golf courses leasing the caddies from third-party leasing companies, and Royal Links USA agreeing to reimburse the golf courses for their lease obligations. Royal Links USA proposed to make their revenue from advertising display panels on the beverage caddies. “In October 2004, Royal Links USA notified golf courses across the country that it planned to cease making monthly reimbursement payments to all customers. Each golf course has a written agreement with Royal Links USA, which obligates Royal Links to pay courses approximately $300 per caddy per month, an equivalent amount to the lease obligations. Most lease obligations are for sixty months, and most golf courses have seen less than one year's worth of reimbursements from Royal Links USA, thus leaving an obligation to pay four more years of lease payments. In some cases, golf courses were sold on the program within days of the written correspondence from Royal Links USA. The Chicago-based laws firm of Lord, Bissell & Brook LLP filed the action on behalf of members who contributed funds for this matter. In an up-date on this matter, Mr. Karen posted this on the www.ngcoa.org web site: “A class action complaint was filed against Royal Links USA, Inc. ("Royal Links") in the United States District Court for the Northern District of Ohio on April 1, 2005. The complaint alleges, among other things, that Royal Links breached the terms of its beverage caddie program agreements with hundreds of golf course owners and operators across the United States. It is expected that Royal Links will be served with the complaint soon. Discovery and further investigation will commence in the coming weeks and we will provide you with updates concerning the status of the case. “ Some of the leasing companies involved in the beverage caddie transactions have responded to correspondence sent on behalf of course owners and operators. Legal counsel is currently reviewing these responses and evaluating what further action should be taken with respect to the leasing companies. “Lord, Bissell and Brook sent certified letters to all leasing companies which participated in the Royal Links beverage caddy program. These communications accuse the leasing companies of conspiracy to defraud participating golf course owners, demand the leases be cancelled immediately and all remaining lease payments be forgiven. Copies of the letters are below. “Andrew Gifford of Lord, Bissell & Brook LLP (LB&B) addressed a group of golf course owners at the NGCOA Solutions Summit. Mr. Gifford outlined options for legal action against Royal Links USA and the various leasing companies. Royal Links will likely be named as a defendant in the lawsuit. A lead plaintiff has been identified. LB&B is currently evaluating possible action against the leasing companies. “With respect to those course operators who have received offers for new lease agreements from leasing companies, Gifford discussed the fact that companies signing a new agreement may result in a waiver of potential recourse against the leasing companies.” A call to RoyalLinks USA states “no one is available to take your call.” The option of going to the operator resulted in a disconnect. A message was left in a second call for a statement regarding the company's position. Leasing News subsequently learned from another source that the principals of the company have started a new similar venture. Here is a copy of the letter written to Preferred Capital, which also has a copy of the private label leasing contract: http://leasingnews.org/PDF/Royal_Links_Preferred_Capital.pdf Here is a copy of the complaint, 42 pages, 30mb download in pdf format (Please be aware, this is a long down load as it is a very large file and will be five minutes even on a T1 line): |
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