Part III---Conclusion of Three Part Series
“Take the Money and Run”
by Christopher Menkin
It appears Sierra Cities CEO Tom Depping was micro-managing the various
aspects of his company as his world was apparently beginning to fall apart. The bank, the internet, the “roll over” of independent leasing companies under one “franchiser,” and Chase Tower were headed for the “perfect storm.” Those who tried to warn the “captain” that he was steering the ship toward disaster were
evidently thrown overboard.
The more letters sales manager Mark McQuitty wrote, the more Sierra Cities
CEO Tom Depping was annoyed. He called McQuitty a “dinosaur” in the sales jungle.
Mark McQuitty with his wife Carolann
He and Jim Raeder had built up Republic Leasing of Anaheim into a multi-million dollar sales operation. They only sold their company to Sierra Cities to obtain lower costs of funds and continue their sales effort across the country.
No sooner had Republic Leasing of Anaheim been “absorbed,” the rules
and operations were changed. The heads of the successful company
were stripped of authority, and McQuitty, even though he owned 20%
of the stock, was about to be fired.
He became desperate about warning about doing sales via the internet. He actually predicting the demise of the dot.com equipment leasing industry as it was known at the time.
June, 2000, McQuitty wrote his famous letter, calling for Depping to resign.
“...Whenever there is dissent, a difference of opinion, or a policy baffle of one sort or another, anyone passionate enough to challenge or resist Tom Depping or engage in a healthy debate in order to flesh out the potential weaknesses in the argument, finds themselves terminated.
“One need go no further for evidence of this than to look at all the members of senior management that have vacated Chase Tower or other regions in the last 2 years: Quinn; Hall Sr.; Hall Jr.; Brazier; Litt; Lester; Barash; Zaretsky; Madonna; Hayden; Borland; Cetto; Hayes; Mohammed; Hale; Nino; Darrington; Wing; Phung (add today Jim Constable, Bob Henchey, Jeff Mayberry, Pete Smith, Jim Raeder, Van Etten, even Ruth Spiers , Executive Assistant to Depping ,who resigned after 19 years with him at three different companies, allegedly over “ethics.”. Editor); et al., not to mention all the branch manager’s, ether VP’s and "acquirees" terminated, or quit for one reason or another. (Tim Cello offered to buy his branch back and perhaps in an ill-judged gambit, quit to force Houston’s hand and then later recanted.
“ He has the best performing portfolio in the company and Tom Depping wouldn’t allow him back, or even entertain the buyback of his branch). Rather, Tom Depping closed it down. In this list are three heads of credit and two heads of documentation. If nothing else, sir, that’s all we are, a credit and documentation firm (currently the average tenure in credit / doc / funding operations is no longer than six months). This is not only disturbing, it could prove fatal. All the level headed, leasing-experienced senior managers have gone and have been replaced by weak, inexperienced and ineffectual low level former assistants. And when new people are hired, they are non-leasing accountant types unfamiliar with the industry. You can’t run a public leasing company like this - continually replacing leasing experience with non-leasing experience.
“Tom Depping prefers to remain secluded, distant and be accountable to no one- Rarely is he in the office and when he is, it is rarely longer than 4 hours. There are never any senior management group meetings, as I suspect he abides by the theory of divide and conquer. Never are the executives assembled together in one room, I suspect, for fear of their collective will on strategic decision-making and the potential for broad debate on company direction. He is afraid to be challenged and thus always meets individually with his senior management in an effort to control them. This is extremely unhealthy for the corporation and further, it is indicative of a leader insecure with himself.”
Thomas J. Depping Looking Out Upon Houston, Texas
It appears to be true that Depping was seen less and less around the office, remaining in his tower office, seeming to be aware his ship was sailing for
the Perfect Storm and he wanted off before it hit. He could not even
get his application to form a bank together.
July 3, 2000--SierraCities.com Inc. (Nasdaq:BTOB), an innovator of technology solutions for online B2B financing, today announced that it has withdrawn its recently approved application to become a bank holding company. In April, the Company announced that its application was approved by the board of governors of the Federal Reserve.
Thomas Depping, president and CEO, said, "Although our application with the Federal Reserve was approved in April, we have decided not to implement the banking strategy at this time as we are in the process of potentially splitting our technology and finance operations." On April 24, SierraCities.com announced that it retained Donaldson, Lufkin & Jenrette to advise on the potential division of the Company's technology and finance operations.
SierraCities reports $7.7 million loss for second quarter
"The Company reported a net loss of $7.7 million for the second quarter, including non-recurring pre-tax charges of $6.9 million. On an operating basis, the Company reported a loss of $3.4 million compared to net income of $252,000 in the second quarter of 1999. Second quarter operating results were largely impacted by reduced gains from asset sales resulting from a poor secondary asset market during the quarter. The asset sales completed during the quarter resulted in gains of $957,000 compared to $3.5 million in the second quarter of 1999.
Sales were originally generated with the purchase of the smaller leasing company, who joined the parent with funds available often a lower rate and supposedly less rules and regulations than the small leasing companies funding sources. This type of sales generation series appeared to generate more sales, but in affect, these smaller leasing companies had discounted, brokered, or borrowed for most of their business and the asset was the management and sales niche of the smaller leasing company. The concept was for sales from the new company generated sales for the larger company and as long as new companies were being added, sales appeared to grow. In effect, many of the smaller company’s sales diminished with the original principal leaving or the entrepreneurial spirit changing in the operation of gathering business.
### Press Release #############################################
Ironically, the man who McQuitty had suggested in his call to have Tom
Depping resign, was Fred Van Etten, the last of the original group, the
man who was good a raising money and making things happen. Ironic
because it was Van Etten who was sent to fire him.
Fred Van Etten, 1997
As a side note, paradox of paradoxes, Fred Van Etten was fired by
Depping for supposedly trying to oust him as CEO, exactly what
McQuitty had originally suggested. We are told by one source
that Van Etten had his day as he sued and won that he was terminated
“without cause.” Mr. Van Etten would not confirm nor deny this,
and did not read a draft of this article or contribute to it. It is our
guess he has a “do not disclose” to his settlement, which he would
also not confirm nor deny.
As the lease matured, or defaulted, or brought up heavy servicing problems, the Sierra Cities concept began to collapse. The “roll over” of companies started with the purchase by Sierra Cities of Eric Barash’s company. Here is the complete
list with dates they were acquired:
General Interlease Corporation (GIC) 6/96
( a Florida, Colonial Pacific Pegasus Lease Dealer )
Corporate Leasing Group 9/96
Lease Pro, Inc. 2/97
Heritage Credit Services, Inc. 5/97
Universal Fleet Leasing 5/97
Public Funding Corporation 6/97
Northcoast Capital Leasing Company 9/97
Financial Management Services dba Cascade Leasing 9/97
Heritage Credit Services of Oregon 11/97
All American Financial Services 11/97
Independent Capital Corporation (ICC) 3/98
Integrated Lease Management (ILM) 3/98
OMNI Leasing 4/98
Vendor Leasing Services 4/98
TFS, Inc. dba The Money Source 6/98
21st Century 6/98
Republic Group, Inc. ( Anaheim ) 7/98
Suffolk Street Group ( England ) 7/98
Brooker Montague Leasing Limited 8/98
Titan Finance Limited 10/98
Fifth Third Leasing 6/99
Capital Alliance Financial 12/99
In purchasing the operations, the key players were eventually let go, and
the uniqueness of the operation was also lost, as instead of being management
in an entrepreneur spirit, the Houston office was running it in the Army
style---you know, the right way, the wrong way, and the Army way.
Thomas J. Depping in his Office drinking Diet Coca Cola
In the press release, it was noted:
"The Company incurred a one-time $6.0 million pre-tax charge in the second quarter related to the restructuring or elimination of under performing operations." Sierra Cities Press Release “
Charlie Lester perhaps best described the man on the executive floor of Chase Tower, as, "he has no old friends, just new friends and wannabes". He sat
purposely isolated in what he proudly called “the tallest building West of the Mississippi.”
Thomas J. Depping Looking Out Upon Houston, Texas
Greg McIntosh said there were no “scheduled meetings” with his boss
Tom Depping. He had continued to run spot checks of the RW leasing
portfolio, also asking staff to bring “anything unusual” to his
attention. A bankruptcy notice was received on one physician’s accounts in the RW portfolio by the Sierra Cities collections department. He went to the file
and the lessee was paying like clockwork. It seemed very strange to Greg McIntosh, Leasing News was told. He had his staff look into it further. Surprisingly, the physician had filed bankruptcy a year earlier. A consumer credit report showed terrible trades, but the Sierra Cities payments were not only on time, but “anticipated.”
In looking over the RW portfolio, he found the collection department had received similar notifications before, but ignored them as the accounts were paying on time.
In the past, such notices were not acted upon before McIntosh took over. The bottom line---the leases were being paid as agreed, there was a substantial reserve, and additional guarantees of RW Professional and possibly Barry Drayer himself.
The department devised a spot check program and re-ran the credit on
several other files, finding nothing “alarming.” McIntosh was concerned,
we are told, and again brought the information to his superiors. The procedure was written up by members of the department, several other officers, and a signed memo was sent to Tom Depping. When he reviewed their findings, he called them into his office. At that time, the American Express offer was in “due diligence.”
Depping’s first request was to put everything in writing and send him a “full report.” When he received this, he responded in writing that Sierra Cities was in
“sound shape” and RW Professional had sufficient reserves to cover any
loses. He signed it. He told the officers and staff it was his decision as CEO.
Thomas J. Depping Office at Sierra Cities
Reportedly Barry Drayer was interviewed about this account. He allegedly admitted to making the payments, and “violating” his agreement with Sierra Cities, but claimed to be doing them as a favor by allegedly keeping delinquent accounts current with RW payments. He also purportedly reminded everyone who would speak with him that he still had major cash reserves and Sierra Cities had the guaranty of RW Professional.
When the discrepancies were discovered and quickly grew, it was decided at this time to “cut” Barry off, no more leases from RW Professional. Tom Depping concluded there was enough in reserve and with the RW guarantee that Sierra Cities was “adequately covered.” He wrote and signed a memo to this effect to those who reported to him about the incident. The matter was “solved.”
Leasing News has requested a copy of this memo from American Express. The
attorneys will provide no information until the litagation is complete, we
were told. There are too many people who have made mention of this
memo to know that it does exists. We are told it was utilized in American Express investigation of events.
When American Express completed the purchase of the company, one of the
first things they did was to investigate the RW Professional portfolio. They
interviewed everyone involved, and called for a full report of the RW Professional portfolio. They requested not a spot check, but a “full report” on the “entire
According to a key player involved, the first file they pulled, they found the
lessee was in bankruptcy and RW Professional was making the lease payments.
They were astounded. It was the first file they pulled. As they dwelled further into the portfolio, they found that many of the lock box payments from lessees were being made by RW Professional. It appears that the practice was much wider than Barry Drayer had originally explained to Tom Depping and his staff or explained, but ignored by Depping.
August 23, 2001, Rich Tambor, Sr. VP of American Express Small Business Services, according to highly reliable sources, conducted a conference call with the all personnel within his division. In that call, Mr. Tabor referred to issues with the RW Professional Leasing portfolio that were being addressed by his company.
Now, while the main case continues, the problems with individuals, the “victims,”
“I am a dentist in ***** and have been stung by the RW Leasing fraud. The FBI has been to our office and collected evidence. We will never enter into a lease again, after the heartache we have endured.
“Whatever benefit there may be (if any) with leasing, has been greatly outweighed by the damage done to us. RW Leasing had me sign multiple leases prior to receiving equipment as we opened our dental office in late 1999. Since we were opening a new dental office, more equipment was added after the first leases were signed. So Barry Drayer from RW Leasing had me sign new leases that contained the previous equipment as well as the additional equipment and told me that the first leases would be destroyed.
“As far as we could tell the first leases had been replaced, since we did not see them or pay them for two years. When RW Leasing ran into financial problems the banks began calling, demanding we pay them directly. Of course, RW Leasing claimed that we were to still pay them.
“When the smoke began to clear (if it ever has) we found that the first leases we had signed had never been replaced, but had been somehow hidden from us by RW Leasing.
“ We had never seen them or paid them for over 2 years. I prepared a 30 page spread sheet for myself and the FBI to track the equipment and the leases. Almost every lease had multiple duplications, meaning that each piece of equipment showed up on more than one lease. In late 2002 we settled with *****************. However, one bank (*********************) cut off all communications with us in April 2002 after we brought the fraud to their attention. They never returned calls and never asked for money. ********** has since been acquired by ********** and in May 2003 ************* filed a law suit against us for full payment of the leases in question...
(name with held )
On April 23,2003, River City Bank, Sacramento, brought suit for $1.2 million against Crawford & Sons for March,2001 funding of RW Professional medical equipment leases. The suit claims Crawford allegedly said all its lessees were with licensed medical professionals who put a personal guaranty on many of the leases, plus further characterized the leases as very strong credits, rated at either A or B, which is considered investment grade, the suit said. Crawford also allegedly told River City that the medical equipment had been delivered to the medical offices.
A broker claims to have admitted to producing bogus invoices for Barry Drayer, (2) cashed checks sent to him in the name of the bogus vendor and reportedly
forwarded cashier's checks back to Mr. Drayer made payable to cash and (3)
reportedly operated mailboxes for Mr. Drayer forwarded invoices for
"clients" back ---recently was visited by the Federal Bureau of
The question is who lead the FBI to the broker. Could it be Barry Drayer
is trying to make a deal?
It appears the other litigation awaits the outcome of the Criminal Court
proceedings. The Crawford matter has a November 5, 2003 Conference
date. In the Criminal matter, May 20, 2003 a copy of a letter is entered
regarding a telephone call of May 16th to replace Roger Drayer’ attorney Kenneth Thompson, Esq. with Jerald Rosenthal. The next is a “LETTER dated 6/20/03 from Sena Kim-Reuter, Law Clerk to USDJ Spatt to Jerald Rosenthal, Esq. Re:
The Court acknowledges receipt of a copy of a letter dated 5/20/03, you mailed to Geoffrey Kaiser, in which you inform Mr. Kaiswer (sic) that you have been retained to represent df Roger Drayer in the above-referenced case replacing Kenneth Thompson, Esq. Kindly be advised that to replace Mr. Thompson as counsel you must both sign a consent to change attorney form and file wit with the Court (Coleman, Laurie)”
There are many lawsuits listed in the Pacer system involving RW Professional Leasing. It is apparent the defendant has much experience, and readers who
may view the latest as “stalling” may be right, or maybe there are other reasons.
Is someone else going to “Take the money and run?”
A special thanks to Charlie Lester , Leasing News Senior Advisor, who at our request for over two years opened doors for us, introduced us to key players, and helped with the “accuracy” of this three part series. We could not have done
it without you, Uncle Charlie.
Kit Menkin, editor/publisher
(The most recent picture we have of Charlie Lester, taken on Father's Day, with
his oldest daughter Sharon Hess on the left , and his youngest daughter Melanie