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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.
http://two.leasingnews.org/imanges_uael_wael/McQuitty,mark.jpg 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.”
http://two.leasingnews.org/imanges_uael_wael/Deepings_view.jpg 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. Press Release: ##################################################### 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.
http://www.leasingnews.org/pictures_past/past_06-05-03.htm 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.
http://two.leasingnews.org/imanges_uael_wael/Tom_Depping.jpg 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.”
http://two.leasingnews.org/imanges_uael_wael/Deepings_view.jpg 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.
http://two.leasingnews.org/imanges_uael_wael/Toms_office.jpg 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 portfolio.” 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,” continue: “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 Investigation. 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
http://two.leasingnews.org/imanges_uael_wael/clester.jpg (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 Milligan .)
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