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NorVergence Head Finally Tagged a Felon
The head of NorVergence, Thomas N. Salzano, finally has been found guilty, although a very small charge for the millions of dollars it has cost banks, leasing companies, and small businesses; over $300 million. He has plead guilty to five felony counts of theft over $500 and was sentenced to three years’ supervised probation. He also is to reimburse the District Attorney's Office for the cost of prosecution.
Salzano was charged with multiple counts of money laundering, conspiracy and felony theft, allegedly defrauding five local businesses out of $100,000. He previously pleaded not guilty at his arraignment in 2009.
Leasing News has been following this story since June, 2004. This aspect began in 2009, involving David Caldwell with the Louisiana State Attorney General's Office and John DeRosier, Calcasieu Parish District Attorney, who were like a bulldog that didn’t want to give up its bite.
In 2011, Deputy AG Caldwell told Leasing News:
"Thomas Salzano has been indicted for felony theft in Lake Charles Louisiana by the Attorney General's Office in conjunction with the local DA. We have been fighting that case in criminal court for over two years. It is currently on remand from the third circuit court of appeals for August 10 of this year. We would be anticipate a trial date by the first of next year.
"We are the ONLY state or federal agency to have followed this through. We had a total a five victims in Louisiana out of 13,000. For the only individual business owner in our state we obtained FULL restitution from LIBERTY bank in an amount over 160k, and in order to do that we filed criminal charges for filing false public records in Shreveport Louisiana.
"We were the only agency to have obtained those results on behalf of its citizens. We've been busting our butts on this case, have run up against everything you can think of that would delay getting this case done, and we're still fighting. The wheels of justice turn slow, but that's not our fault. I can't make other states or federal agencies fall in line."
Caldwell and Calcasieu Parish District Attorney John DeRosier said Salzano’s company affected 11,000 businesses nationwide, but that Louisiana is the only state to prosecute him.
“Shame on the United States government and all those high-powered regulatory agencies that had the opportunity to stop this scam in its tracks and did not do it,” DeRosier told Americanpress.com. “Even doubly so after they learned about the scam and we started investigating it and they still didn’t do anything about it.
“I’m sure it scared off a lot of prosecutors in a lot of jurisdictions because it was so complex and required preparation, requiring travel all across the country. We paid for investigators and attorneys to go up to Washington, New York and different areas. It was very complex.”
Caldwell said authorities agreed to the plea deal because a trial would have entailed flying in victims from across the country and would have cost up to $60,000 and because authorities then would not have been able to seek restitution.
“He is now a convicted felon,” Caldwell said. “In this type of case where you’re dealing with a white-collar case, someone who’s defrauding, what you’ve got to do is you’ve got to get them one time.
“The problem with these guys is they keep operating in the gray area and until somebody actually does something about it, they’re going to continue to do these kinds of things, so we really feel this is a good resolution because now he’s a convicted felon. This is all over the place. This was the subject of congressional hearings at one time and in the national media.”
For new readers, “NorVergence, was a Newark, New Jersey corporation started by Thomas and Peter Salzano. Prior to filing for bankruptcy in July 2004, the company sold fraudulent telecommunications services, devices and related products to small businesses with little tech savvy…
“In its three-year existence, NorVergence hired 1,800 sales and other employees and had revenues of $143 million.
“Lawsuits against the company have been filed in numerous states, by both former employees and customers. The lawsuits allege that NorVergence was a Ponzi scheme or pyramid scheme, or that the technology did not work.
“Calcasieu County (Louisiana) District Attorney John DeRosier said, ‘The 11,000 plus victims around the country and the total amount of money that they have lost through this scheme is in excess of $300 million and nobody was doing anything about it. Now, they come to Calcasieu Parish and that's where we draw the line. We're not afraid to go after a complicated case. I think that it is a legitimate case of fraud."
“On December 8, 2004, Pennsylvania Attorney General Gerald J. Pappert filed against Peter J. Salzano, seeking civil penalties in the amount of $1,000 for each and every violation of the Consumer Protection Law, increased to $3,000 for each violation where the victim was age 60 or older.
“Peter J. Salzano filed bankruptcy on January 1, 2005.
“On September 11, 2006, the Federal Trade Commission filed charges against the Salzano's and won a stipulation judgment on October 17, 2007. The FTC won a default judgment of $181.7 million from NorVergence and a stipulated judgment keeping the Salzano’s out of related businesses and any assets up to $50 million owed to NorVergence’ s lessees. The judgment also seeks money from Salzano's wife and son for NorVergence money allegedly used to pay personal bills”
There were many different rulings, not just by state, but by different courts, as each of the trials had their own ‘viewpoint’ regarding the responsibilities and legal issues.
Most of the state's AG's were able to get the matter reduced from 85% to 95%, plus return on insurance and personal property taxes in certain states. Many decided not to take this but to go on their own as they viewed it as an ‘injustice’ and not a ‘business decision’ of cutting their losses and time spent.
Several banks also suffered, and smaller banks failed, as well as several leasing companies either closed or sold to another leasing company or bank.
Originally filed as an Involuntary Chapter 11 on June 30, 2004, creditors had it converted to a Involuntary Chapter7 on July 14, 2004. Claims are still being "disallowed as of September 6, 2013 latest filing, according to Pacer.
What is a Net Lease?
What we fail to realize is the lessee is not familiar with the terms of a lease and the only points of reference a lessee has is a loan or a finance contract. I have suggested in the past to create an outline or a procedure to follow when closing a lease. There are many requirements found in a lease that are different than the requirements found in a loan and the quantity of leases that are transactions intended as a security agreement has caused theses leases to be assumed to be fancy loans.
A lease agreement is a “contract” and the terms of the contract need to be followed regardless of which Article of Law governs the transaction.
The word “net” needs to be explained as the requirement that the lessee is responsible for paying for insurance, maintenance, and all taxes. Few lessees understand the word “net” but they do think they understand the word “lease”. Many have leased an apartment, leased a rental car, or leased office space. Therefore they cannot be faulted for thinking that all of the net requirements of this transaction is covered by the lessor.
A lot of this confusion comes from the failure of the lessee to read the lease agreement. However given the legal language in the lease, I am not sure the average lessee would understand the requirements even if they read it. Occasionally if the lease is large dollar amount, the lessee may take it to an attorney to be checked and understood--- but this rarely happens in middle market leases.
It is easy to explain the requirements during a personal closing, but what do you do if a vendor closes the lease or you do it through the internet. I suggest you create a closing letter that brings out the net lease requirements in clear English and points out the lessees reasonability for maintenance, insurance, and taxes. It might be important that you have the lessee acknowledge the letter by initiating it and returning a copy.
A net lease is so common in the leasing business that we think the lessee understands it, but it needs to be explained and clarified so there is no misunderstanding that requires a lot of corrections in the future. It’s best to be professional and let the customer know you want them to be aware.
If there is an Evergreen clause in the lease, definitely bring it up. You will get repeat business by thinking of your customer rather than with the sales attitude of “sign the lease, and let’s get this over with!”
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty years and can be reached at firstname.lastname@example.org or 502-649-0448.
He invites your questions and queries.
Previous #102 Columns:
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Good News for Lending
A SNL Feature Article
The number of banking institutions with Texas ratios over 100% continued to decline in the second quarter, according to data compiled by SNL. A total of 243 commercial banks and savings banks were above the 100% threshold as of June 30, 2013, down from the peak of 510 at the end of 2010. At March 31, the total was 260, and a year ago, there were 358 institutions with Texas ratios above 100%.
Banks continue to fail at a slower rate than in recent years. With four banks closed in August, the count for 2013 closures so far remains relatively low at 20, compared to 51 closures during the whole of last year. Based on the pace of failures in prior years, the industry will most likely see more banks closed this year.
Although a high Texas ratio does not guarantee a failure, the ratio is a good measure of a bank's ability to absorb future losses. SNL defines the Texas ratio as nonperforming assets plus loans 90 days or more past due, excluding delinquent government-guaranteed loans and other real estate owned covered by loss-sharing agreements with the FDIC, divided by tangible equity plus reserves.
Community's Bank perched atop U.S. banks and thrifts with the highest adjusted Texas ratios, with a Texas ratio of 1,339.07%. The Bridgeport, Conn.-based bank first surpassed the 100% threshold at the end of 2012. Community's Bank was hit with a cease and desist order Feb. 17, 2010, which was later modified on April 27, 2011.
Second on the list of banks with the highest Texas ratio is Millennium Bank NA, a unit of Millennium Bankshares Corp., with a ratio of 1,152.84% at June 30, down 10.86 percentage points, as the bank reported a decrease of $10 million in nonperforming assets from March 31. The Sterling, Va.-based bank was rated red, according to the Veribanc rating system as of March 31.
Eastside Commercial Bank ranks third with a Texas ratio of 926.06% as of June 30. The Conyers, Ga.-based bank reported an aggregate equity and reserve balance of only $6.65 million; its nonperforming assets totaled nine times that. Eastside is one of 40 currently active institutions in Georgia with a Texas ratio above 100%. That's the highest number banks and thrifts with Texas ratio above 100% in any state in the nation. Next in line are Florida and Illinois with 26 institutions each.
Decatur, Ark.-based Decatur State Bank reported a Texas ratio of 239.98%, the highest decrease of 363.56 percentage points since March 31.
Parsons, Tenn.-based Community South Bank and Fort Myers, Fla.-based First Community Bank of Southwest Florida, third and eighth in prior-quarter rankings, were closed by regulators on Aug. 23 and Aug. 2, respectively. These institutions had Texas ratios of 887.89% and 777.58% as of June 30, respectively.
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“Wants to work in bank in credit capacity”
Question: I have been in credit throughout my career with non-banking institutions. I am currently interested in getting into a credit role with a bank. So far, I have not been successful in even securing an interview! Can you provide some insight?
Answer: Typically, someone interested in the banking industry has determined this early in their career and have worked themselves up the ladder; often beginning as an intern and/or through a training program.
Banks are typically looking for:
If you do not meet any of the above criteria and are not new to the workforce:
Education is the key as it develop a well-rounded personality and increases your knowledge and creativity.
It is not an impossible feat; however, you will be competing with many that do meet their requirements. Be ready to present a compelling reason why you would be someone to consider for the role!
Career Crossroads Previous Columns
Sales Makes it Happen by Steve Chriest
Ending the Crisis in Sales Management
There are at least four steps senior managers can take to ease or end the crisis in sales management. First, they must stop the automatic practice of promoting great salespeople to the position of sales managers. Second, they must stop using sales managers to sell to and supervise important customers. Third, senior managers must invest in the education and training of sales managers. Finally, senior managers must allow sales managers to develop themselves and their teams.
The psychological profiling experts have told us for years that when a great salesperson becomes a sales manager, three things usually occur: The company loses a great salesperson, the company gains a mediocre or terrible sales manager, and the company's customers suffer in the transition.
Senior managers can avoid these unfortunate results by first determining whether or not the salesperson under consideration for a promotion to sales manager possesses the aptitude required for management. Once it is determined that the salesperson can perform the duties of a sales manager, the next step is to determine “if” he or she will perform the duties. Ability without desire will result in a bad promotion decision.
The second step senior managers can take to end the crisis in sales management is to stop encouraging or allowing sales managers to play frontline, active roles in selling to and managing key customers. Too many sales managers today are “managers” in name only. Their real function is to act as their company's primary sales point with important customers.
As sales managers continue to perform sales duties, they do not have time to perform the functions of sales managers. Worse, the sales team is robbed of the chance for high-level sales experience and the successes to be gained from interaction with the company's most important customers. The best and brightest sales team members recognize this and plan their exit, seeking employers who are willing to help them gain experience and grow as professionals.
The third step senior managers can take to end the crisis in sales management is to commit time, money and other resources to the education and training of their sales managers. Senior managers must commit to developing comprehensive sales management programs that teach sales managers how to attract, develop and retain top sales performers.
It is baffling that company managers spend so much money training financial managers, various operations managers, production managers, and customer service managers, and spend so little money on training sales managers, who theoretically oversee the company's revenue generating process!
Finally, the crisis in sales management cannot ease or end until senior managers allow their sales managers to do the real work of sales management. The most comprehensive sales management training programs won't work unless sales managers are allowed to execute a sales and sales management process that is designed to support the growth of the sales managers and their team members.
About the author: Steve Chriest is the founder of Selling UpTM (www.selling-up.com), a sales consulting firm specializing in sales improvement for organizations of all types and sizes in a variety of industries. He is also the author of Selling The E-Suite, The Proven System for Reaching and Selling Senior Executives and Five Minute Financial Analyst, Basic CREDIT & Analysis Tools for Non-Accountants. He was the CEO of a very successful leasing company and executive at a major company. You can reach Steve at email@example.com.
Record Number Pass CLP Test
"This was the highest number of individuals to gain the designation in one sitting," Rosanne Wilson, CLP, BPB, declared." Thank you CLP Foundation vice-president David Normandin, CLP, and his bank Pac Trust Bank, Irvine, California for hosting the two day National Equipment Finance Association for Leasing Professions (ILP). Congratulations to those who passed the eight hour test.”
Today’s Top Companies with Employees who are CLP
Financial Pacific Leasing (17)
Total CLP Membership: 186
The fourth edition has new chapters on Agriculture and Insurance with expanded sections on Lease Pricing and Asset Management - Collections. The History, Classification and Tax and Accounting chapters have also been updated to reflect the pending changes in the FASB and IASB Exposure Draft. Whether you’re a college student, entry level leasing associate, or an old pro, this book is an invaluable resource.
Why I Became a CLP series:
CLPs in Good Standing
Top Stories September 3--September 5
Here are the top stories opened by readers:
(1) Archives---September 5, 2007
(2) Scottrade Bank Equipment Finance
(3) September 3, 2013 --Leasing Schemes’ Court Cases
(4) Changes at Barry Marks’ Law Office
(5) Leasing 102 by Mr. Terry Winders, CLP
(6) Jack Nicholson reportedly retires because of 'memory loss'
(7) Sample of Usury Laws in United States
(8) Next Tuesday, Sept. 10 Free Webcast
(Tie) (9) Channel Partners named 3090th on 2013 Inc. 500 List
(Tie)(9) New Hires—Promotions
(10) GM leads Detroit's return to leasing
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### Press Release ############################
GE Capital Takes $26MM Loss in Trucking Company Fraud
HOUSTON—Sergio Lagos, 44, Aurelio “Jim” Aleman, 59, and Oscar Barbosa, 50, have been arrested following the return of a six-count federal indictment charging wire fraud and conspiracy to commit wire fraud, announced United States Attorney Kenneth Magidson.
Lagos was the former CEO of USA Dry Van Logistics (USADV), a cross-border trucking company that services the maquiladora industry, while Aleman and Barbosa were the former chief operations officer and former controller, respectively.
The indictment alleges that from March 2008 through the end of January 2010, Lagos, Aleman, and Barbosa joined in a scheme to defraud and swindle GE Capital Corporation (GECC), a lending company that provided capital to USADV, fraudulently obtaining funds through a revolving line of credit. Lagos, Aleman, and Barbosa allegedly schemed to conceal from GECC the truth about USADV’s declining operating performance and financial results. Rather than reveal USADV’s true condition, Lagos, Aleman, and Barbosa allegedly misrepresented USADV’s true operating performance and financial results.
According to the indictment, they misrepresenting to GECC the nature of the USADV’s accounts receivable, against which GECC was permitting USADV to borrow hundreds of thousands of dollars on a weekly basis. This caused USADV to appear to be operating more profitably that it actually was.
According to the Indictment, Lagos and Aleman entered into a financing agreement with GECC under which GECC would issue a revolving line of credit which was secured by USADV’s accounts receivables. By January 2010, the maximum borrowing limit under the agreement was increased to $38 million. Pursuant to the agreement, USADV allegedly justified advances on the line of credit by submitting “borrowing base certificates” to GECC. Lagos, Aleman, and Barbosa allegedly signed, prepared, and/or directed others to prepare certificates that falsely inflated the amount of the company’s accounts receivables and caused them to be submitted to GECC to enable USADV to obtain more funds than would otherwise would have been permitted.
Lagos, Aleman, and Barbosa allegedly perpetuated and concealed the scheme to defraud GECC by directing other employees to manually invoice millions of dollars of fraudulent receivables to inflate the borrowing base and to create false and forged invoices and support documentation for accounts receivables that did not exist. Lagos, Aleman, and Barbosa also submitted false financial statements to auditors and GECC, according to the indictment.
When the truth about USADV’s operations and finances were revealed, USADV went into bankruptcy. The indictment alleges USADV successfully re-organized under Chapter 11 bankruptcy proceedings and is currently operating with new owners. Lagos, Aleman, and Barbosa are no longer affiliated with or employed by the company. According to the indictment, the amount of actual loss to GECC was more than $26 million.
Each of the six counts of the indictment carries a maximum punishment of 20 years in prison and up to a $250,000 fine.
The investigation was conducted by Homeland Security Investigations and the FBI. Assistant United States Attorneys Casey N. MacDonald and Grady J. Leupold are prosecuting the case.
An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless convicted through due process of law.
#### Press Release #############################
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Posting is Free to Attorneys who specialize in financing and leasing:
"This is Pattycake. She is an absolutely fabulous foster dog that desperately needs a home of her own. She is about 2 y.o., a pug/terrier mix?, about 20 lbs., does great with dogs of all sizes, cats, kittens etc...and has been around a large Macaw. She LOVES to play so we want her preferably placed with another dog, that dog should want to play as well. She adores children and would make a perfect family dog. She is crate trained and housebroken, up to date on all vaccines and spayed. She is very sweet and loving as well and enjoys hanging out wherever her people are. She loves spending time outside but also on the couch next to you watching a movie!
"If you would like to see if Pattycake is your perfect friend, please email Rebecca at firstname.lastname@example.org for more info on this sweet little girl ASAP because we all know she will be scooped up quickly.. she certainly won't last long! You will not be sorry! :)"
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