|
|
 |
 |
 |
|
|
|
|
|
Kit Menkin's Leasing News www.leasingnews.org
Wednesday, September 25, 2002 Accurate, fair and
unbiased news for the equipment Leasing Industry Monday's Leasing
News posted www.leasingnews.org at
11:09am PDT ---------------------------------------------------------------------------------- e-Mail Removal
Form: \http://65.209.205.32/LeasingNews/removalform.asp ----------------------------------------------------------------------------- Pictures from the Past
-------------------------------------------------------------------------------------------------- Classified Ads---- http://65.209.205.32/LeasingNews/JobPostingsWanted.htm " Sales: Atlanta ,Irvine, Portland, Scottsdale- "UAEL" Experienced sales personnel. Compensation is above industry
average including strong health and dental benefits along with 401K participation.
Resume to: QuintonBerry@CapitalWerks.com with desired location.
Sales: Fresno, CA "NAELB"
"ELA " Looking for leasing agents to cover territories. Email:chuck@goAFFILIATED.com Sales: Ft. Lauderdale, FL
"ELA" Looking to expand our Southern CA office. Sales person with
strong vendor development background. Salary + commission + benefits.
Email:ddean@coastalleasing.com Sales: National "UAEL" National company specializing in the medical & IT markets
seeking a seasoned sales professional to join it's 7 offices. Location
not important brains are. Email:gsaulter@chaseindustries.com Sales: San Juan Capistrano, CA "ELA" Wanted experienced equipment leasing professional, with a
minimum of 3+ years successful track record of achievement in vendor program
development. Please forward resume: admin@eccilease.com Sales: Dallas, TX "UAEL" Forum Financial Services, www.forumleasing.com, 14 years
in biz, seeks experienced self motivated sales/lease professional in Dallas.
Excellent compensation package and work environment. Email:toconnor@forumdata.com
for full list, please
go here: http://65.209.205.32/LeasingNews/JobPostingsWanted.htm Headlines---- Fed
holds interest rates steady over objections of two members who wanted
cut Netbank
Goes After Subprime "Home Solutions" Equipment
Leasing News Weekly News Summary Sysix
Financial $10 Million in Leases 1st Year Cronos
Group/ Major European Bank Container Program Bill
Cuts Leave Amtrak Short $500 Million Tyco
Took Profit on Bad Deal, Then Paid Bonuses to Executives Microfinancial/Leasecomm
Stock Continues Dive/Insiders Sell Their Shares ### Denotes Press Release ---------------------------------------------------------------------------------------- Fed holds interest rates steady over objections of two members
who wanted cut WASHINGTON – Over the dissent of two of its members, the
Federal Reserve on Tuesday held interest rates steady despite a wobbly
economic recovery and worries about a possible war with Iraq. The dissenting
pair favored a rate cut – the first of the year. Economists said that the 10-2 vote among the members of the
Federal Open Market Committee – the group responsible for setting interest-rate
policy – shows the difficulty even among experts to divine where the economy
is heading during these turbulent times. Stock Market hits four year low. Nasdaq hits six year low.
Looks like it won’t be a Merry Christmas and Happy New Year.
We have been printing cartoons from time to time, especially
if applicable to our industry. I
am going to try to do this more often for the “on line” version only ( we send in text ). To see past cartoons, go to: http://www.leasingnews.org/cartoons.htm -------------------------------------------------------------------------------------- Eastern Association of Equipment Lessor Conference It was late last night and my head is clearer now. We actually
had 270 registrations and walk-in attendees yesterday. In addition our Washington, D.C. conference is being held
April 3 - 6, 2003, the peak Cherry Blossom weekend. Please let your readers
know that and to contact Alison Pryor at EAEL for more details. Steven B. Geller, CLP Leasing Solutions LLC 20 Dike Drive Wesley Hills, New York 10952 845-362-6106 fax 845-354-2803 cell 914-552-0842 www.leasingsolutionsllc.com (Great turn out. The UAEL San Diego was at last check 302
and they expect more. I have asked ELA for a forecast of their turn-out. I also think the NAELB meeting in November will find a good number, too. A good sign. Editor
) --- The New Lease Study info was awesome. Thank you for a very informative article and email today. Keep fighting the good fight, your doing a service here. Ziya Arik (Other leasing newsletters printed the press release, but
not the report. We were the only one to request it and make it available
to readers: http://www.leasingnews.org/PDFFiles/study_leasing.pdf ---- European Accent descent Collection Calls (I was solicited for a listing in some yellow pages and the
accent of the caller and the verifier were both Indian but both used western
names----Didn't fool me, I can tell an Indian accent anyplace, especially
after watching The Simpsons!) I found Steve Geller's comment about Indian accents amusing,
but Apu is Pakistani, not Indian! Barbara B. Low bibliotech@leasingsourcebook.com President BIBLIO.TECH P.O. Box 657 Lincoln, MA 01773 (781) 259-0524 -- Donald “Duck” Dunn. As always, thanks for the "info" section at the
end of Leasing News (a great way to start a morning!). Just a point of clarification: Reading through today's post,
if I'm not mistaken, Donald Dunn plays bass, vs. tenor sax? Thanks again, BG Bob Gash Monahan Gash & Associates 770-516-9055 (direct) 770-592-1111 (main) bob@monahangash.com www.monahangash.com ((Bob, you, of course, are talking about "The Day in
American History." "Blues Brothers" is my favorite musical movie (
really, I like it better than the "Sound of Music.") I took my
son to it when it came out. He said
I looked like John Bulishi without my glasses, so at skits I used to play him and he would be Dan Akroyd. I must
have seen the movie with my son two or three times, and many times when it went out in video, and
when I see it, I am reminded of the time my son and I had together
( He is in the US Navy, high alert, can't say more ). (( You are right, he is a bass player. I am also wrong, his birthday is not September 24, but November 24. I must have had too much wine when I was putting this together, and evidently had
another "Blues Brother" musician in mind. ((Thank you for catching this. http://us.imdb.com/Name?Dunn,%20Donald)) --------------- Kit, "BB" is one of our favorites also (they don't make
them like that anymore!). I'd kind of forgotten Duck Dunn (until reading your article).
Through his career, he seems to have played with most major musicians
over the years (even played bass with Wilson Pickett on "Midnight Hour"). I guess that's one of the reasons I enjoy your articles -
they not only provide enjoyable new facts, but help me to remember forgotten
information about interesting people and events. BG ---- -- Ken Greene Picture Nice photo!. I look like I just got off the boat from Transylvania.
I miss Ray and Trish. Seems that Ray's unfortunate departure marked
the beginning of the end of UAEL. Oh well. There's always the ELA. Ken Law Offices of Kenneth C. Greene 938 B Street San Rafael, CA 94901 Tel: 415 721 7900 Fax: 415 256 9922 E-mail: KGreene100@aol.com ((Thank you. I have
been asking both readers and leasing associations to send in pictures to post---I will return pictures. We also have
started a file of the pictures we have posted. The tool bar is above “Top Stories:” http://www.leasingnews.org/pictures_past/past_INDEX.htm ((Your picture was
unique because you not only appeared very tall, but all in the picture are no longer members of UAEL, meaning Total
Funding, Ken Greene & Associates (past board member, too ) and of course
Dr. and Mrs. Williams. Send me in a picture you like, Ken, and I will post it.
Perhaps playing the piano with your jazz group. Editor )) --- New
Mail Server Status: Second day and it is looking great. MAPS also said they testing
our site and we are not doing an “open relay”, so they will notify
their carriers to accept our e-mail. We have re-configured our second firewall, for our new mail server software, Sun Cobalt, running on
Unix, along with a Linus. It is
ironic as we move toward the switch, that after two weeks the services to the ISP have realized they have made a mistake
and are correcting it. Perhaps by the end of the week all our
5,000 readers will again be receiving Leasing News...and we will have two
systems. ------------ Football Teams: Which is the most profitable or has the highest
net worth, you might be surprised with this public filing with the football
commissioner (sent in by a reader who did not want to be named): http://www.leasingnews.org/articles.doc/NFL.htm -- Top Gun Sergeant-at-Arms Okay the secret is out.
Bob Rodi, CLP, president of LeaseNow, former president of UAEL, will be our Sergeant-at-Arms for the two “Top Gun”
Leasing Workshops at the San Diego Conference. What you don’t know about Rodi is he is an ex-cop. “I spent 4.5 years with the Baltimore PD. I started out as a uniform officer in the 7th district, working post 735. My main corner was North Ave, and Pennsylvania Ave.” He then became a “suit” and was about to join the homicide department, when he decided equipment
leasing was for him. We’ll make an official announcement about his role at the
two workshops. ------------------------------ Attached is a revised agenda for the Streamlined Sales Tax
Project meeting in Milwaukee. - http://www.leasingnews.org/articles.doc/streamline9-23.htm Dennis Brown DBROWN@ELAMAIL.COM --------------------------------------------------------------------------------------------------- NETBANK GOES AFTER SUBPRIME “ HOME SOLUTIONS” U.S. BANKER WEEKLY BULLETIN Home ownership today is at a national high of 67 percent
but minority home ownership continues to lag at 44 percent,, according to the
Department of Housing and Urban Development, NetBank's new private sector
mortgage program, Home Solutions, is designed to ease barriers to
minority home ownership by providing low- to moderate-income families access
to more competitively priced loans in 27 markets (Atlanta; Baltimore;
Birmingham; Boston; Charlotte; Chicago; Cleveland; Dallas; Detroit; Ft.
Lauderdale; Houston; Jacksonville; Los Angeles; Memphis; Miami; New Orleans;
New York; Newark; Norfolk; Oakland; Orlando; Philadelphia; Raleigh;
Richmond; St. Louis; Tampa; and Washington, D.C.). The Home Solutions program
is offered through RBMG, Inc., the bank's business-to-business mortgage
lending subsidiary that provides funding to community-based wholesale
and correspondent lenders. NetBank and Market Street Mortgage
Corporation, the bank's retail mortgage lending subsidiary, are scheduled
to add the Home Solutions program to their product menu later this year. -----------------------------------------------------------------------------------
Equipment Leasing News Weekly News Summary In addition to their Thursday newsletter, ELA now does a
weekly wrap-up on Tuesday---here are excerpts from this excellent
report by Amy Miller and her staff. "Financial-ese" Computerworld (09/23/02) P. 14; Hoffman, Thomas The internal rate of return, one of three financial calculations
that can be used for IT projects, expresses the dollar return
expected from a project as an interest rate. After the rate has been established, one can compare it with rates that can
be earned by investing in other projects. Another financial metric used by senior management is net present value, which refers
to the future net cash flow that a project is expected to deliver--minus the investment. This calculation defines the value of a project in "today's dollar." A third financial calculation used for IT projects is called discounted cash
flow, which, in say a server leasing agreement, is calculated by
adding the initial cash down payment to the monthly leasing payments.
The value of a high-priced item over time can then be determined
by subtracting that sum from what it would have cost to buy
the servers at the outset. http://www.computerworld.com "Web Site Flourishes by Leasing Combines" Wichita Eagle (09/22/02) P. C1; Griekspoor, Phyllis Jacobs Six-year-old Machinerylink.com, an Internet-based business
that helps farmers find machinery for sale, share, or lease, has
grown from a spare bedroom in Kingman County, Kan., farmer Dave
Govert's house to a storefront with 15 full-time employees,
35 combines ready to lease, and 19,000 pieces of used equipment
for sale. Machinery Link
provides farmers with combines for harvesting anywhere in the country, operates a repair hotline,
and contacts local dealers that will supply parts and repair
right on the farm. Govert,
in an attempt to help farmers save even more money, is considering expanding his leasing operations
from just combines to include other expensive farming equipment
as well. Govert does
not understand paying $250,000 for a piece of farm equipment and then only using it a few weeks per
year, and leasing the equipment through a network of farmers and
dealers is the most logical way for farmers to access machines
without paying the cost to actually purchase the equipment. http://www.wichitaeagle.com "Goodwill as a Banker's Weapon" Wall Street Journal (09/23/02) P. C1; Rapoport, Michael;
Weil, Jonathan Upcoming write-downs of goodwill assets by several big companies
may provide bankers with the ammunition they need to demand
higher interest rates and fees from borrowers. Although none of the companies that expect to take goodwill charges are in
danger of defaulting on their debt, each does apparently run the
risk of violating their credit agreement. AOL Time Warner, Corning, Solectron, and Sanmina-SCI are on a short list of businesses
that are in jeopardy of breaching their debt covenants. Traditionally, companies in this predicament go to the negotiating table with lenders to try to amend the credit
agreements or obtain a waiver on the contract; however, these
solutions often come at a tall price. "Xerox Faces Criminal Inquiry Tied to Financial Restatement" Wall Street Journal (09/24/02) P. A1; Bandler, James Federal authorities are deciding whether to file criminal
charges related to Xerox's huge misstatement of earnings, and the
Securities and Exchange Commission apparently says that various
individuals involved could face civil charges, though the
SEC's case has been settled. Xerox's
restatement earlier this year, which dealt with earnings back to 1997, showed that the company
had misbooked $6.4 billion in equipment revenue and overstated
its pretax income by $1.41 billion. Xerox says it will cooperate with the U.S. Attorney's office. Various entities, including the SEC, say that Xerox wrongly booked long-term copier leasing
contracts to get more revenue and profits earlier than it
should have, and that it used reserves earmarked for merger costs
to meet earnings expectations instead. The SEC also says that the former Xerox accountant, KPMG, and various KPMG and Xerox
current and former employees, that they may still face civil charges,
but the SEC case is separate from the criminal investigation.
KPMG claims that it has done nothing wrong. http://www.wsj.com "In Focus: Lenders' Bankruptcy Status Holds--For Now" American Banker (09/20/02); Julavits, Robert The financial services industry has actively lobbied against
a bankruptcy bill sponsored by Sen. Richard Durbin (D-Ill.)
and convinced the senator to alter language that previously would
have allowed bankruptcy courts to allocate bankrupt companies'
assets toward funding employee pension funds instead of paying
off the companies' secured lenders. Financial services representatives say the original bill, which was meant to
prevent the abuse of employee retirement funds by bankrupt companies,
had the potential to completely tear apart the system of secured
lending and provoke bankruptcy for hundreds of companies.
Lenders are safe for now, but industry representatives say
the issue is sure to resurface, perhaps as part of a broader
pension overhaul bill, when the Congress reconvenes in 2003. http://www.americanbanker.com/article.html?id=200209195BPGDG5D&from=NatiGlob "In Brief: Huntington Buys Equipment Leasing Firm" American Banker (09/20/02); Mandaro, Laura Huntington Bancshares has purchased LeaseNet Group, a privately
held leasing company that focuses on high-tech equipment.
LeaseNet leases network server class equipment for its 300
commercial business clients, and will operate as a wholly
owned subsidiary of Huntington.
Huntington says LeaseNet will add sales representatives in several Huntington markets. *** SUBSCRIPTION INFORMATION To update your current ELA member profile information, please
visit: http://www.elaonline.com/memberDir/Profile/IndivForm.cfm To unsubscribe or change your subscription, please use the
form in ELA Online's Email Discussions section: http://www.elaonline.com/discussions/MembersOnly/ If you have other questions or comments relating to Industry
News Weekly, please email Amy J. Miller, Vice-President of Communications,
at amiller@elamail.com. Industry News Weekly is free to ELA members. Copyright 2002 by the Equipment Leasing Association http://www.elaonline.com/ Phone: 703/527-8655 Fax: 703/527-2649 (Note: The above are excerpts.
Members get the full group, perhaps the best equipment leasing news
wrap-up on line today. Counting their list serve, two news wrap-up, and
industrial news on line---often ahead of even us on major stories---worth
the dues to join ELA. And they have more to offer.www.elaonline.com. editor ) --------------------------------------------------------------------------------------------------- #### ########################################### ################## Sysix Financial, LLC Announces $10 Million in Leases in First
Year; New Suite of Financial Solutions on Horizon Growing Base of Sysix Customers in Manufacturing, Education
and Financial Services Industries
Select Leasing to Finance Tech Solutions That Reduce Bottom Line Costs LOS ANGELES, -- Sysix
Financial, LLC, the leasing and financial division of the Sysix Companies,
a national provider of IT business solutions spanning infrastructure,
consulting and financing, announced today that it has generated more than
$10 million in lease originations to companies implementing technology
solutions since the company launched its operations just over a year ago.
Sysix Financial also announced plans to unveil a new suite of Web-enabled
leasing solutions for asset tracking and management, online leasing applications
and approval notification, and software-only leasing services.
The new leasing products will be available beginning in early 2003. The announcements were made at the HP World
Conference in Los Angeles. Leasing options are a key component of Sysix "bundled"
solutions offerings which combine infrastructure from leaders such as
Hewlett-Packard, IBM, Sun, JANDX, EMC and others, with consulting services
and support. Sysix leasing solutions
are designed to facilitate the rapid and cost-effective implementation
of business solutions and enable customers to reduce the total cost of
ownership by minimizing upfront purchase costs, freeing up working capital
and optimizing tax benefits. In addition, Sysix leasing solutions can
protect users from technology obsolescence by allowing users to add or
upgrade equipment at anytime during the lease term. A sampling of customers utilizing Sysix Financial's solutions
includes: ABN AMRO Services Company, Moody Bible Institute, Ungaretti
& Harris Law Firm, Washington State Community College, Dana Corp.,
Goodrich Corp., Tenneco Automotive, as well as others. According to Ned Covic, president of Sysix Financial, "In
today's tough economic climate we see leasing as an area of growing need
for our customers. We work with companies across all industries that must
continually acquire and refresh technology to sustain their businesses,
yet are often faced with budget limitations. The wide array of leasing
options we bring to market offers our customers greater financial flexibility
and a better return from technology investments." Web-Enabled Products Planned for Sysix Financial Portfolio
In the coming year, Sysix Financial plans to introduce several
new products and services including Web-enabled asset tracking and management
and online lease application and approvals for general leases under $50,000.
The company will also offer software-only financing solutions in addition
to its current set of financing for hardware, implementation and support. "In the asset management area, we are developing new
financial products to address our customers' need to help manage their
IT assets and maintain accountability within their organizations,"
adds Covic. "In the wake of many recent and well publicized accounting
scandals, organizations are requiring a more critical eye on managing
internal assets. Our new offerings will be a natural extension of our
leasing expertise and will be designed to assist those customers seeking
a qualified external partner to assist in the process of tracking infrastructure
within the enterprise, for cost center bill backs, lease termination management,
etc. The new asset management services will include Web-based reporting,
tracking and databases, to bring maximum access and ease of use to our
clients." About Sysix: The Sysix Companies: Sysix Technologies, LLC; Sysix Consulting,
LLC; and Sysix Financial, LLC provide mission-critical business technology
solutions including infrastructure, consulting and financial solutions.
Headquartered outside of Chicago, Sysix also maintains a strong local
presence in Milwaukee, Indianapolis, Los Angeles, New York, Phoenix and
Minneapolis. For more information, visit the Sysix Web site: www.Sysix.com
. SOURCE Sysix Companies
CO: Sysix Companies;
Sysix Financial, LLC; Sysix Technologies, LLC; Sysix Consulting, LLC ############ ########################################### The Cronos Group and Major European Bank in Joint Venture
Container Purchase Program SAN FRANCISCO----The Cronos Group (NASDAQ:CRNS) announced
today the establishment of a joint venture container purchase program
with a major European bank. The purpose of the program is to acquire marine
cargo containers, which will be leased to third parties by a Cronos affiliate. The formation of the joint venture will provide Cronos with
the opportunity to expand its managed container fleet, primarily in the
long-term lease market. Container acquisitions will be funded 20% by equal
equity contributions from both parties to the joint venture and 80% by
debt financing. Cronos is one of the world's leading lessors of intermodal
containers, owning and managing a fleet of 390,000 TEU (twenty-foot equivalent
units). The diversified Cronos fleet of dry cargo, refrigerated and other
specialized containers is leased to a customer base of approximately 450
ocean carriers and transport operators around the world. Cronos provides
container-leasing services through an integrated network of offices using
state-of-the-art information technology. This release discusses certain forward-looking matters that
involve risks and uncertainties that could cause actual results to vary
materially from estimates. Risks and uncertainties include, among other
things, that the joint venture partners may not be able to attract additional
lenders to participate in the program and, therefore, that the program
will not achieve its targeted volume of container purchases; fluctuations
in the demand for leased containers; the risk of disruption to international
trade caused by war or terrorist operations; and fluctuations in world
trade. For a further discussion of the risk factors attendant to an investment
in Cronos' Common shares, see the Introductory Note in the Company's Annual
Report on Form 10-K for the year ended December 31, 2001, which was filed
with the SEC on March 26, 2002. Cronos will file with the SEC a forthcoming 8-K report providing
further details on the establishment of the joint venture container purchase
program. This press release and other information concerning Cronos
can be viewed on Cronos' website at www.cronos.com. CONTACT: The Cronos Group Elinor Wexler, 415/677-8990 (Investor Relations) ir@cronos.com SOURCE: The Cronos Group ############### ############################################ ---------------------------------------------------------------------------------------------------- Bill Cuts Leave Amtrak Short $500 Million By Michael Barbaro and Don Phillips Washington Post Staff Writers Republicans on the House Appropriations Committee have drafted
a bill that would leave Amtrak with $500 million less than it says it
needs next fiscal year and could require the shutdown of six long-distance
routes, according to a copy of the legislation circulating among committee
members. The bill, scheduled to be considered by the full committee
tomorrow, would give Amtrak $760 million, although the railroad has asked
for $1.2 billion to stabilize service while it undertakes a major reorganization.
The 31-year-old passenger railroad, which has never turned a profit and
nearly ran out of money this summer, plans to cut personnel and end its
costly express freight service even if it gets the full amount. "Anything less than $1.2 billion will take us straight
back to the crisis of this past summer," said Bill Schulz, an Amtrak
spokesman. The legislation also requires states to help subsidize some
of Amtrak's long- distance routes, which could jeopardize almost all passenger
service in at least five states: Arizona, New Mexico, Texas, Kansas and
Arkansas. Amtrak has called for the eventual end to state-subsidized
trains unless the states agree to cover all of their operating losses.
But the House bill would shift even more responsibility for Amtrak funding. The GOP language, which is not included in the Senate Appropriations
Committee bill, is certain to be modified or deleted in an eventual compromise
bill. Nonetheless, political insiders expressed surprise that the Republicans
would take such an action before the November elections. The six trains
pass through the districts of several key Republicans who are in tight
races. If approved, the legislation would terminate federal funding
in July to routes where Amtrak loses more than $200 per passenger on a
normal run, unless states pick up the costs above that amount, according
to the draft bill. The long- distance routes include the Texas Eagle,
which runs between Chicago and San Antonio; Three Rivers, between New
York City and Chicago; the Southwest Chief, between Chicago and Los Angeles;
the Sunset Limited, between Orlando and Los Angeles; the Kentucky Cardinal,
between Chicago and Louisville; and the Pennsylvanian, between Philadelphia
and Chicago. Though the trains in question carry only about 3 percent
of Amtrak's annual 23 million riders, their shutdown would paralyze intercity
rail service in many states, said Ross Capon, executive director of the
National Association of Railroad Passengers. But Rep. Harold Rogers (R-Ky.) said the bill would hold Amtrak
routes to the same financial standard as federally subsidized airline
routes. "If the railroad is to remain a viable entity, rather than
one that lurches from crisis to crisis, serious reforms are required and
cost sharing is essential," he said in a statement. The potential political complications illustrate why it has
been so difficult to abandon train routes over the past three decades. Rep. John L. Mica of Florida, a senior Republican, is in
a fight for his political life in a state where the passenger train and
high-speed rail have become an issue. His district would lose the Sunset
Limited. Louisville would lose the Kentucky Cardinal just months after
Kentucky politicians talked Amtrak into extending the train across the
Ohio River from its former terminal in Jeffersonville, Ind. The congresswoman
for Louisville is Republican Anne M. Northup, who is in a tough reelection
battle. In Fort Worth, which would lose the Texas Eagle, the city
recently dedicated a $4 million refurbished station for Amtrak, the Trinity
Rail commuter service and other local transportation. Amtrak paid $1 million
of the cost. Texas would lose almost all Amtrak service, a particular
blow to Sen. Kay Bailey Hutchison (R), who has been a champion of Amtrak.
Hutchison gave the keynote address at the opening of a remodeled Marshall,
Tex., station where volunteers raised $1.4 million to match federal funds.
That station would lose its only train. "You can't tie Amtrak's arm behind their back and expect
them to succeed," Hutchison said yesterday, adding that she would
"fight this all the way" if it reached the Senate. __________________________________________________________________ Tyco Took Profit on Bad Deal, Then Paid Bonuses to Executives By FLOYD NORRIS New
York Times Tyco International claimed a profit on an investment even
as the company lost money on it, a review of the transaction shows. Tyco
then used that profit as an excuse to pay almost $24 million in bonuses
to top managers. Most of that went to L. Dennis Kozlowski, the former chief
executive, and Mark H. Swartz, the former chief financial officer. Details of the transaction, which occurred 15 months ago,
have emerged only in recent days and are raising questions about the accuracy
of the company's profit reports, in the opinion of some accountants. The transaction appears to have provided a clear economic
loss for Tyco, which was forced to pay an above-market price for an 11 percent
stake in a small company called Flag Telecom that has since gone bankrupt. But Tyco disclosed last week that the company had managed
to claim a profit of $79.4 million on the transaction, and that this profit
was used to justify the bonuses. Mr. Kozlowski and Mr. Swartz have been indicted for what
the prosecutors say was the looting of Tyco by paying multimillion-dollar
bonuses to themselves without the board's authorization. The Securities and Exchange Commission has asserted that
the tactics involved the hiding of the bonus expenses in certain nonoperating
accounts, thus overstating the company's operating profits. But it has
not said that net income was exaggerated. The Flag transaction, however, may indicate that the company
reported profits improperly, or at least in a way that bore no resemblance
to economic reality, and that the executives collected bonuses based on
those so-called profits. To justify the profits reported, Tyco apparently assumed
that stock it obtained was worth what it had paid — something that was
clearly not the case at the time — and then exaggerated that value by
using outdated valuation figures. A result was that Flag's value was overstated
by 53 percent when the transaction closed. While the existence of the Flag transaction has been known
since it occurred in June 2001, some details necessary to evaluate it
were not disclosed until Tyco's report last week by David Boies, the lawyer
whose firm was hired to review what had happened at the company. Other
details were provided yesterday by Verizon Communications, which was on
the other side of the transaction and profited from it, and by a person
close to Tyco. Flag was a company with audacious plans to build an international
fiber optic network. It hired Tycom, a Tyco subsidiary that was publicly
traded, to lay its cable under the Pacific Ocean. Under the transaction, announced on June 20, 2001, Verizon
sold 15 million shares in Flag, worth $74.4 million when the deal closed
on June 22, to Tyco. Tyco paid $11.4 million in cash and 5.6 million shares of
TyCom. At the June 22 price, those shares were worth $89.3 million, for
a total compensation of $100.7 million. A simple subtraction of the two
values would indicate that, economically, Tyco had a loss of $26.3 million
— hardly a reason to grant bonuses. The sale was made under an agreement negotiated the preceding
April, providing for what was supposed to be an equal exchange of value,
based on trading prices over the five days before Verizon forced the sale
to be made. Because Verizon had the discretion to decide when the deal
closed, it could choose a date on which the movement of the shares gave
it an advantage, and it did so. Under accounting rules, Tyco could claim a profit because
its cost of the TyCom shares was less than their market value at the time. What Tyco did was to assume that the TyCom shares it gave
up were worth $16.38 each, according to a person close to Tyco, and to
assume that the Flag stock it bought was worth as much as it was giving
up. That person said that Tyco used a 10-day moving average price of TyCom
shares, but said he did not know what period was used. It appears that
it was the period ending June 14 — well before the actual transaction
took place. By the time the deal happened, values had fallen. The person
close to Tyco said the profit was proper. Accounting rules permit a company to base the value of a
deal on the value of either what was paid or what was received, depending
on which is ascertainable. In this case, both were, but Tyco chose to
use the value of what it gave up, even though the structure of the transaction
— with Verizon having the ability to choose a time opportune for it —
had made it all but certain that that figure was likely to be higher than
the value Tyco received. Some accountants say the value should have been
set based on prices when the deal closed, not weeks earlier. In Tyco's financial statements for the quarter ended last
June, the company disclosed a profit of $64.1 million on the sale of stock
in an unnamed subsidiary, which Tyco officials confirmed yesterday was
TyCom. The Boies report said the company actually computed a profit of
$79.4 million. It appears the difference related to hiding the value of
$15.4 million in compensation expenses reflected in the bonuses the executives
were paid. By reducing the stated profit, the company could also avoid
reporting the compensation costs without affecting the reported income
numbers. In fact, a a person close to Tyco said, the bonuses paid
were substantially more than $15.4 million, although that fact is not
reported in the Boies report. That is because the bonuses to Mr. Kozlowski
and Mr. Swartz were "grossed up" to cover taxes on them — something
not done for the other five executives, who got smaller bonuses. It is
not clear where the value of the additional compensation was reported. On paper, those bonuses were paid when the company gave stock
to the executives and then bought it back from them. The Boies report
said most of the sales were made on June 20, the day the Flag deal was
announced and two days before it closed, so eager were the executives
to get their cash. The remaining sales of stock by Mr. Kozlowski and Mr.
Swartz were made two weeks later. All told, their bonuses on the deal
totaled $20.4 million. A lawyer for Mr. Kozlowski dismissed as ridiculous the reported
timing, which showed that the stock sale was made before the profit justifying
the issuance of the stock was recorded. "It makes no sense for him
to sell stock before he received it," said Steve Kaufman, the lawyer.
Scott Tagliarino, a spokesman for Mr. Swartz, declined to discuss the
timing. But the reports the two executives filed with the S.E.C. many
months later confirmed the dates of the sales. Tyco's board, according to the Boies report, was kept in
the dark for many months about those bonuses. On Oct. 1, the board's compensation
committee did approve them. But the report complained that no one told
the board that by Oct. 1, the Flag stock had declined sharply in value,
"thus undermining the basis" for the bonuses. But if the board did not know of Flag's problems by then,
it evidently was not paying much attention. For those problems had had
a significant and well publicized effect on TyCom. On Aug. 6, Flag announced
it was unable to raise money to pay for the Pacific cable it had hired
TyCom to install, and TyCom said it would go ahead with the project on
its own. Flag stock was down to $2.63 and Jack B. Grubman, the Salomon
Smith Barney analyst who had been a strong supporter of Flag, removed
his buy recommendation. In the end, Flag went bankrupt and Tyco wrote off its entire
investment, which it valued at $114 million — a value of $7.60 per share
of Flag stock. But Flag shares were worth only $4.61 on June 20, when
the deal was announced, and $4.96 on the day it closed. Had either of
those values been used, Tyco's reported profits would have been far lower. The deal was a fiasco for Tyco. Flag shares would never again
trade for as much as $6 a share, and yesterday, with the company in bankruptcy
proceedings that are expected to end with the shares worthless, they closed
at two-tenths of a penny. Verizon did better on the deal. The TyCom shares it received
were later converted into Tyco shares, when Tyco reacquired the company.
Verizon sold some of the Tyco shares at relatively high prices, in January,
and the rest in July, at much lower prices. It received about $45 million
for the stock, plus the $11.4 million it got in the original transaction. But if Tyco suffered from the transaction, it was just one
more bonanza for Mr. Kozlowski and Mr. Swartz, who were able to get millions
in a way that would not be reported as compensation. (Wait until they finish about the purchase of CIT Group,
$20 million "finders fee" and hen $4 billion loss in the sale
of CIT Group--It isn't Monopoly money, but real cash, ldies and gentlemen.
Editor ) Microfinancial/Leasecomm
Stock Continues Dive/Insiders Sell Their Shares http://www.smartmoney.com/eqsnaps/index.cfm?story=insiders&symbol=MFI __________________________________________________________________ E-Mail Removal Form: \http://65.209.205.32/LeasingNews/removalform.asp +++++++++++++++++++++++++++++++++++++++++++++++++ Subscribe, Unsubscribe, Make Changes E-Mail. You may subscribe
by using the contact form at LeasingNews.org or by contacting me directly at kitmenkin@leasingnews.org. If you change your e-mail address, please don't forget to
notify me. If mail comes back more than a few times, we will delete the
mailing address ( usually every five days .) If you would like to be deleted, the list is kept under your
first and last name or how you asked to be listed ( not your URL ). Either use the contact form or e-mail directly or go to: http://65.209.205.32/LeasingNews/removalform.asp . Changes
are made daily, including additions, corrections, and removal when the right
information is provided. There is a trend for Spam programs for workstations and networks.
In addition, some companies block their employees from receiving
news from us. If you have stopped receiving Leasing News, it may be due
to being blacklisted. You can correct this by using another e-mail address. If a "Spam" issue, on your workstation, you will need to "delete us"
from your filter. Most programs allow you to make exceptions to what the program
considers "Spam." If done by your carrier, you will need to contact your carrier
or the "relay carrier" to allow our e-mail. It is our experience, once named, we cannot contact you ,meaning we can't tell you that our mail
is being rejected. Your carrier will make changes when contacted by
the subscriber, not by us. Often they subscribe to these programs that arbitrarily
filter “bulk mail.”. If we are being block, go to our website: www.leasingnews.org---for the on line edition.
Each edition is normally posted to the website ( www.leasingnews.org
) at 10: 30am, sometimes later PDT. The e-mail is sent out very early in the morning. --------------------------------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++ Policy Statement Policy Statement---Nothing is sent out that is not "fair."
Always unbiased reporting. Fairness always. If it is questionable, we will
ask the writer's permission to quote them. We will print information without
attribution, but feel as long as we do not name the person who sent it, we
can use the information. Any information we think is suspicious, we try to have if
substantiated first by at least two reliable people. We will not purposely
send out "negative" news. We prefer "positive" news. We have no "axe"
to grind or are not paid or seek or accept any remuneration
for product or promotion. We do not Spam anyone. To be added to the
mailing list, you must request it. We do not send anything about our company or personal e-mail or jokes to
the leasing news list. We do not share our mailing list with anyone. We try
not to send more than one report a day, if at that, unless an "alert." We follow Internet Netiquette
at all times. Our sole purpose is to provide communication to improve our profession. We reserve the right
to deny sending the newsletter when requested. We reserve the right
to edit or delete an opinion that is
not in good taste or is outright derogatory. |
|
