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www.leasingnews.org Wednesday, April 10, 2002 Accurate, fair and unbiased news for the equipment Leasing Industry Headlines---- Buy Rates
Rising? The Funding Tree---Six Months Later GE to Hold Conference Call, First in 110 Years Former President of PinnLease Responds to $6.7 Million Charge BancLease Names Anna Ferrell Director of Marketing House moves to
allow interest for business checking accounts Hewlett-Packard Must Face
Trial Over Compaq Buy
Ex-Pat Owner Chuck
Sullivan lived under cloud of suits, complaints ### Denotes
Press Release Leasing News is working on a new story concerning Commercial Money Center---It Will Knock Your Socks Off !!! ( Joe Bonnano should get a medal) __________________________________________________________ One Month---no announced sale of any of the divisions of CIT Tyco. ------------------------------------------------------------------------------------------- Buy Rates Rising? Along with mortgage rates, some funding sources are raising their long term fixed leasing rates. “Officially, because our cost of money is rising. Unofficially, because other companies we watch are raising their rates. Those companies base their rates on T-bills which have increased over the last 3 months.” Name Withheld It is no secret that credit has tightened up considerably, and what would have been approved a year ago, is now turned down. In addition, margins are thin. Whether it is reports the economy is improving or lower profits, leasing buy rates are on the rise. However, Treasury Rates are not going up, they are going down: Rates retreat
on short-term Treasuries; one- year bills slip By Associated
Press WASHINGTON
- Interest rates on short-term Treasury securities fell in yesterday's
auction. The Treasury
Department sold $10 billion in three-month bills at a discount rate
of 1.71 percent, down from 1.79 percent last week. An additional $10
billion was sold in six-month bills at a rate of 1.98 percent, down
from 2.11 percent. The three-month
rate was the lowest since Jan. 22 when the bills sold for 1.67 percent.
The six-month rate was the lowest since March 4 when the rate was
1.89 percent. The new discount
rates understate the actual return to investors - 1.74 percent for
three-month bills with a $10,000 bill selling for $9,956.80 and 2.02
percent for a six-month bill selling for $9,900.20. Separately,
the Federal Reserve said the average yield for one-year constant maturity
Treasury bills, the most popular index for making changes in adjustable
rate mortgages, fell to 2.64 percent last week from 2.70 percent the
previous week. __________________________________________________________________ The Funding Tree---Six Months Later Sent to Leasing News October, 2001 “The Funding Tree, Inc., Riverside, CA has been accepting sub-prime deals on trucks and other equipment. They collect 15% prepaid residuals and doc fees up front. They cannot fund and getting refunds is next to impossible. I know of deals that are 3 plus months old. They also claim on their letterheads to be members of the NAELB. They are not according to Maria at the NAELB.” Some deals are as old as 7/01 Gary W. Psaledas Western Equipment Financing, Inc. 83 Abajo Dr., Edgewood, NM 87015 505-286-5437, Fax 505-286-543 Thirty-three years, Member NAELB Funding Tree Response: “We have 3 deals that are 120 days aged. 1 is a managed credit program, which means, this is normal. The vendor receives the payments and once the lessee makes 4 or more consecutive, on time payments the vendor is paid. The other two transactions are trucking transactions.” Kendra Bernal The Funding Tree, Inc. 6141 Riverside Ave., Suite 1 Riverside, CA 92506 909.369.3150 Office Phone Looking into this further, Leasing News reportedly found over thirty transactions not funded: Dealers Not Funded Midwest Truck Sales, Inc. John Saied 888-446-1127 R.E.B. Express Ellie Corbello 888-968-3563 X 113 Volvo of Utah Rebecca Hall 888-478-2276 Rush Finance Brent Hughes 800-973-7874 Coastal Finance(broker) Jim Coxe 800-887-0843 Volvo of Albuquerque Venita Coffee 505-843-7703 Inland KW-Phoenix Jerald Collens 800-258-7791 TEC Equipment Georgia Field 800-497-7667 Idaho FL Frank Flemming 800-658-5084 Danforth Capital (broker) Dan Chagnon 800-910-2225 Whited Trucks Mark Walsh 800-786-4736 IMCO Trailers Paul Yberra 888-496-4626 Prudential Leasing (broker) William Ross 972-392-3008 AMEX Equipment Dick Steensland 623-872-3468 Premier Truck Center Chris Mehaffie 800-671-6882 Atlas Trucks Gordon Chou 877-860-6757 S.E. Truck Sales Peter O'Donnell 877-295-3748 M&K Quality Truck Sales, Inc. Ron Meyering 800-510-8727 I-10 International Trucks Gayle Austin 877-954-9241 returned half of $26,000 up front money Tulsa Freightliner Dan Clark 800-725-5312 According to the Department of Corporation, there are another two dozen deals from dealers on one street that were not funded, money not returned, and they have an on going investigation and hearing to be held on the allegations. At this time, Gary Psaledas of Western Equipment Financing goes on line via listserve of the National Association of Equipment Leasing Brokers to warn other members about the Funding Tree and the experience he is having. Other brokers have similar problems with the Funding Tree. He then contacts the California Department of Corporations. “I received a phone call from John Noonan, CA Dept. of Corps., Investigations division, 916-322-6067. He asked a lot of questions regarding the Tree. He also told me that Bernal had 9 Felony counts in 97 of which she pled to two. I will be talking with him again today. This may be a good source for you to send the ex-employees and the other brokers.” Leasing News confirms this information with the Department of Corporations and the District Attorney, who confirmed what we were told. One of the requirements was “ Mrs. Bernal not to handle money of others.” The Funding Tree nor Kendra Bernal is not a licensed in the State of California, although she originally told Leasing News the company was licensed. Ex-employees, including the ex-sales manager tell us about high lease factors, advance rentals and 15% deposit collected on many hard credit “owner-operator” leases, but commissions not paid, and they suspect the leases were not funded. They state the Funding Tree was also collecting monthly rentals from lessees, although the vendors had not been paid. Reportedly “commission only” sales people come and go. Kendra Bernal states this is a misunderstanding and she will have a statement soon. In the meantime, the Funding Tree and Integrity Group merges. She tells us they have money and will be funding leases, as part of the agreement to merge, plus they are seeking new “investor money.” Please wait, she asks, as this will all be straightened out. From: Dave Muilenburg <dave_muilenburg@yahoo.com> Subject: Re: Funding Tree Inc. Confidential Date: Wed, 13 Mar 2002 11:11:23 -0800 (PST)
“I appreciate your prompt response and would like to file a complaint. I don't know what information you need but the following should suffice. Lessee - Gilbert Lechuga dba G.L. Concrete Pumping. Approved January 31, 2002. Amount approved $50,020.00. Down payment $7898.00 (which they cashed). We requested the advance back verbally and they are insisting of it in writing which we are doing. Let men know if you need any more information. Thanks, Dave” Leasing News does not know the true status of this transaction at this date. Yes,. this was confidential, at first, then given permission to quote and try and obtain the advance rentals “or approvals” back. This went back and forth trying for resolution. In the meantime, Gary Psaledas is counter sued and upon the advice of his attorney, will make no more statements. Kendra Bernal states she is returning all the advance rentals from deals not funded, just as Commercial Money Center did, and to please give her some time to accomplish this. Several more weeks go by. Perhaps another month. “Here is some info I know about them. I am just a small time broker that previously worked for *******. I moved from California to ***** and was offered a position with the Funding Tree, as I had a lot of contacts in the "D" and "F" credit arena. “They were trying to pick up where CMC left off, but I can tell you, they were the most unprofessional group of people I have ever worked with. They have been collecting hefty advance rentals since August of last year and as far as I know have not funded a single transaction. It only took me a short time to figure out they were not going to come through on any of their promises. I was told it could be 30 days for funding “. I know I personally booked about 125K in transactions before I figured out that none of them were to going to fund. Not a huge amount,(3K in commission)that I will never see, but I felt truly bad for the lessees I helped to convince the 15% advance would secure the equipment they so badly needed. “ I think they are painting a picture to gullible brokers like me, using their contacts to get deals, and then dumping them after they have generated several deals for them. I realize my problems are minimal but maybe you can forewarn others of the situation.” ( name withheld) Joe Rodriquez of Integrity Group calls to say please hold off on the story as he is trying to legally end this merger. He states he has not made any money. Any of the advance rentals and deposits have stayed with the Funding Tree. He is a broker. Kendra Bernal promised to bring in investors and lines of credit to fund transactions as they were going to be the next Commercial Money Center. But it never happened. He states he has gone through two attorneys in trying to “clean this up.” More dealers reportedly not paid: Courtesy Chevrolet (AZ) 602-279-3232 Sam Garber American Machinery Exchange (AZ) 623-872-3468 Richard Steensland Rush Truck Centers of AZ 602-272-7611 Roger Tarlton (2 deals) Rowe Bros. (OR) 503-228-5558 Hal Western Empire Truck Sales (NY) 716-538-2200 Not sure who to talk to there. Leasing News asked again to learn what was happening, particularly regarding the Department of Corporation restraining order. Kendra Bernal replied: “Sorry it took a while to get back with you today. We did receive a cease and refrain order prohibiting us from doing "consumer lending without a license" This does not impact our leasing business. We have made some modifications to our lease documentation, etc. to ensure that nothing we are doing can be considered "consumer lending". We are working with legal counsel on this matter and feel that we are in complete compliance. “As to the transaction of GL Concrete transaction: “We received the transaction in on 03/05/02. The transaction is still missing several items (Copy of drivers license, copy of full phone bill, some bank statements, Vendor Profile, Personal Financial Statement, Indemnity Agreement, Certificate of Insurance, Original Invoice is incorrect) as you can see this is more than a couple of items. The broker that sent the transaction to us (A-1 Financial) was notified of the missing items on 03/06/02 and again on 03/11/02 and yet again on 03/13/02. We spoke with Clair this morning and he said that he did not receive the missing item list on 03/11/02, so we re-faxed the list to him today. We cannot fund a transaction that is incomplete. “I do not know who Dave Muilenburg is. As far as we know the only additional broker is Anear Financial and Melinda is the only contact that has been forwarding information to Clair and TFT. We did receive a call from an irate CPA this morning by the name of Yvonne who wanted to cancel the transaction. This is obviously not the lessee. We require that all cancellation requests be put in writing. Unlike most leasing companies we do allow lessees to cancel transactions and we do issue refunds, minus our doc fee of $395.00. “ If you need to speak with me, give me a call at the office (909) 369-3150 Kendra Bernal President During this time brokers on the National Association of Equipment Leasing listserve were being solicited to send business to the Funding Tree. We have several faxes, along with the broker agreements and other terms. One of the claims is that the Funding Tree has been in business for over five years. The main pitch: “ We specialize in A to D credit transactions. Referring to our guidelines, you will find that we are unconventionally liberal in our credit decision criteria.” During this time, the Funding Tree had the Department of Corporations hearing postponed. I think there were two postponements, but the main hearing is now June 4. STATE OF CALIFORNIA BUSINESS, TRANSPORTATION AND
HOUSING AGENCY DEPARTMENT OF CORPORATIONS TO: KENDRA BEERNAL The Funding Tree, Inc. The Integrity Group Integrity Funding P.O. Box 1016 Mira Loma, CA 91752 6141 Riverside Avenue, #1 Riverside, CA 92506 or 10263 50th Street Mira Loma, CA 91752 DESIST AND REFRAIN ORDER The California Corporations Commissioner (“Commissioner”)
finds that: 1. At
all relevant times, Kendra Bernal is mad has been the president of
The Funding Tree. toe. (“The Funding Tree”), a California
corporation. She is also associated with the entities The Integrity
Group and Integrity Funding. 2. Beginning
in or about July of 2001, Kendra Bernal and The Funding Tree held
themselves out as being engaged in the business o making consumer
and/or commercial loans, 3.
In
multiple transactions involving consumers in multiple states, including
Illinois, Florida, and Texas, Kendra Bernal and The Funding Tree represented
to consumers that they would provide the consumers funding for purchases
of commercial vehicles. In reliance upon those representations by
Kendra Bernal and The Funding Tree, multiple consumers entered into
contacts with dealers for the purch2se of, and took possession of,
commercial vehicles. 4. Kendra
Bernal and The Funding Tree also entered into agreements -with consumers
whereby Kendra Bernal and The Funding Tree promised that they would
fund loans to the consumers. The consumers provided valuable consideration
to Kendra Bernal and The Funding Tree in exchange for those promises. The agreements to make the loans were entered into
in the State of California, but the Commissioner has not issued a
license pursuant to financial Code section 22100 authorizing Kendra
Denial or The Funding Tree to engage in the business of
a finance lender or broker. Accordingly, the Commissioner is of the opinion that
Kendra Bernal and The Funding Tree have been and are engaged in business
as finance lenders or brokers without a license from the Commissioner
in violation of the California Finance Lenders Law, Financial Code
section 22000 et seq. (“CFLL’), and therefore orders
them to desist and refrain from such activities and from further violations
of this division, whether a thing individually, jointly, or under
other names or through other entities. This Order is issued pursuant
to CPU section 22712 on the ground that it is necessary, in the public interest, for the
protection of consumers and consistent with the purposes, policies
and provisions of the CFLL. Dated: January
__, 2002 Sacramento, California DEMETRIOS A. BOURTRJS California Corporations Commissioner By VIRGINIA JO DUNLAP Acting Supervising Counsel Enforcement and Legal Services Kendra Bernal told Leasing News her attorney advised her that she was not doing consumer loans, although the company was running consumer credit on each application, and that it was NOT necessary to have a California Finance Lenders License. In California, all the major banks and finance companies require discounters to have such a license, and it is part of their application process to do business with them. From a United Association of Equipment Leasing Legal Workshop Conference: “The point was that if the transaction was ruled a loan, not a lease as you had intended, you could be subject to laws of usury in California. “The lease then could be considered usurious and you would lose, even if in default. “All your salesmen must either have this license or work as your employee ( you cannot have a free lance salesmen unless he has a license ). Bank of theWest and others used not to do business without evidence of the license. “Some of these licenses are needed in other states.” Kendra Bernal states she does not need the license to operate, attract an investor or obtain a line of credit, and has hired an attorney to represent her at the June 4 Department of Corporation hearing. Leasing News asked her for a statement, and she sent this PDF file, three pages, which we recommend you read in its entirety: : http://www.leasingnews.org/PDFFiles/TFT_LN_COMMENT.pdf GE to Hold
Conference Call, First in 110 Years By Rachel
Emma Silverman, Wall Street Journal GE will be
on the line tomorrow (4/11/02) for its first-ever earnings conference
call in its 110-year history, a move to increase communication with
investors. The increased
disclosure comes amid broad worries about financial transparency triggered
by Enron's bankruptcy-law filing. GE spokesman David Frail said the
call is part of an "ongoing process that we started back in September
when Jeff Immelt became CEO. It's another step in the process." The call,
scheduled for 9 a.m. EDT, after its 8:30 earnings release, will also
be broadcast on the Internet. The call is expected to last an hour,
including a question-and-answer period for investors and analysts.
Those with additional questions can call GE afterward, Mr. Frail said. The Fairfield,
Conn., conglomerate will also be making more disclosures in its first-quarter
report. The company will continue to report earnings and revenue figures
for 26 individual businesses each quarter, as it did for the first
time in its annual report last month. GE also plans on releasing balance-sheet
and cash-flow data. For the first
time, GE will release the impact of postretirement income in its quarterly
earnings report. It will break out the impact of postretirement income
in its individual operating units and instead report it at the consolidated
level. In its quarterly
report, analysts and investors hope to see more details about what
portion of GE's earnings comes from acquisitions as opposed to underlying
operations. A GE spokesman says the company will provide "more
information on acquisitions, but what format that will come out as
remains to be seen." Last year, $200 million of GE's earnings
growth was from acquisitions, or about 15% of overall earnings growth
of $1.4 billion. GE wouldn't specify if it would break down acquisitions
growth by specific business unit, so that investors can see which
individual businesses' growth is driven by buying sprees. The call
is likely to be a tough one for GE. By allowing investors, analysts
and reporters on the call, GE is opening itself to more outside inspection
than ever before and will face new questions from investment professionals
about its business model and the quality and transparency of its earnings,
especially those generated by its GE Capital financial-services arm,
which accounts for 40% of earnings. Whether such changes will satisfy
investors and analysts remains to be seen. As stated in its annual
report, GE also expects a charge of $1 billion, or 10 cents a share,
for the first quarter of 2002, related to a rule that changes the
accounting of goodwill, the difference between the purchase price
of an asset and its book value. __________________________________________________________________ Former President of PinnLease Responds to $6.7 Million Charge
Tommy Larsen, formerly president of PinnLeasing, responds to the Receiver lawsuit Filed February 28, 2002 and
pertains to Tommy Larsen as president and CEO of PinnLease
from June, 1999 through March, 2001 It involves not only himself,
but “CopyFax”, which shows payments over $3,9995,502, which
claims he was the owner while he was CEO of PinnLease. It also claims
“ fraudulent, non- existent or sub-standard service or products,”
stating it receive more than $1.4 million in “direct payments.” The claim also alleges $108,200.999
in transfer of assets, plus $1,000,000 in compensation above his contracted
salary of $180,000, plus non-payroll of $419,940.87, not including
$713,292.97 in American Express Credit Card payments from 1999 to
2001. ” Plaintiff alleges that
T. LARSEN received within one year of PINNFUND filing bankruptcy,
the following preferential payments in excess of $508,273.2---an an
amount well beyond his exorbitant
salary (see Exhibit “F”): a.1. Cashier Checks: $50,000 b. Non-Payroll Checks $13,264.88 c. American Express Charges $424,592.83 d. BMW Financial Payments: $10,315.56 total of $508,272.27 Here
is his formal statement: For
over 30 years, Tommy Larsen has been in the office equipment sales
and leasing industry —-
in the U.S. and Europe. In
1998, Mr. Larsen was recruited by Michael Fanghella, chief Executive
Officer of PinnFund USA, to
work tot a recently created PinnFund subsidiary, PinnLease USA, an
equipment leasing company. PinFfund was engaged in the real estate
mortgage loan business and was a long-time customer of Mr. Larsen. From
January 1, 1999, through March 22, 2001, Mr. Larsen was employed as
President of PinnLease. lie opened PinnLease offices throughout the
United States. lie was never an officer, director, shareholder, or
employee of PinnFund. Nor was he involved in PinnFund’s operations. on
March 21, 2001, the U.S. Securities and Exchange commission brought
an action against PinnFund and other entities and individuals in connection
with the fraudulent offer and tale of millions of dollars of unregistered
securities. Mr. Larson was not named as a defendant
in the SEC suit or in any of the actions brought by public investors
against PinnFund. A receiver was appointed for PinnFund and its subsidiaries. Recently,
the receiver sued Mr. Larsen, claiming that CopyFax, Inc., an office
equipment company owned by Mr. Larsen’s son, and 3KL, an entity
owned by Hr. Larsen, received excessive amounts of money without providing
fair value to PinnFund in Connection with office equipment sales,
servicing and leasing. The receiver also contends that it was improper
for PinnFund to pay attorneys’ fees for Mr. Larsen in connection
with prior litigation and is challenging amounts expended on Mr. Larsen’s
credit card. Mr. Larsen will vigorously defend the receiver’s suit. He denies arty impropriety in his dealings with PinnFund and PinnLease and intends to prove that the transactions in question were made in the ordinary course of business, in good faith, and on commercially reasonably tents. Mr. Larsen has filed a cross—claim against PinnLease for indemnification of his litigation expenses as & corporate officer. ------ Leasing News has stated, “ Assume he is innocent, until proven guilty.” Any relationship between “CopyFax” and PinnFund Leasing is not illegal, and all along Larsen has stated he was the prior owner, joined PinnFund and then sold to his children, and the company not only provided faxes and copiers for PinnFund, but PinnFund did all their leasing. This information was broadcast, and still is today, on their website: http://www.cfimaging.com/about/index.html In addition, all the action taken was during his term as president, obviously authorized, and reviewed all the years he served in the position. It is not uncommon for a board of director to do business with another company they may have an interest. In fact, it is encouraged as it benefits both entities. Leasing News has received many e-mails, recommending Mr. Larsen’s character, both personal and business. He appears to have many friends in the leasing business who will testify on his behalf. _______________________________________________________________ #### ##################################################### BancLease Names Anna Ferrell
Director of Marketing SIKESTON, Mo-- BancLease, a leasing software
and consulting service provider for community banks, announced the
addition of Anna Ferrell to its management team. As director of Marketing, Ferrell
is responsible for BancLease's overall marketing and strategic planning
programs. Specifically, Ferrell is coordinating BancLease marketing
efforts such as direct mail, email campaigns, trade shows, seminars
and sales literature. Prior to joining BancLease,
Ferrell served as director of Marketing with Charleston, Mo.-based
CAD Group, Inc., which offers a variety of computer consulting and
computer-aided design (CAD) services. Before joining CAD Group, Inc.,
she was employed by American Heart Association in Cape Girardeau,
Mo., KSTG/KMPL Radio in Sikeston, Mo. and Oktibbeha County Hospital
in Starkville, Miss. Ferrell holds a Bachelor of Arts degree in Communications
with an emphasis in marketing and public relations from Mississippi
State University. "Anna's broad marketing
experience will facilitate future success for BancLease," said
Britt McConnell, director of BancLease. "I am very confident
that Anna's organizational and strategic marketing expertise will
allow BancLease to accelerate its growth through marketing to community
banks nationwide." About BancLease BancLease is a lease consulting
service for bankers that was created by First Security State Bank
in Charleston, Mo. in 1993. It was designed to help other community
banks interested in developing an in-house leasing program. The program
provides a turnkey solution that allows banks to lease equipment for
commercial, agricultural, and municipal customers and includes software,
operating manuals, sample policy, telephone support system, and on-site
sales training. Today, more than 190 banks
in 34 different states are using the BancLease program for leasing.
For more information about the BancLease solution, contact Britt McConnell
at 800.530.5327 or write P.O. Box 1526, Sikeston, MO 63801. Visit
its Web site at www.banclease.com. CONTACT: BancLease Britt McConnell, 800/530-5327
CST bmcconnell@fssb.com or Media Contact for BancLease
Katie Hogan, 678/781-7225 EST katie@williammills.com ( Note: Jim Lahti recently left this company to re-start Affiliated Corporate Service, announcing that ACSI is back in business as a broker funding source and has opened an office in Jonestown , TX.
("I have resigned from BancPartners of Texas in order to return to servicing the broker community which we have done for the last 17 years though ACSI. Although my relationship with BancPartners remains strong and they have a unique business model serving community banks, I felt a need to go in a different direction and continue being a funding source for brokers. We are committed to being "The Flexible Funding Source" as the "ACSI Advantage" and look forward to re-establishing the many relationships we've had for so many years") ### ############################################################## House moves to allow interest
for business checking accounts By Jim Abrams ASSOCIATED PRESS WASHINGTON – The House
voted yesterday to end a 70-year-old
ban on banks paying interest on business checking accounts. The measure also would approve
interest payments on reserves that banks must maintain at the Federal
Reserve. "It's long past time to
repeal this really archaic Depression-era law that no longer serves
any useful purpose, if it ever did," said Rep. Pat Toomey, R-Pa.,
the sponsor. He said the legislation would help small businesses make
ends meet. The ban was imposed in the
1930s because of concern that interest payments would lead to further
insolvency in the struggling banking industry. The measure, passed by voice
vote, must still be considered by the Senate. The changeover to interest-bearing
accounts could begin after a two-year transition. President Bush included interest
checking for businesses as part of a package of measures to help small
businesses. He outlined the package last month. "This legislation is about
giving greater choices to our community banks and small businesses,"
said Rep. Sue Kelly, R-N.Y., who sponsored similar legislation that
passed the House last year but was not taken up by the Senate. "Banks
need the flexibility to choose what kind of services they offer to
their customers." National Federation of Independent
Business senior vice president Dan Danner said it was long overdue
legislation that would encourage competition in the banking industry.
The measure also has the backing of the Federal Reserve Board, the
U.S. Chamber of Commerce and the National Association of Federal Credit
Unions. Toomey said the provision allowing
interest payments on "sterile reserves" that banks must
keep at Federal Reserve banks would help stem a sharp decline in balances
kept with the Federal Reserve, "thereby enhancing their ability
to conduct our monetary policy." The legislation also expands
a practice, used by larger banks, of "sweeping" money from
commercial clients back and forth between checking accounts and interest-bearing
accounts, such as money markets. Allowable "sweeps" would
be increased from six to 24 a month. The bill is H.R. 1009. On the Net: Congress: thomas.loc.gov/ Hewlett-Packard
Must Face Trial Over Compaq Buy Wilmington,
Delaware: A judge ruled that Hewlett-Packard Co. must face trial on
dissident director Walter Hewlett's claims of vote buying in the proxy
contest over the company's $18.7 billion bid for Compaq Computer Corp. Delaware
Chancery Court Judge William Chandler III said in an opinion today
that Walter Hewlett's lawsuit meets the standards of Delaware law
for suits over proxy contests. Walter Hewlett,
the last family member on the board of the world's second-largest
computer company, sued March 28, asking Chandler to throw out as much
as one-quarter of the proxy votes. He claims the company gave shareholder
Deutsche Bank AG new business for changing its vote to favor the Compaq
acquisition. The director
is ``entitled to a judicial determination of the validity of certain
votes cast at H-P's March 19 special stockholder meeting concerning
the proposed merger,'' Chandler wrote in denying the company's request
to dismiss Walter Hewlett's complaint. Chuck Sullivan
lived under cloud of suits, complaints Amid deals
gone sour, ex-Patriots VP traded on family's reputation to win new
investors By Christopher
Rowland, Boston Globe Chuck Sullivan's
life over the past decade has been marked by a quest for big financial
rewards. But like his sponsorship of the Michael Jackson Victory Tour
of 1984, which lost $20 million and ultimately cost his family ownership
of the New England Patriots, many of his more recent endeavors have
ended badly. Sullivan
has been one step ahead of process-servers, litigants, and angry investors
in recent years, according to public records, as he continued to try
to trade on the goodwill his family built up after owning an NFL franchise
for 28 years. He has faced at least five formal complaints or lawsuits
from investors and owes creditors at least $4.1 million in a series
of judgments entered in New York courts. According
to one lawsuit, he invited a Missouri investor to New York in 1998,
touted his family's NFL connections at a dinner at the Harvard Club
and sealed the deal with promises of extraordinary returns - returns
that never materialized. Last week,
the Securities and Exchange Commission filed the most serious charges
yet, alleging that the former Patriots vice president and seven others
bilked wealthy investors out of $20 million. But even
when his financial deals went seemingly awry, Sullivan managed to
put the best face on things. ''With Allah's
blessing, we will ensure every success,'' Sullivan wrote to the increasingly
agitated representative of an Arab investor who was allegedly cheated
in the scheme. Sullivan's
license to practice law in New York was suspended in 1998 under unusual
circumstances. New York court disciplinary officials were investigating
allegations that he failed to return more than $1 million in investor
funds in one case and misappropriated $400,000 in another. The investigation
foundered when Sullivan, who has a history of heart trouble, said
he was too ill to complete interviews by the investigators. His license
was suspended indefinitely. After learning
of the New York action, Massachusetts bar officials followed suit
in 2001, barring him from practicing law in the Commonwealth by placing
him on ''inactive disability'' status. It was a blow to the New York
resident who still owns a home in Cotuit and has many family ties
to the area. Despite his
bar license suspensions, Sullivan continued working with a group of
investment specialists and entrepreneurs, holding himself out as ''general
counsel'' of a company called Brite Business that was at the heart
of the SEC investigation. Sullivan
declined to comment on the SEC investigation or other complaints against
him. But court records indicate that Sullivan has been targeted by
an array of creditors and investors, at least one of whom left court
papers with the doorman of his midtown Manhattan apartment building. Lured by
allegedly guaranteed returns of 5 percent a week for up to two years,
Kansas City investor Clayton Franse flew to New York in 1998 at Sullivan's
expense. Sullivan wined and dined him at the Harvard Club and reminded
Franse of his status as the scion of a former NFL family, according
to Franse's subsequent lawsuit. ''Because
of his family name and connections,'' Sullivan promised Franse he
would win a large financial reward, according to the suit. But Sullivan
failed to live up to the agreement and still owes Franse $166,000,
Franse alleges. Franse called Sullivan repeatedly. ''Promises were
made, but not kept, for returning the money,'' Franse's lawyer, Lawrence
L. Ferree III, said yesterday. Franse's
lawsuit has been stalled since it was filed last year, his lawyer
added. ''We have not been successful in serving him,'' he said. ''He's
made himself scarce.'' New York
court records indicate suits and judgments against Sullivan beginning
in the early 1990s. National Community Bank of New Jersey won a $570,000
judgment in 1992. Bankers Trust Co. also won a judgment of $864,037
in 1998, a relisting of debts stemming from the 1980s. Following an
arbitration hearing, Joseph Fekete of Brooklyn won a $2.7 million
judgment in 1999. Fekete's lawyer, Israel Vider, would not comment
or describe the nature of the case. But while
the courts entered judgments in all three cases, the creditors have
yet to collect. The SEC case
apparently represents the first time allegations of fraud have been
leveled by a federal agency against Sullivan. The agency began probing
dealings of Brite Business in December 2001 and questioned him in
Boston on Jan. 18. Sullivan,
accompanied by lawyer John T. Dugan, appeared cooperative, although
he repeatedly, without bidding, mentioned his work with various NFL-related
charities, according to portions of the transcript released by the
agency. ''I was involved
in charity fund-raising, but I was not involved in fund raising or
money raising for Brite Business,'' he told the investigators. Sullivan
also was asked about $350,000 of investors' money that was transferred
from Brite-related accounts to one of his corporations, Commonwealth
Management Associates. Sullivan said he intended to pay those loans
back to Brite. In the 1980s,
Sullivan championed the family's sponsorship of singer Michael Jackson's
Victory Tour. The $20 million that Sullivan lost as promoter of the
tour ultimately drove Stadium Management Co., the company Sullivan
headed, into bankruptcy. The Sullivans were forced to sell Sullivan
Stadium in Foxborough, and, eventually, the New England Patriots. Christopher
Rowland can be reached at crowland@globe.com. www.leasingnews.org |