Headlines---

   

   CIT----Great Espirit de Corp

     ELA President Fleming Suggests More Association Conference Cooperation

           The Week Ahead---- February 25-March 1

              Fred St. Laurent Becomes a Leasing Broker

                EFJ Ron Caruso---Is the Worst Over?

                    Mississippi mayor takes over as chairman of Amtrak board

                      The suspicious thing in the old man's pocket

                                       Bob Greene, Chicago Tribune

 

Part I   “***Cause for Concern***”

       Whatever Happened to....

                       Republic Leasing of Anaheim 

   

________________________________________________________________

 

CIT----Great Espirit de Corp

 

Tyco, now the once rising company is being questioned, and the spin is on other internet and paper newspapers. There is growing negative press regarding Tyco and its acquisition of CIT as bad news sells over good news. Many readers

may say, “well, that is like the pot calling the kettle black.”  While that may

be true, Leasing News does report positive news.

 

All the CIT people I spoke to, over a dozen, in all ranges of occupation, were

optimistic.  They did not want to go on the record as per company policy that

anything they would say to the press has to be cleared, even if it is something

positive.

 

Here are two comments from a person in a very high management position

at CIT, who makes these statements in anonymity:

 

“...yes, some are trying to make changes but the core business most continue and to be successful or more importantly continue to be successful, then numerous programs must be offered even if they are not popular with other senior management. They are learning that it takes a great deal more to operate all of EF than just the prior Tempe operation!!!!!!!! “

 

“CIT is in the business, there maybe some things that are being put on the back burner or the process is being slow down for specific reasons, but to the best of my knowledge, all of your products are still being offered but at probably different rates.  This is a solid operation and will remain so.”

 

Leasing News has spoken with over twenty or more CIT employees, in all

positions, and the morale is high; great espirit de corp.

 

Kit Menkin, editor

 

ELA President Fleming Suggests More Association Conference Cooperation

 

 

 

Kit,

 

I noticed the advertisement/notice in your Leasing News today about the

Equipment Leasing Association Funding Symposium.  Are you aware that attendance is restricted to ELA members?  I would think that the other leasing associations would want to offer their members the opportunity to attend, but I have received no encouragement from either the National Association of Equipment Leasing Brokers or the United Association of Equipment Leasing in pushing some kind of a  deal.   I would think ELA would benefit from having broader attendance than just their membership.  I wonder if I'm the only UAEL/NAELB member who is not an ELA member and who would like to attend the Symposium?

 

Richard

 

========================

Richard C. Walker

Capital Equipment Leasing

President

========================

http://www.CELeasing.com

e-mail: rwalker@CELeasing.com

tel:  (858) 551-1214

 

Richard---

 

At your suggestion, I am including Mr. Fleming in this e-mail.

 

Leasing News has many ELA readers, and thus we send out announcements...plus

we hope that readers will become ELA members, for many reasons, including

the ability to attend a conference.

 

I know the other organizations have a separate non-member price,

and some, like AGLF, promote non-members to attend---and others

have a "potential member" price as UAEL brought in 122 members

last year with this offer.

 

There also is an issue that some of the conferences are "sell outs,"

so they want to take care of members first.

 

Also, perhaps a member can bring a guest they pay for to attend,

and that may be a legitimate avenue to explore.

 

editor.

 

Response from Michael Fleming, President of ELA

 

Just to clarify.  Non-members may attend ELA Conferences at least once.  In addition, we have suggested to other associations that their members could attend conferences if the organization endorsed or promoted the conference. 

 

 

 

 EXCLUSIVE--- Three Part Series

 

 

Whatever Happened to....

                       Republic Leasing of Anaheim 

 

 

   (Never told before... only rumors and innuendoes exist.

Here for the first time is an insider’s viewpoint, from perhaps what can be

viewed today as an “historic document.” It was not written in

hindsight or “Monday morning quarterback,” but during the actual

time of events, June, 2000..  It is fascinating with historic accuracy.)

 

This exclusive report comes from an 18-page letter to David Solomon, President of the Redstone Group that put up the initial seed money to start First Sierra. While he was not involved in the operation, David Solomon is credited with raising the initial money.  He was well respected by all parties, as he is today.

 

Thomas Depping did not start the company, nor was he the first president. He

is the one, however, who began acquiring other smaller leasing companies

with the idea of making one large network with a very low cost of funds

for all “branches” to enjoy.

 

Also mentioned is Michael Sabel, the stockbroker manager than took First Sierra public at Friedman, Billings and Ramsey-a stockbroker company. It is reported

that Michael Sabel came up with the name SierraCities.com, ironically a few weeks before the bubble burst on all dot.coms

 

The letter to David Solomon is quite dramatic from a very concerned ex-branch

manager and major stockholder of the company.  It came at a time of what

the Equipment Leasing and Finance Foundation study called “ The Perfect Storm.”    http://www.leasefoundation.org/pdfs/perfectstorm.pdf    

 

                           Part 1

 

  “Introduction:

       **Cause for Concern**”

 

 

Mark McQuitty migrated from New Zealand when he was 18 years old, “ with nothing but a few hundred dollars in my pocket,” he remembers. “ In  1992, with a only $5,000 each loaned off our respective credit cards and in the middle of a recession, Jim Raeder and I started The Republic Group, Inc. (commonly referred to as Republic Leasing of Anaheim, as they were located in Anaheim, California. Not to be confused with Republic Leasing of South Carolina. Editor).

 

“ With no outside financial assistance ...not even a company working capital credit line right up to the merger date.... and through hard work and determination, we built a 200 employee company with a 130 man sales force in only six years, that we later sold to First Sierra in an all stock deal.”

 

“In the course of our six years of independence, the company was recognized by INC magazine as one of the nation’s fastest growing companies in back to back years. 1996 saw the company attain the ranking of #59 on the list. In 1997, we grew and became the 30th fastest growing company in the US out of the 500 companies.

 

“We had made it clear to all that we didn’t want to do the deal if Tom Depping was going to change anything materially, or try to micro-manage our operation.

 

“Because of the representations we had made to them regarding the agreement we had with Tom Depping that no changes or tinkering would occur, all but one out of the 130 sales reps agreed to come with us.  You know, First Sierra stock rose to $7 on the news of our acquisition.

 

 

“ We had an operation that was like a highly tuned precision engine, “McQuitty

explains. “ It wouldn’t respond well to Saturday morning backyard tinkering by amateurs. An assimilation team was promised but it never materialized. No sooner had the ink dried on the agreement, than corporate began dismantling the Anaheim back office in an effort to consolidate with the main office.

 

“This move in effect decimating the risk management team we had put in place, which had worked spectacularly for the life of the company in preventing bad deals from leaking into the system and/ or any sales-induced fraud from occurring, “ he said. “ Our crew was on top of everything with excellent control. And no sooner than the back office being dismantled, corporate went after our sales force.”

 

“Michael Sabel showed up on our doorstep, supposedly for a routine visit,

but what turned out to be orders to fire 100 employees just before Christmas.

 

“Not only had we lost control of the back office functions, but now the origination side of the business as well, something we were told were the reasons First Sierra wanted us in the first place.  It was a terrible time and both Jim and I had no idea about what was to happen.

 

“ Needless to say, this was catastrophic on company morale and on any remaining loyalties the surviving employees may have had to First Sierra, along with any credibility that we may have had as their managers and any belief that we were still in control.

 

“ We soon found out we were managers/VP’s in name only.  And to top this off,

corporate headquarters failed to keep its commitment to issue options to the top producers. They reneged on this immediately post acquisition, which had a devastating effect on morale

 

“It is my understanding there were only a few available and these were reserved for Mr. Michael Sabel as part of his package. Again, Tom Depping did not give out options to the sales force in 1999, but did manage to get 100,000 options for himself along with a $450,000 salary/bonus package.

 

“Additionally, no one in the field received their bonuses, but members of corporate management. There was no attempt to keep this secret and its effect on morale was devastating. I have heard of principled CEO’s refusing this type of compensation, regardless of what their contract states, until their companies soundly rebound.

 

“What went wrong? False promises from Tom Depping and outright

misrepresentation. The assimilation never happened. A year passed before the sales force even had computers. The two styles of business between corporate and Anaheim didn’t mesh well. In short, the merger didn’t work Clearly there was a different corporate culture.

 

“  Where we put the sales rep on a pedestal and not only recognized, but celebrated their unique abilities, the corporate attitude was to treat them as a necessary evil. No effort was made to hide this.  Somehow we were labeled the “bad boys” of leasing.  (What attracted the purchase of our company was our selling ability, and we were to become the training center.)  Once we signed the dotted line, many of the middle managers in Houston who were in opposition to the merger in the first place, did everything they could to dismantle us. They did nothing to curtail this and it appeared by their statements they actually encouraged it.

 

 

“Notwithstanding the ‘98 Q3 and Q4 issues, through Q2 1999, we were still the golden haired boys as far as generating income was concerned, having netted $5,000,000 in the 1st 6 months of ‘99. Somewhere in the ensuing 2 Qtrs we experienced meltdown. Relations between the branch and corporate hit an all time low. Delinquencies began to increase company wide, as I believe credit took their eye off the ball and began buying everything with a pulse to spike earnings. Additionally, the sales force no longer had a vested interest in tending to the family farm with any passion or concern and our back office no longer existed and corporate was clueless. Where once the rep would have been motivated to intercept questionable transactions, they no longer cared, having been treated so poorly by Tom Depping and his staff. Anaheim’s last line of defense against this) our credit people, had either been terminated or re-assigned.

 

“The first telling sign we were in for a nightmare ride, was that as soon as Corporate had effectively assimilated ancillary fee income collections including interim rents, these dropped to a mere $20,000 a month from a Republic high of $150,000 a month. My salesmen protested loudly, as this was commissionable income they were losing. I was personally alarmed, as this was over $1 million a year net, out of the company treasury which could have offset many corporate expenses

 

“We were now down to 25 reps from a high of 130 pre-acquisition. However, notwithstanding this small sales force, they represented over 70% of the ‘98 revenues. The best and brightest were still committed to the company and were willing to give it another chance.

 

“In a lengthy e-mail I pleaded with Tom Depping not to “throw the baby out with the bath water”. He did not even open it, or respond — no doubt previewed it, then discarded it. At the time, I was next to Tom Depping, the single largest shareholder employed in the company, owning over 600,000 shares and no doubt one of the top 5 or 6 shareholders of record (I still have substantial holdings). This hit me at the time as particularly troubling. In hindsight, it is clear my departure was already being planned by Tom Depping.

 

“It seemed as though the strategy was now on being an internet company free from the dependence on salesmen and then tying this into internet processing company... “— no commissions and cheap cost of finds. The money would surely roll in. I guess in theory it has a certain appeal, but if Tom Depping was at all familiar with our business, he would have seen it as counter intuitive.

 

“Not only was the original intention of training new salesmen, but even having

salesman call on vendors or direct business, became the “old way” to create

business.  We became known as dinosaurs in our traditional way of conducting business.

 

“We had a staff of about 40 and were ordered to fire 15, even though they were paying for themselves and we believed we had cut the branch to the bone. Unfortunately, this became an easy task, as the competition around town was bleeding us of our best and brightest. First Sierra had effectively paid for the hiring and training of many of the employees of its Southern California competition, all of which appear to be doing well financially—unlike SierraCities.

 

“Soon we were down to a staff of 10, down from 200 in just over 20 months from acquisition.”

 

      Tomorrow  Part II

 

            Fred  Van Etten is sent to fire McQuitty.

           

 In his June, 2000 letter to David Solomon, McQuitty  calls it “E-Commerce Follies” and predicts the outcome. McQuitty was obviously way ahead of his colleagues. His predictions are uncannily accurate.

 

  ( Thursday, Noon, Mark McQuitty: Meet the Leasing News Maker)

 

 

 

 

The Week Ahead----  February 25-March 1

                                   Washington Post

 

 

 

----25 Monday

 

ECONOMIC

 

INDICATORS:January home resales.

 

----26 Tuesday

 

Enron hearings resume in Senate.

 

Scheduled to testify: former chief SEC accountants, former Enron CEO Jeffrey Skilling, current Enron executives Sherron Watkins and Jeffrey McMahon.

 

Home Depot reports quarterly earnings.

 

ECONOMIC INDICATORS: February consumer confidence.

 

----27 Wednesday

 

House takes up Tauzin-Dingell bill,

 

which would allow regional phone companies to offer Internet broadband and long-distance service, whether or not there is competition for local service.

 

Fed Chairman Alan Greenspan testifies on monetary policy before House Financial Services Committee.

 

Enron hearings continue in Senate on issues of corporate governance, retirement security and role of Wall Street analysts.

 

Gap reports quarterly earnings.

 

ECONOMIC INDICATORS: January durable-goods orders, new-home sales.

 

----28 Thursday

 

Thousands of steelworkers

 

scheduled to converge on Ellipse to press White House to impose stiff tariffs on steel imports.

 

Summit on Retirement Savings opens at Capital Hilton.

 

Senate Banking Committee hearings on Argentina's financial crisis, with Treasury Undersecretary John Taylor as witness.

 

Al Franken addresses National Press Club on predatory lending.

 

Target, Kaiser Aluminum, Tiffany and Interpublic Group report quarterly earnings.

 

ECONOMIC INDICATORS: Revised fourth-quarter GDP, new weekly unemployment claims.

 

________________________________________________________

 

Fred St. Laurent Becomes a Leasing Broker

 

I wanted you to know that I am leaving MRI Melbourne (on good terms) and

taking a job with American Financial Network Inc. out of Cleveland.

The opportunity is an exciting one, and although it is "on the other side of

the fence" it is not too different from what I have been doing as a

recruiter.

 

Over the last 6 months I placed three people with Spencer Richman, the

owner, and we have become friends. He has some great programs and I am

excited about this opportunity.

 

My plan is to keep my memberships in NAELB and UAEL and rejoining ELA on my own soon.

 

I spent the weekend getting my office ready at home and I officially start

on Monday morning. My focus will be to establish vendor relationships.

Wish me luck.

Fred St Laurent

(the new) National VP Equipment Leasing

American Financial Network

NAELB UAEL

216-360-9020 Home Office

321-952-1422 Field Office

Fred@afnleasing.com

 

( Well, that is a first. A recruiter who likes the product he represents so well,

 he becomes a leasing broker.  Fred has taken pictures at leasing conferences

 for us in the past, and told me he will be attending the National Association

of Leasing Brokers Conference in Orlando. He will take pictures for Leasing

News. Leasing News will miss his e-mails about what is happening in the recruiting  business and jobs available; however, he must have found the right job

 and decided to take it himself. Our hat is off to you. The best of luck,

 too. editor )

_________________________________________________________________

 

 

 

                   Is the Worst Over?

 

by Ron Caruso

   ( from www.efj.com newsletter—subscription is free)

 

Economists and financial analysts are "almost certain" that the

recession is bottoming out and we are on the road to-----? Therein

lies the big question. Some are calling for a strong recovery,

enthusiastically predicting an upsurge in GDP to 4% on an

annualized basis. Others are saying wait a minute, the recovery

will be slow, perhaps very slow. Now a new possibility is being

suggested- a double-dip recession. Stephen Roach, chief economist

at Morgan Stanley Dean Witter Inc., warns that any recovery may be

short-lived and be merely a respite in a much more prolonged and

deeper slowdown. One reason this may occur: the U.S. economy seems

to be doing far better than it is supposed to during a recession.

Underlying this better than expected performance, has been

consumer spending, the pillar of the economy during this

downturn.  Now unfortunately the consumer having taken advantage

of zero or low-cost financing for major, not every-day purchases,

may be maxed out on credit cards, etc. and will not be able to

continue the wave of spending, which reached a peak of 5.4% growth

in the fourth quarter.

 

For the equipment financing sector, although the worst may be

over, the upturn is still not here. Orders for new equipment are

still lagging and in most equipment categories. The rippling

effect of reduced air travel and tourism, along with stay at home

or close to home alternatives have had a drastic impact on the

economy. As an example, during a recent trip to NYC, I enjoyed

dinner at a tremendous restaurant called ROC, in the Tribeca area.

In normal times, reservations at a restaurant of this caliber

would have to be made two weeks in advance. Unfortunately for the

restaurant business in NYC, especially near ground zero, these are

not normal times and reservations for dinner, especially during

the week are often not needed. Regaining the confidence of all

travelers will take time. The security measures we all are

experiencing at airports will become a standard part of our new

lives, but hopefully also instill in all of us a confidence in the

safety of flying.

 

Accounting Issues -Dark Clouds

 

Amidst a glimmer of hope that the recession has bottomed out and

we are on the road to recovery, however slowly, a major issue

remains to be confronted: financial reporting. For several years,

the issue of mirrored accounting, i.e., having the same set of

rules for financial reporting in all countries has been discussed,

with no resolution in sight. One of the principal stumbling blocks

has been accounting for leases and off balance sheet treatment for

certain liabilities.

 

Before the disclosures related to Enron, these issues were on

hold. They are starting to regain their strength and soon may

reach hurricane force. The downfall of Enron damaged more than

just the shareholders, employees and its creditors. It has become

a poster child for all that is wrong in financial reporting. It

has created a fallout that has caused questions to be raised about

the accounting procedures used by many companies, including CIT-

TYCO, GECC and IBM.

 

In the case of CIT-TYCO, the questions raised have caused its

stock price to plunge, negatively impacted CIT's credit rating and

has forced it to find other funding alternatives to replace

commercial paper, which is no longer available to it. The problem

has reached the point that TYCO may be forced to sell CIT on a

distressed basis, to relieve itself of the financial burden. This

presents quite a challenge, given both the diversity and

complexity of CIT's operations, as well as the current state of

the leasing industry.

 

The greater issue is what impact all of this will have on

financial reporting and general confidence of all parties in the

information that is disclosed. This problem will not be sorted out

quickly. During the process, some companies will be deemed guilty

until proven innocent-this is the way the pendulum swings.

 

The impact within the leasing industry is more than just financial

reporting concerns. It has affected the structure and prevailing

ways that companies were used to doing equipment financing. The

rules for certain types of joint venture structures are now

requiring greater equity participation by the minority party and a

more balanced sharing of the inherent risks, as just one example.

 

Although the leasing industry has faced accounting and tax issues

before, in this particular situation lurking in the background is

the desire to have a level playing field for accounting treatment

on a world wide basis. Could this be the catalyst to cause this?

 

Mississippi mayor takes over as chairman of Amtrak board, pledges to try to preserve the rail system

 

 

 

By Laurence Arnold

 

 

ASSOCIATED PRESS

 

 

WASHINGTON – Amtrak's governing board has selected the mayor of Meridian, Miss., as their new chairman.

 

John Robert Smith, a member of the board since 1998, succeeds Tommy Thompson, who led it while serving as governor of Wisconsin. Thompson relinquished his Amtrak role last May after becoming Health and Human Services secretary.

 

Former Massachusetts Gov. Michael Dukakis, the acting chairman since Thompson's resignation, will resume serving as vice chairman.

 

The seven-member board voted unanimously for Smith at a meeting on Friday.

 

Smith, a Republican, was elected mayor of Meridian in 1993. The city of 40,000 is served by Amtrak's New York City-New Orleans "Crescent" train.

 

Smith, like Thompson before him, could help Amtrak build support beyond its natural base of Northeasterners and Democrats.

 

"I am especially pleased that a Mississippian has been elected to this very important post," said Senate Minority Leader Trent Lott, R-Miss. "He certainly has the strength and commitment to lead Amtrak through the challenges before it."

 

Smith takes over at a particularly difficult time for Amtrak. It is cutting 1,000 jobs, many at maintenance yards and small train stations, and has threatened to eliminate 18 long-distance routes – including the Crescent – this fall if Congress does not dramatically increase funding.

 

In a statement released by Amtrak, Smith said the board is committed to preserving all Amtrak trains.

 

"I believe very strongly that our country's economic competitiveness and the mobility of all Americans depends upon a vital national passenger rail system," Smith said.

 

Amtrak spokesman Bill Schulz said the layoffs are hitting about 200 employees at 85 stations around the country, all of which are served by two or fewer trains per day. Hours of operation at those stations will be reduced beginning March 1.

 

About 225 workers at Amtrak's Beech Grove maintenance yard in Indianapolis are being let go, as are about 175 workers at two yards in Wilmington, Del. About 100 office and support personnel throughout the company are also losing their jobs.

 

Amtrak is also eliminating about 300 management jobs. About 100 were cut Feb. 1, Schulz said, and the rest will be cut shortly.

 

 

 

 

On the Net:

 

 

 

 

The suspicious thing in the old man's pocket

 

 

Bob Greene, Chicago Tribune

 

'They just kept passing it around — there were eight

or nine or 10 of them who handled it before it was over," he said.

 

"They had found it in my pocket at the airport, and they thought it was suspicious. It's shaped like a star, and they were looking at the metal edges of it, like it was a weapon. I asked for it back, but they kept handing it to each other and inspecting it. I was told to move to a separate area.

 

"I told them — just turn it over. The engraving on the back explains everything. But they thought they must have something potentially dangerous here.

 

"I told them exactly what it was — I said, 'That's my Congressional Medal of Honor.'"

 

The man relating that story is retired Gen. Joe Foss, 86. His experience last month in Arizona — at the international airport in Phoenix — may be the ultimate symbol of the out-of-kilter times we are going through. We are so afraid of terrorists in our midst that what happened to Foss is not only believable, but perhaps even inevitable:

 

The Congressional Medal of Honor will be taken from its recipient because it looks vaguely ominous.

 

I spoke with Foss because I wanted to hear it from him directly. He told me that he holds no animosity about the incident — "I'm just as interested in defeating the terrorists as anyone is, I promise you that" — and that he is mostly sad that no one knew what the Medal of Honor was.

 

Foss was awarded the medal by President Franklin D. Roosevelt during World War II after shooting down 26 enemy planes as a Marine fighter pilot in solo combat in the Pacific. He grew up in South Dakota — after the war he would become governor of that state — and took flying lessons as a young man, then went to war.

 

He lives in Scottsdale, Ariz., and when he travels he is patted down in airports instead of going through the metal detectors, because of a heart pacemaker. At the airport in Phoenix, he said, he was being searched manually and he put his jacket through the X-ray machine.

 

A couple of things caught the attention of the screeners — rightly so. Foss has a keychain made out of a dummy bullet, with a hole drilled through it to make it evident it is harmless; he also carries a small knife/file with the Medal of Honor Society's insignia on it. The screeners took both of them from Foss — traveling during these nervous days with items that look like bullets, or with even a small knife, will, and should, invite scrutiny. Even if you're 86. Even if you're a war hero.

 

That's not what frustrated him. The screeners, he said, allowed him to mail the keychain and the little knife back to his home from the airport. But for 45 minutes, he estimated, he was passed from person to person, made to remove his boots and tie and belt and hat three different times, and prevented from boarding his flight (he was eventually allowed on) because the security personnel, he said, had misgivings about his Medal of Honor.

 

(America West Airlines, in whose terminal in Phoenix the incident allegedly took place, said through a spokeswoman shortly after the misunderstanding that the airline's objective is to ensure safety and security for all passengers and employees.)

 

"I want you to know," Foss told me, "that I don't go around wearing my Medal of Honor, or carrying it with me. The only reason I had it with me on this flight was that I was supposed to give a speech to a class at the United States Military Academy at West Point, and I thought the medal was something the cadets might be interested in seeing."

 

I asked him what he remembered about being presented the Congressional Medal of Honor.

 

"I was right fresh out of combat when I was called to the White House," he said. "FDR was behind his desk, and he pinned the medal on my uniform. He said it was for actions above and beyond the call of duty.

 

"I was nervous, being in the presence of the president. I think I may have been more nervous there than I was in combat. My wife and mother were with me — it was quite a day. I think President Roosevelt called me 'young feller.'"

 

After the White House ceremony, Foss had his photograph taken with the medal — the nation's highest military honor for valor in action — on his uniform. That photo was the full front cover of Life magazine, the issue of June 7, 1943; the cover caption was: "Captain Foss, U.S.M.C. America's No. 1 Ace."

 

And now, almost 60 years later, the Medal of Honor was being handed from one skeptical security screener to another in the Phoenix airport, while Foss, at 86, took his boots and belt off as ordered.

 

"I wasn't upset for me," he said. "I was upset for the Medal of Honor, that they just didn't know what it even was. It represents all of the guys who lost their lives — the guys who never came back. Everyone who put their lives on the line for their country. You're supposed to know what the Medal of Honor is."

 

( Thursday, Noon, Mark McQuitty: Meet the Leasing News Maker)

             www.leasingnews.org/newsmaker.htm

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