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February
9, 2001
Headlines---- Linda Kester Pro and Con NCC: "Deja vu all over again." Compaq Leasing--Now Offers Free 60 day Trial CompUSA Goes to Trial in Texas--fascinating story Source Capital Declares Dividend— note: they stopped accepting lease broker application last November. " the Company experienced significant early loan pay downs in the fourth quarter of 2000 causing an 18% decline of loans outstanding from the beginning of the quarter to December 31, 2000. The decline in loans outstanding during the fourth quarter was a significant contribution to reduced fourth quarter earnings. " ---------------------------------------------------------------------------------------------- CIT-Atlanta Broker Division--Closed? Have several reports, unconfirmed, that CIT has closed their Atlanta office, which was a broker division. It has been rumored for the last few weeks that CIT was backing out of accepting broker lease applications. No confirmation at this time. Do not know if this is "true" or how many broker division affected. ------------------------------------------------------------------------------------------- Fraud Alert --- NCC Enterprises, Tulsa, Oklahoma
Ronald J. Brodt National Equipment Capital When I read Steve Lundergan's comments on NCC Enterprises, I had a flash of "deja vu all over again." ( Yogi Berra's famous line.editor ) About five years ago, I was the Credit VP for the Dallas Processing Center of AT&T Capital Leasing Services, a small ticket lessor which was subsequently purchased by Newcourt. About that time, myself and other members of our senior staff started noticing anomalies in some of the transactions were processing. NCC was one of our "vendors" at that time. To make a very, very long story short, we discovered that there was a network of fraudulent vendors sending us business. Most of them were located in Missouri, Kansas and Oklahoma. All told, we unearthed between 30 to 40. (The transactions which were booked ultimately resulted in a loss to Leasing Services of upwards of $50 Million.) The scheme is quite simple. The "bad guys" contact what once were respectable vendors and ask them if they would allow their company names to be used on equipment invoices. If the vendor agrees and his company "bills" for a product, he receives a commission, generally 5% -10% of the transaction amount without having any overhead costs or having to actually deliver product. That takes care of the "vendor" side of the equation. Customers are generated by responding to advertisements in local newspapers soliciting loan customers. Generally the ads are quite short: "Need a business working capital loan? Call 555-XXX-XXXX." The "bad guys" screen the customers for credit worthiness (as typically the companies they refer business to use some kind of credit scoring system) and ask what type of equipment they own free and clear. A doctor's office would have medical equipment, a dentist, dental equipment, a small business would have a copier, computers or office equipment, etc. The type of equipment determines which of the "vendors" will submit the sale-leaseback transaction to the leasing or finance company. The application is either faxed or sent electronically to the lender and the dollar amount will generally be slightly under the application-only limit, i.e., if the limit for the lender is $25,000, the equipment request will be $24,898.00 or $24,995.00, etc. Since the customer is pre qualified by the "bad guys' the system approves the loan or lease. The customer is told that when the lender calls, he should confirm that all the equipment ordered has been received and is in good working order. Of the $24,995.00 funding, the customer received $10,000 - $12,000 and is tied into a 36 - 48 month lease. Because no interest rate is quoted to the customer, most have no idea that they are paying usurious rates for what they are netting. Of the funding, 10% goes to the "vendor" and the "bad guys" keep the difference. In some instances, I found that customers were told that they had to make a minimum of six payments to the lender before they could default or file bankruptcy. The intent was to demonstrate that the lease was entered into in "good faith" and, well shucks, business just didn't work out. The thing that struck me as strange, and I guess I could appreciate it from a monetary perspective, is that lenders did not prosecute or sue these so-called "super brokers" or "fraudulent vendors" when they caught them. During my tenure at Leasing Services, literally millions of dollars were charged off and the vendor relationships terminated but not one was sued. The dollar amounts of each transaction were comparatively small and the vendor's customers were spread out over the U.S. NCC was one of the vendors we terminated 4 - 5 years ago. It looks like they are still at it! And the sad thing is....they are not alone. I'm sure the others we terminated went elsewhere as well. (I heard that BankVest was doing business with some of the same vendors; where is BankVest now?) Sincerely, Ronald J. Brodt National Equipment Capital Lewisville, TX 75077 972-221-7285 ----------------------------------------------------------------------------------- Likes Linda's Industry Comments Hooray for Linda Kester! I love people who look at the glass half full instead of always seeing it as half empty. She nailed it right on the head with her statement about those trying to "buy" market share being the ones who are making "The List". I would add that you have a lot of third party people out there wringing their hands and looking for a dry shoulder because they flocked to these types of sources, attracted by the low rates and "we'll buy anything credit criteria". I hope that some of these recent experiences teach people that the old "only as good as your last deal mentality" has gone by the boards. The new order will be a well deployed CRM strategy that is achieved by training your "human browsers" to leverage technology, thereby providing the customer with a superior service experience at a competitive price. If you think about it for a minute that is a recipe for "VALUE", of which price, is but one component. The lowest rate charts in the entire universe will not help you hold on to a customer if you don't take care of him. Based on Linda's comments I will make another prediction about a practice I see rapidly catching on in the market place. That is the "fee income" game. I recently learned of a funding source who is now charging customers a $25.00 fee for requesting a pay off quote. There are other fees that are sneaking into bills. When these "fees" are discovered and challenged they are usually taken off the bill. The prevailing wisdom is, however, that 30-40% of the customers will pay these without noticing or complaining. Maybe so, but the other 60% are your customers too and if you've assigned a deal to a source that's engaging in these practices you will be guilty by association. Talk about inviting regulation and unwanted scrutiny of our industry. Some people just never learn. Kudos to Linda again, for her comments. Bob Rodi LeaseNOW, Inc. www.leasenow.com drlease@leasenow.com 1-800-321-LEAS (5327) + + + Doesn't Like Linda's Comments Kit: I was surprised that you broke your rule about no advertising on the newsletter by printing both Mike Granieri's and Linda Kesters blurbs about their services. I certainly don't have any objection to someone showing their company name and slogan or logo, but a full-fledged schedule, price list and application is just too much. Keeping the newsletter free of advertising is a major advantage, setting it a cut above commercial sites such as the Monitor. You provide a lively and entertaining service. Printing information about association workshops, meetings and conferences is important to the industry. But the moral high road is very narrow and it's easy to slide off. Name With Held First, I thought I was being "cute" with the Mike Graneri e-mail. At the end, I told him I couldn't run it because it might be construed as advertising. In reality, it is also posted on the article page: http://www.leasingnews.org/articles.doc/newsletter4.htm Mike not only contributes articles for the general readership, that we print and then keep in our article section, but he also does reporting of events for us. He did not ask me to print the schedule in the news, but I thought I owed it to him. I am sorry if it offended someone and I will be more careful about the "plugs" we give. The Linda Kester e-mail was not advertising, although it can be viewed as a "plug" for her service, primarily due to the "signature on her e-mail." However, as you note, we always print all the signature of someone's e-mail, which often is more than their company name and address. In addition, Ms.Kester is going to contribute articles for our readers. For free. She should get some kind of recognition for this. So I am more liberal in what she sends than what maybe someone else would send. If that is favoritism, I am guilty. I have never met her and don't know her. I did attend her workshop at NAELB Conference in Nashville. Shhe gave one of the best workshops on retaining business that I have seen in quite a while. One of the benefits of going to conferences is not only networking, but getting ideas and learning new things, and her workshop was "outstanding." I look forward to any workshop she might give as I think she is not only intelligent, knows the leasing business, but has much to contribute. In addition, her viewpoint and comments were quite refreshing, as Bob Rodi pointed out. Unfortunately the news media is usually concerned with "bad news." You don't see "good news", even on Enterntainment Tonight. I personally don't enjoy writing about my colleagues having problems, employees losing their jobs, and what the less than 1% of our industry does in fraud or misrepresentation. So Linda's comments to me were a "fresh breathe of air." I agree with Mr. Rodi---"Kudos for Linda." editor ---------------------------------------------------------------------------------------- CompUSA Goes to Trial By DAVID KOENIG, AP Business Writer DALLAS (AP) - Carlos Slim Helu, by some accounts the richest man in Latin America, has been spending a lot of his time lately in a tiny Dallas courtroom, where he is on trial in a case that's either about greed and betrayal or about business incompetence. It depends on who you believe. Three Texas businessmen say they had a deal to open CompUSA stores in Mexico, and turned to Slim for financing. But they say that Slim - whose empire includes a controlling share in Telmex, the Mexican phone company, a leading seller of computers in that country - simply used them to gain insider information about CompUSA, which he bought a few months later for $800 million. The three men sued Slim, CompUSA and three other defendants. On Tuesday, their lawyer asked a jury to award the men at least $83 million for "lost profits" and two or three times that in punitive damages. After a three-week trial, the jury began deliberating the case in a state district court in Dallas. Slim, 61, and his co-defendants said businessmen Lawrence McBride, Roger Cunningham and Ron Beneke are trying to win in court what they couldn't get in the marketplace. Slim's lawyers said the men never came up with a convincing business plan and were turned down by at least 36 other potential partners. Slim denied misusing confidential information in his January 2000 takeover of CompUSA. "I am a strong competitor ... not out of the rules," he testified. Slim, the son of a Lebanese immigrant to Mexico who made a small fortune in real estate, launched his first company in 1965, invested aggressively during downturns in Mexico's economy and built an empire that includes interests in banking, insurance, mining, construction, retail and restaurant companies. His boldest stroke was leading a French-U.S.-Mexican group that bought formerly state-run Telmex in 1990. He has made major investments in U.S. companies such as Office Max and Barnes & Noble, bought Internet service provider Prodigy Communications, and formed a joint venture with Microsoft Corp. to create a Spanish-language Web portal. Last year, Forbes magazine ranked Slim the wealthiest man in Latin America, pegging his personal fortune at $7.9 billion. McBride, Cunningham and Beneke aren't in Slim's league, but they have done all right for themselves. McBride ran several international business ventures, including selling farm equipment in the Middle East and irrigation equipment in Mexico. Cunningham exported oil field equipment to Mexico and sold credit insurance to Mexican industrial companies. Beneke is a trial lawyer cum real estate investor whose family invests millions, but he also has nearly $21 million in judgments pending against him. McBride and Cunningham both thought they knew Mexico pretty well, and they thought opening CompUSA stores there was a terrific idea. No one offered the company's package of computers, training and service. They also thought they had an in: McBride knew Jim Halpin, CompUSA's chief executive, through the Young Presidents Organization, an exclusive Dallas business club to which both men belonged. Even their wives and children knew each other. In June 1998, McBride and Cunningham reached a franchise agreement with Halpin - and disagreement over the meaning of the deal is at the heart of the lawsuit. McBride and Cunningham say the agreement gave them an exclusive franchise to open CompUSA stores in Mexico. But the defendants - who also include Halpin and two companies controlled by Slim - say it was only an unsigned promise to negotiate if McBride and Cunningham came back with partners. Beneke signed up for the new venture, called COC Services Ltd., investing $1 million. The men then set about looking for a partner in Mexico. And looking. According to their own documents and testimony, dozens of investors ranging from Citigroup and J.P. Morgan to local Latin American investors turned them down. The men blamed CompUSA's deteriorating financial picture, which had sent its stock price plunging from $35 to $6. After more than a year of searching, they contacted Slim's organization and were directed to his son-in-law, Arturo Elias, an executive at Telmex. In May 1999, Elias told an aide to send the Texans packing - he thought their request for $30 million in funding was outrageous. But four months later, Elias testified, he reconsidered after learning that his father-in-law had bought nearly 15 percent of CompUSA's stock. McBride and Cunningham said Slim's associates were very excited about backing CompUSA stores in Mexico and talked of giving the Dallas men 20 percent of the venture. But first they wanted lots of sensitive financial information about the company. After hesitating, CompUSA turned over the information, McBride and Cunningham said, and as soon as that happened, neither Slim nor his son-in-law would return their phone calls. At the same time, CompUSA gave them a deadline to find a financial angel. The deadline passed. Beneke angrily confronted Halpin, the then-CEO of CompUSA. "We had Mexico and you're taking it away from us," Beneke told him. Less than a month later, Slim's organization announced it would, along with minority investors SBC Communications and Microsoft Corp., buy CompUSA and take the company private. Mark Werbner, the lawyer for McBride and Cunningham, accused Slim of sabotaging their bid to avoid sharing any future CompUSA sales in Mexico. He accused Halpin of aiding Slim to grease the sale of CompUSA, from which he received a $21 million golden-parachute payment. Halpin said the Dallas men had plenty of time to make a deal but failed. Slim said he rejected a Mexican CompUSA venture because there were already too many competitors selling computers and not enough affluent Mexicans to buy them. "CompUSA in Mexico was maybe a risky business and was not interesting to us," Slim testified. There are still no CompUSA stores in Mexico. ----------------------------------------------------------------------------------------------- Compaq Leasing Goes Head to Head with Dell Leasing Free 60-day trial of GeoMedia 4.0 Plus Compaq Lease and Workstation Trade-in Program Offer---Too!!!! Intergraph Mapping and GIS Solutions, a division of Intergraph Corporation (NASDAQ: INGR), today announced it has partnered with Compaq(R) Computer Corporation (NYSE:CPQ) to offer the ultimate GIS solution to GIS professionals. For a limited time, Intergraph is offering a free 60-day trial of GeoMedia(R) 4.0, fully functional and ready to install. Compaq is complementing this free trial with an exceptional lease and workstation trade-in program. GIS professionals can experience the power of GeoMedia today by ordering a free 60-day trial at www.intergraph.com/gis/geomedia4 and also learn about Compaq's hot new workstations optimized for GIS. "We're excited to give new and existing customers the opportunity to test-drive GeoMedia 4.0 so they can experience first-hand the unparalleled data integration capabilities that are the hallmark of GeoMedia," said Preetha Pulusani, executive vice president, Intergraph Mapping and GIS Solutions. " By partnering with Compaq, we've brought together a GIS solution that delivers top-notch performance and reliability to help our customers tackle their most challenging business issues." GeoMedia analyzes data and solves problems in a single environment GeoMedia 4.0, the perfect solution for enterprise-wide GIS implementations, features an open architecture that makes it simple to deploy and customize and an intuitive interface that is easy to use. GeoMedia solves one of the recurring problems experienced by most traditional GIS users by making i t easy to share up-to-date spatial data throughout the enterprise. GeoMedia enables users to perform multiple queries, access and analyze data, and make smart business decisions, all in a single environment. With GeoMedia's innovative data server technology, users can access and manipulate dispara te data in its native format, including industry formats such as ARC/INFO, ArcView Shape files, MapInfo, AutoCAD, MicroStation, Oracle 8i Spatial, and Microsoft SQL Server. Intergraph also provides support and professional services to help GeoMedia users plan and implement their GIS initiatives. Compaq workstations power GeoMedia Compaq's Workstation Trade-in Program offers new and existing GeoMedia users an easy way to migrate their investment in older Compaq and non-Compaq workstations or PCs to improved levels of performance and reliability. Sponsored by Compaq Financial Services, this program accepts trade-ins of certa in Compaq and non-Compaq workstations or PCs in conjunction with the purchase of new Compaq Professional Workstations. Buyers can benefit from the value of their existing technology, eliminate the issue of equipment disposal, and simplify the upgrade process. Compaq Financial Services provides inn ovative technology leasing and financial asset management solutions at competitive rates worldwide so GIS professionals can get high-performance computing technology to power GeoMedia. For More Information To order a free 60-day trial of GeoMedia 4.0 and to learn more about the special Compaq lease and workstation trade-in offer, visit www.intergraph.com/gis/geomedia4 or call 1-800-791-3357. This special offer is available only in the United States. About Intergraph Mapping and GIS Solutions Intergraph Mapping and GIS Solutions (IMGS), a division of Intergraph Corporation (NASDAQ: INGR), develops, markets, and supports core geospatial products that address a wide range of market segments. IMGS is focused on delivering end-to-end geospatial solutions and services at all levels of gover nment and industry worldwide. With its GeoMedia technology, Intergraph succeeded in engineering a new generation of geospatial solutions, removing the barriers to data interoperability and integration. IMGS products and solutions can be found on the Web at www.intergraph.com/gis. Intergraph and GeoMedia are registered trademarks of Intergraph Corporation. Compaq is a registered trademark of Compaq Computer Corporation. Other brands and product names are trademarks of their respective owners. EDITORS: If you wish to include contact information for reader inquiries, please use 1-800-791-3357 (within the United States) or Intergraph Mapping and GIS Solutions' Web address: www.intergraph.com/gis. CONTACT: Intergraph Mapping and GIS Solutions, Huntsville Shelley T. Miller, 256/730-7631 stmiller@ingr.com ---------------------------------------------------------------------------------------- Source Capital Declares Dividend, Earns $1,010,217 or $0.77 Per Basic Share in 2000 ( Their press release---significant paragraphs to leasing industry in release--- )
SPOKANE, Wash.----Source Capital Corporation (Nasdaq:SOCC), a commercial lender, today reported the Board of Directors approved the payment on March 2, 2001 of a $.22 per share cash dividend to the shareholders of record on February 19, 2001. The Company recorded net income of $1,010,217 or $.67 per diluted common share for the year ended December 31, 2000, a 4% decrease from net income of $1,055,443 or $.66 per fully diluted common share for the year ended December 31, 1999. Net income for the quarter ended December 31, 2000, was $211,577 or $.15 per diluted common share, an 18% decrease from net income of $259,315 or $.16 per fully diluted common share for the fourth quarter of 1999. Real estate loans outstanding at December 31, 2000 increased 8% to $46.1 million from $42.8 million a year earlier. While real estate loans outstanding exceed the amount outstanding a year ago, the Company experienced significant early loan pay downs in the fourth quarter of 2000 causing an 18% decline of loans outstanding from the beginning of the quarter to December 31, 2000. The decline in loans outstanding during the fourth quarter was a significant contribution to reduced fourth quarter earnings. Leases outstanding declined 12% from $14.2 million at December 31, 1999 to $12.5 million at December 31, 2000. The decline in lease receivables during the year 2000 is the result of the imposition of tighter credit standards and increases in required lease rates during the year, culminating in the discontinuance of approving any lease applications received from lease brokers after November 1, 2000. Loans and leases past due as to principal or interest more than ninety days equaled 2.4% of net loans and leases outstanding. Other real estate owned and repossessed equipment totaled approximately $679,000 at December 31, 2000, as compared to $805,000 at September 30, 2000 and $594,000 at the end of the prior year. On February 1, 2000, one of two banks that provide a line of credit to fund the Company's real estate lending operations informed the Company that it had made a business decision to exit the mortgage warehouse lending business. This decision encompasses all companies for which the bank has previously provided credit facilities to fund new real estate loan originations, including the Company. The Company's existing line of credit matures on April 30, 2001 and the bank has indicated that it will seek to obtain approval of an extension of the time for an additional six month period which would expire on November 1, 2001, in order to allow the Company time to seek alternative lines of credit from other financial institutions. The Company has not yet had any discussions with other potential lenders and consequently the Company is not able to determine at this time whether such alternative lines of credit can be obtained. Any trend or forward-looking information included in this press release is subject to numerous possible risks and uncertainties. These include, but are not limited to: the possibility of adverse economic developments which may, among other things, increase default and delinquency risks in Source Capital's loan and lease portfolios; shifts in interest rates which may result in lower interest rate margins; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; changes in the regulatory and competitive environment, and other risks. Source Capital Corporation's future results may differ materially from historical results as well as from any trend or forward-looking information included in this release. This news release should be read in conjunction with Source Capital's annual report on form 10-KSB for the fiscal year ended December 31, 1999, its form 10-QSB report for the quarter ended September 30, 2000, and other Source Capital Corporation filings with the Securities and Exchange Commission. Source Capital Corporation is a commercial financial services company specializing in commercial real estate lending and equipment leasing. The Company is headquartered in Spokane, Washington with lending offices in Phoenix, Portland, Seattle and Spokane.
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