|
|
July 17, 2001 Headlines—
Barbados Court Freezes PinnFund Exec's Assets Chicago Tribune-Comdisco + Execs face bankruptcy, too Who Are Comdisco's Largest Credtors--- Capital Stream Selects TIBCO AmSouth Reports 2nd Q. Earnings of $133.5 Million
Leasing Ethics Dialog---New Viewpoints & Runnalls Final Word? plus
-EXCLUSIVE— Bob Rodi, CLP --Personal Credit Ruling Without Explained _________________________________________________________________ Barbados court freezes PinnFund exec's assets ASSOCIATED PRESS BRIDGETOWN, Barbados -- A court has frozen the Barbados assets of Michael J. Fanghella, former chief executive of PinnFund USA of Carlsbad, at the request of U.S. officials who accuse him of bilking investors out of millions to fund his lavish lifestyle. The High Court in Barbados froze the assets of Fanghella and his one-time girlfriend Kelly Cook, including $808,000 in a local bank account and a property worth $1 million, the government said in a written statement.. Fanghella and Oakland lawyer James Hillman were accused of securities fraud in a civil lawsuit filed by the Securities and Exchange Commission in March. A U.S. District judge in California froze Fanghella's assets there. At least 166 individuals and small groups invested in PinnFund, which sold mortgages to people with poor credit histories. Investors were kept in the dark with bogus financial statements showing a profit, according to the SEC. Investigators called it a classic Ponzi scheme in which early investors were paid off with money from later investors for eight years until the program collapsed. Barbados' attorney general sought the order from the High Court in May based on requests from the U.S. Department of Justice and the Securities and Exchange Commission, the government said in its statement. --------------------------------------------------------------------------------------------------- COMDISCO RECOVERY PLAN Execs face bankruptcy, too BY HOWARD WOLINSKY BUSINESS REPORTER Chicago Tribune When Middle Eastern terrorists exploded a bomb at the World Trade Center in New York in 1993, Rosemont-based Comdisco Inc.'s disaster recovery unit had its bank clients in the Manhattan skyscraper up and running the next day in Comdisco's facility across the Hudson River in New Jersey. Monday, the tech company, which took a body blow from the high-tech downturn, set into motion its own disaster recovery plan as it filed for protection from creditors while it reorganizes under Chapter 11 of the federal Bankruptcy Act and said it planned to sell its technology services business for $610 million to Hewlett-Packard Co. Comdisco also is planning a quick recovery. It aims to exit from Chapter 11 in early 2002. Any units not sold off will form a new Comdisco, with computer leasing once again forming the core competency of the company. Norm Blake, chairman and chief executive of Comdisco for three of the past four months and former CEO of the U.S. Olympic Committee, said in a statement, ''As a result of our comprehensive strategic review, we decided that the sale of our technology services business was in the best interest of Comdisco and our stakeholders.'' Fifty-one Comdisco units, 35 tied in with the company's defunct Prism Communication Services high-speed data network, are seeking Chapter 11 protection. In its quarterly filing in May with the Securities and Exchange Commission, Comdisco said it owned $7.52 billion in assets and owed $6.74 billion in debts. Comdisco is considering selling its core technology equipment-leasing business and asked the court for permission to auction off one or more of its businesses that lease high-tech equipment. The company plans to fire 170 employees, about 100 of them in the Chicago area. Thirty vacant positions will be eliminated. All told, Comdisco employs 2,900 employees worldwide in its technology services, equipment-leasing and ventures businesses. The company had 4,000 positions when it started cutting last fall. Comdisco's stock fell from a 52-week high of $33.50 touched on July 25 last year to 53 cents last month. The stock closed Monday at $1.06, down 49 cents. Hewlett-Packard plans to complete the purchase of Comdisco's technology services businesses, including the disaster recovery and Web hosting businesses, by Oct. 31. Comdisco has received a $600 million credit line from a group led by Citibank NA, subject to court approval. The technology services unit being picked up by Hewlett-Packard employed about 1,300 and was responsible for 25 percent of Comdisco revenues, or $637 million, in fiscal 2000. In fiscal 2000, Comdisco rang up $3.8 billion in revenue, with $2.5 billion coming from the company's core unit that leased computers and medical equipment, and $673 million from the unit that leased equipment to venture-backed start-ups. Execs face bankruptcy, too Repercussions from Comdisco Inc.'s corporate bankruptcy might resonate in the personal bankruptcies of dozens of top Comdisco executives. More than 100 Comdisco executives could be facing personal bankruptcy as a result of a ''shared investment plan'' in which they tied their personal fortunes to the company's success. The execs borrowed about $1 million each three years ago to purchase shares at $17 to $20 each. Comdisco has been one of the pillars of Chicago's tech scene. With a $5,000 loan from his father, Kenneth Pontikes, a former IBM salesman, started Comdisco (short for Computer Discount Co.) in 1969 to lease used IBM mainframes. Pontikes died from cancer in 1994. The company had its ups and downs over the years. About 10 years ago, it took a stab at gas and oil exploration. In the early to mid-1990s, Comdisco returned to its original business and began a turnaround as it trimmed its workforce and became the largest independent computer services company in the world. It also moved into leasing personal computers and medical equipment, such as reconditioned CT scanners. Under Nicholas Pontikes, 36, son of the founder, Comdisco increasingly became involved in Internet-related ventures, including a high-speed data network and leasing equipment to start-ups. The company was clobbered when the high-tech economy bubble burst last year. Nicholas Pontikes resigned in December, saying the company required an experienced executive at the helm. Comdisco Inc. eliminated its quarterly dividend in May as it announced $54 million in losses in the second quarter, compared with a $43 million profit during the same period the previous year. Bank of America Top Unsecured Lender to Comdisco By Christine Richard, Dow Jones Newswires Bank of America will be listed as holding the top unsecured claim against Comdisco when the company's bankruptcy court petition is made public, according to a Comdisco spokeswoman. Bank of America has an unsecured claim against the company of $88,950,000, putting it on top of the list of unsecured creditors. Analysts say, however, that institutional bondholders may have larger claims. Royal Bank of Scotland has the second largest unsecured claim of $72,550,000. Citicorp has the third largest claim of $71,140,000. Banc One Capital Markets has the fourth largest claim of $62,680,000. Credit Lyonnais S.A. has the fifth largest claim at $61,820,000. Topping Comdisco's list of trade creditors when the company's Chapter-11 bankruptcy filing is released will be Cisco Systems, the spokeswoman said. Cisco is owed $4,115,749. Solectron Corp. is second on the list of trade creditors with a claim of $3,504,457. Nortel Networks is third on the list with a claim of $2,535,503. International Business Machines is fourth with $1,437,107, and EMC Corp. is fifth with $1,216,992. Chase Manhattan Bank is the top holder of Comdisco bonds - $387,409,000 worth - the Comdisco spokeswoman said. She described Chase Manhattan as the "largest registered noteholder." Analysts said the bank was likely to be a trustee rather than the ultimate holder of the debt. The second largest holder of Comdisco notes is Bank of New York at $273,044,000. The third largest is State Street Bank & Trust at $223,692,000. Fourth on the list is Bankers Trust at $143,420,000, and fifth is Citibank at $140,808,000. Analysts said mutual funds and insurance companies were likely to be the largest holders of the debt. +++ ### ########### #### Comdisco Receives Approval of "First Day Orders"
ROSEMONT, Ill.--(BUSINESS WIRE)--July 17, 2001-- Interim Approval Granted For $600 DIP Financing Facility; Employee Wages And Benefits To Continue As Normal; Court Schedules Hearing To Approve Bidding Procedures For Sale of Availability Solutions Business to Hewlett-Packard and For Potential Auction of Leasing Assets Comdisco, Inc. (NYSE: CDO) announced today that the U.S. Bankruptcy Court for the Northern District of Illinois yesterday approved "first day motions" that are intended to support the company's employees, customers and vendors and provide other forms of operational and financial stability as Comdisco proceeds with its reorganization process. At Comdisco's request, the court approved the following first day orders: Payment of pre-petition and post-petition employee wages, salaries and benefits during the company's voluntary restructuring under Chapter 11; interim approval for $600 million of debtor-in-possession (DIP) financing for use by the company to continue operations, pay employees and purchase goods and services; authority to maintain existing cash management programs; authority to pay certain prepetition commitments that are necessary for operation of the company's core businesses in the normal course; and authority to retain certain legal, financial, real estate and other professionals to support the company's reorganization cases. A final hearing to approve the DIP credit facility, which is being provided by a group of banks led by Citibank, N.A. as Administrative Agent, The Chase Manhattan Bank as Syndication Agent, and Heller Financial, Inc. as Documentation Agent, has been scheduled for August 9, 2001. Of the $600 million facility, $200 million is available during the interim period, $100 of which has been reserved specifically to support international operations. As announced Monday, Comdisco has, subject to Court approval, agreed to sell its Availability Solutions business to Hewlett-Packard Company for $610 million. The Court has scheduled a hearing on July 23, 2001 to approve bidding procedures related to the sale and has set August 23, 2001 as the date for the sale hearing. The Court has also scheduled a hearing on July 23 to approve bidding procedures for a sale of all or part of Comdisco's leasing business. Norm Blake, Comdisco Chairman and Chief Executive Officer, said, "We are pleased with the prompt approval by the court of our `first day orders,' which, taken together, will enable the company to operate without interruption and meet normal business obligations as it proceeds with the reorganization process. Comdisco and all of our subsidiaries will conduct business operations as usual while continuing to make customer service a top priority during the restructuring and transition process. The prompt approval of these `first day orders' is good news for our company as a whole, as well as its customers, employees and business partners." The case has been assigned to the Honorable Judge Ronald Barliant under case number 01-24795. Additional information on the case can be obtained via the Internet at www.ilnb.uscourts.gov and entering the case number 01-24795. About Comdisco Comdisco (www.comdisco.com) provides technology services worldwide to help its customers maximize technology functionality, predictability and availability, while freeing them from the complexity of managing their technology. The Rosemont, (IL) company offers a complete suite of information technology services including business continuity, managed web hosting, storage and IT Control and Predictability Solutions(SM). Comdisco offers leasing to key vertical industries, including semiconductor manufacturing and electronic assembly, healthcare, telecommunications, pharmaceutical, biotechnology and manufacturing. Through its Ventures division, Comdisco provides equipment leasing and other financing and services to venture capital backed companies. Safe Harbor: The foregoing contains forward-looking statements regarding Comdisco. They reflect the company's current views with respect to current events and financial performance, are subject to many risks, uncertainties and factors relating to the company's operations and business environment which may cause the actual results of the company to be materially different from any future results, express or implied by such forward-looking statements. The company intends that such forward-looking statements be subject to the Safe Harbor created by Section 27(a) of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. The words and phrases "expect," "estimate," and "anticipate" and similar expressions identify forward-looking statements. Certain factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: the ability of the Company to continue as a going concern; the ability of the Company to operate pursuant to the terms of the DIP Facility; Court approval of the Company's motions as prosecuted by it from time to time; the ability of the Company to develop, prosecute, confirm and consummate one or more plans of reorganization with respect to the Chapter 11 Cases; risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for the Company to propose and confirm one or more plans of reorganization, for the appointment of a Chapter 11 trustee or to convert the Company's cases to Chapter 7 cases; the ability of the Company to reduce its workforce and related expenses and to achieve anticipated cost savings; year end audit and other procedures which may affect the Company's 2001 financial results; the ability of the Company to obtain trade credit, and shipments and terms with vendors and service providers for current orders; potential adverse developments with respect to the Company's liquidity or results of operations; the ability to fund and execute its business plan; the ability of the Company to attract, retain and compensate key executives and associates; the ability of the Company to attract and retain customers; potential adverse publicity; and adjustments arising in the course of completing the analysis of information with respect to the review of the company's businesses and evaluation of impairment charges; continuing volatility in the equity markets, which can affect the availability of credit and other funding sources to the high technology sector companies in the Ventures portfolio, resulting in the inability of those companies to satisfy their obligations in a timely manner and an increase in bad debt experience beyond current reserves; continued consolidation in the telecommunications industry and curtailment of the growth plans of the remaining companies in that sector, which could result in fewer buyers and reduced prices for available Prism assets, and a further reduction in the proceeds actually received from the sale of those assets compared to prior estimates and an increase in the losses associated with the discontinued operation. Other risk factors are listed from time to time in the company's SEC reports, including, but not limited to, the report on Form 10-Q for the quarter ended December 31, 2000. Comdisco disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. CONTACT: Comdisco Inc. For Investors, 866/757-7750 or Mary Moster(MR), 847/518-5147 or Kekst and Company Fred Spar or Jeremy Fielding, 212/521-4800 KEYWORD: ILLINOIS #### #### ---------------------------------------------------------------------------------------------- Capital Stream--- News potentially of interest for you regarding the future of the Commercial Finance Industry as a whole in terms of flexibility, efficiency and profitability. This partnership, announced today, means banks (including Bank of America), finance companies, and manufacturers will be accelerating the speed at which they do business. Please let me know if you're interested in receiving the complete scoop/release. CapitalStream Selects TIBCO Software To Provide Enterprise Application Integration Across Its Networked Commercial Finance Platform CapitalStream improves its robust commercial finance platform; additional technology will enable rapid, scalable integration for third-party and customers' legacy systems SEATTLE, WA. - July 17, 2001 - CapitalStream (www.CapitalStream.com), a Seattle-based provider of commercial finance automation technology, today announced it will utilize the TIBCO Software Inc. (Nasdaq: TIBX) Enterprise Application Integration (EAI) suite to integrate, connect and extend its network and offerings for banks, financial institutions and manufacturers. The choice for CapitalStream is significant in that it will make it possible for its offering to integrate more quickly and easily with customer legacy systems and increase customer usage flexibility - all while accelerating the commercial finance transaction workflow process... Sincerely, Nancy Gardner DDB Seattle for CapitalStream 206/223-6339 --------------------------------------------------------------------------------------------------- Ethics Dialog—Continues CLP License Not the Answer--- I do not believe that "licensing" people by the CLP program is in any way going to keep unethical people from being unethical. I do not have my CLP, nor does anyone in my office, and have no plans to be "licensed". I worked in a field that required licenses had a series 7 and series 63 required by the SEC to trade stocks and futures when I worked for EF Hutton and Dean Witter. In my office alone in Boston, we had 4 brokers that were caught for scamming and churning. One is in jail. Do you honestly think having a license stops those people that want to make money the easy way? It only puts more power in their hands to learn the ropes. And with a license like I had..comes very, very strict regulation. The SEC and the NASD. Even they can't stop frauds. I have heard through the grapevine which brokers etc are unethical and I will not to do business with them. By going to association meetings, ELA, EAEL, UAEL and NAELB you will learn who to do business with. Know who's been in this business a long time, and get to know people that you may never do business with but are well respected. Those are the people you can call when you want "info" on a source etc. If they don't know you they won't tell you. By attending and being active in associations there are principals of banks and some of the largest leasing companies that I go to. This to me is just as valuable as deal flow. Licensing is not the answer. Knowing who you do business with is the answer. Sincerely, Deborah J. Monosson President BOSTON FINANCIAL & EQUITY CORPORATION 20 Overland Street Boston Massachusetts 02215 617-267-2900 617-437-7601 Fax +++ Last year the UAEL advertised a 3 day seminar that was a prep for the CLP exam. I signed up, took the 3 days along with a number of other people. On Sunday 4 of us took the exam and were completely unprepared for that exam. All of us failed the exam. I wrote to the UAEL for a refund for the seminar, and have been ignored. Letters were send with a return receipt. Ms. Dalton signed for two of them. But there has been no response to letters, e-mails, and telephone messages. Cindy ( Spurdle of the CLP Foundation ) states that UAEL is responsible for the cost of the seminar. She is willing to let me take the exam again at no additional cost. Want to print this, be my guest.
Cary Sue Lavan ( Leasing News has received several complaints about CLP Examinations involving UAEL seminars, and we have referred them to the Executive Director Joanie Dalton. editor ) ~~
Everyone is counting penny's and losing dollars on this issue. The problem lies with industry stalwarts who somehow convince banks (Lehman) to lend them money on false statistics that have no way of truly succeeding. Examples are T&W Leasing, Bankvest, UniCapital, Granite, Copelco and even Finova when they got in. Most of these industry leaders knew that they could ramp up volume through false credit models, attach that volume to past performance, create value based upon current production and past performance and then subsequently go public and/or sell the company thus yielding millions in profits for the founders. I have posted several write ups on the issue of FUNDER FRAUD!!! Until Wall Street and Others get smart, very few "leaders of our industry" will resist the temptation of millions. Let's face it, nothing has happened to these con men. And that is what they are....CON MEN!!! If the con men get prosecuted, maybe others will be less tempted. I do believe that Buyers of Leasing companies are smarter these days and will look for other variables when valuing a prospective leasing company. Would it have made a difference if the Price's were CLP's or not? NO WAY!! They had 20 years of successful experience and a great reputation. But look at them now. One is being prosecuted under Tax Fraud and both have become difficult to contact. I do not know what happened to the UniCapital guy but looks pretty fishy to me. Copelco, Finvova, Bankvest and others are too well connected within the CEO's of America. These leaders are the one's who created unbelievable credit strategies. Anyone in the Fitness industry can remember how difficult it was competing against BankVest. It was absolutely incredulous how competitive and flexible they were. No one with any sense of credit would have done the deals they did unless there was an alternative motive. I stated before that I have actually scene T&W's credit models. I also worked with them 5 years ago before those models were made. They had the highest rates for the credit they were looking for I had experienced at that time. There is NO WAY they created that model without knowing how bad it would perform. But it did one thing for them, added volume to drive the stock long enough to sell it and make money!!! Brokers and Funders will always have their problems. However, it is these "leaders" who have made it more difficult for the rest of us. If you have any information that can hang these "leaders" give it to the proper authorities so we can get back some of the industries tarnished reputation. -Anonymous. +++ I recall the good-old days in the 80s, long before the abundance of money of the economic espansion that, from my perspective, dumped the cartage of unethical and unscrupulous players onto our industry. In those days, a funding source was treated with the utmost respect and value, and that good customer relations brought about repeat and referral business. Two very early axioms I learned were: (1) Never argue with or deceive a funding source and (2) Pigs get fat, hogs get slaughtered. Sadly, the nature of the broker-funding source relationship ultimately reversed itself, almost to the point of the tail wagging the dog. Ethics and scruples were subordinated to volume. Everyone rolled out the picnic blanket on the railroad tracks, never expecting the train to come. But it did. The recent tightening of money and souring of portfolios has created an environment which has left funding sources distrustful, brokers jaded, and end-users "undeciseful". "I can only offer to my industry's community is that, just like the good times did not last forever, nor will these times. Stay the course, do the right thing, take control over what we can control, let go of what we cannot, and let the Universe take care of the rest.
Jim Fleming nationalbusinesscredit@yahoo.com + + We Know Who You Are— Barry Marks says, "You want a better leasing world? Make it so, don't wait for this association or that to do it for you. Mr. Runnalls has done a good thing in posting his thoughts, but complaining that the guys donating their time to promote improvement aren't doing enough doesn't help unless it is combined with a real commitment to pitch in and help." I do not believe it is necessary for me to defend Russ' commitment to the industry. He's donated his time, paid his dues and fought the battles. Russ has volunteered many good years of service to the leasing industry through his involvement in UAEL and he has been vocal in his concerns through this medium as well. Barry's comments that much unethical behavior derives from a lack of education is to bury his head in the sand. All unethical behavior is a result of greed. I, too, have sat on panels hearing ethics complaints. They were seldom a matter of interpretation, but were more often than not a way to exact some measure of vengeance for a deal gone bad and some amount of money was involved. If the injured party really believed in the claim, it would have been heard in a court of law. Notwithstanding the merit of the claim, ethics hearings were essentially a way for one person in the leasing industry to embarrass another. The irony of it was the frequency with which the two adversaries would afterward continue doing business as usual with each other. NAELB is not new to trying to educate its members on what its standards are. Anyone in the industry who doesn't know how to behave by now is not uneducated, he is stupid. Pure and simple, there are no teeth in the Standards. UAEL penalties for violating ethics are essentially one or a combination of either private or public censure, probationary or suspended membership (all forms of embarrassment) or expulsion, which will not stop unethical behavior, not in quotes since my definition to what is unethical behavior is simply a "no" answer to the question, "Is it the right thing." Barry is right that there is a need to communicate, to adopt a zero-tolerance attitude against unethical behavior and kick the bad apples out. But out of what? UAEL? ELA? NAELB? EAEL? How about running them out of the industry. Which brings me to Bob Rodi's comments about licensing without regulation. Huh? To compare leasing professionals (and there are many for whom I have a very high regard) whom for the most part have fallen into equipment leasing with the years of educational training and internships that dedicated doctors, lawyers and CPAs have to go through is an insult to those professions. Ruth Paddock once said when a new WAEL Board was introducing itself and answering the question of how we each came to be in leasing, that she didn't know anyone who went through four years of college and said, "I want to be an equipment lessor when I grow up." No, Bob, I don't agree that this industry can simply police itself because others can. The leasing industry can only achieve the reputation of being an ethical one by allowing itself to be regulated and I believe it should invite regulation if it wants to give its varied codes of ethics any teeth at all. To simply say yes we will police ourselves and encourage others to do so at the risk of ostracizing them is to continue ethical masturbation and watch nothing happen. The unfortunate part of all of this is that it is the few who are inclined to disregard what is right stains the many who strive to act ethically. As I've said before, we each know who we are. Hal T. Horowitz Search West 340 North Westlake Blvd., Suite 200 Westlake Village, CA 91362 Pho: 805-496-6811 ext. 231 Fax: 805-496-9431 Pager: 818-318-9900 hal.horowitz@searchwest.com http://horowitz.searchwest.com It is my mission to collaborate with my clients in order to further their success by identifying professionals of uncommon ability to whom my clients might not otherwise have access and who will make a valuable contribution to my clients' goals. ++ __ If It Ain’t Broke--- This whole topic really gets me annoyed. For years thousands of brokers have been making an honest living in this industry and I believe most of them have conducted themselves in a honest and sincere manner. We currently work with many funding sources and we do a respectable amount of business. We have also been in this industry for over twenty years and I can honestly say that no funding source has ever said to us " Just Send Volume and We will Approve It blind" If that were true we would all be millionaires 10 times over. If anybody out their knows of a funding source that is not interested in derogatory information and is approving deals without checking them out please let me know who they are. We also do our internal due diligence and the financing sources really like it and our delinquency rate has always been very low. I also believe any talk of regulation or licensing can only hurt the business. I also believe it will not change anything and will hinder the new broker who wants to get in the business. I also believe even though the CLP status is very nice, does it really help make a deal or keep someone who is unethical more ethical , absolutely not. I find that for the most part most customers want to know their payment and get the equipment. I think our organizations do a good job and you always have a few people who want to think of themselves as model citizens an want to eliminate the world of their perception of what they call "Unethical Behavior". Personally I cant stand those type of people. This industry has been built on an entrepreneurial basis an over the years I have met many people and most are hard working and honest people. Lets not look to change and get licensed or regulated because of a few people who see themselves as better than every body else an want to make the world better based on their own standards. My father always taught me "If its Not Broke Don't Fix It" Philip Dushey +++ I felt that I needed to do a follow-up to my posting of 7/12/2001. My posting to Bob Rodi CLP's original posting prompted so many calls, direct E-mails and comments in Leasingnews from people I have been associated with for so long and have such respect for, I felt I need to say just a little more. If I analyze what everyone had to say, it boils down to the same thing; we need to figure out a way to clean this industry up. Everyone had a little different slant on how they said it, and they may have taken a shot or two at what has been done or tried to be accomplished but failed, but no real solutions came out. Let me outline a few of the comments and my take on them: 1) First, my "Big Deal" comment on education was not directed at the importance of education, but the fact that education is constantly held up as the solution to solving this and most other problems. Do you think for one minute that the owners/managers of the unethical companies (lets go back to "Scum") we are talking about are uneducated. Do we all believe for one minute that they do not know what they are doing. Do you think that a better education about our industry, marketing strategies, accounting standards, new legal regulations, how to use the Hp12C, how to better telemarket, etc is going to make the scum wake and say "wow, I know so much now that I can go straight and make the same amount of money." These people are not stupid or uneducated about our industry. They know exactly what they are doing and they know enough about our industry to do it very well. They also know that this is a wide open unregulated industry with tremendous profit potential, with absolutely no retribution for unethical behavior. NONE! They have been well trained by some of the long established "Incubator" leasing companies. 2) Bob Baker made a very good point about being part of the problem if you do not blow the whistle on someone you know is unethical. Unfortunately, the present systems in place by the trade organizations require absolute, documented facts, which are many times hard to establish. I believe a lot more people would come forward if the information could be dealt with initially as an unconfirmed rumor. Enough rumors, and then maybe we have a fire that needs to be looked into further. I will tie this together later with public disclosure. Also, Leasingnews is doing the industry a great service by allowing these types of discussions to take place and inform the participants in this business to communicate. 3) There were a lot of negative comments relative to the performance of the trade organizations to date on enforcing the 'Code Of Ethics." I received a couple of comments that suggested an organized withdrawal from trade group membership since they felt there was no value to belonging any longer. I agree with most of them, however, I still believe that strength comes from groups that empower their individual members. Trade groups have been primarily ineffective to this point in maintaining the industry ethics, probably because it was not a huge issue so energy was spent elsewhere. Well, the time has come to put some intense focus on this issue and come up with a solution to effectively enforce our industry ethics. We have a lot of very smart Attorney members, I am sure they can find a solution that works. Other organizations have developed solutions to do this very effectively, so can we. Additionally, if the trade groups can devise ways to add true value to membership, there will be more members, and more active members (more on this later). 4) Funding Sources. They need to accept a fair share of the blame for the scum in the industry. There was a good, anonymous 7/16/2001 posting that started out "Hal, I'm on the verge......." First of all, I hate to give credit to an anonymous posting because I am not sure what they are hiding from, however this one was very good relative to the contribution of funding sources to this situation. If you have not read it, you should because it hits the nail on the head. Funding sources need to become part of the solution and not part of the problem. They need to work with the trade groups in sanctioning the scum. When they turn a blind eye to unethical operating and marketing practices, they are supporting the scum. OK. Let me see if I can pull some of this together and offer a few ideas. First of all, if you want to put someone out of business, you cut off their customer base and their money source. The money source is easy. With a little help from the funding sources (especially the major ones) by not doing business with the known scum, the scum would not last long. As far as effecting the customer base, if each trade group had a web page that (1) lists members in good standing, (2) notes certain members that have had complaints or sanctions, and (3) gave customers a place to make their own complaints about bad experiences with a specific leasing company, we members could refer our prospective Lessees to this page for reference. Now we have some real value added as a member of a trade group. Our customer can now check to see who is a member (now there is value to being a member and listed), who is a member but has had complaints or has been sanctioned, who is not a member (and wonder why), and/or affords any present or previous customer a chance to complain about a bad experience. This does not fix everything, but we have to start somewhere and this might be a decent start. This is similar to what the Better Business Bureau does. The CLP Foundation could also be very instrumental by making Certification a true value, but they need to put some teeth back in their program and take a close look at some of the present CLP's and how they are conducting their business. This has been a very interesting and important subject. I am very impressed with the exceptional interest this has drawn from the leasing community. Maybe we can really take a giant step forward. Thank you Kit for the vehicle. W. Russell Runnalls Markay Financial Corporation (818)998-6125 (818)998-6127 (fax) www.markay.com russ@markay.com Bob Rodi, CLP Exclusive---Personal Credit Without Signature Explained http://www.ftc.gov/os/statutes/fcra/tatelbaum2.htm
ENSIGN, the nick name for the electronic signatures act, became law on July 1, 2001. Many of us who had studied this issue with great interest were anxiously awaiting a follow-up reaction to the Medine-Tatelbaum opinion of last summer. I had theorized that the FTC would alter their opinion somewhat, once ENSIGN became law or once someone actually interepreted the FCRA from the standpoint of the "spirit" of the law rather than the strict "letter" of the law.
As Barry Marks points out, the newest opinions ( I believe he is referring to the "Zalenski" 5/24/01) really alters the very strict interpretation that Medine took in his answer to Tatelbaum with respect to "permissible purpose". Whether or not you have permissible purpose, should not necessarily be confused with the need to obtain a signature. The controversy around "permissible purpose" centered around a simple change in the wording of the FCRA of 1996. That simple change was that the words "a transaction involving the consumer" was changed to a transaction "initiated by the consumer". David Medine, the staff attorney for the FTC that answered Tatelbaum referred directly to this change in wording and interpreted this in the strictest sense. He cited Section 604(a)(3)(A) or (F)(i) of the FCRA stating:
"Those subsections provide such a purpose only where the recipient of the report:
(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to ... the consumer; or ... (F) otherwise has a legitimate business need for the information (i) in connection with a business transaction that is initiated by the consumer. (Emphasis added)
Section 604(c) states, "The term 'consumer' means an individual." Your (Tatelbaum"s) letter states specifically that the "credit process is initiated by the company seeking the business or trade credit." When a corporation, partnership, or other business entity -- rather than an individual -- applies for commercial credit, there is thus neither an "extension of credit to (a) consumer" or "a business transaction that is initiated by a consumer" to provide a permissible purpose under either Section 604(a)(3)(A) or (3)(F)(i).
This is the statement by Medine that is most supportive of Barry's assertion as follows: "Now think about it a minute - why do you need a credit report on a company president who isn't signing a guaranty for a corporate lessee and therefore isn't liable on the debt? It's the loose, snoopy, sort-of-makes-us-feel-better stuff FTC's saying is a no-no. So, the rule: If the guy is legally responsible for payment, pull the report. If not, and you want it for whatever reason, get consent first."
While I can't read Barry's mind I believe that he is questioning the common industry practice of obtaining a credit report, on the principles of a closely held corporation, even if the intent is to consider the application as "Corp Only". I would like Barry to let me know if I have interpreted, what he describes as "loose, snoopy, sort-of-makes-us-feel-better stuff", correctly. This was, I believe, clarified in the Zalenski opinion mentioned above
Hopefully the letter below (including the footnote) will put the issue of "permissible purpose" to rest, once and for all. While Zalenski cast dispersion of Tatelbaum 1, this letter, known as "Tatelbaum 2", certainly has an esteemed group of attorneys asking the FTC for clarification of this issue. While this letter represents the "make sense" argument that many of us made at the UAEL Spring Conference on this issue, it appears that this group is somewhat more influential. It also appears that our brethren in the banking industry were experiencing a bit of consternation over this issue as well.
Hopefully the major lenders and funding sources are reading LeasingNews for the announcement of this late breaking story. One would think that they would be monitoring the FTC website for something that is this important. The Tatelbaum 2 letter was issued 6/22/01 and was just posted, I believe, as of 07/10/01
In our next LeasingNews report we can finish the issue of electronic signatures, which, as of July 1, 2001 are valid as a substitute for a "wet" signature, by Federal Law. In the meantime I would like to hear why they are not being accepted.
Until then I remain ever vigilant on behalf of good, upstanding, third party brokers, lessors and originators everywhere!!
Bob Rodi, CLP President LeaseNOW, Inc. www.leasenow.com drlease@leasenow.com 1-800-321-LEAS (5327)x101
UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION WASHINGTON, D.C. 20580 Joel Winston Acting Associate Director Division of Financial Practices
Phone: 202-326-3224
Fax : 202-326-2558
E-mail: jwinston@ftc.gov
June 22, 2001
Julie L. Williams First Senior Deputy Comptroller and Chief Counsel Office of the Comptroller of the Currency
William F. Kroener, III General Counsel Federal Deposit Insurance Corporation
J. Virgil Mattingly General Counsel Board of Governors of the Federal Reserve System
Carolyn Buck Chief Counsel Office of Thrift Supervision
Dear Banking Agency Counsels:
This responds to your May 31 letter concerning the Federal Trade Commission staff opinion letter dated July 26, 2000, from David Medine, former Associate Director for Financial Practices, to Charles Tatelbaum. That letter was in response to Mr. Tatelbaum's request for the Commission staff's written views on whether a permissible purpose exists under the Fair Credit Reporting Act ("FCRA") for a business credit grantor to obtain a consumer report on an individual who is a principal, owner, or officer of a commercial loan applicant (a sole proprietorship, partnership, or corporation), or who signs a personal guarantee in connection with a commercial credit application by a third party. Mr. Medine's letter set forth the position of the Commission staff that neither Section 604(a)(3)(A) nor Section 604(a)(3)(F)(i) of the FCRA provides such a purpose.
Your letter advocates an alternative interpretation of Section 604(a)(3)(A), concluding that "the FCRA would permit a lender to obtain a consumer report in connection with a business credit transaction where the consumer in question is or will be personally liable on the loan, such as in the case of an individual proprietor, co-signer, or guarantor."(1) We agree that it is reasonable to view a business transaction in which an individual has accepted personal liability for the business debt as involving the consumer, thus providing a permissible purpose for the lender to obtain a consumer report under Section 604(a)(3)(A). We understand your practical reasons for desiring that all parties be able to rely on your interpretation. Therefore, we are willing to consider the Tatelbaum letter superseded to the extent that it concludes otherwise.
This informal staff letter is not binding on the Commission.
Sincerely,
Joel Winston
Endnote:
1. However, we note that you "generally agree that a lender would not have a permissible purpose under section 604(a)(3)(A) of the FCRA to obtain a consumer report on an individual who will not be personally liable for repayment of the credit, such as when the individual is a shareholder, director, or officer of a corporation, but does not guarantee or co-sign the loan, and is not an individual proprietor liable for theloan."
President LeaseNOW, Inc. drlease@leasenow.com <mailto:drlease@leasenow.com> www.leasenow.com <http://www.leasenow.com> 1-800-321-LEAS (5327)x 101 ######## ############## ################## AmSouth Reports Second Quarter Earnings of $133.5 Million or $.36 Per Share BIRMINGHAM, Ala.---AmSouth Bancorporation (NYSE:ASO) today reported earnings in the second quarter ended June 30, 2001, of $133.5 million, or $.36 per diluted share. In 2000, AmSouth reported earnings of $99.9 million or $.26 per diluted share. Excluding the impact of merger-related and other charges, AmSouth reported earnings of $158.1 million or $.41 per diluted share for the second quarter of 2000. The second quarter 2001 earnings are $.02 per share higher than the preceding quarter's. AmSouth's second quarter performance resulted in a return on average equity of 18.7 percent, a return on average assets of 1.40 percent and an efficiency ratio of 53.4 percent. "Despite the headwind of a weakened economy, AmSouth turned in a solid quarter," said Dowd Ritter, AmSouth's chairman, president and chief executive officer. "We've got the right people in the right places, and all of them are focused on executing the strategic initiatives that will drive our growth. That puts us in a strong position for the future." Net interest margin continued its steady improvement, increasing 19 basis points from the first quarter to 4.12 percent. That compares with a net interest margin of 3.79 percent in the second quarter of 2000. Second quarter net interest income was $343.4 million compared with $352.6 million in the same quarter in 2000. Average earning assets declined by $4.9 billion to $34.9 billion between years reflecting the company's decision in 2000 to restructure its balance sheet. Low cost deposits, which include checking, savings and money market deposits, grew $286.3 million between the first and second quarters or 7.4 percent on an annual basis. The growth in low cost deposits drove core deposits, which also include certificates of deposit, higher by 3.4 percent on an annual basis to $25.2 billion. Noninterest income, which includes earnings from trust, investment management services and other sources of fee income, was $187.6 million, an increase of 3.2 percent compared with the same quarter in 2000. Second quarter noninterest expenses were $292.0 million, up 2.0 percent compared with the same quarter in 2000. Comparisons to 2000 results exclude merger-related cost and pre-tax gains on the sale of businesses as well as the impact of IFC Holdings, which was sold on September 30, 2000. Net charge-offs were .75 percent of average net loans in the second quarter of 2001 compared with .63 percent in the previous quarter. The ratio of loan loss reserves to total loans was 1.54 percent, down from 1.55 percent in the previous quarter. Total nonperforming assets at June 30, 2001, were $223.7 million, or .90 percent of loans net of unearned income, foreclosed properties and repossessions, compared to .93 percent or $227.9 million in the previous quarter. AmSouth's performance in the second quarter was driven by a continuing focus on the company's six strategic initiatives. For example, the "Free Internet Banking with Bill Payment for Life" campaign that began in late February was extended twice in the second quarter because of the continuing strong response. By June 30, AmSouth had over 325,000 customers signed up for Internet Banking tripling the number of Internet Banking customers in only seven months. Equity lending also increased, growing to $4.8 billion in the second quarter, an increase of 9.5 percent compared with the same quarter in 2000. About AmSouth AmSouth is a regional bank holding company headquartered in Birmingham with $38.4 billion in assets, 600 branch banking offices and more than 1,200 ATMs. AmSouth operates in Tennessee, Alabama, Florida, Mississippi, Louisiana and Georgia. AmSouth is a leader among regional banks in the Southeast in several key business segments, including consumer and commercial banking, small business banking, mortgage lending, equipment leasing, annuity and mutual fund sales, and trust and investment management services. AmSouth also offers a complete line of banking products and services at its web site, www.amsouth.com. ########## ####################### Fifth Third Reports 14% Increase in Operating Earnings Fifth Third Bancorp's operating earnings were $338,233,000 for the second quarter of 2001, up 14 percent, and $644,448,000 for the first six months of 2001, up 11 percent, compared to $296,715,000 and $578,507,000 respectively, for the same periods in 2000. Operating earnings per diluted share were $.58 for the quarter, an increase of 12 percent over the $.52 posted in the same period in 2000. For the first six months of 2001, operating earnings per diluted share were $1.10, up nine percent over last year's $1.01. On an operating basis, return on average assets was 1.89 percent and return on average equity was 18.9 percent for the second quarter of 2001, from 1.80 percent and 21.1 percent, respectively, for the same quarter last year. Fifth Third's equity capital ratio was 10.01 percent for the quarter compared to 8.53 percent in 2000's second quarter illustrating significant progress in returning to the levels to which Fifth Third is accustomed. "We are very pleased and encouraged by our financial performance in the initial quarter of our combination with Old Kent Financial," stated George A. Schaefer, Jr., president and CEO. "We promised our shareholders that we would carefully integrate Old Kent to achieve the financial objectives of the acquisition while preserving and accelerating revenue growth. This quarter we took a significant initial step in fulfilling that promise. The conversion of the former Old Kent Chicago locations to Fifth Third's systems and processes in June was the most successful in our history. At the same time, the Bancorp's core growth rates for net interest income, service fees to Retail and Commercial checking account customers, and investment advisory revenues accelerated this quarter. Our team also worked hard to strengthen the balance sheet and dramatically improve credit quality. Progress on Old Kent is ahead of our expectations. These early successes certainly make us optimistic about the second half of the year." Schaefer continued, "Second quarter's results were highlighted by strong growth across all of our business lines and improved credit quality. Throughout our footprint, Banking Center and Commercial sales teams sold an outstanding number of new checking accounts, our fee businesses continued to produce remarkable results and revenue growth continued at a solid pace. Sales results were among the highest in our history as we continue to emphasize earnings growth accountability deep in the organization. Midwest Payment Systems (MPS) had yet another strong quarter and remains well positioned to continue to capitalize on the opportunities of e-commerce. Our Investment Advisory businesses benefited from impressive new sales results and the addition of new talent through our focus on recruiting top performers." In addition Schaefer noted, "I would like to welcome our over one million new customers from Old Kent and acknowledge the outstanding efforts of our employees in Michigan and Chicago in ensuring a smooth integration. We are extremely proud of the results in our new markets, and we made certain that our new officers from Old Kent are aligned as owners by including them in Fifth Third's annual stock option grant in April. In addition, we have made significant progress in building the management teams in our new affiliates and the support areas necessary to allow us to capitalize on future revenue growth opportunities." Operating earnings for the second quarter of 2001 exclude nonrecurring pretax merger charges of $255 million resulting from the merger with Old Kent Financial Corporation. Operating earnings for the second quarter of 2000 also exclude nonrecurring pretax merger charges of $73 million resulting from prior acquisitions by Fifth Third Bancorp and the former Old Kent Financial Corporation. For the first six months of 2001 and 2000, operating earnings exclude nonrecurring pretax merger charges of $255 million and $99 million, respectively. The effect of these one-time charges in 2001 and 2000 was to reduce net income by $210 million, or $.36 per share, and $67 million, or $.12 per share, respectively. Financial data for all prior periods have been restated for the acquisition of Old Kent Financial Corporation, accounted for as a pooling of interests. In general, the effects of the pooling lowered Fifth Third's originally-reported financial performance ratios and growth rates. ### ##### Bank One Reports Second Quarter Operating Income of $0.60 Per Share
Corporate Banking Reduces Loans $4.5 Billion During Quarter And $11.5 Billion from the 2000 Third Quarter Peak Tier 1 Capital Ratio Increases to 8.2% from 7.2% a Year Ago Loan Loss Reserve Increases to 2.54% of Loans from 1.73% a Year Ago CHICAGO, July 17 /PRNewswire/ -- Bank One Corporation (NYSE: ONE) today announced 2001 second quarter operating income of $708 million, or $0.60 per diluted share, before a $44 million after tax charge for the cumulative effect of an accounting change. Including this change, reported net income was $664 million, or $0.56 per diluted share. This compares to a loss of $1.269 billion, or $1.11 per diluted share, in the year-ago quarter. For the first half of 2001, operating income totaled $1.387 billion, or $1.18 per diluted share. Including the effect of the accounting change, reported net income for the first half of 2001 was $1.343 billion, or $1.14 per share. This compares to a net loss of $580 million, or $0.51 per diluted share, a year earlier. 2001 second quarter results were affected by the following significant items: * The sale of $232 million of problem commercial credits, resulting in 42 million of after tax ($68 million pre-tax) net charge-offs. While these sales were completed well within established reserve levels, on a net basis the Corporation added $24 million to loan loss reserves, strengthening reserves to 2.54% of period-end loans from 2.45% at the end of the first quarter, and 1.73% a year ago. * Implementation of a new accounting rule (EITF 99-20) changed the way the Corporate Investment Group's collateralized debt obligations are valued and recorded. The cumulative effect of this change resulted in a charge of $44 million after tax ($69 million pre-tax), or $0.04 per share. "We have made significant progress throughout our company in upgrading our systems and improving customer service while reducing our cost structure," said James Dimon, Chairman and Chief Executive Officer. "Operating margin improvement resulting from waste reduction has enabled us to strengthen our balance sheet and absorb credit costs, which are almost $1 billion higher annually than a year ago. We continue to aggressively manage our credit risk even at the expense of reduced earnings. "We are achieving modest asset growth in the areas that we want to expand, while deliberately reducing certain assets, most notably corporate loans," he said. "We are conscious of the difficult business climate and remain sharply focused on continued improvement in our cost structure. Taken together, these actions give us confidence we are building a stronger company for the future." Highlights of the quarter included: Systems and Operations * Remained on track to convert two of the big five deposit systems this year, including the Texas / Louisiana conversion later this month. Retail * Enhanced the customer assist functionality of the 15,500 personal computers installed over the last year in all banking and call centers. * Produced a record $3.1 billion of home equity loan originations through the banking centers, up 56% from a year ago. Commercial Banking * Reflecting the previously announced initiative to more actively manage the risk profile and improve relationship profitability: -- Corporate Banking loans declined $4.5 billion in the quarter, with a total decline of $11.5 billion, or 23%, from the 2000 third quarter high point. -- Corporate Banking off-balance sheet exposure declined $6.6 billion in the quarter, with a total decline of $12.2 billion, or 13%, from the 2000 third quarter. * Achieved 10% growth in noninterest income, adjusted to exclude the year-ago significant items. * Achieved continued strong capital markets results, with revenue of 169 million, up 42% from a year ago, adjusted for last year's significant items. First USA * Improved the pre-tax return on average outstandings to 1.97% from 1.46% in the 2001 first quarter. * Opened over 1 million new accounts. * Strengthened the management team by hiring Daniel Frate as president and chief operating officer. * Continued to achieve operating efficiencies, including the effect of consolidated sites. Investment Management * Achieved a 5% increase in net income, adjusted to exclude the year-ago significant items, and modest growth in assets under management despite a difficult market environment. Corporate Investments * Hired Richard Cashin to head Private Equity Investments and refocused the business toward direct equity investing with less emphasis on investing through third-party funds. Financial Performance * Increased the loan loss reserve as a percent of period-end loans to 2.54% from 2.45% at March 31, 2001, and 1.73% at June 30, 2000. * Increased the Tier 1 capital ratio to 8.2% from 7.8% at March 31, 2001, and 7.2% at June 30, 2000. * Increased the tangible common equity to tangible managed assets ratio to 5.8% from 5.6% at March 31, 2001, and 5.4% at June 30, 2000. LINE OF BUSINESS DISCUSSION www.leasingnews.org
|