Leasing News

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United Associations of Equipment Leasing Philadelphia Funding Retreat is July 26th.

Jim Buckles from Preferred Broker Solutions will be offering training on CapitalStream Advantage and the alaQuote software programs.

Last call for registration. If interested, please register today at www.uael.org.

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This is not uncommon due the economic times, including mergers, acquisitions, and failure of many large leasing companies. Middle of year figures are usually lower,

The Eastern Association of Equipment Lessors is a trade association for entrepreneurial leasing companies, banks, brokers and their services firms.

EAEL is primarily a regional association with 67% in the Northeast (NY, NJ, MA, CT), an additional 5% in PA and MD, and the remainder in 25 states and Puerto Rico.

One important distinction in EAEL membership recruitment is that they do not solicit Brokers/ Lessors west of the Mississippi River.

Members share information, have a close bond, often join other leasing associations in joint conferences.

There has been talk for years that this association would merge with another, but there is a closeness among members that would be lost, and as important, the membership dues overall are the lowest of the other three leasing organization who would be their suitors.

Many of their members now belong to other leasing associations, as is common in the industry, especially for funders and those companies with business across the United States.

This is a very unique group with their own personality, with prime interest on East Coast networking and business.

Corporate wrongdoers could no longer file for bankruptcy to avoid civil fines and lawsuit claims from bilked shareholders under a provision of the proposed accounting reform bill making its way through the Senate.

But a long-standing legal loophole could make it difficult for regulators and courts to use that provision, assuming it survives in the final legislation, to reach some of the wealthy executives at the center of corporate scandals that inspired the Senate provision.

Known as the unlimited homestead exemption, the loophole allows bankrupt debtors in six states, including Texas and Florida, to shield unlimited amounts of equity in luxurious estates such as the $15 million mansion that Scott D. Sullivan, the ousted chief financial officer of WorldCom Inc. is building in Boca Raton, Fla., and the $7 million penthouse that former Enron Corp. chairman Kenneth L. Lay owns in Houston.

Although neither Lay nor Sullivan have filed for bankruptcy protection from creditors or have been charged with securities violations, the exemptions could help protect them from the new legislation's tougher measures if their fortunes changed.

"The homestead exemption in Florida has been a magnet for affluent deadbeats and bad actors for years," said Travis B. Plunkett, legislative director of the Consumer Federation of America. "The fact that this mansion loophole exists just adds insult to injury to WorldCom investors."

Before disclosures of WorldCom's accounting troubles helped build bipartisan support in Congress for accounting reform, lawmakers in April tentatively agreed to restrict the homestead exemptions as part of a broader overhaul of the nation's bankruptcy law. But the effort stalled last month after House and Senate leaders failed to agree on other parts of the legislation in a private conference.

The compromise would have required an individual to own a home for at least 40 months before filing for bankruptcy protection and trying to use the unlimited exemption. Residents who own homes for less than 40 months would be allowed to shield $125,000 of equity. Individuals convicted of certain felonies or securities fraud in the 10 years before filing for bankruptcy could not claim the unlimited exemption.

"This would say that there's no way these head honchos in these companies under investigation would be able to hide their assets in their homes," said Sen. Herb Kohl (D-Wis.).

The Securities and Exchange Commission has charged WorldCom with fraud for allegedly booking $4 billion in routine expenses as long-term capital investments over five quarters.

Enron is under investigation by the SEC for its accounting treatment of partnerships it used to hide debt and losses. Lay is a defendant in shareholder lawsuits and was accused in an investigation by Enron's board of failing to maintain oversight of the company.

WorldCom fired Sullivan on June 24 and last week sued him to recoup a $10 million retention bonus he was paid. Sullivan is also named in at least one suit brought by shareholders. Earlier this week, he and former WorldCom chief executive Bernard J. Ebbers refused to testify before a House committee, citing their Fifth Amendment right against self-incrimination.

Sullivan, meanwhile, is building his mansion on a four-acre compound in an exclusive area of Boca Raton. The estate features an 18-seat movie theater, a swimming pool and cabana, a two-story boathouse, a guest house and two three-car garages with maid quarters on their second floors.

The architect, Randall Stofft of Delray Beach, Fla., said the project has been in the works for two to three years and is about 85 percent complete. Stofft declined further comment other than to say with a laugh, "It's still a nice house, isn't it?"

Legal experts said it probably does not matter that Sullivan, who owns a more modest home in a nearby Florida community, is not yet living in the mansion. Florida law does not require a debtor seeking to use the unlimited homestead exemption to live in the residence for a specified period.

"They only have to be a permanent resident of that property, and that's a judgment call," said Jeff Morris, a law professor at the University of Dayton. "Even if the paint isn't done, the courts would likely find that it is a homestead if the person intends to move there."

A Florida Supreme Court decision last year also allows individuals to avoid paying their debts by putting money into their homes even if the purpose is to defraud creditors.

The Florida homestead exemption has a long history of protecting wealthy debtors in bankruptcy.

Former Singer Co. chairman Paul Bilzerian, who was convicted of securities fraud in 1989, kept his Tampa mansion away from creditors and federal regulators trying to collect civil penalties after he filed for bankruptcy. Actor Burt Reynolds, who declared bankruptcy in 1996, got to keep his $2.5 million estate in Hobe Sound.

Kohl said he may try to propose the bankruptcy provision that covers corporate wrongdoers as a separate amendment to other legislation if the bankruptcy bill cannot be reconciled.

"Once we get it passed, Mr. Sullivan, Mr. Ebbers, Mr. Lay, none of these people would be covered," he said.

But some legal experts said the bankruptcy legislation would still contain loopholes for executives convicted of fraud.

Elizabeth Warren, a Harvard University law professor, said married couples could get around the law by transferring the property to a spouse.

"I suspect a number of lawyers to the rich and infamous are carefully mapping out strategies to exploit the many, many loopholes tucked into the congressional compromise," she said.

GETTING AWAY WITH MURDER

Kathleen Pender San Francisco Chronicle

In 2000, the average sentence for white-collar fraud was less than three years, according to the U.S. Attorney's Statistical Report.

Executives can usually get a lesser sentence by pleading guilty. Junk bond kingpin Michael Milken spent just 22 months in a minimum-security prison after pleading guilty to conspiracy, securities and mail fraud.

In fraud cases where the losses are enormous, a sentence might exceed the maximum. But jail can only be imposed in criminal cases.

Most securities fraud cases are civil actions brought by the Securities and Exchange Commission or private plaintiffs.

The SEC can impose fines and require officers and directors of public companies to disgorge ill-gotten gains. It also can bar them from being officers or directors of public companies. But it can't throw anyone in jail.

When a case is egregious, the SEC can call in federal, state or local prosecutors, who may file criminal charges if they think they can meet the higher burden of proof.

In criminal cases, prosecutors must prove guilt beyond a reasonable doubt.

In civil cases, plaintiffs must only prove that the preponderance of evidence points to guilt, which means "it's more likely than not that the person did it," says Helane Morrison, the SEC's administrator in San Francisco.

Criminal securities cases can be especially hard to win because they can be mind-numbing for juries and because corporations often out-man and out- spend the government on their defense.

NO SLAM DUNK

Everyone thought the U.S. Justice Department's case against Arthur Andersen would be a slam dunk, but it took the jury 10 days to find the accounting firm guilty.

Justice in that case was amazingly swift.

Remember Media Vision? The Fremont tech firm went under in 1994 after allegedly falsifying its financial performance. In 1998, the U.S. attorney's office filed securities fraud and insider trading charges against two former executives. Paul Jain, Media Vision's former president, pleaded guilty and agreed to testify against Steven Allan, the former chief financial officer.

The jury deadlocked 11-1 in the case against Allan last year. A retrial began this week in Oakland. Jain has yet to be sentenced.

Then there's California Micro Devices, a Silicon Valley outfit that disclosed widespread accounting and other irregularities in early 1995. Former CEO Chan Desaigoudar and former Treasurer Steven Henke were convicted of insider trading and securities fraud in 1998. But an appeals court overturned the convictions because their lawyers had been hampered in their defense by a confidentiality agreement with another former executive. The two pleaded guilty in May, just before a new trial was to begin. They have yet to be sentenced.

Many legal experts say longer prison terms, by themselves, do little to deter fraud.

"It's more the certainty of the penalty" than the severity, says Harry Hu, a securities law professor at the University of Texas.

California Attorney General Bill Lockyer says, "It's fine, doubling a penalty, but if you don't prosecute, it doesn't mean anything."

President Bush's proposal to double the maximum jail term for certain types of financial fraud sounds tough.

But the stiffer prison sentences, if enacted by Congress, would still be shorter than the maximum terms for other federal crimes, and they would not apply to frauds that already may have been committed at Enron, WorldCom and other companies in the news.

"Any new penalty provision would apply to a crime only if the crime in whole or in part occurred after the date the new penalty was enacted," says Martha Boersch, chief of securities fraud at the U.S. Attorney's office in San Francisco.

E-mail Not from Kit Menkin at Leasing News

There is a virus that invades your address book and sends out mail using the address

from your book, rather than from you. The hackers dreamed this up as a way to

prevent you from notifying others that they may receive a bogus e-mail from you.

The e-mail comes from someone on your address book.

We do not send out individual e-mail, unless it is a reply to your e-mail.

From: Joe Harper <jharper@republicleasing.com>

Subject: Hoax E-mail

Date: Wed, 10 Jul 2002 15:38:54 -0400

To: kitmenkin@leasingnews.org

“I had Chris Oder with our IS department look at the e-mail I received concerning the supposed “Klev worm” and the fix which was reportedly offered by you. It didn’t appear that there really was any virus attached. The wording of the e-mail was not what one would expect from you so it looked funny from the start.

We simply deleted it. I don’t think it is anything to be alarmed about as it looks more like someone being mischievous, but not really malicious. Anyway,

I just wanted you to be aware that someone sent the e-mail under your name at Leasing News as the source.

Thanks,

Joe

Joe Harper

jharper@republicleasing.com

From Kristi Brown, First Bank,Richmond

One of our sources phoned me earlier and said that they had an e-mail from

me in which a virus was detected. The bank computer guys spent an hour

and a half on my computer performing checks and I didn't even have a virus!?!

So just be careful what you open from anyone....apparently two subject

matters that are going around are "detected" and "Japanese girl vs.

Playboy" so be sure to watch for these. Sorry for any problems! Kristi

Frist Bank, Richmond

Note: free virus check is available at www.antivirus.com

We use PC-cillin and have found it the most affective. They also have a “mail server” program. We use them on the server, and each workstation, because you can get a virus

from a download on a website ( and from a search, too ).

I also use only text in messages, and reading in text. I don’t use Microsoft Outlook, although others do in our offices (and they have problems from time to time ). The

new virus modes invade the address book and instead of sending mail as the host

of the address book, take names off the address book and re-send in this manner.

If the host discovers he has been invaded, and informs those in the address book

to look out, they will be fooled as the message did not will not have the host’s

return address, but one randomly taken from the address book. Editor.)

We just completed a 12 day cruise of the Abacos (a chain of cays, pronounced "keys", running from northwest to southeast in the northern Bahamas) aboard a friend's new 70' luxury motor yacht. The three couples flew in to Port Lucaya on Grand Bahama Island and picked up the boat which Steve had brought over a month earlier. We visited Walkers Cay, Green Turtle Cay, and Marsh Harbour as well as several out island via the dinghy. Other than perfect weather, extremely calm azure blue seas, excellent food, and great company, the trip wasn't all that great! As I have always said, "if you can't be rich, have rich friends"!

I hope everyone's business is doing well and I look forward seeing many of your readers at upcoming meetings.

I am driving over to the Owens Valley in California next week to see if I can fly a hang glider 100 miles. (It was first done there on July 24th, 1977 by Jerry Katz.) This will be a much lower-risk activity than being in the leasing industry has been for the last

(By the number of auto responder messages, there are hundreds on vacation next week.

While this week was popular, it appears there is an equal amount next week. What

does this mean? Ken Goodman is working harder as there is less competition, right,

You may quote any or part without our permission. We have no advertising, banners,

and we are free. Please forward to a colleague and ask them to subscribe. Please

United Association of Equipment Leasing Philadelphia Funding Retreat is July 26th.

Jim Buckles from Preferred Broker Solutions will be offering training on CapitalStream Advantage and the alaQuote software programs.

Last call for registration. If interested, please register by this Friday (7/12) at www.uael.org.

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The NextCard home page still encourages people to sign up for the Internet credit card, but the feds, who seized its failed NextBank subsidiary last February, are advising about 800,000 Visa cardholders that their plastic is no longer good.

The news really should not be a surprise, as NextCard went down with a boom when banking regulators told the company that its online banking subsidiary, NextBank, would have to categorize certain fraud losses as credit losses and would have to apply them to its loan loss reserves.

The FDIC, which is now running the bank, said the ultimate cost to the taxpayers for the failure of NextBank will be between $300 million and $400 million. Many NextCard customers apparently received the news in e-mails sent yesterday; other customers won't find out until they receive letters later this week.

"We tried to give as much warning as possible," FDIC spokesman David Barr told the Associated Press. "It's been a real juggling act for us to keep these accounts active."

Regulators had been trying to sell the accounts for more than four months, but apparently Internet shoppers and cardholders were not of much interest to more established financial institutions. The FDIC finally struck a deal last week to sell about 200,000 NextCard accounts to Utah-based Merrick Bank for $126 million. Merrick Bank will take over those accounts by the end of September. The other 800,000 are being closed.

San Francisco-based NextCard saw its stock crash last October when banking regulators warned about problems at NextBank.

NextCard became a skeleton company in March when it eliminated the jobs of 90 percent of its employees and asked Nasdaq to delist its stock (NXCD: Quote, Company Info) effective March 18. The stock is now traded on the OTCBB and is listed in the one-cent range.

NextCard account holders will lose all bonus points that they stockpiled while using their cards, although Amazon.com said it would honor them. The customers also won't receive refunds for any annual fees they may have paid to use the cards.

All customers with closed accounts will be required to pay off their outstanding balances under the interest rates previously in effect.

NextBank was a non-traditional lender whose business consisted of issuing credit cards and taking minimum $100,000 certificates of deposit. NextCard acquired the operation with the August 1999 acquisition of Textron Financial Corp.

At the time the bank was seized, the feds said that: "NextBank pursued a strategy of marketing credit cards solely through the Internet. However, the OCC (Office of the Comptroller of the Currency) found that the bank's risk management policies and procedures were inadequate and the bank's assets were of lower credit quality than initially projected in the bank's business plan. The bank failed to identify the extent of its credit quality problem or to implement effective corrective measures."

Ironically, even this morning the NextCard site was enticing new customers to sign up, saying "Click here to get your card." But when you click through, you get this: "Thank you for your interest in NextCard, unfortunately we are presently not accepting new applications for credit."

Techfi provides industry leading data consolidation and portfolio management tool for Questar registered representatives

DENVER – – Techfi Corporation, a leading provider of software and outsourcing solutions for the financial services industry, announced Questar Capital Corporation, one of the fastest growing independent full-service broker/dealers in the country, has selected AdvisorMart Institutional (AMI) as the technology platform for Questar’s

“Our representatives have been asking for, and needing, a tool that would take care of their data, portfolio, client relationship and overall back office management needs – we have found this in Techfi’s AdvisorMart Institutional,” said Scott Chimner, president of Questar Capital Corporation. “With AMI we are now able to provide the highest level of technology and service to our representatives allowing Questar to attract and retain the highest levels of talent available for clients.”

AdvisorMart Institutional is the leading advanced data consolidation, portfolio management and client relationship management tool for financial institutions. The AMI product uses a combination of proprietary logic and automated technology, with a manual oversight layer that gathers and reconciles institutional level feeds from clearing firms, transfer agents and custodians. Through these components, AMI provides financial professionals with the targeted technology applications they need to produce and customize client performance reports.

“Techfi is pleased to provide Questar with our unsurpassed technology platform, AdvisorMart Institutional. Their representatives can now use more of their time on revenue producing activities, rather than on their time-consuming data

management needs,” said Matt Abar, president and CEO of Techfi. “With AMI at their fingertips, Questar’s representatives can take advantage of the most advanced performance reporting and portfolio consolidation technology available today.”

Headquartered in Denver, Techfi Corporation was founded in 1998 and provides software, technology and services to the financial intermediary market. Clients include broker dealers, investment advisors, financial planners and other financial institutions. Techfi develops leading-edge technology products and services for the financial intermediary market including:

• AdvisorMart.com, the industry's first online account aggregation and portfolio management solution;

• AdvisorMart Institutional the premiere private-labeled data aggregation solution for financial institutions;

• Financial Office, an integrated suite of financial products that includes Portfolio, Trader and Contact;

• Web Office, an integrated suite of web-enabled solutions for portfolio management, contact management, account

Questar Capital Corporation is a broker-dealer registered with the SEC and NASD as well as being a Registered Investment Advisor. Our headquarters are located in Ann Arbor, Michigan. We specialize in servicing, training and educating financial advisors who are also independent contractors. There are currently over 400 registered

representatives located throughout the United States whom are licensed through our firm. For further information on Questar Capital Corporation, please visit our website at www.questarcapital.com or call us at 800-568-7526 and ask for Jason Kavanaugh, Chief Marketing Officer.

Note: Techfi and AdvisorMart are registered trademarks of Techfi Corp. Other product and company names herein may be trademarks of their respective owners.

Attendees at an investors conference that drew about 500 people to Boston ate up a presentation by Krispy Kreme Doughnuts Inc. yesterday - and, over the course of the two-day conference, 2,000 doughnuts, the organizer said.

With stores dedicated to doughnut theater and machines that create glaze waterfalls, North Carolina-based Krispy Kreme has long been a culinary phenomenon in the South, and after enjoying one of the most successful initial public stock offerings in recent years, it has become a business phenomenon.

The Krispy Kreme saga has been told repeatedly, but investors at a consumer growth conference sponsored by CIBC World Markets seemed delighted to hear the story again - despite the fact that its stock closed yesterday at $32.75, well below its 52-week high of $46.90.

Fifty-five companies made presentations at the conference, but few generated more interest than the doughnut chain which, according to CIBC, had system wide sales of $622 million for the 12-month period that ended Feb. 3.

Such is the fame of its freshly made hot doughnuts that Krispy Kreme doesn't need an advertising campaign, chief operating officer John Tate told investors who had gathered at the Four Seasons Hotel.

Its doughnuts have wowed so many celebrities, generated so many breathless news accounts, and inspired so many TV sit-com punch lines that there is little point in buying air time for ads.

Indeed, about the only thing that has seemed to slow Krispy Kreme down even slightly has been getting a toehold in the local market.

''Real estate is tough here,'' Tate said. ''We've found Boston to be one of the most challenging real estate markets.''

Because most Krispy Kreme stores make doughnuts on the premises, they require roughly an acre of land and need to be located on well-traveled roadways. Vacant sites that meet those requirements are scarce in densely populated New England.

Jan Cos., the Rhode Island company with franchising rights for the region, estimates that the first local store could open in Medford by next spring. Between the fall and early next year, the hope is that three Krispy Kremes will be operating in Connecticut, including one at Foxwoods Casino.

In Massachusetts, possible locations are being scouted in such communities as Attleboro, Dedham, Peabody, and Saugus, Jan vice president Janice Mathews said this week.

As of May 5, Krispy Kreme operated 225 stores, with some of its most successful stores in the Minneapolis, Seattle, and Toronto markets. The company says the United States can eventually support 750 doughnut-factory stores, Tate said.

By way of comparison, Randolph-based Dunkin' Donuts has about 600 stores in Greater Boston alone. Dunkin' is geared toward everyday convenience and about 40 percent of its sales come from coffee. Krispy is more about customers who buy a dozen doughnuts as a treat several times a month. Only a small fraction of Krispy Kreme sales come from beverages, with some customers going elsewhere to buy coffee.

Thanks to a new technology developed by the company's ''doughnut scientists,'' Krispy Kreme thinks it may some day be able to open more smaller satellite stores, which would often be supported by an existing and much larger ''factory'' store nearby, Tate said.

The doughnut making process would be started at the factory store; then half- baked products would be shipped to a satellite store where machines with the new technology would finish the job.

Tate said even the most discerning of doughnut gourmets can't distinguish between a doughnut made the old-fashioned way at a big factory store and one that is sold at a satellite store too small to accommodate a full doughnut production line. If successful, satellite stores could give the chain more opportunities to penetrate a market such as Greater Boston.

________________________________________________________________________ "The Fix is In," McCain says