|
|
Kit Menkin's Leasing News www.leasingnews.org Tuesday, June 25, 2002 Accurate, fair and unbiased news for the equipment Leasing Industry ------------------------------------------------------------------------------------- Headlines---- Confirmed Exodus from Amex Biz Finance Medical HPSC Jumps to 65th Largest On Monitor 100 2002 List Is Sal Maglietta Still with Citi? Lease Acceptance Closes Their Doors? Gamper Gets Green Light RW Professional Leasing---Ten Months Later The Gazelle is Back???? Mineta Is 'Confident' On Future Of Amtrak eLNA Expands Networking Event To Invite Monitor 100 Companies Jeff Taylor Website Tops in Search Engine Report by MarketLeap California home prices surge to new highs in May BBC Reports----US could default on debt ### Denotes Press Release The Leasing News List—up-dated---Tomorrow ----------------------------------------------------------------------------- Confirmed Exodus from American Express Business Finance Medical Here's the real story behind the Amex Exodus. One VP of Sales, two Top Sales Reps accounting for over $32MM in fundings in 2001, and two sales associates leave for HPSC. Another top rep and associate will resign this week, accounting for another $15MM+. All told...seven found a new home in HPSC Highly Reliable Inside Source-Name With Held __________________________________________________________________ #### #################### ######################### HPSC Jumps to 65th Largest On Monitor 100 2002 List, Reflecting Company's Growth BOSTON----HPSC, Inc., (AMEX:HDR) announced that The Monitor 100 List, issued this month, now ranks the company as the 65th largest equipment/asset leasing company in the U.S., an increase from its ranking of 77th last year, based upon an 18.4% increase in net assets. The ranking, performed by the independent publication Monitor Daily, reflects growth in net assets. On the ranking of volume of originations, HPSC also ranked 65th this year, an improvement from 75th place last year.
Said John Everets, Chairman and Chief Executive Officer of the company, "We are very pleased with the company's new ranking in the Monitor 100. It demonstrates that our operations are growing strongly, compared to others in the industry, and that we are performing well on the metrics by which our sector is evaluated, namely growth in net assets and origination volume. This improved ranking also reflects the continued hard work of our employees in meeting the needs of our growing customer base."
More information about The Monitor 100 can be obtained by purchasing reprints:. http://www.monitordaily.com/reprints.shtm Previous Monitor 100 are located here: http://www.monitordaily.com/mon_100.shtm About HPSC Inc.
HPSC, Inc. (AMEX:HDR) is a leading non-bank financial services company providing leasing and financing opportunities to the medical and dental professions in all 50 states. Through its asset-backed lending subsidiary, American Commercial Finance Corporation (ACFC), the Company provides asset-backed lines of credit to manufacturing and distribution companies throughout the eastern United States. For more information, the company's website can be accessed at www.hpsc.com.
CONTACT:
HPSC Inc.
John Everets, 617-720-3600 ### ############################## #################### ________________________________________________________________ Is Sal Maglietta Still with Citi? I've heard from a good source that Sal Maglietta is no longer with Citi. I have further heard that he's be seen at De Lage Landen. I've also heard that De Lage is about to make a big announcement about the healthcare market. Any comments? please do not list my name. -------------------------------------------------------------------------------------------- Lease Acceptance Closes Their Doors? A very reliable source states Lease Acceptance Corporation in Farmington Hills,Michigan closed their doors for business today... regional manager and sales reps t were given their pink slips today with small severances. ---------------------------------------------------------------------------------------------- Loud Iron Train RUMBLES ---switch the track now! Green Light. ---Al Gamper CIT Prepares for IPO After Being Almost Thrown Off the Track By Emma Moody and Mark Lake (complete story, not abridged ) New York (Bloomberg) -- CIT Group Inc. Chief Executive Officer Albert Gamper, pitching the company's planned $5.8 billion stock offering, says Tyco International Ltd.'s ownership of the finance company has left him ``war-scarred.'' Criticism of Tyco, whose accounting is under scrutiny by the Securities and Exchange Commission and whose former chief executive was indicted for tax evasion, has become a centerpiece of Gamper's presentations to potential investors the past 10 days as he tries to persuade them to buy CIT shares from Tyco. In speeches to more than 400 investors at Manhattan's Pierre Hotel, the Sears Tower in Chicago and on a Webcast to Goldman, Sachs & Co. sales people, the man who has led CIT for 15 years blamed Tyco for his company's low credit ratings, stalled earnings growth and inability to win new business. All of that will be set right once CIT is a standalone company, he said. ``The recent situation is not of our making,'' Gamper told Goldman's sales people in a presentation later distributed to prospective investors. ``It's not my fault and not my problem.'' Tyco is selling 200 million CIT shares at $25 to $29 each, valuing the initial public offering at $5 billion to $5.8 billion. At the high end of the range, CIT's IPO would be the third-largest in the U.S., at the low end, the fourth-largest. Goldman and Lehman Brothers Holdings Inc. are managing the sale. Gary Holmes, a spokesman for Tyco, declined to respond to Gamper's comments. Tyco shares fell 5 cents to $13.65 in midmorning trading. Sluggish Growth Gamper is trying to prove to investors that the company is worth buying again, even though CIT, which leases airplanes and trains, finances telecommunications companies and provides home equity loans, isn't likely increase earnings this year and is likely to suffer from high borrowing costs for the next three quarters. ``I'm struggling to get excited about it,'' said Jeff Parker, who manages the $1.3 billion Pimco Target Fund. Shortly after bounding through the Pierre Hotel's crowded ballroom at lunchtime on Friday, Gamper stepped onto the podium to give the assembled investors his pitch. ``Someone said to me on the way in that you are all Tyco shareholders in need of a free lunch,'' he said, alluding to Tyco's share price, down 77 percent this year. The jibe underscores how tensions have grown between Gamper and Tyco executives since the plan to sell the unit was announced in January. Gamper stepped up his efforts to put distance between CIT and its parent after former Tyco CEO Dennis Kozlowski was indicted earlier this month for allegedly evading $1 million in New York taxes. Tyco paid $9.5 billion for CIT 12 months ago. Gamper ``made it clear that he was not pleased with what had happened at the corporate level at Tyco,'' said Andrew Flynn, a portfolio manager at Northern Trust Corp. who attended CIT's presentation in Chicago last week. ``He's clearly looking forward to when the IPO is done.'' Betting on Turnaround Under the stewardship of Tyco, CIT recorded its first-ever net loss. The finance company took a $4.5 billion charge to reflect the reduction in its value since Tyco bought it last year. A further write down of more than $1 billion is likely, CIT Chief Financial Officer Joseph Leone told the investors at the Pierre. Founded in 1908, CIT was the first company to offer financing to help people buy Studebaker cars early last century. It remained independent until 1980. Since then, Livingston, New Jersey-based CIT has been owned by RCA Corp., Manufacturers Hanover Corp. and Japan's Dai-Ichi Kangyo Bank before being sold to the public in 1997 and bought by Tyco in 2001. The executives are betting on a turnaround once CIT is an independent company. To help allay investor concerns about CIT's links to Tyco, Gamper will be the only CIT executive on the board. Management also will receive bonuses in stock to conserve cash. Leone said he's expecting credit ratings to be raised as soon as the IPO occurs and is already planning to sell more than $4 billion in debt. Lower Rating Standard & Poor's and Fitch Inc. in February cut the ``A-1'' credit rating on CIT's commercial paper, which matures in nine months or less. That prevented the company from selling the obligations, which are among the cheapest forms of corporate borrowing. The credit ratings companies cited high debts and dwindling cash at Tyco, rather than CIT, for the downgrades. The lower credit rating has caused CIT's borrowing costs to surge in part because it has reduced the number of borrowing options available, said Leone. CIT sold five-year notes in April to yield 265 basis points more than U.S. Treasury securities with comparable maturities. A year ago, CIT sold five-year bonds to yield 169 basis points more than benchmark government debt. A basis point is 0.01 percentage point. Selling New Debt Because borrowing costs won't decline immediately, they will weigh on earnings for the next three quarters, Leone said. CIT plans to sell as much as $4 billion of commercial paper by the end of the year, and may increase that to $5 billion in 2003, he said. CIT also will sell fixed- or floating-rate debt with longer maturities of about three years, CIT told investors. ``If you have confidence that they can get a rating upgrade, then you'd probably buy the stock,'' said Pimco's Parker. ``If not, then you wouldn't.'' Tyco's ownership of CIT, and concern about when and if Tyco would be able to sell the finance unit, led some customers to balk at signing long-term contracts, and the finance company has been unable to seek new business, Gamper said. Tyco said Jan. 22 that it would sell CIT either to the public or through a private sale as part of a plan to split Tyco into four companies. Then-CEO Kozlowski dropped the plan to break up Tyco in April. The slowdown in new business is ``disturbing,'' Gamper said. ``There is some reluctance to do business with us in this environment,'' he said. ``That will change once we have independence and our ownership is sorted out.'' ------------------------------------------------------------------------------------------------ RW Professional Leasing---Ten Months Later by Christopher Menkin June 21,2002, forty FBI agents raided the offices of RW Professional Leasing in Island Park, NY, on Long Island. Those arrested were RW's president and co-owner, Rochelle Drayer Besser, also known as Rochelle Drayer, 66, of Long Beach, California; her brother, RW's senior vice president, Barry Drayer, 62, who operated a branch in Wellesley, Mass.(reportedly the defacto CEO); another brother, Roger Drayer, 59, of Long Beach, who holds various titles, operating a small office in California; and Roger Drayer's daughter, Jennifer Tarantino, also known as Jennifer Drayer, 31, of Oceanside, California. Not arrested was Rochelle Drayer Besser's husband, Wallace, who reportedly has been ill for the past three years and has not really been active in the business since 1996, so that probably explains why he was not arrested. However, he was named as a defendant in a lawsuit filed on Tuesday, June 18th by a consortium of community banks. and arrested Barry Drayer and Rochelle Drayer Besser, Roger and Jennifer Drayer. An unconfirmed report has Barry Drayer on a “suicide watch,” as it appears there may be others to be named in the conspiracy. There is a waiting list who would like to “interview” Barry Drayer, who has been able to talk himself out of trouble in the past. So far the investigation has found $6.5 Million of outright fraud with a lot of hard evidence. Prosecutors said RW Professional Leasing Corporation concocted elaborate schemes using up to 100 rented mailboxes as far away as California to send phony checks, sham invoices, bogus leases and other false documents to banks in various states. Based on those documents, the banks lent RW millions of dollars to buy equipment and lease it out, prosecutors said. The schemes included multiple loans from different banks for the same medical equipment and loans for equipment that was never bought or leased, prosecutors said. It is said it may go higher than $200 million, including the American Express-Sierra Cities portfolio. Vendors, brokers, attorneys, and others are owed money. There may also be “brokers” and others to be named in the scheme. Leasing News has been writing about RW Professional for ten months: (8/2001) "A high ranking executive with Amex has verified that Amex is investigating possible problems with the portfolios of RW Professional Leasing... "(9/2001)“-Interview with Charlie Lester. First, who is he? After a 19 year sales and management career with IBM, Charlie settled in Atlanta and somehow got into the leasing business in 1984. In 1986, he founded Lease Pro, Inc. and operated it as a medical niche broker until 1997 when First Sierra Financial acquired most of its assets. The remaining assets were assigned to LPI Financial Services as a new corporate entity.
“-After his two-year contract was honored, he resigned and sat out his non-compete period before expanding LPI Financial into a niche broker offering working capital loans to medical professionals.”
To understand what went wrong, you need to understand how discounting a lease and a private label program works.
Discounting leasing is when you have a lease contract with your name on it and discount the stream of payments to a buyer ( bank, funder, syndicator) ( you may or may not keep the residual and may discount it too, meaning present value the stream of payments and the residual, too ). You get paid up-front, instead of the difference between the monthly interest earned and paid. It may be recourse or non-recourse, but it certainly will have “representations and warrants.”
Sierra Cities bought many discounters local operations and combined them into one, calling it a Private Label Program. They offered the ability to continue to discount plus to accumulate leases and syndicate them to the public for a better rate of return; a better margin and more liberal credit policy. Westinghouse, CIT, Heller, Textron, and of course, GE also have private label programs, but Sierra Cities carried the Colonial Pacific Pegasus program one step further. In fact, this division was making a $20 million annual profit from its inception. What made it so successful: Oren Hall, Mark McQuitty, Jim Raeder, Charlie Lester, Fred Van Etten, Mike Wing and others were in leadership capacity
What went wrong?
LN. I think you should explain what the Sierra Cities private broker program worked to understand RW Professional Leasing as a Private Label Recourse broker. GC. A Private Label Recourse broker has a contract with a funding source to buy deals at a buy rate 150-250 basis points lower then their non-recourse brokers. In return, the recourse broker is responsible for the collection of all monthly payments and in the event of default, to repurchase the entire lease contract. The recourse broker may also receive an even lower buy rate for handling all personal property and sales taxes. ( somehow the arrangement right before the acquistion by American Express went from recourse to non-recourse, it is reported. ) ---- this is only partial of the first of a three part interview explaining how the private label program works, now assembled here----- (9/2001)Open Question for American Express Business Finance "Based on extremely reliable insider information, Leasing News has been told that a former First Sierra employee would be agreeable to "give up" Depping in return for a lawsuit settlement with American Express. The question is, "Does American Express want Thomas Depping to ‘answer’ for actions he may or may not have taken?" (In reality, American Express settled with this person, Fred Van Etten, who obviously has signed an agreement not to talk publicly.) Another individual known to Leasing News who did not want to be named says he was employed by Sierra Cities, came into Houston for a meeting, and at a Chinese Restaurant with Fred Van Etten, Greg McIntosh, Jim Raeder and perhaps two other people, one of whom might have been Tom Depping, when the conversation of RW Professional came up. ( He specifically he did not remember if Depping was there, but he believed Depping was aware of the Old Kent Financial deal with Barry Drayer. By the way, this person is a regular reader of Leasing News. ).
He told the gathering he knew the company as Professional Leasing, who did a lot of dental business, when he was at the Vanguard Division of Old Kent Bank for eleven years, this person ripped them off for between $6 million to $10 million. Why should Sierra Cities do business with them? he asked. He was told Sierra Cities had the company and personal guarantee---and it was recourse, so Sierra Cities was allegedly protected. ( Now the case with American Express Business Finance centers on “what happened to the recourse agreement?” and was stock involved in the “arrangement?” What does Greg McIntosh know? ( He says he knows nothing. Editor) Will Fred Van Etten talk? ( Not today?) Will Jim Raeder speak publicly why he was let go at Sierra Cities? P.S. It wasn’t about Republic Leasing. The spin doctors may have put that out, but Fred Van Etten and Jim Raeder were let go for the same reason. (Leasing News revealed some of it in Mark McQuitty’s “Whatever Happened to Republic Leasing of Anaheim. Editor).What did Oren Hall know?( Reached at his residence, he said he was retired and didn’t want to make any comment?) Will Charlie Lester write the entire story for Leasing News, naming names, places, dates? (Perhaps we should have Charlie Lester on “Meet the Leasing News Maker.”)Did it center around the Private Label Program and RW Professional? Is that why Leasing News spent three days defining private label recourse and non-recourse? Does the leasing public have the right to know to protect themselves in the future? Perhaps from a legal standpoint, do stockholders have the right to know the truth? Is fraud involved. ) How did RW allegedly get away with it with Vanguard? (He made a deal.)
Here is a ethics question for readers who are funders:
Broker calls up funding source and says, "How did you like the way I screwed you over for $10,000,000. Was it as good for you as it was for me? Well, I thought it was fun and now you have a decision to make---do you put me in jail and get nothing or will you settle for $3,000,000 and give me a clean bill of health, so I can go back to business as usual?" To all the funding sources, what would your answer be? (None of the funding sources responded, as they knew they would most likely take the money. Editor ) If your company policy is to prosecute, how many fraudulent brokers, vendors or lessees have you brought criminal charges against in the past five years? (Two people formerly at Old Kent Financial can now talk about this as there was an order signed that employees could not talk about this, but since the company is no longer in business, neither is the agreement. Editor )
( The answer to the question: Old Kent Financial took the deal---and is reported American Leasing Express did the same thing. Not illegal, but there are many community banks and individual lessees who wish the deals had not been made. Editor ) (9/2001) Charlie Lester American Express and Private Label Programs.
http://www.leasingnews.org/docs/Private_label.htm .(10/02)RW Professional starts suit against Leasing News for stories written (around this time the affects of the 9-11 tragedy affected American Express, as well as others, as well as the legal action taken by RW Professional, although we were still collecting background information and working on several stories.) 10/2001) . There was a settlement made between Barry Drayer and Old Kent for a situation very similar to the latest situation, except in this case, Old Kent for a lower dollar amount “forgave” the situation. For the first time, we publish this e-mail: “I was the one who originally found the fraud when I was the litigation manager for Old Kent. I was not involved in the final settlement but I know how it was done and their attorney's can try to do their best to save the name of RW Professional Leasing but there efforts will be fruitless. “If anyone ever called me to do business with RW or their principals I would have no problem advising them to stay away. It's poor business people like them that give brokers a lousy name in this industry. A lot of lenders lost a lot of money because of their scam and in turn cut off all their brokers as a result. They need to get out of the leasing industry. “That is just my opinion.” Regards, Susan M. Adamatis 10/2002) Practical Ethics---If Crime is Not punished, Does it Cease to be a Crime? Special Report Written by Kit Menkin and Charlie Lester
If a tree falls on a desert island, does it make a sound when it falls? This is an old college question, and many of us had fun trying to justify our answer. Does fraud exist, if it never is prosecuted? If crime is never punished, does it cease to be a crime? When do we hear the sound of a tree, if we are not there?
On September 4, 2001, Leasing News began publishing question and answer articles with Charlie Lester, President of LPI Financial, Atlanta, Georgia, formerly President of Lease Pro, who sold his company to Sierra Cities in 1997. Charlie is also the senior member of the Leasing News Advisory Board. The three day interviews concerned private label recourse programs, the procedures, the process, the pros and cons, and is available on-line at: http://www.leasingnews.org/archives/September01/9-04-01.htm http://www.leasingnews.org/archives/September01/9-05-01.htm http://www.leasingnews.org/archives/September01/9-06-01.htm
On September 7, 2001, we asked: Open Question for American Express Business Finance "Based on extremely reliable insider information, Leasing News has been told that a former First Sierra employee would be agreeable to "give up" Depping in return for a lawsuit settlement with American Express. “The question is, ‘Does American Express have reason to want Thomas Depping to “answer” for actions he may or may not have taken?’" Those at the Chinese restaurant meeting heard about Professional Leasing, who did a lot of dental business when he was at the Vanguard Division of Old Kent Bank for eleven years. He said this company ripped them off for between $6 million to $10 million. He asked, “Why should Sierra Cities do business with them?” He was told Sierra Cities had the corporate and personal guarantees---and it was recourse, so Sierra Cities was supposedly protected. Now, the situation with American Express Business Finance centers on “what happened to the recourse agreement and the personal guarantee?” and was stock involved in any “arrangement?” they can protect themselves in the future? Perhaps from a legal standpoint, do American Express stockholders have the right to know the truth if American Express paid too much for Sierra Cities due to hidden problems”. Did American Express fail in their job of due diligence before acquiring Sierra Cities and did they cost their stockholders millions? We have been asking these questions. . (2/2002) American Express Business Finance Major Loss? (Would one of the portfolio letters be “R”? ) A well informed source tells Leasing News that one of the portfolio’s sold to American Express by First Sierra has a loss of $16 million now. This is getting large enough to be footnoted in the Security Exchange report. (2/2002) Finance Team of America, Weston, Florida informs RW Professional they will not longer be referring business. “FTA has serious concerns regarding Professional Leasing’s business practices. We have attempted for the last five months to get straight answers in regards to our transactions( customers) that are in funding as well as delays in credit review and structures. “In addition, our commissions are well past due for months now and we have tried to work with your company on a payment plan for the past due amounts that add up to a six figure sum...Many doctors are being billed without receiving their funds and some are asking questions about the description and structure of their transaction on their monthly statement; vendors have not been paid up delivery, Financial Institutions have not been paid regarding payoffs and Sub-Broker’s commissions have not been paid due to PLS not funding Finance Team of America its commissions due.” (3/2002) I am getting complaints that RW Professional is not making payments on leases, the bank they assigned leases to is now asking them for payments direct, stating that RW Professional is not paying them. I am told the New York State Banking Investigator is looking into this. I am not going to pass this around the entire board; however, the bank involved is Blue Stem Bank in New York. Was that the bank you had been talking to who had leases with RW Financial? (4/2002) “He also says that he filed a complaint with the FBI in Albany and they have bumped him up to a level 2 investigation-whatever that is, but he thinks it is a higher level and the FBI means business. $20,000,000 at Amex, $15,000,000 at community banks and pretty soon, you are talking real money.” (5/2002) “Finance Team of America (Eric Castro, Bob Castro, Mommy K.C. Castro and all the other members of the Castro clan (Fidel was fishing and could not attend) today in Weston, FL ...unloaded with three hours and a two inch thick file they have been building, including letters from Amex to lessors/debtors saying they realized there was a problem with the lease/loan payoff and they were addressing the problem with RW Professional and expected to reach an acceptable resolution for all parties---in other words-B.S.. They are convinced that Amex cut a payment plan deal with Barry and he is screwing the community banks by taking early payoffs on leases and loans and using the money to make the payments to Amex. They said they heard he was paying as much as $70,000 a week. The logic-Amex could sue him and make him go BK and even prosecute him for fraud. However, each community bank as a stand alone entity will probably take a 100% write-off and not pursue him since the dollar amount is probably less than $300,000 per bank plus they may only be seeing a $50,000 problem at a given time and being a little naïve, not putting 2 + 2 together to know that their entire RW portfolio is at risk. Plus, they do not talk to each other and band together---divide and conqueror. “Barry Drayer told me he had 48 community banks in his network-all established by Al Crawford in Albany, NY. “ (5/2002) Finance Team of America makes complaint to Massachusetts Attorney General regarding RW Professional Leasing. During this time, the Leasing News stories got the attention of the authorities, several community banks, and some physicians, like one who was asking for a payoff at the bank that he showed they had 11 payments left and the bank 52,and was physician contacted the first bank, before assigned, and it showed he had 11 payments left and wa |