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Kit Menkin's Leasing News www.leasingnews.org Wednesday, June 26, 2002 Accurate, fair and unbiased news for the equipment Leasing Industry ------------------------------------------------------------------------------------- Headlines---- WorldCom Finds $3.8 Billion Error, Fires CFO What Has American Express Buried from Its Stockholders??? Report: Martha Stewart facing wider probe in stock sale Up-Date on RW Professional Leasing Arrests UAEL Managing Director Joanie Dalton Resigns Fed meets with little expectations of changes in interest rates Leasing Co-op: Six Showing--- Seven on the Line!!! Fitch Expects To Raise CIT's Senior Debt To 'A' Yahoo closing streaming radio, video services eLNA Breaks All The Rules! Invites Monitor Top 100 Free Amtrak Postpones Shutdown---"Very,Very Close," Mineta says Wednesday---Odds and End Mahr Federal Selects eMarket Capital Fitch Rates Marlin Leasing Receivables ePlus Reports Record Fiscal Year-End Net Earnings of $8.9 Million ### Denotes Press Release ------------------------------------------------------------------------------------------ WorldCom Finds $3.8 Billion Error, Fires CFO By Peter Henderson SAN FRANCISCO (Reuters) - WorldCom Inc., the No. 2 U.S. long- distance carrier, on Tuesday said it had fired its chief financial officer after uncovering improper accounting of almost $4 billion in expenses, in the latest financial scandal to rock Corporate America. WorldCom also said it would cut 17,000 jobs, or more than 20 percent of its work force, starting on Friday, a cost-cutting move expected to save $900 million on an annual basis. The Clinton, Mississippi-based company said that accounting irregularities involving expenses misrecorded as capital expenditures had inflated its cash flow and that otherwise it would have reported a net loss for 2001 and the first quarter of 2002. The accounting irregularities, which did not conform to Generally Accepted Accounting Principles, included transfers between internal accounts of $3.06 billion in 2001 and $797 million in the first quarter of 2002. Accounting firm Andersen, whose role as the auditor of Enron helped lead to the energy trader's collapse, had audited WorldCom's financial statements for 2001. Shares of WorldCom had plunged in after hours trading on Tuesday following a report by CNBC that the company had uncovered accounting irregularities. The stock fell to 20 cents a share on the Island system from a close of 83 cents on Nasdaq. The previous closing low was 87 cents, while the stock had traded as high as $16.06 in the past 52 weeks. WorldCom also said it had fired Chief Financial Officer Scott Sullivan and accepted the resignation of David Myers as senior vice president and controller. "Our senior management team is shocked by these discoveries," said John Sidgmore, WorldCom CEO for less than two months. "I want to assure our customers and employees that the company remains viable and committed to a long-term future. Our services are in no way affected by this matter," he said in a statement. WorldCom said it had notified the Securities and Exchange Commission ( news - web sites) and had asked auditor KPMG to undertake a comprehensive review of its financial statements for 2001, --------------------------------------------------------------------------------------------- What Has American Express Buried from Its Stockholders??? American Express/Sierra Cities---The Portfolio’s October 22,2001 Leasing News We asked the questions as part of our story on the acquisition of Sierra Cities by American Express. Was history repeating itself? Were deals being made “to look the other way?” Did Thomas Depping specifically “remove” the personal guarantee portion from the portfolio of Barry Drayer at RW Professional Leasing or did one ever exist?
“I hope this is not the same Professional Leasing on the east coast that took Old Kent Leasing for a ride on many fraudulent transactions with dental practices. If it is, I can tell everyone how it was done and what to look for since I had to charge-off the money and we ended up settling with Professional Leasing as well. If anyone wants some insight I would be happy to provide it.”
Leasing news called, spoke to the person, and then confirmed the person’s position, and also received similar information from our source that it was true:
“A fictitious vendor supplied an application for a dental practice installing "NEW" medical equipment. All credit checks were completed on the customer etc. Only if the lessee defaulted would you ever know that there was in fact no new equipment. The equipment description on the vendor invoice was either for existing equipment that was in some cases over 20 years old or it never existed. These were in fact loans. We had a couple of lessee's so afraid of being sued and going to jail for fraud that they signed statements and admitted just how much cash they received. Needless to say the cash the lessee received was a lot less than the amount funded to Professional Leasing. The lessees claimed this vendor solicited them to supply additional cash for the business and all they would have to do is ‘sign on the dotted line’.”.
Our original source who was involved, said that a settlement was made for a much smaller amount on the condition that Old Kent would not go public about the losses on Professional Leasing’s role in these deals. This was reported in Leasing News earlier as being discussed at a Chinese Restaurant in Houston.
It was reported to Leasing News by one of the 40 or more former vice- presidents of Sierra Cities, and confirmed by three other highly reliable sources that RW Professional Leasing was allegedly double dipping or even triple dipping deals (same deal to ATT and First Sierra and banks doing business with RW) and when RW received a payoff from a recourse client, they allegedly did not always payoff the deal at the original funding source. In addition, reliable sources have told Leasing News that Tom Depping refunded most of the reserves RW had with Sierra Cities in return for a promise of more volume. Now American Express has the portfolio and small in-house reserves from RW to cover repurchases. American Express has reportedly audited the books, interviewed Greg McIntosh, among others, and found the loss potential, but they are allegedly not sure how to proceed since there is no personal guarantee from Barry Drayer. Leasing News has not been able to confirm or deny this.
These were among the questions we wanted to ask, including the rumor of a bankruptcy as a means to avoid repayments to American Express. Was RW double or triple dipping deals and when RW received a payoff from a recourse client, did they always payoff the funding source? These sources say the statement is accurate, but what does Mr. Drayer say? In addition, we are told, Tom Depping refunded most of the reserves RW had with First Sierra in return for a promise of more volume. Is this true? Will the Securities Exchange Commission or a Court of Law be the arbitrator? Has American Express decided to sweep this under the carpet, just as Vanguard and Old Kent reportedly did?
Now American Express has the portfolio and small in-house reserves from RW to cover repurchases. American Express has reportedly audited the books and found the loss potential, but they are not sure how to proceed since there is no personal guarantee from Barry Drayer. Reportedly there was such an arrangement before the acquisition. Was a deal made? Leasing News believes papers have been signed, but cannot get confirmation or denial.
We will have more, including the inside of the MidAm Portfolio story. (Well, it appears the MidAm Portfolio story is about to come home to roost, too. How long can American Express avoid these questions. It took the Feds ten months to catch the Drayers. Editor ) ------------------------------------------------------------------------------------------------------------ Report: Martha Stewart facing wider probe in stock sale By Associated Press NEW YORK (AP) Martha Stewart may be facing a wider probe of her sale of ImClone Systems Inc. shares, including possible charges of obstruction of justice and making false statements. In a story posted on its Web site late Tuesday, The Wall Street Journal, citing an unnamed source familiar with the case, said federal prosecutors widened their probe and are investigating whether Stewart misled prosecutors in divulging details about her sale of ImClone stock. Congressional investigators are examining whether Stewart had inside information when she sold nearly 4,000 shares of the biotech company a day before the Food and Drug Administration announced that it had decided not to consider ImClone's experimental drug for combating colorectal cancer, Erbitux. Stewart, who commands a multimedia empire and a profitable corporation, increasingly is under the glare of government scrutiny and tabloid attention bringing investor displeasure. Shares of her company, Martha Stewart Living Omnimedia, have fallen amid questions about her ImClone stock sale. Omnimedia stock is traded on the New York Stock Exchange, of which Stewart recently became a director. Stewart, in her weekly appearance on CBS' ''The Early Show,'' said Tuesday: ''I think this will all be resolved in the very near future and I will be exonerated.'' Up-Date on RW Professional Leasing Arrests
By Robert E. Kessler News Day STAFF WRITER Long Island Four officials of an Island Park-based leasing company were arrested by FBI agents Friday on charges that they engaged in a complex series of schemes to defraud lending institutions around the country of millions of dollars in loans that were ostensibly meant to finance the leasing of medical equipment. Agents hurriedly raided the offices of RW Leasing Services at 4584 Austin Blvd., Island Park, and a satellite office in Wellesley, Mass., because an informant told investigators the company's records were being destroyed, according to Assistant U.S. Attorney Gary Brown and an FBI affidavit filed in support of a search warrant. One official of the firm said several officers were planning to flee to Greece with their families, according to the affidavit. An ongoing investigation indicated that at least 12 banks nationwide had possible losses of more than $6.5 million, the affidavit said. But the informant said that as many as 90 other loans may have been involved in the scheme, indicating the alleged fraud might be as large as $200 million. Brown said in U.S. District Court in Central Islip late Friday that the case was "conservatively a tremendous fraud." RW Leasing Services has specialized for 20 years in obtaining loans for physicians, dentists, veterinarians and optometrists to finance the long-term leasing of expensive medical equipment such as X-ray machines. The company then managed the leases, collecting payments on the loans and passing them on to the lending institutions, the affidavit said. Among the various frauds in which the company allegedly engaged were: obtaining loans and not passing them on to their medical clients; obtaining loans for nonexistent practices and pocketing the money; and obtaining loans from several banks for the same lease. Brad Simon, the attorney for the president of the company, Rochelle Besser, said his client was not guilty and he "will defend the case vigorously." Besser was held as a possible flight risk pending a hearing tomorrow in U.S. District Court in Central Islip. Others arrested were Besser's brothers, senior vice president Barry Drayer and Roger Drayer, whose title was not given; and Jennifer Tarantino, Roger Drayer's daughter, a company employee. They were released on varying bails. UAEL Managing Director Joanie Dalton Resigns ############# ############################### ################### " United Association of Equipment Leasing Executive Committee, Bob Fisher, CLP President; Bette Kerhoulas, CLP Vice President; James Coston, Secretary/Treasurer and Chick Brazier, CLP Immediate Past President, along with Joe Woodley, CEO of UAEL announced today that Joanie Dalton, COO of UAEL has submitted her resignation effective July 3rd, 2002. Joanie has been with UAEL since March of 1999. Mrs. Dalton has decided to pursue another opportunity outside the non-profit Association arena. The Officers, Board of Directors and Staff of UAEL wish her success in her new endeavor." Bob Fisher, CLP CEO ######### ################################## #################### “Position Too Good to Turn Down” Elevated from her position several times, originally brought in by past executive director Dr. Raymond Williams, Joanie Dalton says she was “offered the position of a lifetime.” She has watched the organization grow to over 400 members, become more financially stable, and guided it through what former President Chuck Brazier called “rocky times,” helping to build a strong foundation. Her family has always been in the restaurant/hotel industry, and her background was with catering at the Cruiseline for eight and one half years, the catering convention manager of the San Francisco Peninsula. She came to UAEL on March, 1999 to manage the conventions, grew into other administrative duties, and was made. October 3,2000, Dr. Williams was “dismissed.” He served for almost eight years, following Jon Bednerick, CAE. He was very popular among the membership. The operation was left up to Joanie Dalton and Cindy Spurdle, formerly with the National Association of Equipment Leasing Brokers and now with the Certified Leasing Professional Foundation. Year 2000 UAEL President Bob Rodi, CLP,announced: “Joan Dalton is appointed Managing Director of the United Association of Equipment Leasing effective January 1, 2001.” There were questions about her experience, but members rallied behind her, and the board of directors gave her full support. November 20,2001 Leasing News Report: . Ex-WAEL Prez to Be New Chief Executive Officer Joe Woodley, CLP, is the new full-time United Association of Equipment Leasing ( UAEL )Chief Executive Officer. He will continue at Westover Financial. Steve Jones is the president of Westover. He was president of the organization in 1987, when it was the Western Association of Equipment Lessors Joanie Dalton, former executive former meeting planner, executive director, has been elevated to Chief Operating Officer.
2001 president Chuck Brazier, CLP, Centerpoint Financial, says it is “ time to get the executive committee out of running the office and to spend more time with members, listening to them, providing solutions, and being more active. “This will provide consistent leadership, giving Joanie more time to run the office, work on conferences. It will give management more time to work with members, plus give time to the executive committee to meet with committees, make committees work, and bring balance back to our organization.” Since the departure of long time executive vice-president Dr. Raymond Williams, CAE, Joanie Dalton along with the executive committee, utilized “outsourcing” to keep the budget in line. “ This is a very, very positive move for our association, “ Joanie Dalton said. “ It is also both very positive for me personally and professionally…to have a mentor such as Joe Woodley is perfect. We can provide more benefits to our members. 2002 will be an exciting year for UAEL.” -- In an exclusive interview with Leasing News, she appeared very “up” and happy. “The position was too good to turn down, “ she said. “It was not just the more money, but a company car ,and practically no commute, as they are located in South San Francisco. “ I know and enjoy the restaurant and hotel trade...my only reservation was leaving Joe, who has been wonderful to work with. He is very dedicated to the industry, “she added. “I will be around to help him, at any time. I will miss you all, but out of the blue, I was offered this chance of a lifetime. ” --------------------------------------------------------------------------------------------- Fed meets with little expectations of changes in interest rates By Jeannine Aversa ASSOCIATED PRESS WASHINGTON – Faced with an economy that's not showing much gusto, the Federal Reserve probably will hold short-term interest rates at 40-year lows through the summer, giving borrowers yet more time to take advantage of low-cost financing. That's the growing feeling among economists as Federal Reserve Chairman Alan Greenspan and his Federal Open Market Committee colleagues began a two-day meeting Tuesday to discuss interest rate policy. Reinforcing that view was a report that showed consumer confidence fell in June to a four-month low. The Conference Board, which calculates the index, said confidence was hurt by accounting scandals and worries about jobs. By keeping interest rates low, the Fed's goal would be to motivate consumers to spend and businesses to step up investment in new plants and equipment, crucial ingredients to helping along the economy's comeback from last year's recession, economists said. "The U.S. economy is like a canoe in very choppy water. It is trying to make headway, but it is still very difficult," said Lynn Reaser, chief economist with Banc of America Capital Management Inc. On Wall Street, stocks slumped. The Dow Jones industrial average fell 155 points to close at 9,126.82. Recent economic reports suggest the recovery is slowing. Some economists believe economic growth, as measured by the gross domestic product, will clock in at around 2.5 percent in the current quarter, down from the brisk 5.6 percent pace posted in the first three months of the year. Consumers, whose spending accounts for two-thirds of all economic activity, have shown less vigor recently. Sales at the nation's retailers were down 0.9 percent in May, the largest drop in six months, though unusually cool weather was a factor chilling shoppers' appetites. Still, low mortgage rates and solid appreciation in housing values, especially given the weak performance of the stock market, continue to motivate home buyers. Sales of previously owned homes dipped 0.3 percent in May but still racked up the fourth-highest monthly level on record: a seasonally adjusted annual rate of 5.75 million, the National Association of Realtors said. Although the unemployment rate dipped to 5.8 percent in May, the jobs market remains sluggish, and economists worry that could damp consumer spending in coming months. Manufacturing, after being knocked down by the recession, is back on its feet but isn't bursting with vitality. Capital spending by businesses has yet to turn around, which means a key component to a sustained recovery is lacking, economists said. Deep cuts in spending on new plants and equipment helped push the economy into recession. Companies who saw their profits take a hit during the slump are worried about the recovery's staying power and are reluctant to make big commitments, in spending or hiring, until they are convinced the turnaround is for real, analysts said. Economist Clifford Waldman, president of Waldman Associates, worried that violence in the Middle East, tension between India and Pakistan, threats of new terror attacks on the United States and Enron- type accounting scandals will give companies another reason not to make big commitments. Fed policy-makers, who meet eight times each year to set interest rate policies, have not changed rates since last December, when they capped a yearlong easing drive by cutting their target for the federal funds rates to 1.75 percent, a 40-year low. The funds rate is the interest banks charge each other on overnight loans. Banks' prime lending rate, which follows changes in the funds rate, is now 4.75 percent, meaning consumers and businesses are enjoying the lowest short-term borrowing costs since 1965. Given the spotty recovery, economists are predicting the Fed will leave rates unchanged at the end of their two-day meeting Wednesday and through the summer. Policy-makers have leeway to keep rates low because inflation has been well-behaved, analysts said. "Events of late give the Fed more reasons to remain on hold," said Stuart Hoffman, chief economist at PNC Financial Services Group. Some economists are now predicting that the first interest-rate increase would come at the Fed's Sept. 24 meeting at the earliest. Some forecast the first rate increase would come later, in November or December. Others believe there's a good chance rates may be left alone for the rest of the year. Even with the rebound slowing, most economists said they weren't worried that the economy might backslide into a downturn, a "double- dip" recession. And, they believed the chance of a Fed rate cut in the coming months was small – barring a shock to the economy, such as another major terror attack on U.S. soil. Federal Reserve: www.federalreserve.gov _______________________________________________________________ Leasing Co-op: Six Showing--- Seven on the Line!!! Just that I completely under-estimated the marketing side of the cooperative. I have been concentrating on the funding side too much. I am now a sales force for 6 member businesses. We are going to be marketing to other cooperatives and many other businesses full force. Next week, OneWorld will sign an agreement to become a preferred leasing arrangement for thousands of small businesses in 10 cooperatives. Richard Selby OneWorld Leasing 1553 W. Todd Dr., Suite 110 Tempe, Arizona 85283 tel. (480) 831-6118 ext. 40 E-mail: rselby@mainstreet.coop URL: www.mainstreet.coop ############# Nationwide Lease Finance Cooperative Holds Organizational Meeting: Initial Focus on Marketing Phoenix AZ - OneWorld Leasing, a cooperative owned by independent lease finance companies, held its first organizational meeting in Minneapolis, Minnesota. Eric Bryant, Jay Foster, Chris Raley and David Stearns were elected to the cooperative's Board of Directors. Richard Selby will serve as President and CEO, and Stearns, from Chicago-based American Leasing Alliance, was named Chairman. "I became an owner of OneWorld early on because I want help build the co-op to become a market leader in the industry," said Jay Foster from MidPark Capital Corporation in Dallas TX, who was also elected corporate treasurer. Lance Blount from Quest Financial in Costa Mesa CA, added, "We are confident that OneWorld will help us to become a force for positive change and increase our bottom-line." OneWorld Leasing currently has six members. Discussions with several banks and other finance companies about funding partnerships began in May. The cooperative plans to have 300 members nationwide by the year 2007. Initially, the members agreed to focus on recruiting other members and on marketing its nationwide leasing services to businesses across America. One World Leasing, comprised of member companies committed to honesty and integrity in their dealings with all constituencies, exists to strengthen the competitive positioning of its members by ensuring the effectiveness of Independent Lease Finance Companies as providers of high quality, competitive, and market leading financial products for their clients. ######### ############################## ############ Here is a copy of their original. Their goal was seven members. . ############### April 3,2002 OneWorld Leasing Launched as Leasing Cooperative American Leasing Alliance and MainStreet Cooperative Group announced plans to launch a nationwide cooperative owned by independent equipment lease financing companies. The cooperative, OneWorld Leasing, Inc., will serve as a marketing and loan syndication company for small- and medium-sized companies in the industry. The cooperative expects to have 7 founding members and plans to have 77 member businesses with an aggregate lease loan value of $770 million USD by the end of 2004. David Stearns, CEO of American Leasing, says, "OneWorld Leasing will become a true leverage play for the smaller leasing company concerned about industry consolidation, super brokers, better lease-loan rates and a level playing field. Unlike lease consolidation plays, the members will own this, yet continue to be independent." Stearns will initially serve as incoming Chairman of the OneWorld Leasing board. MainStreet's Richard Selby will serve as interim CEO during the cooperative formation period. Six to nine months after launch, a leasing industry veteran will be identified to lead OneWorld. According to Selby, "of all of the cooperatives I have seen being launched in the last decade, OneWorld Leasing is a 'home run' in terms of industry dynamics and syndication opportunities. We are proud to launch this together with American Leasing Alliance. They truly are an industry champion. OneWorld Leasing will benefit its members in many ways, both financially and operationally," Selby added. American Leasing Alliance, based in the Chicago suburb of Lake in the Hills, Illinois, is an emerging leader in the equipment lease finance industry. The company specializes in structuring lease financing for production, income-producing and business-essential equipment. MainStreet Cooperative Group, based in Tempe, Arizona is a leading cooperative service company. MainStreet focuses on developing member-owned cooperatives in various industries and also offers consulting and business services to cooperatives within its network, which is approaching $3 billion in aggregate revenues. David Stearns may be a candidate for "Meet the Leasing Newsmaker" to explain how this process would work small and medium sized companies in the industry. His Phone # is (847)458-0191 (Both Richard Selby and David Stearns did appear on “Meet the Leasing News Maker:” April 8,2002 http://www.leasingnews.org/Conscious-Top%20Stories/Leasing_co_op_$100M.htm ############### ######################### ###################### Fitch Expects To Raise CIT's Senior Debt To 'A' Fitch Ratings expects to raise CIT Group's (CIT) and related entities' senior debt, subordinated debt, and preferred stock upon successful completion of its IPO and effective separation from Tyco International. CIT Group, Inc.'s (CIT) current senior debt, subordinated debt, and preferred stock at 'BBB', 'BBB-', and 'BBB-', respectively. The commercial paper rating is 'F2'. All of the company's ratings are on Rating Watch Evolving. The indicative long-term rating would be 'A', subordinated debt and preferred stock would be 'A-'. The indicative commercial paper rating would be 'F1'. The Rating Outlook is expected to be Stable and would be removed from Rating Watch Evolving. Should a transaction not be completed as planned CIT's and Tyco's ratings would be equalized at Tyco International's levels (senior currently rated 'BB', Rating Watch Negative by Fitch). Fitch's indicative ratings reflect increased comfort with the current liquidity plan and contemplated reduction of the CP program going forward (down to $3-5 billion from over $8 billion). Comfort with the liquidity plan stems from the contingent sources of liquidity the company accessed during this period - $3 billion in funding through ABS (Equipment and Home Equity) and new programs it executed - $2 billion in new conduit facilities (both of which have been tested and repaid) as well as CIT's ability to re- enter the term unsecured debt market despite looming concerns for the company under the Tyco umbrella. Importantly, Fitch's expected actions presume complete separation. While CIT has worked diligently to develop contingent sources of liquidity and takes great comfort in surviving the capital markets stress it has been under thus far, Fitch believes that this will be an enduring process for market funded companies which seek to earn and maintain 'F1' ratings. Issuers such as CIT must regularly demonstrate their ability to monetize assets to ensure that in the event they are unable to access unsecured sources of capital, the company would be in a position to unwind the portfolio or execute contingency funding plans that are sufficient to meet all upcoming maturities. Securitization, one means of demonstrating market accessibility, has accounted for at least 20% of funding for CIT and that will continue to be the case at a minimum. CIT plans to resume a more normal funding strategy which includes accessing the unsecured capital markets in short order, in meaningful amounts, including the repayment of its bank funding by the end of the year. It is important to note that $3.8 billion of bank borrowings are not actually due until March 2005. From a capitalization perspective Fitch views CIT as modestly undercapitalized, however, the company is stronger than it was pre- Tyco due to some divestitures and improved capital formation, aided by slowed origination activity resulting from market conditions. Current asset quality trends are a concern with net chargeoffs outpacing peak 1991 and 1992 levels. However, CIT's acquisition of NewCourt and consumer expansion make such historical comparisons less useful. While a concern that bares monitoring, portfolio performance remains manageable. Based in Livingston, NJ, CIT Group, Inc. is one of the largest commercial finance companies in the world with managed finance receivables and operating leases of $48 billion March 31, 2002. The company has leading market positions in a variety of business segments. ################## ########################################### ------------------------------------------------------------------------------------------------------ Yahoo closing streaming radio, video services By |