Kit Menkin’s Leasing News

           Thursday, June 6, 2002

Accurate, fair and unbiased news for the equipment Leasing Industry




   Dennis Kozlowski---Delusions of Grandeur

   Tyco Turmoil May Hurt CIT's Sale, IPO, Investors Say

     Telemark---Seeking Information

        From: Andrew Thorn

            Leaseback Capital---Canada

Need Suggestions for Top Gun Salesman and Sales Manager

  Semiconductor industry group projects recovery

    Subject: Woden From: Jim Harrington

      For the "High Brows"---Jeff Taylor on FASB

         ELNA Conference    August 28-30 Atlanta, Georgia

             Harborside Capital/Wafra Investment Join Venture



### Denotes Press Release





Dennis Kozlowski---Delusions of Grandeur


 by Christopher Menkin


As a credit analyst or manager, when you start to see red flags pop up, you should

look deeper. Such is the case with Dennis Kozlowski, whose ethics as a president

of a major corporation should be viewed with disdain.  Perhaps this starts with a corporation who evades taxes by being located in Bermuda.


In the recent case, reading between the lines, he resigned as president because

he knew he had been caught, not just by the State of New York, or the Internal

Revenue Service, but inadvertently by the Securities Exchange



Here is an excerpt from the New York Times story:


“Investigators say the funds Mr. Kozlowski used to purchase at least six of the paintings were borrowed from Tyco through an executive loan program that was supposed to be used for a different purpose -- helping top employees pay taxes that become due upon the vesting, or taking full ownership, of restricted stock awards.

Outside lawyers said the borrowings -- or Tyco's failure to disclose them -- could have violated federal securities laws or state laws.”


In the charges of avoiding sales and income taxes:


“According to the indictment, Kozlowski and others’ agreed to generate false documents, such as invoices and shipping documents, to make it appear as though the art work was to be shipped out of state and therefore not covered by New York state sales tax provisions.’ Tyco employees were allegedly told to sign false documents reflecting receipt of the paintings in New Hampshire, only to ship them back to New York.”


Many people in the art world said yesterday that one anomaly in the Kozlowski transactions, which the indictment says took place from August 2001 to June 3, 2002, was the apparent use of Southern Trucking of Brooklyn. That trucker was not known to dealers who are used to working with a handful of well-known and heavily insured companies whose specialty it is to ship valuable and often delicate works of art.


Chris Hanson, president of Southern Trucking, said in an interview yesterday that he had no knowledge of having done business with either Tyco or Mr. Kozlowski, adding that he would "have to check the records."


Mr. Kozlowski bought the paintings, which included a Renoir and a Monet, for $13.1 million for his 13-room apartment at 950 Fifth Avenue, the prosecutors contend. To avoid paying New York sales taxes, they charged, he shipped empty crates to Tyco's headquarters in Exeter, N.H., and transported paintings back and forth from New Hampshire to Manhattan. According to the indictment, when Mr. Kozlowski bought a Monet for $3.9 million it was delivered to his Fifth Avenue apartment, but Ms. Berry sent a document to the dealer, Alexander Apsis, saying that it would be shipped to New Hampshire.


Altogether he is said to have saved about $1 million in sales tax.


The indictment says his purchases came from three well-known dealers but does not name them. Mr. Apsis and Vance Jordan, both from Manhattan, confirmed their sales to Mr. Kozlowski. Mr. Apsis, a private dealer who at one time ran Sotheby's department of Impressionist and modern art in New York, works out of a Fifth Avenue apartment. "He is unaware of any wrongdoing," said Robert Katzberg, the lawyer for Mr. Apsis. "But he's cooperating with the investigation."


Mr. Jordan, who runs a Madison Avenue gallery, is one of the world's leading specialists in American art.


The third dealer, Richard Green, runs a large gallery on Bond Street in London. The gallery, one of the biggest buyers at auctions both in this country and abroad, is no stranger to the New York art world. The gallery exhibits twice a year at international art and antique fairs at the Seventh Regiment Armory on Park Avenue, where its booth has been filled with a mixture that has included Dutch and Flemish old master paintings, British sporting scenes and Impressionist works.


People close to the investigation said that typically, Ms. Berry would visit a gallery either alone or with Karen Kozlowski, Mr. Kozlowski's wife, and look at various pictures from various fields. Her purchases, they said, were diverse and ranged from a Dutch old master to the French Impressionists, generally second-tier work by big-name artists.


Often the galleries would send the artworks to Mr. Kozlowski's Fifth Avenue apartment, these people said, so the couple could "live with" the painting or sculpture for a while — a common practice, especially when a client is spending millions of dollars.


The people close to the investigation said yesterday that Ms. Berry had told the dealers that rather than use their truckers, she wanted to send several works of art bought from the various dealers to Mr. Kozlowski's house or office in New Hampshire and that it would make sense to send them all at once with her trucker, Southern Trucking. The trucker provided receipts for the artworks shipped, lawyers knowledgeable about the investigation said.


The first of the Kozlowski purchases under investigation came last August during a London shopping trip when he bought three paintings from the Richard Green Gallery, one by Sir Alfred Munnings, the English painter of horses and country life; another by Adolphe-William Bouguereau, the 19th- century French academic artist; and a third by John Atkinson Grimshaw, a Victorian painter. He paid a total of $1.98 million for those paintings.


A spokeswoman at the Richard Green Gallery said: "We've been aware of the investigation for two weeks and are cooperating fully. We don't believe we've engaged in any violation of New York law." She referred further questions to Jeremy Epstein, a partner at Shearman & Sterling in Manhattan, who declined to comment.


A senior member of Mr. Morgenthau's office said yesterday that prosecutors were "taking a look at other dealers and other customers."


Mr. Kozlowski's indictment became a topic of discussion yesterday at a meeting of the Art Dealers Association of America. "I think people learned long ago that you don't send the empty boxes — everybody was shocked," said Gilbert Edelson, who is a vice president of the association. He added that he had not heard "of any other dealers subpoenaed at the moment — it's still early days."


Although the indictment was part of a continuing look by the district attorney at what is thought to be fairly common sales tax fraud involving purchases of items like jewelry and furs, many of Manhattan's leading art dealers said they were appalled.


"Most dealers and most collectors are extremely careful," said Andrew Fabricant, director of the Richard Gray Gallery in Manhattan. "We're talking about very wealthy clients who don't want this kind scrutiny."



                     And this March 30th news story:


Tyco International Ltd. Chief Executive Dennis Kozlowski and Chief Financial Officer Mark Swartz lent $14.1 million in 2000 to Warren Musser, a board member of former affiliate TyCom Ltd., the company said.

The loan, which has been repaid, was not reported publicly by Tyco because disclosure was "neither necessary nor was it required," said Brad McGee, Tyco's chief strategy officer.

Musser was a board member of TyCom, the largest maker of undersea cable, when Tyco offered to buy the 11% of the company it didn't own for $748 million in October 2001. Tyco reached a definitive agreement with the affiliate 15 days later. Shareholders filed lawsuits claiming that the pace at which the transaction was completed indicated the companies didn't negotiate in good faith. Tyco, based in Bermuda and run from Exeter, N.H., has said the lawsuits are without merit.

Musser wasn't a member of a special committee of TyCom directors that reviewed the Tyco offer, McGee said. He repaid the loan, made in December 2000, a year later.

Musser didn't respond to a request for comment.


Perhaps this is corporate culture, where directors take care of each other.  They

are not elected by the public, and really the stockholders get to “rubber stamp”

the choices.  They are really insiders.


John F. Fort
Lead Director

Joseph F. Welch

Mark H. Swartz
Executive Vice President and
Chief Financial Officer

Lord Ashcroft, KCMG
Chairman of
Carlisle Holding Limited

Joshua M. Berman

Richard S. Bodman
Managing General Partner
AT&T Ventures LLC

Stephen W. Foss
Chairman and President
Foss Manufacturing Company, Inc.

James S. Pasman, Jr.

W. Peter Slusser
Slusser Associates

Wendy E. Lane
Chairman Lane Holdings, Inc.


This opinion is also shared by Henry M.Paulson, Jr., who Patrick McGeehan of

the New York Times reports:



WASHINGTON,— In a rare public appearance, the chairman and chief executive of Goldman Sachs, Henry M. Paulson Jr., called for changes yesterday in how public companies are run, audited and regulated to help restore investor confidence.


Mr. Paulson said faith in corporate executives was at a low and was forestalling a recovery in financial markets. He proposed several measures to rebuild trust, including restrictions on the ability of chief executives to sell shares of their own companies.


Tracing the crisis back to the collapse of the Enron Corporation last fall, Mr. Paulson said during a lunch meeting at the National Press Club here, "I cannot think of a time when business over all has been held in less repute."


In his speech, he was surprisingly critical of the corporate executives and directors who make up the client base of major investment banks like Goldman. Seldom does such a powerful Wall Street executive take on corporate America so directly.


"The business community has been given a black eye by the activities and behavior of some C.E.O.'s and other notable insiders who sold large numbers of shares just before dramatic declines in their companies' share prices," he said in his speech. He did not name any companies on that score.


Corporate directors should require executive officers to hold their company stock for "significant periods of time" and company insiders should have to give back any gains from sales of their companies' stock made less than a year before a bankruptcy filing, he said.


Wall Street firms have their own troubles, of course, and Mr. Paulson spent a few minutes discussing conflicts of interest at investment banks like Goldman. He said he felt compelled to speak out because the situation had become dire. Other than the two top executives of Merrill Lynch, which has been embroiled in an investigation into investment recommendations of its stock analysts, senior executives on Wall Street have kept low profiles in recent months.


"I think this speech is a month or two overdue," Mr. Paulson said.


Still, he devoted most of his speech to corporate governance and accounting reform. In the wake of several notable restatements of company earnings, investors have lost faith in the American accounting system, he said.


He cited two factors: the pressure chief executives feel to report bigger profits every quarter and the complexity of the "rules-based approach" that underlies the generally accepted accounting principles set by the Financial Accounting Standards Board. That system, he said, is "ripe for manipulation" and should be updated and simplified quickly, under the oversight of the Securities and Exchange Commission.


"If the outcome of all we have been through in the last six months, all the soul- searching and debate, is business as usual at the F.A.S.B., then we will have missed an enormous opportunity for improvement," Mr. Paulson said.


The accounting used by J. P. Morgan Chase and some of the huge banks that compete with Goldman has long been a pet peeve among their investment bank rivals. Mr. Paulson reiterated that complaint yesterday, saying that companies specializing in financial services should be forced to carry assets and liabilities on their books at their current market value, not at their historical cost as many do now.


To the certain consternation of many of Goldman's clients, Mr. Paulson predicted that companies eventually would have to treat the stock options they give executives and employees as an expense. Executives of technology companies, among others, have fiercely fought efforts to make companies count the value of options — a big component of pay in certain industries — as a cost of doing business.


"Ultimately, I think options will be expensed and the accountants will win out," he said. "But who knows?"

Mr. Paulson also said companies, to avoid the appearance of a conflict of interest, should not buy consulting services from the accounting firms that audit their financial reports. As for Goldman's own conflicts of interest in trying to serve corporations and investors who buy their stocks and bonds, investors should trust the firm to police itself, he said.


"For an integrated investment bank like Goldman Sachs, conflict management has always been a core competency," he said. But he added that, through the boom and bust of telecommunications and technology stocks, "we have not done as good a job as we might have of preserving and protecting the independence of our research analysts."


Goldman has made some changes in the organization of its stock research operation, installing an ombudsman and giving the audit committee of the firm's board oversight of research. But the firm, like Merrill and others, has clung to the view that analysts must play a role in helping to land investment banking assignments from the companies that they rate.


"The major part of our effort will be to continue to focus on doing better fundamental analysis," Mr. Paulson said. "The next time something looks too good to be true, we hope we have the wisdom to see it and the courage of our conviction to act accordingly."




Tyco Turmoil May Hurt CIT's Sale, IPO, Investors Say

Exeter, New Hampshire: Tyco International Ltd., seeking  to sell its CIT Group finance arm for as much as $6.5 billion, may get less than $5 billion as the ouster of Chief Executive Officer Dennis Kozlowski adds to concern about stability, shareholders and analysts said.  ( Tyco paid $8.2 billion. editor )

``This is an absolute lack of management credibility,'' said Tom Giles, who owns shares of Tyco, the top maker of electronic connectors and security systems, among $1 billion in assets he helps manage at Dean Investment Associates. ``People are afraid there's something else out there.''

Tyco shareholders have lost half their investment in the past three and half years, a period during which the 55-year-old former accountant was paid about $300 million in salary, stock options and other compensation. Kozlowski was forced out yesterday and indicted today for trying to evade about $1 million in New York sales tax on art purchases valued at $13.2 million.

The charges, to which Kozlowski has pleaded not guilty, raised concern about his personal money management and oversight of the company, putting its future in question, investors said. Tyco has lost more than 72 percent of its value in 2002 alone.


(compliments of )



Text of indictment





Telemark---Seeking Information


Can you get me any information on Telemark? We have been in the process of

buying portfolios and finance companies over the last year and I have been

told by some of our people that they would be a good fit for us. We cant

seem to find them on the internet? Any information would be helpful.



Jay Apsey, Executive VP

Federated Capital Corporation

30955 Northwestern Highway

Farmington Hills, MI 48334

248.737.1300 Ext. 500







From: Andrew Thorn <>


(His auto responder)




This is a very exciting week for me and I will be out of the office and

somewhat slow to respond. 


I am competing in my very first Iron Man Triathlon.  What does this mean?

It means I will swim 2.4 miles, ride 112 miles (on a bicycle) and run (or

walk or crawl) 26.2 miles in a race in Provo Utah.


I hope to finish in less than 12 hours I only get 17.  I will be checking in

and hope to find time to respond. 


Enjoy Life,





Leaseback Capital---Canada


Have you heard anything of Leasebank Capital Corporation in Canada?

Apparently they've opened a small ticket division, with many people from the

larger Lessors (CIT, Heller). Please post something if you've heard.




Anonymous please



Need Suggestions for Top Gun Salesman and Sales Manager


October 5, Leasing News will be hosting two panel workshops at the

United Association of Equipment Leasing Fall Conference in San Diego,



Need one more “Top Gun” salesman. Criteria is a W2 with at least $250,000

a year.  Not a broker, but a salesman who works for a company and earns

at least $250,000.  We want to have him on the panel with three other “Top Guns”

to tell us how he does it.


Need one more “Top Gun” sales manager.  This is a person who manages company

salesmen, not brokers.  I have three committed and am looking for a fourth. 


This is to join a panel on Saturday morning, San Diego, October 5th.


Any suggestions will be appreciated. 


Kit Menkin, Leasing News




Financial Services Technology Forum: Online 2002

Redefining E-Delivery


September 22-24, 2002 Scottsdale, AZ


Don't miss the unprecedented coverage on how to maximize the impact of Internet technology. Register now!




Semiconductor industry group projects recovery

REDWOOD CITY, Calif. (AP) Worldwide semiconductor sales are expected to increase 3.1 percent in 2002 and jump 23.2 percent in 2003, according to a midyear forecast released Wednesday by an industry trade group.

The Semiconductor Industry Association, which represents most U.S. chip makers, said the market is now in the initial phases of recovery after its most challenging year in history.

''Our expectation is that the recovery will gain momentum in the second half of the year and continue with strong growth through 2003 and 2004,'' said Dwight W. Decker, chief executive of Conexant Systems and a semiconductor association board member.

Worldwide sales of all chips are expected to total $143 billion in 2002, $177 billion in 2003 and $213 billion a 20.9 percent increase in 2004. Another slowdown is expected by 2005.

The growth will be fueled by increases in sales of cellular phones and personal computers as well as other digital consumer electronics equipment.

The Asia Pacific market is leading the recovery. Sales are expected to increase 27 percent to $51 billion in 2002 the only region that will see a year-over-year sales growth this year.

The Americas, on the other hand, are expected to decline 4 percent to $35 billion in 2002 but grow 24 percent to $43 billion in 2003 and 22 percent to $52 billion in 2004.

The Semiconductor Industry Association has represented U.S. chip manufacturers since 1977. Its members account for more than 90 percent of U.S. chip production.

On the Net:

Semiconductor Industry Association:




  Subject: Woden

       From: Jim Harrington <>




Hey Kit,


Curiosity has got the cat.  Who is Woden, as in today's headline 'Woden's

Day----The Leasing God is Angry!!!'?


Just wondering because I grew up in Woden, Iowa.




(Wednesday is named after Woden...much of our language comes not from

the English, but the Scand avian countries. Woden was a god of hunting.

Thor for Thursday was the god Thor...language is a fascinating

as it teaches you a lot about “history.”


(I thought of Woden for Wednesday, as it was Woden's day---and

the leasing god's being angry came from Mark McQuitty in a comment

I did not print, but definitely was appropriate.  Mark said, "

The Leasing gods are angry...” He will be on the “sales manager”

panel.  Republic, Sierra Cities, CapitalWerks, he has taught many

salesmen to make a lot of money. This is a first time appearance

for this leasing industry “Top Gun” and man of many talents. Editor )



for the “High Brows”


Jeff Taylor’s   Executive Caliber.WS

Leasing Training for Leasing Professionals


“Dedicated to FASB.”





ELNA Conference    August 28-30 Atlanta, Georgia

    Ritz-Carlton, Buckhead




    Previewed by Alan Zeppenfeld for Leasing News


Picture this!!  You are invited to a banquet at an elegant mansion, with a select number of other guests who are all important to your business success, and your host’s main objective is to make sure that you get ample opportunity to meet, interact, and do business with everyone there. Can you picture that in your mind?  Great!!  Now if you want to make that picture a reality, go to and check out the information on the eLNA Annual Networking Conference.


Almost a year has gone by since we Rode the eTrain.  Kit has accepted my mea culpa for spending so much time attending the conference presentations last year that I was late in submitting my article and asked me to cover it again.  Being very impressed with John Semon’s “quality over quantity” approach, I wanted to get a sneak preview of this year’s event to see if that would still hold true or if eLNA was headed along the “just another conference” route.  John was very candid and it was soon clear to me that here is a man that is focused on his ideals and principles, sees himself with a defined mission in the leasing industry, and has great passion for the journey he is taking.


“It all begins with networking “.  Although Semon spent the first part of his career in a major corporation arena, he is now drawn to operating primarily in the pre-IPO company environment.  This focus is not intended to isolate these companies from the large corporations, but to enable them to have a forum to present their products and find business opportunities through networking.  Technical, commercial finance and manufacturing companies find common ground in eLNA because of their involvement in developing and utilizing Internet capabilities.


Semon sees the leasing industry paradigm changing in the eLeasing environment.  While the traditional leasing environment has been made up of the whales and the minnows, the emerging eLeasing environment will tend to be the fast versus the slow. Another major change is that in the past leasing companies have been very proprietary in their activities, but success in the future will require a collaborative approach.  This presents an interesting dilemma to the presenters at the Networking Conference as they are there to do business and make sales, but they have the indigenous fear that they will give away their “secret handshake” to their competitors.  This year’s conference has effectively addressed this by offering several types of workshops and briefings so companies may chose comfortable environments for their presentations. 


Although I am not from Missouri, I still have a “show me” approach to life.  From everything I’ve seen, the eLNA staff delivers as advertised and more.  All I can say about this year’s conference is that if you consider yourself a serious participant in the eLeasing world, you really ought to be there!!




 Harborside Capital Group LLC and Wafra Investment Advisory Group, Inc. announce Joint Venture Agreement.


Harborside Capital Group LLC and Wafra Investment Advisory Group, Inc. are pleased to announce they have entered into a Joint Venture Agreement. Under the terms of the agreement, Harborside will originate and service equipment lease transactions for Wafra’s income fund. The focus of the program will be to invest in true lease transactions, both single investor and leveraged, with quality credits that offer the potential for residual upside. Marketing of the program will be accomplished through a combination of a direct end user sales effort as well as purchasing leases in the secondary market. 

Wafra Investment Advisory Group, Inc., is a U.S. registered investment adviser that was founded in 1985. Wafra, as part of a major international investment institution offers an extensive range of investment services including portfolio securities management, direct equity investing, real estate, equipment leasing and other structured products. Wafra sponsors seven external funds and has assets in the United States in excess of $3.3 billion.

Harborside Capital Group LLC was founded in 2000 by George J. Fry and Peter C. Platt. Harborside is an independent equipment leasing company that generates transactions for its own account as well as for syndication. Harborside offers vendor sales finance/leasing programs, private label leasing programs and Lessor/Lessee advisory services.


For further information please contact:


    George J. Fry                                                                      Peter C. Platt

           18 Sylvia Court                                                            22 South Holmdel Road

   Woodcliff Lake, NJ 07677                                                Holmdel, NJ 07733

      Phone: 201-573-0216                                                     Phone: 732-817-1400

       Fax:    201-573-8037                                                      Fax:    732-946-7884

   E-mail:                       E-mail:





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