Equipment leasing and all things related

If you had done any homework you would have known that Norvergence was in bed with the leasing industry through their secretive private master agreements long before us lessees ever heard of Norvergence. Some of these crooks continue to this day to try to profit from a proven fraudulent business known as Norvergence.

Your industry had an obligation to perform simple due diligence before handing over hundreds of thousands of dollars to Norvergence. A simple background check on the principles of Norvergence would have revealed their criminal past. Is it normal to write thousands of leases for the same piece of equipment with a price ranging from $7500 - $350,000 and nobody bats an eye? Yet somehow greed got in the way of a sound financial decision and now your industry pins its hopes on a vaguely written "hell or high water clause" placed within a rental agreement which has already been proven fraudulent by the FTC and other courts across this country. This is the reason why so many lease companies offered settlements. They knew it was the right thing to do.

As a business owner I continue to lease. However, I will not do business with any company currently suing Norvergence lessees. I even refinanced my very large mortgage away from one of these companies. There are approximately 11,000 of us across this country that feel the same way. Suing small business owners is not the way to rectify the mistake your industry made when they rushed to fund Norvergence.

Anonymous, I am truly sorry to hear that you and so many other people/companies got burned. I know nothing of the facts surrounding this case other than what has been posted in this blog and a couple brief stories that I read. If as you say there was a massive conspiracy to commit fraud, I hope you received restitution, damanges, and that those involved in the fraud are facing jail time. As I am an outsider to the case, but, professionally interested in leasing matters, I have a few questions that would help me sort out the facts. Are you open to answering questions either on this blog or emailing me directly? Shawn, if this is not acceptable, please reply and I will drop further discussion on your blog.

Jay,
One of the purposes of the blog is to engender discussion, which I think always is of value, so please continue. I don't have an agenda to push on my blog, which I will reiterate to Anonymous when I reply to the comment, so all comments are welcome, as long as they are constructive, informative, relevant, and in good taste.

I am the Norvergence lessee that replied earlier. I would be happy to answer any question posed. I believe that many leasing company officials that were not involved in any way with the Norvergence scandal have no idea how deceitful and fraudulent this scam was and don't realize the extent to which many in your industry unknowingly or knowingly with "protection" built into the agreement, conspired with Norvergence.

I do not believe as you say that there was a massive conspiracy on the part of the leasing companies to commit fraud. Many got involved because big leasing company "A" or "B" was involved and they fell into a similar trap believing the hype as us lessees. One major difference was that none of the lessees had any knowledge in advance that these non binding documents that never contained the word "lease" would within three days of signing the agreement be assigned to a third party finance company that demanded payment whether we were receiving service or not. Norvergence officials admitted in some of their sales presentations to your industry, that they felt the word "lease" would scare off potential customers. Furthermore we signed numerous documents at the same time as the rental agreement that guaranteed that Norvergence had to live up to certain obligations (like the equipment was installed and actually worked)and if they failed we would be reimbursed or could cancel out. Of course this never occurred because it wouldn't be too long before the world learned that Norvergence's magic "Matrix Box" was nothing more than an ordinary router and since Norvergence was a scam, they never had any intention of rectifying any issues and the whole thing blew up when they filed for bankruptcy months later.

Why some in your industry continue to this day to try to shift the blame to the lessee is beyond me. We did not bring this scam to your front door. The credit checks and which leasing company would receive the assigned contract were all kept hidden from us. Kudos to the leasing companies that smelled a rat. Too bad they didn't warn the others and shame on the leasing companies that are spending millions in legal fees trying to collect on a fraudulent agreement by suing the very people that many in your industry would desire as a customer. I could go on and on but for everyone's sake I will wait for your questions.

Shawn, appreciate your attitude and the forum provided. I don't have an agenda, other than to gain knowledge and perspective in areas I may otherwise lack. I'll list a few questions now, hoping to hear from you and Anonymous.

1. Were Norvergence customers required to lease through Norvergence or could they pay cash or select their own independent source of financing?

2. Did Norvergence hold deals, sell the deals single investor or sell just the payment stream?

3. Were Norvergence customers given a cash price breakout of costs for their particular solution (i.e. equipment, install, service, maintencance, etc) or only quoted monthly lease payments?

4. If costs were quoted, either cash price or lease payment, did they differ upon receipt or commencement?

Answers to these questions would help me sort out certain aspects of the transactions as I have not followed the case.

Anonymous and Shawn,

I sent a few questions before seeing Anonymous's response. After reading his/her response, I now recognize I had a faulty understanding of the transactions. I originally thought that the Norvergence deals were simple telecom equipment "solutions" from a corrupt vendor that duped not only its customers but third party leasing companies. Under that scenario I found it hard to lay the majority of the blame or responsibility on the leasing industry as they would be simply providing financing for equipment that the lessee picked. As well, I found it hard to follow the logic of how the leasing companies could have participated in the fraud if the lessee selected the lessor. Nor did I think it reasonable for Anonymous to expect a third party lessor to perform in depth background checks on each deal it funds. This would add a great deal of time, cost, and liability to each lease that market would not be willing to pay for.

Under the scenario painted by Anonymous, it sounds like Norvergence only permitted a captive rental solution and the underlying financing was supplied by companies of Norvergence's choosing. In my mind, this does open the door to some responsibility on the part of leasing companies to perform due diligence. I might have a change of heart. Questions:

1. Who was the legal owner of the equipment during the rental period?

2. Approx. what percent of lessors involved in a trial were found guilty of fraud and what percent were found to be duped like the lessees?

3. If any lessors were found innocent, did the lessees have to continue paying them? If so, does Anonymous think this is fair?

3. If the rentals were not sold to third parties and customers could prove that equipment was not working as promised, would this have affected the outcome differently than if under a lease?

4. I hate to ask this question, but . . . did Anonymous perform a simple background check on the principals of Norvergence as he/she believes was the responsibility of the lessors?

As an aside, I do not work for any leasing company or the leasing industry. As stated, I simply have a professional interest in leasing matters.

1. The "Norvergence solution" was not presented as a lease at all but a bundled "non-binding" Rental contract for phone services that carried a best price guarantee and a cancellation guarantee, should Norvergence ever fail to perform. However, as we have found out, only a portion of the agreement could be cancelled, although it was presented as a unified and single agreement. NO, there was no cash option, NO we did not select the leasing company or the equipment, we did not even know there was a leasing company waiting in the wings with a master agreement, and NO we did not know that the same equipment was being sold for wildly different amounts, and NO we didn't know the equipment was merely a blinking light with a Norvergence label that was actually an Adtran router that sells for $200 (SOHO) or under $2000 (Adtran 850), but carried a price tag of $15,000 - $300,000. Same box, wildly different prices.

1.The leasing company got title to the equipment and Norvergence had the option to buy it for $1 at the end of the period.

2. and 3.(no 1) Don't Know

3.The rentals that were never sold to a third part had a very different outcome. The bankruptcy trustee had them declared VOID and uncollectable, as did the courts in Texas, Illinois, and a select few other states. Actually, the court in TX declared all Norvergence leases VOID.

4.The businesses that were targeted were small business with no IT dept and NO legal staff, unlike the leasing companies. Norvergence paid for references. Norvergence sued anyone who said anything negative (including one of their own employees) or paid them off. Did you see the movie "Chicago"? Remember the tap dance scene? Well they got very good at tap dancing.

Read the archived files, including master agreements, AG suits, employee statements at
http://www.connincorp.com/Norvergence/ShowDir.asp

And there are some interesting audio tapes of late sales meetings explaining how to convince a sucker (I mean potential customer) that there is no risk. I saved copies from the internet and you can find them at
http://www.fightthescam.com/audio/index.html

The leasing companies turned their backs on the facts deliberatly because the profits were too good to ignore.Furthermore, there are leasing companies that referred to Norvergence as "Financing Air". That is not the attitude of an innocent third party. The small businesses were thoroughly duped by con men who covered all their bases with the help of the generous funding of the leasing companies.

As for me, at the end of May 2004, they supposedly hooked up my local service and transferred it to Norvergence. On May 31, my local phone company disconnected my phone service for lack of payment. They had my bill sent to them, but that was all. They did not pay it, and were not licensed by the PUC to provide local service in Texas (or maybe anywhere). I had cellular phones with perpetual busy signals, an Adtran router that merely blinked and routed my internet (maybe that's why it's called a router?), and I still had to pay my own phone bill and long distance. In other words, I got nothing except legal headaches, all because I signed a non-binding agreement to save a little money on phone service.

My apologies. The audio files referenced above were about the bounced paychecks and the beginning of the end. The audio on "how to convince the sucker there's no risk
is at
www.fightthescam.com click on FTP Audio Files/Art cont2 - Think u can get this.wav

Texas Victim,

Thank you for taking the time to post the details. I have a much clearer picture of what transpired. And for what it is worth, I believe your account. Norvergence has much to answer for as do some lessors. I hope the judges and the juries can understand the facts when they make their decisions.

It's interesting to note that one of the larger leasing companies did not even have a certificate of authority to do business in the state of Texas. That might explain some of the reluctance on the part of the leasing company to pursue the issue with vigor and it also explains why the lease was declared void. Their attempted workaround was to reorganize their business units in an attempt to avoid further litigation; that didn't work either. I for one do believe that, given the size of the deals associated with Norvergence, the onus was on the leasing companies to undertake due diligence efforts and the evidence suggests strongly that they actually did. It's enlightening when you see the names of Norvergence employees that also show up as leasing company employees. From the inside of one these cases looking out, it's very hard to imagine that the leasing companies involved did not conspire with Norvergence to commit fraud. The evidence I have seen suggests strongly that there was conspiracy involved on the part of the leasing company. The Texas Attorney General's office apparently believes so as well.

IFC loses its bid to sue UBI....
Illinois US District Court
Firday 08/04/06
In a 2 hour and 15 minute deliberation an Illinois jury found for the defendant UBI.
After a week long trial attorney Gregory Adamski of Adamski & Conti sufficiently convinced a 12 person jury that IFC was not the holder in due course and therefore could not assert any rights on the leases acquired from Norvergence.

TNG like Norvergance used fraudulent schemes to bundle services with equipment, then lease out the whole cost as equipment. They also have gone bankrupt. What is the known within the industry about this case.

Dr. Leo,
I really haven't heard much about the TNG bankruptcy and business practices. There has not been any buzz amongst lessors about needing to enforce purchased lease contracts, especially relative to when the Norvergence scam came to light. I wonder if TNG was carrying its own paper.
Shawn