Equipment leasing and all things related

I can respond to some but not all.

1. quote from Leasingnews.org
(There were 48 leasing companies who purchased NorVergence contracts. Leasing News has posted 145 stories on this subject in the last year and a half, not including the complaints and “questions” mentions the year and a half before the bankruptcy.

Noted were those who saw the packages and turned them down, as evidently Allegiant-Partners did. Among the leasing companies mentioned were Pacific Capital, Bank of the West, including Financial Pacific who did one, and when the second one came in for the same piece of equipment for a different dollar amount, they said, “no way.” A highly reliable source said the first one was settled favorably to the lessee, once they found out about the service issue in the bankruptcy news..

4. Norvergence did not propose something that was "too good to be true". It was sold as technology and ecomonies of scale being able to bring down fixed and variable costs about 20%. This was not unreasonable, given the fact that technology makes things cheaper all the time (computers, Plasma tvs, dvd players, cell phones) and ecomonies of scale make businesses more efficient (Walmart). And I and many others asked many questions. The Lease portion was titled "rental agreement" and the lessee was called "rentor". That was approved language by the leasing companies and was done so as to NOT raise red flags about a binding lease, when we were only purchasing phone service.

I received a letter dated Dec 30, 2003 that acknowledged my "applicaton pending", entry into so-called Phase II of application process. Phase III is final "approval" including credit approval and Installation (which never fully occured as of June - I was still paying my local phone bill which was the bulk of my expense). Interestingly, IFC ran a credit check on Dec 31, 2003. Norvergence knew who they were going to use, but kept that fact a secret on the contract. So, they and IFC knew which state law would supposedly prevail well before any services or equipment were provided. That concealment alone is fraud.

I can't answer anything other questions that you posed, except to comment that the lessors, given their exposure to the myriad of contract amounts, varying insurance requirements, and full knowledge of the model numbers for the equipment, should have known better. (We were sold a "solution" utilizing a Norvergence Matrix, developed in partnership with Nortel - not an Adtran router) Furthermore, if the equipment was worth the risk, they should just take back the equipment and sell it off to satisfy the so-called defaults. Except that the equipment is and was worthless. Change the rules - don't finance air.

I am the anonymous Norvergence Lessee who commented on the previous blog and I will answer the questions that are appropriate.

1. Similar to a pyramid scheme, the Norvegence telecommunications/leasing scam took some time to unravel. At first most lessees believed we were going to receive a guaranteed savings of at least 35% on a combination of our high-speed internet, local and long distance phone and cell phone charges as a result of signing up with Norvergence. There was no discussion by Norvergence sales reps of any leases for equipment at anytime. I believe that most of the 11,000 did not know they were signing a lease document. The word lease does not appear anywhere on this document nor was there any cost or residual listed for the Matrix Box. Speaking for myself, as a small business owner who has completed dozens of equipment leases, the Norvergence Business Solution was skillfully presented as a consortium of companies such as Cisco, Nortel, Qwest choosing Norvergence's magic matrix as the small business solution to drastically reduce telecommunications costs. All of these companies logos appeared on all Norvergence sales literature. This was just a small part of the deception. The Norvergence sales reps were profesionally taught how to create the proper smokescreen. Most documents had the words "Non Binding" in bold. Norvergence sales people also presented us with reimbursement documents and pricing guarantee/cancellation documents for our signature which guaranteed us that the contract could be voided and/or the customer would be reimbursed if Norvergence did not follow through with their obligation to install the equipment or provide service. I would guess that up to 75% of all Norvergence lessees never had the matrix box installed properly or were receiving all of the services that Norvergence claimed their customers would receive. If a potential Norvergence customer had been burned before in a similar scam then perhaps they could have smelled it out. I find it interesting that some victims are actually attorneys.

2. The lessors that created master agreements with Norvergence and then modified these agreements to protect their interest at the lessees expense share an equal responsibility as Norvergence and should have seen this unraveling. Instead of trying to protect their paper as the customer complaints flooded in, they should have put the screws to Norvergence and not the lessees, since it was Norvergence that brought the lessees to the leasing companies and not vice versa.

3. According to the FTC decision, Norvergence gave the leasing companies the means and instrumentalities to commit fraud by assigning a fraudulent financial agreement that is illegal according to the FTC Act. However different Judges see things different ways. This is for the courts to ultimately determine.

4. Yes, especially in a situation where the lessee brings the vendor to the leasing company. However if the company that we are agreeing to do business with is a well orchestrated scam that has already snuckered the leasing industry, and that is paying off references and suing employees and customers for speaking out, its hard to do proper due diligence without hiring an attorney, detective or IT expert.

5. My company will no longer lease any equipment where service is involved and the contract can be assigned to another company. We had to turn down a fairly benign lease with Pitney Bowes for this reason.

6. DUE DILIGENCE. The type of due diligence a leasing company should do before agreeing to hand over hundreds of thousands of dollars to a brand new company would have exposed the criminal background of the major players at Norvergence. After Norvergence began to unravel some leasing companies finally did the due diligence they should have done in the beginning. They were not happy with the results.

7. I hate to say it but greed is a huge motivating factor as to why many in your industry look the other way especially with the double digit returns the Norvergence relationship was supposed to yield.

I appreciate this forum and the opportunity it provides for members of your industry to get all sides to this unfortunate situation.