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Christopher Menkin
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Christopher "Kit" Menkin is of editor LeasingNews.org (http://www.leasingnews.org/), an internet trade publication for the finance/leasing industry. He has 41 years experience in the finance/leasing industry as well as being a founder of a commercial regional bank and serving on... More
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  • Allied Health--A Bizarre Story: $50 Million and climbing 7 comments
    Aug 24, 2010 4:40 PM
    by Christopher "Kit" Menkin

    BK Hearing requested to be moved to September 7th
     

    Key Equipment Finance, Superior, Colorado, Kingsbridge Holding, Lake Forest, Illinois, Republic Bank, Oakbrook, Illinois who the filed Involuntary Bankruptcy Chapter 7 against Allied Health Care Services, Orange, New Jersey have filed a petition to have a trustee take property of the estate and move the hearing to September 7, 2010, 12pm. Courtroom 3A, MLK, Jr. Federal Building, Newark, New Jersey. Objections to be received no later than September 3, 2010, 11am.

    Perhaps the most important, even more important than the FBI investigation, will be the Medicare, Medicaid, and collateral involved, being used by many whose lives depend on the respirators. Some are required to have three, one as spare if one is being maintained (at least every nine months or specific hours of usage) and always having a back-up. Many also are AID patients and others will serious breathing conditions. This is going to be a nightmare for the workout, as well as extremely difficult for the users. The actual personal property value after all the work will be very small. The problems with the equipment, as in NorVergence, Brican, Royal Carts, should have been the first signal to any credit decision.

    Kingsbridge Holding was the first to file a complaint, $1,089,371.14. Of the 19 who have filed since then, the other two joining for an involuntary Chapter 7 (all the way, not reorganization): Key Equipment Finance for $3,768,449 and Republic Bank of Chicago for $3,053,923 were not one of the 19 who filed. There also is a connection with Thomas X. Geisel President/CEO, Sun National Bank and Key Corp., as he worked for the bank before joining Sun.

    Combining the numbers of those who have filed complaints and both Key and Republic, the total is now over $50 million. This number does not include others, one bank with a $1 million, nor another that had $2 million (originally), and many others at such as Larry LaChance at $6 million, so this might be one of the largest fraud to hit Leasing in a long time.

    Sun National may be the largest, $15 million, who allegedly hold a lien on all Charles K. Schwartz's property, the alleged sole owner (his wife Marilyn never signed any personal guarantees and there is an attorney letter on record with many creditors about this and their tacit agreement to accept her non-involvement.) In the lien agreement with Sun National Bank, he did not lien his house, perhaps in the back of his mind, planning in advance for a personal bankruptcy filing.

    Schwartz's September 1, 2009 (before the Sun National liens, used by all leasing companies Kit Menkin spoke to, including brokers, for lease applications and leases after the September 1,2009 date) personal financial statement values his real estate investment at $4,715,000, Allied Health at $16,990,584 and Evenstar Stables at $1.5 million (more on this later in this story.)

    All property 100% owned by Charles K. Schwartz (wife not included, nor does she appear as guarantor on any of the leases.)

    Several, more than three brokers, asked Kit Menkin for his assistance in understanding and wanted to "sell" the lease and utilized his financial assistance, submitting financial and tax returns personally on Charles K. Schwartz and Bruce Donner and their companies. In addition, several banks who had leases were quite concerned and "off the record" help quite a big in gathering information, sharing information, wanting to get the story public (without their name involvement.) Even tax returns were verified with the signer’s permission, as well as a QuikTrac, published in a previous story.

    Credit should go to them for this story and the original alert could not have been written without their direct assistance.

    Allied’s Year End 2009 statements: Not since Equipment Acquisition Resources have I seen such an increase in sales and net income. His net profit margins are incredible at over 43%, again, like Equipment Acquisition Resources.

    A broker with one of the many packages being hawked the first quarter asked me to come up with questions to ask Charles K. Schwartz. Here are the questions and his responses:

    "How many LifeCare units do you have on lease and or own outright?
    4,425 Half are leased and they own the other half.

    "2) How many people are using these units and what do they pay each month per unit?
    1,450 to 1,475 patients and he said that most have 2 to 3 units each for back-up.

    (He said they are $1,050 per mo per unit. And that includes peripheral equipment.)

    "3) Do you re-sell any of these units? If so how many LifeCare units do you sell versus rent each year?
    He didn’t tell me if they re-sell them but he said they don’t sell any units outright. He said they have a useful life of 8 to 12 years."

    It should be noted Medicare requires that the patient own the unit after a specific period of time.

    Looking at the numbers, here are units Allied is buying at $5,000 each (no sales tax or property tax in New York or New Jersey on this type of equipment) and renting out at $1,050 a month, Schwartz states, so in five months everything after that is free and clear, except for expenses in running the operation. His gross by his own numbers is $1,548,750 a month.

    His financial statement shows a $43 million gross not $538,788 and purchases $4.5 million. His lease payments, according to his tax return appear to be about $500,000 a month. Where is the other $1 million going? If the number is $18,500,000.

    $43 million gross 2009, gross profit $17 million, net income $18 million. That is after making the $500,000 a month payments in the expense cost. Allied has over a $1 million a month and should no way be behind three months with a lease.
     

    And then there is the vendor's corporate salary and profit, as well as Schwartz.

    The $1,500,000 on the Schwartz financial statement (from a $585,000 original investment as per his PFS) Evenstar Stable shows an incorporation: Status Report For: EVENSTAR FARM, L.L.C.
    Business Name: EVENSTAR FARM, L.L.C. Report Date: 08/16/2010
    Business ID Number: 0600170267 Transaction Number: Sequence: 1711872: 1

    ======================================================

     

    Business Type: DOMESTIC LIMITED LIABILITY COMPANY
    Status: ACTIVE

    Filing Date: 05/20/2003 Home Jurisdiction: NJ
    Status Change Date: Stock Amount: 0
    DOR Suspension Start Date: DOR Suspension End Date:
    Tax Suspension Start Date: Tax Suspension End Date:
    Annual Report Month: 5
    Last Annual Report Filed: 07/24/2009
    For Last Annual Report Paid Year: 2009

    Incorporator:
    Agent: CHARLES K SCHWARTZ
    Agent Address: 84 MAIN ST P O BOX 738
    ORANGE, NJ 07051
    Office Address Status: Deliverable
    Main Business Address: 86 GEORGE HILL RD
    FRANKLIN, NJ 07416
    Principal Business Address:
    Officers/Directors/Members
    1) Title: OTHER
    Name: CHARLES SCHWARTZ
    Address: ********* ******, NJ

    (home address deleted)

    A public record finds a purchase of the stable April, 2010, perhaps his original goal when he applied for $6 million in August, 2009 at Sun National Bank:

    Property:
    Parcel Number − 05−00025−0000−00014
    Book − 8742
    Page − 851
    Property Address: − 86 GEORGE HILL RD, AUGUSTA NJ 07822−2004, SUSSEX COUNTY
    Owner Address: **************** SUSSEX COUNTY
    Sale Date − 04/19/2010
    Loan Amount − $13,684,095
    Loan Type − CONVENTIONAL
    (leaving the Schwartz home address off.)
     


     

    The actual address by Google is:
    86 George Hill Road, Branchville, NJ 07826
    (there are discrepancies in the public records of the actual city.)


     


     

    Thomas X. Geisel, President/CEO, Sun National Bank came to the bank in January, 2008 after a personal turmoil in New York. His 2008 salary was $1,015,933. "He joined Key in July 1999 in New York City where he served as Managing Director of Investment Banking for the East and West Regions of KeyBanc Capital Markets… In 2002, he was promoted to President of Key's Capital Region New York District and subsequently to Regional Executive for Commercial Banking for which he (and his wife Sandra Beth, a school teacher. editor) relocated to Albany, New York. From 2005 through 2007, served as President for KeyBank's Northeast Region, which comprised eight districts across New York, New England and Florida, with assets of approximately $20 billion and revenue exceeding $550 million. Mr. Geisel's other experience includes representing the U.S. Department of Justice in various capacities domestically and as a diplomat in Latin America and the Caribbean."

    http://people.forbes.com/profile/thomas-x-geisel/75272S

    Sun had gone from 745 full time employees the beginning of January 1, 2008 to 717 employees by the end of the year. Equity had dropped from $435 million to $431.6 million and net income had dropped to $18.4 from the year end. At the time Schwartz applied for the loan, September 30 shows an increase in net equity to $436.9 million but a large jump in non-current loans from $28.1 million to $84.399 million. The bank was showing a $8.6 million loss due primarily to real estate loans (charge offs: $2.1 million construction and real estate development; $3.8 in 1-4 multifamily homes, $2.3 million in non-farm, non-residential property and $9.5 million in commercial and industrial loans. Year-end equity was down to $430 million, noncurrent loans $95 million and a loss of $14.5 million. The June, 2010 FDIC filing shows an $80.6 million loss.

    https://cdr.ffiec.gov/Public/ViewFacsimileDirect.aspx?ds=call& amp;idType=fdiccert&id=26240&date=06302010
     

    As reported in previous stories, July 7th the bank raised $100 million. The money came from billionaire Wilbur Ross, who now owns a 25 percent interest in the bank, as he invested $50 million, and the majority stock holders of the bank, the Brown family who contributed $30 million; other investors contributed $20 million.

    Does Sun have other liabilities in this transaction? What else is going to “pop up.” Leasing News has some ideas, but the story is bizarre enough to end this chapter and to wait for the full disclosure of all debts owed by Allied Health Care Services and the names of the debtors. Stay tuned.

    Thomas X.Geisel LinkedIn
    http://www.linkedin.com/in/txgeisel
     

    OST Interim Motion:
    http://leasingnews.org/PDF/OST_Interim_Trustee_Motion.pdf
     

    Previous stories:
    http://www.leasingnews.org/Conscious-Top%20Stories/allied_health.html



    Disclosure: no position
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Comments (7)
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  • Gunnerblossom
    , contributor
    Comments (6) | Send Message
     
    I am considering a slander suit against this author, Christopher Menkin. My name is Marilyn Schwartz, and I have been divorced from Charles since 1995, if the author cared to do some fact checking. He has remarried twice since then.

     

    Neither of us have ever owned, nor have the slightest interest in, Thoroughbred horses, although Chuck does own one old quarter horse who is approximately 25, and retired. If a competent author were to look closely at the picture Mr. Menkin scammed off my Facebook page, he could easily see that there are two Quarter Horses, and one grade gelding. He obviously ignorant of anything equine, though very quick to attack and ridicule in his ignorance.
    The fact that my Facebook account picture and information was illegally obtained is another issue, as I thought this information was available only to "friends".

     

    The accusation of leading an "extravagant lifestyle" would be funny, if it wasn't so very serious. As I sit here writing this in my little 50-year-old bilevel home, wearing my $14.00 WalMart jeans and $7.00 WalMart shirt, having just eaten our usual after-church lunch at our favorite restaurant - a local diner - yep, sounds extravagant to me.

     

    Where this poor excuse for a reporter has come up with these, and other fraudulent and slanderous claims, is beyond me. I resent having my name smeared in this fashion by someone who is either too lazy, incompetent, or both, to get his facts straight, thereby dragging an innocent person's name through the mud.

     

    I am not even going to discuss the innuendo's, as well as false and misleading statements ,regarding the case against Charles Schwartz, but I hope that the next item regarding this matter published here is written by a more honest and competent author.
    5 Sep 2010, 05:12 PM Reply Like
  • Christopher Menkin
    , contributor
    Comments (89) | Send Message
     
    Author’s reply » I will print your statement.

     

    Here is an event that follows the comment above:

     

    Allied Schwartz Arrest $87 million Fraud

     

    United States Attorney's Office District of New Jersey Contact: (973) 645-2700

     

    Founder and President of Allied Health Care Services Inc. Arrested, Charged with $87 Million Fraud Millions in Loans Based on Phony Medical Equipment Lease Agreements

     

    NEWARK, NJ-The founder and president of Allied Health Care Services Inc., an Orange, N.J., durable medical equipment corporation, was charged in a criminal complaint unsealed today with fraudulently obtaining more than $87 million from banks based on phony lease agreements, U.S. Attorney Paul J. Fishman announced.

     

    Charles K. Schwartz, 56, of Sparta, N.J., was arrested this morning by special agents of the FBI at Allied's offices in Orange. The defendant is scheduled to appear this afternoon before U.S. Magistrate Judge Madeline Cox Arleo in Newark federal court.

     

    According to the complaint filed in this case, from at least 2002 through July 2010, Schwartz obtained more than $87 million in loans through Allied by telling banks that the money would be used to lease valuable medical equipment. In reality, the purported medical equipment supplier did not provide Schwartz and Allied with any equipment during that time. Instead, Schwartz and the "supplier" created phony invoices that appeared to reflect legitimate transactions.

     

    As part of the scheme, Schwartz approached various financial institutions and informed them that Allied needed to lease particular medical equipment. Using the phony invoices from the "supplier," Schwartz convinced the financial institutions to enter into leasing arrangements. According to these arrangements, the financial institutions purchased the medical equipment-which they immediately leased to Schwartz and Allied-and sent payment for the medical equipment to the purported supplier. The "supplier" then sent the money received from the financial institutions (minus his 3 to 5 percent payment) to an entity created by Schwartz to facilitate the fraud.

     

    Schwartz used the money, among other things, to repay earlier bank loans that were a part of the scheme. By August 2010, several financial institutions from which Schwartz had obtained loans filed lawsuits against Schwartz and Allied-claiming he owed them at least $20 million.

     

    Schwartz and the medical equipment "supplier" undertook efforts throughout the scheme to evade questioning from bank examiners who sought at various times to inspect the non-existent medical equipment, which technically belonged to the financial institutions. At one point during an August 2010 conversation between Schwartz and the purported supplier, Schwartz commented that the financial institutions had fallen "hook, line, and sinker" for the false explanation they had given to bank examiners who asked why the purported supplier used his home address on certain invoices.

     

    "Schwartz allegedly tried to capitalize on the public's real need for lifesaving medical equipment by convincing financial institutions to lend him money for equipment that didn't actually exist," U.S. Attorney Fishman stated. "This case is yet another example of our office's commitment to investigating and prosecuting health care and financial institution fraud."

     

    "The financial losses in this case are staggering," said Michael B. Ward, special agent in charge of the FBI's Newark Division. "Based upon the amount and extent of alleged fraud with which Schwartz is accused, it appears he was determined to steal as much money as he could, as fast as he could. I commend the special agents and prosecutors who worked so diligently to bring this matter to justice."

     

    The criminal complaint charges Schwartz with one count of mail fraud. If convicted, he faces a maximum potential penalty of 20 years in prison and a fine of $250,000, or twice the gross gain or loss from the offense.

     

    U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, for the investigation. He added that the investigation is continuing.

     

    The government is represented by Assistant U.S. Attorneys Jacob T. Elberg and Joseph Mack of the U.S. Attorney's Office Health Care and Government Fraud Unit in Newark. The charge and allegations contained in the complaint are merely accusations, and the defendant is considered innocent unless and until proven guilty.

     

    DOW JONES NEWSWIRES

     

    The Federal Bureau of Investigation arrested the founder and president of a New Jersey durable medical-equipment company for allegedly getting more than $87 million from banks based on phony lease agreements. Charles K. Schwartz, 56, of Sparta, N.J., is scheduled to appear in federal court Thursday afternoon. He is alleged to have obtained the money from at least 2002 through this past July, telling lenders the money would be used to lease medical equipment from a medical-equipment provider. But federal prosecutors allege that company wasn't providing any equipment to Allied Health Care Services Inc., Schwartz's company, during the time in question.

     

    Prosecutors also contend the money obtained from the banks was used to pay down Allied's bank loans, after the supposed supplier received 3% to 5% of the bank financing. A number of banks have sued Schwartz and his company, saying they were owed at least $20 million. Michael B. Ward, special agent in charge of the FBI's Newark, N.J., division. "Based upon the amount and extent of alleged fraud with which Schwartz is accused, it appears he was determined to steal as much money as he could." If convicted of the single count of mail fraud currently pending against him, Schwartz faces up to 20 years in prison and a fine of $250,000, or twice the gross gain or loss from the offense.

     

    Schwartz's attorney wasn't immediately available for comment.

     

    Creditors are meeting in New Jersey to speed up the Bankruptcy 7 hearing today. Story plus previous articles: leasingnews.org/archiv...
    6 Sep 2010, 02:11 PM Reply Like
  • Gunnerblossom
    , contributor
    Comments (6) | Send Message
     
    I am only interested in having my name vindicated.

     

    Marilyn Schwartz
    6 Sep 2010, 03:05 PM Reply Like
  • Christopher Menkin
    , contributor
    Comments (89) | Send Message
     
    Author’s reply » I have removed the paragraph and photo from the instablog here
    at Seeking Alpha.

     

    I have removed it from the Leasing News archive story.

     

    If you do not want me to reprinting your comment that appeared here in Seeking Alpha from the coming Wednesday edition of Leasing News, noting that a correction has been made to the story, please let me know.

     

    Kit Menkin, editor, Leasing News
    kitmenkin@leasingnews.org
    6 Sep 2010, 04:17 PM Reply Like
  • Gunnerblossom
    , contributor
    Comments (6) | Send Message
     
    Thank you for correcting the errors. You may reprint my comments or not - that is immaterial to me. This story has not hit the local papers, as yet. When it does, reading related articles, such as your own, will be next. I am already dealing with some of the fallout from this with my son, who is devastated. I know this is not your concern, but please, please check and recheck your facts - there is, and will continue to be, heavy repercussions to the employees of Allied, as well as those of the affected financial institutions. When aiming your arrows, make sure that your aim is true. Thank you.

     

    Marilyn
    6 Sep 2010, 07:45 PM Reply Like
  • Christopher Menkin
    , contributor
    Comments (89) | Send Message
     
    Author’s reply » I have deleted the paragraph on all stories that I have found, and it will not appear in any stories. I had an old public record.

     

    I think if I print your comment in Leasing News it will be seen by a lot more people who did not read the original story, and it may also confuse them. And it will be picked up by more newspapers as I have a copy of the FBI filing with the testimony of the vendor, Donner Medical, on how the fraud was conducted by he and your former husband.

     

    You are correct, it is my error in not checking further.

     

    The fact is Charles Schwartz did purchase a $14 million stable, and has a corporation for the stable. I was told he did it primarily for his wife. I had the wrong wife and when I discovered the Facebook, I put the riding of horses and your name from public record ( old) together. I should have been more careful. You are right, I don't know anything about horses as they looked like handsome horses to me.

     

    I will not reprint your comments in Leasing News as the story has been removed and bringing it up, will only bring more publicity to you.

     

    If you would like to discuss this further, I can be reached
    at kitmenkin@leasingnews.org
    7 Sep 2010, 01:08 PM Reply Like
  • Gunnerblossom
    , contributor
    Comments (6) | Send Message
     
    Thank you and God bless.

     

    Marilyn
    9 Sep 2010, 02:12 PM Reply Like
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