Internet, Long/Short Equity, Portfolio Strategy, Banks
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Open Letter blames Internet Blogs
by Christopher Menkin
Major class action suits against Brican America are now underway in many states, including New York, New Jersey, and Florida. Ronald Gossett (Gossett and Gossett, Hollywood, Florida), winner of cases involving NorVergence lessees, along with co-counsel Michael Witt (Des Monies, Iowa, formerly attorney with Wells Fargo Equipment Leasing and Advanta Leasing), filed a major Putative Complaint on Tuesday. An estimated 2,500 dentists and optometrists, all who had leases with Brican America (Miami, Florida), are involved for over $50 million.
NCMIC Finance Corporation dba Professional Solutions Financial Services (PSFS), Clive, Iowa (a suburb of Des Moines) withdrew their suit against Brican America in February. The suit was for $38 million involving 1,672 lessees and pertained to a letter that supposedly allowed lessees to cancel their lease contract. NCMIC stated in their letter to the lessees, "... upon information available to it, continuing to spend a large amount of money on legal fees to pursue a judgment against an apparently insolvent company simply did not make business sense." (1) The doctors would have to continue to make their lease payments, regardless of the promises of Brican America or whether there was support for the equipment on lease.
NCMIC is owned by Professional Solutions, a major provider of malpractice insurance, business insurance, credit cards, financial plans, and leasing.
What happened next is that once the advertising payments stopped, the doctors stopped paying their leases. The advertising payment arrangement was with this purpose; along with the guarantee Brican America would make the payments if the advertising entity did not. The doctors formed an internet blog, the main one on Google. Other blogs were notified, calling colleagues to unite their efforts, attracting other Brican American lessees in the same dilemma. Eventually, while sharing 'war stories', attorneys were contacted and interviewed.
Meanwhile it appears that Brican, under the co-counsel of attorney Michael Leichtling, Troutman-Sanders (2), often called one of the "Iron Chefs of Leasing Attorneys", has been advised to take bold offensive/defensive moves in blaming their troubles on seven dentist’s internet blogs, PFSC, and Leasing News.
Brican America stated Brican would be continuing its company, its program, paying the marketing fee, but alleged that PFSC, the financial arm of Professional Solutions, damaged Brican's reputation in the financial community, and cut them off. Additionally all the problems with Brican primarily stemmed from PFSC and false rumors and misinformation on the internet blogs of doctors and Leasing News, an internet trade publication for the leasing industry.
In Gossett’s Putative Class Action Case filed Tuesday, March 16, 2010 in US District Court, Southern District of Florida (to be amended today adding new plaintiffs), he labels the Brican contracts a “Ponzi scam” and outlines how it worked. The suit presents alleged collusion between several related parties as well as Professional Solutions PFSC regarding the marketing agreement and lease payments by the doctors.
First, the Brican America open letter to doctors posted on
(Please click on letter to make larger in order to read)
In the deposition from the PFSC ex-employee Paula Barkley:
Q. Did you understand that the marketing agreement provided that it was going to give to the lessee a sum of money?
Q. Okay. Did you view that as being a positive or a negative towards the successes of the leases that you were writing?
A. Me and Jean discussed this and said that it would help the doctors make their payment, but, you know, somewhere along the long it would have to stop. You know, how far could that go with making somebody else's payment?
Q. You could go 5 years, which is the term of the lease; right?
Q. Okay. Was there anything besides that?
Q. During the course of the time that you were employed by the company did you ever hear about those payments ceasing?
Q. Were you in charge of anything related to lease defaults?
Q. Who handled defaults?
A. Jolynn Quick and Tim Borseth.
Q. Did you speak with either of them about lease default rate on Brican leases?
Q. Okay. Meaning that there were too realm of your responsibility; right?
Q. You're sort of compartmentalizing what you do?
A. Front end is primarily –
Q. -- front end.
Q. You said that there was a group meeting with Greg Cole about the relationship between PSFS and Brican?
A. No. It wasn't a group meeting over that. It was a group meeting of how we were going to strategically grow the business, because we had cut off Brican and it wasn't it was a positive thing. We can do it, you know. We got sales. We got -- you know, it wasn't like a, "Oh, no, now that we don't have Brican --" it was not like that.
Q. All right. Were you ever told why Brican was cut off?
Q. What were you told?
A. That it -- we were -- it was over a certain percentage that was allowed by the company.
Q. Too many leases? Is that a simple way of putting it?
Q. "Concentration," did you ever hear that word?
A . Concentration. Saturated.
Q. Okay. Who told you that?
A. Todd Cook.
Q. When did he tell you that?
A. We had talked about it for quite a few months.
Q. It was no secret that the company was very heavy in with Brican; right?
Q. Did he state any other reason why the agreement was terminated?
Q. Did he say the agreement was terminated because the document before you, the vendor agreement, said that Brican was a Nebraska company when it was a Florida company?
Q. Did you ever see any documents or hear that that was a complaint of Brican -- I mean of PSFS?
Q. Okay. Did you ever hear that anyone at PSFS complained that they wanted to terminate the agreement with Brican because Brican, LLC, was involved?
Q. In fact, everyone at the company pretty much knew Brican, LLC, was involved; right?
Q. That was very common knowledge; right?
Q. Okay. It was also common knowledge about the existence of the marketing agreements; right?
Q. Okay. Did you ever hear anyone complain and say that the agreement with Brican was being terminated because of the existence? of the marketing agreements?
Q. At the time that Todd told you that Brican was being terminated because of the concentration issue, did he raise any of those items that I just mentioned -- whether it was Nebraska; Brican, LLC; or the marketing agreement -- as a basis for getting rid of Rican?
Q. Do you recall the time frame when that occurred? Would that have been about April of '08 -- I mean of '09?
A. Of '09, yeah, right in -- it was, like, around April 15, maybe, April -- he just came out and told me do not send them money.
Q. And up to that point, like even as a couple days before that, it was business as usual; right?
In the Gossett Putative Class Action Case, starting page 39:
“310. According to the testimony of Todd Cook, he became aware of the marketing agreements, and the specific language which permitted the customer to cancel the lease if Brican America, Inc., failed to honor its financial commitments pursuant to the marketing agreement, during July, 2008. [Cook (Oct.) Tr., p. 13.]
311. When Mr. Cook became aware of the existence of the marketing agreements, he asked Vincens and Lemacon how many such agreements existed. [Cook (Nov.) Tr., p. 76.]
312. Vincens and Lemacon responded that there were "some." [Cook (Nov.) Tr., p. 76.]
313. Although Mr. Cook was a CPA by education and training, and accustomed to exactness in his business affairs, he accepted the representation that there were "some" marketing agreements in existence, and failed to request copies of all which had been extended to customers. [Cook (Nov.) Tr., p. 76.]
314. Although Mr. Cook reported to the president of NCMIC Finance Corporation in the hierarchy of the corporation, according to the president of NCMIC Finance Corporation, Gregory Cole, no one advised him of the existence of the marketing agreements until April, 2009. [Cole Tr., p. **.]
315. During July, 2008, (the time when Mr. Cook admits to knowledge of the existence of
6Mr. Cook did not become aware of the existence of a written Vendor Agreement with Brican America, Inc., until a visit to the offices of Brican America, Inc., in November, 2008. [Cook (Oct.) Tr., p. 16.]
the marketing agreements) the Vendor Agreement between NCMIC Finance Corporation and Brican America, Inc., provided that Brican America, Inc., warranted and represented that:
6.c. There are no other agreements or warranties given to Lessee relating to the Goods or Leases written or verbal that are not included in the documents given to PSF S.
316. Brican America, Inc., had not provided NCMIC Finance Corporation with copies of the marketing agreements because, as Jean Francois Vincens testified, nobody from NCMIC Finance Corporation asked for them. [Vincens Tr., p. 166.]
317. Upon learning of the apparent breach of representation and warranty contained in ¶ 6.c, as quoted above, rather than demanding that copies of all such agreements be provided to it, NCMIC Finance Corporation asked Brican America, Inc., how many leases had marketing agreements connected to them. [Cook (Nov.) Tr., p. 76.]
318. Brican America, Inc., answered that only "some" existed. [Cook (Nov.) Tr., p. 76.]
319. NCMIC Finance Corporation took no steps to obtain copies of all of the marketing agreements, or to advise those Plaintiffs who had marketing agreements that NCMIC Finance Corporation would not honor the representations contained in the marketing agreement, specifically the representation that the equipment rental agreement could be canceled.
320. By permitting the existence of the marketing agreements, as authorized by Fred Scott, NCMIC Finance Corporation ratified and confirmed the cancellation provision contained therein.
321. By failing to so notify the customers of a contrary position in July, 2008 (when Todd
Cook learned of the marketing agreements), NCMIC Finance Corporation ratified and affirmed the cancellation provision of the advertising and marketing agreements. NCMIC Finance Corporation Conspires with the Brican Companies
322. Having learned that the leases contained related marketing agreements which contained cancellation clauses, NCMIC Finance Corporation, through its officer and employee Todd Cook, conspired with Brican America, Inc., and Brican America, LLC, to modify the contract documents so that the fraud could continue.
323. From the beginning of the vendor relationship through December, 2008, 25% of the total business done by NCMIC Finance Corporation was with Brican America, Inc. That figure increased to 70% during the first four months of 2009. [Cook (Oct.) Tr., p. 23.]
324. During July and August, 2008, Todd Cook, the vice president and general manager of the equipment finance division of NCMIC Finance Corporation, assisted Brican America, Inc., and Brican America, LLC, in furthering the fraud in this fashion:
a. He changed the program from a semi-private label program (where the name and logo of Brican America, Inc., were dominant on the lease forms) to a private label program (where only the name of Brican America, Inc., or Brican America, LLC, appeared on the lease forms), although by agreement the leases would be immediately assigned to NCMIC Finance Corporation…”
There is much more in the filing, and it certainly has many similarities with what happened at NorVergence. A major leasing scandal involving a $500 piece of equipment in a $30,000 lease which was actually service from telephone companies using the $500 piece of equipment.
Leasing News has been informed that there will be Attorney General action, and the Federal Trade Commission may get involved, which occurred in the NorVergence matter.
Statements and/or comments from Brican America and PSFS attorneys and spokespersons were requested, but none to date except for an open letter posted on an internet blog from Brican America.
(1) PSFS Letter to Dentists:
(2) Michael Leichtling bio
Paula Barkley Deposition (71 pages):
Gossett Putative Class Action Case (79 pages):