Here’s a scenario: it’s 2008. You’ve lost your job. The economy sucks. Jobs are few. You’d love to be in business for yourself—if only the right opportunity were there. And there it is—bingo! A Matco Tools franchise!
Franchising has always had its allure—just invest upfront, play by the rules, and watch the money roll in. Sounds like a no-brainer. Assuming the franchise is a successful one.
And therein lies the rub of the Matco Tools class action lawsuit that’s been filed. TD Bank’s also in on this one—as a defendant.
The lawsuit, filed by David Villano III and his father, David Villano, Jr., alleges that Matco Tools and TD Bank (Commerce Bank at the time—TD Bank has since acquired Commerce) conspired to make Matco Tools franchise opportunities appear a bit rosier than perhaps they really are. The idea, the lawsuit claims, was that by inflating the appearance of Matco’s annual performance projections, lenders would approve small business loans, allowing the sale of the franchise to the franchisee.
Only thing was, the class action lawsuit claims, that the soon-to-be-franchisees weren’t shown those inflated projections—and so they received their loans and set off to start what they thought was a viable business. Hell, if the bank loaned the money, it must be viable, right? However, according to the lawsuit, that business was destined to fail and the money never should’ve been lent in the first place. Financial fraud? Where have we heard that before…?
According to an article that ran in the New York Post a while back, loans to Matco franchisees had a default rate of 37 percent in 2004. That compares to an eleven-year average Small Business Administration (SBA) loan default rate of 11.64% according to a study done by the Coleman Report. Something seem a bit screwy? (forgive the tool pun…)
Ahh, but you ask, wouldn’t the bank have raised a red flag or denied the loan? Well, here’s the thing—small business loans are granted by SBA-approved lenders who in turn receive an SBA guarantee on the loan in the event of default. Bottom line: if the loan then defaults, the lending bank can recoup its losses up to the amount of the SBA guarantee. Not a bad deal, eh?
And for Matco, the allegations would mean they could simply re-sell the franchise once the initial franchisee defaulted.
So, the bank would allegedly reap the interest paid on the loan prior to default—with minimal risk, and Matco would allegedly get to basically flip its franchises.
And, if you’re one of those franchisees caught in the middle of it all, that just might make you flippin’ mad.
So franchise, business and estate attorneys Marks & Klein are representing the plaintiffs, and the class action has been filed. Stay tuned.
Wells Fargo—the fourth largest bank in the country in terms of assets—was assessed the largest fine ever issued by the US Federal Reserve (The Fed) for allegedly pushing borrowers into more expensive mortgages, and in so doing helping to foster the sub-prime mortgage mess.
These were borrowers with good credit and cash flow, and could have easily qualified for conventional mortgages at prime, according to a report yesterday in CNN Money.
Instead, they were allegedly nudged into mortgage products that would have proved more expensive in the end. Wells Fargo Financial, a subsidiary that closed last year, was also accused of pushing through loan applications that would otherwise not have qualified due to income restrictions. It is alleged that the income information was ‘doctored.’
We say ‘alleged,’ because even though Wells Fargo agreed to pay the largest fine ever handed out by The Fed—$85 million—the banking juggernaut was not required to admit to any wrongdoing.
In fact, Wells Fargo explained in a statement that the alleged wrongdoing occurred at the hands of a few ne’er do well former employees, and that such conduct is not within the mandate or policy of Wells Fargo.
That’s like parents claiming they are not responsible for the actions of their children.
And what does that say about ethics in the banking industry?
I was doing a story on personal finance some years ago and a banking executive was very frank in her assessment of the lengths some banks will go to get loans on the books—in other words, generate business for the bank.
“If you come in looking to borrow, say, $15,000 to buy a new truck and the loans officer realizes that you have the cash flow that would accommodate $25,000—you’re going to be pushed to borrow that $25,000. It will be a polite push. But it will be a firm push, and a push just the same. All you want is fifteen grand.
“But the bank seems to know what’s better for you, than you do.”
That interview took place around 1991 or so—20 years ago.
So look what that policy got us into (and I’m not picking on Wells Fargo here, this applies to everyone…)
It was the banks that helped fuel the sub-prime mortgage meltdown by pushing people into more expensive mortgages beyond their comfort zones (or their financial contingencies). It was the banks or their agents that allegedly doctored income statements. The stories of individuals who qualified for a mortgage without the capacity to confirm their income at all are legend, and the stuff of modern financial folklore.
The bank is supposed to say, ‘whoa…wait a minute…you may not be in a position to afford that truck, or that big house. C’mon now, take a good hard look at your finances. You have to dial your expectations back a notch.’
But no. The opposite proved true. Or, at least in one case, the opposite is alleged to have proven true. Wells Fargo will pay $85 million in fines, plus compensate up to 10,000 borrowers to the tune of between $1,000 and $20,000 apiece.
They can afford it. Earlier this week Wells Fargo reported $3.9 billion in net income for Q2 from revenues totaling in excess of $20 billion.
An $85 million fine? Millions more to compensate victims?
What’s something, is that they didn’t have to admit they (allegedly) screwed up…
We’ve been ticked off at credit card companies for a long time, haven’t we? The high interest rates, the late-payment fees, and the propensity to jack up the rates at the drop of a hat. Congress finally called the credit card companies to the carpet and forced them to reign in some of their practices—although critics have always maintained there will be other ways found to make up for any lost revenue.
And that’s just for us—the schmucks who use credit cards. What about the merchants?
Well, according to a proposed class action lawsuit filed Monday in Canada, merchants aren’t happy with the status quo, either…
Mary Watson is a retailer who operates a furniture store in British Columbia. She has since 1990. And like most merchants who sell big-ticket items, she can understand that most people would rather use plastic to buy that pricey leather sofa, than pull out a wad of hundred-dollar bills.
No, she’s okay with that. What Mary is upset about are all the fees charged to her business when a consumer uses plastic. The fees are hard to track. What’s more, she’s not allowed to promote, or suggest that her customers use an alternative form of payment, such as cash or debit.
She’s not exactly required to suggest her customers use their credit cards. But at the same time, Read the rest of this entry »
What would you do with 20 life insurance policies? Would you even buy 20 life insurance polices? Probably not, that is, if you knew what you were doing. Mary Mullen, an institutionalized senior—in her 80s—with Alzheimer’s disease, did not know what she was doing and so relied on salesmen from New York Life Insurance to take care of her. Instead, they took care of themselves. Those 20 life insurance policies– by the way—cost $600,000—and involved a number of elaborate schemes including an arranged marriage. New York Life, for their part, apparently refuses to investigate the suspicious policies, for which “the primary motivation” was “commissions and premiums.”
The whole sorry saga, which is now the subject of a lawsuit, began in 1994, when, according to Rebecca McFarland, trustee of the Mary Mullen Revocable Trust, one John Palmateer approached Mullen representing himself as an expert in insurance and financial matters. McFarland claims he gained Mary Mullen’s trust by visiting her occasionally, sometimes at the hospital. Of course, most people at this point would ask—’what about her family?’ Well, Mary Mullen had family, but they all lived out of state. Palmateer is accused of keeping the truth about Mullen’s deteriorating health from her family.
Palmateer also stands accused of collaborating with Mullen’s neighbor, Guido “Jack” Chirillo, to defraud the elderly woman of her assets. According to the complaint, “At Palmateer’s suggestion and direction, Chirillo married Mullen, who was then 87 years old, ostensibly to assist with the care of Mullen.” And, you guessed it, her family was never notified. BTW—Chirillo and Mullen never lived together.
The complaint also states, “Palmateer and [Jeffrey] Knight participated in a series of steps to Read the rest of this entry »
Hindsight is 20-20, that’s for sure. And while the Carr Miller Ponzi scheme charges are currently in “alleged” mode, I couldn’t help but do some surfing around—just who the hell is Carr Miller Capital? After all, I grew up in NJ (“Joisey”—ok, I said it) so shouldn’t I know something about them—like, did I go to school with anyone there? Things of this sort get me reaching for my mouse—so I did, and a few clicks later I had some interesting Carr Miller dish…dish that perhaps turns up some should’ve-seen-it-coming signs about falling in love with Carr Miller…
Should’ve Seen it Coming Sign #1: Arrogance.
Did I say Carr Miller was based in NJ? Why yes, I did. Funny though, all the “official” info about Carr Miller Capital refers to them as being “headquartered in the Philadelphia metropolitan area”. What? Joisey not good enough for you? You’re in Marlton, NJ folks. And last time I was in the area—ok, I was in Cherry Hill—Marlton was east of both I-95 and 295 and no, I couldn’t even see the Philly skyline if I tried (Marlton’s about a half hour out of Philly). Regardless, I guess Marlton or NJ didn’t have enough cache for CMC…just like those NY Giants…
Should’ve Seen it Coming Sign #2: Investment company doubles as film production company.
Carr Miller’s in multiple verticals. And how! Their website homepage mentions “…CarrMiller is providing innovative solutions from financial expertise to multimedia entertainment”. Who knew? And they don’t just mean that they invest in such—they OPERATE such businesses. Case in point: Carr Miller Entertainment. Haven’t heard of ’em? You’ve heard of Brian Austin Green, right? Oh—maybe you haven’t since his Beverly Hills 90210 days. His latest—aside from being Mr. Megan Fox—is a movie, “Cross”—and it’s one of Carr Miller Entertainment’s projects. Last I checked, my financial investment team was only in one major vertical: wealth management—mine. Pixar, Carr Miller is not.
Should’ve Seen it Coming Sign #3: Investment company takes keen interest in nightclub.
Carr Miller loves the nightlife. Yep, they apparently like to boogie—or so it would seem. As if film production with “emerging talent” weren’t enough of a sideline, Octo Waterfront Grille in Philadelphia is “A Holding of Carr Miller”. With 13,000 square feet of fun alongside the majestic Delaware River, it may well be a watering hole of choice for those who’ve just found out they’ve been charged with orchestrating a Ponzi scheme.
Should’ve Seen it Coming Sign #4: Head of Investment company has day job as Big Oil exec.
Movies? Nightclub? How ’bout Oil? Not of the olive or suntan type—no, we’re talking big oil here. Yes, Carr Miller had pumped a fair amount of funding into Indigo-Energy. In fact, back in 2008, Indigo’s CEO, Steve Durdin was quoted as saying, “This package with CMC represents a realistic approach with real funding to be strategically implemented for maximum productivity. Indigo can now really begin to move forward.” Of course, here we are about two years later to the day and Indigo’s SEC Form 8-K reveals a complete 180 of things:
In addition, on December 18, 2010, Everett Miller resigned from the Company. The voluntary resignations came in the wake of a civil complaint filed by the State of New Jersey against Everett Miller and his company Carr Miller Capital Corporation and others alleging violation of the securities laws and other violations. See Item 8.01 of this 8-K. Item 8.01 Other Events On December 17, 2010, the Company was named as a nominal defendant in a civil complaint filed by the New Jersey Attorney General against Everett Miller, Carr Miller Capital and certain other individuals and companies. The Company is named because of Carr Miller Capital’s investment in the Company. There has been no allegation of wrongdoing on the Company’s part but the complaint does state that the Company was unjustly enriched by the actions of Carr Miller Capital. The Company had no knowledge of any wrongdoing alleged to have been committed by Carr Miller Capital and the company is cooperating fully to assist the Attorney General’s office in its court action.
Now, lest you think that this was merely an investment opportunity for Carr Miller, Everett Miller was also Chief Operating Officer over at Indigo. Sounds a bit more “hands on” than just signing a few checks. I might also add, as it’s a favorite topic of mine, Indigo’s one of those companies engaged in hydraulic fracturing—but that’s another story.
Should’ve Seen it Coming Sign #5: Investment company achieves high “D” marks (high five’s all around!)
The BBB weighs in on Carr Miller… A little checkeroo over at the BBB shows Carr Miller Capital achieving a D+ rating. Hey—it is at the high end of the D scale. To be fair, the score could’ve come in post-Ponzi allegations. But still, Carr Miller is not a BBB Accredited Business. (Btw, in case you’re wondering, LawyersAndSettlements.com is, with an A+ rating.) Also, to be fair, there were only two complaints noted against CMC at the BBB—both apparently contract issues; one was resolved, the other not.
Should’ve Seen it Coming Sign #6: Investment broker cum real estate brokerage has prayer in hell of earning real estate’s coveted “Circle of Excellence” award.
And there’s another vertical—real estate! Yes, but of course—Carr Miller, well, I’ll let them say it for themselves (from their website): “CarrMiller Real Estate incorporates proven, professional techniques specializing in the marketing, listing and selling of real estate.CarrMiller Real Estate maintains a staff of well-trained real estate professionals who continually strive to provide top quality service for their individual clients and customers.” Phew—that’s a mouthful! And surely you’d think of ringing up Carr Miller should you want to sell your home. So I did! But then I saw there’s only one listing on their real estate website—a rental in Myrtle Beach. They’re maintaining a staff for one listing?
Should’ve Seen it Coming Sign #7: Mention of company + “scam” in same sentence, or as popular google search term.
Carr Miller whispers…Want to check the pulse on something? Hit a message board. No, you can’t take it as fact, but you’ll definitely get some opinion. Like this one, from 2009 over at scam.com: “I am having second thoughts about investing with Carr Miller Investments. In my opinion, I think they are a SCAM company that will take your investment and then file bankruptcy in a couple of years after taking your money.” Uh, well, not exactly but not exactly far off either.
Ahh…should’ve, could’ve, would’ve. It’s all hindsight now, and Carr Miller investors will have to wait for things to play out in court. In the meantime, maybe I’ll go over and become a fan of Carr Miller Capital LLC on Facebook—they have no “likes” so I’d be their first! Or maybe I’ll follow them on LinkedIn where they only have 4 followers (not even Everett Miller, 1 connection, is following). Gee, maybe Facebook and LinkedIn are Should’ve-Seen-it-Coming Signs #8 & #9?