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[KIPDOCTOR]

This is taken from the Long Island Business News, Mar 11, 2011 by David Winzelberg

Some small business customers of a major Long Island office equipment supplier are suing the company and its former top salesman for an alleged scam that netted several million dollars in overcharges.

In one of the lawsuits, attorney Ralph Pecorale, a plaintiff in the suit, claimed that Anthony Masotto, a former sales rep for Melville-based Carr Business Systems, changed the length of leases for copiers and other office equipment, while inflating the machines' values to finance companies. Those finance companies paid Carr much more than the equipment leases were actually worth, according to Pecorale's suit, leaving the small business owners to overpay or default on the inflated rental agreements.

The way it worked, Pecorale said, was that Masotto told clients the equipment leases lasted 36 months, but those numbers were allegedly changed to 63 months without customers' knowledge. The lengthening of the lease term meant that Carr, a wholly owned subsidiary of Xerox, could get more money upfront from the finance companies that had to collect monthly payments from Carr's clients.

Manhattan attorney Robert Altchiler, who represents Pecorale, said this bait-and-switch leasing practice isn't new and has taken many forms in other industries.

"It's a very interesting and complicated scam," Altchiler said.

Denise Buser, who owns a real estate office in East Islip, said she signed a blank piece of paper for Masotto and was later charged $568 a month for a Ricoh copier that sells for about $2,400. "It's humongous," she said. "There was no way I needed that big a machine."

The length of the lease was 63 months.

Buser said she complained to people at Carr to no avail. Eventually, she had to take out a loan to pay the $10,000 settlement she agreed to with the finance company to keep the copier Carr for which had overcharged her.

Masotto, who left Carr last summer, said the lawsuits were brought by people who fell behind on their lease payments and Carr was chasing them to get paid. He denied misrepresenting the length of the lease terms. "Every deal that we do was 63 months, and they all knew that," he said.

Carr President Mitchell Cohen, also named in the lawsuit, denied knowledge of the leasing transgressions and said he wouldn't trust anything Pecorale says because he was once indicted in a case involving mortgage fraud. When asked why Masotto, Carr's leading salesman, was let go, Cohen told LIBN, "That's not anyone's business."

But Altchiler, a former prosecutor, said he's "in the process of conducting a thorough investigation of Masotto's activities as well as those of Carr, specifically looking into what Carr and related companies knew about those activities."

Pecorale, who was sold five leases by Masotto between 2005 and 2009, is being sued by three different finance companies for a total of nearly $500,000. Altchiler said he believes Pecorale's loss isn't as substantial as some of the dozens of overbilled small businesses signed by Masotto and Carr. Altchiler estimated the total losses would eclipse several million dollars.

Tim Costigan, CFO of Fox's apparel stores, said he was taken by Masotto and Carr for $130,000 his company now owes to GE Capital for about $24,000 worth of office equipment. Costigan said his company would join a class action suit against Carr, but he didn't want to bear the expense of hiring a lawyer to sue them separately, like a few of the other alleged victims have chosen to do.

"They turned a three-year lease into five years," he said. "I feel embarrassed that I was fooled. They're bad guys. They're greedy bad guys."

Barbara Pizzolato, an attorney representing Carr Business Systems, denied the charges. "The allegations are untrue, and Carr is defending them vigorously."
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What we have gained in technology, we have lost in humanity.

[KIPDOCTOR]

And more developments today.
Taken from Long Island Business News by David Winzelberg
Published: March 31, 2011



Claims of forged signatures, altered lease terms and misappropriated funds have widened the investigation into an alleged fraud by a Long Island office equipment supplier owned by Xerox.
After an LIBN story on a couple of civil lawsuits charging Melville-based Carr Business Systems and its former top salesman with fraudulently changing lease agreements and inflating the value of its equipment, more small businesses have come forward to share similar experiences they’ve had with other salespeople at the company.
The new evidence could result in criminal charges against some Carr executives and employees and a multimillion-dollar class-action suit against Carr and Xerox, according to Manhattan attorney Robert Altchiler, a former prosecutor for the Brooklyn District Attorney’s Office.
Altchiler is assisting Smithtown attorney Ralph Pecorale in his suit against Carr, which also named company president Mitchell Cohen and former salesman Anthony Masotto, both of whom have denied that there were any problems with Carr’s leasing deals.
But another former Carr employee said the frauds alleged in the lawsuits were widespread and even encouraged by higher ups.
Xerox spokesman Carl Langsenkamp said the company for 75 years has conducted business ethically and in a transparent manner. “In this case, we simply cannot respond to alligations that have not been validated.”
But Michael C, who had been a customer service manager at Carr for eight years before his dismissal in February, said, “Everybody in the company knew what was going on.”
C said Carr administrators routinely held back a portion of commission money from sales reps to settle frequent customer disputes over buyout figures and the length of leases. He said Masotto would give customers blank contracts to sign and the salesman would fill in the terms later.
“He would tell them the lease was 36 months and it came back 63 months,” C said. “There was a running joke at Carr that Anthony was dyslexic.”
Masotto told LIBN that every lease he wrote was for 63 months and all of his customers were aware of that.
The length of the leases wasn’t the only argument small business owners had with Carr. Charles Harris, of Oxford Management in Melville, has filed a lawsuit against Carr, Xerox, Masotto and Cohen. Harris currently owes more than $1 million on office equipment leases arranged by Carr, a lot of which, he said, were grossly overvalued.
“You can’t take a machine that’s worth $10,000 and make it $50,000,” Harris said.
By extending the lease terms and inflating the equipment’s value to finance companies, those companies paid Carr much more than the equipment leases were actually worth, according to the lawsuit.
Mineola attorney Martin Pollack sent a letter to a Carr vice president claiming his lease agreement for a Xerox copier had been altered after he signed it. Pollack also claimed the company was overcharging him for a copier that Xerox had discontinued eight months prior.
Lawrence Litwack, of Big Apple Abstract in Bayside, wrote to the U.S. Attorney’s Office last April that he never signed a Carr lease contract that was faxed to him from GE Capital Solutions, one of the finance companies Carr and Xerox sell the leases to. Despite several requests, Litwack said neither GE Capital nor Carr would send him a copy of the original lease.
GE Capital confirmed through a spokes-man that the company has alerted federal authorities when confronted with evidence of possible frauds surrounding leases it finances.
“We are taking all appropriate steps with respect to any reporting requirements,” said GE Capital’s public affairs director Ned Reynolds via email.
Ken Greenberg, who heads Hauppauge-based ad agency Austin & Williams, has been doing business with Carr for about 15 years and hasn’t encountered any problems. Greenberg said the finance company called and went over the lease terms with him “before they would release payment to Carr,” and he doesn’t know how other customers could have discrepancies in their leases after that kind of confirmation process.
Realtor Barbara Wanamaker, owner/broker of Signature Properties in Huntington, however, said her secretary never signed a new equipment lease contract from Carr, although the contract sports a signature looking like the secretary’s on it.
“This might be an issue because I think someone else signed my secretary’s name,” she said.
Signature’s account was handled by Michael Ferrara and Anthony Bulla, not Masotto, Wanamaker said. Masotto left Carr last summer and now leases office equipment for Workplace Group in Hauppauge.
C said it wasn’t uncommon that Carr’s accounting department would commingle funds, using overpayments from some customers to credit the accounts of other customers in order to keep them square.
He added that there are many copiers sitting in Carr’s upstairs warehouse on Spagnoli Road that some customers are unknowingly making payments on because the company failed to pay off the old leases after the customers received new equipment.
Since LIBN’s first story on the alleged copier fraud, Altchiler said “victims, insiders and Good Samaritans” have come forward to provide information that has advanced his probe. The attorney is looking into the company’s complicity in the charges against it and whether management at Carr and/or Xerox condoned wrongdoing surrounding the doctored leases.
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What we have gained in technology, we have lost in humanity.

Last edited by KIPDOCTOR on Sat Jan 05, 2013 1:51 pm; edited 1 time in total

[phan6622]

wow.. interesting read.

[REPRODOGGIE]

This sort of thing used to go on at copier companies...in the 1980's.

Leasing companies installed safeguards to prevent this type of "alleged" fraud. I guess like many companies, the leasing companies Carr was using have been cutting corners to save money.

I would doubt that this "alleged" fraud extends beyond the branch level. I would imagine that the margins achieved would be so out of line with their average, eventually someone with a brain would take a look.

I hope none of this was perpetrated on KIP Leasing. Despite my initial reluctance to use a manufacturer's leasing program, I find KIP Leasing to be an invaluable resource providing the best vendor experience I have seen in 25 years of writing leases.

It is likely that once this reaches Xerox Corporate, the mother hens in charge there will lawyer up and pay off. While we all secretly (or not) delight in our competitors misfortune...and we do...it is better for most people reading this that the KIP name and image not be tarnished by this.

Actually, as lease fraud goes, these guys were amateurs. It was only a matter of time. I have heard stories of much more thoughtful cases throughout the years. The bottom line, there are no shortcuts.