Thursday, December 17, 2009

“December 17, 2009 (Lakes Region Weekly)” plus 1 more

“December 17, 2009 (Lakes Region Weekly)” plus 1 more

December 17, 2009 (Lakes Region Weekly)

Posted: 17 Dec 2009 12:08 PM PST

An indictment delivered Dec. 11 against Windham resident Kaile Warren, who rose to national prominence as the founder of the Rent-A-Husband handyman company, has left Mainers who loaned him money feeling vindicated.

While Warren's indictment was a major blow to Rent-A-Husband, it was not the only indication last week of a company in trouble. Just as a Cumberland County grand jury was preparing to unveil the indictments, the contents of a storage unit, including Rent-A-Husband business records, were auctioned off after the company failed to make monthly rental payments.

But it was the indictments accusing Warren of theft by deception, securities fraud, and sale of unregistered securities that caught the attention of the people who say they loaned Warren money based on his boasts about the company's well-being, but received none of the financial returns they say Warren promised. They are now hoping they may see their money returned, or possibly see Warren put in jail, should he be found guilty of misleading investors.

However, Warren, through his lawyers, said he will ultimately be vindicated.

A statement released Tuesday afternoon by the law firm of Marcus, Clegg & Mistretta said, "Mr. Warren vigorously denies the charges made against him. He remains confident that when all of the facts are brought to light, it will become indisputably clear that he has done nothing wrong or illegal ... Mr. Warren looks forward to a full presentation of all the facts, and not just inaccurate and misleading accusations that reflect the sentiments of a few disappointed investors."

 

'We aren't investors'

But Windham real estate broker Peter Forbes, who loaned Rent-A-Husband $10,000 in May 2008 and was promised a 20 percent return within one year, said Warren is misleading the public with Tuesday's statement.

"We aren't investors. We are promissory note holders. There's a big difference," said Forbes, who is frustrated with Warren's public comments describing him and others as disgruntled investors who knew there was risk involved and decided to invest anyway. Since Warren sold him a promissory note, Forbes said, repayment of his loan didn't depend on the financial health of Rent-A-Husband.

"We didn't buy stock in Rent-A-Husband that was somehow conditional on whether the company did well or not," Forbes said. "Our loans were promissory notes that he signed. There were no conditions. It was clear. We were to receive a certain amount at the end of the term; in my case, $12,000 in May of 2009. That's what makes promissory notes different from stock certificates."

According to the indictment, Warren shouldn't have been selling promissory notes in the first place. The third count, regarding his sale of unregistered securities, accuses Warren of "acting intentionally or knowingly ... and sold what were in fact securities, namely promissory notes issued by Rent-A-Husband, LLC, KW Enterprises, Inc. and defendant, to the individuals ... when such securities were not, in fact, registered under the Revised Maine Securities Act or the Maine Uniform Securities Act."

The other two counts include a Class B charge of theft by deception and securities fraud, a Class C crime. At most, Warren would face 10 years in prison if convicted for all three counts.

 

Theft by deception

According to Maine Assistant Attorney General Michael Colleran, the theft by deception charge stems from accusations that Warren lured investors by touting a joint venture with Ace Hardware, which had already fallen through.

In a statement released Tuesday by Ace Hardware, the nationwide chain said, "For six months in 2003, the Ace Hardware Corporation worked with Rent-A-Husband for it to provide certain services to customers of several Ace stores located in Maine and New Hampshire. Over the next several years, Ace had a series of informal discussions with Mr. Warren regarding a potential ownership stake in Rent-A-Husband, but no formal agreement or agreement in principle was ever reached. In early 2008, Ace discontinued these and other conversations with Mr. Warren for a number of business reasons."

Several investors, however, said Warren never revealed negotiations with Ace had ceased in early 2008.

Lori and Ray Johnson of Fort Collins, Col., were among many who invested primarily because of Warren's promises of partnering with Ace.

"(Warren) told us in January 2009 that the Ace deal was on. I love Ace Hardware. That was the icing on the cake. We ended up losing $39,000 so I guess you could say we were drafted by deception. It makes me feel sick," Lori Johnson said.

Promoting the deal with Ace wasn't Warren's only technique to convince investors of a sure thing, according to the indictment's third count. Warren also told prospective investors that his business had no debt and was worth $18 million.

But according to findings by the Maine Office of Securities, which spent the last year and a half investigating Warren's business dealings, Rent-A-Husband was $240,000 in debt by December 2003 and was more than $1.6 million in debt by August 2009.

The second count of the indictment also alleges Warren had used proceeds from the sale of the promissory notes to pay for personal expenses, which is illegal according to Maine law.

"The defendant's business could not meet its obligations without continuously selling promissory notes," the indictment alleges. "And a substantial portion of the money raised from the sale of prior notes had been used to pay for restaurant meals and other personal expenses of (Warren), and (Warren) intended to use a substantial portion of the proceeds from the sale of new notes in the same way."

"Basically, Warren deprived investors of knowledge about the finances of the Rent-A-Husband enterprise, as well as creating and reinforcing the notion that his business was sound when the business was not sound," Colleran said.

 

Auction

As a result of Warren's failure to pay monthly rent on a storage locker at Acorn Storage on Larrabee Road in Westbrook, Chris Jack, owner of Acorn Storage, was forced to hold an auction Dec. 10 of the contents of Warren's 8-square-foot locker.

Mark Hudson, auctioneer with Storage Auction Solutions of Middleton, Mass., started the bidding at $40 and eventually sold the contents - which included two window fans, a shower stall, a silver platter, a large display case, as well as numerous cardboard boxes - for a total of $250.

About 20 people attended the auction, many of them contractors who attend auctions on a regular basis trying find good deals. Warren was not present. One of the contractors, Bob Henaire of Biddeford, said while he and others were looking through the items prior to the auction, one of the cardboard boxes fell over and out spilled business records for Rent-A-Husband.

"Kaile Warren could take better care of his business records, I would say. He's abandoning his business by the looks of it," Henaire said.

Chris Jack said Warren never attempted to claim any of the items in the locker and had failed to pay rent for the last few months. "If it's over 45 days for non-payment, it's eligible for auction, that's all I have to say," Jack said.

Investors buoyed

Windham resident Lane Hiltunen, a frequent columnist for this newspaper who loaned Rent-A-Husband $10,000 in January 2009, said he was surprised by last Friday's indictment of Warren.

"The three-count indictment, I had no idea that was coming," Hiltunen said. "I figured they'd subpoena some of the investors first. So that kind of tells me they have a strong case. The attorney general is only going to try cases where they think they can win. Since they've jumped on this, they must feel this is a very solid case to prosecute."

Another Windham resident, Donna Chapman, who served with Warren on the Windham Town Council, said, "It's worse than I thought it was. He had a great business concept, but it looks like he got greedy. I just hope my friends get their money back," she said.

Likewise, Joanne Grace, of Kennebunk, who first tipped off the Maine Office of Securities last summer as to what she believed were corrupt loan practices by Warren, was glad to see the indictment handed down. Grace invested $156,000 with Rent-A-Husband and was promised franchise rights. Her mother invested $15,000, and her sister invested $85,000.

The $15,000 her mother invested was to be repaid Dec. 5, 2008 with accrued interest of 20 percent. No one in the family has received repayment, Grace said.

"The money my mother gave him was supposed to go for her burial expenses, so we wouldn't be burdened," she said. "When Kaile came to the house to try to get my mother to invest, he told her she looked like his mom and he could tell how much I loved her, and that he had a deep relationship with his mom. She ended up giving over the money, but he never paid her back a dime. He never gave any of us a dime."

Last summer, Grace said she got fed up with Warren and that she was going to try to get her money back.

"I was dead broke, I had no help. So I said to myself, I can either sit here and get depressed, or I can get up and fight. I decided to fight this Goliath," she said.

She first contacted the Maine Office of Securities in the summer of 2008. She then contacted the Maine District Attorney's Office in October 2008, which she said told her to get a civil lawyer, which she couldn't afford. She then approached the FBI. In the meantime, she started trying to find other investors. She also made contacts in the media, and soon found herself working with USA Today, which has published several articles on Warren's alleged fraud.

Now that the matter is working its way through the justice system, Grace feels good about her role, but would feel better if she had some of the money she invested with Rent-A-Husband.

"I'm in my mid-50s. Everything I worked for is now gone, and I have to start over. My house is up for sale, and my retirement is gone. I can't even find a job. I feel like I'm starting over from scratch," Grace said.

Christian and Colleen Olsen of Windham are likewise buoyed by Warren's indictment and hope they can salvage their $200,000 property on Route 202, which Warren convinced them to put up as collateral for a $45,000 loan Warren secured from Coastal Realty to help prop up Rent-A-Husband.

In a lawsuit in May in Cumberland County Superior Court, the Olsens contend Warren told them Rent-A-Husband was in excellent financial shape and that their house was in no danger of being foreclosed upon. But in recent months Warren has failed to stay current on their mortgage, which puts their home in jeopardy, the lawsuit states.

"The recent attorney general's indictment is a positive move forward. We now feel confident that future investigations will also expand to include associates that may have profited from (Warren's) inappropriate business dealings," the Olsens said in a joint statement on Monday.

According to Colleran, the assistant attorney general, Warren will face arraignment in the next few weeks. Warren's trial could start next summer or fall. Colleran said a plea arrangement could also be arrived at earlier, precluding the need for trial.

 

fivefilters.org featured article: Normalising the crime of the century by John Pilger. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.



image

Bailout banks keep tax breaks as they repay loans (Washington Post)

Posted: 16 Dec 2009 10:24 AM PST

Tax law allows money-losing corporations like Citigroup Inc. and General Motors Co. to use current net operating losses to offset future taxable income, reducing their tax bills for up to 20 years after the losses occur.

Under ordinary circumstances, those tax breaks would be severely limited if the companies underwent an ownership change, much like many of them did when the government acquired big blocks of their stock.

Losing the tax breaks would have substantially reduced the value of the companies, even as the government was trying to prop them up with bailout funds.

The Treasury Department didn't want that to happen, so it started issuing tax guidance about a year ago that said the rules didn't apply when the government, through its bailout programs, caused the ownership change.

Last week, Treasury issued additional guidance saying that the rules also won't apply when the government sells its stock. The new rules mean that Citigroup and other bailout companies will still be able to take advantage of tax breaks worth billions of dollars, once they become profitable and start paying taxes again.

For tax purposes, it's like the government's ownership never happened, said Robert Willens, a corporate tax accountant in New York.

The size of the tax breaks will depend on how soon the companies become profitable, Willens said. "It's certainly in the billions," he said.

Citigroup announced this week that it was repaying $20 billion to the government's Troubled Assets Relief Program, or TARP. Citigroup had taken $45 billion in rescue funds - among the largest bailout packages received by any bank - but the government converted $25 billion of that amount into a 34 percent equity stake, which it is now selling.

The tax breaks will cost the government billions of dollars in tax revenue, but the government's stock in the companies is worth more because the value of the companies is higher.

Treasury spokeswoman Nayyera Haq said the guidance issued last week was not targeted toward any individual company. It was released last week because Treasury was expecting a number of banks to start paying back their loans, exiting the bailout program.

"This guidance is the part of the government's orderly exit from TARP," Haq said.

She defended the overall strategy of helping bailout companies preserve their tax breaks, pointing out that the original law was intended to prevent corporate raiders from taking over money-losing companies simply to cash in on their tax breaks.

"This rule was designed to stop corporate raiders from using loss transactions to evade taxes, and was never intended to address the unprecedented situation where the government owned shares in banks," Haq said. "And it was certainly not written to prevent the government from selling its shares for a profit."

White House spokesman Robert Gibbs said the policy merely allows Citigroup and other bailout companies to preserve the tax breaks they were entitled to before the government intervened.

"There are tax breaks in the law for companies that are losing money. That's been the tax law for quite some time," Gibbs told reporters. "Citigroup's losing money. They can use that against their taxes."

Willens said the Treasury Department's strategy makes sense. However, he said, it highlights an unprecedented government intervention in the private sector.

"We've never seen anything like this," Willens said. "The unilateral actions they are taking are unprecedented. This is just one of many."

fivefilters.org featured article: Normalising the crime of the century by John Pilger. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.



image
Posted by Rakhma at 4:07 PM

0 comments:

Post a Comment