Complaints Led to Uncovering of Equipment Leasing Fraud

Michael Flood thought he had cut a good business deal when he sold a $191,500 tractor to a San Diego firm in April.

The deal was so good that Flood even paid $10,858 to the buyer--New England Commercial Corp. (NECC), a San Diego equipment leasing firm. The money actually was a loan to one of Flood’s customers, who was going to lease the tractor from NECC but needed three months’ worth of leasing fees in advance.

But Flood became suspicious when he still hadn’t been paid three weeks later, and he flew to San Diego to demand the money in person.

All he found when he went to NECC’s headquarters was an empty office.

Infuriated, Flood took his case to the Federal Bureau of Investigation in San Diego.

But authorities already knew about NECC and about the $270,000 it bilked from 20 other businesses.

“I was just another victim,” Flood said.

What Flood had no way of knowing was that, beginning the day after he sent NECC a cashier’s check on April 30 and continuing through May 15, a man calling himself Joseph A. Butler had withdrawn $201,349 from two NECC bank accounts at two San Diego area banks.

Butler is now nowhere to be found, although sources close to the case believe he may be in Jamaica.

What authorities do know about Butler is that his real name is Larry Kent Clark, a former San Francisco district manager for U.S. Leasing Inc., a nationwide equipment leasing firm. Clark also is on probation for a narcotics conviction in Florida four years ago.

Clark is one of two men who authorities allege were the backbone of NECC’s operations. The other is Gary Nixon Parker, although would-be clients of NECC knew Parker as Stephen Marshall, Donald Hunnicut or Robert Ogden.

Clark and Parker were indicted in October by a federal grand jury on 22 counts of wire fraud, mail fraud, conspiracy and interstate transportation of property taken by fraud.

Parker, 37, pleaded guilty to one count of mail fraud and one count of wire fraud on Jan. 10 and will be sentenced by U.S. District Judge J. Lawrence Irving on March 11. He faces up to 10 years in prison.

NECC’s victims hailed predominantly from the Northwest and Southwest, and lost $2,000 to $66,000 each, federal prosecutors allege.

The scheme, according to the indictment, started in December, 1983, when Parker and Clark placed advertisements in newspapers throughout the country saying that NECC had capital available for new and used equipment leasing.

As would-be customers called either NECC’s toll-free number in Delaware or its San Diego operation--out of a modest house in Point Loma--to arrange leasing and financing arrangements, they were told by NECC officials that leasing contracts required at least two months’ payments in advance.

The payments were to be made only by cashier’s checks payable to NECC or by wire transfers to one of NECC’s two bank accounts in San Diego, according to the indictment.

The scheme lasted until mid-May, when complaints from victims such as Flood began pouring in to authorities.

When a secretary showed up for work at NECC on May 16, she found that the doors had been locked and all of the furniture inside removed.

“Everything was gone,” recalled the secretary, who asked to remain unidentified.

The day before, Parker had given the secretary an envelope containing about $2,000 in cash, she said. He told her he would tell her later where to mail the package.

When the secretary returned to her home after finding the office closed, she received a call from Parker, whom she knew as Stephen Marshall.

“He said (the money) would help me get by for a while until I got another job,” she recalled last week.

She said she “didn’t think it was a bribe, it was like severance pay.”

Parker also told her that if anyone came looking for him or for Clark, the secretary should say she “worked for a couple of black guys.” Both Parker and Clark are Caucasian.

Then Parker and Clark disappeared.

It took authorities nearly six months to find Parker, who never used his real name in connection with any NECC business.

Parker was caught after a telephone answering service--alerted by investigators--jotted down his car license plate number after he picked up his phone messages. The answering service believed their client was Donald Hunnicut, one of Parker’s aliases.

Authorities traced the vehicle, a 1983 Lincoln Continental, to a rent-a-car firm in Georgia, which had leased the car to a Gary Nixon Parker of El Cajon.

When contacted by The Times, Parker would only say that he “wasn’t an owner” and “controlled no money” at NECC.

“I thought I was just working hard and had finally stumbled onto a good job,” he said. “I never put a dime in the bank or took a dime out. I had no authority to do anything.”

The former NECC secretary said, however, that Parker and Clark “were equal” in power and responsibility at the office.

Although none of NECC’s victims were San Diegans--save for a local printer who was left with an outstanding bill--they well could have been because of the popularity of equipment leasing among businesses, according to Assistant U.S. Atty. Charles F. Gorder Jr., who coordinated the grand jury investigation.

The business deducts the entire lease payment, while the purchaser--typically third parties that are drawn to the arrangement by a broker-type firm, such as NECC--receives investment tax credits and can depreciate the equipment.

Although equipment leasing may become less attractive if proposed tax law changes eliminate investment tax credits and lessen annual depreciation deductions, it is still an appealing deal for businesses.

But how can business owners avoid being cheated by schemes such as NECC?

“Some people did protect themselves,” Gorder said. “Some of them felt that the NECC deal was a little too good to be true, that the interest rates were too good.”

Another would-be NECC customer demanded that the advance lease payments be deposited in an escrow account until the equipment was delivered and the deal final. Still another potential NECC client bowed out because of the firm’s insistence on a cashier’s check rather than a business check, Gorder said.

But merely demanding an escrow account or insisting on a business check is not a sure-fire protection method, either.

An escrow account doesn’t guarantee that the money won’t be used for fraudulent purposes, and cashier’s checks are often legitimately used to speed the check-cashing process, which can take weeks for out-of-state checks.

Gorder advised business owners to thoroughly investigate firms they sign contracts with and consult an accountant with deals such as those proposed by NECC.

Had customers looked into NECC, for example, they would have found that the company was founded about a decade ago as Sandpiper Holding Co. in Delaware. It remained a “shelf” corporation until Parker and Clark took control of it--”Hunnicut” bought it for $1,000 in money orders--in December, 1983, and renamed it New England Commercial Corp.

But before Parker and Clark became involved, neither NECC nor Sandpiper Holding conducted any business or owned any assets, according to the indictment.