ATM LEASEBACK SCHEMES-- any insight?

[attorneysteve]

An involuntary Chapter 7 bankruptcy was filed against the company yesterday (Sep 19) in the U.S. District Court for the Central District of California.

1:14-bk-14313-VK Nationwide Automated Systems Inc
Case type: bk Chapter: 7 Vol: i Judge: Victoria S. Kaufman
Date filed: 09/19/2014 Date of last filing: 09/19/2014

(I am not associated with the company. A friend of mine is a victim.)

[webhick]

I can't wait until it's available on Pacer. Just can't. Positively giddy.

[worried]

(I am not associated with the company. A friend of mine is an investorvictim.)

I'm starting to feel optimistic that the SEC, et al, really did get in and freeze all assets they could find before Joel/Ed knew what was happening. There may be some hope of easing SOME pain due to their efforts. ALL victims (even the ones who are in a profit position) should be grateful to the SEC/FBI for stopping this scam before it got even bigger and worse, before you gave MORE money to Joel/Ed, etc. Their efforts to capture and control what's there now, will help ALL of you. I can't stress enough how important their work is and how much we should all appreciate it. The men and women in organizations like the SEC and FBI REALLY make the difference between this country and so many other places I REALLY wouldn't want to live (and I've been outside this country enough to know I don't want to be outside this country, except maybe Japan (except it's really expensive)).

[webhick]

ATMCompany2,

I've tried googling this, but I'm not having any luck. I've got three different prefixes for terminal IDs to look up and you mentioned that the first two letters identify a company associated with it (LK to Worldpay). How do I find out who the company is based on those two letters?

[Gregg]

I've done a little digiging of Cardtronics, because they're a public company and as such their books are more or less open. A few things I find that make NAS a bit more scammy...

First, NAS took payments for 31,000 machines....accordiing to public filings, the largest owners of ATMs are...

Top 5 ATM Owner Statistics
Company Number of ATM’s
Cardtronics 32,856
Payment Alliance 26,000
Bank of America 18,426
JP Morgan Chase 14,144
Wells Fargo 12,353

So, fact one, if they had 31,000 machines, they'd show up in the above list, but more importantly, theyd have more ATMs than JP Morgan Chase and Bank of America combined. That stretches credibility a bit. Especially as they seem to run the whole show out of an office suite with a few clerical employees.

The industry trade group classifies machines in two groups of ownership, FI or Financial Institution owned, and IAD or Independent ATM Depolyer owned. The breakdown for these groups are:

ATMs in the United States*
Total ATMs: 425,000
ATM Ownership in the U.S.
► IAD-Owned ATMs — 222,500
► FI-Owned ATMs — 202,500
On-Premise vs. Off-Premise Breakdown
► Off-Premise ATMs: 290,000
► On-Premise ATMs: 135,000


So, NAS, if they had 31,000 machines would be more than 10% of all ATMs not owned by banks in the USA. Even more, actually, as one of the claims about why they charged so much per machine was that they were buying one for the investor and one other one for themselves....so again, if they took money for 31,000 machines, that would be 62,000 and over 20% of the non FI owned machines in the USA. Again, I find it hard to believe that a comany that controls 20% of the industry doesn't show up in any industry-centric searches.


Another question that comes up, if this business has been operating for 20 years, how did they make money prior to 1996? You see, and I am astonsihed by this fact but it is true, ATM Surcharges (the $ fee you are splitting with NAS) were not authorized until 1996. In Septmeber of 1996 in fact.

There are two primary trade associations that represent the interests of ATM owners in the U.S.:
• The National ATM Council, Inc. (NAC) is a not-for-profit trade association that grew out of two former
trade groups (NAAIO and ASCP) and is solely focused on representing and protecting the interests of U.S.—
based IADs and the manufacturing and service sectors that supply and support these ATM businesses.
Bruce Renard
Executive Director
E-Mail: bruce@natmc.org
(904) 683-6533 O │ (904) 710-3522 M
• The ATM Industry Association (ATMIA) is a global trade association whose aim is to promote ATM
convenience, growth and usage worldwide. ATMIA is focused on providing education and promoting best practices
for the ATM industry worldwide.
David N. Tente
Executive Director USA
E-Mail: david.tente@atmia.com
(407) 833-7906 O


So, from this little bit of digging, I'm forced to conclude that NAS is lying about the number of machines they have, why they charge so much for machines and teh split between investor owned/company owned machines.

This is getting a little more scary the deeper one digs.

[worried]

ATMCompany2,

I've tried googling this, but I'm not having any luck. I've got three different prefixes for terminal IDs to look up and you mentioned that the first two letters identify a company associated with it (LK to Worldpay). How do I find out who the company is based on those two letters?

And while you're at it ATMCompany2, can you tell us the actual name of your company? Are you a member of ATMIA? Can you elaborate on how you address the myriad of issues in https://www.atmia.com/files/US%20Region ... PDATED.pdf

Please don't take these questions negatively...

[worried]

Another question that comes up, if this business has been operating for 20 years, how did they make money prior to 1996? You see, and I am astonsihed by this fact but it is true, ATM Surcharges (the $ fee you are splitting with NAS) were not authorized until 1996. In Septmeber of 1996 in fact.

I've had the same nagging question, quotes for how long NASI has been operating have always been 2-3 yrs longer than what is really possible. That seems to be a kind of exaggeration that really indicates LYING...

[ATMCompany2]

ATMCompany2,

I've tried googling this, but I'm not having any luck. I've got three different prefixes for terminal IDs to look up and you mentioned that the first two letters identify a company associated with it (LK to Worldpay). How do I find out who the company is based on those two letters?

Is there a way to upload a file on this site? I would be happy to share a sample report.

[ATMCompany2]

I've done a little digiging of Cardtronics, because they're a public company and as such their books are more or less open. A few things I find that make NAS a bit more scammy...




So, NAS, if they had 31,000 machines would be more than 10% of all ATMs not owned by banks in the USA. Even more, actually, as one of the claims about why they charged so much per machine was that they were buying one for the investor and one other one for themselves....so again, if they took money for 31,000 machines, that would be 62,000 and over 20% of the non FI owned machines in the USA. Again, I find it hard to believe that a comany that controls 20% of the industry doesn't show up in any industry-centric searches.


Another question that comes up, if this business has been operating for 20 years, how did they make money prior to 1996? You see, and I am astonsihed by this fact but it is true, ATM Surcharges (the $ fee you are splitting with NAS) were not authorized until 1996. In Septmeber of 1996 in fact.

There are two primary trade associations that represent the interests of ATM owners in the U.S.:
• The National ATM Council, Inc. (NAC) is a not-for-profit trade association that grew out of two former
trade groups (NAAIO and ASCP) and is solely focused on representing and protecting the interests of U.S.—
based IADs and the manufacturing and service sectors that supply and support these ATM businesses.
Bruce Renard
Executive Director
E-Mail: bruce@natmc.org
(904) 683-6533 O │ (904) 710-3522 M
• The ATM Industry Association (ATMIA) is a global trade association whose aim is to promote ATM
convenience, growth and usage worldwide. ATMIA is focused on providing education and

This is getting a little more scary the deeper one digs.

Some strong an accurate research there. ATM surcharging didn't start until 1996, so what were they doing the first 2 years? And with that many machines, they would sure to be part of some of the ATM organizations you mention. And they would certainly have a lot more headlines in the news, like Cardtronics.

[webhick]

ATMCompany2,

I've tried googling this, but I'm not having any luck. I've got three different prefixes for terminal IDs to look up and you mentioned that the first two letters identify a company associated with it (LK to Worldpay). How do I find out who the company is based on those two letters?

Is there a way to upload a file on this site? I would be happy to share a sample report.

We do not allow file uploads, but anyone who wants to share documents can always PM me and I'll host them on my Drive account.

[worried]

I've done a little digiging of Cardtronics, because they're a public company and as such their books are more or less open. A few things I find that make NAS a bit more scammy...




So, NAS, if they had 31,000 machines would be more than 10% of all ATMs not owned by banks in the USA. Even more, actually, as one of the claims about why they charged so much per machine was that they were buying one for the investor and one other one for themselves....so again, if they took money for 31,000 machines, that would be 62,000 and over 20% of the non FI owned machines in the USA. Again, I find it hard to believe that a comany that controls 20% of the industry doesn't show up in any industry-centric searches.


Another question that comes up, if this business has been operating for 20 years, how did they make money prior to 1996? You see, and I am astonsihed by this fact but it is true, ATM Surcharges (the $ fee you are splitting with NAS) were not authorized until 1996. In Septmeber of 1996 in fact.

There are two primary trade associations that represent the interests of ATM owners in the U.S.:
• The National ATM Council, Inc. (NAC) is a not-for-profit trade association that grew out of two former
trade groups (NAAIO and ASCP) and is solely focused on representing and protecting the interests of U.S.—
based IADs and the manufacturing and service sectors that supply and support these ATM businesses.
Bruce Renard
Executive Director
E-Mail: bruce@natmc.org
(904) 683-6533 O │ (904) 710-3522 M
• The ATM Industry Association (ATMIA) is a global trade association whose aim is to promote ATM
convenience, growth and usage worldwide. ATMIA is focused on providing education and

This is getting a little more scary the deeper one digs.

Some strong an accurate research there. ATM surcharging didn't start until 1996, so what were they doing the first 2 years? And with that many machines, they would sure to be part of some of the ATM organizations you mention. And they would certainly have a lot more headlines in the news, like Cardtronics.

uhhh... it's a scam... I posted a LONG, LONG time ago, that I found exactly 3 (THREE!) machines actually registered to NASI back in 2007 (ok, I may misremember the year), but nothing other than that, I think I remember the location as New Jersey... but, the takeaway is that: a fairly exhaustive search of machines registered to NASI (even by a rube like me) turned up ONLY 3 machines... can anybody else do better?

[MarvinGardens]

This thread now contains close to 500 posts. Anyone joining now, and the thread is growing rapidly as events unfold, is faced with the daunting task of bringing themselves up to date - which most won't do.

I am noticing that the thread is beginning to repeat itself and run in circles as it were. I find many people trying to reverse engineer a business that I believe is simply not what it seems. Once again we are trying to figure out how it is possible that NASI can do what it says it can do. But, I think it simply cannot, and all attempts to rationalize or reverse engineer a business model that cannot work just wraps us around the axle.

If I may be so bold, I am reprinting a post I wrote back in February 9th that I think needs to be reintroduced for the benefit of those new to the thread who haven't the stamina to read 500 posts.

As long as we retain the illusion, created by NASI, that their business is managing ATMs we seem never to be able to conclusively show how they can do it. My hypothesis is that they aren't in that business at all. It's a smoke screen for their true business which is selling annuities. But, they are annuities that cannot be full filled because they are underpriced. That is the question that I posed to the SEC - are these annuities?

It would appear that the SEC agrees that they are and is pursuing NASI for violation of regulations applied to securities. The FBI has a different agenda. They believe they may have encountered criminal fraud and that's their beat. If it turns out NASI has sold 31,000 contracts and acquired far fewer machines that's just theft, plain and simple. The most logical conclusion is that NASI is a pure Ponzi scheme which can run for decades. If this is one, it nearly did.

If we think of the product as an annuity many things, otherwise unexplainable, become clear. So in this spirit I would humbly like to re-present what I said in February and lay it out again for consideration.

Like everyone else on this thread, I was at first focused on ATMs – the industry, the payouts, the costs, the traffic, the locations, whether or not leasebacks are securities as defined by the different regulatory agencies and so on. Trying to sort out the intricacies of the ATM business is challenging. I was scratching my head about this until I watched a particular Bloomberg interview that explored ATMs as an investment. There were two interviewees – one was a man whose company sold ATM franchises and the other was the CEO of an investment firm that specializes in ATM investments of all kinds. You can watch that interview on this page: http://www.tremontcapitalgroup.com/

The investment firm’s CEO is Sam Ditzion and you can find his bio here: http://www.tremontcapitalgroup.com/leadership/

This man is clearly an expert in the ATM industry. In the interview he breaks down the ATM business in broad strokes and shows the primary expense categories. But what leapt out at me was his statement that on average, independent ATM providers earn a 7% return on their investment. Independent, in this case, means private operators rather than banks. We have recently learned that as late as 2013 Cardtronics, the largest ATM operator and only public company, returns less that 3%.

The obvious question is this: How can a company pay 20% for money year after year and invest it in an industry that yields just 7%. In 35 years of analyzing business plans I have never encountered such a proposition. Yes, companies in trouble or who are temporarily cash flow constrained may borrow at a high rate for a short period to cover the expenses of expansion or just a rough patch – but as an ongoing proposition? In my experience, debt financing works the other way. One borrows at a lower rate than he sells. The business must return enough money to pay all expenses plus interest on the debt and return a reasonable profit. Over time, to do otherwise would be a sure road to ruin.

Realizing I had become lost in the details (an occupational hazard) and theorizing that if you cut out all the middlemen and operated the machines yourself, the usual return you could expect was 7%, I had to ask myself the question – What business is this company really in? And, should I be analyzing the company as an ATM business at all? That’s when I realized I’d been looking at the business all wrong.

If we look at the investment in a different way much of the confusion of the program falls away. It answers questions like these:

How can the company take different amounts of money for the initial purchase of an ATM machine?

How can we evaluate the risk of such an investment?

How can we be sure that we have true ownership of the machines we have purchased?

How can we compare ATM leasebacks with competitive investment vehicles?

So, let’s do that and take this deal apart so we may analyze it dispassionately.

What is the Real Product?

First, let's talk about what NAS is actually selling. I suggest that the ATMs are irrelevant and I’ll show you why I think so. We start, as we always should, by looking at their market. Initially, I looked at NASI’s market as being the users of ATM services and that’s where I started down the same rabbit trails as most on this thread. After all, isn’t this the firms primary business and like virtually all businesses the financing of the enterprise is secondary? Perhaps not.

What if its market is not ATM users at all - but instead the investors themselves? So I forgot about the ATM business for a while and looked at NASI as an investment company.

What interests investors is the offer of a 10 year guaranteed monthly payment of a certain amount, depending on the size of their initial investment, that results in a 20% annual return on that investment.

That is, by definition, an annuity. If you think about it this way, it doesn't matter if an investor puts up $11k, $12k, $19.8k, or $24.5k all of which I have heard from actual investors or on this thread. 20% is 20% regardless of the amount you deposit. Think of the ATM investment as any other interest paying deposit. With some exceptions, it doesn’t matter how much you deposit, your savings return the same percentage amount.

Or think about it as I have where you are just purchasing annuities of differing size. Looking at the business as a seller of annuities gets rid of the entire issue of how much one pays for an ATM machine. In fact, it makes the ATM issues including the differing amounts you pay up front completely irrelevant. Stick with me here and let’s take a look at how we can evaluate this investment in a way that makes sense.

Analyzing an annuity – what is the investment worth?

I began this exercise because a client asked me to evaluate his portfolio. This client had 40% of his investable funds with NAS, had been involved for about 17 years and was currently living off the interest income spun off by the investment and was re-investing to accumulate more ATM machines.

(As an aside, a person may certainly have the majority of his capital tied up in a business. And, that assumes the person understands his business. But the investors in this scheme know nothing about the ATM business. For them it is a passive investment. And having such a large percentage of one’s money in a single passive investment is asking to take a large draw down, even an insurmountable loss.)

So, in the case of my client who pays $19,800 per contract, what is that annuity worth?

Let’s calculate the present value of that 10 year stream of payments. First, you have to use a "hurdle rate" as a baseline for comparison. Traditionally, that is the risk free rate of return on government bonds. Treasury reports that the yield on a 10 year note is currently 2.7%. Since that’s the period of the NAS annuity, let’s use that interest rate for comparison.

Given those parameters and using NAS guaranteed payments of $330 per month for 10 years we get a present value of that annuity of $34,619. Yet my client pays only $19,800. Now, that's a bargain. But, that's using the risk free rate for comparison. What about the opportunity cost? That is the amount you would get from a competitive investment which is riskier than a government bond.

Let's say the average return from the stock market is currently 4.5% which is being generous. If we use that interest rate the value of the annuity is $31,766. The stock market is riskier than the government, it is widely believed, so the annuity purchase should cost less - since the risk of not getting any, or all, of your annuity is higher.

The difference is the risk premium. If you divide the target return 20% by the risk free rate of return or the opportunity cost we can estimate the comparative risk of the NAS offering. Simplistic, yes, but useful. By this measure, the 20% annuity is four and a half times more risky than a diversified portfolio of stocks and seven and a half times more risky than the 10 year US Treasury note.

NAS investor's pay about $20k for the same stream of income. Why? Because the risk of getting repaid is way, way higher than the government or an annuity backed by stocks (which no one actually does.)

People generally purchase annuities because they generate periodic income. They are buying a stream of guaranteed income payments. And, the safety of that income stream is paramount. Annuities are an insurance product and the safest ones are backed by some of the largest and most stable companies there are. The insurance industry is heavily regulated and their annuities rated by independent rating agencies.

The annuity we are examining is guaranteed not by a huge, stable, regulated insurance company backed by the profitable business of selling insurance, but by a couple of guys in a small office in Calabasas running an ATM business that according to the ATM Council returns an average of 7%. If it were backed by a Swiss bank, a major insurance company or a large diversified financial firm the price of that annuity would be well north of $30k as we have demonstrated.

That investors pay a third less than that to NAS for the same stream of payments shows what a huge risk premium is attached to the investment offered by NAS. In plain words, NAS is telling investors that an investment in their product carries considerable risk.

I would agree with that assessment. Yet, those who would bring us into the scheme tell us that it is risk free.

And, all we are evaluating is business risk. What is the probability that borrowing at 20% for a business that yields 7% is unlikely and may indicate fraud? If we think it is even money, then we double the risk.

It is puzzling that the firm is willing to extend the period of that annuity without requesting additional investment as I have verified occurs. I don’t believe any legitimate company would do that without requiring additional investment. I can think of no motivation that makes business sense.

Summary:

I believe the actual product marketed by NASI is a 10 year (or beyond) monthly annuity whose price is infinitely adjustable and returns a 20% per annum return. We have explained why the price of the ATM machine doesn’t matter.

That annuity is not backed by a large secure institution, but by the small business of placing and servicing ATM machines. But the business could be anything. It could be a dry cleaning chain, a string of restaurants or anything at all. Or, as some on this thread have suggested, nothing at all. That it is an ATM business is irrelevant and serves to misdirect the investor from the true nature of the business.

The business pays a much higher rate of return than virtually all mainstream investments. To put this in perspective, with this rate of return, Warren Buffett should sell his other investments and buy NASI leaseback contracts. He won’t. Neither will I.

Perhaps, those of you who are invested in this scheme might want to consider if you should.

In the next post I’ll address the nature of risk in a portfolio, identify the risks that investors face in this particular investment and summarize my investigation into the issue of whether or not this annuity is a security that should be regulated under the Securities Exchange Act of 1934 including highlights of conversations with regulatory agencies.

I hope that analyzing the NAS offering in this different way has been illuminating. I run the risk of confusing the issue further, I know. But it has clarified the issue for me and focused my attention on the risk of this scheme. My hope is that potential investors may also be made aware of the level of risk implied by the pricing of this offering.

The old saying that "If it sounds too good to be true ... it is too good to be true" is a good thing to keep in mind. All I've tried to do in this post is illustrate through more detailed analysis just how much too good to be true this offer is.

[Tednewsom]

Re-reading this slow-motion train wreck, the comments of the company's head salesperson, four days ago, ring rather harshly to me:

investor » Tue Sep 16, 2014 6:32 pm

To Ted Newsom...........you might consider paying your friends mortgage until this is resolved so that they do not lose their home. If the SEC was not harassed into investigating NASI your friends income stream would not have stopped.

So, apparently, by asking my original questions about this enterprise, challenging the impossible math and stating that the business plan was something out of Bizarro World, I have magically transformed the world's only 100% honest ATM leaseback arrangement into a crooked Ponzi scheme. Well, just call me Harry Potter.

But it turns out I didn't work this magic all by myself. She continues:

Joel and Ed have been running a REAL business with REAL ATM'S and REAL Income until you all pressed to have this investigated.

So, you see... it was a real business with real ATMs.... until people started asking questions, at which point the real business and real ATMs magically transformed into phantoms. It wasn't just me, it was you all. And the SEC was harassed into investigating. Yes, that's it. Everything would have been just fine if you people had not asked all those pesky questions.

The denial is astounding. That's like someone saying, "Doctor, it's all your fault! If you hadn't said it was cancer and ought to be cut out, my grandma wouldn't have any disease at all!"

Then "investor's" superficial (mis) understanding of metaphysics glows right through her personal sniping, turning someone's concern and love for a scammed family member into some weird (and totally unfounded) Perry Mason plot:

To Worried............the light shines............and the truth shows.........you were worried about your inheritance. Shall I say it again INHERITANCE.

"Investor"--- how dare you. Do you have any idea of the number of lives you have devastated? Not just someone you consider "your best friend," that would be rotten enough.... but strangers-- retired people -- grandmothers and grandfathers-- young marrieds hoping to actually have something put away.

No, "investor," this ATM Fantasy Football Game would not have remained all hunky-dory if I -- or anyone here -- ignored the financial irregularities.

As for your churlish suggestion:

Ted Newsom...........you might consider paying your friends mortgage until this is resolved so that they do not lose their home.

Y'know what? Considering you have been living high off the hog for a dozen years while our mutual friend has barely been scraping by... and considering she would not have found herself in this mess in the first place except for you -- plus your continued offers of more and more great ATM offerings -- and your constant assurances that it was such an honest company... I'd say you ought to start by apologizing to her yourself, then paying her the money she's had stolen from her.

"investor": Between the two of us, one of us has had the best interest of a beloved friend at heart. The other blinded herself to obvious criminality, ignored basic mathematics, turned a deaf ear to years' worth of warnings, scooped up dough while roping more and more suckers into a doomed financial chasm -- and now has the gall to blame everyone but herself and the shysters she's served so well.

[The Observer]

I am noticing that the thread is beginning to repeat itself and run in circles as it were. I find many people trying to reverse engineer a business that I believe is simply not what it seems. Once again we are trying to figure out how it is possible that NASI can do what it says it can do. But, I think it simply cannot, and all attempts to rationalize or reverse engineer a business model that cannot work just wraps us around the axle.

I agree with you completely and have pointed this out earlier in the thread. I think your theory pointing to the fact that this was a shell game with annuities posing as ATMS is on target. Greg's research showing that NASI's claim of having 31,000 ATMS is patently false is another nail in the coffin and supports your theory - and that is probably why the FBI is involved. But, unfortunately, you are up against the tide of human emotion in trying to educate and reason with the victims who are going through this grieving cycle of loss - they are stuck in the denial stage. And when people walk in here and talk about 20% returns on ATMS, that just helps the victims to stay in that denial stage: "See? It was possible that Joel was telling the truth! Our money must still be there! We will be made whole!"

I am not sure how complete and accurate the asset and finance schedules will be as filed for involuntary bankruptcy, but maybe that will help punch some more holes in the boat that people are riding down Da Nile river. Especially when it is revealed that NASI never owned the number of ATMS that Joel claimed was owned.

In essence, what they will eventually find is that NASI borrowed money from the victims on a long-term unsecured loan, with low payments and at interest rates that would rival loan sharks. But hey, if you have no intention of paying your victims back, you can promise them the sun.

So, apparently, by asking my original questions about this enterprise, challenging the impossible math and stating that the business plan was something out of Bizarro World, I have magically transformed the world's only 100% honest ATM leaseback arrangement into a crooked Ponzi scheme. Well, just call me Harry Potter.

But it turns out I didn't work this magic all by myself.

Yes, this is what I mentioned earlier about the scammers still manipulating the victims. The participants in this scam are going to try to blame you, the government, and anyone else that raised the lid on this trash can of a scam and yelled, "Holy cow, this stinks!" It is their attempt to deflect the coming anger of the victims away from the scammers. If this deflection gets some of the victims to start feeling sympathy for NASI, even better: "Man, Joel, this would have never happened if those nosy busybodies had just minded their own business. I was completely happy with the payouts you were providing; why couldn't they just leave well enough alone?"

So I won't be surprised to see Joel and Co. releasing little tidbits of "information" about NASI and its finances, in order to shore up the myth of how sound their business was and how their investors were victimized not by NASI but by the 800 pound gorilla called government who simply will not let businessmen run a business in this country and let the ordinary citizen get a piece of the American dream.

So, you see... it was a real business with real ATMs.... until people started asking questions, at which point the real business and real ATMs magically transformed into phantoms. It wasn't just me, it was you all. And the SEC was harassed into investigating. Yes, that's it. Everything would have been just fine if you people had not asked all those pesky questions.

Yes, NASI was the "Cinderella" with a model business and everything was fine until "midnight" happened and their "golden carriage" got turned back into a soggy pumpkin. Incredible as this myth seems, what is even more incredible is the fact that people are going to swallow this story and believe it.

[JamesVincent]

This thread now contains close to 500 posts. Anyone joining now, and the thread is growing rapidly as events unfold, is faced with the daunting task of bringing themselves up to date - which most won't do.

I am noticing that the thread is beginning to repeat itself and run in circles as it were. I find many people trying to reverse engineer a business that I believe is simply not what it seems. Once again we are trying to figure out how it is possible that NASI can do what it says it can do. But, I think it simply cannot, and all attempts to rationalize or reverse engineer a business model that cannot work just wraps us around the axle.

If I may be so bold, I am reprinting a post I wrote back in February 9th that I think needs to be reintroduced for the benefit of those new to the thread who haven't the stamina to read 500 posts.

As long as we retain the illusion, created by NASI, that their business is managing ATMs we seem never to be able to conclusively show how they can do it. My hypothesis is that they aren't in that business at all. It's a smoke screen for their true business which is selling annuities. But, they are annuities that cannot be full filled because they are underpriced. That is the question that I posed to the SEC - are these annuities?

Very true. The problem being that, yes, it is possible to get a 20% monthly return off of an ATM, possible to get more then 20%, it is impossible to guarantee it. And ATMs vary so much in income month to month and season to season it is doubly impossible to guarantee it for years on end. I would question any ones whose reports have the same number of transactions month after month, year after year, even within 10% of the same number. Businesses have sales that bring in more one month, there is a road closure that lowers sales for one month, stores go out of business or out of favor and customers go to different stores, there are so many variables that you cannot predict or plan for. Hotels have seasons of travel and seasons of slack time, yet can fill up one month for a conference in town and not at all the next month. Bars and nightclubs suffer due to weather, busier in the fall and spring and slower in the summer and in snowy areas. Maybe it's different in Cali then the rest of the world but I've seen the ups and downs of businesses due to all of these and worked in the entertainment business enough to deal with it. No different then when I was doing contract work. Busy during the spring and summer, slack in fall and dead in winter.

So if they paid a consistent 20% month after month, year after year it had to be coming from somewhere else. It is possible to have a star unit in an awesome location but every single one of an alleged 31,000? Impossible. And especially in locations, like hotels, that are notoriously lower in income and usually have a greater variance in use. That being the case there had to be something else that paid those returns and kept them consistent.

Something we had also talked about was the simple inefficiency and bad business that paying out an unnecessary 20% or more of profit by a company. It makes no sense and no company I know of does it. Why? Why would you. You could get a bank loan or a line of credit for much, much less and know that the money is there, instead of drumming up more "investors". It is so far out from what a normal business would do that it boggles the mind. There are lenders out there that specialize in loans for these types of machines and other entertainment machines where you could get rates down to 2-4%, maybe as high as 6-7% if you have bad credit or are a startup. Even if you paid 10% that is still half of 20% and a much better chance of lowering that rate the second time around.

Take the numbers ATMcompany posted and some of the things I had posted about. An ATM should pay itself off in a year. That would mean a 100% ROI at the end of a year, but only an average 8.3% monthly, which is pretty realistic. It is possible to do higher but a consistent average like that is maintainable and can be planned on. Much higher then that is not.

[webhick]

We've been getting a lot of new usernames that sound like NASI victims trying to come onto the forum (and at least a few looking to victimize the victims again), but I'm not seeing many actually signing in.

So, as a reminder to those who may have registered but not received an activation, I direct you to Registration/Activation Problems. The long and short of it is that if you haven't received an email about your activation, try logging in anyway.

[Burnaby49]

We've been getting a lot of new usernames that sound like NASI victims trying to come onto the forum (and at least a few looking to victimize the victims again), but I'm not seeing many actually signing in.

So, as a reminder to those who may have registered but not received an activation, I direct you to Registration/Activation Problems. The long and short of it is that if you haven't received an email about your activation, try logging in anyway.

Exactly what happened to me years ago. I registered and waited for an activation confirmation that didn't come. So I gave it a shot anyhow and found that I'd been activated.

[dawnth]

Statement says nothing about the ATM other than serial #s EA-244418, MB-XXXXXX,FC-XXXXXX, TR-XXXXXX etc. Location, and number of transactions. Everyday, it is becoming more clear, that this was all bull-ony.. Thank you.

[Tednewsom]

MarvinGardens' explanation makes sense, that the "ATM" element of this enterprise was a chimera, and that the business model is actually a one-sided annuity Ponzi scheme rather than a service. And that makes total sense in view of the previous incarnations of the scheme in past years, by other con men, where the alleged "product" would be leasebacks of pay phones, office furniture, Xerox equipment or whatever. The Trojan Horse didn't need to be a giant carved representation of a horse, it could be a wedding cake or a fiberglass image of Paul Bunyan or a toothpick model of the Eiffel Tower. It was the game that mattered, not the game-piece.

[Tednewsom]

I knew I wasn't hallucinating. This is theinterview with Joel Gillis on a site called Capitalist Exploits. Weirdly, the credulous interviewer uses only the guy's first name, never "Gillis."

http://www.capitalistexploits.com/2011/ ... y-printer/

The page itself has been pulled from the site. I got this via the Wayback Machine, thanks to Mr. Peabody.

Capitalist Exploits /Frontier Markets Investing, IPO's, Private Placements and Venture Capital

Interview with a Money Printer…
by Mark on November 10, 2011 • 7 comments
Earlier this week we spoke about an opportunity to get involved in a relatively simple, straightforward and profitable business. Something that literally anyone, including college students and retirees could do.
As promised we provide the conversation that I had with the businessman I was introduced to.
I’ll alert you in advance that his isn’t a frontier market business. Joel operates entirely in the U.S. Normally we look outside the States, however there are opportunities everywhere, and although we think the States has some tough times ahead of itself, this does not preclude us from seeking out particular investments which provide us with a decent return with limited risks. We believe this particular deal ticks all the necessary boxes.
So, what’s the deal? Cash baby, cash…
Joel runs a company called Nationwide Automated Systems (NAS for short). It’s a private company operated by Joel and his partner of the last 17 years.
Put simply, NAS owns and leases ATM machines in hotels, convenience stores and gas stations across the US.
Right now they control about 20,000 such machines, owning 2/3 of those directly, and leasing the other 1/3 from individuals that have purchased the machines and leased them back to NAS. Hence the opportunity…
Joel and I spoke via phone from his poolside cabana location at the Four Season’s Maui. I have to admit that I was momentarily a bit envious. No matter where you are, or what your perspective, the Four Season’s Maui has to be one of the nicest spots on the planet.

Mark: I guess the first thing to ask is how did you get started in the ATM business? I know there are some barriers to entry so how did you guys stumble into this?

Joel: Well actually at the time I got into it, which I think was in ’95, I was with New York Life. I was an estate planner for them. One day I got a call from my (now) partner in this business. He’s a CPA and had always done my taxes. I’ve known him for years. He said there was a fellow in his office that was getting into the ATM business and he wanted to meet me because I had insurance customers that owned property, and he wanted to put his ATMs on those various properties.
So I went over and met the guy and we made a finder’s fee deal.
It didn’t work out as planned, and he wound up owing my partner and myself about $6,000. We never got paid, and we started chasing him for the money. We started gathering all this information about ATMs. We talked to his bank, his processing company, etc. and we decided to try it ourselves.
We put up about 6 machines. We couldn’t touch his machines because they didn’t belong to us. It was a total disaster. I was almost immediately looking to sell the machines.
Then we got a break. I have a brother who’s a securities attorney in Texas who deals with some hotel chains. He set up a meeting with a client and I flew to Houston. I met with them, and that meeting ended with us getting the Sheraton Astrodome. At the end of the first month there was huge volume. We grew from there.
We landed Hilton in ’97 and they gave us 1,800 properties to do. After 17 years we’re approaching 20,000 machines running. We’ve done mostly hotels, but we have 5,000 Exxon Mobile stations, and a lot of convenience stores.

Mark: So, in actuality you’re selling a small business. People buy the machines from you and then my understanding is they lease them back to NAS who places them, maintains them and insures them.

Joel: Yeah, the individual owns the machine and we lease it from them. It’s a small business really, so they are entitled to depreciation. They write off 20% a year over 5 years. Basically they’re getting their money back in 3.8 years when it’s all said and done.
The machine owner can keep it forever if they want to, but after 2 years they can sell them back to us and we’ll literally give them their money back. After 2 years we’ve made a profit and we don’t care whether they own it or we own it.

Mark: So then when you buy those machines back from the investor, they’re NAS machines. They don’t get sold to another investor. In that instance they become an asset of NAS..?

Joel: Right.

Mark: In a way, NAS kind of backstops the business owner’s risk because you guarantee a minimum payout per machine per month is my understanding..?

Joel: That’s correct. Actually we guarantee it for a year based on the machine’s cost. Let’s use round numbers – if the machine costs $20,000, by contract we have to pay the owner $4,000. We’re guaranteeing them 20% per annum on the lease back.
If the machine produces less, then we send them a makeup check at the end of the year. However, we changed that about 3 or 4 years ago and now we just give them their 20% monthly. So we’re going to send the owner a check of $330 per month, per machine that they own. We also pay at the rate of $0.50 per transaction, so if the machine does more than 660 transactions a month then the investor gets the difference.

Mark: OK, so if you’re in a high traffic location you could do better.

Joel: Correct.

Mark: Which tend to be the best performing locations?

Joel: The convenience stores are really the best locations we’ve ever had. Selfishly, we try to keep the best locations in house. As an example, we do the Waldorf Astoria in New York. That hotel produces 3,000-4,000 transactions a month. We’re not going to give an outside owner that hotel.
We make sure and give owners locations that we know will perform to at least the minimum, guaranteed payout.
Convenience stores are excellent. By the way, that’s what we’re doing now. We’re installing 2,500 additional convenience stores.

Mark: We imagine a lot of the current owners will want to pick up these additional locations because, like you said, you haven’t been offering new opportunities for awhile.

Joel: That’s correct.

Mark: So you’re offering a first right of refusal to existing owners, but those interested in getting involved for the first time – there’s also a chance for new people to come in, correct?

Joel: Short answer, yes. Here’s what happens. Current owners always have their name on my waiting list whether they buy 1 machine or 10 machines. They’re always anxious for more machines. As an example, if you said to me today, ‘Put aside 100 machines for me,’ I would put them aside for you, new owner or existing. If you’re buying 1 or 5 or something like that, it’s not a problem. With 2,500 locations I’ve got enough available now.
If you’re interested in doing something with us, now is a good time to do it. We’ve gone as long as four years without a location. They’re hard to come by.

Mark: What’s the typical lifespan of the machines? Do they literally last forever?

Joel: The original machines that came out in the mid ’60s are still operating. As a matter of fact, there’s one in Phoenix that has a big plaque that says, ‘This is the original ATM machine.’ They’re a box with a cash drawer and circuit board and occasionally we change out the circuit board or something, but we pay for that.

Mark: What kind of tracking system is in place to make sure that you’re tracking the machine transactions properly and the onwers are getting the proper payout?

Joel: We use processing companies. We have 5 of them around the country. They monitor the machines. If a customer goes to a machine and puts in any kind of credit card or bank card, within a millisecond the processor knows whether they have money in their bank account and they can release cash, or whether they don’t. They give us what kind of a card is used, the time of day, how much cash was dispensed, etc.
If the cash is running low in a machine, they send out the armored car to refill the machine. If a machine breaks down, they send out the service people. We have service people in each state, geographically, depending on how many machines we have that in that state. They pretty well monitor everything for us.

Mark: OK, and that’s covered by NAS not by the owner, correct?

Joel: Correct. We also insure every machine out there with Hartford, and they cover it for anything that could possibly happen, including liability insurance – $4 million per incident in case somebody gets robbed or shot using the machine. So we pretty well have it covered.

Mark: Over the last 17 years have you seen changes in revenue patterns? Is this a business that’s growing year over year or is it pretty consistent?

Joel: The business is pretty consistent; however, we’ve had times where maybe our machines are up 5% for a year or down 5%. When the recession hit 3 years ago, we did see a downtrend in most of our locations except for hotels for some reason. Hotel businesses picked up. It’s very hard to put a handle on it.
People use cash. Some people say, ‘Well, don’t they use less cash?’ We haven’t found that to be true. Cash is cash. If you travel yourself and you go to a city, you’re not going to walk around without some cash in your pocket. You have to tip, and cab drivers don’t always take credit cards, that sort of thing. Cash is still relevant. In our industry we always talk about the downside if we become a cashless society. We feel that’s still many years away.

Mark: That leads me into my next question. Most of our readers are pretty sophisticated and some of them, including ourselves, are of the opinion that the current financial system is heading for some sort of a shakeup and possibly even in a worst case scenario, a reset.

Joel: If something should happen – let’s say there’s a run on our banks or something – we’re a very cash-rich company. We have reserves that are pretty significant.
Again, remember, we own 2/3 of the machines that are out there. Independent owners only control 1/3. We would probably just pay the investors back and that would be the end of it. Like I said earlier, In our contract the owner can cash out, so that’s probably what would happen. We would be out of business, investors would get paid back and that would be the end of the story.

Mark: What about all the automation that’s happening with things like iPhones and Android phones?

Joel: It really doesn’t affect our business. You got to remember, our machines are strictly cash dispensing machines. You still can’t do that on an iPhone. I think that we’re probably very safe in my business for another 20 years before we have to start to worry about it, even with all these new innovations that are coming out.

Mark: Say that I work my way up and I eventually own 100 machines myself. I’ve got equipment now that’s theoretically worth $2 million, 100 machines times roughly $20,000 just for even numbers, which is giving me a massive cash flow of about $400,000 a year. No employees, no maintenance; it’s a beautiful business.
I can’t think of a reason someone would want to sell out of that situation but anything is possible. Does NAS allow people to sell their business as an independent, or does NAS always have first right of refusal?

Joel: Yes, they have to sell it back to the company. They can’t sell them to someone else. The only time they can transfer is if someone dies and it’s in their trust or will. Other than that if somebody wants to just cash out, it’s got to come back to us.

Mark: OK. Right now when you say you control 20,000 machines does that include NAS and the independent owners, or is that just NAS machines?

Joel: Right now the independent owners have about 6,000-6,500 machines – in that range.

Mark: That’s something like $120 million worth of equipment?

Joel: Sounds right.

Mark: So in a worst case scenario, NAS would be in a position to buy those machines back from investors?

Joel: Oh yes, absolutely. I would like to buy them back tomorrow to be honest with you, but most of my machines are with people that have owned them for years, they’re friends really, and they’re collecting 20% plus on their money.
I’ll turn the question to you. Let’s say you’ve been with us for 10 years and you are getting paid every month, without fail and I call you up and I say, ‘You got 50 machines; I’d love to buy them back. I’ll send you a check for a million bucks.’ What are you going to say to me? You’re going to say, ‘It’s going to cost you a lot more than a million bucks.’

Mark: Yeah because you’re buying the cash flow…

Joel: Exactly. We were approached by a big bank several years ago that offered us a fortune for our business. The only thing is, they didn’t want to take the independent owners machines. If I sold the company machines, it wouldn’t do me any good because I’d still have the same amount of work as far as the other machines are concerned.
So we didn’t sell out, and the current owners have a forever deal. If I probably had to do it over again, Mark, I would set it up differently. I wouldn’t do what I’m doing because the company is actually locked into the investors forever. My kids will be locked into the investors.
It’s been a wonderful business; don’t get me wrong and everybody’s thrilled with it, but I would probably structure it differently if I did it today.

Mark: What about these 2,500 new locations? Have you considered just buying them all yourself then and not offering them out?

Joel: We could except I have so many obligations from current owners that are waiting for new locations. I wouldn’t do that to them.
The way it’s probably going to come out is we’re probably going to take half of them and offer out the other half of them. That’s the way we’ll split them up.

Mark: OK, fantastic. I wish I would have bought a few machines years ago! Anyway, I want to let you get back to enjoying your vacation.

Joel: Thanks Mark. Take care, aloha!
Have a great weekend!
- Mark
“The use of money is all the advantage there is in having it.” – Benjamin Franklin