ATM LEASEBACK SCHEMES-- any insight?

[webhick]

Anyone interested in the tax implications would be wise to see what the IRS has to say on the matter. And it does not appear to involve amending prior returns.

[Nationwideinvestor]

Mike Hiltzik, guys. LA Times' financial expert, Pulitzer-prize winning investigative reporter, and a friend.

If he's got the time and interest, he's the guy.

(No, I'm not taking a commission on every ATM investigator I'm selling.)

If he's *a friend* show him this blog!

It might best wait and get facts which will be publically available shortly.
The process has started and a great deal of press is counterproductive at this time.
We urge everyone to stay calm until the trustee takes over and the proper conduit for information is established and the authenticated facts become public. The creditors will NOIT benefit from publicity at this time. The creditors will benefit from the full cooperation of the debtors and that becomes more difficult in a public forum. There is plenty of time for drama downstream. What is important is for those harmed to have an optimized chance to recover losses and the press will only have access to speculations that will harm and identify victims which at this time should remain private.

[Nationwideinvestor]

SNOOKERED - Not knowing what is going on about anything and assuming some agency is working to help victims, is wearing on everyone. To top it off, I have info that could be helpful to the SEC & FBI, and they won't even reply to my emails or phone calls offering to discuss/provide this to them, so can't count on them to resolve anything before Joel & Ed unload all their assets. Someone in another post just suggested a name of an investigating journalist for the LA Times, so I think its time to get them involved and see what turns up. Otherwise It may be time to contact an attorney like the three women did to file a bk petition against NAS for breach of contract/stopping pmts.

I think contacting a reporter is a good idea. I don't think hiring an attorney at this point is. Why throw more good money after bad? At some point, the authorities will reach out to us. They just don't seem to be ready for that just yet. As difficult as it is, I think we just have to be patient.

Contacting the press is a very bad idea and limits the ability of the parties to work together in confidence. A team of attorneys have already advised against going to the press at this time as it is counterproductive to the resolution and becomes still another issue to manage by the debtor, the creditors, the trustee and most of all the victims. Once the bankruptcy is accepted by NASI, every investor will have equal footing with the trustee. The trustee will be the conduit for all investors and will be contacting each for details. There is no opportunity now for independent legal action, other than to get information on how to deal with the loss personally depending on what kind of entity it was in. But there is value of getting educated. Read about how Chapter 7 are handled. Victims disserve privacy as possible.

[Nationwideinvestor]

Thanks!! Unless some else has already contacted Mike at the LA Times, I'll be contacting him tomorrow.

Don't do it. See other post.

[Judge Roy Bean]

Breaking News.... I have been told by a rather reliable source that Joel and Ed have been arrested and are going before the Grand Jury today.

Does anyone know if there is a way to confirm this?

It's a specious question. Grand Jury proceedings are secret. Arrest records are not. The accused who are arrested are arraigned in a court where they have counsel, not taken before a Grand Jury as witnesses. Your allegedly reliable source is confused about how a Grand Jury works and the criminal legal process in general.

Either that or you're simply making stuff up to make some kind of point.

[MarvinGardens]

Originally much of the information in this post was a response to questions posed to me by PM. There are many people with advice and opinions, now that this scheme is unraveling, and clearly some have expertise. I can lend some insight for those of you who hold NASI contracts inside an IRA. I've decided the information I provided might be of some use to those of you who have questions about IRAs and am posting it to the general forum.

In general, IRA custodians stand between the investor and the IRS. Their primary responsibility is to do the accounting and accurately report the condition of the IRA to the IRS. Secondarily, it is to weed out the clearly prohibited investments. It is not, as I have posted before, to make a determination of the quality of the investment. That's between you and your financial advisers.

Most IRAs, which has been pointed out by others, offer a fixed menu of pre-screened investments, like a basket of mutual funds, among which you may choose. If you want to go outside that environment you must have a different kind of IRA. There are IRAs which allow you to invest in gold bullion, or real estate or other specialized investments. But they generally have considerable expertise in the defined area which will keep you in compliance with IRS regulations.

It is unlikely to be able to use a regular IRA for an investment in NASI. The most likely scenario is that the investment is done through a self-directed IRA. See my prior post for an example of how a self directed IRA, in this case PENSCO, presents its obligations.

One question on a PM was about NASI changing IRAs. That's not necessarily suspicious conduct.

There could be all kinds of reasons for changing custodians - and the NASI scheme could be acceptable to many self-directed IRAs. An obvious scheme wouldn't get past cursory examination. Any kind of investment that directly benefits the owner of an IRA or a close relative would be prohibited and not accepted, for instance, and virtually all self-directed custodians would catch that.

That said, some promoters do work directly with IRA custodians. They go in, introduce themselves, explain what the investment is and answer any questions. The understanding is that the promoter will direct investors to that particular self-directed IRA which presumably understands the investment and will then accept it without undue delay or challenge. It's an honest quid pro quo.

And this makes sense. If you have an investment that is difficult to understand, you don't want to present your case to dozens of IRA custodians. What made it possible for Joel to tell prospective investors that you could hold the lease inside an IRA was that he'd found a self-directed IRA that would accept his structure and he required you to use it if you wanted to hold it inside an IRA. This is not unreasonable.

By the way, custodians can be conned too. These firms aren't as competent as people imagine. Neither is the IRS.

Let me give you an example of just how far you can go:

I have an LLC, which I manage, the stock of which is wholly owned by my wife's IRA. That structure allows me to invest in anything. I created it to speculate in rental properties in foreign countries - which is quite difficult to do, even inside a self-directed, real estate investment oriented IRA if time is of the essence. If I want to move quickly, I don't have time for the staff of an IRA to review and bless an investment which is beyond the area of their experience. The deal could disappear before they could make up their minds.

This structure is so difficult for people to understand that it took me a year to open a bank account for the LLC. (I didn't want to use the law firm's recommended bank.) I finally was able to do it with a bank where the president knows me personally. And even then I had to quote the law in that state.

There is one California custodian that routinely allows it because the lawyers who created this structure went to the custodian and showed them precisely what they were doing. The custodian's lawyers agreed it was legal and the law firm directs all their clients to that custodian.

If I have any questions, and so far I haven't, the custodian will direct me to the managers who are connected with the law firm. They don't pretend to have the expertise to oversee the structure. And I am 100% responsible for what goes into that IRA. If I don't thoroughly understand the rules about prohibited investments (which I do), I could blow up the IRA. I mean immediate liquidation with penalties.

Now, I have definitely pushed the boundaries of what is generally acceptable in an IRA. But it is completely legal ... so far. The IRS is disallowing some of these structures, but they have attacked those which have investments in prohibited transactions. That's fair. But this is not the place to evaluate what is and what is not a prohibited transaction. A sale/leaseback agreement is not prohibited. Even, as I have suggested, this is an annuity - it is still not a prohibited investment.

If you owned and managed the ATMs directly, that would normally be prohibited. You may not, ordinarily, own a business inside an IRA. And, that's a feature that NASI offers - you buy a contract, they do all the management and you just get a check. From the custodian's viewpoint this is an allowable investment.

That the company who is the counter-party has perpetuated a fraud is immaterial. People invest in all kinds of investments that fail and often fraud is a component. Doesn't matter.

Those of you who have suggested the custodian has some kind of responsibility which gives you the opportunity to recover are quite likely wrong. Read your custodial agreement. Once you cross the boundary into self direction, you have assumed the responsibility to vet the investments.

That said, and I'm repeating myself here from previous posts, if your NASI investment is inside an IRA, the custodian will want some kind of proof that the investment has a lower value than the basis at which you purchased it. You can substantiate it by selling the investment or, at some point, the investment will be given a value - after the SEC has cleared all the payments and closed the case.

Keep in mind folks, many of us on this thread have declared this to be a Ponzi scheme, but the SEC has not. Our opinion will hold no authority with an IRA custodian. The principals are not in jail because they have not been charged. The investigation continues and I expect it will be a long one. That they are laying low is just simple prudence. There's a lot of pissed off people out there.

I don't know, but suspect, that there are a lot of hired hands trying to comply with an exhaustive subpoena in the hope that NASI may remain above water long enough to recover. Suing under chapter 7 for a declaration of bankruptcy does not put a firm in bankruptcy immediately. Nothing will move forward until that process is complete. And, IRA custodians are going to require proof that an investment is worthless before they will write it off.

[grimreaper]

Originally much of the information in this post was a response to questions posed to me by PM. There are many people with advice and opinions, now that this scheme is unraveling, and clearly some have expertise. I can lend some insight for those of you who hold NASI contracts inside an IRA. I've decided the information I provided might be of some use to those of you who have questions about IRAs and am posting it to the general forum.

In general, IRA custodians stand between the investor and the IRS. Their primary responsibility is to do the accounting and accurately report the condition of the IRA to the IRS. Secondarily, it is to weed out the clearly prohibited investments. It is not, as I have posted before, to make a determination of the quality of the investment. That's between you and your financial advisers.

Most IRAs, which has been pointed out by others, offer a fixed menu of pre-screened investments, like a basket of mutual funds, among which you may choose. If you want to go outside that environment you must have a different kind of IRA. There are IRAs which allow you to invest in gold bullion, or real estate or other specialized investments. But they generally have considerable expertise in the defined area which will keep you in compliance with IRS regulations.

It is unlikely to be able to use a regular IRA for an investment in NASI. The most likely scenario is that the investment is done through a self-directed IRA. See my prior post for an example of how a self directed IRA, in this case PENSCO, presents its obligations.

One question on a PM was about NASI changing IRAs. That's not necessarily suspicious conduct.

There could be all kinds of reasons for changing custodians - and the NASI scheme could be acceptable to many self-directed IRAs. An obvious scheme wouldn't get past cursory examination. Any kind of investment that directly benefits the owner of an IRA or a close relative would be prohibited and not accepted, for instance, and virtually all self-directed custodians would catch that.

That said, some promoters do work directly with IRA custodians. They go in, introduce themselves, explain what the investment is and answer any questions. The understanding is that the promoter will direct investors to that particular self-directed IRA which presumably understands the investment and will then accept it without undue delay or challenge. It's an honest quid pro quo.

And this makes sense. If you have an investment that is difficult to understand, you don't want to present your case to dozens of IRA custodians. What made it possible for Joel to tell prospective investors that you could hold the lease inside an IRA was that he'd found a self-directed IRA that would accept his structure and he required you to use it if you wanted to hold it inside an IRA. This is not unreasonable.

By the way, custodians can be conned too. These firms aren't as competent as people imagine. Neither is the IRS.

Let me give you an example of just how far you can go:

I have an LLC, which I manage, the stock of which is wholly owned by my wife's IRA. That structure allows me to invest in anything. I created it to speculate in rental properties in foreign countries - which is quite difficult to do, even inside a self-directed, real estate investment oriented IRA if time is of the essence. If I want to move quickly, I don't have time for the staff of an IRA to review and bless an investment which is beyond the area of their experience. The deal could disappear before they could make up their minds.

This structure is so difficult for people to understand that it took me a year to open a bank account for the LLC. (I didn't want to use the law firm's recommended bank.) I finally was able to do it with a bank where the president knows me personally. And even then I had to quote the law in that state.

There is one California custodian that routinely allows it because the lawyers who created this structure went to the custodian and showed them precisely what they were doing. The custodian's lawyers agreed it was legal and the law firm directs all their clients to that custodian.

If I have any questions, and so far I haven't, the custodian will direct me to the managers who are connected with the law firm. They don't pretend to have the expertise to oversee the structure. And I am 100% responsible for what goes into that IRA. If I don't thoroughly understand the rules about prohibited investments (which I do), I could blow up the IRA. I mean immediate liquidation with penalties.

Now, I have definitely pushed the boundaries of what is generally acceptable in an IRA. But it is completely legal ... so far. The IRS is disallowing some of these structures, but they have attacked those which have investments in prohibited transactions. That's fair. But this is not the place to evaluate what is and what is not a prohibited transaction. A sale/leaseback agreement is not prohibited. Even, as I have suggested, this is an annuity - it is still not a prohibited investment.

If you owned and managed the ATMs directly, that would normally be prohibited. You may not, ordinarily, own a business inside an IRA. And, that's a feature that NASI offers - you buy a contract, they do all the management and you just get a check. From the custodian's viewpoint this is an allowable investment.

That the company who is the counter-party has perpetuated a fraud is immaterial. People invest in all kinds of investments that fail and often fraud is a component. Doesn't matter.

Those of you who have suggested the custodian has some kind of responsibility which gives you the opportunity to recover are quite likely wrong. Read your custodial agreement. Once you cross the boundary into self direction, you have assumed the responsibility to vet the investments.

That said, and I'm repeating myself here from previous posts, if your NASI investment is inside an IRA, the custodian will want some kind of proof that the investment has a lower value than the basis at which you purchased it. You can substantiate it by selling the investment or, at some point, the investment will be given a value - after the SEC has cleared all the payments and closed the case.

Keep in mind folks, many of us on this thread have declared this to be a Ponzi scheme, but the SEC has not. Our opinion will hold no authority with an IRA custodian. The principals are not in jail because they have not been charged. The investigation continues and I expect it will be a long one. That they are laying low is just simple prudence. There's a lot of pissed off people out there.

I don't know, but suspect, that there are a lot of hired hands trying to comply with an exhaustive subpoena in the hope that NASI may remain above water long enough to recover. Suing under chapter 7 for a declaration of bankruptcy does not put a firm in bankruptcy immediately. Nothing will move forward until that process is complete. And, IRA custodians are going to require proof that an investment is worthless before they will write it off.

So...you think the IRA conundrum is really the *problem*?. Looks like NASI has a lot more to deal with...like maybe FRAUD?? Stay tuned

[MarvinGardens]

So...you think the IRA conundrum is really the *problem*?. Looks like NASI has a lot more to deal with...like maybe FRAUD?? Stay tuned

No, of course not. It's an area where I have expertise and can make a helpful contribution for those who are concerned with holding the investment inside an IRA. I explained that in the first paragraph. Didn't you read it before commenting?

[grimreaper]

So...you think the IRA conundrum is really the *problem*?. Looks like NASI has a lot more to deal with...like maybe FRAUD?? Stay tuned

No, of course not. It's an area where I have expertise and can make a helpful contribution for those who are concerned with holding the investment inside an IRA. I explained that in the first paragraph. Didn't you read it before commenting?

Thank you. In this instance having an IRA is moot, They will lose the investment if it's fraud.
Goverment doesn't insure IRAs.

[notorial dissent]

Whether the NASI holding was through an IRA, or whatever, is going to be largely irrelevant to the actual loss, it is gone, and most likely gone completely. The "investors" with their holdings in an IRA are pretty much in the same boat as the people who owned ENRON stock, SOL.

Again, this is something that will need to be taken up with a good tax lawyer or CPA who is familiar with the rules on this. Whatever was in the IRA is a loss to the IRA and not the owner.

[Tednewsom]

And at no place in MarvinGardens' long & detailed explanation does he (as far as I can see), suggest that an IRA might have magically protected anyone's loss. He's explaining an arcane series of stuff which may well be important to a victim for tax purposes, and to put things into perspective, like what is and is not "suspicious" behavior by a custodian or IRA manager, what is or is not their legal duty, a possibly legitimate reason why the con men preferred using one custodian over the other, and so on. And he actually seems to know what he's talking about.

No, it's not specifically about NASI or the two old boys who scammed everybody, no it's not another tale of "I was so dumb, it's all gone," and it's not another link to a Xerox version of the same scam. It's information which may be helpful in sorting things out for some of the 2500 victims who may have put their phantom holdings into an IRA.

Dismissing someone's input because that particular sub-topic does not fall into one's personal opinion of "relevant" seems pretty snippy to me.

One fella here-- no names, please-- dismissed my musing on how much an authorized or informal "salesperson" might make on sales of these things. "That has nothing to do with how the scam works." Hey, I didn't say it did, I just want to know how much one individual scammed off the victim I know (repeatedly, over 12 goddamned years.). Another poster -- no names, please. Well, I think it was the same no-names-please, now that I think about it -- dismissed my query as to the strange dichotomy between the $19,800 fee and the $12,000 fee "It doesn't matter for the purpose of the scam to operate." I didn't say it did! I just want to know WHY, because it relates to the amount of money scammed from an individual. Jeeeze.

[Lost Income]

Given the above comments, I'll not release this to the press yet. However, the reason for considering releasing this to the press, was in hopes of the press investigating this to provide investors some information. Currently investors have no verification that the SEC or FBI are actually proceeding with anything and no verification that the bk petition will benefit more than just the three investors involved with it, while Joel & Ed are free to do whatever including not honoring their contracts. Even all the ira questions are moot until there is shred of hard information on this situation one way or the other to discuss with a tax accountant.

[AndyK]

Perhaps the posters in this thread are not aware that many members of "the press" are members and/or readers of Quatloos AND that members of the press also keep themselves current on happenings within the SEC, bankruptcy courts, and so on.

If there were any factual, newsworthy information available, it would have been published already.

Makes one think ???

[webhick]

It may be that the press is well aware, but does not want to report on an investigation in progress, especially since the SEC may not be able to comment at this time.

[webhick]

Two more entries appeared on the involuntary bankruptcy docket: a stipulation and Notice of Lodgment. In the first, it states that NASI does not contest the allegations in the petition and that they consent to the order of relief. It's signed by their attorney, Henry N. Jannol.

Does anyone else find it odd that NASI would consent?

[Lost Income]

When I forwarded info to the FBI Tip Line Website suggested, I received a reply stating "that careful review of my information suggests the possibility of a fraud or ponzi scheme, so we recommend this information would be better relayed to the FTC". So apparently the FBI is not even investigating this, and now I'm not sure what or who to believe.

[Lost Income]

Webhick - Please can you explain what your posting means (sorry I'm not more familiar with this legal jargon).

[The Observer]

And at no place in MarvinGardens' long & detailed explanation does he (as far as I can see), suggest that an IRA might have magically protected anyone's loss...[a]nd he actually seems to know what he's talking about.

Exactly. Unfortunately the snippy attitude about MarvinGarden's excellent and knowledgeable posts present the risk that he or she may decide it isn't worth sharing information and insight in the future. And you can't expect them to have to defend or explain themselves to people who can't apparently comprehend why the information was offered in the first place - even after MG explained in the original post why he/she was sharing it.

Why cast your pearls before swine?

[dawnth]

Thank you MarvinGardens for the explanation. It is apparent you understand what it means to have the principal in essence in jail with a custodian under these circumstances.

So, for those who aren't getting it because this isn't something you are dealing with, its ok to leave out the unnecessary comments. Some of us, are using this board to acquire information and ideas. You are taking up space if you aren't providing useful comments.

Originally much of the information in this post was a response to questions posed to me by PM. There are many people with advice and opinions, now that this scheme is unraveling, and clearly some have expertise. I can lend some insight for those of you who hold NASI contracts inside an IRA. I've decided the information I provided might be of some use to those of you who have questions about IRAs and am posting it to the general forum.

In general, IRA custodians stand between the investor and the IRS. Their primary responsibility is to do the accounting and accurately report the condition of the IRA to the IRS. Secondarily, it is to weed out the clearly prohibited investments. It is not, as I have posted before, to make a determination of the quality of the investment. That's between you and your financial advisers.

Most IRAs, which has been pointed out by others, offer a fixed menu of pre-screened investments, like a basket of mutual funds, among which you may choose. If you want to go outside that environment you must have a different kind of IRA. There are IRAs which allow you to invest in gold bullion, or real estate or other specialized investments. But they generally have considerable expertise in the defined area which will keep you in compliance with IRS regulations.

It is unlikely to be able to use a regular IRA for an investment in NASI. The most likely scenario is that the investment is done through a self-directed IRA. See my prior post for an example of how a self directed IRA, in this case PENSCO, presents its obligations.

One question on a PM was about NASI changing IRAs. That's not necessarily suspicious conduct.

There could be all kinds of reasons for changing custodians - and the NASI scheme could be acceptable to many self-directed IRAs. An obvious scheme wouldn't get past cursory examination. Any kind of investment that directly benefits the owner of an IRA or a close relative would be prohibited and not accepted, for instance, and virtually all self-directed custodians would catch that.

That said, some promoters do work directly with IRA custodians. They go in, introduce themselves, explain what the investment is and answer any questions. The understanding is that the promoter will direct investors to that particular self-directed IRA which presumably understands the investment and will then accept it without undue delay or challenge. It's an honest quid pro quo.

And this makes sense. If you have an investment that is difficult to understand, you don't want to present your case to dozens of IRA custodians. What made it possible for Joel to tell prospective investors that you could hold the lease inside an IRA was that he'd found a self-directed IRA that would accept his structure and he required you to use it if you wanted to hold it inside an IRA. This is not unreasonable.

By the way, custodians can be conned too. These firms aren't as competent as people imagine. Neither is the IRS.

Let me give you an example of just how far you can go:

I have an LLC, which I manage, the stock of which is wholly owned by my wife's IRA. That structure allows me to invest in anything. I created it to speculate in rental properties in foreign countries - which is quite difficult to do, even inside a self-directed, real estate investment oriented IRA if time is of the essence. If I want to move quickly, I don't have time for the staff of an IRA to review and bless an investment which is beyond the area of their experience. The deal could disappear before they could make up their minds.

This structure is so difficult for people to understand that it took me a year to open a bank account for the LLC. (I didn't want to use the law firm's recommended bank.) I finally was able to do it with a bank where the president knows me personally. And even then I had to quote the law in that state.

There is one California custodian that routinely allows it because the lawyers who created this structure went to the custodian and showed them precisely what they were doing. The custodian's lawyers agreed it was legal and the law firm directs all their clients to that custodian.

If I have any questions, and so far I haven't, the custodian will direct me to the managers who are connected with the law firm. They don't pretend to have the expertise to oversee the structure. And I am 100% responsible for what goes into that IRA. If I don't thoroughly understand the rules about prohibited investments (which I do), I could blow up the IRA. I mean immediate liquidation with penalties.

Now, I have definitely pushed the boundaries of what is generally acceptable in an IRA. But it is completely legal ... so far. The IRS is disallowing some of these structures, but they have attacked those which have investments in prohibited transactions. That's fair. But this is not the place to evaluate what is and what is not a prohibited transaction. A sale/leaseback agreement is not prohibited. Even, as I have suggested, this is an annuity - it is still not a prohibited investment.

If you owned and managed the ATMs directly, that would normally be prohibited. You may not, ordinarily, own a business inside an IRA. And, that's a feature that NASI offers - you buy a contract, they do all the management and you just get a check. From the custodian's viewpoint this is an allowable investment.

That the company who is the counter-party has perpetuated a fraud is immaterial. People invest in all kinds of investments that fail and often fraud is a component. Doesn't matter.

Those of you who have suggested the custodian has some kind of responsibility which gives you the opportunity to recover are quite likely wrong. Read your custodial agreement. Once you cross the boundary into self direction, you have assumed the responsibility to vet the investments.

That said, and I'm repeating myself here from previous posts, if your NASI investment is inside an IRA, the custodian will want some kind of proof that the investment has a lower value than the basis at which you purchased it. You can substantiate it by selling the investment or, at some point, the investment will be given a value - after the SEC has cleared all the payments and closed the case.

Keep in mind folks, many of us on this thread have declared this to be a Ponzi scheme, but the SEC has not. Our opinion will hold no authority with an IRA custodian. The principals are not in jail because they have not been charged. The investigation continues and I expect it will be a long one. That they are laying low is just simple prudence. There's a lot of pissed off people out there.

I don't know, but suspect, that there are a lot of hired hands trying to comply with an exhaustive subpoena in the hope that NASI may remain above water long enough to recover. Suing under chapter 7 for a declaration of bankruptcy does not put a firm in bankruptcy immediately. Nothing will move forward until that process is complete. And, IRA custodians are going to require proof that an investment is worthless before they will write it off.

[ATM'd]

I just called the Office of the U.S. Trustee in Los Angeles - a division of the U.S. Justice Department - inquiring whether a Trustee had been appointed.

I was told "I'll transfer you to the Woodland Hills office - that's their case"

I left a message on the voicemail of Gabe Rodriguez requesting a callback.

I assume we'll know more shortly.