ATM LEASEBACK SCHEMES-- any insight?

[Tednewsom]

I just discovered this board-- and I'm in awe at the smarts and savvy here. So I'll defer to my elders and betters with a naive question: are there ANY firms that run an "ATM leaseback program" which AREN'T scams? 'cause man oh man does this whole thing smell like ol' Doc Ponzi to me.

I have a good friend who's invested +/- $80,000 in this company, and at one time encouraged me to invest as well. She was pulled into it by a friend, whom she trusts implicitly. I know the friend, and have found her bright, smart, and more than occasionally naive as a child.

The set-up is this: you sign up and pay a chunk of change (about $20,000-- E-Z terms available through the company, of course; more than happy to forward you to a receptive lender) to "own" an Automated Teller Machine, which the company will place in some high-traffic area. You then "lease back" the machine to the company, which operates it and manages it. You and the company then split the usage fee on each ATM transaction 50-50. Plus, the company "guarantees" a minimum monthly income of $200-300 bucks; could theoretically be more, depending on traffic.

At the end of the "lease" period-- like, after you've made your initial payment back-- oh, boy, oh, boy, it's all gravy. Of course, at $3600 a year, you're still in the hole for the first six years.

(The actual ATMs themselves, from what I've poked around & found out-- cost about $2000-$5000 to buy. Already this is looking like a great deal... for the company. That's a 300% profit.)

And in the meantime, you're encouraged to buy more ATMs (Well, sure it's a good deal! You already see for yourself what a good investment they are-- hey, you're getting a check for $300 every month!)-- PLUS you get a couple grand for every mark-- (ahem), I mean sucker (kaff-kaff, pardon me), er, that is, every new client you bring in.

I've done a great deal of on-line research on assorted actions by the SEC and state attorneys against similar companies, and the story sounds the same, conviction after conviction. Often the company ends up buying no new machines whatsoever, they just haul in new suckers, pay out to those who jumped on board early... and eventually are either popped or they go bust as the pyramid collapses of its own weight.

I also emailed my Secretary of State after I found a public notice that this particular company had its license revoked two years ago for nonpayment of a filing fee. I explained what the company did and what I knew about it in the most dispassionate terms possible, and got a return email, quite pleasantly saying, "We understand your concern, but hope you understand we cannot discuss ongoing investigations." Mmm. Ongoing investigation, eh?

Without any definitive statement or opinion regarding the honesty or legitimacy of the company, I will state that, according to the company's on-line SEC business filing, it does business as Nationwide Automated Systems; it is located in Canoga Park, California; it is an offshoot of two Nevada-based companies, ATM Holdings, Inc. and its predecessor, Trigate Associates, Inc. According to this filing, the principals are Joel Gillis, a former insurance salesman, and Edward Wisher, an accountant.

You guys know a potfull more about all this than me. And I have a beloved friend who has pretty much her entire retirement tied up in mystery ATMs which may or may not even exist. Any advice would sorely be appreciated.

Thanks.

[Tednewsom]

* SEPTEMBER 21, 2009, 9:48 A.M. ET
This is exactly the sort of scam I'm worried about (recent article from Dow Jones):

Two Charged in ATM Ponzi Scheme

By CHAD BRAY

NEW YORK -- Two men are facing criminal charges for an alleged $80 million Ponzi scheme that revolved around purported investments in automated teller machines, prosecutors said Monday.

Vance Moore II, 55 years old, of Raleigh, N.C., and Walter Netschi, 62, of McKinney, Texas, have been charged with conspiracy to commit wire fraud and nine counts of wire fraud. Each charge carries up to 20 years in prison.

"Vance Moore II and Walter Netschi used false promises and fake returns to steal tens of millions of dollars from their victims. We will continue to use the full resources of our office to expose the perpetrators and vindicate the victims of complex financial frauds," said U.S. Attorney Preet Bharara in a statement.

Mr. Moore was arrested in Garner, N.C., on Friday and Mr. Netschi is expected to surrender to federal authorities in Manhattan on Monday. Mr. Moore is expected to appear in federal court in North Carolina Monday. Mr. Netschi is expected to appear before a U.S. magistrate judge in Manhattan on Monday.

Prosecutors from the U.S. Attorney's office in Manhattan alleged Mr. Moore and Mr. Netschi solicited more than $80 million in investments in ATMs that they represented to investors were placed in retail locations nationwide, including convenience stores, gas stations, malls and hotel. Instead of using the money to purchase ATMs, the men used the money to further their fraudulent scheme and enrich themselves, the government said.

Mr. Moore and Mr. Netschi entered into contracts with victims falsely representing they have purchased about 4,000 ATMs, prosecutors said. About 90% of the machines purportedly purchased either didn't exist or weren't owned by the men, the government said.

To further the scheme, Mr. Moore and Mr. Netschi allegedly sent phony monthly reports and payments to victims purportedly related to their investments, prosecutors said. The payments weren't revenues from the ATMs, but were from money the men had collected from new investors, prosecutors said.

Write to Chad Bray at chad.bray@dowjones.com

[cdj1122]

Let's see if I understand the situation.
.
It walks like a DUCK,
It talks like a , errrr DUCK,
It smells like those Duck farns on Long Island I used to drive past, DUCK again,
You haven't found any golden eggs, so that eliminates a Goose,
The only time it is mentioned in news reports is when some clever devils win an all expense paid vacation to the Graybar Hotel,
And,
The Secretary of State refuses to comment due to pending investigations,
.
Hmmmmm , ........ A real Puzzler this one.

[Tednewsom]

LOL.


Hey, I never bought into it as anything but a transparent pyramid con.

The problem is, trying to talk someone out of the emotional & irrational belief that a friend would never betray them, even innocently. That is, of course, the key to a successful "affinity scam." "They're just like me, so they would never screw me." It's best from friends and family, of course.

I have made my grave reservations known to my friend-- although I haven't yet mentioned the "pending investigations" detail, nor the fact that I found out the company's license to do business was suspended 2 years ago due to non-payment. (To the latter: hey, maybe the paid the bill in the meantime and there's just no record of it. Or...)

She relayed my concerns to her girlfriend, who replied, oh, yes, there are some of those companies that are dishonest, but I've known these guys for several years and this company's much different than those others.

*sigh*

So I'll ask the question again: given all the caveats, given all the reports of indictments and clampdowns, given all the obvious signs of fraud and scam inherent in any "equipment leaseback" scheme... is there ANY record of such a company being totally legitimate?

Hmmm...

[sedempet]

Any news on this? I am also very curious about Nationwide Automated Systems. I can't find anything online that gives much information.

Any information is much appreciated!

[Tednewsom]

Walkin' like a duck... squawkin' like a duck... Duck!

[ArthurWankspittle]

Sounds like a 21st century version of the payphone scam. Punters were asked to do deals involving buying payphones which would be placed in profitable areas, split the revenue, maintenance done by company, etc. etc. The ATM is the new payphone.

[JamesVincent]

What Arthur said. With something like that a dead giveaway would be if you asked about licensing. IIRC in Maryland they have to be licensed and tagged individually, just like entertainment machines.If something like that was what you are interested in there are several companies that sell the units directly to you and you can also find them used in places like Craigslist and others. One of the business I worked with for a few years had several ATMs in different bars and pool halls and made decent money out of them and I dont think he spent more than $4,000 on an ATM. Maybe pulling some facts from companies that are legit can help your friend understand better what s/he got into. And it may not have been the friends friend being malicious, they may have been duped as well and figured they were doing a good thing.

[Nikki]

At least the duck isn't quacking about non-recourse funding and taking tax credits for complying with the laws regarding access for disabled individuals.

[Tednewsom]

The suggestions almost invariably come from friends and acquaintences, a variation on the "affinity scam." Why, your own friend wouldn't steer you wrong, would they? Answer: they would if they were duped, too.

Yes, the set-up is exactly the same as the pay-phone scam, or office equipment "lease-backs," etc.

James Vincent's quoted price of an ATM is pretty on-point. There are more elaborate bells-n-whistles machines for $5000-7000, and simpler ones for as little as $2000. You have to figure that an established scam outfit gets a discount on machines because they buy so often (or worse, that they don't really buy any handware at all-- they just SAY they do. And the location is most often so distant, you'll never ever visit "your" ATM.)

If a sensible retailer wanted ATM service on site, he'd buy a machine outright himself, not lease it from one of these companies. Even if a retailer spends +/- $1000 a year in upkeep (refilling the machine's bank, occasional tech problems, etc.), in seven years, that's a total outlay of perhaps $11000-15000-- and he keeps 100% of each transaction fee.

But to buy into an "ATM leaseback" scheme, it's usally a minimum of $19,000 to as much as $30,000, and although you receive a check every month, you actually do not see any "profit" for 6-7 years. You're simply getting dribs and drabs of your own money back, plus you're splitting the usage fees with the company-- and the company pockets about 10 grand on each sale up front.

It's that consistent monthly check which looks superficially so enticing to suckers. "Look! I'm making money regularly! Every month!" Yes, dummy-- that's the money you gave them!

[JamesVincent]

If a sensible retailer wanted ATM service on site, he'd buy a machine outright himself, not lease it from one of these companies. Even if a retailer spends +/- $1000 a year in upkeep (refilling the machine's bank, occasional tech problems, etc.), in seven years, that's a total outlay of perhaps $11000-15000-- and he keeps 100% of each transaction fee.

The places youll find an outside ATM are usually a smaller store that doesnt want to be bothered with it at all or a chain that has a contract with a service provider that provides them for them. We dealt with all types of entertainment machines, like touch screens, pool tables and whatnot. Believe it or not there are still some places that do not take credit cards and more and more gas stations are switching to having a discounted price for cash around here so there are places that you can put an ATM into, just takes some work to find.

[Timetogetitright]

The person who wrote this negative blog about the ATM has so much incorrect information in their comments that I just had to comment. The company has been in operation for over 18 years. I have watched it and have even bought my own machines. I have watched it for over 13 years.

Almost all information supplied in the negative blog is incorrect. The cost, the terms, the comments about financing, the statement about commissions paid for "marks",the payout and even the non pIayment of secretary of state fees. The non payment of the secretary of state fees was on a different company named Automated Teller Machines, Inc.. That company was never fully set up to operate so there was no need to pay fees on a company that was not to be used.

Before I invested I did my own due dilligence investigation. Anyone that spends a little time will find that the negative blog is incorrect if far more ways than it is correct.

One things is for sure. I will keep my investment in this company and all the doubters out there can continue to invest in companies like Enron, Tyco, Worldcom and the list goes on and on.

[notorial dissent]

Timetogetitright, welcome to Quatloos.

Since this is a relatively dead, or at least should be topic, first question, I'm curious as to what brought it to your attention?

Second question, since you have made the statement, just what exactly is incorrect in the previous postings?

Inquiring minds want to know?

[Tednewsom]

So would I. I would dearly love NOT to be concerned about my friend's investment (or anyone's, in general).

The length of time in operation seems like a positive aspect, but I'm not sure it's a decisive factor. You'll recall that Bernie Madoff practiced his magic for more than 30 years, but the end result was the same as the guy on the streetcorner with the three walnut shells and the one dried pea. I could've sworn that pea was under the middle shell.

Seriously, a couple of answers from the new member of the thread could be enlightening, and change my entire attitude. Why, she might even convince me to become a partner myself!

1) Why does the company charge its customers-- oops, "associates"-- different rates for buying the machines based on the ability to pay? In that, I mean: if a potential customer lives in, say, Newport Beach (a rather hoity-toity, upscale area), why do they get hit for more money than someone in, for example, the more working-class San Fernando Valley, for exactly the same machine & leaseback arrangement?

(Or are you perhaps unaware that this is done? Because it is.)

2) Have you personally ever seen any one of "your" ATMs? That is, have you ever gone to the location where the paperwork says your leased machine is operating and compared whether the serial number is the same as in your agreement? Or, barring a trip to an Indian casino in Montana or a 7-Eleven in South Philly, have you ever contacted anyone at the location to verifiy that there is indeed a security on the premises? (Since the machines are physical property, they are securities, legally, no matter what linguistic rigamarole in the contract.)

3) If the purpose of the company is to make money for both the "partner" (we shan't call them "investors"; the SEC would probably get nosy) and the company, why then does the filing statement to the California Sec'y of State say specifically that the company makes its money selling machines at a profit, and that any income derived from use of the machines is secondary and not even to be expected?

4) Why would anyone think buying a $2000 machine for $19,000 is a good deal? I mean, it IS a good deal for the outfit selling the machine, sure, but I mean the average Joe.

5) Mathematically, how can any company guarantee a minimum monthly return on an investment? That is part of the pitch: your money is safe, because you absolutely, 100% positively will receive at least the minimum payment of +/- $300 a month, whether or not the ATM actually makes a profit in a given month (or quarter, whatever).

(And further, why does the official State filing for the company say specifically that the company does not guarantee any minimum payments? Does this perhaps seem to you slightly at odds with what is told to prospective "partners" in the sales pitch?)

6) If it is such a no-lose proposition, why does the company rely on word-of-mouth references and "satisfied customers" referring friends and family as potential "partners"? Why not advertise, shout it from the rooftops, take out billboards and skywrite it?

7) More broadly speaking, if it were a viable business plan and a "can't lose" deal with (what looks to me) like a guaranteed 15-to-20% annual return... why haven't the major financial players like B of A or Chase swooped in and cornered the entire business?

Or, on a more minor level, logically speaking, if the whole "ATM leaseback" deal was so resolutely positive, why would the company seek individual outside investors at all? Wouldn't you think the principals would want to corner the market themselves? Crunch their own positive numbers, write out a business plan explaining how it's a proven, "can't lose" proposition, show the numbers to a bank, and then own every ATM from Sarasota to Tijuana? And yet, it relies on someone telling their friends, "I've got this really cool investment deal you might like, and I get a little check every month..."

Does this not seem a puzzlingly low-key way of spreading the word?

Since you are an "insider," the right answers from you to these questions would certainly make me feel a lot more secure. I'm sure that others here, far more knowledgable than me in these things, will have even better questions.

And btw: I would bet a hundred bucks that you, personally, are a smart, honest and caring human being, who genuinely believes the operation is 100% legitimate.

[notorial dissent]

I agree, I would like to see some response to those questions as well.

[jbv]

I own a alternative investment broker dealer in Los Angeles. Every year 5 to 10 of my clients come to me to investigate gillis and the ATMs. Each year I try to call him expressing my desire to do homework for clients and if him and his ATMs pass our firms due diligence, we could potentially bring them more money than they could handle. Year after year it is the same story. No response at all. Call after call nothing. I have met many clients who have been involved for over a decade and swear by their 20% returns but when I push them for more detailed descriptions of the machines they own. Unfortunately they don't have solid answers other than they get checks each month. Ponzi's can run for years until they implode on themselves.

If an investor can't answer the questions poised above in the other comment about their investment I suspect they too are being led down the yellow brick road of blind belief. Sadely these stories end in the same fashion year after year.

Legitimate investments shout to the world about their accomplishments and welcome scrutiny. I have worked and raised hundreds of millions for hundreds of great alt investments. Beware of the "secrete" friends and family only deals that shroud themselves in a "trust me" lack of transparency.

[Tednewsom]

Note to "timetogetitright"

You stated "The non payment of the secretary of state fees was on a different company named Automated Teller Machines, Inc.."

-- a "different company" which just happened, by the wackiest coincidence, to have the same principle officers and the same address as the other one, and dealt in precisely the same "service" on exactly the same terms. Huh. What are the odds? Well, no wonder there's confusion, huh?

Note to jbv:

Ah, another precinct heard from. That's precisely the sort of information I've gotten from others... which does raise far more questions than it supplies answers. Thanks. Please drop me a p.m.

note to self: Ironically, I'm watching the Jessica Lange movie "Frances." Funny old world.

[notorial dissent]

And still from timetogetitright the sound of crickets was heard, which is to say nothing. Imagine that???!!!!

[flatsixforme]

Hi all,

This is my first post and my first time to this site was a couple days ago when I found this thread after researching Joel Gillis and his company Nationwide Automated Systems. I feel compelled to reveal some more facts to this thread as there is little information on the web about him or his companies practices.

I've been approached now twice by a family friend to call Joel Gillis and invest in his ATM business. The first time was at a party, it was loud and the family friend was drunk so I dismissed it. The most recent time was this past weekend at a brunch. I took the opportunity to inqurie and ask questions as his first pithc to me left me scratching my head. It started as, "hey, what would you do if you had $500k?" I gave my answer. Next he said he was getting a guaranteed 20% return on his investments. I inquired further and this is what I found out about this particular person's investments in Joel's company:

- He "owns" over 200 machines and his cost is $11k/machine.
- If I were to invest today's price is $12k/machine.
- He started investing from what I can gather in the mid to late 1990s (which matches with what the SEC filing date is)
- He met Joel through a very wealthy client of his.
- He does not work anymore (used to be a high end home home GC) and is now in his early 50s.
- He gets a guaranteed 20% return. On the months where his check in the mail is not 20% he tells Joel and another check is sent.
- Some machines produce more than 20% each month and he gets that windfall. He says his machines are averaging about 25%.
- He invited me several times in the conversation to come up to LA and stay the night at his house, then we would all have breakfast with Joel the next morning and I could pepper him with all the questions I wanted.
- When asked, "why does Joel need your money and why would he need to pay out 20%?", he siad the model is for every $12k investment Joel buys 2 machines...one is Joel's and the other is the investors where Joel leases the machine back from said investor.
- When asked if he had ever seen one of his machines his answer was, "No."
- When asked how long the lease is for he said, "forever." I raised my eyebrow and told him that that was not a legal contract because nothing can be in perpetuity. I then asked when I got my initial investment back and he said, "whenever you want, you just tell Joel you want him to buy you out of a machine and he'll write you a check".
- I asked him how wealthy Joel was and he said a multi-multi-millionaire many times over.
- When I questioned the business model asking many of the questions already posed in this thread like, "why not get a business loan from a bank and make the company much more profitable?" and, "why have other larger institutions not taken hold of the business model?" he didn't really have good answers. He kept hanging his hat on the fact that there are only so many ATM sights that pop up each year and so the amount of machines to invest in is limited.
- I told him that the model just didn't add up in my head and didn't make business sense. Nobody would set up a model and pay double or triple the going return. This is where he got a bit defensive and said he talks to a lot of people who dismiss this investment idea but that he's proof that it works. He then kept telling me to buy just one and see how it went.

I get the impression that my family friend is one of the early investors in the company. I don't really know him well enough to know if he is being dooped or is in on the ponzi scheme. I didn't get the sense that there was any "mark" like other ponzi schemes but it could be he just didn't mention it. At the very least I hope this adds some clarity to this business structure. To me, it does not add up and therefore, I won't be touching Mr. Gillis' company with my nor anyone elses money!

All the best to all in their future endevors,
Flatsixforme

[Tednewsom]

Interesting again. The current costs that I'm aware of are still $19,000, for the same "product." Well, that's in the Valley. I think the same thing is sold (by the same outfit) in Newport Beach for $25,000. Only $11,000? Wow! Get in on the ground floor, flatsixforme, it's a bargain at half the price!

Go ahead, guess which shell has the pea under it. Don't take your eye off the shell, pay attention. Okay, now guess. It's easy.

PS. If (let's say, hypothetically, with all due courtesy to your friend) I hooked a chump on the line who'd given me $2,200,000 over the years, I wouldn't mind sending him a check for an extra fifty bucks a month either. And if he's out there beating the bushes for other "investors"... ...it's certainly worth my time to toss him an extra grand for roping another mark into the fold.

Or, what the hell... maybe my friend's girlfriend is right when she says Gillis assures her it's legit... assures her that, sure, yes-yes, there are a lot of companies out there which operate in the exactly same way but are crooked, but this one is different. This is the world's one and only honest ATM leaseback scheme.

Hey. It could happen. Right?