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Matter of People v. Leasing Expenses Co. LLC
Citation: 2021 NY Slip Op 06444Docket: Index No. 452357/20 Appeal No. 14642-14642A-14642B Case No. 2021-01114
Court: Appellate Division of the Supreme Court of the State of New York; November 17, 2021; New York; State Appellate Court
Original Court Document: View Document
The Appellate Division, First Department, affirmed the Supreme Court's March 16, 2021 order, which permanently enjoined Leasing Expenses Company LLC and associated respondents from engaging in equipment finance leasing (EFL) activities. This order followed a prior ruling that found the respondents in violation of Executive Law 63(12) due to their involvement in a fraudulent leasing scheme similar to that of Northern Leasing Systems, Inc. The court highlighted that the lease terms used by the respondents mirrored those of Northern Leasing, including provisions that prevented cancellation and enforced automatic renewals. Complaints from lessees revealed that independent sale organizations employed by the respondents engaged in deceptive practices, such as misrepresenting savings and omitting lease details until after signatures were obtained. Some lessees alleged forgery of signatures and malfunctioning equipment. The respondents continued to demand lease payments despite these complaints and unlawfully enforced leases that had been rescinded based on the previous Northern Leasing ruling. Executives Schachter and Krieger, former Northern Leasing officials, were found to have knowledge of the prior fraudulent activities and were deemed personally liable for perpetuating the scheme through their roles in the current companies. The appeals regarding a temporary restraining order were dismissed as moot and subsumed within the judgment appeal. Cohen and Mezei, founders of Northern Leasing, established entities NLS-EF and LEC through family trusts to continue fraudulent activities related to Northern Leasing. They have been identified as liable for fraud due to their knowledge of the scheme and control over these entities. The family trusts were created specifically to manage ownership of the successor entities and facilitate ongoing fraudulent operations. Evidence suggests that the trustees were aware of the businesses' activities, implicating them under Executive Law 63(12). Cohen and Mezei also control Fieldston Capital LLC and JS Ventures Holdings LLC, which received proceeds from the fraudulent activities. The establishment of NLS-EF and LEC violated a prior injunctive order against Northern Leasing, with significant overlap in management and operations among the entities. The court found ample support for applying alter ego liability to NLS-EF and LEC due to their connection to Cohen and Mezei, who orchestrated the fraudulent scheme. The petition was backed by competent evidence, including non-hearsay affidavits from lessees detailing their experiences with the respondents. Additional evidence included complaints to state attorneys general and the FTC, demonstrating that the same lease forms and methods were used to perpetuate the fraud. The court determined that the injunctive provisions were appropriate and rejected the respondents' arguments against them. This summary reflects the court's decision and order issued on November 18, 2021.