In Search of a Sure Thing
Investors in this ATM deal thought it couldn't fail. They were wrong.
By David Landis, Contributing Editor
From Kiplinger's Personal Finance magazine, February 2005
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Trainor says that the only lead Cash Link provided was a sparsely trafficked kosher deli in New Jersey. When Trainor went to see the owner, he would not accept a machine, saying that he kept little extra cash on hand to fund ATM withdrawals. As if on cue, a customer paid for a $28 order with two $20 bills, and the owner struggled to make change.
Months after Cash Link set up shop, regulators started to suspect that the company wasn't legitimate. In December 2003, South Dakota ordered the company to stop doing business there. Gail Sheppick, the state's director of securities, says that his office first discovered Cash Link through a newspaper ad. The cease-and-desist order was issued after Cash Link didn't respond to a letter requesting information about the business. The Texas State Securities Board issued a similar order in February 2004. Regulators in both states say that because Cash Link was headquartered elsewhere, their primary concern was to keep it from victimizing residents of their own states.
The feds step in
When it appeared that state actions weren't slowing Cash Link down, the SEC came on the scene, filing suit last July in federal court in Texas. The agency alleged that Cash Link was engaged in a "fraudulent scheme," and it convinced a judge to freeze Cash Link's assets and appoint a receiver to help victims recover their money. "The SEC believed investors from virtually all 50 states were being defrauded," says Kevin Edmundson, the SEC lawyer in charge of the case.
At last word, the receiver, Dallas lawyer Michael Quilling, had recovered only about $1 million in assets. Additional assets could be recovered as part of a settlement with Cash Link's owners, although their identities have been shrouded.
The person identified in the SEC complaint as Cash Link's president is Alan Levine, 71. But Needelman, in the deposition he gave in the SEC's suit against Cash Link and Levine, describes him as a figurehead, a view seconded by Levine's lawyer.
In the same deposition, Needelman says Cash Link was started by the backers of another firm, Ameri P.O.S., which also sold cashless ATMs and prepaid phone cards. Ameri P.O.S. filed for bankruptcy in mid 2004 after generating 94 complaints to Florida regulators. But bankruptcy filings and legal skirmishes with regulators are not necessarily a barrier to starting new or parallel ventures under different corporate guises. "There have been five or six companies that have opened and closed that look, smell and sound just like Cash Link," says Bob James, a compliance officer with the Florida Department of Agriculture and Consumer Services.
Offer of help
Not all cashless-ATM ventures are scams, insists Michael Gilot, president of ATM Alliance, an Austin, Tex., dealer in ATM and credit-card equipment. Many small firms would be happy to accept cashless ATMs and share in revenues they generate, he says. Typically, these businesses can't afford to accept credit-card payments (because of the fees they must pay to sponsoring banks) but want to offer customers a way to use credit and debit cards in their stores.
Gilot has offered to find a home for the machines owned by victims of Cash Link. The catch, though, is that ATM Alliance wants half the commissions investors were expecting under the terms of their Cash Link deals. That's fair, Gilot says, given that it costs $600 to $1,500 to place a machine. He says "several hundred" Cash Link victims have taken him up on his offer.
Trainor, who borrowed about half the money he invested with Cash Link, says he "hit a wall of depression" after realizing that he had been bilked. He expresses little interest in ATM Alliance's offer and hasn't decided what he'll do with his 25 machines. He says he has little hope of recovering more than a token amount of the money he lost. For Trainor, the whole experience has been a "faith breaker. I just don't know who to trust."
--Research: Amy Esbenshade Hebert