June 23, 2011
Con artist or lending lifeline? VetFinance Group under scrutiny
Veterinarians allegedly bilked by broker Ron Paterson
For The VIN News Service
To many veterinarians, Ron Paterson embodied hope as they struggled to keep their practices afloat amid a sinking national economy that caused pet owners to postpone medical care and local banks to freeze lending for business staples like cash flow and debt refinancing.
Ron Paterson was arrested
by the Lake Havasu City Police Department in 2007. He now brokers loans for veterinarians.
The banks said "no" while Paterson, a loan broker and owner of VetFinance Group, said "yes." But in some cases, Paterson's promises were not kept. Conservative estimates — tallied from the accounts of dismayed veterinarians posting on the Veterinary Information Network (VIN), an online professional community — reveal that tens of thousands of dollars appear to have been swindled from once-trusting DVMs.
Paterson, who has a lengthy criminal and civil record chock-full of cons and schemes, is accused of taking upfront fees ranging from $2,500 to $8,000 from veterinary clients in exchange for brokering loans for them. The alleged scheme, as told by victims, involves Paterson taking the money from clients to find banks willing to lend to them. Weeks into the hunt, he'd start dodging clients' phone calls and failing to follow through on loan initiatives.
Paterson became the man of a million excuses, and the money his clients initially paid became just as elusive.
In an interview with the VIN News Service, Paterson vehemently denied swindling veterinary clients and presents a variety of reasons for his missteps. Taken together, he paints himself as a businessman hit by bad luck in his personal life and alludes to other extenuating circumstances. He has not been arrested for his dealings within the veterinary profession, though authorities are taking notice. In an interview with the VIN News Service, Paterson cast his lot of unsatisfied veterinary clients as a disgruntled minority.
“There’s a lot who are happy,” Paterson said.
Amid dozens of complaints on VIN is one veterinarian who reports a positive experience with Paterson and his firm. Dr. George Cuellar, a practitioner in Woodland Hills, Calif., credits Paterson for saving his practice by helping him secure a $710,000 loan that lessens his monthly expenses by $4,000.
Still, Cuellar describes Paterson's business practices as questionable.
"The process was just bizarre from the beginning," Cuellar wrote on VIN of his dealings with VetFinance Group. He described everything from the paperwork he was required to sign to his communication with the broker as atypical. In February, Cuellar signed papers on a loan with Sunwest Bank in Laguna Hills, Calif. He initially starting the lending process with Paterson four months earlier.
"I was not being asked for the right material at first and was convinced this was not on the up and up," Cuellar wrote in his post. "...Then after I had sent in all the documents in January, we closed on a loan from Sunwest Bank that I would have never ever gotten on my own. For me, Ron saved my practice, and I forever owe him a debt of gratitude."
At the same time, Cuellar acknowledges that Paterson's list of unsatisfied veterinary clients is growing. He tells the VIN News Service: "I know there are a lot of pissed off veterinarians, and if I were on the other side of this, I'd be out for blood."
Dr. Lauren Bowling of Bloomington, Ind., was impressed by Paterson's winning personality and knowledge of the business. Dr. Aric Sabins in Roxboro, N.C., thought he had a nice website.
What they didn’t know was that Paterson, who now operates under the name VFG Practice Solutions, has a felony arrest record in Arizona and a Chapter 7 bankruptcy in his not-so-distant past. Well-known names in the veterinary profession, including Northeast Veterinary Supply Co. in Harrisburg, Pa., and Dan Scott & Associates in Westerfield, Ohio, have sued him, alleging fraud related to equipment lease payments. Nor did veterinarians know that he is being investigated by the Anaheim police in connection with the disappearance of funds raised by parents in the local Pop Warner Football League, where he says he is a coach.
“I never touched a penny,” Paterson said to the VIN News Service, while acknowledging that he is under police suspicion.
Bowling and her husband, Dr. Elad Stotland, operate the Bloomington Cat Hospital, a feline-only practice near Indiana University. She recalled being intrigued early last year by a letter she received advertising VetFinance Group and its loan offerings. Their practice was struggling due to the economy and a mistaken belief by some residents that the hospital was still owned by the previous veterinarian. Bowling and Stotland wanted to consolidate their existing loans at a lower interest rate and increase cash flow — a loan to pay bills in anticipation of revenues — but were shot down by local banks. They got in touch with Paterson.
“He told us we needed to pay a $3,000 filing fee for the bank,” Bowling recalled. “We were hesitant at first, but they had an ‘A’ rating from the Better Business Bureau in southern California, and there was nothing (reported) on VIN. He was incredibly believable.” (Paterson's BBB rating is now ‘F’)
They paid Paterson the $3,000 from a credit card.
Soon after, the veterinarians' frustration began and dragged on for more than four months. They had highs and lows, many of which are documented on the VIN message board. It got to where Stotland called VetFinance Group every few days. “He continually stalled us,” Bowling said of Paterson. Believing they were victims of predatory lending, the couple contested the credit card charge, got their money back and never heard from Paterson.
Then on June 15, Patterson phoned Bowling and Stotland to apologize after learning the couple shared their story with the VIN News Service. He promised to make things right.
How he will do that is unclear. Paterson tells the VIN News Service that he is no longer in the loan business; the loan application link to his website has been disabled.
Without a bank loan, Stotland looked for supplemental employment to help pay the bills but was able to find only part-time relief work near the couple's home and practice. He now works on the East Coast and comes home as much as he can.
Dr. James Ponder and his wife, Mary Ann, tried twice to get financing from Paterson and ended up suing him after he refused to return the $3,000 they paid for the privilege the second time around. They have two clinics: Romie Lane Pet Hospital in Salinas, Calif., and another one 17 miles up Highway 101 in Aromas. In their first contact with the company, they saw an advertisement for VetFinance Group and sought Paterson's help to obtain an equipment loan, which would use their practice's laboratory equipment as collateral. For six months, they sent him documents to secure a loan but had not yet paid a fee. When Paterson stopped returning their calls, the Ponders decided to put things on hold and explore other possibilities.
“So it’s almost a year later that we saw another ad for him, and we said, 'Let’s look into this again,'” Mary Ann Ponder said. “So my husband called him, and he (Paterson) gave him some cock-and-bull story. We can be pretty gullible sometimes in trying to forgive people and understand their problems. So we went through it all over again.”
For several months, they again sent Paterson reams of paperwork, she said, until one day Paterson told them that the bank he was working with was not going to lend to them. "He tried to convince us to go to another department of his agency that does these credit card loans," Ponder said. "The interest rate is, like, 30 percent!”
The Ponders asked for the return of their $3,000 upfront payment, she said, and Paterson refused.
“He made it sound like it was all our fault that we hadn't gotten the loan. And he never gave us the money back," Ponder said. "Then my husband finally, after months and months, said, 'This is your last chance. If you will return our money we won’t go any further with this.' He (Paterson) had the nerve to write us back a letter claiming we were blackmailing him because we were demanding our money back.”
Last year, the Ponders won a $3,000 judgment against Paterson in small claims court, but they have not collected the judgment. Asked why during a recent interview, Paterson could offer no reason. As for the runaround the Ponders endured, Paterson alluded to an unspecified “breach of contract” and “health issues” involving Mary Ann Ponder.
The complaints from other veterinarians against Paterson appear to be just as frustrating. Dr. Arik Sabins in Roxboro, N.C., told nearly the same story as Bowling and the Ponders. He paid $3,000 to Paterson upfront and was stunned when the broker also asked for the first month’s loan repayment before closing. Finally concluding he had been scammed, he got his $3,000 back by contesting the credit card charge.
Dr. Craig Ball in Gilmer, Texas, says he was out $8,000 but got $2,000 back by disputing one of the credit card charges. He said Paterson’s excuses for not securing a loan or returning his phone calls included being on an airplane, being out of town with his son for a sporting event and at dinner with clients. Paterson, he said, told him his financing would come from Bank of America. When a friend working with the bank searched Bank of America's computer system, Ball said, there was no record of anyone trying to get financing for him.
Paterson denies that there's any truth to that, but the details of his business dealings are as murky as his past.
Paterson lived with his family for a number of years in Lake Havasu City, Ariz., a desert community near the California border, three hours from Phoenix, three hours from Las Vegas, and four hours from Los Angeles.
In October 2006, Paterson promoted a $1.2-million rock festival at Lake Havasu State Park featuring Cheap Trick, Blues Traveler, the Doobie Brothers, Live, and the Black Crowes, among others. Paterson had dreams of being a big-time concert promoter, he told a local newspaper. But within days, rumors began circulating that vendors and the bands were not being paid. Lake Havasu City Police said they investigated five complaints of non-payment totaling $200,000. Paterson angrily denied that checks had bounced or anyone had not been paid. He claimed to be a victim, himself, of $200,000 in theft and ticket counterfeiting.
“It’s a non-story. I don’t believe this town,” Paterson told the Today's News-Herald in November 2006.
Six months later, Paterson was indicted on three felony theft charges for allegedly failing to pay nearly $75,000 to the band Cheap Trick, a local security company and the Howard Johnson Motel. His bond was set at $60,000 with the condition that the full amount be posted, not a percentage. Paterson spent nearly a month in jail before he was able to post bail. In July 2007, five more felony theft charges were added to the case, including the alleged failure by Paterson to pay $80,000 to the Black Crowes, $50,000 to Live and $30,000 to the Doobie Brothers, according to a story in Today’s News-Herald.
Despite the high-profile names involved, the case never went to trial. None of the bands filed as creditors when Paterson declared Chapter 7 bankruptcy on Aug. 16, 2007. In January of this year, Mohave County Assistant District Attorney Jeremy Huss threw in the towel.
“I dismissed it,” Huss said. “Not because there was no legitimate case. Everyone lost interest. It was really a nightmare to put it all together.”
Huss said the failure of the bands to file as creditors in the bankruptcy case was a factor in his decision to dismiss. He believes that Paterson got off “scot-free." Though he's aware of an ongoing investigation with the police in Anaheim, Calif., Huss would say little about it.
Paterson thinks the dismissal means that he was cleared of all charges, calling the prosecutor's claims that there was a loss of interest in the case "ridiculous." But he's lost a number of civil cases, including a $720,000 judgment in May 2005, when his former employer, CB Richard Ellis, Inc., proved that Paterson pocketed a half-million dollars worth in advanced deposits on equipment lease transactions between January 2002 and January 2003.
Paterson challenges the relevance of the VIN News Service's reporting of his legal troubles, including his bankruptcy case, noting that many other people go bankrupt, including veterinarians.
Paterson shed more than $675,000 in debt when he was discharged from bankruptcy on Dec. 28, 2007. One that stayed with him was a $9,000 court judgment owed to Christian and Marci Worthington of Big Bear Lake, Calif., whom he met in 2005 when they came to Lake Havasu City looking to buy a vacation rental property. According to facts presented in a 2008 bankruptcy court document — Paterson stipulated in the document that the facts presented about the case were correct — he talked them into buying two vacation rentals and hiring him as their rental agent.
“Thereafter from the closing of the properties in May 2005, though July 2005, Paterson rented the properties several times,” the document stated. “However, Paterson failed to provide any of the rental income to the Worthingtons. Despite the omnipresent, ‘the check is in the mail’ responses from Mr. Paterson, no rental funds were ever delivered to the Worthingtons and the Worthingtons stopped using Paterson to rent their properties.”
In March, 2006, the couple obtained a $7,750 judgment against Paterson. Worthington said he and his wife never fully recovered from Paterson’s fraud. When the recession hit in 2008, their properties had bigger mortgages than their market value, and they lost them to the bank. Nonetheless, they pursued Paterson doggedly, fighting him on their own in bankruptcy court until a law firm noticed their plight and offered to represent them at no charge. They even tried to garnish Paterson’s wages. He finally agreed to a three-year payment plan and the Worthingtons got their money.
“We are wondering when the law will catch up to him,” Worthington, a flooring and kitchen remodeling contractor, wrote in an e-mail. “He is very crafty and cunning and knows the ins and outs of the court system and always gets away with his crimes.”
It seemed that the lesson Paterson took away from his experience with the Worthingtons was that collecting payments and not remitting them to the rightful owner was a business plan with a future.
Last summer, Northeast Veterinary Supply Co. (NEVSCO) in Harrisburg, Pa., a wholesale distributor of veterinary pharmaceuticals, supplies, and equipment, filed a lawsuit against Paterson accusing him, in essence, of doing to them on a larger scale what he did to the Worthingtons in Arizona. In this case, according to the legal complaint, Paterson purchased medical equipment from NEVSCO and leased it to two small veterinary clinics in Maine. The clinics made their lease payments, but Paterson stood accused of keeping all the proceeds instead of making payments to NEVSCO, court documents show.
According to the original complaint, the story began in February 2008 when Paterson’s brother-in-law phoned NEVSCO president George Rasi, whom he had known for a long time, and urged him to consider using VetFinance Group to finance the sale of medical equipment to veterinary practices, according to the complaint filed in the case. In April, Paterson met with Rasi and his partners to complete the deal.
NEVSCO agreed to sell Paterson two each of the Abaxis Vetscan VS-2, a blood chemistry analyzer, and the Vetscan HM5, a hematology system. Martin Mulroy, Abaxis vice president of sales and marketing for North American animal health, told the VIN News Service that his company doesn’t exercise any control over the financing of equipment sold by distributors. He said he never heard of Paterson. The value of the deal was just under $39,000, and the equipment went to the Westside Animal Hospital in Cumberland, Maine, and the Hollis Animal Clinic in Hollis Center, Maine.
By 2009, Paterson had paid nothing to NEVSCO for the equipment. Rasi caught up to him in mid-January at the North American Veterinary Conference in Orlando, Fla., and extracted a promise to pay in two weeks. That didn’t happen. In early February, Paterson sent Rasi two checks covering the equipment for each hospital. According to the complaint, one check bounced and payment was stopped on the other.
Around that time, Paterson sold the lease to Lakeland Bank in northern New Jersey without notifying or obtaining the permission of NEVSCO, which contended he had no legal right to do that. What he did, in essence, was to give the bank the right to collect the lease payments from the two hospital in exchange for a cash payment, typically discounted from the full value of the lease, court records show. Lakeland Bank did not respond to requests for comment.
After several months of unsuccessful negotiations with a California law firm hired by Paterson and deciding that California authorities were unlikely to file criminal charges because there was no California victim, NEVSCO won a default judgment of $48,944 (the original debt plus interest) in Pennsylvania. They hired a California law firm to pursue payment there, Rasi told the VIN News Service. By then, Paterson’s lawyers had quit. They had sued him in Orange County small claims court in December 2009 after he refused to pay $5,000 in legal fees, and won.
Paterson stated in the recent interview with the VIN News Service that he became aware of the original lawsuit and the default judgment only six weeks ago. Rasi doubts that, stating that Paterson accepted service of both the original lawsuit in Pennsylvania and the one in California to enforce the judgment.
Paterson has used Lakeland Bank in at least two other transactions, possibly three. One transaction involved equipment purchased from IDEXX Laboratories, Inc., and leased to an animal clinic in Burbank, Calif., according to an IDEXX lawsuit filed at the beginning of 2010 seeking payment from Paterson of roughly $47,000. Josh Fredericks, manager of Dan Scott & Associates in Westerville, Ohio, says Paterson “walked out on me and three other vendors to the tune of $100,000.” Dan Scott & Associates, a veterinary equipment distributor, has sued, and Fredericks thinks the bank that bought the leases might have been Lakeland. “That sounds right,” he said.
The other confirmed transaction was a $65,000 debt consolidation loan arranged by Paterson for Dr. Sonnya Dennis and her husband, George Bailey, who own and operate the Stratham-Newfields Veterinary Hospital in Newfields, N.H. Bailey, the business manager for the practice, didn’t experience the initial delays imparted by other veterinarians.
The problems for them began after the financing was arranged in 2008 with Lakeland Bank. Paterson was supposed to receive the proceeds of the loan from the bank and then pay off the practice’s debts to various equipment vendors, including NEVSCO. That was when Paterson became elusive and largely unreachable, Bailey said, and vendors complained they hadn’t been paid. When Bailey did reach Paterson, he made excuses like one would expect "your idiot apartment-mates in college" to make, Bailey said.
Eventually, Bailey’s persistence got Paterson to pay, and his main losses were time and some interest charges from vendors. But what he hated most was the feeling of powerlessness, “that here was this guy in California, on the other side of the country, and I’m a small business guy trying to keep my stuff together and take care of my people. We’re trying to be small business people in an ethical, responsible way.”
Jason Sivgals is the investigator for the Anaheim Police Department who is looking into Paterson’s activities, especially the missing $9,000 from the Pop Warner Football League. He won’t talk much about the case publicly but does say that the Pop Warner investigation likely will be resolved much more quickly than cases involving loan or lease deals gone bad.
The challenge he faces to investigate Paterson's loan and lease dealings involve manpower and jurisdiction; the cases have tentacles reaching across the country, touching down in multiple states. “I mean, I’m just a local cop,” Sivgal said. “It’s a lot bigger than me.”
Veterinarians with complaints against Paterson have been calling Sivgal since it became known on VIN that he was looking into Paterson's business tactics within the veterinary profession. Ball, the veterinarian in Gilmer, Texas, is one of them. He is eager to pursue some sort of criminal and/or civil complaint against Paterson concerning the $6,000 that he believes the broker still owes him. Ball said Paterson called him on June 15, the same day he called Stotland, and promised to make things right. Ball scoffed.
“His last word to me was, he was going to send me an e-mail when we got off the phone (saying) how he intended to give me my money back. Which of course, I never received.” Ball sent a reminder e-mail to Paterson, then a text message. The latter warned Paterson that if he fails to follow through, legal retribution is certain.
“I told him in the text that he now would be dealing with the authorities instead of me, and I hoped he enjoyed his jail time," Ball said. "He then texted me back at 11:30 last night with his statement: ‘Relax, I will have info tomorrow, quit with your crap. Need to confirm numbers, I want you resolved so your threats and extortion are out of my life. You will get your $5,000 back to close this out.'”
Ever the negotiator, Paterson had just slashed a thousand dollars off the amount Ball said he was owed. The veterinarian wasn’t that upset. He doesn’t expect to see the money anyway.
Sivgal said the investigation of Paterson’s financial activities “could take years.” The goal, he said, is to get the investigation to the point “where I can hand my case off as a local cop to some three-letter acronym, nationwide law enforcement (agency)."
VIN News Service commentaries are opinion pieces presenting insights, personal experiences and/or perspectives on topical issues by members of the veterinary community. To submit a commentary for consideration, email firstname.lastname@example.org.
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