Metro Pulse/Cover/Jeffrey Lynn Coppinger

Comment
on this story

How a car rental operator took a financial services company and its investors for a ride

by Barry Henderson

William Hall retired in 1998. A middle manager in the manufacturing industry, he had his retirement pretty well planned out. At the recommendation of a family member, the 68-year-old widower, who lives in Karns, put about $40,000 of his nest egg in LandOak Capital, LLC, a West Knoxville investment firm that was doing well financing auto leases and paying good interest, annualized at 10 percent or more.

Two years later, Hall found his money tied up indefinitely in LandOak's reorganization in bankruptcy. The company told him it had been scammed out of millions of dollars by Cherokee Rental Inc., an auto leasing agency run by one man, Jeffrey Lynn Coppinger, who LandOak officials said ran a Ponzi scheme based on forged leases and fraudulently obtained titles.

LandOak was in a shambles; SunTrust Bank, a $6 million-plus investor, was stuck for an undisclosed amount of its money; Coppinger was under investigation by the FBI and the U.S. Attorney's office here, according to documents filed with the U.S. Bankruptcy Court in Knoxville; and William Hall went back to work part time to help pay his bills.

Neither the U.S. Attorney's criminal division chief Greg Weddle, nor FBI agents in Knoxville would confirm in recent days that the investigation, which has been ongoing for nearly four years, even exists. But witnesses say they've been called before a federal grand jury that has taken testimony and reviewed evidence without, as yet, returning any indictment in the case.

Coppinger is still doing business, most recently as a representative of an after-market auto warranty company, and William Hall, who was only one of about 60 investors who was left holding the bag when the scheme collapsed, is resigned to a personal financial loss.

"I've got over it. I've accepted the fact that I'll probably never see that money again," Hall says. He blames Coppinger and says he can't believe the case has not been prosecuted, but he also says he's disturbed that LandOak "failed to perform its fiduciary duty" to him, allowing the scheme to take him and other investors to the cleaners.

For its part, LandOak has been struggling in reorganization to come up with a plan for a pro-rata stock distribution that would give those investors a chance to recover their money.

Pat Martin, one of LandOak's founders, says a second plan is to be filed soon, a point confirmed by the debtor's attorney, Lynn Tarpy. It will offer creditors stock in a growing technology-sector firm, the noteholders say they've been informed, to settle their claims. An earlier offer of stock in another high-tech firm partly owned by the LandOak principals failed to pass muster in the bankruptcy proceeding and was not approved by Judge Richard Stair. Still, several of the creditors told Metro Pulse they have confidence in Martin's efforts to save their investments and are optimistic that the second reorganization plan will produce good results.

What the 43-year-old Coppinger did with money raised in the scheme described in the bankruptcy court documents is a cloudy issue. He was living a high life style in 2000 before the whole thing came apart, or, as LandOak attorney David Fielder says, "He pulled it apart."

A golfer, Coppinger held memberships in The Honors Course at Ooltewah and at Gettysvue in West Knoxville, both exclusive clubs. An Honors Course membership alone starts at $40,000. He lived in a $300,000 home in Farragut Crossing, drove expensive cars, ran with a wealthy crowd, and had made a down payment on a $50,000 skybox at UT's Neyland Stadium, according to court documents from the bankruptcy and from a divorce suit filed in 2000 by his wife, Leslie Ann Coppinger, and granted the same year. That was the year in which LandOak discovered that its investments had soured.

Sharon Draper, an outside contractor with an accounting background, had initiated a review of Cherokee's operations for the LandOak company in December 1999, when the payments from the auto leasing firm slowed. A week into the new year of 2000, a letter to LandOak noteholders explained, Coppinger "broke down and admitted that he had in fact been forging leases, fraudulently obtaining titles, and had been selling assets belonging to our [LandOak's] leasing company."

At the time, the letter says, "Coppinger represented to us that [Cherokee] revenues had historically been around $500,000 a month." A subsequent investigation was conducted for LandOak by Sterling Owen IV, a retired FBI agent and accountant who was brought to Knoxville to untangle some of the Butcher banking scandal in 1983 and stayed to become a private investigator and white-collar crimes specialist. Owen confirms he was "retained by LandOak to investigate a problem with leases, and I found evidence of irregular lease agreements and financial transactions," but he says he's unable to disclose all the details because he was called before a federal grand jury last year and knows grand jury testimony to be secret.

How the Scheme Got Rolling

It appears to have been Cherokee Rental's size and reputation as a legitimate car leasing firm—an East Tennessee company then more than 25 years old acquired by Coppinger in the early '80s—that allowed the scheme to form. That transformation occurred in the late '90s, following the loss of one of Cherokee's major clients, which had at one time included Tennessee Eastman Corp. and TVA. Hundreds of vehicles were under its short-and long-term leases, Coppinger himself had excellent references, LandOak officials point out, and the arrangement between them had worked fine at the outset, starting in 1995, when he came to them for financing.

Their contract, according to LandOak documents, provided that LandOak would be a funding source for purchasing the vehicles Cherokee leased, so long as Cherokee would give LandOak signed leases, vehicle invoices, and title applications. Cherokee would acquire the vehicles with LandOak money, secure and administer the leases, collect the payments, and remit the contracted payments to LandOak, which would disperse a percentage of those funds to its investors according to individual amortization schedules.

"This process continued without a glitch for four years before Cherokee ever missed a payment," a LandOak document explains, adding that in 1998, SunTrust Bank approached LandOak about financing a portion of the leases. The bank conducted its own due-diligence procedures to assure that Cherokee was on the up and up, before investing more than $6 million in the rental company's leases. A little over a year later, the scheme was uncovered. LandOak had continued to provide money to Cherokee Rental, even when the payments from Cherokee and the documentation of leases slowed.

Although Coppinger was maintaining his fine lifestyle, he did not realize cash in huge amounts, Martin says, because he had to bring much of the money back into LandOak in the form of payments on the fake leases. When the company did stop to investigate, it found that its collateral, in many cases, was non-existent or owned by others and had been based on phony leases of cars for which duplicate titles had been issued. Cherokee's relationships with car dealers' sales managers and county clerks' office workers had been built up over the years of steady legitimate business to the point where Coppinger could get unquestioned cooperation from them. Martin says Coppinger was a smooth talker. There's no indication of complicity on the part of clerk or dealer employees in the scam, and the dealers who supplied invoices at Coppinger's request whenever he claimed he needed bids on some number of their cars to satisfy a lease, kept control of the vehicles and sold them under original titles, not knowing where their invoices ended up or that duplicate titles had been applied for.

Pat Martin and Mike Atkins, the other LandOak principal who is presently recuperating from serious injuries suffered in an auto accident, committed $10.9 million in "personal funds" for the benefit of their failing company in 2000, when the payments they had been getting from Coppinger ended, according to LandOak documents. By the time the Chapter 11 bankruptcy was filed in 2001, the company listed its assets at $7.7 million and its liabilities at $30.5 million, including $24 million in investors' principal amounts, as of October 2000. Martin says the potential loss to LandOak and its investors might run a little more than $10 million. "The FBI has another figure," he says.

A Ponzi scheme is built on the investments of early investors, who are paid their interest return from money collected from later investors. It was named for Charles K. Ponzi, an Italian immigrant who bilked investors out of millions of dollars three quarters of a century ago. In Knoxville, Joe Taylor, an investment specialist who bilked a score of prominent, mostly very wealthy Knoxvillians, ran a scheme of much larger proportions in the mid-1990s. Taylor killed himself in '95 when the scheme unraveled. The 1983 collapse of the Southern Industrial Banking Corp., an uninsured part of the Butcher banking empire, produced a Ponzi scheme of sorts, as the company issued notes near its closing promising exorbitantly high interest rates and left those noteholders, including hundreds of small investors, with little of their money and no recourse.

Who is Coppinger?

Born in 1960 in West Virginia, Coppinger worked in Bluefield and later moved to the Tri-Cities area of East Tennessee. He bought the Cherokee Leasing company there. He married Leslie Ann in Pennsylvania in 1989, and they moved to Knoxville at about that time. They have a daughter, now 12. Coppinger has a son by a prior marriage. The divorce was granted to Leslie Coppinger on a default judgment, as were the judgments in a couple of civil suits against him back in 1997—one to Fifth Third Bank for an unpaid debt of about $27,000 and for $11,200 to satisfy a claim brought by an Alabama woman who sued him over her purchase of an SUV from Cherokee Rental. He did not appear in court to challenge either of the suits, according to Knox Chancery Court records.

Besides its Tri-Cities offices in Johnson City and Kingsport, Cherokee offices were opened in the 1980s in Knoxville, most recently on Executive Park Drive just east of Cedar Bluff Road and on Callahan Road at Clinton Highway. Cherokee also had rental lots at several locations around Knoxville. Coppinger and his ex-wife were 20 percent owners of Fairway & Greens, a golf learning and practice complex on Simmons Road off Pellissippi Parkway in West Knox County. He was involved in management of the golf center at one time. The couple split that ownership share in the divorce settlement but are no longer a part of the center's ownership or management in any way, according to Vincent Keller of the Keller Group, owners Fairways & Greens, who bought them out.

Coppinger reportedly lived for a time after the divorce aboard a 47-foot boat moored at Ft. Loudoun Dam near Lenoir City. When the divorce was granted, he retained two boats, a car, the Honors Course membership and assorted stocks worth about $100,000 at the time, according to the decree. He currently has an apartment in Derby Run off Kingston Pike in Farragut.

Contacted last week on his cell phone, Coppinger said he was "on the road" for a warranty company called Heritage Dealer Services. He agreed to meet with Metro Pulse to explain his position in the case, and he said he would call Monday to arrange for the meeting. When the call did not come in from him by late afternoon Monday, he was phoned again. "I'm changing jobs again. Couldn't make any money at it," he said of the warranty business, but he referred Metro Pulse to Nick Bunstine, a Knoxville attorney Coppinger said is representing him, before setting up a meeting or any further conversations. "I'll do whatever he says," Coppinger said.

Attempts to reach Bunstine were not successful.

A website for Cherokee Rental remains on the Internet, but LandOak took over its management in 2001, trying to salvage as much of its assets as possible. There are still a few active, legitimate leases in the LandOak portfolio, Martin says. "We're winding it down now, just a few cars coming off lease," he says.

The first attempt at a stock distribution to holders of unsecured claims was opposed by a minority of the claimants and was not accepted by the court. It involved shares of Tice Technology, developer of textile sewing equipment. Those over-the-counter stocks traded as high as $14 a share before the settlement offer, but are now down below 15 cents a share.

Martin says the new proposal, soon to be filed with the bankruptcy court, will offer shares in Atmospheric Glow Technology, a company that holds patents for "controlled plasma" applications that may be used in a variety of ways, including environmental cleanup and food processing. The company holds great promise, Martin says, and his Lanrick Group company is in the process of raising $10.5 million in operating capital for the company in return for stock shares that could be passed along to the LandOak noteholders, for whom relief has been slow to materialize.

The condition in which the bankruptcy left some of LandOak's investors, with their money tied up in limbo, at best, and with the resultant loss of income, is deplorable. One of the retirees whose nest egg of more than $350,000 is in unsecured notes and a lengthy relationship with LandOak, talked with Metro Pulse only on the condition his name not be used. He put it this way:

"If I live long enough, it will be a disaster. If I die right away, it won't be so bad."

An even larger investor, Edwin Davis, has more than $1 million worth of the notes, including part of his company's 401k pension plan involved.

"We're just hoping something good turns out of it," says Davis, who runs the Morristown Sprinkler Company of Knoxville, referring to proposals to reorganize again with a different stock basis. "I'm not the type to worry, though," he says. "It doesn't do any good."

Many of those contacted emphasized that their trust in Pat Martin remains strong. "He's doing everything he can to get our money back," says Elizabeth Harb, who holds about $40,000 in a LandOak note.

One of the most recognizable names on the creditors' list is that of Don DeVoe, the former head basketball coach at UT, who now holds the same post at the U.S. Naval Academy in Annapolis, Md. DeVoe was contacted through his office there last week, but did not return phone calls to discuss the case. He holds a note of $136,500 in his name and that of "Center Court RT."

Guy Anderson, a retired BellSouth executive, has more than $100,000 invested, but says his wife's and his retirement has not been devastated. "It's hurt," he says, but adds they were "pretty well diversified," and he voices confidence that Martin will right the company, given time.

Another investor who insisted on anonymity in discussing the case, an information technology specialist in his early 40s, says he was referred to LandOak by a friend, as many were. "It was supposedly a very low-risk way to get a good return," he says. The amount of his unsecured claim is nearly $60,000. "Theoretically we had [title to] the cars and could get our money back," he says.

The return was good while it lasted, amounting to 10-to-12 percent per year, distributed monthly to those who wished to use the proceeds as income.

As Metro Pulse goes to press, no indictment has been returned in the case, nor have criminal charges been brought nor any arrest made.