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Comptroller report sheds some new light on Vendor Payment Program

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Illinois

* Press release…

Comptroller Susana A. Mendoza’s office today released a report shedding light on a program that has allowed private companies to buy more than $5 billion in state liabilities and claim hundreds of millions in late payment interest penalties originally owed to vendors who have done business with Illinois.

The monthly report is required under bipartisan legislation Comptroller Mendoza championed to open the books on the Vendor Payment Program (VPP).

“Lenders in this program are making hundreds of millions of dollars off the state’s fiscal calamity. Before my legislation was passed, this program wasn’t codified in state law or subject to even a basic level of transparency,” Mendoza said. “This monthly report will, for the first time, give taxpayers and policymakers an accounting of this $5-billion program.”

VPP was created to assist struggling vendors as Illinois’ backlog of unpaid bills grew. It allows state-approved third-party lenders, known as qualified purchasers, to pay a portion of the state’s unpaid bills owed to vendors up-front. In exchange, the qualified purchasers get the late payment interest penalties when they are ultimately paid by the state.

The qualified purchasers played an important role in keeping vendors afloat, a challenge worsened during the two-year budget crisis suffered during the Rauner administration. But before the passage of Comptroller Mendoza’s legislation, little information was made public about their financial interests or how much state debt they have purchased through VPP.

In addition to revealing to the public for the first time that more than $5 billion of state liabilities have been purchased through VPP, qualified purchasers reported that nearly $275 million in late payment interest penalties have been paid to them to date. Another nearly $327 million in late payment interest penalties are still owed to qualified purchasers.

A companion report, also published today, includes information about qualified purchasers and those who hold interests in these entities. Monthly reports going forward will focus on the liabilities and late payment interest penalties that fall under the program. Any new qualified purchasers who apply to participate in VPP are now required to file disclosure statements, and all qualified purchasers are now required to file a disclosure statement once a year.

Senate Bill 3560 passed unanimously in the state Senate and 109-7 in the House of Representatives. It was sponsored by Representative John Connor, D-Lockport, and Senator Omar Aquino, D-Chicago. Under the new law, VPP will be audited by the Illinois Auditor General.

The monthly reports are here and the financial backer disclosures are here.

posted by Rich Miller
Tuesday, Nov 27, 18 @ 11:13 am

Comments

Rauner was not working for free.

Comment by Al Tuesday, Nov 27, 18 @ 11:22 am
Who is Le S. Chen and why is his name on several of these entities? I clicked on a couple and there isn’t much info available to understand who is providing the loans and who is collecting the juice. This transparency effort could use some more transparency.

Comment by 47th Ward Tuesday, Nov 27, 18 @ 11:24 am
More companies owned by companies owned by trusts. Its the way to keep transparency opaque!

Comment by The Real Captain Tuesday, Nov 27, 18 @ 11:27 am
===Who is Le S. Chen===

I dunno, but he follows me on Twitter https://twitter.com/lechen15

Comment by Rich Miller Tuesday, Nov 27, 18 @ 11:34 am
I tried to spot-check some of the disclosures and had the same experience as 47 and Real Capt. They’re Russian nesting dolls, one bland entity inside another, designed to keep you from knowing who’s making bank.

Comment by Reality Check Tuesday, Nov 27, 18 @ 11:34 am
===Who is Le S. Chen===

Wait, here he is https://www.vcfllc.com/about-us/le-chen/

Comment by Rich Miller Tuesday, Nov 27, 18 @ 11:35 am
===he follows me on Twitter===

He looks like he can afford to subscribe too.

Comment by 47th Ward Tuesday, Nov 27, 18 @ 11:37 am
I saw this as defrauding the people owed money by the State as they would receive 90% to the dollar until a later date. And worse to me was the way GOMB pushed the Agency CFOs and Directors to actively seek desperate victims and then push this program on them as an effort to reduce the backlogs Rauner created. It was all so mendacious.

Comment by I Miss Bentohs Tuesday, Nov 27, 18 @ 11:39 am
===he follows me on Twitter===

Maybe Le S. Chen translate to George Kaplan?

Comment by Oswego Willy Tuesday, Nov 27, 18 @ 11:43 am
Those LLCs and Trusts really don’t tell you who’s getting fat off this program.

Perhaps future legislation could tighten that up. TII — I’d like to see some names.

Comment by wordslinger Tuesday, Nov 27, 18 @ 11:46 am
So are they generally paying .90 on the dollar for these?

that along with the 12% interest is a hell of a return. Even if you pay dollar for dollar, a 12% return with basically no payment risk is not bad at all.

If you look at the monthly reports there are big companies in there (like ATT, Illinois Bell, and CDW) who have sold receivables.

Comment by OneMan Tuesday, Nov 27, 18 @ 12:02 pm
==So are they generally paying .90 on the dollar for these?==
No they are paying 1.00 on the dollar. 90% advance and 10% when the state pays the bills.

Comment by Anon Tuesday, Nov 27, 18 @ 12:17 pm
Congrats to Comptroller Mendoza and those responsible for this legislation. I suspect an investigative piece shortly from someone, But it is perfectly legal. The question that needs to be answered is what entity, outside the State of Illinois, purposefully obligates itself up to pay ridiculous interest rates like this. I understand its a way to force payment to vendors, which is a good motive, but not well thought out. Kind of like 3% compounded COLA on pensions or an 8% projected rates of return on pension assets and the greatest stroke of genius, skipping pension payments right before an economic meltdown that most saw coming. Bad policies hurt everyone.

Comment by 19th Ward guy Tuesday, Nov 27, 18 @ 12:23 pm
@OneMan, “So are they generally paying .90 on the dollar for these?”

I am by no means an expert on this, but I believe the Qualified Purchaser has to pay the vendor 90% of the base invoice up front, and then the other 10% when the state pays the Qualified Purchaser in full, including interest. So the Qualified Purchaser “only” gets to pocket the 12% interest.

Comment by Perrid Tuesday, Nov 27, 18 @ 12:27 pm
Based upon a 2016 Reuters article, Le S. Chen has a 6 percent ownership stake in VCF. 94% of VCF is owned by ER Illinois LLC.

Comment by Anonymous Tuesday, Nov 27, 18 @ 12:29 pm
===Chen has a 6 percent ownership stake in VCF. 94% of VCF is owned by ER Illinois LLC===

Well that clears it up.

Comment by 47th Ward Tuesday, Nov 27, 18 @ 12:31 pm
19th ward guy - you have a credit card?

Why are we blaming the bank for not making our mortgage payments? If the state were current on paying bills, we wouldn’t see such high interest payments.

Complain all you want about the interest payments but direct that angst toward the inability of the governor and legislature to pass a budget. State was providing services it wasn’t paying for…someone has to pay the bill.

Comment by Under Influenced Tuesday, Nov 27, 18 @ 12:32 pm
Jim Edger is part of Illinois Financing Partners.

Comment by Anonymous Tuesday, Nov 27, 18 @ 12:35 pm
==The question that needs to be answered is what entity, outside the State of Illinois, purposefully obligates itself up to pay ridiculous interest rates like this.==

Answer: Nearly every single state and the Federal Government. Illinois is the only state that actually has to pay it because of the backlog. Additionally, it’s the in state that borrows interest-free for 90 days. It’s a good deal for the state and unfair to the vendors. The budget impasse hurt businesses in all industries, but we were all distracted by the Amazon HQ2 show

Comment by Anon Tuesday, Nov 27, 18 @ 12:37 pm
There’s no time frame mentioned anywhere, is the $5 billion over the lifetime of the program? So all the way back to 2012?

I’d like it broken out by invoice date, to see how much of that was incurred as a result of the impasse. Someone might be able to do that going forward from this data, but not backwards.

Comment by Perrid Tuesday, Nov 27, 18 @ 12:45 pm
@Anon, other states have a 12% interest penalty? New to me.
Right now the federal prompt pay interest rate is 3.5%

Comment by Perrid Tuesday, Nov 27, 18 @ 12:47 pm
With all due respect ANON, the prompt payment act laws in the country are all over the place and in no way uniform. In fact most break out different types of contracts for different considerations. I’m all for budgets and paying vendors, but special care needs to be taken when spending taxpayer dollars. This would not happen in the private sector.

Comment by 19th Ward guy Tuesday, Nov 27, 18 @ 12:59 pm
“I’m frustrated too,but —making sure the 1% have a way to make a 12% return buying state debt— is more important than a short term budget”

Comment by Anonymous Tuesday, Nov 27, 18 @ 1:16 pm
The Comptroller has posted SOME of the payments as paid.
They - the 3rdparties, have not been paid.
As when they are paid, we - as in MY firm then -the vendors get paid.
According to one of the top buyers who has bought invoices from my firm, they have not been paid. AT ALL.
I would not take everything the Comptrollers report states as actual fact folks.

Comment by sharkette Tuesday, Nov 27, 18 @ 1:25 pm
The Comptroller has posted SOME of the payments as paid.
They - the 3rdparties, have not been paid.
As when they are paid, we - as in MY firm then -the vendors get paid.
According to one of the top buyers who has bought invoices from my firm, they have not been paid. AT ALL.
I would not take everything the Comptrollers report states as actual fact folks.

Comment by a vendor... Tuesday, Nov 27, 18 @ 1:25 pm
Sorry—1:16 was me.

Comment by LeadingInDecatur Tuesday, Nov 27, 18 @ 1:26 pm
In addition folks.
The legislators, MJM’s gang, did NOT fund paying the balances. which means MY firm is not paid..
You know those small minority local firms that the Comptroller supports to the camera’s & the media.. BUT does not pay in reality,,,

Comment by sharkette Tuesday, Nov 27, 18 @ 1:31 pm
In addition folks.
The legislators, MJM’s gang, did NOT fund paying the balances. which means MY firm is not paid..
You know those small minority local firms that the Comptroller supports to the camera’s & the media.. BUT does not pay in reality,,,

Comment by and.. Tuesday, Nov 27, 18 @ 1:32 pm
==other states have a 12% interest penalty? New to me.==
Yes, nearly every other state has a 12-15% interest rate. It is new to you, because they don’t pay interest. When a vendor does their work in other states and turns in the bill, the state pays it a few weeks later. Go figure. Shouldn’t have tossed in Fed Rate with the group, but DC Rate.

@19thWard. Agreed, the laws are not uniform, in fact Illinois has one of the weakest laws comparatively. Extra care should be taken with taxpayer dollars, by not getting into a two year budget impasse ever again. Put another way… do you think 3% is fair to vendors who have to wait 180 days (half a year!) to get paid by the state? Cuz that is what they get and by the time they get the interest it is the next year.

Raise revenue, cut expenses get the backlog to around $4B and there is no penalty.

Comment by Anon Tuesday, Nov 27, 18 @ 1:33 pm
Prompt payment act is being changed to 2.x from 1 % AFTER 80 days.
Under new law not qute signed off on yet.

90 Days after which by law is by the date the COMPTROLLER enters it.
NOT the Vendors date.
This can be eons, even years after the Vendors actual invoice date

Comment by sharkette Tuesday, Nov 27, 18 @ 1:35 pm
So sharkette, a vendor, and: looking at the the latest monthly report, what is your “proper due date” and what is the “vendor assignment date”? Because the “proper due date” is about a year ago and the “vendor assignment date” is 6 months ago. Are you saying your company has been bypassed?

Comment by Da Big Bad Wolf Tuesday, Nov 27, 18 @ 1:47 pm
And no, that is also not correct.
90% after 90 days, which is the STATES date, not the Vendors actual INVOICE date.
Then 7% once the Comptoller pays the 3rd party.
then once the Comptroller pays what ever interests is due the 3rd party
I could be 10 days it is NOT 12 percent
It is ONE % after 90 Days of whatever the date is that office enters it.
NOT the Vendors date, keep in mind the Vendors already carried a receivable 90 DAYS. There is a cost of aging here kids…
Then once the 3rd parties are paid what ever the interest is. As it is ONLY 12 % if 90 days PLUS 12 months have transpired.. THIS is or would be 15 months later,,,,This is trickery verbiage purposefully published to cause confusion that is FALSE!!
Then the VENDOR gets paid the 3% balance due them.
It is NOT 12 % folks..

Comment by geesh Tuesday, Nov 27, 18 @ 1:47 pm
“Micro Focus Software” shows up as a state vendor receiving their payments on time, rather than earning late penalties. See the October 2018 monthly report for “Pay Plant, LLC” page 8.

But “Micro Focus Software” has revenue of over $1 billion a year, says the google. They hardly are a mom and pop shop. You would think they could afford to wait a bit for payment.

Did someone suggest they use one of these Vendor Payment companies?

Comment by Robert the Bruce Tuesday, Nov 27, 18 @ 1:51 pm
I am saying.
The dating is never accurate. As the date used is the date the Comptroller enters i.
In addition the interest is currently 1 % after 90 days.
I am saying the 3rd parties are not paid, and there fore the vebdors are not paid.
That is shows as paid when it is entered and it is not paid.
These are facts I have pages of it on my books,
We, vendors who sell our invoices are not paid in full until that office pays those inters payments due of 1 % on the day you sell it.
SO my invoice is due jan 1. I am not allowed to sell it until April 1.
If I think I might get paid and wait until May 1. then I sell it to a 3rd party after 120 days.
And they are paid in full in say 1 day, No interest is due. Or say they get paid 100% May 1st.
They are owed 1 % , not 5%, Nor 12% 1 % only in that scenario.
AND I have not been paid in full for 5 months.

Comment by sharkette Tuesday, Nov 27, 18 @ 1:53 pm
Robert the Bruce
RE:

My firm is a MICROFOCUS PARTNER.
MICROFOCUS IS PAID BECAUSE I PAY THEM.
THATS DOES NOT MEAN THE STATE HAS PAID ME.
Would you like to see those open invoices I have?

Comment by Sharkette Tuesday, Nov 27, 18 @ 1:57 pm
Whoa caps and exclamation points? I don’t think so.

Comment by Sonny Tuesday, Nov 27, 18 @ 2:03 pm
Microfocus, and my firm, and all vendors I know and I know a lot after 30 years in this busiess. We ALL bend over backwards to supply products and services across the the board. TO ALL agencies.
We need to be paid, It is that simple.
AND the agencies know so too, and they value us all as well,
The problem is the Comptroller DOES NOT RELEASE THE FUNDS along with the LEGISLATORS make laws to enable not paying us until who knows when.
This IS MJM’s doing kids all day long folks.

Comment by Sharkette Microfocus Tuesday, Nov 27, 18 @ 2:05 pm
sharkette, refresh yourself on the red text there above the comment box.

Comment by Fixer Tuesday, Nov 27, 18 @ 2:09 pm
RE Da Big Bad Wolf o sharkette, a vendor, and: looking at the the latest monthly report, what is your “proper due date” and what is the “vendor assignment date”? Because the “proper due date” is about a year ago and the “vendor assignment date” is 6 months ago. Are you saying your company has been bypassed?
In this scenario 6% is due to the 3rd party only, AND until they are paid the 6 % interest by the Comptroller, The vendor does not get their remaining 3% of the invoice they sold.
And in the above scenerio the vendor floated that deal for 12 months and got only the invoice total, After one entire year. Ther are millions in interest due, plus our- Vendor balances due. they are not paid. Nor did the legislator FUND paying them, nor any date defined to pay them by. Thanx MJM
Some are posted as due. This is NOT paid

Comment by Anonymous Tuesday, Nov 27, 18 @ 2:17 pm
RE Da Big Bad Wolf o sharkette, a vendor, and: looking at the the latest monthly report, what is your “proper due date” and what is the “vendor assignment date”? Because the “proper due date” is about a year ago and the “vendor assignment date” is 6 months ago. Are you saying your company has been bypassed?
In this scenario 6% is due to the 3rd party only, AND until they are paid the 6 % interest by the Comptroller, The vendor does not get their remaining 3% of the invoice they sold.
And in the above scenerio the vendor floated that deal for 12 months and got only the invoice total, After one entire year. Ther are millions in interest due, plus our- Vendor balances due. they are not paid. Nor did the legislator FUND paying them, nor any date defined to pay them by. Thanx MJM
Some are posted as due. This is NOT paid

Comment by sharkette Tuesday, Nov 27, 18 @ 2:18 pm
Sharkette Microfocus, I’m not sure I follow. “The problem is the comptroller does not release the funds.” The first question I have is how do you know the comptroller is hording the money?

The second question is, you say “They - the 3rdparties, have not been paid.
As when they are paid, we - as in MY firm then -the vendors get paid.”
Isn’t the point of using a “qualified purchaser” getting paid earlier? Even if you lose some interest? It sounds like you are saying the vendor gets paid after the “qualified purchaser”gets paid. Which brings the question, why use a “qualified purchaser” at all?

Comment by Da Big Bad Wolf Tuesday, Nov 27, 18 @ 2:25 pm
As far as the interest rates we pay, that is due to the equal and opposite of what we receive. So, our legislatures wanted to encourage people to pay State Taxes by making a high rate of interest as a penalty. However, if we do that then we have to pay out a high rate if we owe money. Since we are always due more than we owe, it is a great idea …. until of course we owe and owe like no one could foresee.

I also wanted to point out that the $200+ million and $300+ million is another $600M to add to the $1.2B the Comptroller stated as unpaid interest before the election. As I have stated before, they true number is closer to $2B in interest/penalties.

Comment by I Miss Bentohs Tuesday, Nov 27, 18 @ 2:39 pm
@ Robert the Bruce

Check out Xerox. They received 90 cents on the dollar and forgo millions upon millions in interest to the Vendor Program. Even big companies often run on small margins and cannot afford to accumulate debt.

Comment by I Miss Bentohs Tuesday, Nov 27, 18 @ 2:46 pm
One way to find out more about the LLCs:

https://www.ilsos.gov/corporatellc/CorporateLlcController

Comment by Anon221 Tuesday, Nov 27, 18 @ 2:53 pm
Sharkette, You sound kinda like a broken record often falsely complaining about Mendoza not paying bills. Were you one of the favored vendors under Munger getting paid for no documented work on the state’s disastrous IT upgrades? ‘Cause those are about the only bills more than 90 days late. And that’s ’cause DOIT won’t document what they have actually done for the hundreds of millions of dollars Rauner agreed to pay them for systems that don’t work.

Comment by A Verifier, Not A Vendor Tuesday, Nov 27, 18 @ 2:55 pm
Sharkette and I Miss Bentohs:

Thank you, truly, for the education and dialogue here.

I do get that the state hasn’t paid you while you’ve paid the vendors - I believe that’s the whole point of the program, right? Vendors need to get paid right away while companies like Pay Plant, LLC take on the risk of waiting to be paid while cashing the late payments from the state. I get how it works.

I was just surprised to learn that a large company like Micro Focus is so cash poor that it needs to engage Pay Plant, when its cost of borrowing via corporate bonds would be lower, and its SEC filing (yes, I’m diving deep here) doesn’t suggest financial problems.

Maybe it’s legit - your engagement here makes it seem more legit than I thought - just seems odd to me.

re: Xerox, they may be on the verge of another bankruptcy says the google, so their use doesn’t surprise me at all.

Comment by Robert the Bruce Tuesday, Nov 27, 18 @ 3:18 pm
Rauner’s plan all along…all his buddies made money while most of the state suffered.

Legal theft.

Comment by The Dude Tuesday, Nov 27, 18 @ 3:20 pm
Shhhh. I think sharkette is sleeping it off.

Comment by 17% Solution Tuesday, Nov 27, 18 @ 3:31 pm