Why careful compliance with the FAA airport rules is CRITICAL

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Two cases show that airports pose risk of criminal sanctions

Misappropriation of funds by Airport Executive alleged

Mayor may have used airport revenues to defend subpoena and to pay for one of her advisers

Airports have been described by economists as “attractive nuisances”. These public utilities generate major streams of economic activity for the community while the neighbors are angered by the environmental impacts.

The attract/repel phenomena is also an apt descriptor of the politics associated with these commercial engines. Elected officials are tempted by using these assets for other than aviation purposes, thus creating potential problems. Viewed from another perspective, the major cash flows created

  • by large airline lease payments,
  • by multiple vendor rents (and awards),
  • by massive financial transactions (and selection of the investment bankers),
  • by multimillion dollar construction contracts

and

  • by a myriad of other small/large dollar transactions

provide accounts which may be siphoned for nefarious purposes. Thus, these headlines, while not entirely surprising, are not common:

 

 

 

 

 

Airline President and Former Virginia Airport Commission Executive Director Indicted and Arrested

Airport Commission fires Executive Director

People Express airline founder indicted on fraud charges in Newport News airport scandal

 

 

Federal auditors to review city’s spending at Hartsfield-Jackson

 

FAA subpoenas Hartsfield-Jackson records in advance of audit


In 2008, the Peninsula Airport Commission (PAC) selected 36-year-old Ken R. Spirito to be the new executive director of the Newport News/Williamsburg International Airport (PHF). The commissioners were impressed with Spirito’s performance in the same job at the Metropolitan Airport Authority of Peoria, Ill. There he successfully obtained $65 million funding (FAA grants and financing) for its new air terminal. At PHF Spiritos was charged with a new task– attracting more direct flights to more cities and building upon routes already in place.

Allegedly, that was the eventual downfall of the Executive Director. According to the US DOT Inspector General, in order to attract low fare carrier, People Express Airline (PEX), Michael Morisi, its president and Spirito conspired to have the PAC guarantee a $5 Million loan for the carrier. Financial enticements for new service are permitted by the FAA, but under very strict terms.

PAC authorized the Executive Director to cosign the loan. He created three bank accounts. He then transferred misappropriated State and Federal funds to the accounts and used the funds as collateral to guarantee the loan. Subsequently, PEX defaulted on the loan, and Spirito used the illicitly obtained funds to help Morisi make the payments.

Morisi was indicted for wire fraud, engaging in monetary transactions in property derived from unlawful activity, making and subscribing a false tax return, and failure to file tax return. Spirito’s charges included conversion and misapplication (i.e., the unauthorized use) of property from an organization receiving Federal funds, engaging in monetary transactions with property derived from unlawful activity, and falsifying records in a Federal investigation.

Not a good activity within the fences within PHF. Airports want/need more airline service; it is rare when an incentive to begin new service results in a permanent addition to the schedule.


The AJC journalists understand the temptation which airports, in particular its local behemoth— Hartsfield-Jackson Atlanta International Airport, pose to politicians. Their investigations have unearthed two potentially damaging allegations—

“…the city had used millions of dollars in airport revenue to pay lawyers to respond to subpoenas from a federal grand jury investigating corruption at city hall,”

And

“…the city had briefly paid Mayor Keisha Lance Bottoms’s [sic] former chief of staff out of airport money”

If the FAA confirms these accusations, they would constitute serious violations of the FARs and the Grant assurances.

Use of airport funds, if true, to pay for defending against a subpoena involving facts unrelated to ATL

and/or

proof that an employee with no airport duties was paid with ATL funds

could result in

civil (large penalties; return of misused funds)

and

criminal sanctions (possible jail time).

 

An extreme case might result in determination that ATL is not eligible for discretionary grants.

ATL has had an unfortunate tendency to be an area of unneeded City Hall help. If severe actions result, perhaps Delta and the state will create an independent authority to govern this critical national aviation asset.

An airport is a complicated business entity—safety, environmental, contracting, construction, community relations. Federal regulations, long term planning, human resources, emergency preparation, etc. These are skills which require highly qualified professionals to make the many, many technical determinations which must be made WITHOUT EXTRANEOUS POLITICAL INTERFERENCE.

In any event, close adherence to a host of requirements mast be the rule or as these two examples show, the consequences may involve jail time.



 

 

 

 

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