Group planning TWA bid stirs skepticism What little is known about the four principals raises doubts that they will be able to pony up a $50 million deposit.
The Fort Worth Star-Telegram
One is a little-known international financier from Oregon who says he's an adjunct business professor at Ohio University. Problem is, school officials say there's no record of his having worked there.
Another is a Sri Lankan investor who last year reportedly came under investigation for operating an unlicensed bank. A third, Stanford Lerch, is a 68-year-old lawyer and head of a five-person law firm in Scottsdale, Ariz.
Finally, there's Albert C. Vitale, a Floridian who calls himself a consultant to start-up carriers and has told business associates that he once flew for Pan Am. According to the Federal Aviation Administration, Albert C. Vitale was issued a pilot's license seven years ago, but only for single-engine aircraft on flights over land. Pan Am went out of business in December 1991.
"If this is the same Albert Vitale, he didn't fly commercially for Pan Am," FAA spokesman Roland Herwig said, noting that Pan Am flew much bigger airplanes.
If Herwig is perplexed, he isn't alone. These are the four principals behind a prospective $6.2 billion bid for the bankrupt Trans World Airlines. If the group makes such an offer by Wednesday's bankruptcy court deadline, it will nearly double what American Airlines - the only other known bidder - has agreed to pay.
Airline industry experts express plenty of skepticism that this little-known group, which calls itself Jet Acquisitions Group or "JAG," will pony up the $50 million deposit and enter a bid for the struggling St. Louis-based carrier. The group's background and reluctance to discuss specific plans - it has disclosed nothing about its financing - have raised questions among people who follow the industry.
"From the outset, Wall Street has substantially questioned the overall credibility of this group," said Samuel Buttrick, a prominent industry analyst with the UBS Warburg investment firm in New York.
A JAG spokesman said as recently as 10 days ago that the group will go forward with its bid. The spokesman also said the group will win any bidding war and turn TWA, a chronic money-loser, into one of the industry's five largest and most successful airlines in just five years.
If more than one bid is made by 3 p.m. Wednesday, TWA's investment bankers will hold an auction in New York on March 5. U.S. Bankruptcy Judge Peter Walsh is scheduled to declare the winner at a hearing in Wilmington, Del., on March 9.
Other than a couple of public announcements, JAG officials have shied away from the news media. Numerous attempts by the Star- Telegram to reach them over the last three weeks have been unsuccessful. A public relations firm that handled the group's initial announcement no longer works for JAG.
However, 10 days ago, Lerch gave a brief interview to Bloomberg News.
He complained that American's position as the bankruptcy lender to TWA, and the $65 million breakup fee that American would receive if outbid by another suitor, "puts other people at a disadvantage."
Lerch did acknowledge, however, the enormous challenge of making TWA a successful stand-alone carrier. Not only will JAG "pay what we have to pay to win the auction bid," Lerch said, "there is going to have to be a substantial infusion of capital into the airline to make it viable."
Throughout his legal career, Lerch has focused on providing commercial law services to small and medium-sized businesses in the Phoenix area and on divorce cases involving personal and small business bankruptcies, according to his Web site and information from the Arizona Bar Association.
He said he played a significant role in the Chapter 11 bankruptcy cases of Continental and America West Airlines. But officials at those airlines dispute that, noting that he was not a member of the creditors committees and did not represent any large creditors.
Lerch did not return calls to the Star-Telegram.
JAG's lead investor is Donald R. Moody, an international financier from Portland, Ore. According to an initial press release, Moody has more than $1 billion in assets at his disposal.
But magazines that track the nation's ultrarich, such as Fortune and Forbes, have not written about him. And, at least in recent years, his name hasn't appeared in his hometown newspaper, The Oregonian, according to a check of that newspaper.
Jim Jeddeloh, president of Perkins & Co., Portland's largest locally owned accounting and financial services firm, said last week that Moody was president of an affiliate company, Perkins International, until 10 months ago, when the two parted amicably.
Now, he said, Moody works primarily through Moody Trust Co., his operating company which invests in international deals. Jeddeloh said the two remain good friends.
Moody headed Perkins International for about 18 months, Jeddeloh said, during which time the two "looked over a lot of international deals, some as consultants, some as investment bankers.
"Don's a smart guy and has a lot of contacts with foreign heads of state in places like Korea, Russia, Thailand and so on," Jeddeloh said.
While together, the businessmen looked at 12 to 15 potential deals, Jeddeloh said, "and we got one deal through Phase 1, to the point where we got paid. But we decided to shut the company down about 10 months ago to look for other opportunities independently."
Additionally, Moody says he is an adjunct professor of international finance at Ohio University's College of Business, and a "special financial adviser" to the university.
But records at the school in Athens, Ohio, show that Moody hasn't been on the faculty at least since the university's payroll was computerized in 1992, according to Audra Rose, a secretary in the office of the school's chief financial officer. Rose also said she found no record of Moody having been a financial adviser, paid or unpaid, to Ohio University.
Debbie Evans, administrative assistant to the dean of Ohio University's business school, said Moody is not a member of the regular or adjunct faculty. She also could not locate staff or faculty members who remembered him having taught at the school.
Phone calls to Moody Trust Co. were not returned.
The other JAG investor is Akam Ashroof Gaffoor. Gaffoor is a Hong Kong-based Sri Lankan financier who last year came under civil investigation by the Philippines' Justice Department after being accused of operating an unlicensed bank, according to reports in The Philippines Daily Inquirer. The Philippines' National Bureau of Investigation also launched an investigation, the paper reported last summer.
Vitale may be the group member best known in the industry for his frequent postings and strong arguments about arcane aspects of the business on an Internet discussion board that is popular with airline enthusiasts.
According to his archived postings on the PlaneBusiness.com Web site, Vitale has, at various times, told associates interviewed for this report that he was a commercial pilot - for the regional carrier Ransom Airlines and for Pan American World Airways.
However, Herwig, the FAA spokesman, said the FAA's data show that the only Albert C. Vitale in its records is from Florida and was licensed in 1994 to fly single-engine airplanes over land. It also noted that his airman's medical certificate, first issued in 1995, lapsed in 1998.