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vatveng
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Former heads of PeoplExpress and PHF indicted

Wed May 22, 2019 7:20 pm

The PeoplExpress fallout continues...

On Monday, former PHF director Ken Spirito was indicted in Norfolk federal court on 18 counts of violating all kinds of federal financial laws involving the airport's secret loan to PeoplExpress.

https://www.dailypress.com/news/airport/dp-nws-newport-news-airport-spirito-indicted-20190520-story.html#nt=oft01a-1li2


On Tuesday, PeoplExpress CEO Michael Morisi was indicted on 18 charges of fraud and tax evasion and arrested by IRS agents.

https://www.dailypress.com/news/airport/dp-nws-newport-news-airport-ceo-indicted-20190521-story.html#nt=oft12aH-1gp2

The indictments against Spirito and Morisi allege the airport director arranged for public funds to guarantee a $5 million line of credit needed to get People Express in the air in July 2014, when Morisi’s efforts to raise private funds stalled. The indictment says those earlier private funds went in part to pay six-figure salaries to Morisi and other airline executives.

After the airline stopped operating that September — and stopped paying back the $4.5 million it owed TowneBank under that credit line — the airport was obliged to repay the debt.

And, although the line of credit agreement said People Express was supposed to keep its accounts at TowneBank, as a kind of security measure, the indictment says Morisi and two other airline executives opened a new account at Bank of Hampton Roads that October — that is, after the airline stopped operating.


And apparently once the state discovered the Bank of Hampton Roads account, they opened a new account at Bank of America and kept paying themselves out of insurance settlements while showing creditors the $0 balance in the TowneBank and BofHR accounts.

The Spirito indictment mentions the airport board's approval of his actions but states that "board members may not have fully understood the loan or the nature of the airport's real commitment". So it sounds like he sold them a bill of goods. The airport board fired Spirito in 2017 for misusing public funds for personal expenses.

Desperation can make you do stupid things, and the airport was still reeling from the AirTran shutdown. But the board really needed to do a lot more research into this deal before signing off on it. Morisi already had a string of high-profile local failures in his wake. His impatience to get PEX in the air should have sent up many red flags.
 
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SierraPacific
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Re: Former heads of PeoplExpress and PHF indicted

Wed May 22, 2019 7:25 pm

I always wonder if some of these startups are clever ways of hiding financial crimes since their business models make absolutely no sense. I guess we now know with PeopleExpress was a scam though.
 
wjcandee
Posts: 11466
Joined: Mon Jun 05, 2000 12:50 am

Re: Former heads of PeoplExpress and PHF indicted

Wed May 22, 2019 7:28 pm

Oh the NEW so-called PeoplExpress. I was thinking, "Geez, that was 35 years ago..."

Did they even ever carry passengers? I guess I could look, but I don't care enough...
 
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vatveng
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Re: Former heads of PeoplExpress and PHF indicted

Wed May 22, 2019 7:31 pm

wjcandee wrote:
Oh the NEW so-called PeoplExpress. I was thinking, "Geez, that was 35 years ago..."

Did they even ever carry passengers? I guess I could look, but I don't care enough...


They operated for just under 3 months in 2014.
 
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enilria
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Joined: Fri Feb 22, 2008 7:15 pm

Re: Former heads of PeoplExpress and PHF indicted

Wed May 22, 2019 7:32 pm

It's hard to know how much of this is just sour grapes. These small airports are desperate to get service and then when it goes belly-up everybody is quick to point the finger. I've seen that a lot. I don't believe that only the airport CEO would have known of any illegality. The CFO it would seem would have to know as well, unless they were the whistleblower. I choose to believe from the airport side this was more the vast gray area of financial incentives which are basically unpoliced by anybody until somebody makes a ruckus. It's like if murder were only a crime if somebody said "I liked that person and I'm against what happened".

It appeared that the PE CEO only had to put up $5,000 bond to leave the courthouse. $5,000 doesn't imply to me this is as serious as the headlines make it out to be.
 
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enilria
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Re: Former heads of PeoplExpress and PHF indicted

Wed May 22, 2019 7:34 pm

SierraPacific wrote:
I always wonder if some of these startups are clever ways of hiding financial crimes since their business models make absolutely no sense. I guess we now know with PeopleExpress was a scam though.

This has not gone to trial. They have been accused/indicted. Not convicted. Michael Avenatti who once spoke of running for President was also indicted just an hour ago in an unrelated case. Indicted does not mean convicted.
 
lpdal
Posts: 1997
Joined: Sat Mar 24, 2012 9:49 pm

Re: Former heads of PeoplExpress and PHF indicted

Thu May 23, 2019 2:03 am

Michael Morisi filed for bankruptcy about four years before PeoplExpress got off the ground, and had several ventures that went defunct in the PHF area. Since the shutdown of PeoplExpress he’s had a job as an ordained minister for a church.
 
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vatveng
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Joined: Wed Jan 07, 2004 11:49 pm

UPDATED: Re: Former heads of PeoplExpress and PHF indicted

Thu Jul 25, 2019 10:02 pm

Today (July 25) Michael Morisi pleaded guilty in federal court in Newport News to one count of wire fraud and one count of filing a false tax return. Sentencing is scheduled for November.

https://wtkr.com/2019/07/25/former-head ... ds-guilty/

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