Silver State and the legal process

[fry]

Posted at JH:

 

http://originalforum.justhelicopters.com/D...M=901893#901893

 

The following represents the level of intensity for which Jerry Airola sought to fulfill his many promises to hundreds of veterans since 2003 their usage of MGIB funds. It is astounding how they thought they would actually be approved after the provisional phase. Randy, please provide your comments on this topic. I told you people ever since this subject came up that SSH could never get Part 141 and that their proclaimations were false. And how could Jerry think that purchasing a 141 school would give him 141 advertising rights? He claimed these rights for many years! To anyone who was ever told SSH was getting part 141 and who anticipated on using their MGIB for SSH training, you may have a strong fraud claim against Jerry Airola, individually, in the State/District where the misrepresentations were made to you. You may also pursue claims in the defendants' district: http://www.co.comal.tx.us/dct.htm Pursue further discovery and there is no telling what you may find.

 

Subject: VA certification update

From: Jerry Airola

Date:8/21/2007 8:19:17AM

To:Jody Pidruzny; enrollment-management

CC:Frank Root

 

Maybe we should look to purchase an existing 141 school?

 

 

From: Jody Pidruzny

Sent: Monday, August 20, 2007 2:07 PM

To: enrollment-management

Subject: FW: VA certification update

 

This is very horrible news. What we thought was going to take about another month - is going to end up being more like another YEAR.

 

Is it possible for the Regionals to disseminate this to the reps so we stop issuing an unrealistic

timeline?

 

We're no longer a few months out - but about a year out from being able to accept the 01 Bill in

any academy.

 

I will continue to update you as I receive more information.

 

Jody Pidruzny

570 W Cheyenne Ave, Suite 30

North Las Vegas, NV 89030

ph: (702) 215-5071

fax: (702) 307-7419

 

From: Frank Root

Sent: Monday, August 20, 2007 12:59 PM

To: Kori Smith

Cc: Dawn Fyler; lody Pidruzny; Mark Fojtek; Rudy Rossi

Subject: VA certification update

 

Houston, we have a problem;

 

I was speaking with Phil Wickliff, our VA rep here in Idaho, and he found a problem with

our application. Our part 141 certificate is still considered 'provisional', and will remain so until

it has been in effect for 2 years. The VA requirement that I read states that a flight school must be in business for 2 years, which technically Boise is. But I today learned that the VA only

recognizes pt.l41 certification for the' being in business' requirement.

 

The good news is thaLthe clock started ticking when the 141 was originally approved in

Arizona. By my reckoning, and our FSDO's, our certificate should drop its provisional status in

March 2008, making us eligible for VA benefits at that time.

 

The bad news is that we will still only be able to submit our applications at that time, after

which the average time for approval is around 2 months (or so I'm told); making the earliest

possible time to begin offering VA benefits to our students sometime in late spring or early

summer, 2008. 1 know nobody wanted to hear this, but we should probably let the enrollment

folks know so that we're not promising anything on the wrong timeline. Please let me know if

you have any questions.

 

Thanks,

 

Frank Root

General Manager - Boise, ID

Silver State Helicopters, LLC

4700 W. Aeronca St.

Boise, 10 83705

(208) 514-3800 Office

(702) 214-6118 Fax

(208) 573-7544 Cell

[fry]

So the court has ordered the company representatives of various companies to “appear…and be examined by counsel for The Student Loan Corporation [i.e., Citibank], and other

interested parties who may appear” related to SLC’s and the trustee’s concerns that Airola made preferential or fraudulent transfers of SSH’s assets just before the bankruptcy filing. Those ordered to appear include:

 

WF Investments, LLC (A large sum was transferred to this entity which appears to be an investment company. Maybe just a money market account or maybe a retirement fund for the execs?)

Central Washington Helicopters, LLC (A flight school acquired by SSH)

Shining Star Equities, LLC (A company controlled by SSH’s CFO and Controller that leased aircraft to SSH)

Infinity Equities, LLC (Another investment company)

Airola Helicopters International, LLC (Airola’s hoped-for continuation of his post-SSH “aviation empire”)

Stars and Stripes Heliplex, LLC

First American Equity, LLC (A company controlled by Airola and Pickett that SSH transferred the Cheyenne HQ property to in August of ’07)

Cheyenne Heliplex, LLC

 

These examinations are to begin on the one-year anniversary of the infamous Super Bowl weekend e-mail…the one where Airola tearfully could “hardly bare to hit the send key”.

 

Also being ordered to submit for examination are the representatives of various banks (Silver State Bank, Bank of Nevada, Bank of the West, Nevada State Bank). In a bit of irony, a couple of these are now as dead as SSH.

 

Airola’s attorneys are opposing all of this with the argument that SLC is engaging in “a fishing expedition”…yada, yada, yada. I can’t believe that the court would find unreasonable SLC’s pursuit of information about transactions that are obviously questionable. But logic has no place in this process; the law works in mysterious ways understood only by its priests...attorneys and judges. The issue that this will ride on appears to be whether SSH was insolvent at the time of the transfers. Of course it was...but can it be proven?

 

Consumer protection advocates are using SSH as a good bad example and going after legislation to prevent the banks from engaging in the kind of predatory student lending they practiced during the SSH era. Too late to help the SSH students but maybe some future generation of students will be prevented from making the same errors in judgment…but probably not.

 

http://www.newamerica.net/blog/higher-ed-w...-providers-8929

 

Here’s the link to the California lawsuit mentioned in the above piece; it’s a pretty good description of SSH:

 

http://www.newamerica.net/blog/files/Silve...0(00060137).pdf

 

In tangentially related development this past week on Wall Street, the prominent head (former Chairman of NASDAQ) of a large hedge fund admitted to running a now defunct Ponzi scheme which cost investors “tens of billions of dollars” ($50 billion according to the prep). How is this related to SSH? The techniques he used to entice and control his investors were similar to those used at SSH…entry to the fund was by invitation-only much like SSH’s application “interviews”; and to stifle questions he would threaten to expel the questioners just like SSH threatened to not hire “assholes”.

 

But the striking thing was that so many “sophisticated investors” (including the owners of major league sports teams, corporate CEOs and other hedge fund managers…and probably those morons at Eos) did little due diligence and ignored warning signs that the fund’s returns were too good to be true. If the SSH students exercised poor judgment in dealing with SSH they certainly have plenty of company.

[Wise Guy]

fry,

Any word on loans being forgiven by any lenders?

 

Thanks

[500E]

A real depressing read Fry, like a lot of financial things Where were the regulatory body when this was going on.

There appears to be no oversight by any agency, and there sure wont be any money left when this all finishes.

The other thing that leaps out is don't live in Ohio and be a consumer,

[CFIAP5544]

ALL of the students should ask for a BAIL OUT!!

 

Jerry Probably already has!

[fry]

Posted at JH:

 

http://www.bankruptcypower.blogspot.com/

 

Going After Airola, Pickett and Trenk [Who's Trenk?]

 

James Lisowski, the Chapter 7 Trustee in the Silver State Helicopters bankruptcy case, has filed an Application for an Order Approving Employment of Fennemore Craig, PC as Special Litigation Counsel to the Trustee. The Trustee's Application states that he "requires representation for the following services: Special Litigation Counsel to assist the Trustee in investigating and analyzing objections to claims, potential claims, and causes of action by Debtors against Jerry M. Airola ("Airola"), Steven Pickett ("Pickett"), Steven L. Trenk ("Trenk"), their family members and any companies in which Airola, Picket or Trenk are officers, directors, members, partners, or shareholders, and to prosecute those objections to claims, potential claims and causes of action, including the initiation and conduct of discovery and the filing of claims objections, adversary proceedings and other litigation as appropriate." I support this action by the Trustee. The hearing on the Trustee's Application to Employ Special Litigation Counsel is set for December 17, 2008 at 2:30 pm.

 

Fennemore? Where's Hawkeye and Chingachgook.

[fry]

The attorneys are still pissing on each others' shoes. The Pinnacle Law Group (the class action against the lenders on behalf of California students) have filed a request for a contempt order against the bankruptcy trustee counsel. It seems the trustee has SSH's e-mail server and won't share with the other lawyers even though the teacher...er, judge...says he has to.

 

In one exchange the trustee's computer guy told the Pinnacle computer guy he wasn't happy about the way the server had been handled and he will have "some mending to do". Ah oh, are they going to screw up and destroy potentially critical evidence? There's got to be some juicy correspondence on that server between Airola and his minions. This is shaping up to be an episode of the Simpsons...the O.J. Simpsons.

 

And speaking of minions, similarities between SSH and the $50 billion Ponzi scheme on Wall

Street continue to emerge. On Wall Street the hedge fund that was running the Ponzi got many of its investors via other funds...funds-of-funds. Now it's one thing for an investor to invest directly in a Ponzi scheme...that investor is responsible for his own due diligence. But, investors who invest in a second tier fund expect that that fund will do adeqate due diligence.

 

So, why did these reputable and respected investment funds not recognize that the Ponzi-fund's returns were too good to be true? Because they didn't want to know. Keep the good thing going as long as it lasts and maintain "plausible deniability" by not asking any questions.

 

Doesn't that sound like the second tier management at SSH and the lenders?

[500E]

Fry

I don't understand US law I thought if there was mail fraud+ telephone (something or another) it became a Federal thing and it escalated to another level?

I presume documents were sent by federal mail to banks out of state?

 

http://www.bankruptcypower.blogspot.com/

[fry]

Was Silver State Helicopters broke when its management began transferring the company’s assets out to themselves? As an exercise, can a case be made that it was?

 

For the purposes of fraudulent transfer litigation, “broke”…i.e., insolvency…is defined as, “the sum of the debtor’s liabilities exceed the fair value of its assets”. It would seem then that the trick is to arrive at a methodology for valuing those assets and liabilities. The accounting on the company’s books doesn’t mean much because most of the assets, the hard assets…aircraft and such, are valued at their cost less depreciation not their “fair value”. Also some of the recorded “assets” may be just garbage given the way a company may keep its books…e.g., like SSH’s accounts receivable. On the liabilities side the books may not even include the most significant debt…in SSH’s case, the contingent liability for future training costs encompassed in its student contracts.

 

So, for example, did SSH’s liabilities exceed its assets in August ’07 when the LV company HQ real estate was transferred to a company controlled by insiders Airola and Pickett?

 

For the asset valuation, the fair value of SSH’s hard assets (all other recorded assets were likely worthless) probably would not have exceeded $40 million. That is because in August of ’07 Orix granted SSH secured credit which SSH subsequently drew down to the tune of $33 million. Orix stopped lending at that point probably because it saw SSH’s bankruptcy looming. Orix wanted to keep it’s exposure to the loan, plus the collection costs, under what it could recover…the “fair value”…from a sale of the assets securing the debt. Therefore the “fair value” of assets could be assumed to be what Orix was willing to loan…not much more than $33 million.

 

The valuation of the liabilities is more problematic. In addition to the myriad business related debt already incurred and unpaid at August ‘07…vendor payables, payroll, unpaid health benefits, various taxes, etc…the largest amount owing by the company would have been the contingent liability to the students for future training costs. I believe that, for the purposes of the bankruptcy court, the value of a contingent liability is defined as, “the expected cost discounted by the probability of its being incurred”.

 

But what would be the definition of the “expected cost” of SSH’s future training obligation? SSH’s convoluted contracts with the students provided for up to 200 flight hours over a period not to exceed 18 months (I believe the additional “10% per month” nonsense in the contract just provided a bogus rationale for SSH’s revenue recognition and allowed it not to have to refund amounts to withdrawing students. I do not think it relieved the company after ten months of the obligation of providing the contracted services).

 

The “expected cost” of future training would have to be more than simply the direct operating costs…aircraft cost, fuel, CFI payroll…of providing up to 200 flight hours for students with less than 18 months in the program. The company would have had to also maintain its overhead costs…rent, utilities, management (that alone would be a big cost), administration, etc…throughout the students’ future training period. Given that SSH had insufficient resources to provide the training (RR estimated the company’s enrollment was 40% over its resource availability) and, that students did not drop out of the program after the 10 month point because they were by then fully invested, it is reasonable to assume…and historical experience would probably confirm…that all of the students under contract would have remained “in training” for the entire 18 months of their contracts.

 

Therefore, the “expected cost” of continuing training for those students under contract would have represented the cost of SSH keeping its various locations open until the last of the students at each location reached the 18 month point in their contract term. That cost would have diminished over time as students finished training and locations were closed but because the contingent liability at August ’07 was so much greater than the value of the assets it is not really necessary to run out the full long term costs to arrive at a determination of insolvency.

 

SSH’s operating costs after August ’07 can be broadly estimated because between the middle of August ‘07 and the end of January ’08 SSH burned through $33 million of the Orix loan and the $13 million Eon says they put into the company. Even allowing that some of that money spent during that period was for the nonsense marketing stunts Airola staged and existing unpaid debts, SSH’s on-going costs to maintain its locations, aircraft and payroll probably would have run to several million dollars a month.

 

For SSH not to have been insolvent at the time of the transfers in August ’07 it would have had to have been able to complete the training for all the students then under contract in a matter of a few months. The company’s resources would have made that impossible.

 

So the conclusion is, I believe, Silver State Helicopters was probably broke at the time its management looted its assets. Whether it can be proven in court...or that anyone will even attempt to...is an open question.

[500E]

I more or less understand the bankruptcy law, it is the federal post & Telecom angle I am wondering about?.

There must have been hard copy of loan agreements sent by mail and hopefully phone records

[fry]

Do the creditors have a cause of action for deepening insolvency against the officers of SSH, Orix, Eos and/or the accountants? I find it difficult to believe that SSH's financial statements adequately reflected the company's liability for future training costs. If they had it would seem that the financial statements would have shown SSH to be insolvent in which case why would anyone provide financing? Wasn't there a local accounting firm involved and weren't they replaced by another firm about the time Eos and Orix got involved? Did SSH...and possibily Eos...misrepresent the company's financial condition to Orix in order to get the financing? If there was a misrepresentation, did Orix accept it and make the loan anyway knowing the sale of the assets would cover the loan and its fees? By making the loan SSH effectively transferred to Orix the only assets the then existing creditors...primarily the students...could have laid claim to in a bankruptcy.

 

What Is Deepening Insolvency?

RONALD R. SUSSMAN, ESQ. BENJAMIN H. KLEINE, ESQ. (Journal of Bankruptcy Law and Practice, Dec. 2006)

 

Deepening insolvency is a developing theory of law that entails the wrongful prolongation of a corporation’s life beyond insolvency, thereby resulting in damage to the corporation caused by, e.g., increased debt, dissipation of assets, and/or decreased reputation. Originally only a theory of damages, it has received some judicial recognition as an independent cause of action under which a bankrupt company or its representatives may recover damages caused by professionals and/or its prepetition officers and directors (e.g. accountants, auditors, investment bankers, financial

advisors, or attorneys) who have facilitated the company’s mismanagement or misrepresented its financial condition, resulting in bankruptcy and loss of corporate assets.

 

OFTEN INVOLVES FRAUDULENT FINANCIAL STATEMENTS

The classic example arises where the defendants use or prepare fraudulent financial statements by overstating assets and/or understating liabilities in order to raise capital in the corporation’s name. If the concealment of the true financial condition leads to an increase in debt such that later

liquidation leaves creditors with greater losses than they would have had if the company had been liquidated before the fraudulent financing, the defendants are at risk of a deepening insolvency lawsuit, in addition to more traditional lawsuits against officers and directors for breach of fiduciary

duty.

 

RECENT EXPANSION IN LIABILITY

In recent years, the pool of possible defendants has been expanded to include all those that assist in the fraudulent continuation of the insolvent company: attorneys, auditors, accountants, and lenders.

[fry]

The similarities between the Wall Street Ponzi scheme of Bernie Madoff and SSH just keep coming. From today's WSJ:

 

Bernard Madoff accepted $10 million from an investor just six days before he was arrested for allegedly running a mammoth fraud, according to a complaint filed in federal bankruptcy court.

 

The investor, Martin Rosenman, president of a Bronx, N.Y., fuel company, is suing to recover funds he wired to a Madoff account at a J.P. Morgan Chase & Co. branch on Dec. 5. Mr. Madoff was arrested Dec. 11 and charged with securities fraud after he allegedly told his sons that he had been running what amounted to a giant Ponzi scheme and that investors' losses could top $50 billion.

 

SSH was still drawing down student loan funds the day before it filed for bankruptcy. Great conmen think alike...and apparently they all have the same contempt for the ability of the legal system to do anything to them.

 

Other somewhat relevant articles in today's Journal include an article about how the owner of a plywood shack in Arizona got a $103,000 loan on the property (it describes the same free money madness that fueled SSH); and an article, by a pyschologist taken in by Madoff's scheme, on why even smart people are taken in by hucksters (although his explanations seem self-serving since, in the end, he was just too lazy to do any due diligence beyond trusting a salesman).

[Goldy]

There will always be con men making Kool aid, and there always seem to be bunch of folks willing to drink it. You can go back two years before the BK by SSH and read comments on this board that question their ability to perform to their promises or stay in business. Those that have been around a few years will remember when SSH was threatning to sue VR for the negative words......the information was out there for those willing to look.

 

I still feel for the SSH students left out in the cold, the CitiBank decision was great news..Fry keep up the good work keeping us all informed.

 

Goldy

[Dano]

Fry,

 

Thanks for your efforts. I do appreciate your posts and stop by the forum once and a while to catch up. Your information is very interesting.

 

I knew some of the Airola family personally and didn't hesitate to attend his school. If I only knew then what I know now. Oh well, live and learn I guess.

 

The point I really want to make is, although many of us do not post here or the other forum, we do read and really appreciate the information. Keep it up.

 

Thanks Again

Dano

[fry]

Last week the court granted the trustee's motion to examine Richard Krott, the former General Manager of the Butte Montana location.

 

http://www.matr.net/article-12481.html

 

Dick Krott of Jefferson City is the manager for the Montana operations. Krott was the former director of the Rocky Mountain Trade Corridor started by former Gov. Stan Stephens in the 1980s.

 

Krott said Butte won out for the school over Great Falls and Helena because of the availability of space at the airport and the fact that Butte is within one to two hours' commute for potential student pilots. [How fortunate for the Great Falls and Helena residents.]

 

The school plans to offer evening classes two to three nights a week, so that students from the region can attend, even if they are working in Butte, Helena, Missoula, Dillon or Bozeman. Students who pass an extensive background check will train on state-of-the-art flight simulators in a three-month ground school before taking to the helicopter controls. ["Extensive background check"...i.e., an approval of their credit]

 

Part of the plan is contingent on the Butte-Silver Bow Council of Commissioners approving up to a $70,000 loan to be used to renovate the aviation building for classrooms and office space. The zero-interest loan would pass through the local government, backed by the airport authority, to Butte Aviation and Silver State. It would be paid off in five years.

 

Butte-Silver Bow's Judy Jacobson said she's glad to see Butte cement this deal and will push for approval of the two-part loan at Wednesday's council meeting. The loan is for up to $50,000 from the Anaconda Arco fund — to be used first — and another $20,000 from Butte economic development funds if necessary. [so much for the wisdom of local government investing taxpayers' dollars in "Economic Development". But then the know-nothings at Eos lost their investors' money so everybody was playing with somebody else's money.]

 

Wonder why the trustee wants to examine only Krott and not all of the other former SSH middle management as well?

[500E]

One is good !!!! then another then ANoooooooooooother??

[fry]

From a piece in the LV news:

 

"...Airola is not the culprit, 'He had no power. He had no say so. He had no authority.'"

 

http://www.lasvegasnow.com/Global/story.asp?S=9724669

 

That's rich...Airola had enough authority to transfer assets out of the company to himself and his cronies.

 

And if Eos really spent a million dollars investigating the financial condition of the company before acquiring a controlling interest in it they were either terminally incompetent or they are in on a scam. A first year accounting student could have seen that SSH was broke before they invested in it and, that it's revenue stream depended on a continuing supply of borrowers at a time when the credit markets were already beginning to seize up.

 

Let's hope that a Democratic controlled federal government doesn't have much sympathy for a scammer with Republican ties.

[IFLY]

Airola Subject Of Federal Investigation

Sun, 25 Jan '09

 

Former SSH Owner Now Deputy In Texas

The saga of former Silver State Helicopters owner Jerry Airola has a new chapter. KLAS-8 in Las Vegas reports the Nevada expatriate is now the focus of a federal investigation into a number of suspect business dealings.

 

As ANN reported, Silver State closed up shop February 3 of last year, and filed for Chapter 7 liquidation the next day. It was an ignominious end for a company that had expanded rapidly throughout the nation, recruiting students with a fast-track rotorcraft proficiency course and the promise of job placement upon completion of their training.

 

Airola was a no-show at an April court hearing into claims he cleaned out student tuition accounts, less than 48 hours before filing Chapter 7 liquidation.

 

The shutdown left approximately 2,000 students across the country scrambling, many with student loans to repay. Airports once served by Silver State were stuck with unpaid fuel bills and other fees racked up by the school. Facing a number of federal grand jury subpoenas, Airola fled Nevada after Silver State closed its doors... and is now a sheriff's deputy for a Native American tribe in Texas.

 

George Kelesis, who has the unenviable task of representing Airola against those investigations, says he firmly believes his client has been made an unfortunate scapegoat for a far greater mess.

 

"I'm not saying Mr. Airola is a victim," Kelesis said. "I'm saying Mr. Airola is not responsible for the acts they are trying to attribute to him."

 

The attorney says Airola sold most of his shares in Silver State Helicopters in 2007 to new owners, and left the company in sound financial condition. The decision to file for liquidation soon thereafter was theirs alone, he claims.

 

"That position was opposed to adamantly, vehemently, and loudly by Mr. Airola," Kelesis asserts. "He did not want to file bankruptcy. In fact, he objected and voted against it."

 

Furthermore, Kelesis maintains Airola had arranged a program for students left out in the cold by the SSH closure to complete their training at one of five alternate schools... but that the new owners shut him down.

 

"He had no power," said Kelesis. "He had no say so. He had no authority."

 

If that sounds as though Kelesis is attempting to paint his client as something of an antihero, it's worth noting the attorney isn't exactly an Airola apologist; in fact, Kelesis says, he's a close personal friend of Clark County Sheriff Doug Gillespie, who won election to that office in 2006 following a bitter campaign against... Jerry Airola.

 

"The circumstances are very unique," Kelesis admits.

 

FMI: www.nvd.uscourts.gov

[heli.pilot]

The attorney says Airola sold most of his shares in Silver State Helicopters in 2007 to new owners, and left the company in sound financial condition.

 

Now that I find hard to believe. Seriously, was SSH ever in "sound financial condition"?

[fry]

Here's excerpts from an article in the WSJ today about how Ponzi schemes are coming to light as the economy worsens:

 

The recent economic boom may have made some investors especially susceptible to Ponzi schemes and other investment frauds, investigators say.

 

"When you have serious economic problems, people who have been content with where their money has been sitting sometimes need it," says Bill E. Branscum, a private investigator in Naples, Fla., who has probed dozens of Ponzi schemes. "And in needing it and in finding out that they can't get it, that serves to reveal Ponzi schemes that may have gone unnoticed."

 

Three weeks ago, the SEC accused a Philadelphia-area investment fund manager, Joseph S. Forte, with running a Ponzi scheme since at least 1995 that claimed returns as high as 38% and raised $50 million. Mr. Forte didn't return phone calls made late in the day.

 

Meanwhile, Idaho's securities regulators are investigating allegations by investors in Idaho Falls that they lost up to $100 million in an alleged Ponzi scheme by Daren Palmer, a local money manager. No charges have been filed. Mr. Palmer didn't return phone calls made late in the day.

 

There was also the case of Marcus Schrenker, an Indiana financial adviser who was arrested in Florida earlier this month after allegedly trying to stage his death in a plane crash as investigators probed his businesses. He faces charges in Indiana and Florida; his lawyer has said Mr. Schrenker isn't mentally competent to stand trial in Florida.

 

The biggest case, of course, is the one allegedly carried off by New York money manager Mr. Madoff, who has estimated inflicting losses of $50 billion on his investors. Mr. Madoff's attorney, Ira Lee Sorkin, declined to comment.

 

The Ponzi scams alleged by the SEC sprung up all around the country: in Texas, where participants, many of them elderly, invested $45 million in a phony hedge fund that supposedly produced annual returns as high as 61%; in a currency-trading scheme in Georgia which promised returns of 10% a month; in Florida, where two companies raised $30 million by allegedly convincing investors they would earn money by exporting gadgets like Apple iPods to South America. The SEC alleges that the companies purchased few electronics and used "newly invested funds to make principal and interest payments to existing investors."

 

In many of the SEC cases, the perpetrators allegedly siphoned off money to fund lavish lifestyles. An SEC civil complaint last year accuses a California investment adviser of using millions of his clients' money "to pay for lavish personal expenses, such as upkeep on his Ferrari, limousine services and shopping trips."

 

The SEC has accused South Florida investment adviser Anthony A. James of misappropriating at least $2.4 million in client funds to buy a six-bedroom home, a Porsche and season tickets to the Miami Heat basketball team.

 

SSH probably could not be procecuted as a Ponzi scheme because it did not involved investment solicitations. But in substance it was the same. It relied for capital on borrowing from the students and the management siphoned off the funds. It would probably be more properly considered a classic vocational school consumer fraud. That's something most states had laws and departments in place that should have contained the damage. Although in SSH's case, for some reason, they were all looking the other way.

[fry]

The bankruptcy court just approved a motion by the Trustee to modify a March 19, 2007 settlement agreement between SSH and Corby Hall. The original paragraph at issue read:

 

[Hall agreed to cease and desist] Directly or indirectly discussing, writing, talking to, e-mailing, distributing literature, handouts, flyers or any other written material about, mentioning or related to Jerry Airola or Silver State, to any other person, including but not limited to, past, present or future a) co-defendants in Federal lawsuits; owners, members and/or participants of any internet website or forum, including but not limited to those listed at Paragraph 2(a) above; or c) Silver State flight academy students, applicants and/or Silver State employees.

 

Student money spent on legal fees to hush up any dissent or negative attention to Jerry’s “aviation empire”. Ya think one of the websites listed at Paragraph 2(a) was this one? The internet will make you free, can I have a hallelujah.

 

The court-approved modification to the agreement reads in-part:

 

Hall shall not breach the settlement agreement if Hall directly discusses with…the Trustee and his counsel, or provides the Trustee and his counsel literature…mentioning Jerry Airola or Silver State; and directly discusses with…or provides to federal and state governmental authorities that are investigating the affairs of the Debtors, literature…mentioning or related to Jerry Airola or Silver State.

 

The Trustee has also recently employed SSH’s former IT guys to assist in accessing the company’s computer information. It would be the rare efficient or ethical company that did not have something useful to a prosecutor in its e-mail archives…and SSH was certainly neither.

[500E]

Dont expect they were paid either????

[fry]

According to filings with the bankruptcy court just under 50 people have had their loans assigned to Citi and thereby wiped out. Don't know what Citi's criteria was for picking which loans would be assigned but it appears to have been strict. That Beverly Hills attorney representing a bunch of the students said he had 172 Citi loans as clients and he was advising all of his clients to accept Citi's offer...apparently less than a third fit Citi's requirements.

[fry]

The latest from the Beverly Hills lawyer's website:

 

[Citibank issued a] settlement letter... clarifying the fact that in exchange for an assignment of the client's proof of claim, Citibank will cancel the debt and not assign its claims to any other company. In addition, Citibank agreed in writing to request that any reference to the Citibank SSH loans be deleted by all credit bureaus to whom the SSH Student Loans were reported. [it appears that] Citibank has decided not to issue any 1099-C debt settlement income forms as a result of its cancellation of these disputed debts.

 

Although, the bankruptcy court filings show only about 50 students' loans assigned. Are there some out there who have not accepted the offer? Why, it sounds like a good deal? Or has the offer not been extended to ALL Citibank borrowers?

 

Also:

 

SLX is Next

 

Student Loan Xpress is the lender that wrote the most student loans for Silver State Helicopters. It is also the lender that I believe is going to be next to make an offer that I can enthusiastically recommend to all of my SLX clients. Settlement negotiations with SLX are covered by a written confidentiality agreement. These negotiations are, in my opinion, about to bear fruit. SLX has already quietly settled several SSH student loan claims with former SSH students in Georgia. Look for an announcement in the next 30 days. I will e-mail all of my SLX clients with the details of this settlement offer as soon as the offer is made public.

 

And finally:

 

Bogus Offer from KeyBank

 

Citibank was the first major lender to settle with the SSH students. Student Loan Xpress is likely to be next. That makes KeyBank most likely to be the last major lender to settle with the SSH students. KeyBank has not made any offer to Plaintiffs' counsel, though it has participated in discussions and agreed to participate in a mediation. Meanwhile, in January of 2009, KeyBank made individual offers to certain California SSH borrowers. In one such offer made to a Los Angeles, California client of mine, KeyBank offered to reduce my client's SSH KeyBank student loan balance by $8,763.36 from $66,763.16 to $58,000.00. This amounts to a 13% reduction for a client that received only his private pilot's license from SSH.

 

KeyBank wants an assignment of the student's proof of claim against SSH, a covenant not to sue, a confidentiality agreement, and a complete release. All it offers in return is a 13% discount. In my opinion, KeyBank's offer is not good enough. It is a bogus offer.

 

KeyBank mailed its offer directly to my client, with no copy to me. KeyBank did this despite the fact that I have previously advised KeyBank and its counsel of my representation of this client and of all the KeyBank clients that I represent. I urge all clients of mine who receive such a letter to forward said letter to me and to authorize me to reject KeyBank's offer. Together, we can do better.

[fry]

The Student Loan Corp (Citibank) filed a motion vacating the depositions it had scheduled with all those companies and individuals who received transfers of SSH's assets just before its bankruptcy filing. Have they decided to just not pursue it now that Citibank is 36% owned by the federal government? Who knows...but, without Citi going after Airola it is not likely anyone else will. The trustee is only interested in liquidating the assets and providing employment for lawyers.