Silver State and the legal process

[jehh]

And you're shocked because... ?

[Dano]

I ran across this yeserday. I thought it was interesting. A precedent?

 

 

A "Key" Victory for Students

Stephen Burd -

March 10, 2009 - 3:30pm

It appears that KeyBank's predatory private student loan practices are finally catching up with the company.

 

Late last month, the bank settled a lawsuit filed by 51 former students from TAB Express International, a defunct flight school in northern Florida, who had accused the lender of colluding with the school to defraud them. The settlement puts an end to the case, which was scheduled to go to trial before a jury this week in a state circuit court in Florida.

 

Meanwhile, according to a U.S Senator in Florida, the FBI and a group of state attorneys general are investigating the exclusive lending arrangements that KeyBank had with TAB Express and Silver State Helicopters, a Nevada-based chain that shut down suddenly on Super Bowl Sunday last year.

 

As we have reported previously, there has been in recent years a proliferation of unlicensed and unaccredited trade schools that do not participate in the federal student aid programs and therefore go largely unregulated. Their growth has been fueled by lenders that have "partnered" with these institutions to provide expensive private loans to the at-risk students these schools tend to attract. The lenders have then turned around and, like subprime mortgage providers, securitized the loans, shifting these high-risk loans onto unsuspecting investors.

 

One of the most aggressive players in this arena has been KeyBank, which has formed exclusive arrangements with dozens of unlicensed trade schools -- particularly ones that focus on computer training and flight training. These schools have required their students to pay for the full cost of their programs up front, with tens of thousands of dollars of private loans from KeyBank. Unfortunately, many of these schools have shut down without warning, leaving their students in the lurch -- heavily indebted with expensive private loans and little to no practical training.

 

In case after case, KeyBank has fought vigorously (and often successfully) to force students to pay back these loans. In doing so, the lender has denied borrowers basic protections that are in federal law to protect borrowers from being scammed. For example, the bank has routinely omitted from the promissory notes for its private loans a required notice that asserts the borrowers' right to have their loans canceled if a school with which it has "a referring relationship" closes down, is not licensed, or engages in fraud. In addition, the bank has tried to prevent students whose schools have shut down from challenging their loan agreements in court.

 

A Big Victory for Students

 

In June 2005, TAB Express International shut its doors without notice after KeyBank ended its three-year relationship with the school. Prior to that, KeyBank and TAB had an exclusive arrangement in which the school required students to pay the full cost of attendance -- which was around $100,000 -- with private loans from the lender before classes even started. The bank sent the money directly to the school. According to the former students' lawsuit, the students were told that their loans would be forgiven after they completed the training and worked for TAB's airline for a period of time.

 

But after enrolling, students became suspicious. "The students became aware of a lack of available instructors, simulators, and aircraft at the flight school as the school continued to increase the number of enrollees," the lawsuit stated. Eventually, they realized that "TAB had no airline." The lawsuit said that the students repeatedly brought their concerns to KeyBank officials but were rebuffed, and the lender continued to help market the school to prospective students.

 

When the deal finally collapsed, the lawsuit said, KeyBank officials tried to convince the students to take advantage of a "train out option" that would have required them to take on additional private loan debt and to waive their right to pursue legal action. Most of the students were not persuaded.

 

Instead, they decided to pursue a lawsuit against KeyBank. They won a major victory last year when the Florida State Appeals Court rejected an effort by the lender to enforce a "venue restriction clause" included in the students' private student loan promissory notes. That clause would have required them to re-file their case in KeyBank's home state of Ohio, which has much weaker consumer protection laws than Florida.

 

With only weeks before the jury trial was to start, KeyBank decided to come to terms with the former students. Under the settlement, the bank agreed to discharge the borrowers' private loans, which were worth about $5 million, and to pay a portion of their legal fees. The company, however, did not admit to any wrongdoing.

 

Under Scrutiny

 

Whether or not KeyBank wittingly helped schools like TAB Express and Silver State Helicopters exploit students is sure to be the focus of an investigation that the FBI is conducting of the lender's activities. Sen. Bill Nelson (D-FL) revealed the existence of the FBI probe in a letter he sent to one of the former TAB Express students last fall that was obtained by Higher Ed Watch. The letter also noted that "the Florida Attorney General's Office is also conducting a formal investigation into the matter as part of a larger multistate group of Attorneys General."

 

At Higher Ed Watch, we are pleased that federal and state investigators are taking these cases seriously. While justice has been served for former students of TAB Express, there are many others who are being forced to repay tens of thousands of dollars in expensive private loan debt for training they never received. Hopefully, they won't have to wait for their day in court before their debt is forgiven.

[fry]

I ran across this yeserday. I thought it was interesting. A precedent?

 

The fact that they settled only just before going to trial is another indication that KeyBank is going to continue to play hardball. There is a similar class action case on behalf of the California SSH students currently working its way through the California court system. But if the timeframe of the TAB case is any indication it may well be a couple more years before it reaches some kind of resolution.

 

http://www.pinnaclelawgroup.com/about/silv..._litigation.php

 

The comments in the article about the Florida Senator pressing for a federal investigation and about the various states' attorneys general pursuing investigations are just repeating news from last year shortly after SSH closed. Nothing has been reported since those initial reports. IMO the attorneys general are not going to pursue SSH because it would point to their own lack of enforcement by their consumer protection departments while SSH was operating. For example, Utah has a law on its books, enforceable by its consumer protection agency, that unregistered schools cannot take advance payments. The consumer protection department even had a hearing with SSH in May of 2007. But the school never stopped operations until it went bust.

 

I could be wrong but, I wouldn't count on much coming from any government entity or representative.

[Witch]

I came across this on the other forum. Basically it's about Randy Rowles and the shananegans going on and how Airola basically set up a scam that got out of control and added to the credit fiasco that ensued.

 

http://www.aviationtoday.com/rw/issue/cove...ened_30107.html

 

Comments Fry?

[gary t]

Fry,

My God man, how much time do you have on your hands??

Seriously?

You're the Cliff Clavin of Vertical Reference...

[fry]

I came across this on the other forum. Basically it's about Randy Rowles and the shananegans going on and how Airola basically set up a scam that got out of control and added to the credit fiasco that ensued.

 

http://www.aviationtoday.com/rw/issue/cove...ened_30107.html

 

Comments Fry?

 

Hardly a Pulitzer Prize contender for investigative journalism…but then R&W ain’t the New York Times. Hell, some of the basic facts of how SSH operated were just plain wrong; how reliable could the more nuanced issues be? The writer really just recycled previously written information in order to fill space (can’t ya just hear the editor, “Gimme twenty ‘graphs in a retrospective on Silver State”).

 

It has been interesting to see the story progress over the years. The details tend to fall away with time and just the sound bites representing the various parties’ points of view remain.

 

The students’ point of view: SSH and the lenders participated in a scam from the start and duped the unwitting students.

 

Airola’s: he was just a businessman who created a company and then sold it to Eos. The company was in good shape when he sold it…otherwise why would they buy it…and it was just the credit crisis that brought the company down.

 

Eos’: no comment.

 

The consumer advocates’ and lawyers’: the (deep pocket) banks preyed on the borrowers with deceptive business practices and we’re going to go after them.

 

Mr. Rowles continues to attempt to burnish the history of his involvement with SSH in his “exclusive interview” for the article. And there’s nothing wrong with that, he certainly wasn’t a prime-mover in the scam part of the business. He probably should stop talking to reporters though. He wasn’t really involved long and doesn’t know much but each re-telling of his story makes him appear to be more dialed in than he was (e.g., “While examining the company’s books, Rowles discovered that SSH’s contract, charter and tourism business was not what it appeared to be.”…Airola, and certainly Pickens, would have never let anyone “examine the books”).

 

By itself SSH might have gotten more attention from the authorities than it has (although maybe not, this vocational/flight school scam seems to keep reappearing) but in the current environment it is just another story among many with the same roots and the same outcome. The fraudulent business practices of the mortgage/student loan feeder companies; the reckless lending by some of the world’s largest banks; the greed and ineptitude of company owners and investors; the failure in oversight by federal and state regulators and elected representatives; and, the carelessness of consumers are all embodied in the SSH story.

 

Maybe someday someone will write a real story of what happened.

[gary t]

Fry,

My God man, how much time do you have on your hands??

Seriously?

You're the Cliff Clavin of Vertical Reference...

 

Hi Cliff, err...Fry.

[permison]

Fry,

My God man, how much time do you have on your hands??

Seriously?

You're the Cliff Clavin of Vertical Reference...

 

Don't knock Fry. The man (?) knows his stuff. He's been kicking around VR for years. At first alot of members thought he was just stiring the pot but history has proven (at least to me) that he is well informed and knows what he writes about. And it isn't crap about the mating habits of the african fruit fly, it's usually on topic and timely to the discussion at hand.

 

You keep right on posting Fry. I get better info from you than the rest of the Internet.

Permison

[gary t]

I just wanted to know if the guy is a shut-in or something. NO ONE with in an ordinary life spends THAT MUCH TIME on meaningless drivel that has no effect on him whatsoever.

Sheesh.

[Witch]

Au contrare, many people do spend much time on things that don't affect them. I have several myself: ie Michael Moore, the TSA, The Goracle, the U.N., and Richard Daley of Chicago-for closing Miegs Field. Others have other hobbies like trains, NASCAR, preparing for the nuclear holocaust...etc. Some are more passionate of some things and less about others.

 

Fry, and many scammed by Silver State, are passionate about this subject. I don't blame them. Wouldn't you if you were in their position? Take note that many have become activists because of events that happened to them. MADD president had her son killed by a drunk driver, Brady's husband was shot, Cindy Sheehan's son was killed in Iraq...the list goes on. Even in your neck of the woods I bet there are people activating about something.

 

I applaude anybody that speaks up and mobilizes for a cause, even if I think it's a stupid cause;except for those global warming dilnoids. The Goracle especially, oh and the IPCC. I smell another scam there.

 

Later

[permison]

I just wanted to know if the guy is a shut-in or something. NO ONE with in an ordinary life spends THAT MUCH TIME on meaningless drivel that has no effect on him whatsoever.

Sheesh.

 

Gary,

Let me give you a little friendly advice. When your brand-new to a group don't start off by trying to knock one of its older members. Give it a little time, let people here get to know you a bit. Fry is usually right on topic with his posts. I don't know his background either but I do know for over 3 years he has been consistently right about much of what he posts here and he posts about other topics besides SS. His knowledge of finance is spot on and we could all learn a thing or two from him.

Permison

[gary t]

Gary,

Let me give you a little friendly advice. When your brand-new to a group don't start off by trying to knock one of its older members. Give it a little time, let people here get to know you a bit. Fry is usually right on topic with his posts. I don't know his background either but I do know for over 3 years he has been consistently right about much of what he posts here and he posts about other topics besides SS. His knowledge of finance is spot on and we could all learn a thing or two from him.

Permison

Thanks for the friendly advice. Now here's a couple of facts for you:

1-I am not new here, just new to posting.

2-I have an MBA and some of what this guy has intimated business-wise is just plain incorrect.

I never fail to be amazed at how folks who are not familiar with topic A seem to always

assume that anyone who posts at length on topic A must be an expert on topic A.

If you have not learned this already, there is a site called GOOGLE that can

make a 9-year old with cut and paste talents seem like an expert on anything.

[gary t]

Au contrare, many people do spend much time on things that don't affect them. I have several myself: ie Michael Moore, the TSA, The Goracle, the U.N., and Richard Daley of Chicago-for closing Miegs Field. Others have other hobbies like trains, NASCAR, preparing for the nuclear holocaust...etc. Some are more passionate of some things and less about others.

 

Fry, and many scammed by Silver State, are passionate about this subject. I don't blame them. Wouldn't you if you were in their position? Take note that many have become activists because of events that happened to them. MADD president had her son killed by a drunk driver, Brady's husband was shot, Cindy Sheehan's son was killed in Iraq...the list goes on. Even in your neck of the woods I bet there are people activating about something.

 

I applaude anybody that speaks up and mobilizes for a cause, even if I think it's a stupid cause;except for those global warming dilnoids. The Goracle especially, oh and the IPCC. I smell another scam there.

 

Later

I'll bet you my house that Fry hasn't lost a dime to Silver State Helicopters.

So why does he continue to drone on and on about it? Answer: To impress you.

[Darren Hughes]

Go away Gary T. Of your 10 posts, so far I have seen only 4 in this topic, which were all aimed at making fun of Fry. Fry may be difficult to like on this site due to his overly aggressive arguments in other topics, but he was one of the main people on this site that fought hard & also aggressive, to help many people realize that getting involved with SSH was a really bad idea.

 

You probably should have taken a class or two in common sense while you were going for that MBA you're flaunting around the place. If you're gonna try to bait someone, at least do it with some level of competence and intelligence.

 

All the education and 3 letter certificates in the world mean nothing to the people around you unless you have their respect, and that can only be earned. I suggest you change your tune to a slightly more gracious one, or head on over to the original Just Helicopters forum, where there are plenty of other bad attitudes floating around and you'll blend in quite nicely.

[fry]

On the 24th the bankruptcy trustee filed adversary complaints against American Express and Sun Care Air Ambulance to recover preferential transfers of money or property provided to them by SSH.

 

The bankruptcy trustee is going after $927,223 of payments by SSH made during the period November 14, 2007 through the petition date (the last payment of $192,280 was made on February 4, 2008...apparently Airola wasn't too broken up to sign a check to cover his Amex bill).

 

In the case of Sun Care, which has also filed bankruptcy, the trustee is going after $158,769 in payments and to avoid any creditor claim by Sun Care.

 

The trustee is claiming the payments were preferential because "the transfers were made while the Debtor was insolvent" and "during the ninety (90) days before the Petition Date". Hopefully the trustee will also go after insider payments made during the 12 months before filing on the same grounds...i.e., that SSH was insolvent when those transfers were made.

 

This practice of dipping in the company till just one more time seems to be SOP among company managements and other assorted slimeballs who are on the verge of going under...or going to jail. The AIG and Merrill Lynch bonuses, Bernie Madoff's wife's withdrawals and Airola's credit card payments all seem to have the same elements in common. They were blatant and unconscionable actions to benefit themselves at the expense of others who they had already taken advantage of; and, the actions were probably blessed by the lawyers as being within the letter of the law.

[fry]

The bankruptcy court has scheduled a hearing in May to consider the motion by Shining Star Helicopters to quash the trustee's examination of its bank records.

 

Shining Star is the company owned by SSH's former CFO and Controller that leased aircraft to SSH (aircraft, most of which, it fortuitously sold shortly before SSH went belly up). Apparently the trustee wants to look at the bank records for the period a year before SSH's filing and up to the present. Shining Star says all of the transactions between it and SSH were reported when SSH filed. Payments by Shining Star to SSH were required to be detailed in the filing for the twelve months before the filing because they were transactions between SSH and company insiders...the CFO also owned equity in SSH.

 

So what are the principals of Shining Star afraid of? If all the transactions were reported with the filing why incur the expense of a lawyer to quash the trustee's examination?

 

Should the trustee be going after the payments SSH made to Shining Star as preferential transfers?

[fry]

This may have been posted back when it was first reported, July. CIT Group is the parent of the defunct Student Loan Express:

 

On Friday 25th, 2008 a shareholder has filed a class action in the United States District Court for the Southern District of New York on behalf of purchasers of CIT Group Inc. (NYSE:CIT) common stock during the period between April 18, 2007 and March 5, 2008.

 

According to the complaint the company's public financial statements failed to account for tens of millions of dollars in loans to Silver State Helicopter, which recently filed for bankruptcy. On March 6th, 2008, Keefe, Bruyette & Woods issued an analyst report on CIT Group Inc. lowering its first quarter 2008 earnings per share estimate by $.08 based on concerns that CIT Group Inc. would have to write down a significant portion of its private student loan portfolio, including the risk that the CIT Group Inc. would have to charge off $179 million of private student loans made to students of Silver State.

 

http://www.pr-inside.com/a-shareholder-has...uit-r726753.htm

 

From CIT Group's recently released 2008 annual report:

 

Reserves were increased from $62 million at December 31, 2007 to $238 million, primarily related to the private student loan portfolio. During 2008 a pilot training school declared bankruptcy. At December 31, 2008, loans to these students totaled approximately $192 million.

 

It could mean CIT is reserving for a total write-off of the student loans or it could mean they are just covering themselves because of the lawsuit.

[heli.pilot]

Go away Gary T. Of your 10 posts, so far I have seen only 4 in this topic, which were all aimed at making fun of Fry. Fry may be difficult to like on this site due to his overly aggressive arguments in other topics, but he was one of the main people on this site that fought hard & also aggressive, to help many people realize that getting involved with SSH was a really bad idea.

 

You probably should have taken a class or two in common sense while you were going for that MBA you're flaunting around the place. If you're gonna try to bait someone, at least do it with some level of competence and intelligence.

 

All the education and 3 letter certificates in the world mean nothing to the people around you unless you have their respect, and that can only be earned. I suggest you change your tune to a slightly more gracious one, or head on over to the original Just Helicopters forum, where there are plenty of other bad attitudes floating around and you'll blend in quite nicely.

Well said. My thoughts exactly...

[fry]

This is rich. On the 21st EOS and Airola provided the bankruptcy court with an agreement regarding documents Airola wanted from EOS. The documents are being requested by Airola as part of the adversary proceeding being brought by the bankruptcy trustee to deny Airola’s creditor claim.

 

The documents Airola wants from EOS are those “that constitute or disclose an analysis by EOS as to whether or not Silver State Helicopters LLC i) was insolvent on August 15, 2007 immediately before the transaction that closed on that date [the sale of 60% of SSH to EOS], ii) was rendered insolvent or was left with an unreasonably small capital as a result of the transaction, iii) remained solvent after the transaction, or iv) remained adequately capitalized after the transaction…”.

 

In response EOS will only provide documents if they will remain confidential. The agreement lists even the court reporters as not being allowed to disclose the contents of any documents. And anyone who might ever view these documents is to be shown this agreement and informed that they had better not disclose any of what they read.

 

And why is EOS so concerned that their analysis of SSH’s financial condition not make its way into the public arena? Because the documents may contain “non-public, proprietary or commercially sensitive information” that if made public might cause EOS “unreasonable annoyance, expense, embarrassment…”.

 

Yeah...I can understand that. Here’s a company in the business of investing in companies using investor money that spent $30 million to buy control of a company that went belly up just 5 ½ months later. That would probably be the “embarrassment” part. As for protecting their “proprietary or commercially sensitive information”, they probably don’t have to worry. It’s not likely their competitors are sneaking around trying to get their hands on EOS’s “proprietary” analysis of SSH’s financial viability…given the results.

 

Between the August 15, 2007 close and the February 2nd bankruptcy filing SSH blew through about $50 million…$33 million borrowed from Orix, $13 million EOS says they put into the company; and, a few million more of student advances. At the time it went tits up the company had only a million or so in cash but offsetting that it also had, in addition to substantial vendor liabilities, a huge unrecorded liability due to the students for future training costs.

 

Hello…how could anyone possibly find that this company had been solvent before, during or after the EOS transaction???

[Goldy]

Not related to the bankruptcy proceedings, but in the March issue of Rotorcraft Professional Magazine there is a well written article from a brand new CFI left out in the cold perspective. I would recommend everyone reading it just to gain that perspective..

 

http://www.rotorcraftpro.com

 

Fly safe,

 

Goldy

Edited May 2, 2009 by Goldy

[fry]

http://www.rotorcraftpro.com

 

That is why many people went to Silver State; the risk of finishing flight school without a job to look forward to was minimal. They constantly had job openings for CFIs, commercial pilots, and even jobs for students while they were training. When I passed my CFI check-ride, I had four Silver State Flight schools that I could have taught in. Now there is nothing. Say what you will about that company, but they did have good intentions and made good pilots. Most important, they gave the fledgling CFI the first job.

 

"...had good intentions"...? No, actually they did not. SSH hired CFIs at a salary that was at least twice what CFIs were being paid anywhere else in the industry. What SSH was paying to CFIs was an unsustainable cost and as a result...of that and their management's other practices...the company went belly up. SSH paid CFIs as they did because it as a loss leader tactic to attract new students. It was part of the sales pitch. They were able to do this because they were paying those salaries not from the operating earnings of the company but from the advanced student loan funds.

 

Jack, sorry no insight on that subject.

[MommaT]

That is why many people went to Silver State; the risk of finishing flight school without a job to look forward to was minimal. They constantly had job openings for CFIs, commercial pilots, and even jobs for students while they were training. When I passed my CFI check-ride, I had four Silver State Flight schools that I could have taught in. Now there is nothing. Say what you will about that company, but they did have good intentions and made good pilots. Most important, they gave the fledgling CFI the first job.

 

Sounds like a PR stunt directed by none other than Jerry! It would be hard to say that I havnt seen these tactics before from him. Where, he makes the statements under guise, or he pays someone or promises them something in return for making such statements. I honestly dont believe you will hear propaganda like this coming from ANY person who worked for SSH, not even from the five percenters who made it through.

Edited May 3, 2009 by MommaT

[joeschmoeheli]

Sounds like a PR stunt directed by none other than Jerry! It would be hard to say that I havnt seen these tactics before from him. Where, he makes the statements under guise, or he pays someone or promises them something in return for making such statements. I honestly dont believe you will hear propaganda like this coming from ANY person who worked for SSH, not even from the five percenters who made it through.

 

I doubt that Jerry had anything to do with it. He has nothing to gain from good PR

 

I'm sure that some dirtbag who made it through SSH and got all their hours and didn't get screwed out of a bunch of money made this statement.

 

Thing that sucks is, Jerry and SSH screwed the whole industry, not just SSHers. People who did their research and went to a decent school are still left out in the cold because of the failure of SSH. It didn't take long, less than a year, for the whole training industry to fall back on it's ass.

Edited May 3, 2009 by joeschmoeheli

[jehh]

What do you expect someone to say in their position? If SSH got them their ratings, got them their 1,000 hours, and got them a job, then from their point of view, they were treated fairly.

 

What, do you expect them to now throw that experience under the bus because of everyone else who was screwed over?

 

I'm not defending SSH the company or Jerry the person, however not everyone who worked there is evil either...

[JDHelicopterPilot]

I wouldn't sterotype everyone from SSH as having little integrity. That is something found in many other pilots from other schools as well. It all comes down to the person. Don't be so quick to judge. There are many great pilots/friends from SSH whom I would fly with any day.

 

JD