Silver State and the legal process

[joeschmoeheli]

I'm not saying that all SSHers were scumbags. I'm not trying to paint with that big of a brush. People's actions define them more than where they were trained.

 

If I was a SSHer who made it through and got my hours with them, I still wouldn't go around praising the company that screwed over so many of my students/friends and my industry. I have seen this happen first hand and I have little respect for these individuals.

 

I have also met some SSH people who display integrity and who were good, well trained pilots.

[MommaT]

Jerry does surely have something to gain from PR. He's been doing it for years, and now is no exception.

 

If you were being investigated by the FBI and 14 State Attorney Generals for numerous fraud crimes you would be out there trying to sway opinion as well.

 

Fact of the matter is Jerry has been known to use some of the dirtiest tactics out there to clear his name or divert attention.

 

See the Clark County Sheriff candidates Ron Williams, Laurie Bische, Doug Gillespie scandal in Las Vegas 2006. Where Jerry paid a cop (Ron Williams) to secretly record another cop's (Laurie Bische) conversation in regards to another cop's (Doug Gillespie) qualifications to be Sheriff. Jerry then took these conversations, switched around the context to his liking, and then the same night of the recording publicly announced that Bische supported Jerry rather than Gillespie for Sheriff. Bische, the next day, objected to Jerry's claims. While defending that she did not agree with some of Gillespie's views, her support was as clear as black and white. Her full support was behind Gillespie, not Jerry.

 

I shouldn't even need to get into the moral and legal arguments of paying cops to record private conversations (notably Nevada has two party consent laws against recording and releasing private conversations). Interestingly, this recording was released to the news by a Jerry campaigner.

 

This is just one of the dozens of incidents Jerry has been the cause of.

 

Do you not think Jerry has some PR work to do, much less that is not actually doing any? All of these incidents will be brought up against him when he is charged with the numerous crimes he has committed. Its called "Evaluation of Character". It will be several days of Court testimony against Jerry by dozens of people.

 

If you want to know about more of these incidents, just ask. Will happy to post them here.

[fry]

From the WSJ regarding a Southern California investment manager being investigated by the SEC:

 

The court-appointed receiver in the Danny Pang case criticized the California financier for running his investment firm like a "personal piggy bank," and claimed that abuse and mismanagement along with a faltering economy had left a hole of between $400 million and $600 million in the firm's books.

 

The receiver, Robert Mosier, alleged in a federal court filing that more than $80 million in questionable personal and business expenses were financed by the firm's investors, including a recent $1 million Disney cruise for the entire staff, the purchase of several jets and $6.9 million in undocumented loans to Mr. Pang.

 

Mr. Pang came under scrutiny by federal officials after an April 15 page-one article in The Wall Street Journal that said some of his claimed credentials couldn't be verified.

 

Too bad the various states' departments of consumer protection did not similarly investigate SSH after the 2006 stories in the LV Review Journal pointed out that Airola's claimed academic and business claims were bogus.

 

It is also unfortunate that a Ponzi scheme involves investor monies and falls under the jurisdiction of the feds while a virtual Ponzi scheme using customer money is only within the authority of the states to pursue.

[fry]

CIT corp, the parent of Student Loan Xpress, is the subject of a front page piece in the WSJ about the company's efforts to ward off a bankruptcy filing. This is probably why there has been no movement in the negotiations between the students' attorneys and SLX/CIT. If the company does enter bankruptcy the situation will become even more complicated with the students' attorneys having to deal with a bankruptcy trustee. While the company might be willing to write off student loans a bankruptcy trustee may not have that same latitude.

[fry]

Those who are into irony will appreciate the situation at CIT...the parent of Student Loan Xpress. The unsecured creditors at CIT are having done to them what was done to the students at SSH.

 

CIT was led by incompetent management during the easy money days...just like SSH...and it found itself out of cash and on the verge of bankruptcy...just like SSH. So...just like SSH...they have used what assets they have, which were paid for by the unsecured creditors...just like SSH...to secure additional cash. They will now blow through that cash, file for bankruptcy protection, the lenders with secured claims on the assets will be repaid and the unsecured creditors will get nothing. Just like SSH.

 

Ironic.

[mrjibbs]

Those who are into irony will appreciate the situation at CIT...the parent of Student Loan Xpress. The unsecured creditors at CIT are having done to them what was done to the students at SSH.

 

CIT was led by incompetent management during the easy money days...just like SSH...and it found itself out of cash and on the verge of bankruptcy...just like SSH. So...just like SSH...they have used what assets they have, which were paid for by the unsecured creditors...just like SSH...to secure additional cash. They will now blow through that cash, file for bankruptcy protection, the lenders with secured claims on the assets will be repaid and the unsecured creditors will get nothing. Just like SSH.

 

Ironic.

 

 

forgive my lack of understanding with legal stuff, but what exactly does that mean for those people with SLX loans? If the parent company, CIT, goes BK then those students with those loans will be free of any obligation to pay the loans back? Sorry if thats a dumb question.....

[fry]

forgive my lack of understanding with legal stuff, but what exactly does that mean for those people with SLX loans? If the parent company, CIT, goes BK then those students with those loans will be free of any obligation to pay the loans back? Sorry if thats a dumb question.....

 

Afraid not. If the loans are still assets of the company...i.e., SLX/CIT did not repackage them and sell them to investors...it becomes the bankruptcy trustee's job to attempt to get something for them on behalf of the creditors. The trustee might try to sell the original loans at a discount to some other company or investor who will attempt to collect them. It is also possible the trustee would negotiate a restructuring of the loans with the students' attorneys and then those new loans would be sold by the trustee.

 

The trustee has an obligation to try to get something for the loans so bankruptcy is not the best scenario for the borrowers. If CIT does not go into bankruptcy it may just decide to write off the loans, the company has already created a reserve for the loans on its books...i.e., effectively treating the loans as a write-off for financial reporting purposes. The bankruptcy trustee probably doesn't have the descrection to do that.

[fry]

A proposed Settlement Agreement covering the vast majority of my clients with loans from Student Loan Xpress, as well as most other former SSH students with loans from SLX, is scheduled to be filed in United States District Court on August 31, 2009.

 

http://bankruptcypower.blogspot.com/search?q=

[fry]

Nothing was filed on the 31st. In fact, on the 28th the court approved a motion to grant additional time...to 10/19...for Student Loan Xpress to respond to the plaintiff's amended complaint. Maybe that means a settlement will be submitted between now and then. Or maybe the parties are still negotiating and the 31st was an arbitrary deadline that has come and gone. Doesn't sound like this Beverly Hills attorney...for his million dollars plus in fees from the students...really knows what's going on.

[fry]

A proposed Settlement Agreement covering the vast majority of my clients with loans from Student Loan Xpress, as well as most other former SSH students with loans from SLX, has been delayed until September 28, 2009. This delay was caused by the ongoing negotiations between SLX and the AG Task Force.

 

http://bankruptcypower.blogspot.com/search?q=

 

Probably complicated because CIT, the parent of SLX, is fighting to stay out of bankruptcy. Don't be surprised if there is no resolution by the 28th.

[fry]

Filed today:

 

Adversary case 09-01264. Complaint for (1) Recovery of Preference; (2) Avoidance of Fraudulent Transfer; (3) Value of Fraudulent Transfer; (4) Breach of Fiduciary Duty; (5) Unjust Enrichment; (6) Conversion Filed by JAMES F. LISOWSKI SR. vs. JERRY AIROLA, STEVE PICKETT, FIRST AMERICAN EQUITY, LLC, STARS & STRIPES HELIPLEX, LLC Fee Amount $250. (12 (Recovery of money/property - 547 preference)(13 (Recovery of money/property - 548 fraudulent transfer)(14 (Recovery of money/property - other)(ZMAILA, ANTHONY) (Entered: 09/15/2009)

 

Airola's legal problems have just started! 'Bout time!

[fry]

Adversary case no: 09-01264

 

09/16/2009 Summons Issued on JERRY AIROLA

09/16/2009 Summons Issued on FIRST AMERICAN EQUITY, LLC

09/16/2009 Summons Issued on STEVE PICKETT

09/16/2009 Summons Issued on STARS & STRIPES HELIPLEX, LLC

 

09/16/2009 Scheduling Conference scheduled for 1/7/2010 at 10:00 AM at MKN LV-Courtroom 2, Foley Federal Bldg. (Entered: 09/16/2009)

 

 

This won't be resolved anytime soon. Airola has been involved in a bankruptcy appeal in Utah related to his last "business venture" since 2004. But if it's any consolation he and Pickett will have this hanging over them for awhile and will pay a lot of legal fees. Maybe they'll get ulcers.

[fry]

Here's the latest from the Beverly Hills lawyer:

 

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

 

This guy is right on top of things...yeah, right! Life is too short to have to interact with lawyers.

[500E]

http://www.verticalmag.com/control/news/templates/?a=11941

Read Latest same as blogspot.

I am with Fry don't hold your breath, lawyers get rich, moneys left seem to evaporate.

When will IRS start to show an interest ? I understand they are a bit like Genghis Karn no prisoners & chase you to the ends of the earth

[mechanic]

I am rootin for you all. Hope you can get some kind of satisfaction. Also, hope these are the final nails ending their careers in aviation or any other corp positions for that matter.

[fry]

From Beverly Hills lawyer blog:

 

Thursday, October 08, 2009

Not Yet

Predicting exactly when a proposed class action settlement agreement will be submitted to the Court has proven to be difficult. This proposed agreement will cover most former SSH students who obtained loans from Student Loan Xpress to attend Silver State Helicopters and were still enrolled at SSH at the time that it filed bankruptcy. It now looks like the settlement papers will be filed with the Court somewhere between next Tuesday, October 13 and next Friday, October 16. All class members will have a chance to accept the settlement or "opt out" and reject the proposed settlement. Many of my clients have pressed me for the details of this proposed agreement, but until it is submitted to court, these details are still covered by a written confidentiality agreement

 

But maybe not. Student Loan Xpress is a subsidiary of CIT Group and CIT is in the midst of attempting to restructur its debt that...according to some analysts...will not be successful. If that is the case CIT will go to a bankruptcy restructuring which could delay the whole SLX issue. I hope not but, it may still be awhile yet on that settlement.

[lelebebbel]

http://www.sacbee.com/business/story/2286675.html

 

 

 

Stranded when their flight-training school folded last year, hundreds of would-be helicopter pilots in Sacramento and elsewhere are getting big portions of their student loans forgiven.

 

Student Loan Xpress will waive $112.7 million of the $174 million owed by students of defunct Silver State Helicopters under an agreement announced Tuesday by Attorney General Jerry Brown and his counterparts in 11 other states.

 

California students will get about $25.5 million in debt relief, Brown's office said.

 

Silver State, founded in Las Vegas in 2002, operated flight academies in 17 states. The branch at McClellan Business Park had about 200 students when the company parked its helicopters and filed for Chapter 7 bankruptcy in February 2008.

 

Students borrowed an average of $69,900. Their debt relief will depend on how much progress they made in their training: The more Federal Aviation Administration certifications they got, the less debt relief they'll get.

 

The average student will have $46,016 in debt waived.

[fry]

Here's the Beverly Hills lawyer's site with some additional links on the settlement:

 

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

[fry]

There may be one or two folks out there who do not have an attorney and who might benefit from the settlement, here's some excerpts from the settlement filed with the Florida court (the smiley faces are a glitch in the posting software and not part of the settlement agreement ):

 

B. The Settlement Terms

 

1. Definition Of The Settlement Class

 

The Settlement provides for the certification of a Settlement Class, forsettlement purposes only, defined as:

 

Class‖ refers to (a) all persons who obtained a loan originated by Liberty Bank to finance the payment of tuition to Silver State, whose loan is held by Student Loan Xpress, Inc. as of the

Preliminary Approval Order Date, and who were enrolled at Silver State as of February 4, 2008 and ( all persons who cosigned such loans.

 

The Settlement also provides that the Settlement Class shall include six Subclasses, also certified for settlement purposes only:

 

(1) ―Subclass One‖ consists of Class Members who did not obtain any FAA Certifications while enrolled at Silver State;

(2) ―Subclass Two‖ consists of Class Members who obtained one FAA Certification while enrolled at Silver State;

(3) ―Subclass Three‖ consists of Class Members who obtained two FAA Certifications while enrolled at Silver State;

(4) ―Subclass Four‖ consists of Class Members who obtained three FAA Certifications while enrolled at Silver State;

(5) ―Subclass Five‖ consists of Class Members who obtained four FAA Certifications while enrolled at Silver State; and

(6) ―Subclass Six‖ consists of Class Members who are Cosigners of Loans.

 

2. Settlement Benefits

 

The Settlement provides Qualified Class Members with an extraordinary package of debt restructuring, debt and interest forgiveness, lower interest rates, financial incentives for early repayment, and other benefits.

 

Some of the Settlement benefits (the unconditional debt forgiveness and the non-accrual of interest from February 1, 2008 to shortly after Final Approval) become effective immediately upon the Final Effective Date of the Settlement.

 

Some of the other Settlement benefits (the conditional debt forgiveness, the lower interest rate, and the refund for early repayment) are conditioned upon each Qualified Class Member making his/her Reduced Monthly Payments within ninety (90) days after they become due. Thus, if a

Qualified Class Member fails to make a Reduced Monthly Payment within ninety (90) days

of its due date as is required under the Settlement Agreement, then such Qualified Class

Member will lose eligibility for the conditional benefits provided under the Settlement and

shall become an Ineligible Class Member.

 

a. Debt Forgiveness Based On The Number Of FAA Certifications

 

The Settlement provides Qualified Class Members with immediate, unconditional debt forgiveness and the right to restructure their loans and to obtain additional, conditional forgiveness. The value of the unconditional and conditional debt forgiveness is more than $110,000,000.

 

Under the settlement, a calculation will be made to determine each Qualified Class Member’s Debt (i.e., the loan principal plus accrued interest as of the date Silver State ceased operations). The unconditional and conditional debt forgiveness then will be calculated based on the number of FAA Certifications received while at Silver State, as follows:

 

Subclass One: Qualified Class Members who received zero FAA Certifications are eligible to receive forgiveness of 75% of their Debt – 7.5% forgiveness effective immediately upon the Final Effective Date and 67.5% forgiveness conditioned on timely repayment of the Restructured

Loan.

 

Subclass Two: Qualified Class Members who received one FAA Certification are eligible to receive forgiveness of 60% of their Debt – 6% forgiveness effective immediately upon the Final Effective Date and 54% forgiveness conditioned on timely repayment of the Restructured Loan.

 

Subclass Three - Qualified Class Members who received two FAA Certifications are eligible to receive forgiveness of 47.5% of their Debt – 4.75% forgiveness effective immediately upon the Final Effective Date and 42.75% forgiveness conditioned on timely repayment of the

Restructured Loan.

 

Subclass Four - Qualified Class Members who received three FAA Certifications are eligible to receive forgiveness of 30% of their Debt – 3% forgiveness effective immediately upon the Final Effective Date and 27% forgiveness conditioned on timely repayment of the Restructured

Loan.

 

Subclass Five - Qualified Class Members who received four or more FAA Certifications are eligible to receive forgiveness of 20% of their Debt – 2% forgiveness effective immediately upon the Final Effective Date of the Settlement and 18% forgiveness conditioned on timely repayment of the

Restructured Loan.

 

Subclass Six – Cosigners are eligible to receive the same aggregate percentage of unconditional and conditional debt forgiveness that the Qualified Subclass Six Member’s corresponding Borrower is eligible to receive.

 

Another of the significant benefits of the Settlement is that it restructures the outstanding obligations of Qualified Class Members, such that they will be entitled to make much lower monthly payments on the remaining amounts on their loans. That is, the Reduced Monthly Payments shall be based on each Qualified Class Member’s Restructured Loan, calculated to fully amortize payment at the expiration of 240 months from the Repayment Date.

 

(The Restructured Loan is the Debt of each Qualified Class Member reduced by (a) the unconditional debt forgiveness provided upon the Effective Date, ( the conditional debt forgiveness that will become effective upon repayment of the Restructured Loan, and © any payments made prior to the Final Approval Order Date.)

 

Ineligible Class Members will not receive the conditional benefits provided under the Settlement.

 

3. Forgiveness Of Interest And Lower Interest Rates

 

a. Forgiveness Of Interest That Would Have Accrued Pending Final Approval

 

In addition to the unconditional and conditional debt forgiveness described immediately above, SLX will forgive unconditionally all interest that would have accrued on Qualified Class Members’ Loans between February 1, 2008 and the earlier of the Final Effective Date or sixty (60) days after entry of the order granting final approval (the ―Interest Re-Accrual Date‖). This interest forgiveness accounts for savings that are conservatively estimated to be at least $20,000,000.

 

b. Lower Interest Rates

 

Another benefit of the Settlement for Qualified Class Members is that when interest begins to re-accrue, it will do so at the lower of either (a) the Qualified Class Member’s Original Interest Rate or ( at a rate three percent (3%) lower than the Original Interest Rate, provided that interest rate in ( will never accrue at a rate lower than six percent (6%).

 

Ineligible Class Members will not receive this three percent (3%) reduction.

 

c. Incentive For Early Repayment

 

Even though the Settlement Class Members’ Loans do not provide any incentive for early repayment, the Settlement further rewards Qualified Class Members who repay their Restructured Loan within five years of their Repayment Date as long as they do not become Ineligible Class Members. Indeed, the Settlement offers an incentive for such early repayment in the form of a refund equal to two-and-one-half percent (2.5%) of each such Qualified Class Member’s Restructured Debt.

 

d. Credit Reporting

 

To the extent SLX has reported information to credit reporting agencies (Equifax, Experian, Innovis, or TransUnion) regarding the loans of Qualified Class Members, SLX shall contact such agencies to request that they remove their respective tradelines.

[fry]

In the settlement there are exhibits of notices that will be sent to students and co-signors explaining the benefits and providing examples of new loan amounts and new monthly payment amounts.

 

But the calculation of the new monthly loan payment amounts appear to be based on an amortization period of less than that specified in the proposed settlement filed for approval by the court (i.e., "Payments shall be based on each Qualified Class Member’s Restructured Loan, calculated to fully amortize payment at the expiration of 240 months from the Repayment Date.").

 

I calculated the monthly payment on a new loan of $28,000 at 6% over 240 months at $117.37. The example in the notice shows a payment of $200.60.

 

Possibily it is that the example uses some kind of variable loan rate factor. Ask your lawyers.

[fry]

By Chris Cobb

The Herald-Zeitung

December 29, 2009

 

Some measure of relief could soon be landing in the mailboxes of former students of Silver State Helicopters.

 

The nationwide flight school had plans to relocate its headquarters to New Braunfels before abruptly going bankrupt in February 2008 — cutting short flight training for thousands of students across the county who had already paid as much as $70,000 up-front through student loans.

 

After more than a year of bankruptcy proceedings in various states, a settlement offer to Silver State students from their largest lender is being mailed out this week, an attorney representing a number of the former trainees said Monday.

 

An agreement between 12 states was struck in October with Student Loan Xpress, which lent money to some 2,300 Silver State students nationwide, and is expected to have the company erase nearly $113 million in student debt.

 

The deal would forgive up to 75 percent of the loan amount for Silver State students who borrowed money from Student Loan Xpress.

 

Now that it is court approved, students can expect detailed notices explaining the settlement to arrive in early January, according to Michael Berger, a California-based bankruptcy attorney.

 

“I feel bad for people to have to pay anything, and I know that can be a great hardship,” Berger said. “But I think if they don’t take this deal, there’s a really good chance they could be stuck with 100 percent of the debt.”

 

Student Loan Xpress was the largest of three lenders used by Silver State’s more than 3,000 trainees — including nearly 50 in New Braunfels.

 

CitiBank had already forgiven 100 percent of the outstanding Silver State loans, although Citibank only represented around 100 students, Berger said.

 

A settlement is not expected any time soon with Key Bank, the third lender, according to Berger.

 

Although Texas was not one of the states that helped broker the settlement with Student Loan Xpress, it will still apply to Texas students.

 

“The settlement is written so that it applies to students in all states,” Berger said.

 

The settlement is only for students who were enrolled in Silver State when it went bankrupt.

 

The amount forgiven is based on a sliding scale, depending on whether a student received certification. If they did not receive any, 75 percent of their debt would be forgiven.

 

“I think it’s the best that can be done under the circumstances,” Berger said.

 

Silver State operated 34 campuses in 17 states.

 

It ran the air traffic control tower in New Braunfels, as well as a flight school.

 

Its bankruptcy in February 2008 cost the City of New Braunfels hundreds of thousands of dollars in unpaid fuel sales the company had been buying on credit, and left dozens of students and former employees wondering what to do next.

 

The large-scale legal battle over its bankruptcy has been going on ever since, with students waiting to hear if they might get some relief after paying thousands for training they would never receive.

 

“Everybody has just kind of been in limbo,” said Derrick Smith, president of Veracity Aviation, a helicopter flight school he started in New Braunfels after the bankruptcy. “No one has really known what’s going on.”

 

For the majority of students who borrowed from Student Loan Xpress, they might be getting some of their money back. [Actually, no one is "getting...money back", SLX is just reducing the loan amounts.]

 

“It’s a drag to pay anything because they never got to be helicopter pilots,” Berger said. “But we think this is the best deal they’re going to get.”

[fry]

The bankruptcy adversary case Airola was...and is...involved in before SSH is on appeal and approaching trial. Here's the background...the unsecured creditors are attempting to recover about $1.5 million they claim was fraudulently transferred to Airola before the bankruptcy filing...it reads much like the current SSH adversary proceeding:

 

FINDINGS OF FACTS

 

A. PARTIES AND JURISDICTION

 

1. Equity Trader is an Idaho limited liability company. On June 19, 2002, an Involuntary Petition in Bankruptcy was filed against Equity Trader in this Court, and on July 16, 2002, an Order for Relief was entered under Chapter 11 of the Bankruptcy Code. Equity Trader continues as a debtor-in-possession under the jurisdiction of this Court.

 

2. The Official Unsecured Creditors’ Committee (the “Committee”) was organized and officially appointed by directive of the United States Trustee on August 23, 2002.

 

3. Jerry M. Airola a.k.a. Jerry M. Airola, Jr. (“Airola”) is an individual formerly residing in the state of Nevada, now residing in the state of Texas.

 

4. This Court has jurisdiction over this matter by virtue of 28 U.S.C. § 1334. Venue is proper in this Court under 28 U.S.C. § 1409. This matter is a core proceeding under 28 U.S.C. § 157((2) (H) and (O).

 

5. Equity Trader held itself out as a company whose business was to purchase at discount consumer paper (“Contracts”) and to service and resell such Contracts. Equity Trader solicited funds from individuals and firms (“Creditors”), to provide funds for the express purpose of purchasing such Contracts, and committed itself to pay high rates of return to such Creditors. The general creditors of Debtor are made up almost exclusively of such Creditors.

 

B. EQUITY TRADER FACTUAL BACKGROUND

 

6. On June 16, 2002, an involuntary bankruptcy was commenced against the above captioned Debtor Equity Trader-1, LLC. (“Equity Trader”).

 

7. The debtor consented to entry of an Order of Relief which was entered on July 16, 2002.

 

8. From February 2000 through December 2001, Equity Trader purchased certain consumer collection accounts. Lance Henderson, the principal of Equity Trader, raised money to purchase the consumer accounts from individual investors, who in turn would receive a promissory note, contract, or letter of intent from Equity Trader for the amount invested, plus annual interest as high as 40%. Lance Henderson raised approximately $9,250,000.00 from individual investors throughout Utah.

 

9. Lance Henderson did not use all of the investors’ money to purchase consumer accounts, but instead, used the funds for other purposes, including to make loans to companies he and others controlled, and to distributed funds to himself and others.

 

10. As a result of such diversion of funds, Debtor operated a classic “Ponzi Scheme” in which it used funds provided by current Creditors to pay the interest and other obligations it had agreed to pay earlier Creditors.

 

11. This activity lead to a cash flow crisis for Equity Trader and it was unable to make the principal and interest payments to its investors. Equity Trader was insolvent based on the value of the consumer accounts purchased being insufficient to cover all investments by several million dollars. Numerous investors began demanding payment of their principal and interest and Equity Trader was not able to meet those demands. Additionally, the Securities and Exchange Commission began investigating Equity Trader for securities fraud. Closure of Equity Trader was imminent. Ultimately, to preserve what assets remained of Equity Trader, certain creditors commenced an involuntary Chapter 11 bankruptcy.

 

C. EQUITY TRADER BANKRUPTCY FILING

 

12. On July 19, 2002, an Involuntary Petition in Bankruptcy was filed against Plaintiff Equity Trader.

 

13. On July 16, 2002, an Order for Relief was entered under Chapter 11 of the Bankruptcy Code. ET1 continues as a debtor-in-possession under the jurisdiction of this Court.

 

14. The Official Unsecured Creditors’ Committee (the “Committee”) was organized and officially appointed by directive of the United States Trustee on August 23, 2002, in this bankruptcy case, and the Committee executes its statutory duties by such authority and under the authority granted or to be granted under any confirmed plan of reorganization.

 

D. JERRY M. AIROLA ADVERSARY PROCEEDING

 

15. Plaintiffs, Equity Trader-1, LLC and The Official Committee of Unsecured Creditor (hereinafter “Plaintiffs”), allege that certain transfers made from Equity Trader to Defendant Jerry Airola, Jr. (“Airola”) were fraudulent transfers under 11 U.S.C. § 548, Utah Code Ann. § 25-6-1 as made applicable by 11 U.S.C. § 544(, and Nevada Revised Statutes 112.150 et seq. as made applicable by 11 U.S.C. § 544(. Alternatively, Plaintiffs allege that the transfers to Airola were funds loaned to Airola which are presently due and owing.

 

16. Airola owned an entity Hague Quality Water of Las Vegas, a sole proprietorship, from July 1995 until October 1999. Hague Quality Water of Las Vegas sold and installed water purification systems in personal residences and commercial operations.

 

17. In October 1999, Airola sold Hague Quality Water of Las Vegas to Craig and Felicia Christensen (the “Christensens”). The agreement between the Christensens and Airola contemplated that Airola would retain ownership of all of the assets of Hague Quality Water of Las Vegas until the Christensens paid all sums due to Airola.

 

18. At the time Airola sold Hague Quality Water of Las Vegas to the Christensens, Hague Quality Water of Las Vegas was the highest volume water purification system in the United States. Airola testified that at its peak, Hague Quality Water of Las Vegas produced 180 sales of water purification systems a month, and would average 100 sales of water purification systems per month.

 

19. Airola retained the right to retake ownership of Hague Quality Water of Las Vegas if the Christensens were unable to pay. After the Christensens defaulted on their obligation, Airola exercised his rights under his agreement with the Christensens and retook ownership of Hague Quality Water of Las Vegas.

 

20. Sometime in November 2000, Lance Henderson approached Airola about purchasing Airola’s interest in Hague Quality Water of Las Vegas.

 

21. On November 28, 2000, a Letter of Intent was entered into by and between Henderson and Robert Long on the one hand and Airola on the other, wherein it was agreed that Henderson and Long would purchase Hague Quality Water of Las Vegas from Airola for $640,000.00. The funds contemplated under the Letter of Intent, $640,000.00, were ultimately transferred to Airola from Equity Trader.

 

22. Airola testified that the value of Hague Quality Water of Las Vegas as of November 28, 2000, was approximately $200,000.00. Under the leadership of the Christensens, Hague Quality Water of Las Vegas’ sales volume had dropped significantly to approximately 30 sales of water purifications systems per month.

 

23. Henderson and Airola changed the name of Hague Quality Water of Las Vegas to Hague Quality Water of Nevada, LLC (“HQWN”). Henderson and Airola, per the records of the Nevada Department of Commerce, were both Members of HQWN.

 

24. Equity Trader had no ownership interest in either Hague Quality Water of Las Vegas or HQWN and received no benefit or assets from the transfer of $640,000.00 to Airola.

 

25. One of the issues that HQWN had at this time was generating new “leads” for sales of water purification systems.

 

26. Airola suggested that HQWN open a call center to generate such leads both for HQWN as well as for other Hague Quality Water franchises around the country.

 

27. The call center was organized under the name “Tanner, Inc.” Tanner is the name of Airola’s son.

 

28. Tanner, Inc. was owned and operated by either Henderson, Airola, or both. Equity Trader owned no portion of Tanner, Inc.

 

29. Airola initially loaned money to Tanner, Inc. to purchase the telephone systems and other equipment needed by Tanner, Inc. and incurred expenses on behalf of what became Tanner, Inc.

 

30. These purchases and payments of other expenses were ultimately reimbursed to Airola by Equity Trader.

 

31. Tanner, Inc. kept and used the telephone system equipment.

 

32. During times relevant to this case, Airola maintained a bank account (Acct No. XXXXXXXX3359) at U.S. Bank under the account name Jerry Airola DBA Hague Quality Water of Las Vegas. Airola was the only individual with ownership, access, or control over this account.

 

E.TRANSFERS TO AIROLA

 

33. The Plaintiffs in this case seek to recover the amounts transferred to Airola as

follows:

 

34. Plaintiffs seek to recover transfers in the amount of $640,000.00 that was transferred from Equity Trader to Jerry Airola related to the acquisition of Hague Quality Water of Las Vegas. Airola admits that he received these funds. The funds originated from Equity Trader and Equity Trader did not receive anything in return. Lance Henderson and Bob Long were the original purchasers of Hague Quality Water of Las Vegas. Additionally, Airola testified Hague Quality Water of Las Vegas was worth substantially less than $640,000.00 at the time of the transfer.

 

35. Prior to trial, in both the Pretrial Order and the Trial Brief of Airola, Airola admitted that he received $640,000.00 from Equity Trader. Therefore, there is no factual dispute that $640,000.00 was transferred from Equity Trader to Airola.

 

36. Plaintiffs seek to recover $170,000 wired directly to Airola. These funds were wired from Equity Trader to Airola and were related to expenses incurred that were associated with Tanner, Inc.

 

37. Plaintiffs seek to recover $212,889.00 wired directly to Airola. These funds were wired from Equity Trader to Airola and were to ostensibly reimburse Airola for expenses he incurred in starting up Tanner, Inc.

 

38. Plaintiffs seek to recover transfers in the amount of $89,233.34 that were used to purchase computer equipment for Tanner, Inc. These funds originated from Equity Trader and Equity Trader did not receive reasonably equivalent value for the transfer.

 

39. Plaintiffs seek to recover $378,147.86 related to expenses of Tanner, Inc. that

were paid by Equity Trader.

 

CONCLUSIONS OF LAW

 

Under § 548 of the Bankruptcy Code, a trustee (or debtor in possession) may avoid voluntary transfers of a debtor's property interests if the debtor “received less than a reasonably equivalent value in exchange for such transfer” and the debtor “was insolvent on the date that such transfer[s were] made....”

 

First, the transfers were made on or within four years before the petition date. The petition date is June 16, 2002, and two years before that date is June 16, 2000. The earliest date of the transfers made to or for the benefit of Mr. Airola was in November 2000.

 

Second, Equity Trader received less than reasonably equivalent value in exchange for the transfers. The transfers in this case went from Equity Trader to Airola. The benefits of these transfers, however, went to either Lance Henderson or Tanner, Inc. In no circumstances did Equity Trader receive reasonably equivalent value for the transfers that were made.

 

Lastly, these transfers were made while Equity Trader was insolvent. Equity Trader was a classic “Ponzi” scheme. Equity Trader solicited funds from investors and promised to purchase consumer accounts with these funds and promised to pay the funds back to the investors at a high interest rate. Instead, however, these funds were diverted to other endeavors.

 

Equity Trader was never capitalized and never had any assets.

 

The statutory language of Section 548(a)(1)( sets forth four elements that must be established to be entitled to avoidance of a fraudulent transfer for constructive fraud. Intent is not one of the elements. See In re Keefer, 307 B.R. 731, 2004 WL 632875, *4.

 

The defense advance by Airola is that the transfers to him from Equity Trader were such that Equity Trader received reasonably equivalent value in exchange for the transfers. Airola’s position is not based on the facts of this case. Value is defined as “property, or satisfaction or security of a present or antecedent debt of the debtor, due does not include an unperformed promise to furnish support to the debtor or to a relative of the debtor.” The case Kipperman v. Onex Corp. 411 B.R. 805, 837 (N.D.Ga. 2009), is particularly instructive in this regard. The court explained:

 

In order to determine whether a debtor received “reasonably equivalent value,” the court must look at what “value” the debtor received in return for the transfer. The court must then determine whether the value received is reasonably equivalent; this will depend on the facts of each case. The issue of whether a debtor received reasonable equivalent value is a question of fact that must be evaluated as of the date of the transaction.

 

Based on the above, the Court concludes that Airola has failed to establish that the debtor, Equity Trader, received any value, let alone reasonably equivalent value, for the transfers from Equity Trader to Airola. Airola asserts that Equity Trader may have received some indirect or other benefit from the transfers. Airola, however, has not set forth any basis for this assertion. The facts establish that the transfers were transfers of property of the debtor for which the debtor, Equity Trader, received nothing in return. The fact that some other entity affiliated with Henderson may have received some benefit from these transfers does not change this.

 

Based on the above, Plaintiffs have established that the transfers detailed above should be avoided and preserved for the benefit of the estate and its creditors.

[fry]

The judgment in the above adversary case against Airola (his training for SSH) was entered yesterday...five years and ten months after the case was filed:

 

Based on the February 24, 2010 Settlement Agreement between Plaintiffs Equity Trader-

1, LLC and the Official Unsecured Creditors’ Committee (collectively “Equity Trader”) and Defendant Jerry M. Airola (“Airola”) (the “Settlement Agreement”).

 

It is ORDERED, ADJUDGED, AND DECREED that Equity Trader, be, and the same

hereby is, granted judgment against Defendant Jerry M. Airola, as follows:

 

1. In the amount of $120,000.00;

2. Post-judgment interest on the entire judgment amount, at the applicable postjudgment

interest rate;

3. This judgment shall be augmented in the amount of reasonable costs and

attorney’s fees expended in collecting said judgment by execution or otherwise as shall be established by affidavit; and

4. This Judgment shall be held in abeyance and not enforced by Equity Trader

pending Airola’s timely performance of the provisions of the Settlement Agreement between the parties.

[fry]

Anyone really interested in the outcome of the Silver State Helicopter fiasco probably already knows about the settlement of the bankruptcy trustee's adversary filing against Airola, Pickett, et al but just to wrap up this thread here it is:

 

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

 

The bad news (aside from that the legal actions against Airola were civil and not criminal) is that Airola will walk away with yet more ill gotten gains from the sale of the Provo UT property...property that was originally purchased entirely with the students' borrowed funds. That is a travesty.

 

If there is any good news in the settlement filing...and it ain't much...it is in one sentence by the trustee justifying why the court should accept the settlement agreement. Under the heading The Difficulties in the Matter of Collection he writes, "Both Airola and Pickett are individuals with possibily insufficient funds to pay a judgment against them. Enforcement of a judgment against them would therefore pose a difficulty."

 

So, while in all probability Airola did not get a big payday from the sale of SSH to that investment group, he may still be getting a check as a result of this settlement.

 

After the motion to accept the settlement was filed on November 11th there were objections to the settlement from former SSH victims sent to the trustee which he has filed with the court. Here are some parts:

 

Sir,

 

My name is Renata (redacted). I’m Alex (redacted) mother of one of the 2,700 SSH victims.

 

I saw my son almost commit suicide when he found out about the situation with Silver State Helicopter. He went in a very deep depression.

 

I can not believe what I just read on Mr. Michael Berger blog!!! The scum bag of Jerry Ariola and his complice will receive money back after stilling it from the students?

 

With the research you have done in this case, you know this guy did wrong. How in the world he will be rewarded to keep one penny?

 

Another objection said:

 

Dear Sirs:

 

I would like to go on record to oppose the proposed settlement between the bankruptcy court, Jerry Airola and Steve Pickett. It is extremely unjust to allow Jerry and Steve to keep anything from SSH. The helicopter that was purchased for the Orange County Chopper deal, was purchased with company funds, reconditioned with company funds and flown for OCC as a trade for the motorcycles. The motorcycles should be sold with all the other assets.

 

And another said in part:

 

Mr. Lisowski,

 

I am one of the student-victims of the Silver State Helicopters scam. I am very dismayed, disgusted and angered to learn that you have entered into a settlement agreement with the primary criminals in this matter. Airola and Pickett made millions of dollars off the back of thousands of us. And now you are giving him more money, money that we were told does not exist. As we have always held since the beginning that any monies recovered from Silver State should be applied to the victims fraudulent loans, I believe you are doing a grave injustice against us. You may have the legal authority to enter this action, but I find you to be just as morally bankrupt as airola and pickett.

 

The court has not yet ruled on the motion to accept the settlement agreement and the trustee, in filing the settlement "with prejudice" and by making these objections available to the court, does not appear to be committed to the settlement. More objections from SSH victims might prompt the court to throw out the settlement (or at least any portion that awards anything to Airola).

 

The trustee's (Lisowski)attorneys' (Zmaila and Goatz) e-mail addresses are:

 

jfltrustee@aol.com

NV15@ecfcbis.com

tony@aaznevada.com

 

Drop 'em a line. Be respectful but let them know how you feel...it's probably the last shot.

 

Happy holidays.

[helonorth]

Before you go: why do you think they could not file any criminal charges againt Airola? The business was obviously unsustainable because when the credit crunch came, they were out of business almost overnight. Wasn't it just another Ponzi scheme? How could anyone ever believe it was anything else?