Jump to content

Recommended Posts

Posted

Criminal probe into Silver State collapse likely

By Mark Huber

 

February 24, 2008

Rotorcraft

 

 

As more students come forward to say they believe they were swindled by the country’s biggest civil helicopter flight school, attorney general offices in several states are looking into the activities surrounding the bankruptcy of Silver State Helicopters.

 

The school abruptly closed its doors on February 3 amid allegations by students and former employees of mismanagement, ethical lapses and possible criminal activities at the Nevada-based company.

 

The growing scandal surrounding Silver State Helicopters and its founder, Jerry Airola, could hurt the entire helicopter training industry by making it harder for students to obtain loans for helicopter pilot training nationwide and exacerbating a looming shortage of commercial helicopter pilots.

 

Several state attorneys general are looking into the activities surrounding the bankruptcy of Silver State. The company filed for Chapter 7 (liquidation) bankruptcy on February 4. Before it closed, the school had 750 employees, 2,500 students and 250 helicopters at 33 locations in 14 states. Silver State listed assets of less than $50,000 and debt of between $10 million and $50 million. The first creditors’ meeting is scheduled for March 14.

 

Silver State has been mired in litigation for years. A growing number of students have filed class-action lawsuits alleging the company took their money and failed to provide promised training. On Friday, February 1, Silver State electronically withdrew all the money from numerous student accounts, according to students’ attorneys. Most Silver State students financed their training with loans from $50,000 to $70,000. Silver State took full payment within six to 10 months, even though the training program, which promised to take students from zero time to certified flight instructor, lasted 18 months. Dan Reed, one of the lead attorneys representing the Silver State students, said the missing money was not part of the bankruptcy filing and that the activity appears “suspicious.”

 

In the week following Silver State’s bankruptcy, Reed fielded more than 750 calls from former Silver State students and employees throughout the U.S. He said he has received numerous reports of money from student accounts vanishing the Friday before Silver State declared bankruptcy. “That money was obviously not included in the bankruptcy filing,” Reed said. “Where is the money? The money went somewhere. It is not in these kids’ accounts anymore.”

 

While he said he has just begun to research his clients’ options, Reed emphasized that the first priority is to help Silver State students negotiate relief from their lending institutions. “We need to stop the payments from coming due so these students can survive,” he said.

 

In the longer term, Reed said he is exploring the possibility of pursuing a class action lawsuit “that would pierce Silver State’s corporate veil and go after the owners and officers individually.”

 

But Reed cautions that such a tack will not be quick or easy. “There’s no way to accurately predict how long it will take. They [silver State] have done everything to hide their tracks and make it as difficult as possible. It could easily take a few years” to recover the money Reed alleges was stolen from students.

 

The school was founded by Airola with a single Robinson R22 in Henderson, Nev., in 1999. He had previously worked as a police officer and owned a home water filtration business. Airola quickly built the school into the nation’s largest, using targeted advertising blitzes, seminars, deeply discounted prices and other marketing strategies. By 2005, Silver State ranked 12th on the Inc. 500 list of fast-growing small businesses, and in 2006 it reported revenue of $78 million.

 

Critics including former employees, students and competitors claim Silver State was little more than a ponzi or pyramid scheme that used helicopters as props while Airola funneled the company’s assets to friends, family members and himself. Thanks in part to Airola’s alleged profligate spending habits, Silver State burned through the average student’s entire tuition in five to six months, almost a full year before they were due to complete training, and was dependent on recruiting ever-larger pools of new students to finance the training of earlier ones.

 

Several former employees assert Airola used Silver State funds to amass a personal collection of exotic cars including a $153,000 Ford GT, buy SUVs and cars for some Silver State employees, directly pay more than $1 million in expenses for an unsuccessful political campaign and buy political influence with a variety of office holders including incumbent Nevada Governor Jim Gibbons, himself the current target of a Federal bribery investigation. Airola is one of the top fundraisers for the governor’s legal defense fund. Just last month Gibbons appointed Airola to the Nevada Economic Development Advisory Board. Silver State’s business practices widely came to light when Airola unsuccessfully ran for sheriff of Clark County, Nev., in 2006.

 

Although Silver State is bankrupt, a new investor in the company may be partly liable if students can prove they were bilked of their training money. Last September, Airola sold a 60-percent stake in Silver State to Eos Partners, a $3 billion New York private equity firm, for an estimated $30 million. “At the very least it looks like they didn’t do their due diligence,” said attorney Reed. “They should have been watching.”

 

Eos officials declined to comment for this story and Airola could not be reached. Company insiders said Airola remained on Silver State’s board and continued to have check-writing authority even after the Eos capital infusion. Last August, Silver State received a $40 million line of credit from Orix Financials secured by Silver State’s aircraft. According bankruptcy court documents, Silver State had used $33 million of the line by February 3.

Posted (edited)

I found the name Jerry Airola in the dictionary the other day. It was right in the middle of the words "Crook" and "Crooked". Jerry, you've got your's coming to you, and it isn't in the form of $$$ dollar signs. Nothing less than all assets you and your family have and lots of lawsuit money owed to the poor souls who you ripped off and a few life sentences should be your fate. If not, well then, you're the biggest masterminded thief of today's time. I hope you get what you deserve, and the students who got ripped off what they deserve. Makes me sick to even think of what has transpired here.

Edited by Ace
Posted
I found the name Jerry Airola in the dictionary the other day. It was right in the middle of the words "Crook" and "Crooked". Jerry, you've got your's coming to you, and it isn't in the form of $$$ dollar signs. Nothing less than all assets you and your family have and lots of lawsuit money owed to the poor souls who you ripped off and a few life sentences should be your fate. If not, well then, you're the biggest masterminded thief of today's time. I hope you get what you deserve, and the students who got ripped off what they deserve. Makes me sick to even think of what has transpired here.

 

Agreed, we in the industry are just begining to feel the repercussions of this fraud. Just when the rest of the industry is on a roll, we have fraud in the flight training sector. I'm at heli-expo and everyone says they are disgusted by the silver state situation. I hope they take Jerry's passport, quick.

Richard

 

www.heli-wear.com

Posted

I too hope there is a good investigation into the dealings at SSH. I think we will some a few insiders start to come out and offer information into the company. I haven't been able to get to Heliexpo this year. I followed up on it via www.aintv.com. They had a segment on SSH an also another with Frank Robinson making some comments as well. Check it out.

 

JD

 

 

 

 

www.myspace.com/jdhelicopterpilot

Posted (edited)
On Friday, February 1, Silver State electronically withdrew all the money from numerous student accounts, according to students’ attorneys.

This part right here is what bothers me the most. This alone should raise serious concern alone! I mean really, what is the reason for them withdrawing money that wasn't theirs to begin with?!?! This should be an outrage to all of us, even if don't have anything to do with the company! Wow! I'm just in awe of the total situation. Jerry and anyone involved deserve to go away for a very long time, but not before they refund Everyones money, ALL of the amount they deserve and should get back!

 

The guy in the video off of AINtv.com said that Silver State did it's business like no other Helicopter training facility, anywhere! Not to get the government involved, but is should be federal law that no institution can take money like this. I don't know how Universities do it, but this is just downright Thievery!

 

Yeah, I'm mad, and I'm not even a student!

Edited by Ace
Posted

As i was walking around the Expo this weekend a question came to mind that i'd like answered if anyone out there knows; i was wondering if SS had reserved a booth this year??? wouldn't that be an indicator that he knew what was coming?? if he didn't plan to attend maybe he knew what was coming. I bet in years past he was strutting his stuff at the Expos...

 

dp

Posted
As i was walking around the Expo this weekend a question came to mind that i'd like answered if anyone out there knows; i was wondering if SS had reserved a booth this year??? wouldn't that be an indicator that he knew what was coming?? if he didn't plan to attend maybe he knew what was coming. I bet in years past he was strutting his stuff at the Expos...

 

dp

 

They did have a booth reserved.. AIN Online has a story on it.

 

http://www.aintv.com/

Posted

Wow, that was fast... thanks for the great info Boatfixer.... back to look at the link some more.dp

Posted
As i was walking around the Expo this weekend a question came to mind that i'd like answered if anyone out there knows; i was wondering if SS had reserved a booth this year??? wouldn't that be an indicator that he knew what was coming?? if he didn't plan to attend maybe he knew what was coming. I bet in years past he was strutting his stuff at the Expos...

 

dp

I was at HAI sunday. The last one I attented to was in Dallas a few years ago. I don't think they had a booth then either. I could be wrong. I remember this Jerry guy found me because some way he knew I was from Tulsa and had a small flight school using an R22. They were planning on opening a school here and told me how great it would help my business, becuase they wouldn't be able to support the overflow of students. I just had to laugh and could see what a con artist he was.

 

Well they flew into town, had a big gathering of about 500 people. I thought to myself, if he can get 10% of these people to sign a loan then he was going to be rich. Well he did. I got a lot of phone calls from people wanting to learn to fly but none of them did. Why? Probably several reasons.

1. would be financing. I don't offer any.

2. Honesty. Tell them about the industry.

I would ask them why they would want to sign a loan for that amount and turn the money over to someone else all at once?

 

I make it clear to my customers (students) that if they give me money up front and stop flying for whatever reason, they get what money they did't use back, withou any penalty. Its not my money until they have spent it with me.

 

God I warned so many people, some listened some didn't.

I feel for everyone who is rapped up in the mess and wish you the best. I know you will find a way to continue the flying and hope that you don't think the rest of the industry is all bad.

 

Oh I did see one flight school at HAI that stood out, they had a sign that said Guarantee Job after training. Man I would take that as a warning sign. I only guarantee that you will have a good flight lesson when we are done flying.

Posted
http://www.danreedlaw.com/

Dont know if this is any help ? or waste of time

:ph34r:

 

Probably the latter. Here's what this attorney says is his "litigation plan":

 

Our plan is as follows:

 

1) First and foremost, we must engage the institutions which carry your student loans. These lending companies may provide immediate relief from payments and interest and may be persuaded to forgive loans when pressed. Our objective will be to negotiate this result.

 

The lenders may already be "provid[ing] immediate relief". I've read that at least one of the lenders (AES) has offered forbearance while they look into the situation; although, that is just deferral of payments, the interest is still running. That will probably be all that the lenders offer to do and the attorneys will take credit for it. I would think the odds of getting the loans forgiven are between slim and none. What leverage do these attorneys have to use against the lenders...threats of fraud lawsuits? Not likely. The lenders would fight that vigorously and they know the students can't afford to pursue something like that.

 

2) Secondly, we will, on behalf of those who retain us, pursue any and all options available in an attempt to recover monetary damages from those who benefited from Silver State's "success". These options may include a class action law suit to pierce the corporate veil and recover directly from the owners and officers of Silver State.

 

Again, the students cannot afford what this course of action would cost...and the other side knows it. Airola has been in court in Utah since mid-2004 related to monies the plaintiffs say was taken out of the last bankrupt business he was involved in. That case doesn't even have a pre-trial hearing until November of this year. Without some pot of gold at the end the attorneys will pursue this course only until the students' retainers run out.

 

3) We will provide proper representation at the bankruptcy proceedings and pursue remedies available through that venue

 

"Provide representation" could mean merely showing up at the creditors' meeting and receiving notices of filings with the court. Consider, if there were any actions the students' attorneys might take in the SSH bankruptcy the other unsecured creditors could take as well. And some of those, like Robinson, have substantial amounts involved and more legal horsepower to bring to the table if they chose to. But no other unsecured creditors have had their attorneys file with the court to provide representation. Only the secured creditors are filing to squabble over the assets. Why is that? Because it is not likely that there is anything the unsecured creditors can do to better their outcome so why spend money on lawyers.

 

The most useful service these attorneys might provide the students is to represent them in their personal bankruptcies if it comes to that.

Posted

Fry,

in response to your comment...

 

"What leverage do these attorneys have to use against the lenders...threats of fraud lawsuits? Not likely."

 

Despite my vulnerability as a (not so smart) consumer working against me, I still have 170hrs of instruction that was promised (not just verbally but in contract) with Silver State that was unfulfilled. Many students got more for their money, some less. This, from my perspective is leverage. Granted it is with Silver State, not my creditor, so there will be some finite litigation in that regard. But I'll still pray for the best.

 

Either way, I appreciate your input Fry and would have been better for it had I considered it more thoroughly last year before this all happened.

 

On a related note, and no offense to those of you from Nevada, but I saw a license plate over here in Washington that said The Silver State on the bottom, just about made me puke.

Posted
Fry,

in response to your comment...

 

"What leverage do these attorneys have to use against the lenders...threats of fraud lawsuits? Not likely."

 

Despite my vulnerability as a (not so smart) consumer working against me, I still have 170hrs of instruction that was promised (not just verbally but in contract) with Silver State that was unfulfilled. Many students got more for their money, some less. This, from my perspective is leverage. Granted it is with Silver State, not my creditor, so there will be some finite litigation in that regard. But I'll still pray for the best.

 

You're right, "...it is with Silver State, not my creditor..." and SSH is bust.

 

Your leverage with your lender could be in that you might be able to have your loan discharged in personal bankruptcy. Be careful not to sign this away. If your attorney says your private student loan is a qualified education loan and not dischargeable under the new bankruptcy law refer him to this and have him explain why it would not apply.

 

http://www.finaid.org/questions/bankruptcylimitations.pdf

Posted
The lenders may already be "provid[ing] immediate relief". I've read that at least one of the lenders (AES) has offered forbearance while they look into the situation; although, that is just deferral of payments, the interest is still running. That will probably be all that the lenders offer to do and the attorneys will take credit for it. I would think the odds of getting the loans forgiven are between slim and none. What leverage do these attorneys have to use against the lenders...threats of fraud lawsuits? Not likely. The lenders would fight that vigorously and they know the students can't afford to pursue something like that.

 

Actually my lender provided me with interest free administrative forbearance while they investigate the SSH matter. I have heard that people that went with other lenders have not been this lucky though.

Posted
Despite my vulnerability as a (not so smart) consumer working against me, I still have 170hrs of instruction that was promised (not just verbally but in contract) with Silver State that was unfulfilled. Many students got more for their money, some less. This, from my perspective is leverage. Granted it is with Silver State, not my creditor, so there will be some finite litigation in that regard. But I'll still pray for the best.

 

Your claim is with SSH, not your lending company.

 

If you borrow money from a bank to pay a roofer, and he runs off with your money, you still have to pay the bank.

 

Your real leverage with the bank is the threat of personal bankruptcy. You won't get the whole loan discharged, but you might get some of it reduced, along with a lower interest rate, in exchange for repaying some of it.

Posted
Wow - that article stated that many students magically found their loans had a co-signer, unknown to them, the same co-signer on all of them.... incredible....

 

Probably not a "co-signor" but rather a reference. The application for Student Loan Xpress has a section for "Reference" and many of those show and individual's name and address and list them as "a friend". It is not likely that the lender would not run a credit report for a co-signor and if it was the case that a single person was on multiple loans that would surely show up.

 

But hey, if it really is true the student can just default on the loan and let the lender go after the mystery co-signor...yeah, right.

Posted
Probably not a "co-signor" but rather a reference. The application for Student Loan Xpress has a section for "Reference" and many of those show and individual's name and address and list them as "a friend". It is not likely that the lender would not run a credit report for a co-signor and if it was the case that a single person was on multiple loans that would surely show up.

 

But hey, if it really is true the student can just default on the loan and let the lender go after the mystery co-signor...yeah, right.

 

Well, the article says "co-signer"

"Another Silver State student, Tony Vaca of Long Beach, said as many as 70 Silver State students in California also have discovered to their surprise that someone had co-signed their student loans, presumably to help them qualify. But the co-signer's name was not familiar to any of them – and they all had the same co-signer."

 

Also, the article states, "Students may have little recourse, but Elena Ackel of the Legal Aid Foundation of Los Angeles offered one sliver of hope, known as “the FTC rule.”

 

The rule, based on a Federal Trade Commission regulation, gives consumers the right to legally raise a financial claim against a lender in cases where a seller and lender have a business arrangement, Ackel said. It applies to private, for-profit schools and educational lenders. "

 

If this 'co-signer' is affiliated with the 'seller' (silver state) & since it is clear the seller had an arrangement with the lender, perhaps having same co-signer on all the loans would not raise a flag, or perhaps it should have raised a flag but didn't because the lender & seller didn't engage in lawful conduct....

Posted

Well, this is as good a thread as any of them to bump. Guess who didnt bother to show up in bankruptcy court yesterday ??? Gool ol Jerry. We are going to be hearing about SSH over the next 5 years. At some point there has to be some civil litigation between Jerry and the investment company he sold out to....

Posted
Well, this is as good a thread as any of them to bump. Guess who didnt bother to show up in bankruptcy court yesterday ??? Gool ol Jerry. We are going to be hearing about SSH over the next 5 years. At some point there has to be some civil litigation between Jerry and the investment company he sold out to....

 

Actually there is no requirement that he attend the creditors' meeting. SSH is in bankruptcy not Airola. SSH's representative, the attorney, was there.

 

It is likely that there is no dispute between the investment group and Airola. At the time they invested SSH probably had negative net worth. If the investors also determined that there was no value in goodwill then Airola would have had to pay them to take a 60% interest.

 

Airola took the headquarters building and $250k out of the company just before the Eos deal closed. SSH was paying rent to a separate Airola company for rent on the building after that. That and an employment contract and all its perks...worthless now of course...are likely all that he got out of the deal. It proably didn't cost Eos anything and they likely got a couple of million in a finder's fee for bringing in the lender, Orix.

 

And now the attorneys are going to pick the bones of whatever is left of SSH.

 

Everybody makes money...except the students, they make loan payments.

  • 3 weeks later...
Posted (edited)

Yet Aero News Network wrote up a faux article about Silver State for the annual April Fool's issue. All the stories are *SUPPOSED* to be funny.

Judge for yourself.

aero-news.net

Edited by Hogan

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
×
×
  • Create New...