09:07 AM PDT on Tuesday, July 19, 2011
By KIMBERLY PIERCEALL
The Press-Enterprise
A civil grand jury is urging San Bernardino International Airport officials to double-check a questionable legal settlement with the airport's developer in order to recoup nearly $1 million in taxpayer's money.
The report also questioned the value of the plane put up as security for most of the settlement, based on FAA title records.
According to the grand jury report, Scot Spencer sold the plane to himself twice for $1 million each time.
The aircraft, a 1973 Boeing 727-227, is considered worthless by the San Bernardino County assessor, but others place its value somewhat higher.
(A 1973 Boeing 727-227 is considered worthless by the San Bernardino County assessor. Airport officials accepted it as collateral for a $550,000 loan in a legal settlement).
An aircraft appraiser said it could be worth anywhere from scrap value to a couple of hundred thousand dollars. Airport officials accepted it as collateral for a $550,000 loan to Spencer that was part of a legal settlement.
The difference in price has led the San Bernardino County civil grand jury to suggest the plane's value may have been artificially inflated and that the legal settlement it's tied to is questionable.
According to the grand jury report, "given the age, model and history of the aircraft, it is highly probable that the sales transaction was inflated by the seller and buyer."
Potentially at stake is $990,000 of taxpayer funds used to settle a dispute over an airport hangar rental.
The plane was used to secure a $550,000 loan that the airport gave Spencer as part of a tenant-dispute settlement. Airport officials admitted to mistakenly leasing the same hangar space at the same time to a company affiliated with Spencer and another tenant in 2008.
From the date when the lease was signed to when the settlement was reached, 48 days elapsed.
Spencer said his company lost a lease deal with Unique Aviation that wanted to lease the Boeing 727 to the Democratic National Committee. Unique Aviation is an investor in other Spencer companies.
A lease with the DNC was never provided to the airport or the grand jury.
Just nine days after the airport and Spencer agreed to make the plane collateral for the loan, the aircraft was transferred off the books of SBD Aircraft Services LLC to subsidiary SBD Aircraft Services Inc. for $1 million, both companies Spencer manages.
A clause in the settlement agreement states that SBD Aircraft Services Inc. only has to repay the loan with proceeds from the sale or lease of the aircraft, if that happens.
Fred Klein, president of Aviation Specialists Group Inc., aircraft appraisers, said that he didn't need to see the plane to know that it was worth a couple of hundred thousand dollars, at most, and more likely is worth far less, describing it as an "economically obsolete" aircraft because of the amount of fuel that model of plane uses.
Spencer disagreed with characterizations that the plane was worthless.
The civil grand jury has recommended that the airport hire an independent auditor to look at the warranties made by Spencer in the settlement agreement to assure that all the statements are true.
If not, the grand jury report urges the airport to demand full repayment of the settlement.
One such representation and warranty in the settlement is that Spencer's SBD Aircraft sent a cancellation letter to the Democratic National Committee around July 24, 2008 -- implying that there was a lease deal to cancel.
The DNC has said previously that it had no contract with either Unique Aviation or Spencer's SBD Aircraft.
The plane's history is detailed in the grand jury report when it was first sold by American Airlines to a company affiliated with Spencer in 2002 for an unstated amount.
Spencer said his company paid cash for the plane. He couldn't say how much was paid.
"I don't know. I don't recall what the price was in 2002," he said.
In 2004, his company used the plane as collateral to secure a line of credit for $125,000.
He wouldn't say how his companies reached a $1 million figure in 2005 when the plane was first sold by his company, KCP Leasing, to another company managed by him, SBD Aircraft Services LLC.
He said the airport never asked the value of the aircraft before signing the settlement agreement and agreeing to the $550,000 loan.
Spencer said he has also never placed a value on the plane.
"Never have and I'm not going to now," he said.
Spencer said he has heard of planes equivalent to his selling for about $1.6 million recently.
"If we put it on the market, we'd certainly put it on the market for north of $1 million," he said.
Of the 13 aircraft originally bought from American Airlines, Spencer has sold 10. He said some were sold for more than $1 million each.
Reach Kimberly Pierceall at 951-368-9552 or kpierceall@PE.com
http://www.pe.com/business/local/stories/PE_News_Local_D_sbaircraft19.3ab61fc.html
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