A United Arab Emirates company is suing Evergreen for $5.4 million, claiming the McMinnville-based airline never paid it for air cargo missions in Afghanistan.
A Florida freight forwarder is suing for $2.1 million, seeking a refund for cargo flights Evergreen allegedly canceled. Hellmann Worldwide Logistics Inc. accuses the airline of fraud, saying it’s now evident from parent company chief executive Delford M. Smith’s statements that the freight carrier is in financial danger and managers knew they couldn’t provide the promised flights.
Together, these and other suits filed against Evergreen reveal an airline in a tailspin, scrambling for cash and often failing to show up in court to defend itself as its 83-year-old leader fights to regain control. Smith has averted disaster many times in more than five decades of management, but people close to Evergreen believe that this time his privately held corporate group is crashing.
“I think it’s not going to work this time,” said Harold D. “Don” New, a former Evergreen vice president of marketing and sales and longtime Smith confidant. “He’s leveraged that company ever since it started, and cash flow always took care of it. But there isn’t any cash flow and they’re caving in on him.”
Closure of the airline would end a half century of intrigue surrounding a company that earned $557 million in revenue and $35 million in profits as recently as 2007. In its heyday, Evergreen fielded a fleet of Boeing 747 freighters that continuously circled the globe, delivering both military and civilian cargo.
Evergreen’s shadowy CIA ties and its secretive foreign missions gave the company based in Oregon’s wine country an aura of mystery that its gruff, hard-charging founder did little to dispel. Smith made a fortune trading planes and building his business empire, then plowed millions into quirky tourist attractions such as a waterpark topped by a 747 jet and an aircraft museum anchored by Howard Hughes’ legendary Spruce Goose.
But the proliferating lawsuits and the loss of the airline’s crown-jewel helicopter unit are clipping its wings. One group of creditors tried to repossess a Gulf Stream jet from Evergreen. Another got a court to order immediate return of a Bell 206B helicopter and payment of back rent at $8,380 a month. Others made the company pay more than $270,000 for aircraft repairs.
Creditors may be rushing to file claims before Evergreen files Chapter 7 bankruptcy, a move that would block suits and put a trustee in place for an orderly liquidation. Evergreen’s human resources manager told state officials Nov. 7 the company would terminate all operations at the end of this month.
But in a statement on the company Web site Nov. 8, Smith said rumors that the company would close were false. He has not returned multiple calls from The Oregonian.
Tim Wahlberg, who stepped down in February as president and chairman of Evergreen International Aviation, said he was surprised by the closure announcement, having thought that sale of the helicopter unit would address the debt problems. He believes Smith will fight hard to save the company.
“I was with him for 43-and-a-half years,” Wahlberg said. “He’s a go-getter, he’s a tiger. If he thinks there’s a way, he’s certainly going to do what he can to make it work.”
The airline’s fate largely depends on the military, said Wahlberg, noting financial pressures from sequestration and cost-cutting. “If the military decides they’re going to make a change in how they’re going to move equipment and people, it’s really going to have an effect on all the carriers that provide those services.”
The military air cargo sector has essentially dried up with the wind-down of the wars in Iraq and Afghanistan, said airline analyst Mike Boyd, president of Boyd Group International in Evergreen, Colo. North American Airlines and Ryan International Airlines both filed for Chapter 11 bankruptcy.
“That whole sector of air transportation has basically dried up,” Boyd said. “And there’s nothing on the horizon to see it coming back.”
Yet Evergreen still pursues military work. Last month the company won a $142 million military contract for international airlift services along with four other airlines.
Evergreen International Aviation, listed by city officials as having 463 workers in McMinnville, has been one of the community’s largest employers. But layoffs, furloughs and the helicopter division sale may already have drastically reduced the workforce.
Recently Evergreen sold off more assets, ranging from a sprawling Arizona aircraft maintenance center to McMinnville-area farmland. But the bleeding continues.
The airline is losing the ability to generate sales. It no longer operates from New York’s John F. Kennedy International Airport, for example, which until a few weeks ago had been an important hub.
Larry Wood, the executive director of the company’s Evergreen Aviation & Space Museum says the nonprofit business – including the water park and an IMAX theater – will survive. But others say that’s an open question, considering Smith’s heavy personal financial support over the years and an ongoing investigation by the Oregon Department of Justice into allegations that Evergreen’s commercial and nonprofit ventures comingled funds.
A giant Boeing 747-212B Evergreen cargo jet sits out front of the museum, perhaps to be incorporated somehow into a planned hotel with a delayed construction date. The nonprofits employ about 65 and attract about 275,000 visitors a year.
Suits filed against the company seek damages ranging from thousands to millions of dollars. They originate everywhere from Oregon to far-flung countries, opening windows into the operations of a company that rakes in money but spends millions of dollars a month on loan payments, aircraft leases and repairs.
In New York, Wells Fargo Bank sued Evergreen in August saying it agreed to lease the company two aircraft engines for $60,000 a month each. Evergreen stopped paying the monthly rent for the first engine in January 2012, Wells Fargo contends.
Evergreen installed the engine on a plane that went to a repair shop in Xiamen, China, according to the suit. Evergreen didn’t pay for the repair work, so the shop didn’t release the aircraft, which has been held in China since at least December 2012, Wells Fargo said.
Evergreen lawyers never answered Wells Fargo’s complaint, so the U.S. District Court for the southern district of New York issued a default judgment Oct. 29 ordering the airline to pay more than $4.3 million to the bank.
In Florida, a company called High Standard Aviation had a contract with Evergreen to repair and overhaul Boeing 747 cargo jets operated by the airline. Ametek HSA Inc., which acquired High Standard’s assets, sued Evergreen International Airlines in federal court last year, seeking more than $159,000 plus interest for services rendered.
By Feb. 26, Evergreen had failed to plead, defend or otherwise appear, and the time for doing so had expired, according to a ruling by U.S. District Judge Michael Mosman.
Mosman ordered Evergreen to pay up. The company did so by June 18, court filings show.
Likewise, U.S. District Judge Anna Brown made Evergreen pay more than $113,000 to Genesis Aviation Inc., a North Carolina company that performed repairs. And the U.S. Eastern District Court of New York ordered Evergreen to pay $3.9 million to Israel Aircraft Industries for aircraft repair and maintenance.
Evergreen lawyers also failed to defend the company this year in a suit brought by Air Partner, a company based in Gatwick, England. Evergreen must pay the company more than $204,000 for aviation fuel, according to a Nov. 4 default judgment.
One reason Evergreen didn’t defend itself in suits may have been the firing of its chief counsel in July 2011. Monique DeSpain then sued Evergreen International Aviation and its then president, Wahlberg, accusing them of sex discrimination and other offenses. The case, which dragged on until August, was settled out of court on undisclosed terms, Wahlberg said.
Evergreen did mount a defense last year after Aviall Services Inc., a Chicago-based company, sued for more than $599,000 in unpaid charges for parts and supplies. But U.S. District Judge Barbara Lynn, in Dallas, Texas, ordered Evergreen to pay in full, plus attorneys’ fees and interest.
In the case of the Anchorage Marriott, hotel owner Columbia Properties Anchorage sued Evergreen this week in U.S. District Court in Portland, claiming the company failed to make payments after March on its outstanding balance.
The owner added 20 anonymous defendants to the suit – referring to them as “Does,” as in John Doe – saying the true names and capacities of the hotel guests could not be determined. Columbia, which routinely held 15 rooms a night for Evergreen at $84 each plus tax, seeks $77,726.88 plus interest and attorneys’ fees.
Mike Hines, Evergreen International Aviation chairman, has not returned phone calls to speak for the company regarding allegations raised in the suits.
The number of lawsuits filed against Evergreen for nonpayment has jumped during the past two years. But some of the suits are the kind that would arise in the normal course of business.
A British insurance company, for example, is suing Evergreen, claiming the airline flew 5,568 cases of cigarettes that arrived in Japan sopping wet.
Evergreen did respond to that suit, arguing the case should be dismissed.
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