Tuesday, June 6, 2017

Newport News/Williamsburg International Airport (KPHF) brings in adviser for audit response

The Peninsula Airport Commission is bringing in some big guns to help it carry out recommendations of a searing state audit that, among other things, says Newport News/Williamsburg International Airport should reimburse the public for the $4.5 million it used to pay off a debt the defunct People Express Airlines owed to TowneBank.

After a more than two-hour closed-door session, the commission voted to engage former U.S. District Court Judge Walter D. Kelley Jr. and the high-powered international law firm he works with as special counsel.

That firm, Hausfeld LLP, specializes in working for claimants around the globe that have a right to seek recovery of funds, according to its website.

Kelley said he would be reporting to the commission's recently appointed lawyer, Jim McNider, but declined to say exactly what the scope of the work would be.

The airport's interim executive director, Sandy Wanner, said Kelley would be advising on laws and options the commission could use to carry out the audit recommendations.

Commission Chairman George Wallace, who has said the commission would look at legal options to recover the $4.5 million, said he was distressed and surprised by the extent of the problems uncovered by the audit, ordered by the secretary of transportation after Daily Press reports on the commission repayment of the People Express loan.

"Disappointed, frustrated, some degree of anger," he said. "And resolved to do what it takes to make this better."

The 300-plus-page audit released last week found the commission's use of taxpayer funds to pay off a $4.5 million debt People Express owed TowneBank was unauthorized, noting, for instance, that the 1946 law setting up the commission did not empower it to promise to pay off private entities' debt.

Separately, Attorney General Mark Herring issued an opinion that the commission's payment violated the state constitution.

The legality of the guarantee the commission made to repay loans People Express took out under a line of credit from TowneBank, a promise it had to make good on when the airline stopped flying after less than three months, could be a critical issue in any effort to recover the money.

The audit also blasted the commission for a lack of due diligence before guaranteeing the line of credit, detailing a multiyear history of People Express' unfulfilled promises to find other financing.

It noted that it was not until some weeks after guaranteeing the credit line that commission officials learned that a key agreement between People Express and Vision Air, the company it hired to operate service from the airport, had been radically revised to deem People Express merely a sales agent for Vision.

The audit also found that former airport director Ken Spirito misled the commission board and reported he had been seen destroying some records and removing others after the audit was ordered.

The audit detailed the extensive behind-the-scenes efforts of former Newport News City Manager Jim Bourey to arrange some kind of financing for People Express, including the loan guarantee that eventually forced the commission to repay TowneBank.

Wallace said he was "somewhat taken aback by how much we weren't told."

The commission decided to guarantee the TowneBank loan by using taxpayer funds in a closed-door meeting in June 2014. The public motion to proceed, drafted by Herbert V. Kelly, Jr., a member of TowneBank's Peninsula board who was the airport attorney at the time, said only that it was authorizing then-Chairwoman LaDonna Finch to take unspecified steps to ensure adequate air service.

That was one of several examples the audit cited of commission efforts to mislead the public.

The commission will pay Hausfeld $30,000 for its help.

State Transportation Secretary Aubrey Layne has said one option for carrying out the auditors' recommendation that the airport reimburse the public for the $4.5 million would be for the commission to recover the money and then use it for the kind of investment in public airport facilities it was intended for.

Another might be to withhold state funds that would otherwise go the the airport, to reimburse the state that way, he said.

The state has been paying the airport about $2 million a year for capital projects. It's been a key flow of money that has kept the airport from needing to cash in assets to make up for annual losses on its operations.

Story and video:  http://www.dailypress.com

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