On Monday, former PHF director Ken Spirito was indicted in Norfolk federal court on 18 counts of violating all kinds of federal financial laws involving the airport's secret loan to PeoplExpress.
https://www.dailypress.com/news/airport/dp-nws-newport-news-airport-spirito-indicted-20190520-story.html#nt=oft01a-1li2
On Tuesday, PeoplExpress CEO Michael Morisi was indicted on 18 charges of fraud and tax evasion and arrested by IRS agents.
https://www.dailypress.com/news/airport/dp-nws-newport-news-airport-ceo-indicted-20190521-story.html#nt=oft12aH-1gp2
The indictments against Spirito and Morisi allege the airport director arranged for public funds to guarantee a $5 million line of credit needed to get People Express in the air in July 2014, when Morisi’s efforts to raise private funds stalled. The indictment says those earlier private funds went in part to pay six-figure salaries to Morisi and other airline executives.
After the airline stopped operating that September — and stopped paying back the $4.5 million it owed TowneBank under that credit line — the airport was obliged to repay the debt.
And, although the line of credit agreement said People Express was supposed to keep its accounts at TowneBank, as a kind of security measure, the indictment says Morisi and two other airline executives opened a new account at Bank of Hampton Roads that October — that is, after the airline stopped operating.
And apparently once the state discovered the Bank of Hampton Roads account, they opened a new account at Bank of America and kept paying themselves out of insurance settlements while showing creditors the $0 balance in the TowneBank and BofHR accounts.
The Spirito indictment mentions the airport board's approval of his actions but states that "board members may not have fully understood the loan or the nature of the airport's real commitment". So it sounds like he sold them a bill of goods. The airport board fired Spirito in 2017 for misusing public funds for personal expenses.
Desperation can make you do stupid things, and the airport was still reeling from the AirTran shutdown. But the board really needed to do a lot more research into this deal before signing off on it. Morisi already had a string of high-profile local failures in his wake. His impatience to get PEX in the air should have sent up many red flags.
