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February 12, 2012

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Ex-sheriff candidate accused of fraud tied to bankruptcy

Trustee: Silver State Helicopters sought cash, students as finances worsened

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Steve Marcus

Jerry Airola, president of Silver State Helicopters, poses on a MD500 jet helicopter in early 2008 piloted by Topper Nelson at the North Las Vegas Airport.

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Thursday, Oct. 8, 2009 | 5:32 p.m.

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Jerry Airola

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Former Clark County sheriff's candidate Jerry Airola is under fire in his helicopter company's bankruptcy case, with a trustee suing Airola and others to recover millions of dollars the trustee says were fraudulently transferred prior to the bankruptcy.

Silver State Helicopters LLC shut down and filed for bankruptcy protection in February 2008, with Airola saying at the time the company was hurt by a lack of funding for student loans that the company needed to run its flight schools.

Reports at the time said the shutdown involved 30 locations around the country, put 750 employees out of work and left some 2,700 students stuck with student loan payments for instruction they would no longer receive.

A report in Inc. Magazine said that three years before the bankruptcy, Silver State had posted $40 million in revenue. An industry observer said the problem with Silver State was that it promoted training for helicopter pilots at a time when there wasn't a big demand for such pilots.

With operations in Southern Nevada including the Boulder City and North Las Vegas airports, Silver State filed for Chapter 7 liquidation in U.S. Bankruptcy Court for Nevada and attorney James Lisowski Sr. was appointed trustee in the case.

Lisowski, who has been working to sell assets to recover funds for creditors, last month filed an adversary lawsuit alleging the fraudulent transfers.

The suit was filed against Airola, former Silver State Chief Financial Officer Steve Pickett, First American Equity LLC (allegedly controlled by Airola and Pickett) and Stars & Stripes Heliplex LLC (allegedly controlled by Pickett and businessman Steve Trenk).

Pickett could not be located for comment on the accusations. But attorney Nile Leatham, who represents Airola, said Thursday that he was preparing to file a response disputing the allegations.

"I don't believe the complaint is meritorious," Leatham said.

The trustee's lawsuit, seeking to recover funds from the defendants for creditors, alleges that in 2007 Airola and Pickett made a deal to recapitalize the company that resulted in Airola being paid more than $10 million.

By entering into a $40 million revolving credit line with Orix Commercial Finance LLC in 2007, of which $31 million was due in February 2008, and continuing to seek helicopter students in 2007, Airola and Pickett left Silver State vulnerable to bankruptcy, the trustee charged.

In 2007 "Airola and Pickett caused (Silver State) to continue its course of offering training to student pilots; courses that (Silver State) did not have the resources to service and complete," the lawsuit charges.

The suit detailed these deals:

--The spring 2007 transfer of assets of an Airola company, Air Excel Inc., which had a lease with the Boulder City Airport, to Stars and Stripes Air Tours LLC for $2.4 million. The deal included Stars and Stripes paying off a mortgage at the Boulder City Airport, $1.2 million in cash and a $700,000 promissory note, the suit said.

--The August 2007 transfer by Silver State to First American of a heliport at the North Las Vegas Airport, $1.2 million in cash, the $700,000 Stars and Stripes note and all the issued and outstanding shares of Air Excel. First American paid nothing for these assets, the lawsuit charges.

--The June 2008 transfer of the heliport from First American to Stars & Stripes Heliplex.

"During the period from April 2007 through August 2007, Airola and Pickett caused (Silver State) to divest substantial assets," the lawsuit charges. "By this series of transactions, Airola, Pickett and First American stripped (Silver State) of assets, for their personal benefit, worth at least $7 million, in the 10 months immediately preceding the filing of the bankruptcy."

The trustee claims Silver State was insolvent when some of these deals were made, meaning Airola and Pickett allegedly received some assets that rightfully should go to creditors.

Silver State "made the transfer with the actual intent to hinder, delay or defraud" creditors, the lawsuit said of the deals in which the heliport, Air Excel shares, Stars and Stripes note and $1.2 million in cash were allegedly transferred by Silver State to Airola, Pickett and First American.

Silver State also "received less than a reasonably equivalent value" in the deal, the suit charges.

The suit also asserts claims of breach of fiduciary duty, unjust enrichment and conversion against Airola and Pickett.

The trustee seeks damages of $8.2 million against Airola, Pickett and First American, plus interest from August 2007.

His suit also seeks a judgment against the defendants for the fair market value of the heliport, the Stars and Stripes note and the Air Excel shares at the time they were transferred.

"This action by the trustee is a good thing for all legitimate creditors of SSH (Silver State Helicopters). It may help to bring money back into the SSH bankruptcy estate. Meanwhile, we are all still waiting to see if any governmental agency will bring criminal charges against Airola and Pickett," said California attorney Michael Jay Berger, who represents student creditors in the case.

In June 2008, In Business TV, a sister production of the Las Vegas Sun, reported FBI agents had interviewed Silver State students as potential crime victims.

Berger, too, said Thursday that he has thousands of student loan clients who have received questionnaires from the FBI. He said some 15 state attorneys general from around the country have been looking into the issue.

Students typically borrowed $70,000 at interest rates of as high as 15 percent, he said. Citibank has forgiven the loans of 68 of his clients, he's working with Key Bank in behalf of another 179 clients and is close to a settlement for 1,090 clients with the major lender Student Loan Xpress, Berger said.

But for students who paid cash, recovering their losses may be challenging because of a lack of assets in the case and the first-lien claim of Orix.

"The bad news is we're pretty far in the hole in this case," Berger said.

Leatham, in disputing the allegations in the trustee lawsuit, said he believes the key issue is whether the company was solvent when the transactions were made.

"It was a strong going-concern company at that time," Leatham said, arguing its demise was caused by the economic downturn and the drying up of student loan funding.

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