BatesLine

Interesting story in today's Whirled about BOk and the loan to the Tulsa Industrial Authority (TIA) that the Tulsa Airports Improvements Trust (TAIT) guaranteed. The loan money was ultimately used to finance Great Plains Airlines, which went bust despite massive taxpayer subsidies. The FAA ruled that the plan to repay the loan in the event of a default -- raising passenger service fees to purchase a part of the land on which Air Force Plant No. 3 sits for a runway extension -- would be an illegal direct subsidy to an airline.

The Bank of Oklahoma is seeking to recoup from a national auditing firm more than $9 million in losses resulting from a loan it made for the now-defunct Great Plains Airline.

The bank sued PricewaterhouseCoopers LLC on Monday in Tulsa County District Court.

Its lawsuit claims that the firm presented financial statements that unfairly represented the "unrestricted" assets of the Tulsa Airports Improvement Trust, on which the bank relied in deciding to participate in the Great Plains loan.

So why didn't BOk go after PricewaterhouseCoopers LLC in the first place? Why did they demand that the City of Tulsa repay the money when some other organization was responsible for the bad loan? (The whole deal was designed so that the City itself -- the general fund that pays police officers and firefighters and other city employees -- would not have any exposure in the event that the airline failed.)

Back when former Mayor Bill LaFortune was trying to get the City Council to agree to repay the loan, I heard a theory about the situation that made sense to me.

Here is the theory, which is speculation based on this person's observations of public behavior and his knowledge of bank loans: BOk made the loan knowing that it wasn't properly secured, but with an unofficial assurance from then-Mayor Susan Savage that the City of Tulsa would make good if anything went wrong, an assurance that she was not in a legal position to make. It would have been a political promise: If it comes to that, we can get the Council to agree to cut BOk a check. To make such a loan without valid collateral would have been in violation of FIRREA, the 1989 lending reform law that was enacted in response to the Savings & Loan crisis, but as long as the loan was repaid no one would notice. No harm, no foul. When the loan went into default, BOk was frantic to get its money back to prevent the possibility of FIRREA enforcement.

That's the theory. FIRREA was created to hold bankers responsible for how they handle federally-guaranteed deposits. In the '80s, S&Ls made all sorts of risky loans safe in the knowledge that if the loans went bad, the FSLIC would take care of depositors. As I understand it, if a banker authorizes a loan without sufficient justification, and the loan goes bad, the bank can be penalized under FIRREA, as can individuals involved in making the loan -- bank CEOs and VPs, appraisers, attorneys, accountants.

Remember what would have happened if the City Council had authorized the payment to BOk for money the City of Tulsa did not owe: Individual city councilors would have been subject to liability under a qui tam action for essentially giving taxpayer money away. (E.g., if all my friends on the City Council voted to use city general fund money to pay off my minivan loan -- in recognition of my many services to the community -- they would be misusing public resources, and they ought to be removed from office.)

BOk has a reputation for being civic-minded, but it looks like BOk management's first inclination in response to this bad loan was to cover their own exposed posteriors by using the Mayor and the newspaper to pressure city councilors into dropping their own drawers.

Comments from those familiar with federal lending regulations would be especially welcomed.

(Added retroactively on June 3, 2006, to complete the column archive.)

This week's Urban Tulsa Weekly column is about corporate welfare, connecting the dots between news that the Great Plains Airlines tax credits are being repaid with money that should be repairing roads and bridges, an effort to extend similar tax credits for the restoration of Shangri-La resort on Grand Lake, former Mayor Bill LaFortune's favorable concessions deals for the Tulsa Talons and Tulsa Oilers, and the biggest example of corporate welfare around -- the $200 million BOk Center.

Tulsa City Councilor Bill "29%" Martinson took a lead role last Thursday night trying to fend off an audit of fuel flow records for fuel sellers at Jones Riverside Airport -- a group that includes Councilor Bill Christiansen, who, like Martinson, was helped into office by Bixby resident and former Tulsa councilor John Benjamin and political consultant Jim Burdge, who were also actively involved in the recall against Councilors Medlock and Mautino.

Martinson argued that the airport investigation was about Great Plains Airlines, and what did fuel flow fees at Jones Riverside have to do with Great Plains? Dave Schuttler of Our Tulsa World has compiled a helpful video to remind Councilor Martinson of what he learned about the investigation at Council committee meetings in the recent past.

Dave also has a link to the documents filed with the Federal Aviation Authority regarding Roadhouse Aviation's complaint against the Tulsa Airport Authority -- including responses from the City of Tulsa. (Roadhouse is Christiansen's competitor at Jones Riverside.)

And he has video of Martinson claiming that fuel-flow fees -- about $774,000 -- weren't important because they were "only" 3% of TAIT's total revenues for 2004. And this guy is touted as an accountant?

Three Republicans have already declared their intentions to seek office: Councilor Chris Medlock, Mayor Bill LaFortune, and former Republican Party Vice Chairman and District 11 State Senate nominee Brigitte Harper. Councilor Bill Christiansen is widely expected to run, as long as his Benjamin'n'Burdge stablemates on the Council (Randy Sullivan and Bill Martinson) can fend off an audit comparing the actual records of fuel purchased and sold at his Jones Riverside Airport business to the fuel flow fees paid to the airport authority.

Despite the widespread disappointment in Bill LaFortune's performance as mayor -- less than 40% support for reelection in his own party according to the latest SoonerPoll.com survey -- no Tulsa Democrat has seized the opportunity to challenge a vulnerable incumbent. That says a lot about the weakness of the Democrat bench in Tulsa. It may also indicate that the Democrats who would have a shot at winning are too dependent on the same oligarchy that seems content with keeping LaFortune in place.

The name of Don McCorkell, former state rep, has been floated as a great Democrat hope. McCorkell is an attorney, but if the online court records are accurate, he doesn't seem to have practiced in about 15 years.

What has McCorkell been up to? In 1996, he finished second to humorist Jim Boren in the Democrat primary to face Jim Inhofe's first Senate reelection bid. In 1997, he was a lobbyist for CFS. He was an early investor and member of the Board of Directors of Great Plains Airlines, buying 10,000 common shares for $10 in December 1998, another 95,000 shares for $95 in October 1999, and 790,478 shares for $790 in May 2000, for a total of 915,478 common shares, about a sixth of the total. On July 1, 2000, he became one of the first four preferred shareholders in Great Plains, purchasing 11,676 preferred shares for $35,028, coincidentally the same number of shares and the same date as Steven Berlin and Great Plains Chairman David A. Johnson. (Steve Turnbo was the fourth of the first four. Berlin and Johnson also each bought 790,478 common shares in May 2000.) He is listed as a 1999-2000 registered lobbyist for the Tulsa Industrial Authority, which is mixed up in the mortgaging of Air Force Plant No. 3 for Great Plains financing. The listing indicated he terminated his lobbyist registration in that period.

Because of his service on the Great Plains Airlines Board of Directors, he and fellow board members have been personally sued by William Stricker, from whom Great Plains bought Ozark Air and its aircraft in March 2001.

It's been rumored that McCorkell is one of those who received in payments for services rendered to Great Plains more than he invested in Great Plains, but we'll have to wait until the records are released until we can know for sure.

Lately he seems to have been interested in multi-level marketing, which seems to be a good fit for anyone involved in the Great Plains deals. Anyone able to convince an entire state legislature to part with $30 million for a risky airline venture can probably talk people into being MLM downlines. He was or is president of something called Casafina International LLC, which was launched in October 2003. Here's the plan for CasaFina associates, and here's his letter to prospective vendors. Here's a bit of pre-launch hype.

Rodger Randle won his 1988 race for Mayor by holding meet-the-candidate coffees in living rooms all over town. If McCorkell runs, will he be the first candidate to use in-home "business opportunity presentations" as a campaign technique?

At least one group of Democrats seems despondent over the lack of someone credible to carry the Democrat banner next spring.

Our Tulsa World has video excerpts of key moments from last Thursday's Tulsa City Council debate on allocating money to acquire Great Plains Airlines bank records, with handy descriptions. (Here are more excerpts.)

There's also a preview of Tuesday's Council Committee meetings. Public Works Committee meets at 8 and will deal with the airport noise abatement program. At 10, there's an item on allowing public discussion of the information gathered by the Council's airport investigation, and Baker wants to talk about his proposal to avoid accountability for making a controversial decision set up a charter review commission.

Today's Whirled featured a "Readers' Forum" guest opinion by John Brock. While normal readers' letters are left to languish for three weeks before being published, this item was rushed to the head of the line. Brock defends World Publishing Co.'s investment in Great Plains Airlines as a gift, with no expectation of return.

Brock also raises an issue that, as far as I can remember, hasn't been aired in the pages of the Whirled, although it has been the subject of a lot of buzz around town: Repayment of the loan from Great Plains Airlines to the Bank of Oklahoma, which was guaranteed by the Tulsa Industrial Authority, using city-owned Air Force Plant No. 3 as collateral. Mr. Brock wants the City of Tulsa to repay the loan, evidently out of the general fund.

The city of Tulsa's contribution was the guarantee of a loan by Bank of Oklahoma. It's now time to make good on that guarantee and pay off the loan. The city put up property at the airport as collateral. BOK made that loan based on its concern for our city and its faith in the integrity and honor of the City Council, not because of the collateral.

A minority of the city councilors does not want to honor that commitment. The excuse is that BOK knew or should have known that the commitment of the City Council could not be trusted, and therefore BOK doesn't deserve to be paid.

This is very strange. How does Mr. Brock know all this? It hasn't been the subject of any public Council meeting of which I'm aware. Was it discussed in a Council executive session, and has Mr. Brock been made privy to what should have been a secret discussion? Have there been private meetings between councilors and bank officials to which Mr. Brock has been tipped off?

It's strange, too, that Brock would call on the City to repay the loan right away, when the owners of the airline -- World Publishing Company, Steve Turnbo, Don McCorkell, Margaret Erling Frette, among many others -- have the collective wherewithal to repay $7 million. Why would BOk, ordinarily a good corporate citizen, demand that the city empty more pools, close more rec centers, take more cops off the street, so that it can get it's money back right now, when it could instead go after the deep-pocketed owners of Great Plains Airlines who stood to profit if the airline had been a success?

If all these investments had been intended as a gift, as Brock alleges, why would these people accept equity? Brock says, "World Publishing Co. invested with no real expectation of profit." That would mean that they never expected the airline to succeed in its mission to provide a needed service. If the airline had succeeded in its mission -- provide non-stop air service from Tulsa to the coast so that Tulsa is more attractive to business -- then new businesses needing that direct air service would have sprung up in Tulsa, and those businesses would have required more direct air service, filling the planes and making the airline profitable.

If WPC and all these lobbyists, PR flacks, and other eminentoes believed that such an airline could never make a profit, then why did they work so hard to convince state and city officials that this airline would bootstrap Tulsa's economy and thus was worthy of public subsidy? There was nothing in the plan for ongoing public subsidy of operations cost, was there? Eventually the airline was supposed to be able to make a go of it on its own.

One more question about repayment of the loan: The matter is in bankruptcy court, and I presume BOk is one among many creditors. Why should they get to go to the head of the line for repayment? Just because they have the political clout to bully the City Council into repaying them? Thursday night, the Cockroach Caucus councilors were uniformly saying not to spend money to acquire Great Plains bank records, because we should wait for the Bankruptcy Court to take care of it for us. Why not wait until the Bankruptcy Court says it's BOk's turn to get its money back? Why not see how much the Bankruptcy Court can recover from sales of assets? Were there preferential transfers made prior to Great Plains declaring bankruptcy? If money from preferential transfers is recovered by the Bankruptcy Court, perhaps it can help repay the BOk loan.

In response to a speaker at Thursday night's Council meeting, who claimed that no one made any money off of Great Plains Airlines, Councilor Jack Henderson pointed out that all that money went somewhere.

One more thing that doesn't add up: Why is Brock concerned about "a minority of the city councilors"? If they are only a minority, Brock will get his way and BOk will get their money very soon. What are he and the Whirled worried about?

If you need a reason to care about Great Plains Airlines, and getting to the bottom of where the money went and making the shareholder agreement public, here it is: You are either going to have to pay more in taxes or make do with less service from the City of Tulsa in order to pay back this loan, unless those who stood to profit take their lumps and pay the debts their company incurred, rather than doing the equivalent of walking out on a restaurant check.

Dan Paden has his own excellent take on Brock's op-ed.

The Tulsa City Council will vote tonight at their regular 6 p.m. meeting on whether to authorize the funding to copy Great Plains Airlines bank records as part of the investigation into that airline. Great Plains says the city can have them, but only if they pay for the cost of making the copies. The Tulsa Whirled and its allies want the investigation to stop. If you think it's important to know where tens of millions of dollars in taxpayer subsidies went, make plans to be present and tell the Council what you think.

More at HFFZ.org.

My latest column for Urban Tulsa Weekly is online, and in honor of National Newspaper Week, I've written about our city's monopoly daily newspaper, the Tulsa Whirled.

The column is about the investigation into Great Plains Airlines, and why the Tulsa Whirled seems so intent on halting that investigation before we know how the airline spent over $30 million in public investment. If you've been trying to understand what the Great Plains fuss is all about, this column is a good place to start, if I do say so myself.

Also in this issue, G. W. Schulz delves into the politics of distributing Community Development Block Grant (CDBG) dollars and other federal funds to local non-profits. G. W. provides the background to the recent controversy over the city repaying grant money to the Feds. And Barry Friedman has some doubts about those estimates of the New Orleans Hornets' economic impact on Oklahoma City.

You can find Urban Tulsa Weekly at finer dining establishments and smart cafés all over Tulsa.

By the way, I've added a blog category to collect each week's announcement of my latest column and thus serve as a sort of column archive.

Did Wilson Busby, an attorney retained by the City Council for their investigation into Great Plains Airlines, violate the Oklahoma Rules of Professional Conduct by talking to the Tulsa Whirled about private conversations with members of the Council's investigation committee?

An attorney pointed me to Oklahoma Statutes, Title 5 (Attorneys and the State Bar), Chapter 1, Appendix 3-A, which is the Oklahoma Rules of Professional Conduct. Rule 1.6 (Confidentiality of Information states, in part:

A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraphs (b) and (c).

The exemptions involve the client expressing intention to commit a crime or a court ordering disclosure.

Then there's this statement in the comments on the rule:

The requirement of maintaining confidentiality of information relating to representation applies to government lawyers who may disagree with the policy goals that their representation is designed to advance.

If Busby's remarks to the Tulsa Whirled are indeed a violation of the Rules of Professional Conduct, he could be reprimanded or disbarred.

The Tulsa Whirled had a front page story Sunday featuring comments from attorney Wilson Busby and former City Councilor Sam Roop, who is now an aide to Mayor Bill LaFortune. Busby was retained by the City Council for their investigation into the Tulsa Airport Authority, which also covered publicly-subsidized Great Plains Airlines. Busby was hired on the recommendation of Roop. A thread connecting the two men is political consultant Jim Burdge, who managed Roop's campaigns for Council and who shared an office with Busby. Burdge also managed campaigns for Bill Christiansen and Randy Sullivan, and he worked for the Coalition for Responsible Government 2004, the group that sought to recall Councilors Chris Medlock and Jim Mautino.

The two associates are accusing Medlock of trying to turn the airport investigation into some sort of witchhunt. Busby claims he saw Medlock pose like a bear and demand "red meat". When I read that, I couldn't help but think of Tim the Enchanter, in "Monty Python and the Holy Grail," warning the knights of the killer rabbit: "Death awaits you all, with nasty big pointed teeth!"

Why would Roop go after Medlock? Roop's boss would lose his job (and so would Roop) if Medlock's campaign is successful.

The story was clearly timed to stop the Council from going forward with a subpoena of Great Plains Airlines bank records. You would think that, if the Whirled were confident that there isn't any damaging information in the records, they would say, fine, go ahead, which would allow them to issue a big "see, I told you so" after the fact. Instead, the Whirled is in full attack mode to stop the subpoena.

Dan Paden picked up on the Whirled's attempt, once again, to mislead its readers by publishing that its parent company, World Publishing Co., owned only 3% of the total shares of stock in Great Plains Airlines. As I pointed out nearly a year ago (and thanks, Dan, for the link), WPC had owned a majority of preferred shares and a majority of the equity, based on the price at which the shares were sold. It's interesting, too, that the story failed to point out that WPC chairman and CEO Robert Lorton gave $2,500 to the campaign to recall Medlock and Mautino.

What we don't know, but should know, considering that our tax dollars and public assets were put at risk for this venture, is the terms of the shareholder agreement. That would tell us how preferred stock and common stock shareholders would have split up any profits -- specifically, how much of the profits would have gone to WPC. WPC, as a shareholder, must have a copy of the shareholder agreement, and it would clear up a lot if the Whirled would make that information public.

But instead of opening up and supplying information, the Whirled is attacking those who are seeking information.

In the meantime, those who loaned money to Great Plains Airlines based on the city's guarantee want their money back now that Great Plains is bankrupt. There's a persistent rumor that the Bank of Oklahoma and the Mayor's office tried to work out a deal to take arena naming rights in repayment for the loan. Another possibility is that the City would repay the money -- about $7 million -- comes out of the City's general fund. That hits basic public services, and it would hurt. Instead of hurting all Tulsans in this way, wouldn't it be fairer for BOk to go after the public officials who sold them on this deal? Or perhaps the bank records will show that funds were paid to favored vendors rather than being available to repay lenders? If that's the case, shouldn't BOk go after that money?

MORE: Comments on the story from Dan Paden and Chris Medlock.

Someone sent me this actually retouched photo of last week's Tulsa City Council committee meeting.

The hatchets weren't really there, except in a metaphorical sense.

At that meeting, Councilor Susan Neal attacked (verbally) Councilor Chris Medlock for wanting to subpoena Great Plains Airlines' original bank records. Her personal cheerleader, Tulsa Whirled reporter P. J. Lassek, is sitting behind Medlock and to the left. Medlock's offense? He wants a full accounting of the tens of millions of dollars in taxpayer funds that went to Great Plains.

Our Tulsa World has a larger, easier-to-view video of Neal's attack and P. J.'s pom-pom shaking for your viewing pleasure.

Although it's still listed on the site map of tulsaworld.com, the link to Tulsa Whirled's archive of stories on the investigation of Tulsa's airport trust is broken. Hmmm.

The findings and documents collected by the Council's airport investigation also appear to be missing from the City Council's website.

UPDATE: Here's the airport investigation report on the Council's website.

Just learned about this today:

Thursday night, after quietly posting notice 48 hours in advance, the board of the Tulsa Airport Improvements Trust awarded a contract for the next phase of the Federally-funded airport noise abatement project to Cinnabar Service Company, the same company that had the contract for earlier phases. Because of the late notice, Mayor Bill LaFortune, an ex officio member of the board, could not be present, and his designee, Allen LaCroix, Chief Operating Officer of the City, was not permitted to vote on the contract in his stead. Carl Clay, a relatively new appointee to the TAIT board, and a watchdog over airport operations, could not be present. Charles Sublett, another recent appointee to the TAIT board, abstained from the vote on the contract. The meeting was scheduled to coincided with the Tulsa City Council meeting so that even if councilors learned about it in time, they would be unable to attend. Because it was a special meeting, the meeting was not taped for broadcast on TGOV (Cox Cable channel 24).

So by a 2-0 vote, another $7.8 million (mainly Federal funds, with a small component of locally-collected passenger service fees) was awarded to a company whose principals also happen to be the principals in Infrastructure Ventures, Inc. (IVI), the company seeking to build a toll bridge across the Arkansas River to undeveloped land in the west part of the City of Bixby. Here is a chart of the connections between the players in Cinnabar, IVI, and county government.

The money for this project comes from FAA grants and is to be used either to buy out homeowners in the area affected by airport expansion or to remodel homes to provide sound insulation. The website for the project is called homequiethome.com, and the home page has a description of the project and its history. One homeowner in the affected area has documented the sloppy, haphazard work that has been done by Cinnabar and its contractors. You'll find his collection of documents, photographs, and videos here. The concern is that Cinnabar is taking a large sum of money for insulating each house (in some cases more than the house itself is worth), contracting on the cheap to have the work done, and pocketing the difference.

Beyond the concern about the performance of the noise mitigation project itself, the timing of the award is interesting, just as work is set to get underway on the Bixby Bridge. Might the contract award to Cinnabar be used to provide a bit of working capital for IVI? I hope someone is keeping an eye on this, and I hope that once the full complement of the TAIT board is present safeguards will be put in place to provide a full accounting of funds supplied to Cinnabar and to prevent a minority of the board from awarding such a major contract, particularly at a hastily-called special meeting.

I hope the FAA is paying close attention, too.

UPDATE: The amount of the program extension was $7.8 million, not $3 million as I previously wrote. A small portion, either 5% or 10% -- I hear conflicting numbers -- is paid from locally-collected passenger service fees; the remainder comes from FAA grants.

A number of readers have contacted me over the last few days with questions about the City Council's investigation of the Tulsa Airport Authority (TAA) and the Tulsa Airport Improvements Trust (TAIT). These are questions that should have been answered a long time ago, but for some reason the Council's investigator, Wilson Busby, failed to produce answers for the committee. Key documents that ought to exist haven't yet surfaced. Even if there were no concerns about Busby's connections with pro-recall political consultant Jim Burdge and Councilor (and alleged beneficiary of allegedly discriminatory decisions by the TAA) Bill Christiansen, there would still be a question of his competence, given the lack of tangible progress.

Here are some of the questions that need answering and soon:

From tonight's City Council meeting: Tulsa City Councilor Roscoe Turner just announced that airport investigator Wilson Busby today submitted his resignation. There has been some concern about the appearance that the investigation is compromised by Busby's connections with Jim Burdge, the political consultant who is running the recall and who has run Councilor Bill Christiansen's campaigns. Councilor Turner himself, who was also a client of Burdge, said he also considered resigning as chairman of the investigation, and that he believes it is time for a grand jury investigation.

I am told that by people I trust that people they trust say Wilson Busby is an honorable man, and I have no reason to doubt that. But there are reports that Busby has gone beyond investigation and has been negotiating deals with various airport stakeholders. There are also concerns that there have been no tangible results from the investigation since the November election.

This happened in the course of an item put on the agenda by non-Councilor Randy Sullivan. Sullivan proposed a council consensus calling for confidentiality in this and future council investigations. Councilor Chris Medlock agreed with the need for confidentiality, but challenged Sullivan to specify what breach of confidentiality prompted his proposed consensus. Sullivan declined, revealing that his motivation for raising the issue was political.

A reader calls my attention to an odd situation: The Tulsa Airport Improvement Trust (TAIT) has authorized $100,000 to pay the Pray Walker law firm to defend it in the lawsuit filed against TAIT by the Tulsa Industrial Authority (TIA) over the convoluted land deal designed to fund Great Plains Airlines. But it doesn't appear that Pray Walker has done anything in the case -- it hasn't even filed an appearance on behalf of its client or an answer to the claims of the plaintiff. Another very strange aspect of a very convoluted and fishy situation.

How convoluted was the land deal? As it was explained to me, the City, TIA, and TAIT all exceeded their authority in the way the deal was structured. They would have gotten away with it if Great Plains had succeeded, but it went belly-up with $7 million due on a loan from the Bank of Oklahoma, a loan that was backed by 30 acres of Air Force Plant No. 3, a facility with surrounding land that was transferred from the City to TIA. TAIT promised TIA that if Great Plains defaulted, TAIT would buy the 30 acres for whatever amount was still owed on the loan (no independent assessment was sought to determine if the price was fair), and TAIT intended to pay for the land by asking the FAA for an increase in passenger facility charges, under the guise that the 30 acres was being acquired for future runway expansion. The FAA saw through the whole thing (Acrobat Reader required), denied the request, and said you can't use passenger facility charges to subsidize an airline. The attorney who structured the deal and advised both parties, J. Richard Studenny, was finally sacked and is a defendant in TIA's suit.

Great Plains was a bad deal set up by Tulsa's politically connected, including the Tulsa World, which owned a significant amount of stock in the airline, but didn't disclose the fact at the time it was editorializing to urge Tulsa's City Council to put a city asset up as collateral for a loan to the airline.

For those of you just beginning to learn about Tulsa politics as background to the Tulsa World's legal threats against BatesLine, Tulsa Today published an analysis piece a few weeks ago that ties it all together -- the Great Plains Airlines deal, the way the Chamber of Commerce handles economic development funds, the development lobby, the effort to recall two Tulsa city councilors, and the Tulsa World's hostility to conservative Republican officials who seek to implement the principles they ran on.

You can read more in my archive of entries about Great Plains Airlines and other aspects of the mess at Tulsa's city-owned airports.

The Tulsa Beacon has a front page story this week with details of the reply from the FAA to the City of Tulsa about discriminatory practices at Jones Riverside Airport. The FAA believes that allegations of discrimination are well founded -- allegations that Councilor Bill Christiansen, who owns an FBO at the airport, has used his public office and connections with a member of the Tulsa Airport Authority to get special treatment with regard to leases and access and to implement airport rules that discriminate against his only competitor. Mayor Bill LaFortune has until March 14th to respond -- with action, not just promises -- or Tulsa may lose federal airport funds.

Nothing official yet, but I am hearing that the Federal Aviation Administration is mightily displeased with the City of Tulsa's response to the FAA's questions about charges of discriminatory rules and practices at Jones Riverside Airport designed to favor fixed-base operator Christiansen Aviation over its competitor, Roadhouse Aviation. Christiansen Aviation is owned by Tulsa City Councilor Bill Christiansen, who has the support of and generally votes as a member of the Cockroach Caucus. The buzz around at City Hall is that the FAA is so displeased with the inadequacy of the city's response that Tulsa has been threatened with a cut-off of certain federal airport funds, and that the FAA believes that airport rules have been enforced in a discriminatory fashion in order to favor Councilor Christiansen's business.

This week's edition of the Tulsa Beacon (on sale at Steve's Sundries and QuikTrip locations, among other places) reports on the letter the Federal Aviation Administration sent to Tulsa Mayor Bill LaFortune:

The Federal Aviation Administration has sent a letter to Mayor Bill LaFortune asking him to answer charges concerning City Councilor Bill Christiansen and Jones-Riverside Airport.

The letter is a response to charges by Kent Faith of Roadhouse Aviation, a direct competitor with Christiansen Aviation. Those are the only two companies that supply fuel at Jones Airport.

The letter raises the issue of “economic discrimination and exclusive rights” for the Tulsa Airport Authority.

“I welcome this,” Christiansen said. “It’s time to clear the air. All these accusations have already been disproved in a lawsuit. There is no judgment against me. I want to get past this and get on with the business of the airport.”

Maybe I misunderstood: I thought the accusations were settled out of court, not disproved in court. And the FAA's questions concern the actions of the airport authority in matters that concern Councilor Christiansen's business, but the questions don't directly accuse or question the Councilor's actions, as far as I can tell. I don't see why he should be taking offense.

The three issues raised by the letter have to do with allocation of hangar space, lease rates, apron access, and enforcement of the airport sign policy.

If the Tulsa Airport Authority is engaged in economic discrimination or granting exclusive rights, it could jeopardize federal grant money for projects at both city-owned airports, not only Jones Riverside, but also Tulsa International.

The Mayor and his staff will be tempted to circle the wagons and obscure everything in a cloud of legalese, in hopes that any discriminatory practices will be left undiscovered or at least unprovable. If the Tulsa Airport Authority has been violating FAA rules, it would be better to confess now and correct the problem, rather than get caught after a denial.

You can read the whole Beacon story here on their website until next Wednesday, when it will be replaced by next week's top story.

(I wish the Beacon would set up a blog and use it to file back articles on their site, rather than clear the old articles away at the end of the week. With most of the Tulsa Whirled content limited to subscribers, if the Beacon put all its city reporting online, it could win the Google battle -- be the higher ranked site for information about various city officials and institutions. It would be simple -- use Blogger and have the files FTPed to tulsabeacon.com.)

Federal scrutiny of Tulsa's airports continues to expand, with the potential of endangering tens of millions of dollars in federal funds for our two city-owned airports, Tulsa International and Jones Riverside, which was once one of the nation's busiest general aviation airports.

KFAQ was reporting today that on December 22, the FAA sent a letter to Tulsa Mayor Bill LaFortune expressing concern about charges of discriminatory rules and practices at Jones Riverside Airport designed to favor fixed-base operator Christiansen Aviation over its competitor, Roadhouse Aviation. Christiansen Aviation is owned by Tulsa City Councilor Bill Christiansen. The FAA appears to be looking at the same allegations that were part of the lawsuit Roadhouse owner Kent Faith brought against the City and Christiansen.

Mayor LaFortune has until January 22 to reply, and he leaves today for a 10-day trip to Tiberias, Israel. He has no deputy mayor -- Steve Sewell resigned at the end of last year to go to work for the U. S. Attorney -- and his interim airports director is also City Clerk and Chief Financial Officer of the City.

City Councilor Sam Roop, who is heading up the Council's inquiry into the airports, said that the Council may send its own reply to the FAA if the Mayor fails to respond in a timely fashion. Roop said he had been trying to meet with the Mayor to help with a response, but he had yet to speak with the Mayor.

Roop also reminded the KFAQ audience that, although Phase I of the investigation is complete, the Council's investigation is ongoing, proceeding to look into these allegations of discriminatory rules, as well as the noise abatement program at Tulsa International Airport and other concerns.

Tulsa stands to lose both prestige and money if we don't get this mess cleaned up.

P.S.: I wish I could link you directly to the KFAQ website to hear audio of the interview with Councilor Roop, but they are still "working out the kinks" with streaming audio. I suspect it's a rights and licensing issue, but if it's a technical problem, guys, give me a call!

It's cute in a pathetic sort of way that on a day with major world news like the ongoing election crisis in Ukraine, the Tulsa Whirled would use its Sunday edition front page lead story to spin the Great Plains Airlines mess to make the Whirled look less evil.

The message of the Sunday lead story (jump page here) is this: The Whirled wants you to believe that no one (especially not the Whirled, which owned a majority of the preferred stock at the time, but failed to disclose this fact for another two and a half years) deceived the City Council in November 2000 into approving the complex deal to finance Great Plains with city property as collateral. As evidence, they feature the two councilors out of nine who voted against the scheme. Clay Bird, now on Mayor Bill LaFortune's staff, and Randi Miller, now a Tulsa County Commissioner, are quoted as saying, in essence, that because they appreciated the risks involved and voted accordingly, that the councilors who voted for the transaction have no right to claim that information was withheld or distorted.

Remember that in November 2000, Tulsans defeated "It's Tulsa's Time," the second attempt to fund a new downtown sports arena with a city sales tax increase. One of the chairmen of that "vote no" effort was former City Streets Commissioner Jim Hewgley. When the Great Plains proposal was under discussion, Hewgley, who was dismissed as a naysayer by the Whirled, KRMG, Mayor Savage and her machine, and the big shots at the Tulsa Metro Chamber, tried to talk to several of the councilors to explain the flaws and risks in the plan. Bird and Miller heeded the advice of Hewgley and voted against the Great Plains scheme.

The Whirled story says that then-Council Attorney Bob Garner "provide[d] information about the risks of startup airlines." I have a lot of respect for Mr. Garner, and I'm not surprised he thought the deal was a bad idea and told the councilors so.

So why did the other seven councilors ignore the advice of sensible men like Bob Garner and Jim Hewgley? This is the part of the story the Whirled doesn't want to and won't bother to tell.

The voices of the skeptics were drowned out by a powerful chorus consisting of Mayor Savage, the Tulsa Whirled, the Tulsa Metro Chamber bureaucrats, and a gaggle of PR professionals, all singing the praises of this tremendous opportunity to invest in Tulsa's future, an opportunity that we dare not pass by. You will look in vain through the Whirled's archives for any hint of skepticism or dissent about the plan prior to the Council's vote. Whatever warnings were given by Bob Garner went unreported. The financial information and the investor lists, if indeed they were given to the Council, went unreported. Instead, you'll find items like the Whirled's November 28, 2000, editorial, urging the Council to approve the Great Plains scheme:

The Tulsa Whirled was in full spin mode this weekend in response to the release of the City Council's preliminary investigation into Tulsa airports and the Great Plains Airlines mess, which has the city on the hook for millions of dollars. Let's look at their Saturday editorial defense of parent company World Publishing Co.'s investment in Great Plains:

Mark Twain's wisdom suggests that a lie told about the World Publishing Co.'s interest in the ill-fated Great Plains Airline will be repeated so much by shrill voices in Tulsa that the truth could be lost.

First, the lie: The City Council's investigator, paid $40,000 so far to amass public records, used out-of-date documents to claim the World holds 51 percent equity in the bankrupt airline.

The fact: The final list of stockholders, published elsewhere in the World Saturday, shows that the World owned 3 percent of the airline stock.

Notice the sleight of hand -- the Whirled responds to the fact that it had invested 51% of the private investment in Great Plains Airlines by saying it only owned 3% of the total number of shares of stock. The Whirled is deliberately confusing preferred stock with common stock. In November 2000, World Publishing Co. acquired 233,333 shares of preferred stock for $700,000 -- $3 per share. That's 3,000 times the cost of a share of common stock, which generally went for one-thousandth of a dollar per share. (Some common stock was sold for a nickel a share.) Preferred shares bring greater rights, such as first cut of any dividends. The exact distinction between preferred stock and common stock for a company is defined by the shareholder agreement, which does not appear to be one of the documents released to the City Council investigation. If the the Whirled wants to persuade us that its investment was insignificant, they'll need to show us the shareholder agreement.

As to the "out-of-date" document claim: The City Council's investigator used the latest shareholder list that was provided to it, from February 2001. Only one more investor of any significance came in after that date: Dr. William E. ("Wes") Stricker, the Columbia, Mo., allergist and owner of Ozark Air Lines. Stricker acquired 250,000 shares of preferred stock when Ozark was purchased by Great Plains in March 2001.

Shortly after the Whirled acquisition of Great Plains stock in November 2000, the Whirled editorial board, on November 28, urged the City Council to agree to mortgage Air Force Plant No. 3 to enable a total of $30 million in financing ($15 million in state tax credits, $15 million loan secured by the property). The editorial claimed that the airline would "over the next decade, create 2,000 new jobs and generate $23 million in revenue to the Tulsa Airport Authority. It represents a tremendous private-public partnership to solve a problem, offer a needed service and boost economic development opportunities." The Whirled editorial made no mention of the launch on November 1 of daily non-stop service from Tulsa to Los Angeles on American Airlines, which undercut the need for the niche Great Plains was meant to fill. There was no mention, either, of the failure a year earlier of AccessAir, another airline which had been heavily subsidized by state and local governments to provide service from the midwest to the coasts. There were plenty of reasons to be skeptical, but the Whirled, owner of a majority of preferred stock at that critical moment, didn't let the public know.

More rebuttal after the jump.

In 2001, the Wall Street Journal picked four startup companies and tracked the companies' fortunes over the course of 2001, in a series entitled "The Challengers." One of those four startups was Great Plains Airlines, and I'm happy to report that the WSJ articles about Great Plains are available online for free on their StartupJournal.com website. Along with articles specifically about Great Plains, there are related articles about the state of the airline industry and the problems besetting small airlines long before the 9/11 attacks.

Some highlights:

• Bios of Great Plains founders James C. Swartz and John H. Knight.

• An interactive guide to the airline's business concept, including a map of existing non-stop routes from Tulsa in 2000, Great Plains' planned routes, actual routes, and how the major airlines rendered their plans moot by offering direct service.

• A detailed background on the airline and its founders. It mentions that in 1996 the two were "prowling around" for an airline to buy in Florida, talks of their efforts in Wichita, and describes how they wound up in Tulsa:

  The two men were in Wichita, Kan., laying the groundwork for starting an airline there when Tulsa came calling. The city in the northeastern corner of Oklahoma is a classic second-tier city, and for years, the locals have been unhappy with their air service, usually having to make at least one connection to get to cities on the coasts. Finally, Tulsa Chamber of Commerce activists took action. Hearing about Messrs. Swartz and Knight, the city's leading lights in the fall of 1997 persuaded them to focus on Tulsa instead. As Mr. Knight recalls, things weren't progressing so well in Wichita, so the choice was easy.

  What followed was a three-year effort to get state and local government to help finance the airline. David Johnson, a prominent Tulsa lawyer and counsel to the airline, helped push through state legislation that would give the tiny airline tax credits that it could sell to raise money. Last year, through a combination of tax-credit sales and a loan from the Bank of Oklahoma, with property put up as collateral by the city of Tulsa, Great Plains managed to amass $30 million in start-up capital. (Today, Mr. Johnson is an investor in Great Plains and sits on its board.)
  

  The article mentions their revenue projections -- $144 million in the third year of operation.

• A timeline of milestones through the end of 2001.

(More highlights after the jump.)

Before the men who started Great Plains Airlines came to Tulsa, they tried to pitch their idea to the City of Wichita, Kansas.

A headline search on the Wichita Eagle's website turns up the following:

• On April 8, 1997, two groups announce plans to bring jet service to Wichita: SunWest Airlines Inc., headed by James C. Swartz, and AccessAir Holdings Inc., a Des Moines-based company. But they are looking for local "seed money" to make it happen.
• An October 7, 1997, story is headined: "AIRLINES TO WICHITA: ANTE UP / ACCESSAIR WON'T SERVE WICHITA WITHOUT $3 MILLION FROM LOCAL INVESTORS. AND SUNWEST AIRLINES REQUESTS A PACKAGE OF FINANCIAL CONCESSIONS THAT AIRPORT OFFICIALS DON'T EXACTLY EMBRACE."

Here's a story from the Wichita Business Journal about SunWest's business concept from June 9, 1997.

And here's a very brief and non-specific September 15, 1997, story from the Wichita Business Journal about SunWest's pitch to the Wichita Airport Authority.

About the time Wichita officials decided to take a pass, Tulsa leaders worked to get the SunWest team to come look at locating here.

I spent part of today at the library, using the Whirled's online archives to see what the Whirled wrote about Great Plains Airlines from its first appearance on the scene as Sunwest (sometimes Sun West) Airlines in 1999. There is a lot of information to sift through.

The Whirled's parent company, World Publishing Co., paid $700,000 for 233,333 shares of preferred stock in the airline in November 2000. (The Whirled claims it paid $100,000 in cash -- the remainder was $600,000 in advertising space. The Whirled didn't bother to disclose its investment in Great Plains Airlines until February 16, 2003. By that time, the taxpayers of the State of Oklahoma and the City of Tulsa had donated millions of dollars in subsidies to support this airline that never came close to delivering on its promises. Throughout this period, in which public officials were deciding whether to continue to pump more money into the venture, the Whirled ran positive stories promoting the airline and its potential. You will look in vain for even a hint of skepticism or concern.

A newspaper has the trust of many citizens and decision-makers in the community. It's assumed that the local daily is doing its best to inform us completely and accurately -- that they wouldn't have any reason to distort or conceal information.

The F&M Bank zoning controversy and the Great Plains Airlines scandal have exposed to the public the extent to which the business interests of World Publishing Co. and its owners skew the Whirled's coverage of local government.

If the Whirled wishes to regain the trust of its readers they should stop using their news pages to defend the company's actions and instead recuse themselves from coverage of the story. Let's have a newspaper from another part of the country with no Tulsa business ties come in and investigate the story.

The findings of the first phase of the City Council's investigation into the operation of Tulsa's airports were released today, published on the City Council's website. You'll find the main body of the report here and the "abbreviated addendum" here.

(Be warned that the addendum is PDF file that has been optimized within an inch of its life. It appears that someone scanned in the addendum documents to create a PDF in Adobe Acrobat, then decided it was too large for people to download, so he ran optical character recognition on the result, keeping only the text found by the OCR and throwing away the image of the original. Hopefully, this will be corrected before long, because what is on the web now is hard to decipher.)

I'm just starting to dig through this. I didn't see the presentation of the report at the City Council meeting, so I'm probably missing some context, but this is what it looks like to me: Great Plains Airlines appears to have been a scheme to take a relatively small amount of private money, allow influential citizens to buy in at a very low cost, in order to pry loose a much larger amount of public money, ultimately for the enrichment of a few stockholders.

First among the preferred stockholders is World Publishing Company (WPC), publishers of the Tulsa Whirled, purchasing 233,333 shares of preferred stock of Great Plains Airline Holding Co. for $700,000. That represents a majority of the 445,699 shares of preferred stock sold at $3 a share, for a total value of $1,337,103. That investment also represents a majority of the capitalization: 6,495,137 shares of common stock were sold at either 1 mill (one tenth or a cent) per share or five cents per share, for a total value of $31,926.14. So the total price of issued stock was $1,369,029.14.

There was a dispute some months ago about what share of Great Plains Airlines was owned by World Publishing Company (WPC). Michael DelGiorno reported that WPC owned a majority of Great Plains Airlines. WPC sent legal nastygrams and insisted that it only held 3% of the stock. WPC's answer was misleading, honest only in a narrow technical sense -- if you divide the number of WPC's preferred shares by the combined number of common shares and preferred shares, you get 3.592%. But if you consider the price paid for the shares, the Whirled's parent company had invested 51% of the private money invested in Great Plains Airline Holding Co. The Tulsa Whirled's parent company had the biggest financial stake in the airline, the most to gain.

The price of the common stock is strange -- selling a thousand shares for a dollar is no way to raise capital for a startup business. The list of names of investors seems to point to an explanation. Many of them were in a position of influence to smooth the way for public financing and subsidy for the airline: Steven Berlin, former CFO of Citgo and a member of the Tulsa Industrial Authority (TIA); Don McCorkell, former Democrat State Representative and an influential lobbyist; Thomas Kimball, head of economic development for the City of Owasso a friend to then-Gov. Frank Keating; Bob Cullison, former Senate President Pro Tempore; Patrick Schnake and Steve Turnbo from the PR firm of Schnake Turnbo, plus Lauren Brookey, formerly a partner in that firm; Margaret Erling Frette, lobbyist and wife of John Erling, once the highest-rated local talk show host; Clyde Cole, former President and CEO of the Metropolitan Tulsa Chamber of Commerce; Van Scoyoc Associates, a DC lobbying firm specializing in government grants. While some of these people invested a tiny amount for their common shares, what would have happened to the value of their shares if an initial public offering (IPO) had occurred (especially if it had occurred before the tech bubble burst)?

I'll be combing through the report over the next few days. I hope you will, too, and I'd enjoy reading your observations, if you'll e-mail them to me -- or head over to the TulsaNow forums for an online discussion.

By a 5-3 vote last Thursday night the Council established an investigation of airport operations. Henderson, Medlock, Turner, Roop, and Mautino voted in favor; the usual members of the Cockroach Caucus (Baker, Sullivan, Neal) voted against, seemingly on the grounds that it would be effective at uncovering wrongdoing. Bill Christiansen expressed his support of the investigation but abstained -- his business is an airport tenant. If you don't believe elections make a difference, look at that list and realize that the vote would have failed if David Patrick and Art Justis had been reelected instead of Roscoe Turner and Jim Mautino.

The Mayor's response has been interesting. Not long ago he had threatened to veto the investigation unless the Council passed his annexation plan. Now he says he's fully committed to the investigation and has his own fraud investigator looking into it, and he wants to see coordination and cooperation between the Council's investigation and his own. A cynic might wonder about the commitment of someone who was willing to treat an investigation into fraud, waste, and abuse as a bargaining chip. An even more cynical cynic might wonder if the purpose of hiring an investigator and asking for cooperation was to be able to learn where the investigation was headed and to tip someone off before the investigation gets too close.

In any case, the Council's investigation will move forward. The question now is who will make up the committee. I would hope for a lineup of Roop, Medlock, and Turner. Medlock in particular has the kind of analytical mind and an eye for spotting patterns and connections that the investigation will need. He will not shy away from asking tough questions and cross-examinination, as we saw in the F&M Bank hearing. I don't know how much confidence I'd have in an investigation that didn't include him.

There have been some calls to exclude Roop and Turner from the committee since they voted for the city's support of the Great Plains deal. I don't see that as a problem, and I'd be concerned that they would be replaced by other councilors who won't be as determined to get to the bottom of things. Roop and Turner believed at the time that Great Plains would be a good thing for Tulsa; they realize now something went terribly wrong and so they support the investigation, which will not, in any event, be limited to the Great Plains deal. In no event should a councilor who voted against the investigation be made a member of the panel -- I would be concerned that said councilor would obstruct rather than aid the investigation. And keep in mind that the Council will only be investigating -- any leads on criminal activity would be forwarded to the appropriate prosecutor.