Negligence suit details Great Plains’ demise

TULSA — A recent court filing indicates that the defunct Great Plains Airlines was insolvent for more than a year before filing for protection in federal bankruptcy court.

A trustee disclosed the information in an amended negligence lawsuit against seven directors.

Patrick J. Malloy III is asking the bankruptcy court in Tulsa to disallow priority status for a claim of $32,040 by the Metropolitan Nashville Airport Authority.

He also wants the bankruptcy court to reclassify $11,262 in wage claims and an unspecified amount of two claims by Tulsa County.

In the legal negligence suit, first filed in January 2006, Malloy disclosed more details on the downfall of the former Tulsa-based airline which "placed at risk tens of millions of dollars of Oklahoma taxpayers’ money with only limited private investment.”

That form of financing, Malloy said, "created the potential for the shareholders of Great Plains to reap enormous profits even through the large majority of the capital at risk consisted of public funds.”

Named in the lawsuit are David A. Johnson, chief executive, and directors Steve Berlin, Tom Kimball, Tammie Maloney, Jeff Sullivan, Donald L. McCorkell and Jack Knight. All were listed as Oklahoma residents, except Sullivan and Knight, who are residents of Pennsylvania.

Quality jobs funds

Originally known as Sunwest Airlines it became Great Plains Airlines Holding Co. with plans to operate out of Tulsa International Airport to both coasts. It obtained $30 million in Oklahoma tax credits under an amendment to the Quality Jobs Act and a financial commitment from the Tulsa Industrial Authority.

The planes acquired did not meet the requirement of the Quality Jobs Act for the service to the East and West coasts because "they were incapable of flying nonstop to either coast.”

Though the airline was a subsidiary of the holding company, Malloy said the two companies "ignored corporate formalities and so significantly commingled their operations that one should be treated as the alter ego of the other.” Great Plains was "grossly undercapitalized from inception,” Malloy said.

After 9/11, the defendants were unable to obtain private financing to acquire additional aircraft and resorted to dealing with "money finders.”

Court case settles

By the summer of 2002, Great Plains was losing more than $1 million a month, Malloy said, and applied for a loan from the Air Transportation Stabilization Board although the directors knew or should have known with reasonable prudent business judgment that it was not eligible for a loan guarantee and should have ceased operations.

The directors obtained an additional $1.2 million in public funds through a convoluted arrangement with the Tulsa Airports Improvement Trust. It was based in part, Malloy said, on "defendants’ misrepresentations” to the trust.

This past summer the city of Tulsa settled a lawsuit arising from that agreement for more than $7 million.

From the time the loan guarantee was denied by the stabilization board Dec. 20, 2002, until it filed for Chapter 11 bankruptcy Jan. 23, 2004, the insolvency of Great Plains increased by $18.5 million, Malloy said. From then, until March 11, 2005, when it was changed to Chapter 7, which calls for liquidation, the company incurred about $600,000 in unpaid liabilities.

During 2003, the defendants "refused to cooperate” with prospective purchasers who withdrew their offers and ceased negotiations.

Malloy said that if they had agreed to sell Great Plains its operating certificate from the Federal Aviation Administration would have "had significant value.”

Added to the 2003 debt was $1 million in public funds from St. Louis MidAmerica Airport in St. Clair County, Ill., in return for providing service to Chicago and Washington rather than providing the service largely funded by Oklahoma.

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