Rectrix Lawsuit Charges Barnstable Airport Commissioners Illegally Diverted Airport Funds in Violation of FAA Regulations

BOSTON, July 21 /PRNewswire/ — A lawsuit filed in the United States District Court of Massachusetts alleges that public officials at the Barnstable Municipal Airport illegally diverted airport revenue to the Town of Barnstable in violation of Federal Aviation Administration regulations.

The suit, filed by Rectrix Aerodrome Centers, Inc., an aviation services provider and aircraft operator at the Airport, also charges that two Airport commissioners, two top Airport executives and the Airport’s attorney “engaged in a pattern of racketeering activity in violation of the Racketeer Influenced and Corruption Organizations Act (RICO).”

Specifically, Rectrix’s complaint alleges that, defendants, among other things, prevented Rectrix from selling jet fuel by intentionally and illegally concealing from Rectrix and other Airport tenants certain Airport standards that specifically state that a commercial aviation service provider like Rectrix “shall provide all fuel services.”

The lawsuit states that, among other objectives, the “objectives of the defendants’ fraudulent pattern of conduct were … to fraudulently obtain funding from the federal government and deprive the citizens of the Town of Barnstable of their right to honest services of public officials.”

The complaint further alleges that the six-member Airport Commission is a member of the RICO enterprise and violated, among other things, the Sherman Antitrust Act.

Named in the RICO claims are Airport Commissioners Michael A. Dunning and Larry F. Wheatley, the Airport’s outside attorney Bruce P. Gilmore, Airport Manager Quincy “Doc” Mosby and Assistant Manager Francisco Sanchez.

Because the lawsuit, which was filed late Thursday afternoon, is being brought under the federal RICO statute, the defendants could be liable for treble damages in the millions of dollars, according to Marc E. Kasowitz of the law firm of Kasowitz, Benson, Torres & Friedman LLP, attorneys for Rectrix.

Barnstable Municipal Airport is the third busiest airport in Massachusetts. The Town of Barnstable includes the villages of Hyannis, Barnstable, West Barnstable, Marston’s Mills, Centerville, Osterville and Cotuit.

According to the lawsuit, in order to obtain more than $12 million in federal grants to improve the Airport, the Commission has repeatedly represented to the FAA that Airport revenues would be used “for airport purposes only.” FAA regulations prohibit diversion of airport revenues to ensure the funds are spent on security, safety and other improvements.

The complaint goes on to allege that in a November 17, 2004 meeting at Rectrix headquarters in Sarasota, FL, Barnstable Municipal Airport Commissioner Larry F. Wheatley told Rectrix CEO Richard A. Cawley that the Town was receiving approximately $1 million per year from the Airport and was using funds received from the Airport for non-Airport purposes.

The lawsuit also states that in separate conversations at least two defendants acknowledged that the use of funds for non-Airport purposes was illegal.

The complaint alleges that in 2003 alone the Airport filed reports with the FAA that underreported Airport revenue by more than $2 million and net income by more than $600,000.

In recent years, the FAA has conducted a nationwide effort to enforce federal laws that prohibit airport revenue diversion for non-airport purposes. In 1997, the FAA froze $60 million in federal grants for capital improvements at the City of Los Angeles’ four airports, including Los Angeles International Airport, and demanded the repayment to the Airport Department of $31 million that the city had transferred to the general fund.

Los Angeles had claimed that the money was reimbursement for services provided to the airport by other city departments. But the FAA conducted a forensic audit of the city’s books and found that only $780,000 fell into that category. The City was forced to repay more than $30 million to the Airport Department or forfeit its federal grants.

The Rectrix complaint recounts how the company has invested millions of dollars in its business at the Airport, which has resulted in a significant number of new jobs and other economic opportunities for Cape Cod residents, but has continually been subjected to actions by the defendants that materially damaged Rectrix’s business.

According to the lawsuit, Rectrix, which leased property at the Airport for a new general aviation facility in 2002, did not learn of the existence of the Airport standards until 2004 when a “whistleblower” came forward with the information. Since learning of the Airport standards, the lawsuit states, Rectrix has repeatedly attempted through negotiation to obtain its lawful commercial rights, but to no avail.

In a January 2005 meeting, the suit goes on to say, Commissioner Dunning told Mr. Cawley that Rectrix would never be allowed to sell jet fuel at the Airport, to which Mr. Cawley replied that Rectrix would be left with no choice but to initiate litigation, the lawsuit charges. It charges that Mr. Dunning then told Mr. Cawley, “You better watch your back.”

The complaint also alleges that defendants violated Rectrix’s statutory and constitutional rights, including by treating Rectrix differently from other Airport tenants. For example, during the course of Rectrix’s dispute with the Airport, the Commission approved Airport leases for aeronautical services to be provided by Silvia Aviation I and II, which gave the Silvia entities more favorable rights than those granted to Rectrix.

When Rectrix’s Cawley complained to an Airport Commissioner about the special treatment afforded to the Silvias, the Commissioner told Mr. Cawley that he should have hired Mr. Dunning’s law firm, the lawsuit charges.

The Silvias had been represented by the law firm of Dunning & Kirrane, L.L.P., of which defendant Dunning is a partner, and were also clients of defendant Gilmore, the Airport Commission’s counsel.

According to the complaint, when Mr. Cawley noted that it would be unethical and a conflict of interest to use Dunning’s law firm, the Commissioner said, in substance, “That’s the way things are done on the Cape.”

Rectrix Aerodrome Centers, Inc.

CONTACT: Mike Sitrick or Tony Knight, +1-310-788-2850, or Jeff Lloyd,+1-212-573-6100, all of Sitrick And Company, for Rectrix Aerodrome Centers,Inc.