The former president of an airline at the center of a financial scandal at Newport News-Williamsburg International Airport has admitted to wire fraud.
PEOPLExpress airline president Michael Morisi, 59, of Suffolk, pleaded guilty to wire fraud and filing a false federal income tax return Thursday in federal court, according to a Department of Justice news release.
Morisi faces up to 23 years in prison on the two charges, and will be sentenced Nov. 15.
According to the news release, Morisi headed the airline, which failed start-up operations at the Newport News-Williamsburg International Airport despite his continued push to get PEOPLExpress operational.
The airline had a history of receiving private investments and having “significant” outstanding liabilities.
The airline switched to public dollars in 2014 when it secured a $5 million loan from TowneBank — which was guaranteed by the Peninsula Airport Commission.
That loan, however, quickly dwindled down.
Within one month of June 2014 when it was secured, PEOPLExpress has drawn down nearly the entire loan amount, according to federal prosecutors.
The airline operated for about three months before suspending service, and officially went belly-up in January 2017.
The suspension caused creditors to seek repayment from the airline in 2014 and 2015. In November 2014, the Newport News airport told PEOPLExpress to pay up or get out.
Around the same time, Morisi opened new bank accounts to receive insurance proceeds and avoid the seizure of funds, according to the news release. He gave false representations to creditors, including the Peninsula Airport Commission, saying no funds were available.
According to the Department of Justice, the commission paid more than $4 million to satisfy the loan.
Instead of paying back creditors, Morisi paid back salaries in large amounts to himself and other executives.
When another issue popped up with the first bank account being subject to a state tax lien, Morisi moved accounts again, allowing him to receive and divert additional insurance money.
Morisi also filed false tax returns for three years, then failed to file an additional two years’ tax returns.
In early 2017, a state audit at the airport dug into the matter of the Peninsula Airport Commission using taxpayer dollars to back the $5 million line of credit.
The 2017 audit caused another airline, Elite Airways, to withdraw from a plan to start service to the Newport News airport, citing “challenging perceptions” about the airport.
Former director Ken Spirito was indicted in May on several federal finance charges, according to an Associated Press report. The indictment includes charges of money laundering, and accuses Spirito of hiding public funds that were used to finance People Express Airlines in 2014.
A new Executive Director Mike Giardino was hired in November 2017.
He has worked to keep the airport’s existing airlines and increase the number of people using the airport.
Recent good news, albeit an incremental step, included Delta announcing it would run larger planes starting this summer.
