Tuesday, October 4, 2022

Month-long review for state’s audit into PAC-backed $4.5M airline loan

The Newport News-Williamsburg International Airport. (Andrew Harris/WYDaily)
The Newport News-Williamsburg International Airport. (Andrew Harris/WYDaily)

Peninsula Airport Commission members may have to wait another month to find out how a now-defunct airline spent a $4.55 million loan which the airport agency backed.

Brad Gales, the Director of Virginia Department of Transportation’s Insurance Office, is leading a special review of the loan between TowneBank and People’s Express.

People Express defaulted on the loan in January after the PAC agreed to guarantee the loan with state funds.  The Secretary of Transportation Aubrey Layne, Jr. requested his office conduct an audit to discover what was done with the loaned funds.

Gales provided an update of the investigation of the loan during the PAC meeting Thursday morning.

“I’m pleased to tell you today that we are moving forward,” Gales said before the PAC.  “Every day we’re gathering more information to complete the puzzle.”

One slowdown in the investigation is the lack of documents provided by People Express.

“We have reached out to their legal counsel, who is attempting to get us access to their books and records primarily so we can confirm what the money has been used for that was in the original loan that the PAC guaranteed,” Gales said.

As word leaked out about the investigations into People Express’s failure and the PAC’s use of state funds to guarantee the loan, Elite Airlines delayed its debut flight to the Newport News- Williamsburg International Airport.

The Portland, Me. – based airline was slated to begin non-stop service from New York City-area airports to the Peninsula in March.  A company spokesman say in an earlier press release it will now wait until after the audit is completed to make its debut. 

“It’s taking a long time and we have things that are pending,” said PAC Interim Executive Director Sandy Wanner.  “Obviously Elite Airlines wants to come on a day where there are the good headlines and doesn’t want to have a potential negative headline.  Obviously the audit is taking a long time but they’re doing a very thorough job.”

Gales said he expects the audit to be completed within 30 days of receiving financial documents from the defunct airline.  However, if those documents are not provided within the next week, Gales said he will move forward without them.  Doing so would limit the amount of information in the audit. He would include a qualification in the report to acknowledge the report may paint an incomplete picture.

In the meantime, Gales said he and his staff will begin pouring over more than 10,000 emails provided by the City of Newport News that were not maintained by PAC, in addition to other documents.  The auditors have also compiled a 200-page timeline of events relating to the loan, the PAC’s guarantee and People Express’ bankruptcy.

The audit, Gales added, will be a public document once released.

“It will be very detailed.  I think it’ll be very enlightening when the report is issued,” Gales said.  “I’m hoping we can move very quickly at this point. Again, we are still waiting for information from various sources.”

The PAC went into a closed session for more than two hours Thursday as they received the update from Gales.  Conversations between both parties regarding the early returns of the audit have taken place, said PAC Chairman George Wallace, and the commissioners are already considering how to implement changes.

“To my pleasure, we’ve heard preliminary discussions about some of this stuff we’re already taking action on,” Wallace said.  “We’re going to be responsive before the final audit is completed and after.”

Wallace added, “We’re going to be better from this particular process.”

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