Great Plains with no great responsibility

Analysis:  The room was crowded and the question was serious, posed back in 2000 during a promotional meeting for a subsequently defeated public project.  The answer, while credible enough then, has since proven to be wildly – if not criminally – wrong.

I asked Jim East, who at the time served as then-Mayor Susan Savage’s communications director, how much risk was really on the table for Tulsa taxpayers if her plan to fund Great Plains Airlines failed.

His answer: “No more than $2 million, tops.”

Today, Tulsa City Councilors are scheduled to vote on a City of Tulsa property tax increase to pay $7.1 million to the Bank of Oklahoma (BOK) to settle the debt, according to Tulsa World city hall reporter, P.J. Lassek.  Click here to read today’s story.

East promoted the Great Plains deal for Savage’s administration with enthusiasm and multiple assurances of its propriety.  Abetted by the Tulsa Chamber of Commerce, the Tulsa World, former Tulsa radio personality John Erling with his lobbyist wife Margaret, and the local public relations firm of Schnake Turnbo Frank, many of Tulsa’s wealthy – including the publishing family of the Tulsa World – invested their personal money in the scheme.  In general, this could be called the “Elitist Democrat Airline Fraud” – a mistake which Tulsa taxpayers now must cover.

The compelling case for Great Plains Airlines, at the time, was its plan for non-stop service from Tulsa to the East and West coasts.  However, the company never acquired a plane that could make a non-stop flight from Tulsa to any coast – including the Gulf coast.

Private investors looked at the deal and declined.  Several sources requesting anonymity confirmed that the Great Plains numbers didn’t work and only after failing all other sources – promoters pushed public officials to spend other people’s money – tax money. 

To fund admirable bi-coastal convenience, the Tulsa Airports Improvement Trust guaranteed a $30 million loan from the Bank of Oklahoma by mortgaging city property – the former Air Force Plant No. 3.  In case of a default, the trust was to purchase the plant site for the amount of indebtedness, but the Federal Aviation Administration’s published rules prevented the sale.

In short, federal rules prevent airports from making direct subsidies to airlines.  Why did no media at the time cover that point?  Why did no official make that rule clear to the public which now seems to be the ultimate victim of fraud?

At the time, the entire deal smelt bad, but Tulsa Today did not have a reporter available to dig into the detail, nor did we did have the advertising support to hire an investigative team.  As publisher, I failed to target what I suspected might end as a public train wreck – and I apologize. But when I posed my question about the Great Plains deal to Jim East – a former co-worker (Tulsa Tribune) I considered an honorable friend – I trusted his answer.  Today, I’m not sure I’d trust him to correctly relate anything more than the time of day.

After his stint with the Savage administration, Jim East worked for Kathy Taylor’s car rental company and, according to several sources, continued his political efforts, first to get Taylor appointed by Governor Brad Henry as Secretary of Commerce, then elected as mayor of the City of Tulsa.  East was most recently seen talking to Rep. Lucky Lamons (D-Dist 66) at the first public meeting on the Tulsa Street Repair Proposal.

J. Richard Studenny was the attorney for the Tulsa Airports Improvement Trust in 2000 who assured the Tulsa City Council and anyone who asked that the deal was proper.  Why is he not paying a price for that deception?

In today’s Tulsa World article, Councilor Bill Martinson said Great Plains is “a deal that should have never happened and that’s not hindsight.  It’s one of those deals that if they had done adequate due diligence going into it, I don’t think it would have happened.”

The Inspector General’s Office of the U.S. Department of Transportation described the deal as “convoluted” – an understatement.

Former City Councilors Clay Bird and Randi Miller opposed the Great Plains deal and voted against it.  Now a Tulsa County Commissioner running for reelection in District 2, Miller has often cited her opposition to the Great Plains deal as an adventure which our public officials should never have allowed.  For that, many Tulsans will always support Miller, who is known for supporting public infrastructure development but opposing growth in the size of government.

On Wednesday, the lawsuit filed by the Tulsa Industrial Authority on behalf of the BOK claim against the Tulsa Airports Improvement Trust was apparently amended to include the City of Tulsa.  The city was not named in the original lawsuit filed in 2004, but this inclusion allows the city to pay the debt from the “sinking fund” derived from property taxes to pay legal judgments against the city.

If the city cannot use the sinking fund, then the debt must be paid from the general budget – an expense that, by all accounts, the City of Tulsa cannot afford as it struggles to sell property to fund the New City Hall and seek a way to fund $2 billion in city street repairs and widening.

Today’s story appears to go a long way to reestablish the Tulsa World’s credibility on the Great Plains debacle, which was significantly diminished as Tulsans realized the depth of financial involvement by the publishing family which underlied years of editorial and news reports praising the deal.

Public and private comment is flying around the ‘net, and one post, apparently from someone with legal education, reads, “Unjust enrichment is a ‘last gasp’ legal theory which is rarely successful.  Just how was the city unjustly enriched? If the city owes the money under any plausible legal theory, they would not have waited years to sue.  They are just going after the deep pocket.  This is all about [Mayor Kathy Taylor] making her friends happy.  She forced the previous attorney out who opined the city had no legal liability for this loan.  The present city attorney she is relying on is not in the civil servant system and does not have those protections – so he is going to take his marching orders from [Mayor Kathy Taylor]. BOK made a loan based on their high powered friends and not on financial business sense. Now that it went sour, they want the city to pay for their mistake. Luckily, alum [Mayor Kathy Taylor] is in a position to help them out.”

Tulsa City Councilor Rick Westcott, an attorney, told the Tulsa World he doesn't think the claims against the trust have merit. If the city is willing to pay the full amount of the loan default, he asked, "why not take the matter to jury trial, because [what is proposed] is not a settlement."