Former Airport Executive Director: Loan Deal Not Illegal, Former City Manager Came Up with Idea

The former executive director of the Newport News/Williamsburg International Airport took the witness stand in his own defense at a federal trial Thursday — asserting that a $5 million loan guarantee to a start-up airline six years ago wasn’t his idea.

The idea, he said, came from former Newport News City Manager Jim Bourey, whom Spirito contended worked the deal with People Express and others behind the scenes.

Bourey — a then-member of the airport’s six-member board in addition to his role as city manager — led the effort to bring the airline to town, the airport executive said.

“You’re denying that the loan guarantee was your idea?” U.S. Assistant Brian Samuels asked incredulously.

“Yes,” Spirito replied. “It was Jim Bourey’s.”

“I was following my boss," Spirito testified. “For People Express, I had to conduct everything through Jim Bourey. You had to go along with him. That was his style. And I had to stay in that style.”

Dressed in a tan suit and black glasses, Spirito testified he supported the loan guarantee to People Express — and recommended that the Peninsula Airport Commission vote for it — but that “my lane” was coming up with the airport funding to back the loan.

His testimony, during about five hours on the stand, contradicts Bourey’s testimony earlier this week. Bourey had cast Spirito as the man who spearheaded the loan guarantee.

“It was his idea and his presentation, and the tactics and the entire strategy was coming from Ken,” Bourey testified, adding that “you have to go with the assurance of your executive director.”

The loan guarantee was worked out in closed session of the airport’s board in the spring of 2014.

Under the agreement, TowneBank issued the $5 million line of credit to People Express — but the airport was on the hook to cover the debt if the airline defaulted.

People Express collapsed in September 2014 — less than three months after beginning service. A few months after that, the airport quietly paid off the loan’s outstanding debt with $4.5 million in taxpayer money.

The Daily Press learned about the debt payment in early 2017, with the ensuing coverage leading to a state audit, a management shakeup — both Spirito and Bourey lost their jobs — and a criminal investigation.

Spirito is on trial in U.S. District Court in Norfolk, charged with 24 felony counts of fraud. Most of the charges pertain to his actions surrounding the loan guarantee, while a couple of the counts pertain to putting some personal car repair expenses on an airport credit card.

Spirito testified that People Express came calling when the airport’s biggest carrier, AirTran Airways, left the airport 2012.

“It was a very challenging turn in the road for us in terms of how we were going to maintain ourselves with that type of impact," he said. “It was very significant."

Though initial approaches by People Express weren’t taken too seriously, Spirito said, that changed when Jeff Erickson, the former chief executive officer of Trans World Airlines, was hired as People Express’ top executive in 2013.

Spirito began working more seriously with the Newport News Economic Development office and others about the prospect of bringing in a new airline. And when a deal was signed, he said, everyone was happy “to help the community.”

“I was excited,” he said. “We all were. We were excited about bringing in a low fare carrier" that would "fly to all the destinations everyone wanted.”

Spirito conceded that he didn’t do much due diligence on People Express at the outset, saying he left that task to Bourey.

Spirito also pointed the finger Thursday at the airport commission’s longtime legal counsel, Herbert V. “Bert” Kelly Jr., for missteps.

Spirito asserted that in a meeting in May 2014 meeting with Kelly and attorneys for TowneBank and People Express, all the attorneys approved the language of the deal.

“They gave the thumbs-up,” Spirito asserted.

Around that time, he testified, Kelly wrote a memo saying that the loan guarantee “followed all state and federal laws," and he followed that guidance.

And in the month before the airport commission discussed the deal, Spirito testified, he asked Kelly to include certain protections in the loan guarantee documents.

“My biggest concern was that this was a risky deal, and I wanted to make sure that the airport was protected,” Spirito testified.

That included such things that the airport board had the power to “inspect” People Express’ books, that the board approved the airline’s draws from the loan, and People Express managers “shall be fiscally responsible.”

While some of Spirito’s suggestions were included in the final agreement, others were not.

“If they had followed the suggestions that I recommended, then I wouldn’t be sitting here right now, " Spirito said.

Spirito’s attorney, Trey Kelleter, introduced two emails that Spirito sent to Kelly as the negotiations with People Express and TowneBank were in the final stages.

(At the time, Kelly served on TowneBank Peninsula board. State auditors later termed it a “potential and/or perceived conflict of interest" for Kelly to have been on that board while working on the airport’s loan guarantee with the same bank).

Spirito sparred with the case’s prosecutor, Samuels, during cross-examination, particularly on state and federal aviation grant rules and money that was shifted between accounts.

Witnesses from both the Virginia Department testified earlier in the trial that the millions of dollars in state grant funding that was used to pay for the loan are only supposed to be used for capital projects — such as runways and terminal improvements — and not for loans to private airlines.

But Spirito contends that just because the state said it was “ineligible” doesn’t make it illegal to have done.

“It’s not wrong,” he said.

As with other projects later deemed ineligible, Spirito asserted, all an “ineligible" ruling means is an airport is “put in the penalty box” for some state Aviation Department grants that are doled out on a discretionary basis.

Spirito and Samuels also disagreed sharply over the movement of money between various airport accounts. (Several of the charges against Spirito are “money laundering” counts pertaining to mislabeling of accounts and shifting money).

Spirito rarely conceded the prosecutor’s points — and at times said he strongly disagreed with prior trial testimony from the airport’s finance director, Renee Carr, about the movements.

Spirito began several of his answers with, “With all due respect, Mr. Samuels,” often followed by a back-and-forth over state and federal airport grant rules, “fronting money,” and hundreds of thousands of dollars at a time moved between at least four airport accounts.'

The prosecution has rested its case, and Kelleter told U.S. District Judge Raymond Jackson that he has no more defense witnesses. The trial will resume Monday with closing arguments.

Peter Dujardin, 757-247-4749, [email protected]

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