Jury Begins Deliberating in Trial of Former Airport Director After Closing Arguments
To hear federal prosecutors tell it, the former executive director of the Newport News/Williamsburg International Airport led the way on a $5 million loan guarantee to People Express Airlines.
It was Ken Spirito, they contend, who came up with the idea to use public money to back the borrowing. He was the one, they say, who convinced board members to agree to the deal, then improperly shifted money between airport accounts, while keeping the guarantee from government regulators and the public view.
“He was the one with his hand on the tiller, guiding the ship," said Assistant U.S. Attorney Brian Samuels, saying Spirito “was at the center of this,” and that “he was all in with these funds being used in this way.”
“He’s like one of the older kids in the neighborhood telling the younger kids to do something,” Samuels said. “Things go terribly wrong, and now he says he had nothing to do with it.”
But Spirito’s attorney, Trey Kelleter,
contends that Spirito has been made the “fall guy” for the actions of a host of players in a fully legal effort to bring People Express to the region.
That includes former Newport News City Manager and airport board member Jim Bourey, then longtime airport lawyer Herbert “Bert” Kelly Jr., who also served on TowneBank Peninsula board, and others.
Spirito contends the loan guarantee was Bourey’s brainchild.
Another airport board member, TowneBank executive Bert Bateman, also took part in setting up the loan deal, according to email evidence at he trial. (Bateman abstained on voting on the deal).
In Biblical times, Kelleter said, a scapegoat was the animal that would “be burdened with all of the community’s sins and sent off into the wilderness."
“They’ve chosen Ken Spirito to scapegoat,” he said, asserting that he got “bum-rushed” out of the airport when the public and regulators began asking questions.
“Nobody here did anything wrong, but people had to get blamed, and it all fell on Mr. Spirito.”
Spirito, who led the airport between 2009 and his 2017 firing, is charged with 24 felonies. The trial in U.S. District Court in Norfolk featured about 30 witnesses, more than 100 email exchanges and other documents. The jury got the case Monday afternoon after closing arguments.
Most of the charges against Spirito, 47, relate to his actions surrounding the 2014 loan guarantee to People Express Airlines.
A key date was June 9, 2014, when the Peninsula Airport Commission held a special closed session to discuss backing the $5 million line of credit to the fledgling airline.
Members then came out of closed session and voted to empower the board’s chairwoman “to do and commit any act ... which the Chair deems necessary to provide for the adequate, economical and efficient provision of air service and general business at Newport News/Williamsburg International Airport."
The chairwoman, LaDonna Finch, signed the loan agreement nine days later. 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 paid off the loan’s outstanding debt with $4.5 million in public money.
The Daily Press learned about the debt payment in early 2017, and the ensuing coverage led to a state audit, a management shakeup — both Spirito and Bourey were ousted — and a criminal investigation that led to the current charges.
Spirito is charged with 12 counts of misusing public money by an organization receiving federal money for the payments the airport made to TowneBank.
He’s also charged six counts of money laundering in relation to the accounts that were used to collateralize and pay the loan. He’s charged with giving false information about the source of the money when the Federal Aviation Administration began asking questions in early 2017.
He’s also charged with embezzling $5,000 for using an airport credit card to pay for a long-term warranty to his own car and repairs to his car and an employee’s vehicles after accidents.
And he’s also charged with obstruction of justice and four counts of perjury in a deposition he gave to an airport lawyer in early 2019 during a lawsuit he filed after his ouster.
Prosecutors contend the bills were personal ones. But Spirito has maintained that he was trying to save money by having the airport directly rather than putting them on insurance.
People Express came calling on the Newport News airport after AirTran Airways pulled out of the airport. Airport officials were anxious to replace the service lost.
Things got more serious, witnesses testified, when People Express hired Jeff Erickson, a former chief executive officer of Trans World Airlines, as its chief executive officer.
The loan was largely hidden from public view between 2014 and 2016. But by late 2016, according to trial evidence, Spirito initiated a process to kick New Dominion Clubs, the airport’s longtime restaurant provider, out of the airport.
Spirito and New Dominion’s owner, Tom McDermott of Hampton, were once good friends -- and Spirito told previously him about the loan to People Express, McDermott testified.
“He told me that his career is the aviation industry would be over if that came out," McDermott testified.
McDermott said People Express founder Mike Morsi told him the board had voted on the loan deal, “but it had never been properly made public.”
McDermott began calling news organizations. “The airport was not being provided proper oversight by management," he said. “I just wanted him held accountable."
McDermott’s daughter, Brittany Stellute, testified that the “minutes” from past airport commission meetings weren’t posted on the airport’s website. But she was able to find a vague reference to the $4.5 million payment deep within the Newport News city budget that year.
Morisi then sent her a document outlining the terms of the loan agreement, she said. In late 2016, New Dominion Clubs filed a Freedom of Information Act request asking for the loan guarantee documents and documents on the restaurant lease.
“It is disturbing that someone fed Tom with information that has never been disclosed publicly,” airport lawyer Kelly wrote to board members in December 20165.
McDermott’s FOIA lawsuit is what spurred the Daily Press to begin asking questions about the loan guarantee in early 2017.
Virginia Secretary of Transportation Aubrey Layne later initiated an examination of the department’s books by VDOT auditors.
But prosecutors say the numbers Spirito gave to the FAA on where the airport got the $4.5 million to pay off the loan were wildly inaccurate, and that the convoluted explanations about the movements “reveals culpability for his actions.”
“You can’t just take these funds out for a joy ride and return them when no one notices,” Samuels said.
Several witnesses from the state Department of Aviation and the U.S. Department of Transportation testified that airport’s grant money was “ineligible” to be used for a loan guarantee to a private airline.
Through “twists and turns” of tortured logic by Spirito, he said, “somehow ineligible becomes allowable.”
Kelleter, however, has argued that it’s not breaking the law to use grant funds in an “ineligible” way.
If that were the case, he said, it would be a crime every time an agency determines after the fact that a grant was used in an ineligible manner, which he said happens routinely. “That would be a lot of crimes committed,” he said.
Peter Dujardin, 757-247-4749, [email protected]
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