Tulsa::GreatPlainsAirlines Category

UPDATED 2011/10/13 with links to further reaction and my interview with KRMG's Nicole Burgin. Just remember, though, BatesLine had the story first, thanks to an email from an alert reader.

This post is worthy of a flashing light, a flaming skull, and 72-point type. Tulsa's taxpayers get our $7 million back.

The Supreme Court of Oklahoma has thrown out the Great Plains Airlines settlement by a 5-4 vote with three of the four dissenters concurring in part. From the decision (emphasis added):

¶26 In the present matter, the settlement was not based on a contract, but rather under the equitable theory of unjust enrichment to the City of Tulsa. The City of Tulsa, at all times, presented the settlement issues to the District Court of Tulsa County. The Judgments Against Municipalities Act does not apply. Therefore, the sinking funds requirement also does not apply. However, since we find the unjust enrichment claim to be unviable and the Statute of Limitations would bar the unjust enrichment claim against the City, we remand the instant matter back to the District Court of Tulsa County to direct the repayment of the settlement funds from BOK back to the City of Tulsa.

See my July 2, 2008, column, The Great Plains Ripoff, for background.

The Supreme Court ruling, sadly, lets Kathy Taylor off the hook for triple damages payable to the taxpayers who brought the Qui Tam suit over the Great Plains settlement. I'd hope Taylor would feel ashamed of ripping off Tulsa's taxpayers as she did, but I don't expect any remorse. The taxpayers of the City of Tulsa weren't as important to Kathy Taylor as the legal and financial well-being of her cronies.

UPDATE: Here's a link to a more readable version of the Supreme Court decision. Thanks to UTW's Jennie Lloyd for the tip.

MORE REACTION (2011/10/13):

City Councilor John Eagleton called it back in 2008 and in 2010, he cited the Great Plains Settlement as one of eight instances demonstrating Deirdre Dexter's incompetence as City Attorney, in a letter urging Mayor Dewey Bartlett Jr to replace her.

News Talk Radio KRMG's Nicole Burgin spoke to me Wednesday afternoon about the Great Plains settlement. You can listen to the full interview via that link. I discuss what should happen with the money repaid by BOK to the City of Tulsa, what lessons should be learned, and speculate about why the Supreme Court's vote was so close.

(My radio chops are very rusty. Way too many ums and ahs. I probably should have asked for a few minutes to gather my thoughts and mentally shift gears from engineering back to politics before doing the interview.)

The KRMG story has a statement from the City of Tulsa:

"The City of Tulsa and the Tulsa Airports Improvement Trust are currently reviewing the Opinion from the Oklahoma Supreme Court setting aside the settlement between the Bank of Oklahoma and the City and TAIT, and considering their options. The City is pleased the Court recognized the City entered into the settlement in good faith, but the ruling by the Court was a mixed result for the City. The ruling obviously will cause BOK to return to the City the $7.1 million the City paid to BOK under the terms of the settlement. The ruling also makes it clear that the City has no liability to BOK arising out of the Great Plains transaction. However, the settlement the court set aside was global in that it included all of the claims BOK had against both the City and the airport. The result is that although the City has no liability to BOK, BOK can now pursue its previous claim against the airport."

KJRH reports that BOK will be resuming its lawsuit against the Tulsa Airports Improvements Trust:

BOK issued a statement to 2NEWS saying, "The Supreme Court's invalidation of the settlement with the City has freed Bank of Oklahoma to assert its $12.5 million claim against the Airport Trust for not fulfilling its obligation to the bank. While we'd hoped this issue would have been put to rest with the settlement back in 2008, the court's decision now requires that it continue."

Here's an idea: BOK should pursue repayment from the investors in Great Plains Airlines, who stood to profit if the airline had succeeded. Or from the vendors who were paid for goods and services with money GPA borrowed from BOK. Or from the individuals and companies that bought GPA's transferable state tax credits. Of the city officials who -- it is claimed -- promised BOK that city would cover any default. If all of the above had an attack of conscience and each paid a bit, they could raise that money very quickly, I imagine.

KOTV's report includes extensive comments from City Councilor Rick Westcott:


"This loan should never have been made. There's nobody that's on the hook for this," said Tulsa City Councilor Rick Westcott....

"What is important is the Supreme Court has ruled that the City of Tulsa has no liability to the Bank of Oklahoma. And the Bank of Oklahoma has to give taxpayers back $7.1 million."...

And don't start looking for a property tax rebate check in the mail anytime soon. The money will likely go into an account to guard against future lawsuits.

"The $7.1 million could be used to pay off judgments in the future and not have to levy citizen's property taxes to pay for those small judgments," Westcott said.

Fox 23 seems to get a key point wrong in their brief report. (It's quite understandable.) Kathy Taylor did not say the settlement "was illegal and unfair to taxpayers because it was paid with property taxes." She and the City of Tulsa asked the district court to affirm that the settlement to which she agreed was lawful. The court action that she filed included the complaining taxpayers as defendants. Taylor was pursuing this action to protect herself against liability for treble damages as a result of the taxpayers' claim; Taylor did NOT agree with the taxpayers that her agreement to the settlement was unjust. (See sections 11 through 15 of the Supreme Court's decision.)

Mainstream media sources like Bloomberg News and the Washington Post have been digging deeper into the bankruptcy of federally-subsidized Solyndra, looking particularly at George Kaiser, whose venture capital companies were involved in Solyndra's financing, and his George Kaiser Family Foundation, which held a large stake in the failed company. A few brief links:

Bloomberg News: Obama-Backing Billionaire's Charity Sought Solyndra in Tulsa

Washington Post: Investment in failed solar firm Solyndra raises questions about nonprofit's purpose

Philanthropy Daily: The Other Solyndra Scandal

New York Times, April 25, 2005: A Tax Benefit for Big Donors Often Bypasses Idea of Charity

Michelle Malkin: Solyndra Watch

KGO: Roseanne says guilty bankers should be beheaded: I imagine generous fundraising for President Obama's re-election would qualify a banker for a pardon from this modern-day Madame Defarge.

Consider this a placeholder. Will come back and add excerpts and my own thoughts later. In the meantime, read these stories for yourself.

On May 29, 1936, Winston Churchill, conservative backbencher, spoke in a debate about British preparedness for the coming air war (emphasis added):

Churchill_portrait_NYP_45063_235px.jpgMy right hon. Friend said the other day that you must not cry over spilt milk, and he said it to-day in other words, as to recriminating about the past, and so forth. I will tell the House the use of recriminating about the past. It is to enforce effective action at the present. It is no use recriminating about the past simply for the purpose of censuring and punishing neglect and culpability, though that, indeed, may at times become the duty of Parliament. But there is great necessity for recriminating about the actions of the past and the neglects of the past when one is not satisfied that all is being done at the present time. That is the justification for it.

THE MODERN CONTEXT: Peter Oborne and Frances Weaver, writing in the Spectator about the vindication of Eurosceptics regarding the single European currency (emphasis added):

Very rarely in political history has any faction or movement enjoyed such a complete and crushing victory as the Conservative Eurosceptics. The field is theirs. They were not merely right about the single currency, the greatest economic issue of our age -- they were right for the right reasons. They foresaw with lucid, prophetic accuracy exactly how and why the euro would bring with it financial devastation and social collapse....

Speaking in the House of Commons in 1936, Winston Churchill -- then himself a marginal and widely scorned figure -- uttered the following words: 'the use of recriminating about the past is to enforce effective action at the present'. So what are the lessons we should learn from the British argument over the euro?

First, we should cherish that very British trait, eccentricity. Study of the public discourse at the height of the euro debate shows how often pro-euro propagandists isolated their critics by labelling them cranks. Here's just one example, taken from the Observer columnist Andrew Rawnsley's column on 31 January 1999: 'On the pro-euro side, a grand coalition of business, the unions and the substantial, sane, front rank political figures. On the other side, a menagerie of has-beens, never-have-beens and loony tunes.'

Most of Mr Rawnsley's 'substantial, sane, front-rank political figures' came together 12 years ago at the launch of the Britain in Europe campaign to take us into the euro -- Tony Blair, Peter Mandelson, Michael Heseltine, Ken Clarke, Charles Kennedy, Danny Alexander. So here's another lesson: be wary of cross-party alliances. Again and again it is the lonely and cussed figures who stand outside the establishment orthodoxy who are vindicated over time.

There's a good bit too about how certain self-interested large corporations co-opted the Confederation of British Industry to support European monetary union. One suspects the same thing is happening any time a Chamber of Commerce backs higher taxes, illegal immigration, or greater regulation.

Just as bad was the CBI, whose claims to represent British industry as a whole have always been dubious at best. By the mid-1990s a small clique of large corporations were firmly in control, and they had the director general they wanted in the shape of the impeccably well connected Adair (now Lord) Turner, later to become chairman of the disastrous Financial Services Authority and chairman of the Government's Committee on Climate Change. Few pieces of conventional wisdom are ever too conventional for Lord Turner. His corporate bosses (Niall FitzGerald of Unilever, David Simon of BP, British Airways' Colin Marshall) claimed that an overwhelming majority of British businessmen backed the single currency -- a vital propaganda tool for pro-euro campaigners. The figures used to support these claims were, however, very flimsy indeed: they could only be sustained by ignoring the views of small businessmen, and in due course they were exposed -- a crucial early defeat for the pro-euro cause.

Linking to the Spectator piece, David Abbott of Brits at Their Best asks, "So what should we learn from the argument over the euro?":

"The cranks", the "loons", small business people and honest people were right. Joining the euro would have been a catastrophe for Britain.

Big business, big politicians, big crooks and the big BBC were wrong.

But make no mistake, they will try to make the same mistake again because it's lucrative, and they will try to drag the British people with them.

AN OPPOSING VOICE: The Laird of Swamp Castle opposes recriminating and bickering about the past:

This is long, but worth reading, particularly if you're knowledgeable about the financial aspects of bankruptcy. There are some interesting twists and turns that seem to suggest that GKFF's investments have been protected to the detriment of federal taxpayers. If that's so, I'm torn: It's better for Tulsa if GKFF doesn't get soaked by the failure of Solyndra, but as a fiscal conservative I have a problem with a government guarantee, particularly one that has a strong whiff of political favoritism, that gives investors nothing but upside while taxpayers break even at best. But that's all my opinion and speculation, and it's certainly not my intent to suggest any wrongdoing on the part of anyone involved.

IMG_9747

Solyndra's Fremont, California, facility, by Monica's Dad on Flickr. Creative Commons Attribution 2.0 Generic license.

A few news stories and commentaries of interest, regarding Oklahoma's wealthiest man, George B. Kaiser, and the recently-bankrupt solar energy firm Solyndra, which failed despite $535 million in federal loan guarantees. The stories discuss Kaiser's fundraising for the Obama campaign, his visits to the Obama White House the week before the Solyndra guarantee was approved, the increasing level of his George Kaiser Family Foundation's investment vehicles in Solyndra, and Kaiser's Argonaut Ventures I moving first in line, ahead of the taxpayers, for repayment.

From the Daily Caller, an account of George Kaiser's four visits to the White House in the week before the Solyndra loan guarantee was approved:

According to White House visitor logs, between March 12, 2009, and April 14, 2011, Solyndra officials and investors made no fewer than 20 trips to the West Wing. In the week before the administration awarded Solyndra with the first-ever alternative energy loan guarantee on March 20, four separate visits were logged.

George Kaiser, who has in the past been labeled a major Solyndra investor as well as a Obama donor, made three visits to the White House on March 12, 2009, and one on March 13. Kaiser has denied any direct involvement in the Solyndra deal and through a statement from his foundation said he "did not participate in any discussions with the U.S. government regarding the loan."

But the countless meetings at the White House seem hardly coincidental. Kaiser, in fact, is responsible for 16 of the 20 meetings that showed up on the White House logs.

In the meetings on March 12, Kaiser met with former Chairman of the Council of Economic Advisors Austan Goolsbee at 11 a.m., Senior Advisor Pete Rouse at 3 p.m., and Deputy Director of the Domestic Policy Council Heather Higginbottom at 6:30 p.m. On the 13th, Kaiser met with Deputy Director of the National Economic Council Jason Furman at 9 a.m....

As TheDC previously reported, Solyndra officials, including Kaiser himself, donated hundreds of thousands of dollars to Barack Obama.

Kaiser personally donated $53,500 to Obama's presidential campaign in 2008. Ben Bierman, executive vice president of operations donated $5,500 to Obama, and Karen Alter, senior vice president of marketing gave $23,000, just to name a few.

From Reuters' MuniLand blog on September 8, 2011: "The President's argonaut," a detailed look at the George Kaiser Family Foundation's investment in Solyndra:

Two of Solyndra's largest investors are Argonaut Ventures I, L.L.C. and the GKFF Investment Company, LLC. Both firms are represented on the Solyndra board of directors by Steven R. Mitchell (see Solyndra S-1 page 119). Both are investment vehicles of the George Kaiser Family Foundation of Tulsa, Oklahoma....

George Kaiser alleges that he didn't discuss Solyndra with any White House officials but his investment vehicles were very hot for Solyndra. I went back into Solyndra's IPO filing and totaled up the amount of funding Kaiser's investment businesses gave Solyndra. Over 9 rounds of financing it invested approximately $337 million, or 48% of all equity raised for the business. Although Kaiser, through Argonaut and GKFF Investment Company, LLC, did not participate in the initial two private financing rounds, they dominated the following funding rounds and were the major venture capital investors in the firm....

Like many bankruptcies there are a lot of creditors in line to be repaid by disposing of Solyndra's assets. What is unusual is the order of precedence of creditors. When the Solyndra loan was guaranteed by the Department of Energy and paid out by the U.S. Treasury according to US law 10 C.F.R. §609.10(d)(13), the government should have become first in line for repayment (page 2):

Any Guaranteed Obligation may not be subordinate to any other debt and must have a first lien position on all assets of the project and all additional collateral pledged as security for any project debt.

But when I read the bankrutpcy filing it turns out George Kaiser's investment firm is actually first in line, ahead of the U.S. government, for $69 million. Here is the ordering:

Tranche A: $69,302,901 - Argonaut Ventures I, L.L.C
Tranche B/D Term Loan Facility: $527,808,544 - U.S. Department of Energy
Tranche E Credit Documents: $186,481,645 - Argonaut Ventures I, L.L.C.

The financing documents were rewritten in February 2011 and gave priority to Argonaut for Tranche A. Several commentators have raised the question of why the Department of Energy would have allowed the government to become subordinate to Argonaut given the law.

Bruce Krasting on the Zero Hedge blog notes a curious omission on the list of witnesses at Wednesday's House Energy and Commerce Committee hearing:

Of interest to me is that there are no witnesses scheduled for the principal owner, Argonaut Ventures (George Kaiser family investment vehicle). One would think that it might be informative to talk with the investors. Ah, well.

Maybe a couple of Tuesday's Tulsa City Council primary winners could have flown up to DC to represent the investors -- GKFF trustee Phil Lakin and former GKFF lobbyist G. T. Bynum.

(Another Tulsa connection: Congressman John Sullivan is vice chairman of the Energy and Power Subcommittee of the House Energy and Commerce Committee and, as such, Sullivan is on the Subcommittee on Oversight and Investigations.)

Krasting writes that Argonaut purchased Solyndra's inventory and accounts receivable in July. He speculates that Argonaut might be able to profit from the purchase of Solyndra as a company to be able to use its Net Operating Losses (NOLs) to offset income from other energy-related investments. (That's my attempt at a summary as a financial novice. Best to read Krasting's opinion for yourself.)

Bottom line. Only Argonaut has a chance of utilizing the tax benefits. Whether they are ultimately worth anything is not clear. But this fact does give Argonaut a potential leg up on other bidders. Keep in mind that Argonaut would not be paying cash for anything. They would just swap all of [Solyndra] (including the NOLs) for their otherwise worthless IOUs.

Krasting goes on to relate something he said on the Pat Campbell Show on Tulsa talk station KFAQ:

At one point it came up that Kaiser is a pillar of Tulsa. I used that chance to say: (Edited for stutters, run ons etc...(Link)
George Kaiser could step up in a bankruptcy court and offer to put $300mm into [Solyndra]. The proceeds would be used to substantially pay down the government IOU. The balance of the debt would be converted into common stock. If [Solyndra] were around in 5-7 years, the government might get the rest of its money back.

That's my challenge to George Kaiser. Step up and fix this problem.

Of course this would be the dumbest thing for Kaiser to do. I don't think he's dumb at all (and he has the best lawyers). I'm sure he doesn't like losing good money after bad. That said, this isn't one of those everyday stories. This one could swing an election. I wonder if he gave it a thought.

I wonder if Bruce Krasting has heard of Great Plains Airlines. The failed Tulsa-based airline defaulted on $7.1 million from George Kaiser's Bank of Oklahoma and burned up some $30 million in transferable tax credits. According to first-hand accounts, bank officials claimed city officials had made implicit guarantees that the city would cover any default, despite assurances from the same officials to the public that the city taxpayers were not on the hook if the airline failed.

When the FAA ruled that the collateral for the loan could not be used for that purpose (an illegal subsidy using FAA passenger service fees to favor one airline over others at the same airport), there was a lawsuit. The city government was added to the suit under the flimsy pretext of "unjust enrichment," then-Mayor Kathy Taylor, a Democrat, immediately waved the white flag, and the loan was repaid, just before the end of 2008Q2, out of Tulsa's sinking fund at the expense of city property taxpayers.

The list of Great Plains Airlines investors was a who's who of Tulsa insiders. (It should be noted that Kaiser was not an GPA investor.) Politically connected private investors would see nothing but upside for investments that often consisted of in-kind services, while the taxpayers would (and did) take it in the shorts if it failed and at best could hope for break-even.

(More about Great Plains Airlines, its failure, and the ongoing impact on Tulsa taxpayers in the BatesLine Great Plains Airlines archive.)

MORE: Bruce Krasting has a September 15, 2011, update, "Solyndra - A few new facts. A few new questions," in which he takes a closer look at the sale of Solyndra's inventory and accounts receivable by subsidiary Solyndra Financial to a day-old Delaware corporation called Solyndra Solar II, with a company called Argonaut Solar acting as agent. The sale is disclosed in the bankruptcy filing. Krasting asks some questions:

I have found no explanation/details for this transaction. It is clear that a purchase/sale took place. The question of how much was sold and at what price is not clear. It is also not clear what Argonaut Solar is doing in this deal. Argonaut is a name that George Kaiser uses. His family investment vehicle channeled money to SOL through a company called Argonaut Ventures. Why would a company controlled by GK have a role as Agent between the buyer and seller of SOL's assets? A question to ask is whether GK has (directly or indirectly) an interest (equity or debt) in SSII.

Krasting considers the impact to the taxpayers:

Argonaut (GK) has separately offered to provide a post bankruptcy loan of $4mm ("DIP"). There are many terms required by Argonaut. One requirement relates to the A/R sales. From the docs:
It is a condition to funding under the DIP Facility that the Inventory Accounts Receivable Trust Funds being held in the Inventory A/R Purchaser Trust Accounts are released to Argonaut Solar, LLC, as agent for the Inventory A/R Purchasers.

Argonaut's (very good) lawyers make their position very clear as to who owns the assets in the A/R accounts.

The Purchased Inventory (including any proceeds thereof) and the Inventory Accounts Receivable Trust Funds (including any proceeds thereof) are property of the Inventory AIR Purchasers and not property of the Debtors' estates.

In other words, Argonaut is willing to make a new $4mm loan, PROVIDED that the Judge releases (at least $3.86m) back to an entity that Argonaut is connected to (SSII). In addition, the Judge would be functionally sanctioning the A/R sale. The inventory (whatever it is worth) and the receivables (whatever they are worth) will be excluded from the Debtors Estate. That means that there is even less of a chance that Uncle Sam sees a penny of the money that he (we) are owed.

Krasting emphasizes that he is not suggesting wrongdoing on anyone's part. (Nor am I.) He is simply, as a taxpayer and blogger, looking for some clarity. (As am I.) Krasting has asked for insight from his readers. If you can shed any light on what all this means, please leave a comment or contact me via email. If someone from GKFF or one of the foundation's related investment vehicles wishes to provide some sort of rationale behind these items from the bankruptcy filing, as noted by Krasting, I'd be happy to publish it here.

MORE: If you've lost Jon Stewart... (via Brandon Dutcher on Twitter)

Stewart leads into a clip from an ABC News story about Kaiser's White House visits: "For this to truly become a weapons-grade political fodder, you're going to need incompetence with more than just a whiff of sinister cronyism."

We're beginning to see components of Tulsa's establishment coalesce around certain candidates for City Council, the candidates they believe will best represent the establishment's interests at City Hall.

Burt Holmes and Ben Latham have selected a partial slate of candidates, according to an email from Latham soliciting contributions for their slate.

Holmes was a director of Great Plains Airlines, a Tulsa-based airline that failed at great cost to taxpayers in Tulsa (property taxpayers had to pay a $7 million debt that we didn't owe, a loan that Great Plains had defaulted on, despite earlier assurances that taxpayers would not be on the hook) and Oklahoma (transferable tax credits were used to fund the airline; the money for the credits came from the state coffers).

Holmes, a maximum donor to Barack Obama's primary and general election campaigns, was also a plaintiff, along with Nancy Rothman, in a lawsuit against all members of the current City Council for alleged violations of the Open Meeting Act, a lawsuit that was later dismissed, but not until each councilor had to hire his or her own attorney to defend the suit.

Ben Latham is head of GBR Properties and is listed as a committee member of Save Our Tulsa, the group that wants to return our city to the "good ol' days" when a small number of the well-heeled and well-connected made decisions for Tulsa without the bothersome and distracting input of the nearly 400,000 other citizens.

Given the backgrounds of the men who picked these six candidates -- David Patrick, Liz Hunt, Ken Brune, Karen Gilbert, Tom Mansur, and Phil Lakin -- it seems reasonable to suppose that these candidates may support massive taxpayer subsidies for crazy business schemes, suing city councilors, and SOT's anti-democracy "reforms" that would dilute geographical and minority representation and put Tulsa at risk for a Voting Rights Act lawsuit. If that's not the case, each candidate should speak up and publicly repudiate the Holmes/Latham endorsement.

Holmes and Latham's list of approved candidates is not too surprising. It includes three of the four publicly acknowledged clients of Karl Ahlgren (Hunt, Gilbert, and Lakin). It is somewhat surprising that Nancy Rothman, Holmes's fellow plaintiff and another Ahlgren client, is not on the list -- at least not yet. David Patrick is a long-time rubber stamp for the Cockroach Caucus. Ken Brune was attorney for Coalition for Responsible Government 2004, the group behind the unsuccessful attempt to recall Councilors Jim Mautino and Chris Medlock.

There's a disparaging mention of the "Gang of Five." Given Holmes's involvement in Great Plains Airlines, that's not surprising. Reformers on the City Council led the effort to investigate the Great Plains scheme and identify those responsible, and they resisted Bill LaFortune's 2005 effort to make the city's taxpayers cover the bad debt.

Latham says the "current city council is basically unchanged from the 'Gang of Five' that eisted when Bill LaFortune was mayor." But the Council has had quite a bit of turnover since 2006 when Bill LaFortune was voted out of office. Only three members (Henderson, Turner, Mautino) of the "Gang of Five" are still on the council, and two of them (Turner, Mautino) lost an election before successfully regaining their seats. Bill Christiansen, who was usually in opposition to the "gang's" initiatives, is the only other councilor still in office who was in office prior to the 2006 election, and he's not running for re-election. So Latham's diagnosis of the causes of City Hall disharmony and his proposed solution are ill-founded.

With all nine councilors -- representing a diverse range of personality types -- at odds with the current mayor, the heart of the problem is obvious, but it seems to have escaped Messrs. Holmes and Latham.

Here is Latham's email.

As you may know, I have been an advocate of electing an entirely new City Council with citizens who want to make a positive difference. The current city council is basically unchanged from the "Gang of Five" that existed when Bill LaFortune was mayor. They have demonstrated they cannot get along with any mayor, male or female, Democrat or Republican. It is time for them to all be voted out.

So far, Burt Holmes and I have met with most of the announced candidates. It doesn't matter what political party, gender, ethnic group, etc. that a person belongs to as long as he/she makes good decisions for our city as a whole. After interviewing the candidates we have selected the best person in each district and have 6 to recommend that we all back. Thus far, all six of these are running their campaigns in a manner we like. They all need financing, so your help is important in making a positive change to our city.

Our six so far are:

District 1: We will have no recommendation.

District 2: We are still evaluating the candidates and will have a recommendation shortly. Incumbent Rick Westcott is not running.

District 3: David Patrick (D); running against incumbent Roscoe Turner.

District 4: Liz Hunt (R) and Ken Brune (D); incumbent is Maria Barnes. Liz will be running against Blake Ewing and Ken against Maria Barnes in the primary.

District 5: Karen Gilbert (R); running against incumbent Chris Trail.

District 6: Incumbent is Jim Mautino. Anybody would be better, but we have no recommendation yet. It will be forthcoming.

District 7: Tom Mansur (R); incumbent John Eagleton is not running.

District 8: Phil Lakin (R); incumbent Bill Christiansen is not running.

District 9: We do not have a recommendation in this race, yet.

The main thrust of this effort is to find community leaders who want to get more engaged; the idea being we will all support a slate of candidates with contributions to ALL the supported candidates. We must go outside of our own districts this time, if we want to make a difference. We recommend you support the candidates directly, and not go through a PAC. This is financially more efficient, and you will be certain who you are supporting and get credit for your contribution.

At this time, I would like everyone to consider making the same contribution to all six of these candidates. Please consider $200 or more to each of these six. I am sure the candidates will appreciate whatever contribution you make. Also attached is a generic contribution form (required) that you can use to send in your contributions. I will keep you informed on the needs of the candidates.

[List of candidate addresses deleted.]

I also request you forward this email to your own mailing list. Let's make a difference! Thank you in advance for your participation.

UPDATE: An August 16 email from Latham adds a candidate to the list of endorsements:

All,

Goods gets good. Nothing gets nothing.

If you are unhappy with the city council and want a change, you must help now. We have recruited, interviewed, and vetted excellent candidates, listed below. The candidates need your contribution NOW for the September 13 primaries. By September 1 it will be too late for them to acquire signs and other campaign materials. NOW IS THE TIME TO ACT.

We all care about Tulsa. This election may be our last chance to change the council to progressive collaborators who can move us forward, faster. The primaries on September 13 will decide the general election because there will be no serious opposition in the November general election except for districts 4 and 5. To be successful, we must support the candidates now, so they can win their primaries. As business people, we all have a vested interest in this.

Hunt, Gilbert, Steele and Mansur are the most in need of money. They, and the others, are running good campaigns, including knocking on doors in 100 degree heat.

We know you care about Tulsa, so send your contributions this week so the seven endorsed candidates can make a strong finish to the September 13 election. Ideally, we all send the same contribution to each of the seven. It's up to you to decide how much and to whom. Please consider $200 or more to each of them. I know all of them will appreciate whatever contribution you make.

Our seven endorsements:

District 1: We will have no recommendation.

District 2: We will not have an endorsement in the primary.

District 3: David Patrick (D); running against incumbent Roscoe Turner.

District 4 Ken Brune (D) and Liz Hunt (R); incumbent is Maria Barnes. Liz will be running against Blake Ewing and Ken against Maria Barnes in the primary.

District 5: Karen Gilbert (R); running against incumbent Chris Trail.

District 6: Byron Steele (R); running against incumbent is Jim Mautino.

District 7: Tom Mansur (R); incumbent John Eagleton is not running.

District 8: Phil Lakin (R); incumbent Bill Christiansen is not running.

District 9: We will not oppose the incumbent in this race.

Below is a generic contribution form that you can use to send in your contributions. Addresses to send your contributions to:

[List of addresses redacted.]

We also request you forward this email to your own mailing list. Let's make a difference! Thank you in advance for your immediate participation.

Good Gets Good!

This email had been forwarded with support from Daryl Woodard, Mayor Dewey Bartlett Jr's appointee to the city's redistricting commission. It's beginning to look like the redistricting commission's radical redrawing of the lines (the adopted plan shifted over 20% of the city's precincts into new districts) is working hand in glove with the Latham/Holmes/Ahlgren effort to replace the council with Bartlett Jr rubber-stamps.

Note too that their effort to find candidates in District 2 and District 9 failed. Ahlgren approached District 9 candidate Robert Pinney, offering support for his campaign, and sought to have him meet with Latham, but Pinney, an independent-minded neighborhood leader and well aware of Ahlgren's reputation and connections, rejected his overtures. This seems to explain the change from "We do not have a recommendation in this race, yet," to "We will not oppose the incumbent in this race." Was this group aiming to knock off a potential rival to Bartlett Jr's 2013 re-election bid? (District 2's rubric changed from "We are still evaluating the candidates and will have a recommendation shortly," to "We will not have an endorsement in the primary.")

From an interesting article by an International Monetary Fund official, in the May 2009, Atlantic. Why does this paragraph make me think of Tulsa and Great Plains Airlines?

Typically, these countries are in a desperate economic situation for one simple reason--the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit--and, most of the time, genteel--oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon--correctly, in most cases--that their political connections will allow them to push onto the government any substantial problems that arise....

Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or--here's a classic Kremlin bailout technique--the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms.

As I was pulling out of the driveway on Saturday, a neighbor ran out into the street and flagged me down. She wanted to know what I thought about the three amendments to the Tulsa City Charter on the November 10 ballot.

(You can find sample ballots with the text of the propositions on the Tulsa County Election Board website.)

PROPOSITION NO. 1

"SHALL THE EXISTING CHARTER OF THE CITY OF TULSA, AS HERETOFORE AMENDED, BE FURTHER AMENDED TO REQUIRE THAT ANY PERSON FILING FOR AND HOLDING THE OFFICE OF CITY AUDITOR MUST BE A CERTIFIED PUBLIC ACCOUNTANT OR CERTIFIED INTERNAL AUDITOR?"

Proposition No. 1 would require the City Auditor to be either a certified internal auditor or a certified public accountant. I can understand the thinking behind it, but I think it's a misguided amendment. The City Auditor is a misnomer. Head of the city audit department would be a more accurate title. The actual auditing work is done by a staff of internal auditors headed up by a chief who reports to the elected City Auditor. The City Auditor is a leader, a manager, and a communicator. As I wrote earlier this year, the City Auditor ought to be engaged in publicizing his department's findings (particularly those audit recommendations rejected by city department managers) and in lobbying for sufficient resources to keep watch over city finances.

Phil Wood didn't become a CIA until 1991, after he'd been elected and re-elected. Preston Doerflinger, the Republican challenging him this year, is working on his CIA certification. It's a useful qualification to have, but it ought to be up to the voters to decide whether a candidate who isn't a CIA or CPA has other qualities that compensate for that deficiency.

I'm voting AGAINST Proposition No. 1.

PROPOSITION NO. 2

"SHALL THE CHARTER OF THE CITY OF TULSA BE AMENDED TO PROVIDE THAT CITY COUNCILORS WILL SERVE FOR THREE-YEAR TERMS, WHICH SHALL BE STAGGERED SO THAT NO MORE THAN THREE COUNCIL DISTRICTS WILL HAVE AN ELECTION IN ANY ONE YEAR?"

Proposition No. 2 would change the City Council term to three years with only three councilors up for re-election. I've written previously about the problems with this idea. Steven Roemerman has two posts, one from July explaining how the change attempts to solve a non-existent problem and one from today asking who benefits from this proposal.

I'm voting AGAINST Proposition No. 2.

PROPOSITION NO. 3

"SHALL THE CHARTER OF THE CITY OF TULSA BE AMENDED TO REQUIRE THAT BEFORE ANY CLAIM OR LAWSUIT WHERE THE DEMAND IS EQUAL TO OR GREATER THAN $1 MILLION ($1,000,000) MAY BE SETTLED BOTH THE MAYOR AND THE CITY COUNCIL MUST AGREE TO THE SETTLEMENT?"

Proposition No. 3 would require approval from the City Council as well as the Mayor before the city settles a claim or lawsuit in excess of $1 million. This is a response, initiated by District 9 Councilor G. T. Bynum, to Mayor Kathy Taylor's hasty acquiescence in a $7.1 million settlement of the Great Plains Airlines loan default lawsuit. Taylor's unilateral action amounted to a property tax increase without a vote of the people or even of their representatives so that Bank of Oklahoma could be reimbursed for a defaulted loan that they should have had the sense not to make. That should never be allowed to happen again. Not surprisingly, the Tulsa Metro Chamber (a major backer of the failed airline plan) doesn't like limiting the mayor's ability to transfer money to favored businesses.

I'm voting FOR Proposition No. 3.

I'm swamped at the moment, but there's plenty of interesting blogging elsewhere around Tulsa. Here are just a few examples:

Mayoral candidate Chris Medlock writes that the Tulsa World buried the story of his opponent, Dewey Bartlett, Jr., voting in support and praising Kathy Taylor's dodgy settlement on the Great Plains Airlines loan -- a settlement that cost Tulsa taxpayers $7.1 million that they didn't owe (emphasis added):

Dewey Bartlett (R) was named to the Airport Board by Kathy Taylor (D). Kathy Taylor thennames former airport Marketing Director Mary Smith (R) to the Airport Board to replace Carl Clay (R) who was an outspoken critic of the Great Plains/BOk settlement. Mary Smith was part of the team that sold Great Plains Airlines to the public, when they went after and secured $30 million in state tax credits. Mary Smith is now Bartlett's Campaign Treasurer!

Please understand, that what Dewey did was to help the current Democrat mayor (Kathy Taylor) brush under the table the single biggest scandal of the previous Democrat mayor (Susan Savage). The Bartlett campaign team made up two-fifths of the vote that needlessly gave away our property taxes to the tune of $28 for every man, woman and child in the city, and he won't even respond to the Tulsa World, who will do everything to put his response in the most positive of lights? Don't you think it's time for KRMG and KFAQ to invite Bartlett back on the air to respond to this action in this giveaway, as well as his support of Kathy Taylor's re-election before the Republicans had selected a candidate?

Listen to Pat Campbell's interview of Chris Medlock on Dewey Bartlett Jr. and Great Plains from this morning's show.

Steven Roemerman asks whether District 5 council challenger Chris Trail is a carpetbagger. (More about Trail and the District 5 campaign for the seat currently held by Bill Martinson when I have some time to write.)

In non-political news:

Jeff Shaw recommends La Hacienda and has photos of a day at the Tulsa Zoo.

Tyson Wynn has a YouTube video of clips of Bob Wills, going all the way back to performing "Take Me Back to Tulsa" in his first movie, Take Me Back to Oklahoma.

Brandon Dutcher celebrates the appearance of homeschooled college football star Tim Tebow on the cover of Sports Illustrated and links to an article about New Urbanists who are vocal supporters of school choice.

A lot of Tulsans were outraged last summer when Mayor Kathy Taylor allowed the City of Tulsa to be added as a defendant in the Great Plains Airlines loan default case -- the Bank of Oklahoma's suit against the Tulsa Airport Improvements Trust -- then, within less than a day, agreed to settle said suit for $7.1 million. (If you've forgotten what that was all about, click through that link.)

What you may not know is that mayoral candidate Dewey Bartlett and his campaign treasurer, Mary Smith, as members of TAIT, also approved that $7.1 million settlement, with Bartlett praising Mayor Taylor for finding a way to get the City to cough up the money -- money that the City of Tulsa did not owe and money that is being paid by an increase in your property taxes. The Tulsa Beacon has the story in its current issue.

The story provides a quote from Bartlett at the TAIT meeting:

"It's something we need to do and I applaud the mayor and the Bank of Oklahoma for working out a deal... a lot of work went into this thing. It was a waste of energy. It's a new day and that's good news.

Here's the video of the entire seven-minute special meeting. The video has annotations to explain who the people at the meeting are, what they're doing, and the context of financing Great Plains Airlines -- the defunct airline that was supposed to provide non-stop service from Tulsa to both coasts.

Bartlett's question, "Is there any land involved?" is a reference to the original collateral used to secure the loan which BOk guaranteed -- a convoluted deal that the FAA inspector general condemned. There were several different parties that should have taken the financial hit for agreeing to this deal for financing GPA but none of them did. Instead it fell back, unjustly, on Tulsa's taxpayer, thanks to the conniving of the mayor that Dewey Bartlett endorsed for re-election.

The attitude that comes across in the video is, "All that matters is that all the big shots have their butts covered. Who cares about the taxpayer?"

Tulsa City Councilor Rick Westcott sent his District 2 constituents an explanation of the legal situation in which the councilors found themselves Thursday night, when they voted to appropriate money from the sinking fund to pay the settlement in the Tulsa Industrial Authority / Tulsa Airport Improvements Trust lawsuit (money that will ultimately go to the Bank of Oklahoma):

There's some misunderstanding about the Council's vote regarding the settlement of the Great Plains lawsuit. We probably should have made it more clear at the meeting.

The City Council did not vote to approve the settlement. We had no authority to either approve or reject the settlement. It had already been done and it was totally out of our hands. The Mayor had already approved the settlement and, on Thursday, it was submitted to the Judge and he approved it. On Thursday afternoon the settlement was filed as a judgment against the City of Tulsa. All of that was done by the Mayor, under her authority as chief administrative officer of the City. The settlement was approved and entered as a judgment before the Council even met on Thursday evening.

The only thing which we did on Thursday was state whether there is sufficient money in the Sinking Fund to pay the settlement. The Finance Department informed us that there is and, based upon that, we had to vote to say, "yes, there is sufficient money."

Legally, we had no choice but to vote 'yes'.

After the Finance Department informed us that there is sufficient money in the Sinking Fund to pay the judgment, if we had voted 'no', we would have been sued, just for voting 'no'.

We had no vote, no say whatsoever, regarding the settlement. The Mayor entered into the settlement agreement without Council approval and it was approved by the Judge before the Council met last night.

The article in the Tulsa World is a little bit confusing. But, the subject is a little confusing.

It says that the Council voted to "have property taxpayers pay the BOK." That's more or less accurate, but it doesn't tell the whole story.

The City's Sinking Fund is used to pay judgments against the City. Once the settlement was filed as a judgment, then, by law, the Sinking Fund had to be used to pay the judgment Money is paid into the Sinking Fund from the City's portion of property taxes. So, it's true that property taxpayers' money will be used to pay the settlement. But, that's because the settlement was filed as a judgment against the City, and the Sinking Fund has to be used to pay judgments, and property taxes are used to put money into the Sinking Fund.

The article also says that the Council voted on "whether to appropriate the money from the sinking fund." Again, that's more or less accurate, but it doesn't tell the whole story, either. By law, the Council had to vote on whether there is sufficient money in the Sinking Fund to pay the judgment. At the meeting on Thursday, the City Finance Department informed the Council that there is enough money in the Sinking Fund. Once the Finance Department told us that, we had no choice but to vote, "yes" and approve paying the judgment out of the Sinking Fund. We had no choice in whether to 'appropriate money from the sinking fund.'

We didn't vote on whether to use money from the Sinking Fund to pay the judgment. By law, that's where the money has to come from. All we did was say that there is enough money in the Sinking Fund to pay it.

If we had voted "no", then the Bank of Oklahoma, or the Tulsa Airports Improvement Trust, or one of the other parties to the lawsuit, would have filed a separate law suit against the City Council, seeking a Write of Mandamus. That's an Order from the Couettlert which commands a public body or a public officer to do something that they have a legal duty to do. In this case, they would have won and the City would also have had to pay their attorney fees which they incurred in pursuing a Writ of Mandamus.

Last night, I explained my misgivings about the settlement. I am against the settlement at this point in time.

As I said, naming the City of Tulsa as a defendant in the lawsuit was just an expedience to put the City in a position where we could legally settle the lawsuit. Previously, when the City wasn't a defendant, there were attempts to persuade City officials to pay for the settlement. That would have been illegal, because we weren't a defendant. Naming the City as a defendant was just a method to put the City in a position to pay for the settlement.

But setting that aside and just looking at it as a straight-up lawsuit, settlement at this time is far, far premature.

I don't think the lawsuit and the claim of "unjust enrichment" against the City had any merit. I would never advise a client to settle immediately after being named in a lawsuit. I'd have gone through the discovery phase and, hopefully, reduced the settlement amount by showing that my client had the stronger case.

But, we weren't given that opportunity.

I hope this explanation helps. If you still have questions, please give me a call or send me an e-mail.

RDW

I appreciate Councilor Westcott's perspective and am glad to know he opposes the settlement. The question now is whether he and the other councilors will do anything to halt the settlement or, failing that, to impose some penalty on Mayor Kathy Taylor for her rash action against the best interests of Tulsa's taxpayers.

The council should also seek full public disclosure of the decision-making process -- why the rush, who stood to suffer if the June 30 deadline wasn't met, who met with whom? And the financial and contractual arrangements between the parties should be fully disclosed as well. Why was a BOk attorney acting as the attorney for the Tulsa Industrial Authority in this lawsuit? Has TIA already repaid BOk, or will they now repay the bank? Was there legal action by BOk against TIA?

In the long run, we probably need a charter change to require council approval on legal settlements or contracts above a certain dollar value. No one should be committing that much city money unilaterally.

Comments from elsewhere on the web about the City of Tulsa's payment of a $7.1 million Great Plains Airlines debt it did not owe:

KFAQ's Chris Medlock was a City Councilor the last time someone tried to get the City to pay for the Great Plains mess. Here's what he had to say when the news of the bogus lawsuit and settlement emerged on Wednesday:

Word is that Friday morning she will meet with the Tulsa City Council in a special meeting to inform them of the deal. She will be using her full authority to bind the city to a contract, so she can act without the approval of the City Council.

On Thursday Medlock spelled out whythe Council's hands were tied

This surveying of the Sinking Fund is considered to be a "ministerial" action which a previous City Attorney, Alan Jackere told the Council when I was a member, that the council is duty bound to certify the figures, if they are true....

The last time the council voted down a "ministerial" action was when it voted not to approve the plat for the F&M Bank that was eventually built at 71st and Harvard. When the Council took that action, F&M filed suit against the councilors individually, threatening their personal assets. Since it took a majority of councilors to deny the plat, a majority of the council were named in the suit. As such, no majority of the council could be mustered to vote to give the councilors [me included] the legal services of City Legal. As such, each councilor was forced to hire their own counsel.

On his Thursday show, Medlock played audio from that morning's TAIT board meeting in which board member Dewey Bartlett credited Mayor Kathy Taylor with working out a settlement with the Bank of Oklahoma. In other words, she wasn't responding to someone suing the City; she was the driving force behind adding the City to the lawsuit.

Steve Roemerman attended Thursday's Council meeting and has photos. He reports that Taylor was unwilling, as she has been throughout her term of office, to face the public or the Council and answer for her decisions:

That leads us to last night's Council meeting. Mayor Taylor showed up for her Mayor's Report, and gave a quick explanation of why Tulsa had to pay this money. She said "This lawsuit has been following Tulsa for years." This is not entirely true because Tulsa was not part of this suit until recently...June 25 recently! Unless 1 day = over a year somehow, "years" is not how I'd put it...The truth is that Tulsa, and the Mayor's office in particular, have been following this suit for years, eager to give BOK money that we don't owe.

When she was finished, Taylor abruptly left, basically telling the Council that a lawyer would answer any further questions they had when it came time to vote on the release of the funds. She did not stick around and listen to the gallery of concerned citizens who went to the trouble of coming down to the council, she left!

Taylor, BOK, TAIT, and their lawyers say this is a good deal for Tulsa. I'm not entirely sure I buy that. If it were, this deal would have been made in the light of day, and there would have been no rush to push it through, in just 3...THREE short little days. I call Shenanigans!

Given the rush to get this done right before the end of a quarter and the end of the City's fiscal year, you have to think some executive at the Bank of Oklahoma would have been in legal jeopardy without this settlement.

Dave Schuttler provides a refresher course on Great Plains with video from the last push to settle this in 2005. In one video, Medlock said instead of preemptively bailing things out, we should let it go to court and have people testify under oath. He mentions handwritten notes from then City Attorney Martha Rupp Carter about the lien on the "collateral" -- Air Force Plant No. 3 -- when the VP of BOk asked for the original paperwork, she wrote that all she had was a forgery.

In another video on that same entry, Jim Mautino mentions being called to the office of Stan Lybarger, president of BOk. Mautino took city attorneys Larry Simmons and Drew Rees with him to the meeting. Lybarger told them that he had twice turned down the Great Plains loan, but relented because then Mayor Susan Savage gave him "assurances." This would be the same Savage who gave "assurances" to the City Council at the time that transfering AFP3 to the Tulsa Industrial Authority would not expose the City to any liability in the Great Plains financing deal.

(Related to that, following Thursday's pre-meeting, Councilor Bill Christiansen -- who, as an airport tenant, recused himself -- pointed out to me that we don't know to what degree BOk may be culpable in this loan default.)

In another video from 2005, Medlock talks about then-Mayor Bill LaFortune relenting from his push to pay off BOk. He also talked about the odd legal arrangements in the TIA-TAIT lawsuit.

And here is video from last night, featuring north Tulsa businesswoman Sharla Walker, who speaks about the immorality of give BOk $7.1 million when north Tulsa needs police, pools, groceries; Jack Henderson explaining why he could not with clear conscience vote for this giveaway. Henderson said he was sick and tired of people being afraid to go to court.

Schuttler writes:

There was plenty of upset citizens attending the council meeting and plenty of other worthy statements and I'll get more out into the internet with time. I think the best way for everyone to voice the opinions now is to cancel your Bank of Oklahoma account. Don't worry they can afford it and it won't hurt them much and you might not get that dirty look the next time you pull out your BOK card. Mayor Taylor will hopefully disappear soon now that this deal is done. Then again she might have more deals ahead but Mr. Baker leaving this week might be a sign of something but then again who knows until the day before.

I hope Mr Turner was correct about the OIG [FAA Office of Inspector General] coming back with tonights deal. Especially since the city still owes 70 plus homeowners their easements after the FAA decision about the money spent by Cinnabar, after the airport officials told them to stop working on those houses when funding ran out. Time will tell and much more money will be spent.

Schuttler also announced a Mayor Taylor sign contest. Steve Roemerman has Taylor holding a $7 million check made out to BOk. That's XonOFF's entry up above.

Finally, here's an analysis of the situation by
Friendly Bear on TulsaNow's public forum:

The promoters of Great Plains Airlines, who have all left town by now, had pitched their "Direct Flights to the Coasts" deal to 2nd tier cities like Wichita and Tulsa.

All the other cities had the sense to turn them down.

Then, the promoters used a network of gifted grifters to garner $30 million in State Tax Credits courtesy of their lobbyist Martha Erling Frette.

Then, got TAIT to pledge 22 acres of land right in the heart of the airport to the bank.

Then, in exchange for $600K in free advertising, they made World Publishing Co. the largest equity owner of GPA, despite today's Tulsa World's repeated Half-Truth that World Publishing only owned 3% of the shares.

PREFERRED shares are not counted the same way as the common stock.

Repeat: The World Publishing company was the single largest equity owner of the airlines. And, that ownership interest bought GPA many, many favorable "news" articles right up to the point when the airline crashed.

WHY didn't anyone exercise some adult leadership over the promoters when the first planes they acquired, they leased two airplanes that were incapable of flying non-stop to either coast.

THAT was a serious RED FLAG.

In a Banana Republic like Tulsa, a few immensely rich families like the Lortons, the Helmerichs, the Kaisers, the Warrens, the Siegfrieds, the Flints, the Rooneys, and the Schusterman's have an influence far, far in excess of what is healthy for what we mistakenly persist in calling our "democracy".

It isn't really a democracy.

It is a Banana Republic.

It only has the edifices of a democracy:

Elections.

Courts.

Judges.

These ruling Oligarch families select our political leaders, the Mayor and a majority of our city councilors.

Their paid paladins like Cameron and Reynolds populate our city boards, commisions and authorities (like TAIT, TMUA, TARE, TIA, TDA, etc.), doing their bidding, and breaking our backs with bad, bad deals like the Trash-to- Energy Plant, clean water piped at cost to subsidize development of our suburbs, Great Plains Airlines, an arena sole-sourced to the Flint-Rooney Oligarchia Familias, etc., etc., etc.

Very scarily, they also select our District and Federal Court judges.

Newly appointed Federal judge Gregory Frizzell is Senator Inhofe's "dear" friend.

Really scary if you are foolish enough or unlucky enough to have a legal tangle with the local Oligarchia Familias.

Their wholly-owned District Judge Jane Wiseman, took all of FIVE minutes to rule that a log-rolled 2003 Vision 2025 ballot, that figuratively sugar-coated voter rat poison, was actually not a log-rolled ballot.

Don't believe your eyes. Believe the judge.

Dear Judge Wiseman's reward:

Shortly thereafter, rewarded with a state Appellant Judgeship.

Welcome to the Banana Republic of Tulsa.

I hope Tulsans will show up at tonight's City Council meetings (at 5 in room 201 of the City Hall tower and 6 in the Council chamber) to voice their objections to Mayor Kathy Taylor's capitulation in the Great Plains Airlines lawsuit and to urge councilors to reject payment of the $7.1 million settlement to Bank of Oklahoma.

You know how think-tanks and political action committees put out report cards? They base their "grades" of legislators on certain key votes, which are usually announced in advance.

I'm announcing today that tonight's vote on authorizing payment of $7.1 million from the sinking fund is a report-card vote. I consider this vote a test of a councilor's integrity and political courage. I will weigh this vote heavily when considering whether to endorse that councilor's ambitions for re-election or higher office. I won't say a "yes" vote is an automatic disqualification, but a councilor who votes "yes" will have to redeem himself in some spectacular and sacrificial way in the future to earn my support. I prefer to support only those candidates who have demonstrated backbone and a willingness to do the right thing in the face of pressure from the wealthy and powerful.

It was illegal three years ago for the City to intervene and pay off the debt which is not owed by the city, but by a bankrupt airline and secured by a trust; the City was not a part of the lawsuit. Adding the City to the lawsuit on a bogus equitable claim of "unjust enrichment," a claim easily defeated because the City of Tulsa was not enriched, unjustly or otherwise, doesn't make paying that $7.1 million any more legal. It only adds conspiracy to misappropriation of funds.

The City of Tulsa doesn't owe this money to BOk, and paying it is against the law. The Mayor and the City Attorney and any councilor that votes in favor of tonight's resolution will be personally exposed to a qui tam action filed by taxpayers under 62 O.S. §372 and §373.

The law provides for a triple penalty. For authorizing the unlawful transfer of $7.1 million, Mayor Taylor would have to pay $21.3 million. She might have to sell her house and park her Bentley at a trailer park for a place to live. Or perhaps she can camp out in her Learjet.

If you're having trouble understanding why this payment is immoral and illegal, follow me in this thought experiment.

Imagine I'm having coffee with Mayor Taylor one day, and she remarks, "You seem sad, Michael. What's wrong?"

"I lent someone $7,000 to help start a new business. The business went broke. I sued the guy, but he doesn't have any money. Another guy cosigned the loan and pledged some collateral, but it turns out he doesn't really own the property, so he can't cover the loan either. I should have known the collateral wasn't his, but I didn't think about it before I lent him the money. Anyway, looks like I'm out seven grand."

"I think I can help you, Michael. Just add the City as a defendant to your lawsuit."

"But the City isn't involved...."

"Doesn't matter. You're my friend, and I can help you. Just file an amended petition against the city, cite any old grounds -- make something up. I'll direct the City Attorney to settle out of court for the full amount. The Council will have to approve taking the money out of the sinking fund, but they're pushovers. They don't like to give the newspaper an excuse to call them bickering obstructionists."

"Won't that raise our property taxes?"

"You know, Michael, it's just pennies per taxpayer, and you're such a valuable asset to our community, you deserve it."

Do you believe that would happen for someone like me? Would it be just? Would it be legal? Of course not. But that's exactly what Kathy Taylor is doing for the Bank of Oklahoma, but for $7,100,000 instead of $7,000.

Tulsa Mayor Kathy Taylor appears to be colluding in a lawsuit against the financial interests of the citizens of Tulsa. She is probably doing this to cover the posterior of the BOk executives responsible for making this bad loan. (As bond trustees for TAIT, BOk was well aware -- or should have been -- of the covenants and restrictions on TAIT's assets and income.)

Tulsa taxpayers have already suffered financially from Great Plains. The transferable tax credits used to finance the airline were repaid to the state treasury through our gasoline taxes, meaning less money to fix our roads and bridges. BOk purchased $18 million worth of those tax credits from Great Plains for $15 million. $3 million in free money -- sweet.

Most councilors will find it very hard to vote no. That's why I consider this vote a measure of integrity and political courage.

David Patrick, Bill Martinson, Dennis Troyer, Bill Christiansen, and G. T. Bynum all received contributions from BOk officers this cycle. Those who were on the ballot in 2006 (all but Bynum) also received BOk backing then. Jack Henderson received $1,000 support from George Kaiser and BOk Financial Corp. PAC during the 2006 cycle, but BOk VP Dan Ellinor backed Henderson's opponent Emanuel Lewis this time around. Only Rick Westcott, John Eagleton, and Eric Gomez do not appear to have received any BOk-related contributions, and in fact, Kaiser and BOKF PAC backed Eagleton's and Westcott's opponents in 2006, and Kaiser contributed to Gomez's opponent this year.

UPDATE: Mayor Taylor was present at the beginning of the meeting, but scrammed before this item came up. The resolution passed by a 5-2 vote. Eagleton, Westcott, Martinson, Patrick, and Gomez voted yes. Henderson and Troyer voted no. Christiansen, as an airport tenant, recused himself. Bynum recused himself, I presume because his grandfather, Robert J. LaFortune, is on the board of BOk. (A grandfather is within two degrees of consanguinity, the standard for the City of Tulsa ethics ordinance.) The "emergency clause," which would cause the payment to be authorized immediately rather than in 30 days, received a 5-2 vote as well, but needed 6 votes to pass.

Eagleton and Westcott objected to the settlement that the Mayor had reached, but they had been advised by the City Council's attorney, Drew Rees, that authorizing payment of the settlement from the sinking fund was a "ministerial" duty, and they had no discretion in the matter. Voting no could subject them to personal liability. (This two-page document from Pennsylvania has a good, brief explanation of ministerial act.)

Rees told me after the pre-meeting that the councilors were not putting themselves at risk of a qui tam action by voting for this, because they had no discretion. Only the official who had the discretion to agree to a settlement involving an unlawful disbursement of funds would be subject to qui tam.

I still would have voted no, despite the risk, and would have asked my fellow councilors for a resolution to seek an injunction against the Mayor's settlement. I don't know if it is possible to enjoin payment of the settlement at this point, but the Council ought at least to express their disapproval formally, perhaps with a censure resolution.

See below for updates, including audio from my interview on KFAQ today and the request for action and the resolution that the City Council will consider tomorrow night.

You may have thought the Great Plains Airlines fiasco was far behind us. Three years ago, then-Mayor Bill LaFortune tried to convince the City Council to pay the Bank of Oklahoma the $7 million (plus) owed by the Tulsa Airport Improvements Trust as a result of their complicated (and illegal) financing deal for the bankrupt airline. LaFortune backed down because of a City Attorney's opinion that the City was not liable for the money and paying a settlement would expose the City's elected officials to a qui tam suit from taxpayers, making them personally liable for misappropriation of funds and subject to removal from office. (My Urban Tulsa Column from November 17, 2005, goes into all the gory details.)

But BOk is coming after your tax dollars once again. Today in District Court, the Tulsa Industrial Authority filed an amended petition in its lawsuit CJ-2004-6124, adding the City of Tulsa as a defendant on the grounds of "unjust enrichment." This equitable claim, I am told, creates an excuse for Mayor Kathy Taylor to say that the City is at legal risk for this debt and therefore the City could legitimately pay it. Rather than vigorously defend against this claim and see if it will hold up in court, Taylor wants to short-circuit the legal process, wave the white flag, and hand over the money. Our money, to be specific.

In 2005, the request to the City Council to repay the debt was preceded by a PR campaign, including an op-ed by John Brock in the Tulsa World. This time, they're trying to sneak it through. Here's what's on the agenda for tomorrow, at the Thursday, June 26, 5 p.m., pre-meeting of the Tulsa City Council:

1. Resolution authorizing payment in full of a judgment settlement, from surplus monies in the Sinking Fund for Case No. CJ-2004-6124: Tulsa Industrial Authority (TIA) vs. Tulsa Airports Improvement Trust (TAIT), City of Tulsa, et al. (Emergency Clause) 05-916-10

And on the 6 p.m. regular meeting agenda:

3. b. [Mayor's Items] Resolution authorizing payment in full of a judgment settlement, from surplus monies in the Sinking Fund for Case No. CJ-2004-6124: Tulsa Industrial Authority (TIA) vs. Tulsa Airports Improvement Trust (TAIT), City of Tulsa, et al. (Emergency Clause) 05-916-10

There had to have been a lot of coordination between the Mayor, the TIA, and the BOk to make all this happen so quickly. The resolution authorizing payment couldn't go forward until the City was added as a defendant to the lawsuit. Isn't it nice to know our Mayor is assiduously looking for ways to give our tax dollars away to private interests?

"Surplus monies in the Sinking Fund" doesn't mean we have extra cash laying around. It means your property taxes will go up to pay for this, as is the case for all judgments against the City.

Reading the definition of unjust enrichment, it's hard to see how the City could be found liable:

1. Was the defendant enriched?
2. Was the enrichment at the expense of the claimant?
3. Was the enrichment unjust?
4. Does the defendant have a defense?
5. What remedies are available to the claimant?

The City wasn't enriched. That should end the matter right there.

In a nutshell, here's what is happening: BOk made a bad loan to finance Great Plains Airlines. GPA went bankrupt, but BOk still wants to recover its money. On August 7, 2006, BOk sued PriceWaterhouseCoopers, for professional negligence. The case was settled out of court within the month.

TAIT doesn't have to resources to pay back BOk, nor does TIA, so BOk is hunting around for someone with deep pockets to hold liable. That would be the City of Tulsa.

Why won't BOk just write this off as a bad lending decision on their part? It may be because the corporation and its officers would be liable under FIRREA, federal lending regulations put in place following the collapse of the Savings and Loan industry. S&Ls used federally-insured funds to make bad loans to insiders. When the borrowers defaulted and the S&Ls folded, the taxpayer was left holding the bag.

Even though it appears that BOk officials ignored plenty of warning signs, they approved the loan and did not call it when GPA's financial problems surfaced. Nevertheless, they want the taxpayer to wind up holding the bag.

One more thing: Shouldn't the public have time to examine this deal before the Council approves it? And shouldn't we know how much of the loan BOk has recovered through the bankruptcy court, the PriceWaterhouseCoopers lawsuit, or other means?

MORE: I've found some web references to laches as a defense against claims in equity, a category that includes a claim of unjust enrichment. Wouldn't waiting four years after filing the initial lawsuit constitute laches?

More on equitable remedies from Wikipedia:

Equitable principles can also limit the granting of equitable remedies. This includes "he who comes to equity must come with clean hands" (ie the court will not assist a claimant who is himself in the wrong or acting for improper motives), laches (equitable remedies will not be granted if the claimant has delayed unduly in seeking them), "equity will not assist a volunteer" (meaning that a person cannot litigate against a settlor without providing the appropriate consideration e.g Money) and that equitable remedies will not normally be granted where damages would be an adequate remedy.

AUDIO: I was on KFAQ's Chris Medlock Show this afternoon, along with Medlock's fellow former councilors Roscoe Turner and Jim Mautino. All three were on the City Council in 2005 the last time a mayor tried to pay off BOk. Here's Hour 1 and here's Hour 2.

DOCUMENTS:

Here is the backup material for the item on the Council's agenda. First, the Request for Action from interim City Attorney Dierdre Dexter to pay $7.1 million from the sinking fund :

REQUEST FOR ACTION: RESOLUTION

DEPARTMENT: LEGAL
CONTACT NAME: Deirdre O. Dexter (ga)
ADDRESS: City Hall, Room 316
TELE: 596-7717

[...]

SUMMARY:

Re: Tulsa Industrial Authority v. Tulsa Airports Improvement Trust, City of Tulsa, et al. CJ-2004-6124

The Tulsa Airports Improvement Trust and City have agreed to settle the above case. In the lawsuit, Plaintiff TIA, by and through Bank of Oklahoma as attorney-in-fact, alleged that TAIT breached an obligation to purchase property from TIA and alleged a claim of unjust enrichment against the City of Tulsa. Plaintiff's Second Amended Petition seeks, as of March 31, 2008, the amount of $11,648,294.00 plus additional accrued and accruing interest and costs. It is anticipated that the parties' settlement will be approved and a Journal Entry of Judgment will be filed on Thursday, June 26, 2008. At that time, a copy of the Judgment will be provided. Attached for Council and Mayoral approval is a resolution authorizing payment from the sinking fund. If the Judgment is not entered, no action will be requested.

BUDGET: FINANCE DIRECTOR APPROVAL:

FUNDING SOURCE: $7,100,000.00 Sinking Fund

It is the recommendation of the Legal Department that the Finance Department be directed to make a wire transfer
from funds available in the Sinking Fund in payment of this judgment.

REQUEST FOR ACTION: All department items requiring Council approval must be submitted through Mayor's Office.

Council review and approve the Resolution authorizing payment from the sinking fund. Mayor approve and direct that Finance to make a wire transfer in the amount of $7,100,000.00 to the Bank of Oklahoma, attorney-in-fact for Tulsa Industrial Authority.

Dexter was previously employed by Frederic Dorwart Lawyers. The firm is the legal counsel for Bank of Oklahoma Financial Corporation. Dorwart is also the attorney of record for the Tulsa Industrial Authority for this lawsuit.

And here is the

resolution the City Council will be asked to approve tomorrow night:

RESOLUTION

A RESOLUTION AUTHORIZING PAYMENT IN FULL OF A JUDGMENT SETTLEMENT, FROM SURPLUS MONIES IN THE SINKING FUND; AND DECLARING AN EMERGENCY.

WHEREAS, on the 25th day of June, 2008, in Case No. CJ-2004-06124, filed in the District Court in and for Tulsa County, State of Oklahoma, the Tulsa Industrial Authority, Plaintiff, and the City of Tulsa and the Tulsa Airports Improvement Trust, Defendants, agreed to a settlement in the sum of Seven Million One Hundred Thousand
Dollars and No Cents ($7,100,000.00), representing principal judgment, interest, and costs, which settlement has been approved by the court; and

WHEREAS, it appears from a survey of the Sinking Fund that there is a surplus of cash and investments in said fund, over and above accrued liabilities and statutory obligations, which would allow the City of Tulsa to pay said judgment in full, including court costs and interest thereon; and

WHEREAS, it is desirable and in the best interest of the City of Tulsa to make such present payment out of the Sinking Fund, and thereafter reimburse the Sinking Fund from subsequent tax levies, as provided by 62 O.S. § 435.

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF TULSA, OKLAHOMA:

Section 1. That the City Clerk and the City Treasurer of the City of Tulsa be, and the same hereby are, authorized to consummate and complete the payment of said judgment by making a wire transfer from the Sinking Fund: To the BANK OF OKLAHOMA, NA, Attorney in fact for Plaintiff, in the sum of Seven Million One Hundred Thousand
Dollars and No Cents ($7,100,000.00), the same representing the full amount of the judgment, interest, and
costs now due and owing to the Plaintiff in the lawsuit identified above.

Section 2. That the City Clerk and the City Treasurer of the City of Tulsa be, and the same hereby are, authorized and directed to properly advise the Tulsa County Excise Board by appropriate reports, of the prepayment of said judgment in order that said Board may include said prepaid judgment as a necessary and lawful expense of
the Sinking Fund of the City of Tulsa, Oklahoma, for which appropriate tax levies may be made to replenish said Sinking Fund, as provided by the provisions of Title 62 of the Statutes of the State of Oklahoma.

Section 3. That an emergency exists for the preservation of the public peace, health and safety, by reason whereof this Resolution shall take effect immediately upon its adoption, approval, and publication.

Note the assertion that the settlement has already been agreed to. Note also that the money we spend out of the sinking fund is replenished by increasing property taxes on City of Tulsa property owners.

And what's the emergency? What is the danger to the public peace, health, and safety if the City Council votes no? Does it have to do with the end of the financial quarter and the end of the fiscal year?

Is BOk on FIRREA?

| | Comments (4)

Interesting story in today's Whirled about BOk and the loan to the Tulsa Industrial Authority (TIA) that the Tulsa Airports Improvements Trust (TAIT) guaranteed. The loan money was ultimately used to finance Great Plains Airlines, which went bust despite massive taxpayer subsidies. The FAA ruled that the plan to repay the loan in the event of a default -- raising passenger service fees to purchase a part of the land on which Air Force Plant No. 3 sits for a runway extension -- would be an illegal direct subsidy to an airline.

The Bank of Oklahoma is seeking to recoup from a national auditing firm more than $9 million in losses resulting from a loan it made for the now-defunct Great Plains Airline.

The bank sued PricewaterhouseCoopers LLC on Monday in Tulsa County District Court.

Its lawsuit claims that the firm presented financial statements that unfairly represented the "unrestricted" assets of the Tulsa Airports Improvement Trust, on which the bank relied in deciding to participate in the Great Plains loan.

So why didn't BOk go after PricewaterhouseCoopers LLC in the first place? Why did they demand that the City of Tulsa repay the money when some other organization was responsible for the bad loan? (The whole deal was designed so that the City itself -- the general fund that pays police officers and firefighters and other city employees -- would not have any exposure in the event that the airline failed.)

Back when former Mayor Bill LaFortune was trying to get the City Council to agree to repay the loan, I heard a theory about the situation that made sense to me.

Here is the theory, which is speculation based on this person's observations of public behavior and his knowledge of bank loans: BOk made the loan knowing that it wasn't properly secured, but with an unofficial assurance from then-Mayor Susan Savage that the City of Tulsa would make good if anything went wrong, an assurance that she was not in a legal position to make. It would have been a political promise: If it comes to that, we can get the Council to agree to cut BOk a check. To make such a loan without valid collateral would have been in violation of FIRREA, the 1989 lending reform law that was enacted in response to the Savings & Loan crisis, but as long as the loan was repaid no one would notice. No harm, no foul. When the loan went into default, BOk was frantic to get its money back to prevent the possibility of FIRREA enforcement.

That's the theory. FIRREA was created to hold bankers responsible for how they handle federally-guaranteed deposits. In the '80s, S&Ls made all sorts of risky loans safe in the knowledge that if the loans went bad, the FSLIC would take care of depositors. As I understand it, if a banker authorizes a loan without sufficient justification, and the loan goes bad, the bank can be penalized under FIRREA, as can individuals involved in making the loan -- bank CEOs and VPs, appraisers, attorneys, accountants.

Remember what would have happened if the City Council had authorized the payment to BOk for money the City of Tulsa did not owe: Individual city councilors would have been subject to liability under a qui tam action for essentially giving taxpayer money away. (E.g., if all my friends on the City Council voted to use city general fund money to pay off my minivan loan -- in recognition of my many services to the community -- they would be misusing public resources, and they ought to be removed from office.)

BOk has a reputation for being civic-minded, but it looks like BOk management's first inclination in response to this bad loan was to cover their own exposed posteriors by using the Mayor and the newspaper to pressure city councilors into dropping their own drawers.

Comments from those familiar with federal lending regulations would be especially welcomed.

An edited version of this piece was published in the May 24, 2006, issue of Urban Tulsa Weekly. The archived version is no longer online. Posted on the web July 3, 2010.

Flunking the Yellow Pages Test

By Michael D. Bates

When he was Mayor of Indianapolis, Stephen Goldsmith had a simple test for whether city government ought to be performing a service or whether it should be left to the private sector:

"Look at the city's yellow pages. If the phone book lists three companies that provide a certain service, the city probably should not be in that business, at least not exclusively."

Using the Yellow Pages Test, Goldsmith cut hundreds of millions in city expenses, money that was then spent on city improvements. City government focused on the tasks that only it could provide. Dozens of functions were completely turned over to the private sector or contracted out. In order to keep a task in-house, a city department had to compete successfully on cost and quality with private providers.

Goldsmith's example is more often applauded than followed. Oklahoma politicians have been all too anxious to get into businesses like entertainment, resorts, and commercial aviation, providing public funds to help private enterprises that are in competition with other private businesses.

These interventions are always justified as essential to the public good, but instead they always seem to drain money away from the basic functions of government.

On Sunday, May 14, the Oklahoman reported that the $27 million in transferable state tax credits used to finance Great Plains Airlines was coming out of fuel taxes, money that would otherwise go to replace

Oklahoma's roads and bridges. Rather than fund the rehabilitation of 90 bridges or the resurfacing of 135 miles of highway, Oklahomans are paying for a failed airline that never got close to its stated purpose of providing air service between Oklahoma and the coasts.

(Don't go looking for that story in the Tulsa World, whose parent company was a major investor in the failed airline.)

With that lesson on the front page of the state's biggest paper, you'd think it would deter the Legislature from making the same mistake again.

Instead, there's a push to approve $30 million in state tax credits for redevelopment of Grand Lake's Shangri-La resort. Earlier this session, a bill containing the credits stalled in the House, but they may be inserted into the massive budget and tax cut bill.

There's no question that Shangri-La is not much of an attraction any more. My wife and I spent our fifth anniversary there 12 years ago and were so bored with the place we left early to visit Buffalo Ranch and the Precious Moments Chapel.

Backers of the plan claim we need a revived Shangri-La to compete with convention centers and resorts in other states. It seems more likely that it would compete for convention business with city-owned convention centers in Oklahoma City and Tulsa and with tribal and privately-owned facilities like the Cherokee Resort in Catoosa and Tulsa's Renaissance Hotel.

Left to its own devices, the free market would be unlikely to pick the southern end of Monkey Island for a major resort. Shangri-La is nearly as inaccessible as its literary namesake. It's over 80 miles away from the nearest commercial airport, and there's only one two-lane highway leading to it.

By now, GOP leadership in the House should have poured cold water on the plan, but they have remained silent. Perhaps they're concerned about protecting the bill's sponsor, Doug Cox, a freshman representative from Grove serving a traditionally Democratic district.

House Republicans should be more concerned about protecting a reputation for common sense and integrity. That will do more in the long run for maintaining their majority and building popular support for their platform than meddling in an area that should be left to the private sector.

Closer to home, there was much ado last week about the city's meddling in the competition for local entertainment dollars.

Last Thursday night, the City Council authorized payments to the Tulsa Oilers hockey team, the Tulsa Talons arena football team, and the Professional Rodeo Cowboys Association (PRCA).

Former Mayor Bill LaFortune changed the formula for splitting concession revenues with the Oilers and Talons. As a result, each team will receive more money back in concession revenues than they paid in rent, about $20,000 more for the Talons and $50,000 more for the Oilers.

The PRCA and Professional Bull Riders (PBR) are each getting a $50,000 sponsorship payment from the city.

During Thursday's Council meeting, Council Chairman "Landslide" Bill Martinson called the payments corporate welfare and said they were offensive. That's ironic: The same Bill Martinson now fretting about $100,000 was just a few months ago pushing to have the city bail out Bank of Oklahoma to the tune of $7.5 million for the bad loan it made to Great Plains Airlines, a loan for which the city has no liability.

The Tulsa World's Friday front-page graphic painted a distorted picture of the payments to the teams by omitting the money the city received in concession revenues from the events. Between rent and concessions, the city made $187,952 from Oilers' games and $63,409 from Talons' games. That's after paying the teams their share of concession cash.

The real question, one the monopoly daily paper doesn't want to address, is whether the city makes enough money from these events to cover the expense of operating the facility. Conventions and major concerts might bring in a significant number of out-of-town visitors, so that theoretically, the increased sales tax revenue from those visitors would offset any operating loss.

But the Talons and Oilers draw mainly from the local area, so the revenues need to be enough by themselves to cover the expenses. Otherwise, we'd be better off keeping the place closed.

LaFortune was quoted in the World as defending the deals on the grounds of quality of life: "Professional teams in our city are absolutely critical to our city's economic well-being."

Minor league sports are really just one entertainment option among many in this city, competing with night clubs, restaurants, and movie theaters for the disposable income of Tulsa residents. There's no more justification for subsidizing them than there would be for a city-funded Western Swing band. (Actually, the latter would be far more likely to bring in outside tourist dollars.)

There's something else ironic about Martinson's fussing about corporate welfare. The amounts in question are three orders of magnitude smaller than what we're spending on the new arena - around 100 grand compared to $200 million. Talk about straining at a gnat and swallowing a camel!

Ordinarily, a private business has to pay for a place to conduct business. You might buy or lease an existing building, or you might build something new, but the cost of a place is part of the cost of doing business. If you're leasing, your rent is paying for the landlord's cost of building and maintaining the place.

But in all the financial projections for the new arena, the cost of construction is left out of the picture. If we exceed all reasonable expectations, we may cover the costs of operation, but there's no expectation that taxpayers should recover the funds we spent to build a place for sports teams and musical acts to make money. If anything is corporate welfare, that surely is.

Taxpayers don't build movie theaters or dance halls, and there's no reason we should be funding a location for entertainment options that compete with those private businesses.

(Added retroactively on June 3, 2006, to complete the column archive.)

This week's Urban Tulsa Weekly column is about corporate welfare, connecting the dots between news that the Great Plains Airlines tax credits are being repaid with money that should be repairing roads and bridges, an effort to extend similar tax credits for the restoration of Shangri-La resort on Grand Lake, former Mayor Bill LaFortune's favorable concessions deals for the Tulsa Talons and Tulsa Oilers, and the biggest example of corporate welfare around -- the $200 million BOk Center.

In this week's column in Urban Tulsa Weekly, I review what happened with Bill LaFortune's plan to have the city pay off the $7.5 million owed by Great Plains Airlines to the Bank of Oklahoma, and ask some questions that need answering.

The cover boy this week is my friend Jamie Jamieson, developer of the Village at Central Park. Jamie was interviewed by Gretchen Collins about exciting developments in the 6th and Peoria area (soon to become known as the Pearl District).

All that and much more in the November 17 issue of Urban Tulsa Weekly.

Tulsa City Councilor Bill "29%" Martinson took a lead role last Thursday night trying to fend off an audit of fuel flow records for fuel sellers at Jones Riverside Airport -- a group that includes Councilor Bill Christiansen, who, like Martinson, was helped into office by Bixby resident and former Tulsa councilor John Benjamin and political consultant Jim Burdge, who were also actively involved in the recall against Councilors Medlock and Mautino.

Martinson argued that the airport investigation was about Great Plains Airlines, and what did fuel flow fees at Jones Riverside have to do with Great Plains? Dave Schuttler of Our Tulsa World has compiled a helpful video to remind Councilor Martinson of what he learned about the investigation at Council committee meetings in the recent past.

Dave also has a link to the documents filed with the Federal Aviation Authority regarding Roadhouse Aviation's complaint against the Tulsa Airport Authority -- including responses from the City of Tulsa. (Roadhouse is Christiansen's competitor at Jones Riverside.)

And he has video of Martinson claiming that fuel-flow fees -- about $774,000 -- weren't important because they were "only" 3% of TAIT's total revenues for 2004. And this guy is touted as an accountant?

Three Republicans have already declared their intentions to seek office: Councilor Chris Medlock, Mayor Bill LaFortune, and former Republican Party Vice Chairman and District 11 State Senate nominee Brigitte Harper. Councilor Bill Christiansen is widely expected to run, as long as his Benjamin'n'Burdge stablemates on the Council (Randy Sullivan and Bill Martinson) can fend off an audit comparing the actual records of fuel purchased and sold at his Jones Riverside Airport business to the fuel flow fees paid to the airport authority.

Despite the widespread disappointment in Bill LaFortune's performance as mayor -- less than 40% support for reelection in his own party according to the latest SoonerPoll.com survey -- no Tulsa Democrat has seized the opportunity to challenge a vulnerable incumbent. That says a lot about the weakness of the Democrat bench in Tulsa. It may also indicate that the Democrats who would have a shot at winning are too dependent on the same oligarchy that seems content with keeping LaFortune in place.

The name of Don McCorkell, former state rep, has been floated as a great Democrat hope. McCorkell is an attorney, but if the online court records are accurate, he doesn't seem to have practiced in about 15 years.

What has McCorkell been up to? In 1996, he finished second to humorist Jim Boren in the Democrat primary to face Jim Inhofe's first Senate reelection bid. In 1997, he was a lobbyist for CFS. He was an early investor and member of the Board of Directors of Great Plains Airlines, buying 10,000 common shares for $10 in December 1998, another 95,000 shares for $95 in October 1999, and 790,478 shares for $790 in May 2000, for a total of 915,478 common shares, about a sixth of the total. On July 1, 2000, he became one of the first four preferred shareholders in Great Plains, purchasing 11,676 preferred shares for $35,028, coincidentally the same number of shares and the same date as Steven Berlin and Great Plains Chairman David A. Johnson. (Steve Turnbo was the fourth of the first four. Berlin and Johnson also each bought 790,478 common shares in May 2000.) He is listed as a 1999-2000 registered lobbyist for the Tulsa Industrial Authority, which is mixed up in the mortgaging of Air Force Plant No. 3 for Great Plains financing. The listing indicated he terminated his lobbyist registration in that period.

Because of his service on the Great Plains Airlines Board of Directors, he and fellow board members have been personally sued by William Stricker, from whom Great Plains bought Ozark Air and its aircraft in March 2001.

It's been rumored that McCorkell is one of those who received in payments for services rendered to Great Plains more than he invested in Great Plains, but we'll have to wait until the records are released until we can know for sure.

Lately he seems to have been interested in multi-level marketing, which seems to be a good fit for anyone involved in the Great Plains deals. Anyone able to convince an entire state legislature to part with $30 million for a risky airline venture can probably talk people into being MLM downlines. He was or is president of something called Casafina International LLC, which was launched in October 2003. Here's the plan for CasaFina associates, and here's his letter to prospective vendors. Here's a bit of pre-launch hype.

Rodger Randle won his 1988 race for Mayor by holding meet-the-candidate coffees in living rooms all over town. If McCorkell runs, will he be the first candidate to use in-home "business opportunity presentations" as a campaign technique?

At least one group of Democrats seems despondent over the lack of someone credible to carry the Democrat banner next spring.

Our Tulsa World has video excerpts of key moments from last Thursday's Tulsa City Council debate on allocating money to acquire Great Plains Airlines bank records, with handy descriptions. (Here are more excerpts.)

There's also a preview of Tuesday's Council Committee meetings. Public Works Committee meets at 8 and will deal with the airport noise abatement program. At 10, there's an item on allowing public discussion of the information gathered by the Council's airport investigation, and Baker wants to talk about his proposal to avoid accountability for making a controversial decision set up a charter review commission.

Today's Whirled featured a "Readers' Forum" guest opinion by John Brock. While normal readers' letters are left to languish for three weeks before being published, this item was rushed to the head of the line. Brock defends World Publishing Co.'s investment in Great Plains Airlines as a gift, with no expectation of return.

Brock also raises an issue that, as far as I can remember, hasn't been aired in the pages of the Whirled, although it has been the subject of a lot of buzz around town: Repayment of the loan from Great Plains Airlines to the Bank of Oklahoma, which was guaranteed by the Tulsa Industrial Authority, using city-owned Air Force Plant No. 3 as collateral. Mr. Brock wants the City of Tulsa to repay the loan, evidently out of the general fund.

The city of Tulsa's contribution was the guarantee of a loan by Bank of Oklahoma. It's now time to make good on that guarantee and pay off the loan. The city put up property at the airport as collateral. BOK made that loan based on its concern for our city and its faith in the integrity and honor of the City Council, not because of the collateral.

A minority of the city councilors does not want to honor that commitment. The excuse is that BOK knew or should have known that the commitment of the City Council could not be trusted, and therefore BOK doesn't deserve to be paid.

This is very strange. How does Mr. Brock know all this? It hasn't been the subject of any public Council meeting of which I'm aware. Was it discussed in a Council executive session, and has Mr. Brock been made privy to what should have been a secret discussion? Have there been private meetings between councilors and bank officials to which Mr. Brock has been tipped off?

It's strange, too, that Brock would call on the City to repay the loan right away, when the owners of the airline -- World Publishing Company, Steve Turnbo, Don McCorkell, Margaret Erling Frette, among many others -- have the collective wherewithal to repay $7 million. Why would BOk, ordinarily a good corporate citizen, demand that the city empty more pools, close more rec centers, take more cops off the street, so that it can get it's money back right now, when it could instead go after the deep-pocketed owners of Great Plains Airlines who stood to profit if the airline had been a success?

If all these investments had been intended as a gift, as Brock alleges, why would these people accept equity? Brock says, "World Publishing Co. invested with no real expectation of profit." That would mean that they never expected the airline to succeed in its mission to provide a needed service. If the airline had succeeded in its mission -- provide non-stop air service from Tulsa to the coast so that Tulsa is more attractive to business -- then new businesses needing that direct air service would have sprung up in Tulsa, and those businesses would have required more direct air service, filling the planes and making the airline profitable.

If WPC and all these lobbyists, PR flacks, and other eminentoes believed that such an airline could never make a profit, then why did they work so hard to convince state and city officials that this airline would bootstrap Tulsa's economy and thus was worthy of public subsidy? There was nothing in the plan for ongoing public subsidy of operations cost, was there? Eventually the airline was supposed to be able to make a go of it on its own.

One more question about repayment of the loan: The matter is in bankruptcy court, and I presume BOk is one among many creditors. Why should they get to go to the head of the line for repayment? Just because they have the political clout to bully the City Council into repaying them? Thursday night, the Cockroach Caucus councilors were uniformly saying not to spend money to acquire Great Plains bank records, because we should wait for the Bankruptcy Court to take care of it for us. Why not wait until the Bankruptcy Court says it's BOk's turn to get its money back? Why not see how much the Bankruptcy Court can recover from sales of assets? Were there preferential transfers made prior to Great Plains declaring bankruptcy? If money from preferential transfers is recovered by the Bankruptcy Court, perhaps it can help repay the BOk loan.

In response to a speaker at Thursday night's Council meeting, who claimed that no one made any money off of Great Plains Airlines, Councilor Jack Henderson pointed out that all that money went somewhere.

One more thing that doesn't add up: Why is Brock concerned about "a minority of the city councilors"? If they are only a minority, Brock will get his way and BOk will get their money very soon. What are he and the Whirled worried about?

If you need a reason to care about Great Plains Airlines, and getting to the bottom of where the money went and making the shareholder agreement public, here it is: You are either going to have to pay more in taxes or make do with less service from the City of Tulsa in order to pay back this loan, unless those who stood to profit take their lumps and pay the debts their company incurred, rather than doing the equivalent of walking out on a restaurant check.

Dan Paden has his own excellent take on Brock's op-ed.

The Tulsa City Council will vote tonight at their regular 6 p.m. meeting on whether to authorize the funding to copy Great Plains Airlines bank records as part of the investigation into that airline. Great Plains says the city can have them, but only if they pay for the cost of making the copies. The Tulsa Whirled and its allies want the investigation to stop. If you think it's important to know where tens of millions of dollars in taxpayer subsidies went, make plans to be present and tell the Council what you think.

More at HFFZ.org.

My latest column for Urban Tulsa Weekly is online, and in honor of National Newspaper Week, I've written about our city's monopoly daily newspaper, the Tulsa Whirled.

The column is about the investigation into Great Plains Airlines, and why the Tulsa Whirled seems so intent on halting that investigation before we know how the airline spent over $30 million in public investment. If you've been trying to understand what the Great Plains fuss is all about, this column is a good place to start, if I do say so myself.

Also in this issue, G. W. Schulz delves into the politics of distributing Community Development Block Grant (CDBG) dollars and other federal funds to local non-profits. G. W. provides the background to the recent controversy over the city repaying grant money to the Feds. And Barry Friedman has some doubts about those estimates of the New Orleans Hornets' economic impact on Oklahoma City.

You can find Urban Tulsa Weekly at finer dining establishments and smart cafés all over Tulsa.

By the way, I've added a blog category to collect each week's announcement of my latest column and thus serve as a sort of column archive.

Did Wilson Busby, an attorney retained by the City Council for their investigation into Great Plains Airlines, violate the Oklahoma Rules of Professional Conduct by talking to the Tulsa Whirled about private conversations with members of the Council's investigation committee?

An attorney pointed me to Oklahoma Statutes, Title 5 (Attorneys and the State Bar), Chapter 1, Appendix 3-A, which is the Oklahoma Rules of Professional Conduct. Rule 1.6 (Confidentiality of Information states, in part:

A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraphs (b) and (c).

The exemptions involve the client expressing intention to commit a crime or a court ordering disclosure.

Then there's this statement in the comments on the rule:

The requirement of maintaining confidentiality of information relating to representation applies to government lawyers who may disagree with the policy goals that their representation is designed to advance.

If Busby's remarks to the Tulsa Whirled are indeed a violation of the Rules of Professional Conduct, he could be reprimanded or disbarred.

The Tulsa Whirled had a front page story Sunday featuring comments from attorney Wilson Busby and former City Councilor Sam Roop, who is now an aide to Mayor Bill LaFortune. Busby was retained by the City Council for their investigation into the Tulsa Airport Authority, which also covered publicly-subsidized Great Plains Airlines. Busby was hired on the recommendation of Roop. A thread connecting the two men is political consultant Jim Burdge, who managed Roop's campaigns for Council and who shared an office with Busby. Burdge also managed campaigns for Bill Christiansen and Randy Sullivan, and he worked for the Coalition for Responsible Government 2004, the group that sought to recall Councilors Chris Medlock and Jim Mautino.

The two associates are accusing Medlock of trying to turn the airport investigation into some sort of witchhunt. Busby claims he saw Medlock pose like a bear and demand "red meat". When I read that, I couldn't help but think of Tim the Enchanter, in "Monty Python and the Holy Grail," warning the knights of the killer rabbit: "Death awaits you all, with nasty big pointed teeth!"

Why would Roop go after Medlock? Roop's boss would lose his job (and so would Roop) if Medlock's campaign is successful.

The story was clearly timed to stop the Council from going forward with a subpoena of Great Plains Airlines bank records. You would think that, if the Whirled were confident that there isn't any damaging information in the records, they would say, fine, go ahead, which would allow them to issue a big "see, I told you so" after the fact. Instead, the Whirled is in full attack mode to stop the subpoena.

Dan Paden picked up on the Whirled's attempt, once again, to mislead its readers by publishing that its parent company, World Publishing Co., owned only 3% of the total shares of stock in Great Plains Airlines. As I pointed out nearly a year ago (and thanks, Dan, for the link), WPC had owned a majority of preferred shares and a majority of the equity, based on the price at which the shares were sold. It's interesting, too, that the story failed to point out that WPC chairman and CEO Robert Lorton gave $2,500 to the campaign to recall Medlock and Mautino.

What we don't know, but should know, considering that our tax dollars and public assets were put at risk for this venture, is the terms of the shareholder agreement. That would tell us how preferred stock and common stock shareholders would have split up any profits -- specifically, how much of the profits would have gone to WPC. WPC, as a shareholder, must have a copy of the shareholder agreement, and it would clear up a lot if the Whirled would make that information public.

But instead of opening up and supplying information, the Whirled is attacking those who are seeking information.

In the meantime, those who loaned money to Great Plains Airlines based on the city's guarantee want their money back now that Great Plains is bankrupt. There's a persistent rumor that the Bank of Oklahoma and the Mayor's office tried to work out a deal to take arena naming rights in repayment for the loan. Another possibility is that the City would repay the money -- about $7 million -- comes out of the City's general fund. That hits basic public services, and it would hurt. Instead of hurting all Tulsans in this way, wouldn't it be fairer for BOk to go after the public officials who sold them on this deal? Or perhaps the bank records will show that funds were paid to favored vendors rather than being available to repay lenders? If that's the case, shouldn't BOk go after that money?

MORE: Comments on the story from Dan Paden and Chris Medlock.

Someone sent me this actually retouched photo of last week's Tulsa City Council committee meeting.

neallassekhatchet.jpg

The hatchets weren't really there, except in a metaphorical sense.

At that meeting, Councilor Susan Neal attacked (verbally) Councilor Chris Medlock for wanting to subpoena Great Plains Airlines' original bank records. Her personal cheerleader, Tulsa Whirled reporter P. J. Lassek, is sitting behind Medlock and to the left. Medlock's offense? He wants a full accounting of the tens of millions of dollars in taxpayer funds that went to Great Plains.

Our Tulsa World has a larger, easier-to-view video of Neal's attack and P. J.'s pom-pom shaking for your viewing pleasure.

Although it's still listed on the site map of tulsaworld.com, the link to Tulsa Whirled's archive of stories on the investigation of Tulsa's airport trust is broken. Hmmm.

The findings and documents collected by the Council's airport investigation also appear to be missing from the City Council's website.

UPDATE: Here's the airport investigation report on the Council's website.

Just learned about this today:

Thursday night, after quietly posting notice 48 hours in advance, the board of the Tulsa Airport Improvements Trust awarded a contract for the next phase of the Federally-funded airport noise abatement project to Cinnabar Service Company, the same company that had the contract for earlier phases. Because of the late notice, Mayor Bill LaFortune, an ex officio member of the board, could not be present, and his designee, Allen LaCroix, Chief Operating Officer of the City, was not permitted to vote on the contract in his stead. Carl Clay, a relatively new appointee to the TAIT board, and a watchdog over airport operations, could not be present. Charles Sublett, another recent appointee to the TAIT board, abstained from the vote on the contract. The meeting was scheduled to coincided with the Tulsa City Council meeting so that even if councilors learned about it in time, they would be unable to attend. Because it was a special meeting, the meeting was not taped for broadcast on TGOV (Cox Cable channel 24).

So by a 2-0 vote, another $7.8 million (mainly Federal funds, with a small component of locally-collected passenger service fees) was awarded to a company whose principals also happen to be the principals in Infrastructure Ventures, Inc. (IVI), the company seeking to build a toll bridge across the Arkansas River to undeveloped land in the west part of the City of Bixby. Here is a chart of the connections between the players in Cinnabar, IVI, and county government.

The money for this project comes from FAA grants and is to be used either to buy out homeowners in the area affected by airport expansion or to remodel homes to provide sound insulation. The website for the project is called homequiethome.com, and the home page has a description of the project and its history. One homeowner in the affected area has documented the sloppy, haphazard work that has been done by Cinnabar and its contractors. You'll find his collection of documents, photographs, and videos here. The concern is that Cinnabar is taking a large sum of money for insulating each house (in some cases more than the house itself is worth), contracting on the cheap to have the work done, and pocketing the difference.

Beyond the concern about the performance of the noise mitigation project itself, the timing of the award is interesting, just as work is set to get underway on the Bixby Bridge. Might the contract award to Cinnabar be used to provide a bit of working capital for IVI? I hope someone is keeping an eye on this, and I hope that once the full complement of the TAIT board is present safeguards will be put in place to provide a full accounting of funds supplied to Cinnabar and to prevent a minority of the board from awarding such a major contract, particularly at a hastily-called special meeting.

I hope the FAA is paying close attention, too.

UPDATE: The amount of the program extension was $7.8 million, not $3 million as I previously wrote. A small portion, either 5% or 10% -- I hear conflicting numbers -- is paid from locally-collected passenger service fees; the remainder comes from FAA grants.

A number of readers have contacted me over the last few days with questions about the City Council's investigation of the Tulsa Airport Authority (TAA) and the Tulsa Airport Improvements Trust (TAIT). These are questions that should have been answered a long time ago, but for some reason the Council's investigator, Wilson Busby, failed to produce answers for the committee. Key documents that ought to exist haven't yet surfaced. Even if there were no concerns about Busby's connections with pro-recall political consultant Jim Burdge and Councilor (and alleged beneficiary of allegedly discriminatory decisions by the TAA) Bill Christiansen, there would still be a question of his competence, given the lack of tangible progress.

Here are some of the questions that need answering and soon:

Busby bombshell

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From tonight's City Council meeting: Tulsa City Councilor Roscoe Turner just announced that airport investigator Wilson Busby today submitted his resignation. There has been some concern about the appearance that the investigation is compromised by Busby's connections with Jim Burdge, the political consultant who is running the recall and who has run Councilor Bill Christiansen's campaigns. Councilor Turner himself, who was also a client of Burdge, said he also considered resigning as chairman of the investigation, and that he believes it is time for a grand jury investigation.

I am told that by people I trust that people they trust say Wilson Busby is an honorable man, and I have no reason to doubt that. But there are reports that Busby has gone beyond investigation and has been negotiating deals with various airport stakeholders. There are also concerns that there have been no tangible results from the investigation since the November election.

This happened in the course of an item put on the agenda by non-Councilor Randy Sullivan. Sullivan proposed a council consensus calling for confidentiality in this and future council investigations. Councilor Chris Medlock agreed with the need for confidentiality, but challenged Sullivan to specify what breach of confidentiality prompted his proposed consensus. Sullivan declined, revealing that his motivation for raising the issue was political.

A reader calls my attention to an odd situation: The Tulsa Airport Improvement Trust (TAIT) has authorized $100,000 to pay the Pray Walker law firm to defend it in the lawsuit filed against TAIT by the Tulsa Industrial Authority (TIA) over the convoluted land deal designed to fund Great Plains Airlines. But it doesn't appear that Pray Walker has done anything in the case -- it hasn't even filed an appearance on behalf of its client or an answer to the claims of the plaintiff. Another very strange aspect of a very convoluted and fishy situation.

How convoluted was the land deal? As it was explained to me, the City, TIA, and TAIT all exceeded their authority in the way the deal was structured. They would have gotten away with it if Great Plains had succeeded, but it went belly-up with $7 million due on a loan from the Bank of Oklahoma, a loan that was backed by 30 acres of Air Force Plant No. 3, a facility with surrounding land that was transferred from the City to TIA. TAIT promised TIA that if Great Plains defaulted, TAIT would buy the 30 acres for whatever amount was still owed on the loan (no independent assessment was sought to determine if the price was fair), and TAIT intended to pay for the land by asking the FAA for an increase in passenger facility charges, under the guise that the 30 acres was being acquired for future runway expansion. The FAA saw through the whole thing (Acrobat Reader required), denied the request, and said you can't use passenger facility charges to subsidize an airline. The attorney who structured the deal and advised both parties, J. Richard Studenny, was finally sacked and is a defendant in TIA's suit.

Great Plains was a bad deal set up by Tulsa's politically connected, including the Tulsa World, which owned a significant amount of stock in the airline, but didn't disclose the fact at the time it was editorializing to urge Tulsa's City Council to put a city asset up as collateral for a loan to the airline.

For those of you just beginning to learn about Tulsa politics as background to the Tulsa World's legal threats against BatesLine, Tulsa Today published an analysis piece a few weeks ago that ties it all together -- the Great Plains Airlines deal, the way the Chamber of Commerce handles economic development funds, the development lobby, the effort to recall two Tulsa city councilors, and the Tulsa World's hostility to conservative Republican officials who seek to implement the principles they ran on.

You can read more in my archive of entries about Great Plains Airlines and other aspects of the mess at Tulsa's city-owned airports.

The Tulsa Beacon has a front page story this week with details of the reply from the FAA to the City of Tulsa about discriminatory practices at Jones Riverside Airport. The FAA believes that allegations of discrimination are well founded -- allegations that Councilor Bill Christiansen, who owns an FBO at the airport, has used his public office and connections with a member of the Tulsa Airport Authority to get special treatment with regard to leases and access and to implement airport rules that discriminate against his only competitor. Mayor Bill LaFortune has until March 14th to respond -- with action, not just promises -- or Tulsa may lose federal airport funds.

FAA to cut Tulsa off?

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Nothing official yet, but I am hearing that the Federal Aviation Administration is mightily displeased with the City of Tulsa's response to the FAA's questions about charges of discriminatory rules and practices at Jones Riverside Airport designed to favor fixed-base operator Christiansen Aviation over its competitor, Roadhouse Aviation. Christiansen Aviation is owned by Tulsa City Councilor Bill Christiansen, who has the support of and generally votes as a member of the Cockroach Caucus. The buzz around at City Hall is that the FAA is so displeased with the inadequacy of the city's response that Tulsa has been threatened with a cut-off of certain federal airport funds, and that the FAA believes that airport rules have been enforced in a discriminatory fashion in order to favor Councilor Christiansen's business.

Beacon reports on the FAA letter

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This week's edition of the Tulsa Beacon (on sale at Steve's Sundries and QuikTrip locations, among other places) reports on the letter the Federal Aviation Administration sent to Tulsa Mayor Bill LaFortune:

The Federal Aviation Administration has sent a letter to Mayor Bill LaFortune asking him to answer charges concerning City Councilor Bill Christiansen and Jones-Riverside Airport.

The letter is a response to charges by Kent Faith of Roadhouse Aviation, a direct competitor with Christiansen Aviation. Those are the only two companies that supply fuel at Jones Airport.

The letter raises the issue of economic discrimination and exclusive rights for the Tulsa Airport Authority.

I welcome this, Christiansen said. Its time to clear the air. All these accusations have already been disproved in a lawsuit. There is no judgment against me. I want to get past this and get on with the business of the airport.

Maybe I misunderstood: I thought the accusations were settled out of court, not disproved in court. And the FAA's questions concern the actions of the airport authority in matters that concern Councilor Christiansen's business, but the questions don't directly accuse or question the Councilor's actions, as far as I can tell. I don't see why he should be taking offense.

The three issues raised by the letter have to do with allocation of hangar space, lease rates, apron access, and enforcement of the airport sign policy.

If the Tulsa Airport Authority is engaged in economic discrimination or granting exclusive rights, it could jeopardize federal grant money for projects at both city-owned airports, not only Jones Riverside, but also Tulsa International.

The Mayor and his staff will be tempted to circle the wagons and obscure everything in a cloud of legalese, in hopes that any discriminatory practices will be left undiscovered or at least unprovable. If the Tulsa Airport Authority has been violating FAA rules, it would be better to confess now and correct the problem, rather than get caught after a denial.

You can read the whole Beacon story here on their website until next Wednesday, when it will be replaced by next week's top story.

(I wish the Beacon would set up a blog and use it to file back articles on their site, rather than clear the old articles away at the end of the week. With most of the Tulsa Whirled content limited to subscribers, if the Beacon put all its city reporting online, it could win the Google battle -- be the higher ranked site for information about various city officials and institutions. It would be simple -- use Blogger and have the files FTPed to tulsabeacon.com.)

Federal scrutiny of Tulsa's airports continues to expand, with the potential of endangering tens of millions of dollars in federal funds for our two city-owned airports, Tulsa International and Jones Riverside, which was once one of the nation's busiest general aviation airports.

KFAQ was reporting today that on December 22, the FAA sent a letter to Tulsa Mayor Bill LaFortune expressing concern about charges of discriminatory rules and practices at Jones Riverside Airport designed to favor fixed-base operator Christiansen Aviation over its competitor, Roadhouse Aviation. Christiansen Aviation is owned by Tulsa City Councilor Bill Christiansen. The FAA appears to be looking at the same allegations that were part of the lawsuit Roadhouse owner Kent Faith brought against the City and Christiansen.

Mayor LaFortune has until January 22 to reply, and he leaves today for a 10-day trip to Tiberias, Israel. He has no deputy mayor -- Steve Sewell resigned at the end of last year to go to work for the U. S. Attorney -- and his interim airports director is also City Clerk and Chief Financial Officer of the City.

City Councilor Sam Roop, who is heading up the Council's inquiry into the airports, said that the Council may send its own reply to the FAA if the Mayor fails to respond in a timely fashion. Roop said he had been trying to meet with the Mayor to help with a response, but he had yet to speak with the Mayor.

Roop also reminded the KFAQ audience that, although Phase I of the investigation is complete, the Council's investigation is ongoing, proceeding to look into these allegations of discriminatory rules, as well as the noise abatement program at Tulsa International Airport and other concerns.

Tulsa stands to lose both prestige and money if we don't get this mess cleaned up.

P.S.: I wish I could link you directly to the KFAQ website to hear audio of the interview with Councilor Roop, but they are still "working out the kinks" with streaming audio. I suspect it's a rights and licensing issue, but if it's a technical problem, guys, give me a call!

It's cute in a pathetic sort of way that on a day with major world news like the ongoing election crisis in Ukraine, the Tulsa Whirled would use its Sunday edition front page lead story to spin the Great Plains Airlines mess to make the Whirled look less evil.

The message of the Sunday lead story (jump page here) is this: The Whirled wants you to believe that no one (especially not the Whirled, which owned a majority of the preferred stock at the time, but failed to disclose this fact for another two and a half years) deceived the City Council in November 2000 into approving the complex deal to finance Great Plains with city property as collateral. As evidence, they feature the two councilors out of nine who voted against the scheme. Clay Bird, now on Mayor Bill LaFortune's staff, and Randi Miller, now a Tulsa County Commissioner, are quoted as saying, in essence, that because they appreciated the risks involved and voted accordingly, that the councilors who voted for the transaction have no right to claim that information was withheld or distorted.

Remember that in November 2000, Tulsans defeated "It's Tulsa's Time," the second attempt to fund a new downtown sports arena with a city sales tax increase. One of the chairmen of that "vote no" effort was former City Streets Commissioner Jim Hewgley. When the Great Plains proposal was under discussion, Hewgley, who was dismissed as a naysayer by the Whirled, KRMG, Mayor Savage and her machine, and the big shots at the Tulsa Metro Chamber, tried to talk to several of the councilors to explain the flaws and risks in the plan. Bird and Miller heeded the advice of Hewgley and voted against the Great Plains scheme.

The Whirled story says that then-Council Attorney Bob Garner "provide[d] information about the risks of startup airlines." I have a lot of respect for Mr. Garner, and I'm not surprised he thought the deal was a bad idea and told the councilors so.

So why did the other seven councilors ignore the advice of sensible men like Bob Garner and Jim Hewgley? This is the part of the story the Whirled doesn't want to and won't bother to tell.

The voices of the skeptics were drowned out by a powerful chorus consisting of Mayor Savage, the Tulsa Whirled, the Tulsa Metro Chamber bureaucrats, and a gaggle of PR professionals, all singing the praises of this tremendous opportunity to invest in Tulsa's future, an opportunity that we dare not pass by. You will look in vain through the Whirled's archives for any hint of skepticism or dissent about the plan prior to the Council's vote. Whatever warnings were given by Bob Garner went unreported. The financial information and the investor lists, if indeed they were given to the Council, went unreported. Instead, you'll find items like the Whirled's November 28, 2000, editorial, urging the Council to approve the Great Plains scheme:

The Tulsa Whirled was in full spin mode this weekend in response to the release of the City Council's preliminary investigation into Tulsa airports and the Great Plains Airlines mess, which has the city on the hook for millions of dollars. Let's look at their Saturday editorial defense of parent company World Publishing Co.'s investment in Great Plains:

Mark Twain's wisdom suggests that a lie told about the World Publishing Co.'s interest in the ill-fated Great Plains Airline will be repeated so much by shrill voices in Tulsa that the truth could be lost.

First, the lie: The City Council's investigator, paid $40,000 so far to amass public records, used out-of-date documents to claim the World holds 51 percent equity in the bankrupt airline.

The fact: The final list of stockholders, published elsewhere in the World Saturday, shows that the World owned 3 percent of the airline stock.

Notice the sleight of hand -- the Whirled responds to the fact that it had invested 51% of the private investment in Great Plains Airlines by saying it only owned 3% of the total number of shares of stock. The Whirled is deliberately confusing preferred stock with common stock. In November 2000, World Publishing Co. acquired 233,333 shares of preferred stock for $700,000 -- $3 per share. That's 3,000 times the cost of a share of common stock, which generally went for one-thousandth of a dollar per share. (Some common stock was sold for a nickel a share.) Preferred shares bring greater rights, such as first cut of any dividends. The exact distinction between preferred stock and common stock for a company is defined by the shareholder agreement, which does not appear to be one of the documents released to the City Council investigation. If the the Whirled wants to persuade us that its investment was insignificant, they'll need to show us the shareholder agreement.

As to the "out-of-date" document claim: The City Council's investigator used the latest shareholder list that was provided to it, from February 2001. Only one more investor of any significance came in after that date: Dr. William E. ("Wes") Stricker, the Columbia, Mo., allergist and owner of Ozark Air Lines. Stricker acquired 250,000 shares of preferred stock when Ozark was purchased by Great Plains in March 2001.

Shortly after the Whirled acquisition of Great Plains stock in November 2000, the Whirled editorial board, on November 28, urged the City Council to agree to mortgage Air Force Plant No. 3 to enable a total of $30 million in financing ($15 million in state tax credits, $15 million loan secured by the property). The editorial claimed that the airline would "over the next decade, create 2,000 new jobs and generate $23 million in revenue to the Tulsa Airport Authority. It represents a tremendous private-public partnership to solve a problem, offer a needed service and boost economic development opportunities." The Whirled editorial made no mention of the launch on November 1 of daily non-stop service from Tulsa to Los Angeles on American Airlines, which undercut the need for the niche Great Plains was meant to fill. There was no mention, either, of the failure a year earlier of AccessAir, another airline which had been heavily subsidized by state and local governments to provide service from the midwest to the coasts. There were plenty of reasons to be skeptical, but the Whirled, owner of a majority of preferred stock at that critical moment, didn't let the public know.

More rebuttal after the jump.

In 2001, the Wall Street Journal picked four startup companies and tracked the companies' fortunes over the course of 2001, in a series entitled "The Challengers." One of those four startups was Great Plains Airlines, and I'm happy to report that the WSJ articles about Great Plains are available online for free on their StartupJournal.com website. Along with articles specifically about Great Plains, there are related articles about the state of the airline industry and the problems besetting small airlines long before the 9/11 attacks.

Some highlights:

  • Bios of Great Plains founders James C. Swartz and John H. Knight.

  • An interactive guide to the airline's business concept, including a map of existing non-stop routes from Tulsa in 2000, Great Plains' planned routes, actual routes, and how the major airlines rendered their plans moot by offering direct service.

  • A detailed background on the airline and its founders. It mentions that in 1996 the two were "prowling around" for an airline to buy in Florida, talks of their efforts in Wichita, and describes how they wound up in Tulsa:

    The two men were in Wichita, Kan., laying the groundwork for starting an airline there when Tulsa came calling. The city in the northeastern corner of Oklahoma is a classic second-tier city, and for years, the locals have been unhappy with their air service, usually having to make at least one connection to get to cities on the coasts. Finally, Tulsa Chamber of Commerce activists took action. Hearing about Messrs. Swartz and Knight, the city's leading lights in the fall of 1997 persuaded them to focus on Tulsa instead. As Mr. Knight recalls, things weren't progressing so well in Wichita, so the choice was easy.

    What followed was a three-year effort to get state and local government to help finance the airline. David Johnson, a prominent Tulsa lawyer and counsel to the airline, helped push through state legislation that would give the tiny airline tax credits that it could sell to raise money. Last year, through a combination of tax-credit sales and a loan from the Bank of Oklahoma, with property put up as collateral by the city of Tulsa, Great Plains managed to amass $30 million in start-up capital. (Today, Mr. Johnson is an investor in Great Plains and sits on its board.)

    The article mentions their revenue projections -- $144 million in the third year of operation.

  • A timeline of milestones through the end of 2001.

(More highlights after the jump.)

Before the men who started Great Plains Airlines came to Tulsa, they tried to pitch their idea to the City of Wichita, Kansas.

A headline search on the Wichita Eagle's website turns up the following:

  • On April 8, 1997, two groups announce plans to bring jet service to Wichita: SunWest Airlines Inc., headed by James C. Swartz, and AccessAir Holdings Inc., a Des Moines-based company. But they are looking for local "seed money" to make it happen.
  • An October 7, 1997, story is headined: "AIRLINES TO WICHITA: ANTE UP / ACCESSAIR WON'T SERVE WICHITA WITHOUT $3 MILLION FROM LOCAL INVESTORS. AND SUNWEST AIRLINES REQUESTS A PACKAGE OF FINANCIAL CONCESSIONS THAT AIRPORT OFFICIALS DON'T EXACTLY EMBRACE."

Here's a story from the Wichita Business Journal about SunWest's business concept from June 9, 1997.

And here's a very brief and non-specific September 15, 1997, story from the Wichita Business Journal about SunWest's pitch to the Wichita Airport Authority.

About the time Wichita officials decided to take a pass, Tulsa leaders worked to get the SunWest team to come look at locating here.

I spent part of today at the library, using the Whirled's online archives to see what the Whirled wrote about Great Plains Airlines from its first appearance on the scene as Sunwest (sometimes Sun West) Airlines in 1999. There is a lot of information to sift through.

The Whirled's parent company, World Publishing Co., paid $700,000 for 233,333 shares of preferred stock in the airline in November 2000. (The Whirled claims it paid $100,000 in cash -- the remainder was $600,000 in advertising space. The Whirled didn't bother to disclose its investment in Great Plains Airlines until February 16, 2003. By that time, the taxpayers of the State of Oklahoma and the City of Tulsa had donated millions of dollars in subsidies to support this airline that never came close to delivering on its promises. Throughout this period, in which public officials were deciding whether to continue to pump more money into the venture, the Whirled ran positive stories promoting the airline and its potential. You will look in vain for even a hint of skepticism or concern.

A newspaper has the trust of many citizens and decision-makers in the community. It's assumed that the local daily is doing its best to inform us completely and accurately -- that they wouldn't have any reason to distort or conceal information.

The F&M Bank zoning controversy and the Great Plains Airlines scandal have exposed to the public the extent to which the business interests of World Publishing Co. and its owners skew the Whirled's coverage of local government.

If the Whirled wishes to regain the trust of its readers they should stop using their news pages to defend the company's actions and instead recuse themselves from coverage of the story. Let's have a newspaper from another part of the country with no Tulsa business ties come in and investigate the story.

The findings of the first phase of the City Council's investigation into the operation of Tulsa's airports were released today, published on the City Council's website. You'll find the main body of the report here and the "abbreviated addendum" here.

(Be warned that the addendum is PDF file that has been optimized within an inch of its life. It appears that someone scanned in the addendum documents to create a PDF in Adobe Acrobat, then decided it was too large for people to download, so he ran optical character recognition on the result, keeping only the text found by the OCR and throwing away the image of the original. Hopefully, this will be corrected before long, because what is on the web now is hard to decipher.)

I'm just starting to dig through this. I didn't see the presentation of the report at the City Council meeting, so I'm probably missing some context, but this is what it looks like to me: Great Plains Airlines appears to have been a scheme to take a relatively small amount of private money, allow influential citizens to buy in at a very low cost, in order to pry loose a much larger amount of public money, ultimately for the enrichment of a few stockholders.

First among the preferred stockholders is World Publishing Company (WPC), publishers of the Tulsa Whirled, purchasing 233,333 shares of preferred stock of Great Plains Airline Holding Co. for $700,000. That represents a majority of the 445,699 shares of preferred stock sold at $3 a share, for a total value of $1,337,103. That investment also represents a majority of the capitalization: 6,495,137 shares of common stock were sold at either 1 mill (one tenth or a cent) per share or five cents per share, for a total value of $31,926.14. So the total price of issued stock was $1,369,029.14.

There was a dispute some months ago about what share of Great Plains Airlines was owned by World Publishing Company (WPC). Michael DelGiorno reported that WPC owned a majority of Great Plains Airlines. WPC sent legal nastygrams and insisted that it only held 3% of the stock. WPC's answer was misleading, honest only in a narrow technical sense -- if you divide the number of WPC's preferred shares by the combined number of common shares and preferred shares, you get 3.592%. But if you consider the price paid for the shares, the Whirled's parent company had invested 51% of the private money invested in Great Plains Airline Holding Co. The Tulsa Whirled's parent company had the biggest financial stake in the airline, the most to gain.

The price of the common stock is strange -- selling a thousand shares for a dollar is no way to raise capital for a startup business. The list of names of investors seems to point to an explanation. Many of them were in a position of influence to smooth the way for public financing and subsidy for the airline: Steven Berlin, former CFO of Citgo and a member of the Tulsa Industrial Authority (TIA); Don McCorkell, former Democrat State Representative and an influential lobbyist; Thomas Kimball, head of economic development for the City of Owasso a friend to then-Gov. Frank Keating; Bob Cullison, former Senate President Pro Tempore; Patrick Schnake and Steve Turnbo from the PR firm of Schnake Turnbo, plus Lauren Brookey, formerly a partner in that firm; Margaret Erling Frette, lobbyist and wife of John Erling, once the highest-rated local talk show host; Clyde Cole, former President and CEO of the Metropolitan Tulsa Chamber of Commerce; Van Scoyoc Associates, a DC lobbying firm specializing in government grants. While some of these people invested a tiny amount for their common shares, what would have happened to the value of their shares if an initial public offering (IPO) had occurred (especially if it had occurred before the tech bubble burst)?

I'll be combing through the report over the next few days. I hope you will, too, and I'd enjoy reading your observations, if you'll e-mail them to me -- or head over to the TulsaNow forums for an online discussion.

By a 5-3 vote last Thursday night the Council established an investigation of airport operations. Henderson, Medlock, Turner, Roop, and Mautino voted in favor; the usual members of the Cockroach Caucus (Baker, Sullivan, Neal) voted against, seemingly on the grounds that it would be effective at uncovering wrongdoing. Bill Christiansen expressed his support of the investigation but abstained -- his business is an airport tenant. If you don't believe elections make a difference, look at that list and realize that the vote would have failed if David Patrick and Art Justis had been reelected instead of Roscoe Turner and Jim Mautino.

The Mayor's response has been interesting. Not long ago he had threatened to veto the investigation unless the Council passed his annexation plan. Now he says he's fully committed to the investigation and has his own fraud investigator looking into it, and he wants to see coordination and cooperation between the Council's investigation and his own. A cynic might wonder about the commitment of someone who was willing to treat an investigation into fraud, waste, and abuse as a bargaining chip. An even more cynical cynic might wonder if the purpose of hiring an investigator and asking for cooperation was to be able to learn where the investigation was headed and to tip someone off before the investigation gets too close.

In any case, the Council's investigation will move forward. The question now is who will make up the committee. I would hope for a lineup of Roop, Medlock, and Turner. Medlock in particular has the kind of analytical mind and an eye for spotting patterns and connections that the investigation will need. He will not shy away from asking tough questions and cross-examinination, as we saw in the F&M Bank hearing. I don't know how much confidence I'd have in an investigation that didn't include him.

There have been some calls to exclude Roop and Turner from the committee since they voted for the city's support of the Great Plains deal. I don't see that as a problem, and I'd be concerned that they would be replaced by other councilors who won't be as determined to get to the bottom of things. Roop and Turner believed at the time that Great Plains would be a good thing for Tulsa; they realize now something went terribly wrong and so they support the investigation, which will not, in any event, be limited to the Great Plains deal. In no event should a councilor who voted against the investigation be made a member of the panel -- I would be concerned that said councilor would obstruct rather than aid the investigation. And keep in mind that the Council will only be investigating -- any leads on criminal activity would be forwarded to the appropriate prosecutor.

About this Archive

This page is a archive of recent entries in the Tulsa::GreatPlainsAirlines category.

Tulsa::Election2008 is the previous category.

Tulsa::History is the next category.

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