Misuse of Trusts and Escrow Funds ‘cannot be repeated’

Business aviation must act to ensure the type of acts underlying the allegations made against Aircraft Guaranty Corporation (AGC) and Wright Brothers Aircraft Title, Inc. (WBAT) and associated parties are not repeated, Ed Kammerer, Shareholder, Greenberg Traurig, told Corporate Jet Investor (CJI).

“We don’t want this to happen again, we really don’t. This is not good for the industry. A lot of people have either lost a lot money or have their money tied up through no fault of their own for a very long period of time and their aircraft are basically stuck,” said Kammerer.

Clients could have been planning on closing on a transaction just days after the accused parties were arrested in December 2020. “And it may be months or, God forbid, longer before they can move their aircraft.”

To use the pandemic analogy coined last week by David Hernandez, Shareholder and Global Transportation Finance practice group member, Vedder Price, Kammerer said the business aviation industry has to make sure “It is wearing masks and remains socially distanced.”

“In other words, we have to do those things which we can do to prevent the spread. By way of analogy, it’s a lot of personal responsibility [on the industry’s shoulders]. This investigation is going to push back on us as an industry.”

Kammerer believes the industry has an opportunity now to: “Clean up our own act.” Speaking with regards to due diligence and vetting processes, he said: “We must take the steps we can to prevent the types of things that are alleged to have happened from happening going forward.”

The more that the industry can do by itself, the less influence will be felt from so-called “government interference”. This should include safeguards to prevent further abuses of systems like the trust structure.

However, most important, Kammerer told CJI, is to address the requirements which may be imposed from those who know little about the industry. In the indictment, one of the examples given of a ‘typical transaction’ described a back-to-back transaction for a purchase and sale.

“That is not the way these deals normally happen. It is certainly something that is accepted but it is more the exception than the rule. So, there’s a lot of misunderstanding from those who come in from outside the community. That’s our challenge, to make sure the people who are reporting on this and people and that are regulating this truly understand what we are doing.”

Kammerer believes the industry has informed outside parties well in the past – citing the efforts of the National Business Aviation Association, the International Aircraft Dealers Association and the National Aircraft Finance Association. But these organisations must make sure the business aviation community’s voice is being heard, he said.

Meanwhile, Corporate Jet Investor staged a special Town Hall on Friday March 5th to study the impact of federal investigations on aircraft transactions. Watch the Town Hall here.