Today

2 BIG Developments today in the Silver State Helicopters matter. First, papers were filed in Federal Court in Tampa, Florida confirming that class counsel reached a proposed settlement with SLX whereby the loans of students enrolled at SSH when it ceased operations will be significantly reduced depending on the number of Federal Aviation certifications or ratings that student achieved at SSH before its bankruptcy and closure. The settlement benefits include debt forgiveness, lower interest rates, notification to credit reporting bureaus, and a refund for early repayment. Second, the attorney general task force that has been working on the SSH matter entered into a consent decree with Student Loan Xpress that will provide 112.7 million in debt relief to former students of SSH.

Here is the press release issued by the California State Attorney General:

Brown and 11 States Force Loan Provider to Forgive $112.7 million in Debts of Helicopter Flight School Students

"El Cajon-Attorney General Edmund G. Brown Jr. and 11 other state Attorneys General today forced Student Loan Xpress, Inc. to provide $112.7 million in debt relief to students facing a "mountain of debt" for helicopter flight instruction they never received.

Of the $112.7 million, approximately $25.5 million in debt relief will go to California residents who did not receive the training they paid for.

"These students did not obtain the helicopter instruction they were promised, yet Student Loan Xpress insisted that they pay off the full cost of their tuition," Brown said. "Without this agreement, Silver State flight school students would face a mountain of debt for training they never received."

Silver State Helicopters was founded near Las Vegas in 2002, and the company quickly grew. At its height, the school comprised 34 campuses in 17 states, and included 2,700 students who paid approximately $69,900 each. In California, Silver State Helicopters operated flight schools in Sacramento, Chino and El Cajon.

In August 2005, Student Loan Xpress became the preferred student loan provider for Silver State Helicopters, lending or servicing some $180 million in student loans.

Yet, even before it made its first loan, Student Loan Xpress had reason to believe that the school was in serious financial difficulty. Students complained of a shortage of instructors, flight simulators and helicopters. Only 10 percent of Silver State students graduated. Ultimately, the school filed for bankruptcy in February 2008.

Many students paid thousands of dollars of tuition, but did not receive the flight training they were promised in return. Regardless of the bankruptcy, Student Loan Express demanded that borrowers repay the full cost of the loans.

Consequently, several state Attorneys General launched an investigation, which determined that the two companies had a close business relationship, and that that Student Loan Xpress had failed to comply with the duty to provide required notices to borrowers. Under the settlement, Student Loan Xpress denied any wrongdoing.

After several months of negotiations, the attorneys general and Student Loan Xpress reached a settlement agreement. The settlement, in tandem with the resolution of a private class action, calls for Student Loan Xpress to restructure approximately $174 million of student debt, based on the number of Federal Aviation Administration (FAA) certifications each student obtained. The fewer certificates obtained, the larger the amount forgiven. The average debt relief for students under this settlement is $46,016.

The company also agreed to:
- Forgive an additional 2.5 percent of the student loan if the adjusted loan is repaid within five years;
- Refrain from providing negative information to credit reporting agencies with respect to any loan restructured; and
- Forgive interest between the dates Silver State Helicopters filed for bankruptcy and approximately the end of 2009.

Student Loan Xpress will also pay $125,000 in legal expenses to the states. The states joining California in today's settlement are: Florida, Georgia, Idaho, Illinois, Missouri, Montana, Nevada, Oklahoma, Oregon, Utah, and Washington.

The $112.7 in debt forgiveness included in this settlement includes the total relief provided in both the states' settlement with Student Loan Xpress, and the proposed settlement in a private, nationwide class-action called Holman et al v. Student Loan Xpress, Inc. That class action was filed in federal court in Florida.

Student Loan Xpress borrowers with questions about the settlement are asked to contact the settlement administrator in this matter by e-mail, at settlementquestions@gmail.com." (Andrew August reports that the reference to the Gmail email address in the Attorney General's press release and in other media accounts is is wrong: "It is not an email address for the settlement administrator. Rather it is our private, secure email account through which we will be able to answer questions. Of course it will not be operational until the court grants preliminary approval of the settlement.")

To read the Assurance of Voluntary Compliance Agreement entered into by Student Loan Xpress and the Attorney Generals for 12 states, click on this link:

http://ag.ca.gov/cms_attachments/press/pdfs/n1827_studentloanxpress.pdf

Here is more information from the press release issued by Andrew August aaugust@pinnaclelawgroup.com and Chris Casper ccasper@jameshoyer.com , two of the leading class counsel lawyers that will directly respond to questions from class members once the proposed settlement has received preliminary approval from the court:

"The parties have requested that the federal court overseeing the action preliminarily approve the settlement and authorize notice of the terms of the proposed settlement to be disseminated to class members. The notice will contain detailed information about the terms of the settlement, class members' options, and ways to obtain additional information about the settlement. The court will then hold a hearing to decide whether to grant final approval of the settlement.

In additon to Class Counsel, numerous other attorneys who individually represented Silver State Students, including Daniel Reed from Utah (representing more than 300 students nationwide) and Michael Berger from California (representing more than one thousand students nationwide) have closely reviewed the settlement and uniformly and unconditionally support it. Moreover, Attorneys General from more than 10 states reviewed and enhanced the terms of the proposed settlement, while also reaching a separate agreement with SLX."

I will post additional information about the proposed class action settlement agreement in the days to come. Clients of mine who want individual, personal advice about the pros and cons of this proposed settlement agreement for them are urged to wait until the court gives its preliminary approval to the proposed class action settlement, approves a manner and form of notice, and establishes a proposed schedule for final approval of class action settlement. All class members will receive a notice in the mail and will have at least 45 days to consider the proposed settlement agreement. I will then happily answer any and all questions from my clients by e-mail and by telephone. Clients of mine who choose to opt out of the proposed class action settlement agreement or who are not covered by the proposed class action settlement agreement will still be represented by me and I will continue to use my best efforts on their behalf.

The proposed class action settlement only covers former students of Silver State Helicopters who obtained loans from Student Loan Xpress to attend SSH and who were still enrolled at SSH at the time that it filed its bankruptcy petition. If you got your loan from KeyBank or paid cash and/or if you were not enrolled at SSH at the time that it filed bankruptcy, you are not covered by the pending proposed class action settlement.

Tomorrow

The proposed class action settlement agreement with Student Loan Xpress will be submitted to the Court tomorrow or Friday for preliminary approval. I will post detailed information about the proposed settlement as soon as it is filed with the Court. If and when the proposed settlement agreement is approved by the Court, as I expect it will be, written notice will be sent out to all class members. This Notice will give you detailed information about the settlement agreement, and will provide ample time for you to evaluate the merits of the settlement for you.

For my clients with KeyBank loans and my clients who paid cash to attend SSH, I am continuing to work for you and will post further updates as soon as there are important developments that affect you.

SSH In The News (Las Vegas Sun, October 8, 2009)

Ex-sheriff candidate accused of fraud tied to bankruptcy
Trustee: Silver State Helicopters sought cash, students as finances worsened

Steve Marcus

Jerry Airola, president of Silver State Helicopters, poses on a MD500 jet helicopter in early 2008 piloted by Topper Nelson at the North Las Vegas Airport.

By Steve Green (contact)

Thursday, Oct. 8, 2009 | 5:32 p.m.



Jerry Airola
Related Document (.pdf)
See the complaint against Jerry Airola
Sun Coverage
Students rage about flighty helicopter school (2-15-08)
Airola powers down helicopter company (2-4-08)
Airola unable to capitalize on scandal (11-2-06)
Former Clark County sheriff's candidate Jerry Airola is under fire in his helicopter company's bankruptcy case, with a trustee suing Airola and others to recover millions of dollars the trustee says were fraudulently transferred prior to the bankruptcy.

Silver State Helicopters LLC shut down and filed for bankruptcy protection in February 2008, with Airola saying at the time the company was hurt by a lack of funding for student loans that the company needed to run its flight schools.

Reports at the time said the shutdown involved 30 locations around the country, put 750 employees out of work and left some 2,700 students stuck with student loan payments for instruction they would no longer receive.

A report in Inc. Magazine said that three years before the bankruptcy, Silver State had posted $40 million in revenue. An industry observer said the problem with Silver State was that it promoted training for helicopter pilots at a time when there wasn't a big demand for such pilots.

With operations in Southern Nevada including the Boulder City and North Las Vegas airports, Silver State filed for Chapter 7 liquidation in U.S. Bankruptcy Court for Nevada and attorney James Lisowski Sr. was appointed trustee in the case.

Lisowski, who has been working to sell assets to recover funds for creditors, last month filed an adversary lawsuit alleging the fraudulent transfers.

The suit was filed against Airola, former Silver State Chief Financial Officer Steve Pickett, First American Equity LLC (allegedly controlled by Airola and Pickett) and Stars & Stripes Heliplex LLC (allegedly controlled by Pickett and businessman Steve Trenk).

Pickett could not be located for comment on the accusations. But attorney Nile Leatham, who represents Airola, said Thursday that he was preparing to file a response disputing the allegations.

"I don't believe the complaint is meritorious," Leatham said.

The trustee's lawsuit, seeking to recover funds from the defendants for creditors, alleges that in 2007 Airola and Pickett made a deal to recapitalize the company that resulted in Airola being paid more than $10 million.

By entering into a $40 million revolving credit line with Orix Commercial Finance LLC in 2007, of which $31 million was due in February 2008, and continuing to seek helicopter students in 2007, Airola and Pickett left Silver State vulnerable to bankruptcy, the trustee charged.

In 2007 "Airola and Pickett caused (Silver State) to continue its course of offering training to student pilots; courses that (Silver State) did not have the resources to service and complete," the lawsuit charges.

The suit detailed these deals:

--The spring 2007 transfer of assets of an Airola company, Air Excel Inc., which had a lease with the Boulder City Airport, to Stars and Stripes Air Tours LLC for $2.4 million. The deal included Stars and Stripes paying off a mortgage at the Boulder City Airport, $1.2 million in cash and a $700,000 promissory note, the suit said.

--The August 2007 transfer by Silver State to First American of a heliport at the North Las Vegas Airport, $1.2 million in cash, the $700,000 Stars and Stripes note and all the issued and outstanding shares of Air Excel. First American paid nothing for these assets, the lawsuit charges.

--The June 2008 transfer of the heliport from First American to Stars & Stripes Heliplex.

"During the period from April 2007 through August 2007, Airola and Pickett caused (Silver State) to divest substantial assets," the lawsuit charges. "By this series of transactions, Airola, Pickett and First American stripped (Silver State) of assets, for their personal benefit, worth at least $7 million, in the 10 months immediately preceding the filing of the bankruptcy."

The trustee claims Silver State was insolvent when some of these deals were made, meaning Airola and Pickett allegedly received some assets that rightfully should go to creditors.

Silver State "made the transfer with the actual intent to hinder, delay or defraud" creditors, the lawsuit said of the deals in which the heliport, Air Excel shares, Stars and Stripes note and $1.2 million in cash were allegedly transferred by Silver State to Airola, Pickett and First American.

Silver State also "received less than a reasonably equivalent value" in the deal, the suit charges.

The suit also asserts claims of breach of fiduciary duty, unjust enrichment and conversion against Airola and Pickett.

The trustee seeks damages of $8.2 million against Airola, Pickett and First American, plus interest from August 2007.

His suit also seeks a judgment against the defendants for the fair market value of the heliport, the Stars and Stripes note and the Air Excel shares at the time they were transferred.

"This action by the trustee is a good thing for all legitimate creditors of SSH (Silver State Helicopters). It may help to bring money back into the SSH bankruptcy estate. Meanwhile, we are all still waiting to see if any governmental agency will bring criminal charges against Airola and Pickett," said California attorney Michael Jay Berger, who represents student creditors in the case.

In June 2008, In Business TV, a sister production of the Las Vegas Sun, reported FBI agents had interviewed Silver State students as potential crime victims.

Berger, too, said Thursday that he has thousands of student loan clients who have received questionnaires from the FBI. He said some 15 state attorneys general from around the country have been looking into the issue.

Students typically borrowed $70,000 at interest rates of as high as 15 percent, he said. Citibank has forgiven the loans of 68 of his clients, he's working with Key Bank in behalf of another 179 clients and is close to a settlement for 1,090 clients with the major lender Student Loan Xpress, Berger said.

But for students who paid cash, recovering their losses may be challenging because of a lack of assets in the case and the first-lien claim of Orix.

"The bad news is we're pretty far in the hole in this case," Berger said.

Leatham, in disputing the allegations in the trustee lawsuit, said he believes the key issue is whether the company was solvent when the transactions were made.

"It was a strong going-concern company at that time," Leatham said, arguing its demise was caused by the economic downturn and the drying up of student loan funding.

Not Yet

Predicting exactly when a proposed class action settlement agreement will be submitted to the Court has proven to be difficult. This proposed agreement will cover most former SSH students who obtained loans from Student Loan Xpress to attend Silver State Helicopters and were still enrolled at SSH at the time that it filed bankruptcy. It now looks like the settlement papers will be filed with the Court somewhere between next Tuesday, October 13 and next Friday, October 16. All class members will have a chance to accept the settlement or "opt out" and reject the proposed settlement. Many of my clients have pressed me for the details of this proposed agreement, but until it is submitted to court, these details are still covered by a written confidentiality agreement.