Dang, if she could only get away with looking good for another year, then as Governor she and her friends would be set for life
On Wednesday we were sued.
On Thursday Mayor Taylor settled, paying out $7.1 million of taxpayers' money
And so four years after the failure of Great Plains Airlines, Mayor Kathy Taylor volunteered $7.1 million in your property tax dollars to pay off money that the defunct airline owed to the Bank of Oklahoma.
Taylor's predecessor, Bill LaFortune, had attempted to persuade the City Council to authorize the same payment in the fall of 2005. LaFortune's effort was backed by a major PR push which included editorials and guest opinions in the daily paper. His plan was undone when City Attorney Alan Jackere issued an opinion that the payment would be illegal, as the City did not owe the money to anyone.
His opinion was that paying off the GPA loan would make the City's elected officials subject to a "qui tam" taxpayers' demand (see 62 O.S. 372, 373), putting them at personal liability for three times the amount of the payment.
The loan default triggered a lawsuit, filed on October 1, 2004, by the Tulsa Industrial Authority (TIA) against the Tulsa Airport Improvements Trust (TAIT) and Richard Studenny, who had been the attorney for both entities and had developed the convoluted and illegal deal to guarantee BOk's loan to GPA.
(You can read more background on the Great Plains financing deal, the lawsuit and LaFortune's attempt to intervene in my October 6 and November 17, 2005, columns. The report about the Great Plains deal by the Inspector General of the U. S. Department of Transportation can be found via a search on "Tulsa" at oig.dot.gov. Visit the online version of this article at urbantulsa.com to find hyperlinks to these items.)
Suddenly on Wednesday, nearly four years after the suit was filed, the City of Tulsa was added a defendant. The charge: "Unjust enrichment." Within 24 hours Taylor settled the case by committing the City of Tulsa to a $7.1 million settlement.
Unjust enrichment is a claim in equity, not one tied to any contractual obligation. Trial lawyers of my acquaintance tell me it's very difficult to prevail with such a claim, as it can fall to several defenses.
The first line of defense would have been a lack of enrichment, unjust or otherwise. The City of Tulsa did not profit in any way from the Great Plains deal, nor did TIA or TAIT, nor would any of those entities benefited directly even if Great Plains had been a tremendous success.
At best, the success of a locally-based airline flying to the coasts would have benefited the entire northeastern Oklahoma region by offering more convenient travel, indirectly and eventually (it was hoped) stimulating local economic development which would have (again, indirectly and eventually) increased local tax revenues.
But in fact, before Great Plains put a single puddle-jumper in the air, national airlines had begun flying non-stops from Tulsa to the coasts and Northwest had announced plans to add a daily Tulsa-Newark non-stop. GPA's raison d'être had dried up.
The direct beneficiaries of the money lent by BOk were the vendors and employees who were paid by Great Plains using the borrowed cash. Had the airline taken off financially, the big winners would have been the stockholders, the media and political insiders who used their political capital to push for the tax credits and loans and who received shares of stock in return.
But rather than defending the City, Taylor and her attorney Deirdre Dexter waved the white flag faster than Marshal Pétain.
Not only did Taylor surrender, but she orchestrated the opportunity to surrender.
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 co-signed 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 daily 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 have colluded in a lawsuit against the financial interests of the citizens of Tulsa. She is probably doing this to cover the posteriors 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 that would have prevented its planned approach to repayment.
Three years ago, during LaFortune's push for a taxpayer bailout for the loan, several councilors were invited one-by-one to the office of BOk President Stan Lybarger in an attempt to persuade them of the City's moral obligation to repay the loan.
Former Councilor Jim Mautino says he took city attorneys Larry Simmons and Drew Rees along to his meeting as witnesses and that Lybarger told them that BOk had twice turned down the Great Plains loan, but then-Mayor Susan Savage gave the bank certain assurances. She had no legal authority to make those assurance.
This would have been about the time Savage was assuring the City Council that putting part of the Air Force Plant No. 3 property up for collateral would not put the City in any financial jeopardy.
After the loan had been made, BOk had plenty of warning that there was danger of bankruptcy and default, but rather than calling the loan, the bank continued to disburse funds to the airline. The responsible bank officials deserve to suffer whatever financial and legal consequences may apply for putting the bank's federally-insured deposits at risk.
We Can Only Guess
One has to wonder whether the rush to get this done by June 30 had to do with some end-of-quarter or end-of-fiscal-year reporting deadline for the bank. Who stood to get hurt if an extra week or two were taken to air this issue publicly before a settlement?
And we wonder to what extent BOk has pursued its other avenues for recovering the debt. We know BOk sued the auditing firm of PricewaterhouseCoopers; how big was the settlement? Has it sued the shareholders of GPA? Has the bank pursued unjust enrichment claims against the businesses that were paid with the money BOk lent to GPA? Has the bank sued Susan Savage for making false representations? Has the bank exhausted its claims through the bankruptcy court?
In her brief interview with UTW's Brian Ervin, Taylor says that she conferred with legal counsel as to the City's risks and weighed the cost of settlement against the potential cost of going to trial. If she expects Tulsans to believe that this deal is a fair outcome, she needs to release all the memos, e-mails, and analyses that led to her decision.
And the City Council needs to insist on that. They may have had no choice but to approve the payment of the settlement, but under state law (62 O.S. 372) they have the first responsibility to sue Taylor to recover this improper disbursement of tax dollars.
A majority of councilors has expressed opposition to this settlement. They need to act on their opposition.
A fraudulent claims lawsuit would open the door for full discovery and exposure of this sordid attempt by Tulsa opinion leaders who used their influence to put public assets at risk for their own private gain.
The repayment of the Great Plains Airlines loan by the City would have been illegal and improper if it had gone through three years ago. The fact that Taylor succeeded in creating a legal pretext to make the payment only compounds the impropriety.
But Wait, There's More
In its coverage of the payoff, the daily paper once again misleads its readers about the extent of the stake its holding company, World Publishing Corp. (WPC), had in the airline. The paper stated Friday:
"World Publishing invested $100,000 in cash in Great Plains Airlines. The World also committed to providing the airline with the equivalent of $600,000 in advertising at standard bulk rates. In return for the cash and in-kind investment, World Publishing was issued 233,333 shares of Great Plains Airlines preferred stock.
"In total, Great Plains issued 7,366,836 shares of common and preferred stock. The World's stock represents slightly more than 3 percent of the total."
In November 2000, World Publishing Co. acquired its 233,333 shares of GPA preferred stock at a price of $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.)
At that point in time, World Publishing's investment constituted a majority of outstanding shares of preferred stock in Great Plains and, in terms of dollars, a majority of the capitalization.
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. That's the document the daily paper needs to release, if the daily wants to convince us that WPC's investment was insignificant.
During that same month, the paper was editorializing in favor of City Council approval of the mortgaging of Air Force Plant No. 3 to support GPA. It continued to run positive stories about the airline's prospect, encouraging further public investment. It didn't disclose its financial interest in the airline until February 16, 2003.
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