Former Braniff President On Trial For Fraud
NEW YORK (AP) _ Scot Spencer was warned by the Department of Transportation in 1991 to stay away from the management ranks of any U.S. airline.
Today in U.S. District Court in Brooklyn, the government started trying to prove that the former president of Braniff airlines violated the government order barring him from the management ranks of any U.S. airline.
The government also alleges that Spencer took more than $350,000 in kickbacks from Braniff’s advertising agency played a role in Braniff’s third failure.
And even after his indictment, Spencer allegedly continued to dabble in other airline ventures, with reports surfacing that he involved himself with the Private Jet charter airline and the now-defunct Republic Air Travel.
Braniff co-owner Jeffrey Chodorow was also Spencer’s co-defendant until last week when he pleaded guilty to the conspiracy and fraud charges just before jury selection was to begin. The government dropped the counts related to the kickbacks in exchange for the plea, prosecutor Eric Corngold said.
Chodorow’s lawyer, Gerald Shargel, and Spencer lawyer, Jeffrey Hoffman, declined to comment on the case.
During the time Spencer was supposed to be affiliated with the company, Braniff spent most of its days in bankruptcy court.
The carrier gained prominence during the 1960s with its pioneering flights to South America. But it hit turbulence in the late 1970s when the U.S. government deregulated the airline industry, intensifying competition.
By 1982, Braniff, then based in Dallas, filed for Chapter 11 bankruptcy protection from creditors. It later emerged as a smaller airline, but found its way back into bankruptcy court seven years later.
And that wouldn’t be its last trip there.
Spencer had a great interest in the airlines, fascinated by the industry and all of its intricacies. He sought to lead one of the nation’s carriers, and by the age of 19, landed himself at the helm of Air One, a fledging nine-plane airline based in St. Louis.
In the late 1980s as Braniff struggled to hold on, Spencer thought the carrier was a prime target for an interested buyer and approached Chodorow, a real estate developer, with the idea.
Soon after, Chodorow and a group of investors bought the airline in bankruptcy court.
A year later, Chodorow and Arthur Cohen, one of the investors, formed BNAir Inc. in Florida, with Spencer as its president. That April, BNAir purchased the rights to the Braniff name and logo, and then merged with Emerald Air Inc.
The Emerald agreement provided the much-needed federal Certificate of Public Convenience, which permitted the airline to carry passengers.
Before the airline could even get off the ground, the Department of Transportation barred Spencer from any role in managing Braniff. Its ruling was based on his criminal record, which included charges ranging from attempted grand larceny to theft by deception.
The federal order, however, did not stop Spencer from taking part in the day-to-day activities of the carrier, holding meetings with Chodorow and other Braniff executives and employees, the charges allege.
In August 1991, Braniff again filed for bankruptcy, only a month after it began regularly scheduled flights. It continued flying until July 1992, when it suddenly closed its doors for good.
Chodorow and Spencer were indicted last year on charges that they knowingly defrauded the government by allowing Spencer to secretly take part in the airline’s activities.
Spencer also allegedly received money from the Braniff’s ad agency, Stephen Associates, Inc., while the carrier was in bankruptcy, concealing assets from the creditors.
The airline made more than $2.6 million in payments to the agency, and the agency then made payments to Spencer totaling more than $350,000, which were not reported in Braniff’s financial books and pocketed by Spencer, the charges allege.
The indicted had alleged that Chodorow knew of the kickbacks.
Spencer faces up to 20 years in prison. Chodorow could face 15 to 21 months.