Lawsuit: Halcyon Jets defrauded charter firm

 - October 27, 2008, 11:55 AM

Charter broker Jet One Jets is seeking more than $60 million in compensatory and punitive damages from Halcyon Jet Holdings and brokerage firm Halcyon Jets for, it alleges, defrauding the company of its employees and customers. Delaware-based Jet One Group alleges that Halcyon Jets took proprietary information and “embarked upon a disinformation campaign” among Jet One Group employees to entice them to leave the company. Jet One Group also alleges that Halcyon knowingly provided to Jet One Jets false information about its management.

According to court documents filed with the U.S. District Court for the Eastern District of New York, Halcyon–under the leadership of CEO Mitchell Blatt, who is also named in the lawsuit–approached Jet One Jets in May to acquire the company, with assurances to Jet One Group that Halcyon was no longer under the leadership of Alfred Palagonia, a former securities broker who pled guilty in 2001 to enterprise corruption and one count of Martin Act securities fraud.

An earlier attempt by Halcyon to acquire the company had failed because “Palagonia’s reputation and criminal background was known to [Jet One Group owners Louis and Anthony Ottimo] and [they] determined it was not in the best interest to do business with any entity with which Palagonia was associated,” according to the documents. Blatt assured the Jet One Jets owners that Palagonia “was no longer involved in the management of Halcyon,” but the lawsuit alleges that Palagonia was “secretly continuing to run and make all executive decisions on behalf of Halcyon.”

“In reliance upon these false representations,” Jet One Jets signed a letter of intent on June 27. Halcyon issued a press release stating its intent to acquire Jet One Jets and broker A-List Jets, but Halcyon executives never signed the letter of intent, nor did they “have sufficient funds nor the access to sufficient funds to consummate the transaction,” according to the lawsuit.

As part of the negotiation, however, Jet One Jets had supplied Halcyon with access to employee and customer lists. The lists were to remain confidential and were not to be used by Halcyon for a period of one year from the letter of intent signing, terms with which Halcyon agreed.

However, Jet One Jets attorney Steve Legum told AIN that Halcyon used the confidential information to “steal” five to 10 employees and more than 100 customers. By July, Jet One Jets “was left with no brokers [employees] and no customers,” according to court documents. On July 28, Palagonia was among the Halcyon executives who informed Jet One Jets that Halcyon was terminating the letter of intent.

The action demonstrated a “pattern of racketeering,” according to the lawsuit, which also accuses Halcyon executives of mail fraud, wire fraud and “willful and malicious acts.” The court documents also list brokers Blue Star Jets and A-List Jets as victims of Halcyon’s “ongoing scheme to defraud.” Blue Star Jets would not comment on the lawsuit, and A-List Jets president Gordon Bijelonic said his company “has no issues with Halcyon Jets.”

Halcyon did not respond to calls from AIN.

Jet One Jets is no stranger to legal trouble. In March, the DOT fined the company $60,000 for the unlawful holding out of air transportation and engaging in unfair and deceptive practices and unfair methods of competition.