Former Eclipse execs embroiled in lawsuits

 - November 23, 2009, 5:49 AM

Although Eclipse Aviation no longer exists, having been liquidated following a Chapter 7 bankruptcy filing earlier this year, legal actions surrounding the company continue to multiply.

Four lawsuits were filed
on October 14 in New Mexico district courts by former deposit-holders for Eclipse 500 very light jets, alleging various wrongdoings–including fraud–by Eclipse Aviation executives before the company’s bankruptcy. Named in the suits are former Eclipse Aviation CEO Vern Raburn, chairman Roel Pieper, COO Peg Billson, president and general manager Michael McConnell, CFO Mark Borseth and other former executives and employees.

One of the suits also lists defendants who were on the Eclipse Aviation board of directors, including Harold Poling (former Ford chairman and CEO), Kent Kresa (former chairman and CEO of Northrop Grumman) and Alfred Mann (chairman and CEO of MannKind and reportedly the largest investor in Eclipse Aviation as well as an investor in the new Eclipse Aerospace).

The lawsuits appear to be an attempt to wrest some money out of the insurance companies that provided directors and officers insurance for Eclipse Aviation, according to Raburn. “The insurance policy expired on Sunday the 18th [of October]. That’s what triggered most of this stuff,” he told AIN.

The lawsuits have no bearing on Eclipse Aerospace, which purchased the assets of bankrupt Eclipse Aviation on September 30.

Some of those named in the lawsuits are salespeople, customer support personnel and contracts administrators. According to Raburn, these lawsuits will succeed only in generating “a lot of anguish.” People will have to testify during depositions and spend money on their own lawyers to defend themselves, he said, “which most of them can’t afford, just because some plaintiff put their name down because they talked to them once.”

That angry depositors, who each lost from tens to hundreds of thousands of dollars, filed the lawsuits doesn’t surprise Raburn. “It wasn’t unexpected,” he said. “To say it’s a massive disappointment is an understatement. It seems to be the American way. This is going to take years and years, and in the end, the only people who make money are the lawyers. There will be millions and millions in legal fees, and that all comes out of the insurance money, if the insurance pays for it.”

Raburn himself lost plenty of money in the bankruptcy of the company he founded. “I lost far more money in the whole Eclipse thing than anybody who sued,” he said, “from money I invested as a straight shareholder and money as stock.” In any case, he added, he already left the company months before its first Chapter 11 bankruptcy filing late last year. “I had no plans to do what happened when I was kicked out,” he said. “The investors who haven’t gotten sued, they are the ones who should have been. I lost a whole lot of money, but I’m not suing anybody.”

The new owners at Eclipse Aerospace have hired some former Eclipse Aviation employees and are working on supporting the 260 Eclipses that were built. “I’m glad that people who truly understand what a great airplane the Eclipse is ended up buying the company, and it wasn’t just a conglomerate.” Raburn is also happy that Eclipse Aerospace is supporting the fleet. “It really is a staggeringly wonderful airplane,” he said. “We were awfully close to succeeding.”

More Legal Disputes
Meanwhile, legal disputes are erupting on another Eclipse front, between Alfred Mann and former Eclipse board chairman Roel Pieper.

The Alfred E. Mann Living Trust is a plaintiff in a March 19 motion for summary judgment, seeking repayment of $10 million by Etirc Aviation and Etirc founder, chairman and managing director Pieper.

The money was part of an agreement by Alfred Mann and Pieper each to provide $10 million in debtor-in-possession financing to keep Eclipse alive until Pieper could buy the company. But Pieper wasn’t able to complete the deal and defaulted on his $10 million promissory note to Mann, according to the Mann Living Trust motion. “Pieper has never denied that Etirc is in default of the promissory note,” the motion states, “or that he is in default of the Guaranty. To the contrary, Pieper has informed Plaintiff that he allegedly does not have adequate funds to fully meet his payment obligations, taking the cavalier position that ‘it is what it is.’”

The court eventually granted the Mann Living Trust’s motion for summary judgment and on June 19 ordered Pieper to pay $10,206,027.39 plus per diem interest of $2,796.17 starting from February 28 until the full amount was paid. Pieper never paid, and on September 18 the Mann Living Trust subpoenaed Pieper, “directing that he produce certain documents and appear for a deposition under oath concerning the nature and whereabouts of his income, property and other assets.”

Pieper has applied to the court to quash the subpoena and for a protective order, but on November 4 the Mann Living Trust filed a motion, asking the court to force Pieper to produce documents and pay legal fees and “other such relief as the Court deems necessary,” and “deny Pieper’s application to quash subpoena or for a protective order.”

According to the motion, “The court should be reminded that the document requests served on Pieper have been rendered necessary only because Pieper has refused to comply with the Court’s judgment and has continued to incredulously [sic] tell Plaintiff–while maintaining his lavish lifestyle in the South of France–that he lacks sufficient assets to satisfy the judgment. Thus, regardless of how ‘burdensome’ Pieper may claim the document request to be, it is the end result of his own stonewalling.”

Mann’s lawyers haven’t given up on getting money from Pieper and have filed a “Writ of declaration of concerted concealment before the District Court of Grasse, France,” seeking to prove that Pieper intentionally concealed the true ownership of a Swan 80 sailboat and a villa in Antibes. The boat is worth about U3 million and the villa was purchased by property investment company l’Hermitage for U2.65 million in January 2008. According to the declaration, l’Hermitage is owned by four shareholders, Pieper’s children, two of whom are minors.

Mann is claiming a “de facto” lien on these assets, the value of which is a substantial portion of what he is owed by Pieper.