Wichita Airport Lawsuit Alleges Fraud, Conspiracy

 - February 24, 2020, 10:24 AM

Midwest Corporate Aviation (MCA), the long-time FBO at Col. James Jabara Airport (AAO) filed a lawsuit last week alleging fraud and conspiracy by the city, Wichita Airport Authority (WAA), and director of airports Victor White over the relocation of a Part 135 operator and aircraft management firm whose original plans included opening a second FBO there. The lawsuit was filed on February 18, the same day the Wichita City Council approved by a 5-2 vote a lease and use agreement for Clemens Aviation to operate at AAO, an executive and general aviation airport.

According to city documents, Clemens, which operates an FBO at Stearman Field (1K1) 21 miles northeast of Wichita, plans to lease for 30 years more than 100,000 sq ft of land at Jabara and invest about $4 million to build 36,000 sq ft of hangars, offices, and a customer service area. At those facilities, Clemens would offer aircraft storage, charter, maintenance, sales, management, and pilot services, according to the documents.

MCA alleges in the lawsuit that it learned of a “secret agenda” by Clemens Aviation and White to create a second FBO on land that was not part of a request for proposal (RFP) to expand at AAO. MCA further alleges it was the only company to respond to the RFP, which was approved by the WAA. Additionally, MCA alleges the second FBO was on land that wasn’t part of the RFP and was in a location that was contrary to the airport master plan. Since MCA had already begun work on its expansion, the lawsuit alleges the plans by Clemens “would profoundly decrease the value of the MCA leasehold at Jabara Airport,” according to the lawsuit.

After MCA learned its RFP to expand on two tracts of land at AAO was approved in February 2018, it invested $350,000 in improvements to its main terminal at Jabara, signed a $1.8 million contract for the construction of an 18,000-sq-ft hangar and started planning for the construction of a second, $1.8 million, 18,000-sq-ft hangar. At the same time, it further alleges “that Mr. White was secretly in discussions with Clemens Aviation for the development of a second FBO,” according to the lawsuit.

About two months later, MCA alleges it was told by White that the “he was unilaterally rescinding WAA’s acceptance of MCA’s proposal in response to the RFP and was retroactively terminating the RFP” because MCA was no longer contemplating a change in its ownership structure and changed the sequencing of construction for its two new hangars, according to the lawsuit. Following a June 2018 meeting between White and MCA, the FBO continued its development plans and later that summer signed a supplemental agreement with WAA to extend its lease at AAO to 30 years, as well as sign a separate agreement for a new, 10-year lease with the city on a fuel farm used by MCA.

All the while, “White continued to negotiate the creation of a second FBO by Clemens Aviation,” according to the lawsuit.

On October 24, 2018, Clemens Aviation announced plans to construct and open an FBO at AAO. “The plans that were released by Clemens showed the construction of a second FBO in the corporate area of Jabara Airport in substantial contravention with the Master Plan, in a manner inconsistent with the RFP process, and in direct conflict with the many statements that had been made by Mr. White to MCA during the previous months during which White had solicited and negotiated numerous significant investments by MCA in Jabara Airport,” according to the lawsuit.

But at last week’s city council meeting, Clemens Aviation attorney Christopher McElgunn told councilmembers that the company’s plans at AAO didn’t include operating an FBO. “The operation will purchase fuel from another vendor, another operator at the airport,” McElgunn said, adding the operation would focus just on Part 135 operations and managing aircraft.

McElgunn and Charles Wittmack, the attorney representing MCA, noted during the council meeting that Clemens and MCA were actively negotiating a resolution and that those conversations were “fruitful.”

“The problem here is how the process unfolded,” Wittmack said. “There was a public process that Midwest Corporate Aviation was forced to pursue and there’d been a separate process that was frankly just a conversation among friends. We want to do business with our friends and that works great in business. It doesn’t work great with the city. Because the city is at its best when it pursues its objectives consistent with its planning documents, through a public process, through transactions that occur at arm's length.”

Following a request by Wittmack and motion to table a vote on the Clemens lease until the two companies could come to a resolution, the motion failed. Even with the lease approval, Wittmack told the council he was hopeful an agreement could be reached without court intervention. “I wish I could tell you what will happen,” he said. “I don’t know. We’re going to continue negotiating in good faith and move forward and get this thing resolved.”