11:59 PM PDT on Saturday, July 23, 2011
By KIMBERLY PIERCEALL
When asked why control of most of San Bernardino International Airport was handed over to a convicted felon — sent to prison for taking kickbacks for secretly managing an airline in bankruptcy — those overseeing the former Norton Air Force Base’s conversion into a commercial airport gave two reasons.
The first cited by elected officials and consultants leading the airport is that Scot Spencer, 46, was an expert with connections in the aviation industry who could help them secure an air carrier at the airport.
And second, he was the only one who would take on developing the airport; no other private company would do it.
“I would much rather be doing business with some large corporation that didn’t have a past,” said Don Rogers, executive director of the San Bernardino International Airport Authority, during a 4 ½- hour meeting with reporters and editors from The Press-Enterprise.
During that meeting, Rogers pointed to Spencer’s ability to recruit general aviation manager Million Air and more recently Boeing, which has been conducting tests of its freighter planes there off-and-on since October, among several reasons why he trusted Spencer to play such a large role at the airport.
Spencer was awarded two no-bid agreements in 2007 to develop the airport and another in 2009 to manage it.
Airport officials have produced no evidence that the airport sought out any other developers and said there was never a request for proposals issued to develop the terminal and the general aviation facility.
The cost to build a passenger terminal and a place for private pilots to land has grown from $45 million to $142.5 million four years, later with construction ongoing. Spencer’s companies have earned at least $6.4 million in developer fees and reimbursements in that time.
A recent civil grand jury report has questioned the close relationship that’s developed between Spencer and the airport’s leaders, including Rogers.
Rogers said he and the San Bernardino International Airport Authority — made up of elected officials from the county’s east valley — entrusted Spencer to develop and manage the airport because they were impressed by what he had done in San Bernardino.
Spencer’s efforts to join the aviation industry at its top management levels started early.
He was only 24 when the Wall Street Journal ran a 3,700-word story in 1989 about his role in reviving Braniff Airlines before it filed for bankruptcy that same year, detailing his prior aviation and criminal missteps.
According to the story, Spencer began his entrepreneurial aviation streak not long after graduating from the Marine Military Academy in Harlingen, Texas, when, at the age of 19, he attempted to recruit staff for a start-up airline dubbed Southern Express that never got off the ground.
Later, he talked his way into the role of CEO of the small Air One airline, a reign that lasted two days before executives realized he wouldn’t make good on a $2 million promise, the story said. He was convicted of writing a bad check in New Jersey and charged with attempted theft at the Dallas-Fort Worth International Airport.
Spencer refused to comment on the story’s claims and incidents that occurred more than 20 years ago, except to say that his lawyer at the time wrote the newspaper a three-page letter pointing out errors in the story. The story has not been corrected.
The Wall Street Journal story described him as an aviation-industry groupie who didn’t know much about running an airline. While at Braniff, Spencer was known for writing directives to his staff on the back of envelopes, sitting in the cockpits of the planes and starting up wonky conversations about airline industry timetables, the story reported.
It was his role in yet another revival of Braniff Airlines that went bankrupt that led to his 51-month federal prison sentence in 1996 for bankruptcy fraud. Spencer had orchestrated a scheme to divert more than $350,000 in payments to himself that would have otherwise gone toward the airline’s advertising budget, hiding the payments and his involvement in the airline from creditors. In cases when Braniff overpaid the advertising agency, the overpayments went to Spencer instead, court records say.
The Department of Transportation had also forbade Spencer from being involved in the airline.
During that time, Spencer was also director of a company called Republic Air Travel, which contracted with another company to sell tickets for charter flights. The DOT determined that Republic, at Spencer’s direction, was operating as an unlicensed public charter airline, selling its own tickets and often knowingly overbooking flights.
After serving time in prison, and with the DOT’s case against him for Republic Air Travel pending, he signed his first agreement with San Bernardino Airport to lease hangar space.
He wanted to store 13 Boeing 727-200 aircraft bought from American Airlines as part of a new company he was managing, Ascend Aviation, which contracted with other companies to fly the planes for charter flights Ascend booked.
The company went out of business in 2003, owing the airport $193,000 in back rent, when the DOT cited Spencer and his business partners for operating an unlicensed charter airline.
For that, Spencer was ordered by the DOT to “permanently cease and desist from further marketing or other involvement in air transportation operations,” and was further banned from the aviation industry.
Spencer filed a motion asking that the ban be reviewed because he said he wasn’t given enough notice to defend himself, but the prohibition stands unchanged.
“Mr. Spencer simply cannot be believed,” according to a footnote in a 2005 legal filing by the Department of Transportation’s enforcement office related to his aviation ban.
The civil grand jury recommended the airport steer clear of Spencer considering his past and because his airport activities appeared to be in direct violation of the federal ban.
After reviewing the grand jury’s report, though, the DOT determined that Spencer’s activities at the airport, “alleged in the report do not appear covered by the prohibitions set forth in the DOT order,” according to agency spokesman Bill Mosley.
Air transportation, as defined by federal statute, is limited to running an airline and doesn’t include operating an airport or developing an airport or general aviation facility, Mosley said.
‘We were always aware’
San Bernardino Mayor Pat Morris, who is president of the airport authority governing board and co-chair of the Inland Valley Development Agency, said all involved were well aware of Spencer’s past before entering into agreements with him.
“We went into this relationship with our eyes open,” Morris said shortly after the grand jury report was released June 30. “In no way did Scot attempt to hide from us his history. We were always aware with the issues in Scot Spencer’s life.”
Despite having no apparent prior experience developing and managing a commercial airport, Morris defended the decision to hire Spencer, paying him several million dollars in developer fees and reimbursements so far pointing to his resume and knowledge of the industry.
“It’s there. You can see it. We saw it,” he said. “We understand this is a world that’s relatively small in terms of the number of experts that’s available.”
Later, during the meeting with The Press-Enterprise reporters and editors on July 5, Morris referred to his 30 years spent as a judge dealing with people with problems and their efforts to put their lives back on track.
“He is in the process of redeeming himself,” he said of Spencer.
Several days after the civil grand jury report was released, Rogers said Spencer’s achievements at San Bernardino Airport gave him confidence in Spencer’s credentials. In almost every case, though, the results of those achievements were hardly successful.
He brought 13 planes to the airport in 2003, when he began renting space as KCP Leasing, which was affiliated with charter airline Ascend Aviation. His role with the charter airline eventually got him banned from the aviation industry and saddled with a $1 million fine after the Department of Transportation ruled it was operating without the proper license.
In August 2005, he became the landlord of Hangar 763, which was filled with a variety of aviation tenants at one time. But first he had to pay more than $193,000 in rent he owed the airport when KCP and Ascend went out of business. Today, the only tenants are SBAM Technics, a maintenance firm now owned by Spencer’s San Bernardino Airport Management company, and AeroPro, an aircraft painting company. Former airport tenants have reported that Spencer’s involvement was part of the reason they left or were forced out.
He persuaded a nationally recognized fixed-base operator, Million Air, to attach its name to the general aviation operations at the airport.
“If you can pull that off, we’re interested,” Rogers said of how he and the board became increasingly impressed with Spencer.
Before being awarded the no-bid agreement to develop the passenger terminal, Spencer lowered the estimated cost to build it from $104 million to $38 million. The cost today, however, is $101.5 million, not counting the cost to build the Million Air general aviation facilities and U.S. Customs building.
He arranged for used aviation equipment to be acquired from American Airlines at a discount to the airport. The civil grand jury report says the airport, which agreed to pay Spencer $4.06 million, may have paid more for that equipment if it had bought some of it new.
Rogers said Spencer lured Boeing to do test flights at the airport, bringing hundreds of Boeing employees to the area starting last October. Spencer would often update San Bernardino airport staff and elected officials at the twice-monthly public meetings about the aircraft maker’s contract extensions and activities at the airport.
Boeing, however, has disputed that it came to the airport because of Spencer or his connections within the aviation industry.
“Boeing chose the San Bernardino facility because of three factors: hangar size, availability and weather,” said Sandra Angers, a spokeswoman with the company’s test and evaluation division.
“The San Bernardino Airport and Mr. Spencer do not speak for The Boeing Co. nor can they speak to the basis of our business decisions,” she said in an email. “Boeing had limited interaction with Mr. Spencer and we were not aware of his background.”
Spencer, at first, seemed to disagree.
To read entire story, click here.