At 26, a pilot bought his failed employer for $27,500 to save his flying job
The company had been hollowed out by fake jet sales, and the 26-year-old pilot bought it mainly to keep flying.
David Senra · From a $27,500 Charter Company to a $4 Billion Private Jet Giant | Kenn Ricci, FlexjetThe call came from Rick Michaels, the dispatcher at the tiny charter outfit where Kenn Ricci flew part time while he was in law school. The boss had vanished, no one else wanted the mess, and Michaels told Ricci he was not smart enough to run it himself but Ricci might be.
Ricci was 26, a fill-in pilot for J&J Aviation in Cleveland. The company managed a handful of small propeller planes and flew them for hire. It had three employees: a secretary, a dispatcher, and Ricci.
What Ricci had walked into was a fraud. J&J was run by a man named Jeff Tolk, and in the early 1980s Tolk had exploited a 10% investment tax credit for buying aircraft, a tax break that let buyers subtract 10% of a plane's price from what they owed in taxes. He sold Citations, a brand of business jet, priced at $750,000 to distant buyers living in California, far from Cleveland, who then received the $75,000 tax credit. The problem was that some of those jets did not exist.
Each month, Tolk sent owners a tidy statement for a plane that was never in the air. It had flown 40 hours, taken in $90,000, spent $78,000, and enclosed was a $12,000 check. In reality, Ricci said, Tolk banked the purchase money, perhaps $1.5 million for two airplanes, and dribbled out interest as fake profit. After about 18 months, an owner demanded to see his jets. Tolk fled.
That is how a charter company with four remaining airplanes and little else came to be for sale for $27,500. Ricci did not want to be a businessman. He wanted to keep flying, and if the airplanes went away, so did his part-time pilot job. So he agreed to buy it to protect the work.
The business was still holding $27,000 in cash, which Ricci planned to use to cover almost the entire price. For the other $500, he called his father.
His father asked how he would pay, and Ricci explained the plan. When his father asked about the last $500, Ricci answered, "Why do you think I called you?" His father covered it, Ricci closed the deal, and renamed J&J Aviation as Corporate Wings, a name Ricci said still exists today.
Questions people ask
What does a small charter company actually do?
A charter company does not sell airline tickets. It hires out an entire small airplane, with pilots, to whoever needs a trip. In this case, J&J Aviation also managed airplanes owned by other people and rented them out when the owners were not using them.
What was the investment tax credit behind the fraud?
It was a tax break that let a buyer subtract 10% of the price of new equipment, like an airplane, directly from taxes owed. For a $750,000 jet, that meant a $75,000 credit, which made the investment attractive even to someone who never planned to fly the plane.
Is it legal to buy a company with its own bank money?
Generally, a buyer may be able to use cash that stays in the business as part of the price. The source does not address whether that move was legally reviewed here, and regulators or lenders may look closely at such deals in other cases.