Streuli: Taken for a ride
The Journal Record March 23, 2010
She was born in November, 1948, a baby boomer if ever there was one, full of hope and promise, sure to achieve great heights.
Now, despite the finest care, she stands humiliated, the star of a show that caused the ruin of a manufacturing company, the seizure of a bank, tax losses in the millions and the sort of private financial catastrophes that leave men with heads hung low at family reunions.
There, gleaming in the sunshine, is the show pony on whose wings hope briefly soared. The four-seat Luscombe Model 11A, tail number N1674B, will go to the highest bidder this week, one of the remnants of Quartz Mountain Aerospace.
The plane is one of 76 known Model 11As in the United States. It`s registered in Kansas, where Quartz Mountain Aerospace tried to expand its operation from the company`s home in Altus. Although QMA, one of several Luscombe Aircraft Corp. successors, flew the plane around the country to attract potential investors and customers, the company intended to build a different aircraft, the model 11E. It would be a modernized 11A, with a wheel under the nose instead of the tail, a modification that had been made to N1674B. The 11E would have some modern electronics and an updated engine and propeller.
Perhaps Quartz Mountain Aerospace would have survived if the company had simply built the 11A, which it could have done under its FAA type certificate. Perhaps they could have sold enough 11As to keep them aloft while the 11E was developed as the new standard for pilot training. Perhaps not.
The company`s president, John Daniel, bragged about public incentives when he was opening the production doors in March, 2006. He boasted that the Oklahoma Industrial Finance Authority put in $2 million to get the company going and that the city of Altus threw in another $2.5 million. Private investors chipped in $10 million more.
`That`s one thing that is attractive about Oklahoma," Daniel told The Journal Record at the time. `The state initially gives up some tax money, and we put that back through the creation of jobs and by using as many Oklahoma-based suppliers that we can."
Quartz Mountain Aerospace never took off, and First State Bank of Altus crashed and burned with it. When the airplane maker filed for bankruptcy in November, 2008, it owed First State Bancorp $6 million.
The bank`s president, Paul Doughty, also happened to be the president of Altus Ventures, which sold $20 million of Quartz Mountain Aerospace`s tax credits over three years. That got Quartz Mountain Aerospace about half the credits` value in cash from companies that needed to reduce their Oklahoma tax liability.
`We`re doing good stuff," Doughty told The Journal Record in April, 2006. `We`re not doing bad stuff."
A week after he said that, Doughty hosted a fundraiser for Republican candidates, writing checks to some of the same people who controlled the tax credits.
In August 2009, First State Bank of Altus became Oklahoma`s first state-chartered bank to fail in 17 years.
Oklahoma should have the tools to lure profitable companies. But in addition to QMA, you and I invested $18 million in Rocketplane, which went south last year. In 2006, we spent $27 million in Ardmore because China`s Nanjing Automobile Corp. was going to build MGs there. That deal was kaput by 2007. And surely you remember Great Plains Airlines.
Something good will come of the Quartz Mountain Aerospace fiasco. Someone will buy that 61-year-old Luscombe Model 11A with tail number N1674B, be delighted with the purchase, and take what`s left of a historic aircraft company off on a new adventure. But Oklahoma taxpayers will have paid for the trip.
March 23, 2010 at 11:54 pm
Where did you get your facts? Not from any records. Go pick up the tax commission`s Capco reports. The 2006 report, the first ever, shows Doughty got $60 million in tax credits for 2006 alone. That was after Doughty was interviewed about getting another $66 million, for 2005. Affinity Ventures also claimed to have invested in QMA. Check SEC filings for Chaparral Energy, and it alone got $30 million in tax credits.
Where did you get the $27 million for Nanjing auto plant? Ignore the facts again? Check those same tax commission Capco reports. You will find odd names on those reports. Check those out and see if you find where they exist? If they do then follow the trail to the Ardmore MG plant.
You neglected to mention QMA employees were laid off without back pay. That QMA had not been forwarding unemployment and insurance payments it had been withholding from employees checks. Leaving employees without insurance and unable to draw unemployment. That was a criminal offense. Unemployment was later paid by the state, but that not until many had no job, no money, for some time.
Nor. did you mention that the QMA loan was but a minor part of the bank`s problems. Try fraud, on many fronts. Bank fraud, to pull off tax credit fraud. Fraud in a Colorado land deal. Apparently, you never caught on to the fact an investigation has been ongoing since before the bank was seized and turned over to Herring Bank, in July.
One could wonder if you have written a low ball cover story to provide cover for state officials who have been turning their backs, on fraud? Or, where you just that lax in checking out the facts?
Don`t feel alone. There is not one reporter or paper in the state that has a clue. Never will as long as all are so willing to rely on what others say, and unwilling to check their facts. There is a good chance that they will totally miss when bank fraud charges are filed.
Here is a tip. Go to http://prowlingowl.com/AltusVentures/FakeLoanSchemeData.cfm where you will be taken step, by step or more appropriately mouse click by mouse click, to where you can see the bank fraud for you own eyes. Right there bigger than life on the Altus Bank`s FDIC quarterly call report.
The OK State Banking Dept missed that for more than 5 years, as did the FDIC. So did the SEC miss Bernie Madoff`s fraud. It happens, and it happens all the time!
March 24, 2010 at 8:35 am
Interesting story. However, I have to wonder about the facts. For example the state most certainly DID NOT spend $27 million in Ardmore. The state also did not spend money for an MG facility. Opportunity Fund money ($15 million) was used to build a new runway at the Ardmore Airpark International Trade Center. Unlike other fiascos cited, there is something to show for the money. The runway is in use and has resulted in increased economic activity. Don`t lump that project in with the others cited. It was state money invested in public infrastructure. Incidently, Tulsa and OKC also received money from the Opportunity Fund. zanella
Patricia L. Daniel
March 24, 2010 at 9:05 am
FYI, When John Daniel left Quartz Mountain Aerospace in October, 2007, there was still money in the bank and virtually no debt. The company was well on its way to making a go of it. They had a sales team and a support team in place and were ready to go. Four aircraft were ready for sale and number ten was up on its wheels on the line. The employees could taste success and were bouyed up as they had never been. You could feel the energy and excitement when visiting the plant.
John had never been happy with the way Paul Doughty and Don Anderson were raising money for production, nor was he happy about their `management fees." Doughty and Anderson controlled the board of directors and they all decided they needed a `big name" CEO and hired Mark Arciero (who by the way was a complete unknown in the aircraft industry) because he `understood finance," which apparently they thought John did not . In the early days of his employment at QMA, John traveled the state drumming up supporters and investors and was personally responsible for obtaining over 4 million dollars in investment for the company. As far as I know Mark Arciero never found one penny for the company, but he sure did know how to spend. It took him less than a year to have the company deeply in debt, Paul`s bank in trouble and he didn`t know how to build airplanes, either. The BOD apparently thought John would be willing to stay there and build airplanes even after they brought an unknown who did not know how to run an aircraft company in over his head, because they were very surprised when he left. And one of them admitted he didn`t believe the company could make it without John. He was right.
John was not with the company during the early years. When he came to Luscombe/QMA in 2001 he had been told they were only a `month away" from obtaining the type certificate. That was not true. Virtually nothing had been done to obtain the TC and the FAA wasn`t even aware they were still in business. The TC was obtained in two years after John was hired, and that is record time, and he did it on very little money. It took years to get money to get into production, but with the tax credits they could have made a success of the business. The BOD and Doughty and Anderson got greedy and wanted to make the company as big as Boeing immediately. John told them they should stay small, grow gradually as the market permitted. They company had a president with 30 years of aircraft experience, most of that with Cessna. He knew the industry, he had been through two economic downturns with Cessna, he knew how to survive them. But the grass is always greener, and the board preferred a sweet talker over an honest realist, so they got what the got and the company is no more. You should do more research.
March 24, 2010 at 9:21 am
I first became acquainted with the Luscombe project in the 1990`s in Kansas. At that time I believe they were trying to find a way to build it at the Parsons, Kansas airport. When I moved to Oklahoma, I was at least a little surprised to see that the project had surfaced here.
It is a sad day when a project like this fails. However, I would hope that someone with a better business model and better financial backing would resurrect this project at some point in the future. But, given the current business climate, I do not anticipate that happening any time soon.
March 24, 2010 at 2:22 pm
Your comments are limited to one channel of funding. Scissortail Capital Company, received $9.45 million in tax credits, for claiming it invested $31.5 million in Oklahoma Global Motors, which according to the Oklahoman, was the Oklahoma company, run by Marc Nettles, for the plant.
Then the most amazing thing happened! Oak Hills Capital received $9.45 million in tax credits, for claiming it invested $31.5 million in Carter County Car Company. And, at the same time that Scissortail said it invested $31.5 million in Oklahoma Global Motors.
This mystery gets even deeper. We can`t find that Carter County Car Company even exist outside of this claim? Considering Ardmore is in Carter County, that would be a good place to start looking.
Wes, being the Ardmore area economic development guru, maybe you could help us? Would you know anything about this Carter County Car Company? Where it is located? What kind of car business? Who might own this phantom business?
That is a state secret, but It would be sort of nice for the public to know where that nearly $19 million actually went? Maybe we could find out a lot of jobs were created, and be real proud of that. As it now stands we definitely know there are no jobs at any MG plant there in Ardmore. That has some of us concerned about just where is this money going?
March 24, 2010 at 2:26 pm
Re: Wes Stucky
Wasn`t picked up in the. above comment
March 24, 2010 at 3:57 pm
Allow me to clarify some of the facts I used, particularly the dollar amounts and their origins. According to records we gathered in 2006, the Ardmore/MG project was getting $15 million from the Opportunity Fund. Additionally, the city of Ardmore was contributing $3.5 million, and the Ardmore Development Authority was pitching in $11.5 million – mostly in Tax Increment Financing funds – and there was to be $2.5 million from the Federal Aviation Administration. That adds up to $27 million. Additionally, a loan of $5 million had been promised to the MG project. The original story ran July 31, 2006.
On the other point, First State Bank of Altus did indeed have well-documented losses on a Colorado real estate development that contributed to the bank`s failure. We reported that last year; related stories appeared on Mar. 3, Jun 23, Aug. 3, Aug. 4, Oct. 24, Nov 3, and Dec. 7. We also published an AP report on the QMA payroll issues on Jan 23, 2009. So, yes, we know about that.
But this column isn`t about those problems — it`s about public money that`s been spent with the hope of great economic development and how in these cases at least, what was promised never materialized. That`s sad, as Mr. Burnett said. It`s especially sad for taxpayers whose money was spent with little or none of the promised return on that investment.
Spending public money to create jobs that don`t materialize is tough to swallow when our state budget is a wreck and we`re taking the existing jobs held by state employees and forcing them to accept unpaid furloughs.
March 24, 2010 at 5:14 pm
You are still missing something here, and your source of information regarding First State Bank Altus is the party line.
The bank was involved in fraud. Fraud in Colorado, and more to your point, committed fraud in creating counterfeit loans used to claim tax credits. Representing the counterfeit loans as money invested in QMA for economic development.
Don`t feel like you are alone. This story has been swept under the rug for the time being. That is easily done when the media relies on the very state officials and so called experts involved in tax credit fraud. In this case the State Banking Department which most relied on for the `some bad loans" story failed to catch the fraud.
See with your own eyes. Go to the FDIC.gov website and search for First State Bank Altus OK. Look at the December 2005 bank call report. Click on Assets and Liabilities. Go down to line 48 where you will see:
$649 million in `Unused loan commitments"
For any not familiar, call a banker and ask them, how a $100 million bank could have legally committed to $649 million in loans?
Look at all the other numbers to see how unreal that is. It is not a typo. That is only for starters.
The whole story can be found here including the 6 receiving the counterfeit loans at
Go look at the Federal Reserve System–National Information Center (NIC) who plays a key role, where you will find another $430 million http://www.ffiec.gov/nicpubweb/nicweb/SearchForm.aspx
Go find an OTC Capco report showing Altus Ventures claim it invested $200 million in QMA during 2006, got`m $60 million in tax credits. That doesn`t include the $221 million 2005 claim this paper covered, in early, 2006 got`m $66 million in tax credits.. Those cannot be the same investment.
Only $32 million was ever invested in QMA
That is as you said `Spending public money to create jobs that don`t materialize." Altus Ventures is only one operating tax credit frauds.
My point was you have grossly underestimated the problem, and therefore are misleading the public as to how serious the problem is. You will have to dig for these facts, and not expect state officials who are turning their backs to provide the truth. Why do you think state officials are withholding information about tax credits, preventing the public from learning what is occurring?
Here are two little extras. 1. Oklahoma law allows state officials to serve as investors and earn a guaranteed $2 for each $1 they invest. They get their $2 profit the same day they invest, and it is theirs to keep even if the business fails the next day. Drop a coin in a slot machine and win two every pull.
Altus Ventures used $507 million of the fake loans. The rest went to Affinity Ventures. Affinity Ventures was owned by Robert McDonald, then head of Capital West Securities, the firm the media most often deferred to for investment expertise. The firm promoting how great these tax credit programs were for our state`s economy. Capital West Securities was behind the key lobbying effort for these tax credits. Imagine that?
Hard to believe, and making this statement earns one the label of a `conspiracy theorist." The facts are the facts, and only have to be examined. If you want the facts, you don`t ask the crooks. You have to dig and dig deep.
March 24, 2010 at 5:20 pm
$440 million in tax credits.
Oops! I forgot to mention that according to an internal OTC email, the cost for 2006 through 2008, and estimated for the remainder of 2009, was $440 million in tax credits. For this one program.
You were that far off Ted! That was my point!
Trying finding any jobs.
March 26, 2010 at 11:06 am
I really hate the fact that you guys are portraying First State Bank of Altus as a dirty no good bank. That is so far from the truth. I have been employed here for 8 years and went through the closing. I will tell you that the only thing bad about this bank was the single individual that is responsible for bringing this once proud bank to it`s knees. Go back and look at our past ratings from our exams, in fact, look at the last one before all of this hit the fan, and you will see that we were rated a 1. It`s a shame what happened, but the people that are STILL here at this bank are honest and hard working and we have always been that way.
March 26, 2010 at 12:35 pm
The main problem here is that journalists who write stories about business situations who themselves have never had any business experience tend to get things wrong. This takes place primarily because their view is theorhetical and based primarily upon wanting to be the next Woodward or Bernstein but looking more like Geraldo.