April 13, 2012

Wall Street Journal Direct Air

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When charter-air servicer Direct Air suddenly canceled service and filed for bankruptcy earlier this month, it left many customers stranded and frustrated. But there did seem to be some good news—customers would be able to get unused ticket refunds because the Department of Transportation required Direct Air to hold customer payments in escrow until it hands the money to the actual airplane operator. (Direct Air is a charter service that doesn’t actually own any airplanes).


But now, lawyers are testifying that the money isn’t in the escrow account, leaving both customers and credit-card companies exposed. The Worcester Telegram reported earlier week that a lawyer for Direct Air, Steven Fox, said during a hearing that millions of dollars are missing from the escrow account. And a lawyer for the bank where the escrow account is held confirmed that there’s only about $1 million in the account.

Fox told the judge that “irregularities” had been uncovered in the handling of the escrow account. “It is our belief that the escrow account was invaded. It may have been invaded in an unlawful manner,” he said, adding that customers are owed at least $10 million and maybe as much as $30 million according to the newspaper.     Fox didn’t return repeated requests for comment

The Department of Transportation couldn’t confirm Thursday that there was any money missing, but spokesman Bill Mosely said the department is investigating. 
 
Customers who’d purchased their tickets by credit card (99% of customers, according to court documents) were directed to seek reimbursements from their credit-card companies. But one credit-card processor said it’s obligated to refund the money and doesn’t have the cash to do so without the escrow account funds.

JetPay, Direct Air’s Visa/MasterCard processor, said its exposure could be as high as $20 million, and that “without reimbursement from the escrow account which JetPay funded, JetPay may run out of cash and be out of business in a matter of weeks.”   JetPay filed a motion last week stating that they haven’t been getting reimbursed from the escrow account and have had to pay the reimbursements out of pocket. The situation is causing a cash shortfall for JetPay, it said, and asked the judge to require it be reimbursed.

3 comments:

Steve Foley said...

Just what we need - ANOTHER STUDY!!!

From the Telegram :

"Minority Leader Bruce Tarr, R-Gloucester, proposed an amendment to a transportation bond bill to form a commission that would decide whether to sell the airport, lease it or maybe just close it down."

Long Jahn Silver said...

Steve, i agree. Another study that the CC will just bury.

Next we'll read that not only does no one know where the Escrow $$$ went, but that the escrow accct was hacked and all they know is that it went to a bank in Nigeria and Obuma's minions are using it to underwrite ship hi-jacking so Obuma can he a hero again. Look for multiple hi jackings in Oct 2012. :)


Twice in the last few daize I have read that 100,000 people have found the airport w/o any trouble. I'll Assume here the 100,000 are DA passengers? Darn statistics! So if most were DA passengers is it not an unreasonable conclusion that most also were round trip DA passengers. So did 100,000 people find the airport with no problemo or did 50,000 find it with no problemo? This horse++++ of people playing with numbers has to end. IMO, this is significanly miseading number, if my assumption is correct. So please give me a list of all the 100,000 who found the airport.

Claude P. Dorman - Worcester Wonderland said...

Senor Pedro Jahn.....you coming to the fest this year?