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Why are private jet charter brokers so sleazy?

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Al Palagonia with Apollo Jets customer Shaquille O'Neal

Al Palagonia with Apollo Jets customer Shaquille O’Neal

Several years ago when a salesman from Blue Star Jets cold called me for the first time, I didn’t know what to make of it.  For one, I thought it was weird that a private jet company was named after the fictional airline in the movie “Wall Street.”  Also, the tone of the call was unusual for that type of sales spiel — fairly hard sell, wrapped in an easy going, personable, sort of bro-to-bro conversational style.  Of course, once I found out more, that all made sense.  For one, the name is not a coincidence, but an intentional nod to the movie by Blue Star founders Todd Rome and Richard Sitomer.  Their background was in the bucket shop / boiler room underbelly of Wall Street (the place), where they had been booted from the industry after some questionable goings on at their firm, Millennium Securities.  The pushy sales tactics were right out of the boiler room business, too.

This seems like a common trajectory for jet charter brokers.  Jets.com co-founders Manny Scarso and Edgar Alacan had similarly been asked to leave the securities business.  Private jet broker to the stars Al Palagonia took it one step further — instead of merely being asked to cough up ill-gotten gains and promise to stay away from the securities industry, he actually had to spend a few years in jail for some securities fraud he described like this: “Let’s just say I took a short cut and it came back to bite me in the ass.”  It’s claimed that Palagonia’s work at infamous brokerage DH Blair served as the inspiration for Ben Affleck’s character in the movie “Boiler Room.”

Palagonia was accused by a competitor of being the “secret ceo” of Halcyon Jets, a charter brokerage that traded as a penny stock and underwent a particularly interesting self-imolation.  Halcyon COO Christian Matteis, along with two others,  was accused of attempting to sabotage the company and steal the client list, and was arrested by the Miami police (see mug shot above).  With the Halcyon stock virtually worthless, the remainder of Halcyon merged with Apollo Jets, where Palagonia can be found today.  Matteis is now CEO of Universal Jet Charter.

What does any of this matter?  I’m not sure.  It certainly doesn’t mean that the flights chartered through these brokers are unsafe.  It doesn’t mean that these guys are ripping customers off.  It just feels, well, dirty.  Blue Star certainly seems to have achieved a level of considerable success.  Al Palagonia appears to have A-list client roster.  Clearly, most people are not bothered by the checkered history of many of the big charter brokers — and, judging from the number of Blue Star hats visible in the Hamptons, they may even embrace it.

Bloomberg has a good article from a few years ago that touches on some of these issues and its definitely worth a read if you fly privately via charter.  It discusses the 2005 crash of a Challenger 600 at Teterboro  (chartered through Blue Star), that highlighted the difficulty of knowing the provenance of the aircraft and crew with which one is flying.    It also talks about the 2004 crash in Colorado injuring NBC’s Dick Ebersol and killing his son.

The NTSB report on the Teterboro crash pointed out the lack of transparency in the charter broker business as problematic.  Here is an excerpt (from NTSB board member Kathryn O. Higgins) that seems particularly apt and is worth considering when chartering a flight:

But how much do these brokers really know about the operators they do business with? How much do they know about the planes these operators fly? How old are they, when were they last inspected? How well trained are the crews, what experience does a particular crew have with the route the customer wants to fly? Have they flown into that airport before? Does this operator have a dispatch function or just flight following? What safety equipment is on the plane? Who will make the decision about de-icing? Does the operator have a safety management program? Are the crews trained in crew resource management? What does the FAA know about this operator?


Business Jet Crashes Expose Rule-Breaking Brokers

Apollo Jets’ founder Al Palagonia  SEC finding

Al Palagonia: The Man Who Never Sleeps

Jets.com co-founders Edgar Alacan and Manny Scarso SEC finding

Halcyon Jets Exec Accused of Sabotaging Company

Christian Matteis, now of Universal Jet Charter

Halcyon’s Christian Matteis, now CEO of Universal Jet Charter

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