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Sleazy Private Jet Charter Brokers, Revisited

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So, WordPress provides a year end summary of activity on your blogs.  This includes facts about how many posts you made (only 1 in my case), how many visitors you had, and how they found you.  For this blog, almost everyone came in via a search engine and, interestingly, WordPress also records what search terms brought them here.  Based on the search terms people are typing into Google and Bing, there are more than a few people interested in the backgrounds of some of these bad boys of charter brokerage.  To wit, here are some of the searches that people are typing in:

apollo jets ceo (number 3 overall)

al palagonia jail (this is number 5 overall)

al palagonia apollo jets

richard sitomer jail  (almost twice as many searches as “richard sitomer” alone

christian matteis arrested

al palagonia prison

millenium securities todd rome

palagonia and jail

al palagonia boiler room

al palagonia arrested

todd rome fraud

unbelievable things (I’m not sure what this is related to, but it’s an intriguing subject.  Unfortunately, I can’t see what post those searches lead to)

al palagonia wikipedia (this is just interesting because this blog is obviously not wikipedia — which should be easy to find without a search engine)

richard sitomer incarcerated

al palagonia arrest

todd rome jail

universal jet g-iv crash

richard sitomer arrested

is bluestarjets legit

who is al palagonia

al palagonia sentenced

blue star jets fraud

what prison did al palagonia go to ?

“apollo jets” fraud

“alfred palagonia”

toilet phenom 100 (unrelated to charter brokers, but I’ve seen them overflow into the cabin when flushed… not cool)

al palagonia jail time

how to be a private jet broker

todd rome first data

blue star charter jet ceo arrested

infamous stock brokers al palagonia

millenium sec todd rome

al palagonia dh blair scandal

christian matteis jail

manni scarso sec

etc…

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Written by mojofinance

January 5, 2013 at 12:36 am

Google execs propose paying for renovations to Moffett Field’s Hangar One in return for space for their private jets

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Future home of Google founders' jets

Future private hangar of Google founders

Larry Page, Sergey Brinn, and Eric Schmidt have proposed to NASA that they will pay for renovations to the historic Hangar One at Moffett Field in exchange for use of some the hangar space for their own private jet fleet.   The bill for that renovation would come to $33 million.  Right now, the government is in the process of removing the old “skin” from the hangar, as it is made of some ill-conceived mix of asbestos, lead paint and PCBs.

The Google excecs’ jets are operated by an llc called H211.  According the San Jose Mercury News article on the proposal, H211  is proposing to house 8 jets in the hangar, using 2/3 of the available space.  Given that 2/3 of Hangar One is the equivalent of four football fields, that seems like a lot of space per plane — so I’m not sure exactly what they have in mind.  From what I can gather the Google execs own one Boeing 767-200, one Boeing 757, two Gulfstream G-V s, some sort of fighter jet, and who knows what the other 3 are.   At any rate, Hangar One will no doubt be the coolest private hangar this side of Saudi Arabia once the work is complete — should NASA decide to take them up on their offer.

The Google trio already enjoys special treatment at Moffett Field.  In exchange for $1.3MM / year and allowing NASA a certain amount of “scientific” use of their planes, they’ve had landing and parking rights on the field for some time.   Just what sort of experiments NASA is running on the Google boys’ flying pleasure dome is anyone’s guess, but it’s probably fun.

If you’ve never seen Hangar One, you should.  It’s an absolutely  unbelievable building.  It was built during the Depression to house the Navy’s fleet of airships.  It is immense.  There’s a good Wikipedia article on it here.  The San Jose Mercury news story on the proposal also has a very nice photo gallery of the hangar here.  The scale of the building is preposterously huge.  To give you an idea, it’s doors weigh 200 tons each.  It is big.  It’s also a remarkable feat of engineering and a great piece of design.  I’m personally very glad to see them offering to refurbish it, as it would really be a shame to lose such a remarkable landmark and a fascinating piece of aviation history.

Of course, reactions appear to be mixed.  A lot of Bay Area Hangar One enthusiasts are excited by the plan and glad to see someone offering to pay to restore the landmark.  A lot of people are getting hung up on why those guys have 8 planes and enough money to drop $33MM on a place to park them.  Probably a lot are, like me, more than a little jealous.

Google Founders' 767

Here are some links about the story:

Google founders offer ‘100 percent’ funding to save Hangar One

Hangar One (on Wikipedia)

Save Hangar One (.org)

Google’s 3 Top Executives Have 8 Private Jets

Wait A Minute — The Top 3 Google Execs Have HOW MANY Jets?

Lawsuits Fly Over Google Founders’ Big Private Plane

Google Founders’ Ultimate Perk: A NASA Runway

Written by mojofinance

December 15, 2011 at 7:31 pm

Blue Star Jets featured on Bloomberg

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Bloomberg has a 20 minute video featuring interviews with Blue Star Jets founders Todd Rome and Richard Sitomer.  They discuss the private aviation world in general and their business in particular.   They mention that their revenue is over $100MM / year, and are targeting $1B + over the next 5-7 years on the back of international expansion.  There’s nothing particularly revelatory here, but it’s interesting if you’re curious about Blue Star.

“What makes private aviation expensive is one guy usually gets caught footing  the bill,” says Todd Rome.  I can certainly relate to that.  By the way, How rich is stinking rich?  I guess it’s one of those things — if you have to ask…

Bloomberg: So, the stinking rich can be very particular?

Sitomer: Very particular.

That comes up in a discussion of some of the more extreme demands that customers can make — specific examples being asking for 4000 thread count sheets, perfect pencil thin asparagus, and ice cubes made from Fiji water.

Blue Star Jets Interview on Bloomberg Enterprise

(thanks to Brad Lee for pointing out this interview)

Written by mojofinance

October 2, 2011 at 9:52 am

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

Amusing video: What does it take to own a private jet?

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The WSJ published an amusing video about what it takes to own and operate a private jet.  Ostensibly, they’re challenging Obama’s lumping of people making $250k a year in with private jet owners in discussion of the debt ceiling.  I’m not sure he really said precisely that, but it’s an interesting video.  Their numbers related to the costs of owning and operating a jet are fairly accurate.

Link to video at WSJ:
What It Takes to Own a Private Jet

The discussion is backed up by some b-roll of a Falcon 7 undergoing testing, in one case taking a high speed run through a giant puddle of standing water on the runway — which is interesting in itself.

 

Written by mojofinance

June 30, 2011 at 9:53 pm

Wow — Obama really hates corporate jets

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Obama boards Air Force One

Obama not amused by corporate jet tax breaks

By my count, Obama mentioned corporate jets and corporate jet owners six times in his press conference yesterday, when discussing the ongoing negotiations regarding the vote to raise the debt ceiling.  And, not in a good way.  He repeatedly lumped corporate jet owners in with hedge fund managers and oil companies as a group of people that are receiving tax breaks they do not deserve.   He claimed that the cost of keeping the accelerated depreciation for business jets would mean compromising food safety, cutting medical research, decreasing college scholarships, compromising the National Weather Service, and risking children’s safety.   That’s heavy stuff.  And: National Weather Service?  Really?

The arguments for the accelerated depreciation (which is the tax break I believe he’s talking about, though he doesn’t specify) are that it causes businesses to spend money they would not otherwise spend on capital equipment for their business.  By allowing them to accelerate the depreciation schedule, they are able to reduce their tax burden, effectively making the cost of the capital goods lower, encouraging corporations to buy more of them, stimulating jobs at the companies that manufacture and sell those goods, thereby growing the entire economy.  Opinions can differ as to whether or not that type of incentive is an effective way of stimulating the economy.  The interesting part here, though, is how he’s singling out corporate jets.  The accelerated depreciation applies to a broad range of capital goods and it’s not at all clear to me why the policy would be good when applied to most assets and bad when applied to  corporate jets.  Certainly a lot of Americans are employed in the production of private jets and other corporate aircraft, so presumably keeping them employed is desirable.  I don’t think there’s an economic argument for singling out corporate jets, so much as they provide a convenient touchstone for class-warfare rhetoric aimed at the Republicans.  Luckily for Obama, not that many people own corporate jets (or manage hedge funds or oil companies), because he’s clearly not working hard to win their vote.

Of course, Obama didn’t mention where the tax break for corporate jets came from: his own stimulus bill.

Even leaving aside the accelerated depreciation of corporate jets, the tax treatment of aircraft used for business purposes is an interesting topic.  I’ve followed with interest the WSJ’s coverage of corporate jet use, and their strong implication that corporate jets are used far more often for personal use than real corporate business.  The tax code, I feel, is a big reason for this.  The asset cost of private jet travel makes up such a large portion of the total cost, that the deductions for standard depreciation and cost of financing radically changes the cost of flying.

I recently looked at an aircraft management proposal for a used Challenger 300.  The annual asset costs (cost of capital plus depreciation) on that plane represented 73% of the total annual ownership cost.  When you work it all out, someone owning and flying that plane personally ends up paying 33% more per hour than someone who checks the >51% business usage box and takes the relevant deductions.  That’s a massive difference on something that is already so expensive.

So, that creates a massive incentive for a company to allow the executive to use the plane for personal flying and call it a business expense, and for individuals to get creative when claiming business use of their own aircraft.  Having to pay an extra 33% is a bitter pill to swallow, especially when it seems like everyone else is claiming all private jet travel as a business expense.

Transcript of news conference at WSJ

Obama’s case against the rich rings hollow 

Obama targets private jets, Big Oil

WSJ back on track: Corporate Jet Set: Leisure vs. Business

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New WSJ piece alleges that corporations dramatically under-report personal use of corporate aircraft.

The WSJ has a new article in what is now a series on private jet usage.  Unlike they’re previous unfocussed, class warfare story of the previous article, this one looks at the under reporting of personal usage of corporate aircraft for top execs.  The allegations made here (or at least implied) are serious and could easily result in tax evasion or fraud cases against some involved.  In most, or at least a lot, of the cases, there may be a legitimate difference of opinion as to whether or not flights by executives to vacation destinations constitute business use, but it seems clear that many executives have been under-reporting their income, and companies have been under-reporting the perks they pay to the top execs.

Interestingly, the rate the SEC requires to be expensed for personal use is only the variable portions of the expenses.  Even if you report everything faithfully, that’s a heck of a deal –flying for just the cost of the fuel and catering — depreciation, pilots, training, and cost of capital be damned.   In most cases that’s probably a 50% discount to what that executive would have to pay a third party to receive the same service.

Also, it looks like their private flight database is back online and searchable.  Looks like it’s undergone some upgrades since it was last available.

Corporate Jet Set: Leisure vs. Business (WSJ)

Written by mojofinance

June 16, 2011 at 5:01 am