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A federal appeals court rejected former Newport News airport director Ken Spirito’s appeal of his convictions for misusing public money, money laundering and perjury.
The charges involved the Peninsula Airport Commission’s use of federal state and local funds to guarantee a loan to the start up airline People Express in 2014.
Stories in the Daily Press revealing the guarantee sparked state and federal investigations, legislation to tighten state transportation finding rules, the resignation of Newport News City Manager Jim Bourey, who served on the commission, and Spirito’s dismissal.
The 4th Circuit Court of Appeals noted that federal law about misuse of public funds speaks only of misapplication of funds, mooting Sprito’s argument that he should not have been convicted because he did not accept a bribe or take personal possession of any money.
It said his active role in designating specific funds in specific bank accounts to be used as collateral for the loan guarantee was sufficient to justify the money laundering charge, and that his statements to federal investigators about the the transactions were perjury.
The court reversed Spirito’s conviction on an embezzlement charge related to his use of an airport credit card, but held that the 23 other counts of misuse of funds, money laundering and perjury should stand.
The opinion said Spirito spearheaded an effort to use restricted state and federal funds as collateral to secure a $5 million bank loan for People Express.
Those funds were in fact disbursed when People Express defaulted on the loan a few months after beginning operations from Newport News/Williamsburg International Airport.
The appeals court noted that all state and federal regulators testified during Spirito’s trial that regulations, manuals, and policies were clear that commission funds could not be used to collateralize a loan or subsidize an airline. Several witnesses testified that Spirito knew of these restrictions.
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The commissioners agreed to the loan guarantee, although the court noted that three members — LaDonna Finch, George Wallace and Stephen Mallon — later said they hadn’t really understood what it entailed.
They agreed to the guarantee after People Express failed to get a loan from TowneBank so it could pay to charter planes.
TowneBank had already turned the airline down because of its large debts, lack of profits and lack of tax returns.
But the bank said it would extend a smaller loan than People Express wanted, a line of credit of up to $5 million, if the airline found a guarantor and a third party source of cash to serve as collateral.
Spirito told Bourey and People Express CEO Jeff Erikson that he had away to make it happen, by guaranteeing the loan with PAC cash, the appeals court noted.
Upon his conviction, Spirito was sentenced to 48 months of probation, with a special condition of home detention for 30 months, and ordered to pay $2.5 million in restitution.
Dave Ress, 757-247-4535, dress@dailypress.com