National Airways Corporation
Telephone (702) 333-2200
Fax (702) 333-22951135 Terminal Way, Suite 208-B
P.O. Box 11397
Reno, NV 89610September 3, 1996
The Mayor
Sparks City Council
431 Prater Way
Sparks, NV 89431RE: AIRPORT AUTHORITY OF WASHOE COUNTY
Dear Mayor Breslow:
Further to our discussion and your request for a detailed synopsis of the issues and public concerns, I trust the following will provide substantive information to these persons considering the merits of a Grand Jury investigation.
The writer has had dealings with the Airport Authority since 1989, firstly as a financier and latterly as a director of the present owner of National Airways Corporation, a Nevada corporation that provides service and air cargo handling for American, Canadian, Northwest, Great American, Sun Country and United Airlines. In fact up until February 1996, until going in-house union, the company handled Southwest Airlines and had also handled Alaska, America West and Continental Airlines who latterly withdrew from the Reno market.
During the ensuring years, the company has made varied requests of the Airport Authority, primarily in the area of supporting information for financial expense recovery allocations that were arbitrarily levied, and to date remain unanswered.
On April 3, of this year, the company requested a renewal of the lease, which remains unanswered to date. On May 11, 1996 we read the local newspaper and were informed that the Airport Authority had entered into an agreement with International Aviation Terminals/Aergo (IAT). Subsequently inquiries of other parties in interest have given rise to our belief that the Airport Authority knowingly, deliberately and willfully withheld information from tenants as to the full and factual basis of the negotiations. Subsequent documentation further confirmed that the Airport Board of Trustees had in fact approved the IAT venture on or about January 26, 1996. Said same "Head Lessee" provided for a lease rate for the existing cargo facility (land and buildings) of approximately one third of what the current tenants are paying. Further, the head lease requires the Airport Authority to pay IAT $15,000 to "manage" the existing facility and they (IAT) are not required to pay any rent until December of 1996.
Under the terms of the tenants’ original lease, it is our belief that the original building was constructed with proceeds of a publicly floated Airport Improvement Revenue Bond which has specific restrictive covenants and as a user paid airport (rents, landing fees etc.). In our opinion the Airport Authority and its Trustees have been party to a litany of deceit, deliberate non disclosure, fiscal mismanagement and knowing and willful fiduciary malfeasance. At each and every turn the person deferred to by all staff members has been Mr. James Kitchell, and it is our belief that nearly all activities and actions are orchestrated by the deliberate connivance of said individual and that there are grounds for an investigation into his and favored Trustees’ direct and indirect actions. National Airways Corp. is also of the belief that Mr. Kitchell is the person behind the spurious manipulation of employment of certain persons in Properties and Administration. We believe all these persons to have had previous direct affiliations to Mr. Kitchell. These persons are presently members of the "Kitchell Quorum", who we believe knowingly acquiess [sic] to his directives, but are in themselves mere pawns in his game of deceptive power politics.
Public statements have been made by Kitchell/Airport Authority to the effect that the Airport Authority will make money off land rental to apply toward future capital improvements. This is flawed and warrants further investigation, as the tenants are of the belief and understanding that the Airport Authority has a borrowing base that would be at a lower cost than IAT. The Airport Authority is the ultimate recipient of all tenant improvements, which would include the building of any tenant occupied facilities. At no time were the tenants given an opportunity to discuss the IAT arrangement, let alone make representations to the Airport Authority to either acquire the existing facilities, or build their own on substantially the same terms as IAT.
We, along with several other tenants, are of the belief that the Authority has deliberately and knowingly precluded the tenants from any disclosure or discussion and has acted in bad faith. We would call for a public hearing to review this entire transaction, and should call for IAT personnel to be subpoenaed.
This brings me to an extremely sensitive issue. We have heard rumors, which we believe to be reliable but have not attempted to substantiate[,] alluding that certain present Authority persons and possibly Trustees and/or their family members, received preferential consideration in the public flotation of shares in Reno Air. We believe this matter to be worthy of investigation by a competent authority.
It is our belief that the Airport Authority has knowingly and willfully embarked on, and does continue to operate in a manner that, not only contravenes public policy and law, but is an out of control bureaucracy who feels they are unaccountable and beyond reproach. This is gross, if not fraudulent mismanagement and as public servants their first responsibility is to ensure their fiduciary responsibility to the public and carriers alike.
This company will cooperate in any way with public authorities investigating and hopefully clearing the air over the conduct of the Airport Authority and its trustees.
Please do not hesitate to call upon the writer throughout your endeavors. I am encouraged by and do support your efforts wholeheartedly. This momentum must be maintained with a clear and defined focus for all.
Sincerely,
John S. Munro
Director