Former airline executive sentenced to 2 years in federal fraud case
"Michael Morisi, former CEO of the People Express airline, waves to media while running away from the U.S. District Court in Newport News after his arraignment Monday afternoon June 10, 2019.
The founder of a failed startup airline that operated briefly out of Newport News/Williamsburg International Airport five years ago was sentenced Thursday to two years in prison on federal fraud charges.
Michael Morisi, 59, of Suffolk — who founded People Express Airlines — got two years behind bars for wire fraud and filing a false income tax return.
U.S. District Judge Arenda L. Wright Allen ordered that the sentences be run concurrently, and allowed Morisi to report for prison later. She also ordered him to pay $500,312 in restitution — to W.M. Jordan Co. (an early investor into the airline), the airport, the IRS and others.
Morisi was arrested in May 2019, a day after former Airport Executive Director Ken Spirito was arrested on charges stemming largely from a $5 million airport loan guarantee to People Express.
Michael Morisi, former CEO of the People Express airline, waves to media while running away from the U.S. District Court in Newport News after his arraignment Monday afternoon June 10, 2019. (Jonathon Gruenke)In June 2014, the Peninsula Airport Commission signed a deal in which TowneBank issued the loan, but the commission would cover the debt if the airline defaulted.
The airline collapsed in September 2014, less than three months after starting service, due to plane maintenance issues and an accident between a plane and a truck.
A few months later, the commission quietly used $4.5 million in taxpayer money to pay off the airline’s debt.
The Daily Press first learned about the $5 million loan to People Express in early 2017, with the ensuing reporting and revelations leading to a state audit, a management shakeup at the airport and the federal criminal investigation.
Morisi was charged in May 2019 with defrauding creditors, including telling vendors in early 2015 that he had no cash — even as the company had just gotten proceeds from the accident and he was still paying himself and other executives.
Morisi was also charged with tax fraud, accused of under-reporting his income to the IRS by $358,000 between 2012 and 2016, including two years in which no returns were filed.
While Sprito’s case appears headed for trial, Morisi pleaded guilty to two fraud charges in July — 16 other charges were dropped as part of a plea agreement.
Advisory federal sentencing guidelines called for him to get between 27 and 33 months in prison .
“The defendant played a key role in continuously promoting a start-up airline (and paying himself a large salary to do so) that was never in a stable position to succeed,” federal prosecutors wrote in a sentencing paper.
After the airline’s collapse, prosecutors said, “the defendant’s priority was, regrettably, to make certain that he and his colleagues collected funds for their own use, rather than that of the various creditors.”
Still, prosecutors asked the judge for a sentence at the low end of the guidelines, noting that Morisi spoke with federal agents even before being indicted, pleaded guilty, “and appears to have expressed remorse for his conduct."
Morisi’s attorney, Assistant Federal Public Defender Kirsten Kmet, asked that Morisi get three years probation with 27 months of home electronic monitoring.
“He has demonstrated acceptance of responsibility for his conduct, and he is extremely remorseful,” Kmet wrote, also submitting to the judge 13 letters in support of Morisi from family, friends and community members.
“Michael always gives of himself, his time and his connections, without every asking anything in return,” said a letter from Danette J. Crawford of Joy Ministries, a Virginia Beach organization that helps the poor and fatherless. She said that Morisi has "always been 100% honest in every endeavor that I have partnered with him on.”
The judge came down with a sentence of two years to serve on the charges.
Morisi first approached the Newport News airport about six years ago, shortly after the Norfolk International Airport rebuffed his efforts to bring People Express there.
The Newport News airport was desperate for new air service after the departure of AirTran Airways.
According to the 2019 indictment against Morisi, the airline drew down nearly the entire $5 million credit line — or $4.75 million — within a month after beginning service in 2015.
Then, the indictment said, Morisi turned away creditors looking to get repaid.
People Express took in at least $469,000 after it collapsed, the indictment said. But much of that money — or $410,000 — went to the airline’s management and employees.
“We simply have no funds available right now, although we are working daily, without any pay here, to get back to work,” Morisi emailed an advertising and marketing company, Nasuti & Hinkle, that was pushing to collect $125,000 in unpaid fees in November 2014.
“I am sorry, we are unable to pay anything toward our debt,” Morisi told the same vendor in January 2015. “We are simply out of cash.”
“Where we are is, we have NO cash,” he emailed them later that month. “We are honest people with integrity and once funded we will not forget the work done for us by Woody and his team…”
Around that time, the indictment said, Morisi had paid himself $26,000 from the airline’s bank account and made $25,000 in payments to two others, and withdrew $65,000 that was paid to himself and others."
Tony and his Baltia fraudster pals, including da whale next up?
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