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[COMMITTEE PRIHT]

THE PENN CENTRAL FAILURE AND THE
ROLE OF FINANCIAL INSTITUTIONS
PART II

CASE STUDY OF A PENN CENTRAL SUBSIDIARY:
EXECUTIVE JET AVIATION

STAFF REPORT OF THE
COMMITTEE ON BANKING AND CURRENCY
HOUSE OF REPRESENTATIVES
91st Congress, Second Session

DECEMBER 21, 1970

Printed for the use of the Committee on Banking and Currency

51-903

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1970

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402 - Price 40 cents



COMMITTEE ON BANKING AND CURRENCY
WRIGHT PATMAN, Texas, Chairman
WILLIAM B. WIDNALL, New Jersey
WILLIAM A. B A R R E T T , Pennsylvania
F L O R E N C E P. DWYER, New Jersey
LEONOR K. (MRS. JOHN B.) SULLIVAN,
SEYMOUR H A L P E R N , New York
Missouri
W. E. (BILL) BROCK, Tennessee
H E N R Y S. REUSS, Wisconsin
A L B E R T W. JOHNSON, Pennsylvania
THOMAS L. ASHLEY, Ohio
J. WILLIAM STANTON, Ohio
WILLIAM S. MOORHEAD, Pennsylvania
C H E S T E R L. MIZE, Kansas
R O B E R T G. S T E P H E N S , JR., Georgia
BENJAMIN B. BLACKBURN, Georgia
F E R N A N D J. ST GERMAIN, Rhode Island
G A R R Y BROWN, Michigan
H E N R Y B. GONZALEZ, Texas
LAWRENCE G. WILLIAMS, Pennsylvania
JOSEPH G. MINISH, New Jersey
CHALMERS P. WYLIE, Ohio
R I C H A R D T. HANNA, California
M A R G A R E T M. H E C K L E R , Massachusetts
TOM S. GETTYS, South Carolina
WILLIAM O. COWGER, Kentucky
F R A N K ANNUNZIO, Illinois
P H I L I P M. CRANE, Illinois
THOMAS M. REES, California
JOHN H. ROUSSELOT, California
N I C K GALIFIANAKIS, North Carolina
TOM BEVILL, Alabama
CHARLES H. G R I F F I N , Mississippi
JAMES M. HANLEY, New York
F R A N K J. BRASCO, New York
BILL C H A P P E L L , JR., Florida
MICHAEL J. H A R R I N G T O N , Massachusetts




PAUL NELSON, Clerk and Staff Director
CURTIS A. PRINS, Chief Investigator
B E N E T D . GELLMAN, Counsel
JAMES F . DOHERTY, Counsel

JOSEPH C. LEWIS, Professional Staff Member
GARY TABAK, Counsel

ORMAN S. FINK, Minority Staff Member
(H)

LETTER OF TRANSMITTAL
To Members of the Committee on Banking and Currency:
On July 16, 1970, the Banking and Currency Committee authorized
the staff to investigate the collapse of the Penn Central Transportation Company with particular emphasis on the role of financial institutions in the operation of the corporation, its parent holding company,
and the various subsidiaries. Part One of the staff report, transmitted
to the Committee on November 2, analyzed the cash flow impact of
the diversification program undertaken by the Penn Central Transportation Company. Transmitted herewith is Part Two of the staff
report which is a case study of a major Penn Central subsidiary, Executive Jet Aviation.
The staff will be submitting additional parts of the report in the
next few weeks. Additional sections will detail, among other things,
insider trading in Penn Central stock by various commercial banks and
the operations of Penphil, an investment club composed primarily of
Penn Central executives and close business and banking associates.
The document being transmitted to you today is a case study of
corporate disaster stemming from unusual, almost unbelievable
circumstances. I t is the history of one of the Penn Central Transportation Company's important non-railroad related subsidiaries—Executive Jet Aviation, Inc. (EJA)—and how Penn Central lost almost all
of its $21 million investment. While the EJA debacle has certain unique
characteristics, it nevertheless contains important clues leading to an
explanation of why the Penn Central Transportation Company, the
nation's sixth largest nonfinancial corporation, found itself presenting
the country with the largest single business failure in its history on
June 21, 1970, when it filed for reorganization under the Federal
Bankruptcy Act.
The report is based on months of detailed investigation by the
staff of the Banking and Currency Committee. I t involves dozens of
interviews conducted in various parts of the nation. I t includes
extensive analysis of court documents, correspondence, bank records, documents obtained from Penn Central and Executive Jet Aviation, and similar material. The examination conducted by the staff
is one of the most careful and detailed investigations ever conducted
under the auspices of the Committee.
As Part One of the staff investigation revealed, the large nonrailroad investments were a major factor in the collapse of the Penn
Central Transportation Company. The staff study of Executive Jet
Aviation reconfirms this fact, but it reveals a great deal more about
the inner workings of Penn Central and the decision-making processes
of those officials who controlled the investment practices of the railroad. The facts laid out by the staff in the following pages present
one of the saddest—and at times one of the most sordid—pictures of
the American business community that has ever been revealed in an
official document. I t is a case study which reveals just how loosely the
operations of the Penn Central Transportation Company were conducted by its most trusted officials.




(HI)

IV

The study raises most serious questions about the involvement of
the commercial banking industry in the strange and far-flung operations of Executive Jet Aviation. Commercial banks made massive
amounts of credit available to E J A for what appeared to be highly
questionable—if not at times illegal—activities. From the data collected by the staff, it appears that the commercial banks asked few,
if any, questions before making the loans to EJA. One can only assume
that the banks approached the affairs of Executive Jet Aviation with
child-like naivete or were actually part and parcel of the high-flying
schemes. I t is hard to believe that the bank loan officers were not
aware of EJA's operations, its questionable control by Penn Central,
and its always shaky financial position.
The staff analysis certainly establishes that the banks did not make
their loan decisions regarding E J A on any normally accepted banking
standards, such as the credit-worthiness of the corporation. The staff
data suggests strongly that the loan decisions were made exclusively
because the banks and E J A had mutual friends at Penn Central; that
is, the chief financial officers of the railroad.
The staff makes ten key findings in its study:
1. There was an astonishing lack of fiduciary concern and
control by the Pennsylvania Railroad (PRR) Board of
Directors over the $21 million that was poured into EJA.
The decisions which eventually provided this total investment in the air service were made almost exclusively by
David Bevan, chairman of the P R R Finance Committee,
and his protege, William Gerstnecker, P R R Treasurer. They
did not request nor did they receive Board approval for the
EJA investment. In fact, $5 million had been funneled into
EJA before the board even knew P R R investments were
being made in EJA.
2. The investment in E J A was aimed at providing entry by
P R R into the air passenger and air cargo transportation
industry on a worldwide basis. The project was initiated with
the full realization on the part of Bevan that a railroad's
control of an air carrier without CAB approval was in direct
violation of the law. Indeed, awareness of the illegal nature
of the project was dramatized by repeated efforts to conceal
from the CAB the control over E J A exercised by the P R R .
This deception included two attempts by the P R R to appear
to divest itself of control of E J A while in fact its domination
of that company remained virtually intact and, along with
the foreign illegal activities, cost the P R R and EJA a total of
$70,000 in fines levied by the CAB, the second largest total
ever levied by the CAB in a single case.
Some $6 million in unsecured P R R investments were made
in E J A after the CAB order to the railroad to divest itself of
its air carrier interest.
3. A principal wellspring for P R R investments in E J A
were commercial banks which, without any real investigation, virtually automatically approved loans based on what
they sadly came to recognize as the P R R myth of financial
power and economic invulnerability. Close to $18 million of
commercial bank loan money, secured by E J A planes, went
into EJA with the only requirement being that the P R R
maintain sufficient compensating balances at these institu


V

tions and that the PRE, agree to give up its security interest
in E J A planes in favor of the banks' own loans to EJA. No
effort was made to examine the credit worthiness of E J A
itself. Moreover, the blind, open-arms attitude of the commercial banks gave EJA easy access to the funds it needed to
purchase large jet aircraft, which proved to be a crushing
financial burden for the company. Ironically, the P R R ' s
channeling of financial resources away from the railroad and
into subsidiary interests like EJA, deprived it of the funds it
desperately needed to stay afloat in the spring of 1970.
4. The disastrous P R R nonrailroad investment program
was mapped to a large extent by Charles J. Hodge, a senior
member of the investment firm of f. i. Dupont-Glore Forgan.
He also played a key role as financial adviser for P R R and its
nonrailroad subsidiaries.
5. EJA, with guidance and assistance from the P R R ,
represented by Bevan, Gerstnecker & Hodge, entered into a
series of secret, illegal, and extraordinarily complex transactions with a group of European financial and air transportation operatives. A mantle of secrecy was an absolute requirement for these activities, which were conducted in a manner
to deceive the CAB while moving toward establishment of a
worldwide air system.
Four million dollars—part of $10 million in European bank
loans to the P R R to finance the reconditioning of railroad
cars—was seized from a Liechtenstein trust by one of the men
involved in EJA's program to establish an international air
service system. Bevan did not disclose the loss of these funds
to the chairman of the P R R board until 9 months after the
disappearance of the funds. The railroad is now threatening
to sue for return of the money.
6. Bevan was aware of authoritative and repeated recommendations made in 1967 calling for removal of O. F . Lassiter
from the post of chief executive of E J A in order to assure
survival of the company. Hodge himself made such a recommendation to Bevan in 1968. Despite this deluge of advice,
Bevan ignored the recommendations. Nor did Bevan seek
Lassiter's removal even after discovery that Lassiter had
transferred E J A funds to his own company, Lassiter Aircraft
Corp., under questionable authority, without E J A board
approval and under circumstances that can only be characterized as a blatant conflict-of-interest situation. The decision to make the transfers of sums totaling more than $100,000 in 1969 and 1970 was made by Lassiter himself and one
other member of the E J A Executive Committee, W. P.
Swancutt, a friend of Lassiter's who had loaned him money.
Swancutt had a brother-in-law who held Lassiter Aircraft
Corp. stock options.
7. In addition to recommendations to remove Lassiter as
EJA's chief executive, Bevan and Hodge were both aware
that Lassiter had squandered millions of dollars of E J A assets
and, therefore, P R R funds by undertaking costly, illadvised projects, by authorizing an enormous number of




VI

nonrevenue-producing administrative flights, and by conducting both his professional and private life in such a
manner as to demoralize the E J A staff. As a result, any
chance that the company may have had of achieving financial
success, was greatly diminished.
8. David Bevan and William Gerstnecker spent an
inordinate amount of time on EJA matters at a time when
the closest attention to the financial condition of the railroad
was demanded. In short, the E J A investment by the railroad
can be characterized as improvident, devious, and profligate.
I t was essentially the decision of one man, David Bevan, to
continue to pump money into EJA when even a modicum of
business judgment would have counseled for a complete divestment. That the E J A investment was doomed to failure
and that its president, Gen. O. F. Lassiter, was not the
man to lead the Pennsylvania Railroad into the air transport
field should have been apparent to anyone with a minimum
of business judgment. An apt description of the EJA escapade
is found in a letter written to William Gerstnecker from the
lawyer who represented the railroad in the EJA case:
As it is, the whole picture is one of amateurish intrigue, vividly
colored with the devious, that suggests a consciousness of guilt deeper
than is justified by the bare facts.

9. In 1968, J. H. Ricciardi, a former EJA employee, filed
suit against the company to recover salary and expenses he
alleged that E J A owed him. During legal proceedings,
Ricciardi testified under oath that at Lassiter's request he
had provided female companions for Bevan and Hodge in
order to relieve the pressure they were exerting on Lassiter
regarding his failure to move EJA out of the red and into the
black. The suit was settled out of court in 1969 on payment of
$13,000 to Ricciardi. Lassiter, Bevan and Hodge have
denied the allegations. They, as well as EJA, have denied
that the settlement payment was made in whole or in part
by them individually or collectively. The question of where
the money came from remains unanswered.
10. In light of Bevan's knowledge of all of the deteriorating conditions outlined above regarding EJA, and his
singular ability to rectify the situation, a serious question is
raised as to why a man of such apparent shrewdness, financial acumen and reputation in the business world would
have allowed the continued and ultimately disastrous
deterioration of EJA to remain unchecked.
The views and conclusions found in this report do not necessarily
express the views of the Committee or any of its individual Members.




W R I G H T PATMAN, Chairman

CONTENTS
Page

Letter of transmittal
Introduction
Initial contact made between P R R and EJA
EJA board of directors
P R R Investments in EJA
Initial investment by P R R
Legal impediments to Penn Central investment in EJA
PRR's future expectations for EJA
P R R investment in EJA through August 1966
Purchase of Johnson Flying Service certificate
CAB's examiner decision
Leasing of large aircraft
P R R advances to EJA after mid-1967
"World Operating Rights" Program
Transavia
International Air Bahama
Purchase of third Boeing 707
Penn Central's failure to comply in good faith with CAB order to divest
itself of EJA control
CAB hearings
Penn Central and EJA after January 1969
Attempted Zimet acquisition
Financing Secured for EJA by PRR_
Bank loans to EJA
Other outside
financing
Recent events
Change of management at EJA
Present situation at EJA
A missing $4 million
Holiday International Tours: The Insiders' Creation
The Penphil Club
The beginning of HIT
Moving downhill
,
_
Business in reverse
No sales contract agreement
Meanwhile, inside HIT
Hide and seek with the CAB
Lifsey departs
"Sale" of HIT stock
Conclusions
Inside EJA
The report's recommendations
A second set of recommendations
Summary
The palace revolt
Lassiter's expenses
Corporate waste
The case of N366EJ
The Jetstar case
The Saga of Soga
Deteriorating morale
Presentation to the board
Lassiter Aircraft Corp
The executive committee
Delaying a board decision
The Bevan letter
The Middle East group
-,
--Lassiter Aircraft Corp.'s payroll
--_-^




(VII)

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vin
Page

The Ricciardi case
Lassiter and Ricciardi meet
The Ricciardi deposition
Ricciardi meets Bevan and Hodge
Ricciardi's understanding
Ricciardi's social arrangements
Ricciardi's evaluation
Ricciardi in Florida
Pressure on Lassiter
Lassiter's deposition
Flying to Europe
Conclusion




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THE P E N N CENTRAL FAILURE A N D T H E ROLE OF
FINANCIAL INSTITUTIONS
P A R T II
CASE

STUDY OF A P E N N

CENTRAL SUBSIDIARY: EXECUTIVE
AVIATION

JET

INTRODUCTION

P a r t I of the staff report analyzed the cash-flow impact of the diversification program undertaken by the Pennsylvania Railroad Co. (subsequently renamed the Penn Central Transportation Co. following the
merger with the New York Central Railroad in February 1968) beginning in 1963. Prior to that date, the Pennsylvania Railroad ( P R R )
confined its acquisition program to railroads or companies engaged in
railroad-related activities. For the first time in its history, the railroad
actively sought to acquire control of significant non-railroad-related
companies. This change in management philosophy occurred at the
same time plans for the merger with the New York Central Railroad
were publicly revealed.
The decision to invest in capital intensive non-railroad-related companies was shown in part I of the staff report to be damaging to the
railroad's cash position, contrary to the claims of the Railroad's
officers. The investment of millions of dollars in a company called
Executive Jet Aviation, while subject to the same criticism, is actually
a separate and distinct story and—in the opinion of many—evidences
many of the problems which led to the filing for reorganization under
Section 77(B) of the Federal Bankruptcy Act of the Penn Central
Transportation Company on June 21, 1970.
Initial contact made between PER and EJA
As was true for all of the companies acquired by the Pennsylvania
Railroad under its new diversification program, information regarding
the possible investment by the Railroad in Executive Jet Aviation,
Inc. (EJA) was obtained from Gen. Charles J. Hodge, chairman of the
executive committee of Glore-Forgan, Wm. R. Staats, Inc. (now
known as f. i. DuPont-Glore Forgan), an investment banking firm
having its principal office in New York City.
The sequence of events which brought E J A to the attention of
General Hodge is as follows: Brigadier General of the Air Force
Olbert F . Lassiter (retired) conceived the idea of having a special
fleet of jet planes and pilots which would contract with the executives
of large corporations to fly them on short notice to specified destinations. In this manner, corporate officers could avail themselves of
the convenience and luxury of private jet service without investing
in the purchase price of these expensive planes. General Lassiter
came upon this concept quite naturally, as he was the commanding
officer of the identical type of program while in the Air Force. Much of
(1)
51-903 O—70—pt. 2



2

2
the groundwork and even the actual incorporation was accomplished
while General Lassiter was still technically a member of the Air
Force.
What was missing, of course, was the money needed to buy the
planes and begin operation. General Lassiter contacted a Washington
attorney familiar with aviation matters, Bruce G. Sundlun, who
also happened to be an Air Force Reserve officer. Mr. Sundlun then
went to New York in search of investment capital and one of his
stops was at Glore Forgan, where a partner of that firm, Sam Hartwell, was given the background information. Mr. Hartwell referred
the matter to General Hodge, who was at the time the investment
advisor to the Pennsylvania Railroad, then actively seeking investment opportunities.
EJA board of directors
The makeup of the board of directors of Executive Jet Aviation
soon after incorporation in 1964 certainly did not lack for fame and
distinction. Besides General Lassiter, Sam Hartwell, General Hodge
and Bruce Sundlun, the list included Curtis E. LeMay, former Air
Force Chief of Staff; Perry M. Hoisington, retired Air Force general;
F. H. Billups, president of Tropical Gas Co.; M. J. Rathbone, former
chairman of the board of Standard Oil Co. (New Jersey); James
Hopkins Smith, former Assistant Secretary of the N a v y ; and entertainers Arthur Godfrey and James Stewart. With this lineup of directors, it is not surprising to learn that there was a military overtone
to E J A and, in fact, E J A was described by General LeMay as a small
Strategic Air Command (SAC) operation. In view of subsequent
events, it is hoped that SAC, for the sake of our national defense, is
operated more efficiently.
PRR INVESTMENTS IN EJA

Initial investment by PRR
All investments in EJA made by the Pennsylvania Railroad were
accomplished through a wholly owned subsidiary, American Contract
Co. (ACC), which up to November 1964 had only minor investments
in transportation companies. The first record of money advanced to
E J A by ACC consists solely of the following letter to William Gerstnecker, treasurer of the P R R :
NOVEMBER 2,

1964.

D E A R B I L L : Since you had the foresight and interest to advance
$275,000 for our project, I thought it important to give you some
protection. Enclosed is a note for the proper amount with the interest
blank. Thought you'd have a better idea on that subject.
Looking forward to getting this project off the ground with you.
Kind regards,
D I C K LASSITER.

The incredibly casual manner in which this money was advanced
to E J A was not at all unusual in the affairs of American Contract Co.
At the time of this loan (Nov. 2, 1964), David Bevan, chairman of
the finance committee of the Pennsylvania Railroad, was the president of American Contract Co. (ACC). At the board meeting of ACC
on December 22, 1964, "the action of the president in approving and




3
making loans to Executive Jet Aviation, in the total amount of
$575,000, evidenced by 90-day promissory notes" was ratified. "This
established the pattern followed consistently thereafter. The officers
of American Contract would purchase stock, make loans, and enter
into other financial transactions with Executive Jet, then, at the next
meeting of the board—which was usually held only once a year—the
directors would 'ratify and confirm' whatever action had been taken
in the meantime." 1
At the time the first advances were made to EJA, the board of ACC
consisted of David Bevan, William Gerstnecker, and three other highlevel employees of the Pennsylvania Railroad. A very interesting development took place at the abovementioned December 22, 1964,
AAC board meeting. These five gentlemen all resigned as directors
and in their place three officers in the financial department of P R R —
all directly subordinate to Messrs. Bevan and Gerstnecker—were
elected in their places. Similarly, the newly elected officers of ACC
were low-level employees of P R R who obviously were not capable of
acting on their own initiative in matters dealing with EJA. In point
of fact, all objective evidence indicates that Mr. Bevan and Mr.
Gerstnecker at all times retained the decision making authority with
respect to P R R ' s investment in EJA.
The question of whether the procedure by which moneys were advanced to EJA complied with the internal bylaws of the Pennsylvania Railroad was examined in the Cole report. Pertinent portions
of that report follow:
Although it is not possible to trace the original source and flow of all of the funds
which American Contract invested in EJA, it is clear that most of them came in
the form of "advances" from P R R or Pennsylvania Co. On June 23, 1965, Mr.
Bevan reported to the P R R board—and this is the first such report on EJA that
we have been able to find—that the company had advanced funds to American
Contract which had made loans in the amount of $4.7 million to Executive Jet
and had paid $328,000 for nonvoting stock.
On February 24, 1965, there appeared on the P R R treasurer's report (a tabular
form containing financial data which is routinely presented to and approved by
the board) an entry in the loan account indicating an advance of $3,700,000 to
American Contract, "to restore advance account." And, on 20 occasions during
the ensuing 31 months, or to September 27, 1967, there were shown on this report
advances from P R R to American Contract for, "additional working capital" in
amounts ranging from $50,000 to $2,400,000, for a total of about $15.9 million.
The use that American Contract was going to make of these advances was never
disclosed on the treasurer's report, and the minutes do not indicate that there
was any verbal explanation. The information was there for anyone to question,
however, and while there may be room for doubt, this form of report presumably
complied with the P R R By-Law * * *.

Legal impediments to Penn Central investment in EJA
There is no documentation to be found of any inquiries as to the
legality of the Pennsylvania Railroad investment in E J A at the time
the initial advances were made in late 1964. Not until March 1965
did the railroad seek an outside legal opinion on the nature and extent
of their proposed relationship with E J A ; with one opinion being
solicited from none other than the general counsel of EJA, Bruce
Sundlun, not exactly the advice of independent counsel. Pertinent
portions of the letter to Sundlun written by David Wilson, the assistant
general counsel of the P R R , appearing below, clearly indicate the
1
From report prepared by Mr. Basil Cole of the P R R at the request of the conflict of interest committee of the Penn Central board of directors, in May 1970, hereinafter referred to as the Cole report.




4
Railroad's intent to enlarge on the original concept of E J A being
merely a small passenger contract carrier:
As I explained to you, we would like to have an opinion covering the matters in
question in order to permit us to consider the nature and extent of our relations
with EJA in the future. For reasons of policy, we would prefer that none of these
questions be taken up either formally or informally at this particular time with
the agency or any of its staff people if our identity would have to be disclosed.
Accordingly, if you conclude that an approach of that nature would be necessary
or desirable, I would appreciate your advising me about it in advance.
As to the matters on which we desire your opinion, you will recall that we were
at first concerned primarily with the legality of any control relationship between
this company and EJA. This is still our main concern but the question may be
broader than we originally contemplated. Instead of our acquiring immediately
a majority equity position, we might prefer to begin with a creditor relationship
including some convertibility feature, option or other form of stock right, which
would permit us to obtain the majority equity position at our discretion in the
future. Your opinion should therefore clarify the status of this alternative type
of relationship from the standpoint of CAB regulation.
Going beyond this feature we would also want to be advised as to the nature and
extent of the procedure which would be involved if any existing exemption by
general regulation were to expire or otherwise become inapplicable. This would
include a general estimate of the action which the board might be expected to
take in such a situation based on its policy positions in comparable circumstances.
Finally, this should be clarified to indicate the procedures and policy issues which
would be involved if the board action would have to be in the form of affirmative
approval and under what type of circumstances, if any, would that be required.
Mr. SundlmVs detailed opinion in response to this letter hinged on
the definition of the term "air carrier" within the meaning of the
Federal Aviation Act of 1958, since Section 408 of the Act prohibits
a surface carrier, such as the P R R , from acquiring control of an
"air carrier" unless approved by order of the Civil Aeronautics
Board. Such approval will only be granted if it can be shown that
such an acquisition is in the public interest. The Sundlun legal opinion
also concluded t h a t E J A may in the future become an "air carrier"
without Board approval if their service was limited to aircraft having
a maximum takeoff weight of 12,500 pounds or less, the theory being
t h a t the control question is only applicable at the time of acquisition.
The introductory paragraph of SundlmVs opinion is quoted below.
I t should be noted t h a t a contrary opinion had already been given to
the P R R from an attorney who supposedly "had not been furnished
all the material facts."
We have examined the question as to whether the Pennsylvania Railroad
(PRR) can acquire a controlling equity interest in Executive Jet Aviation (EJA)
without the approval of the Civil Aeronautics Board (Board). Since it is our
opinion that EJA is not an "air carrier," we have concluded that the economic
regulatory provisions (title IV) of the Federal Aviation Act permit P R R both
to acquire control of and operate EJA without Board sanction. Hugh Cox,
Esquire, of Messrs. Covington and Burling, on March 31, 1965, gave P R R an
opinion that the act prohibited the acquisition of EJA. Mr. Cox, however, had
not been furnished all the material facts, and incorrectly assumed as the hypothesis of his opinion that EJA was an "air carrier." While we would agree with Mr.
Cox's opinion if EJA were an "air carrier, ,, the facts of EJA's operation require a
different conclusion.
PRR's future expectations for EJA
Aware of the legal obstacles facing them, why did the officers of the
P R R decide to make such a sizable investment in EJA? Even the
most glowing financial predictions for EJA's operation under the
original concept of executive jet service would hardly have enticed
a corporation of P R R ' s size and importance to risk such large sums




5
of money in an unproven venture so obviously fraught with risks.
T h a t there was potential for greater things is supported by numerous
statements and speeches by top level P R R officers.
In a number of major speeches, the chairman of the board of the
P R R , Stuart Saunders, urged that railroads be permitted to engage
in other forms of transportation thereby offering its shippers a complete package. The P R R was hoping it would become "a department
store of transportation.'' An important step would, of course, be
entrance into the air cargo business and this is where EJA figured
most heavily. In one speech EJA was mentioned specifically as the
vehicle through which the P R R would enter the air cargo business.
This reference precipitated a stern memorandum from William
Gerstnecker to P R R ' s director of public relations reminding him that
no mention of P R R ' s interest in E J A was to be publicly discussed.
General Hodge, of Glore Forgan, investment brokers to the P R R ,
was quoted as saying: " I screened and proposed EJA. I thought any
railroad management not aware of what's coming in air freight was
not doing its job."
Despite all these pronouncements, the potential for entry into the
air freight business was limited by a simple fact: I t was against the
law at the time. An unsigned memorandum to the file in August 1969
presumably written by an officer of Penn Central sheds additional
light on the railroad's motivation:
The transaction was handled in this way (through purchase of nonvoting stock)
because of the fact that rail carriers, under the law, cannot become involved in
the operation of air freight services. The whole project was undertaken, however,
in the hope that Executive Jet would expand into the freight area and at some
future date laws might be changed so that Penn Central would move in.

PRR investment in EJA through August 1966
Through August 1966, the P R R advanced approximately $13
million to EJA. These funds were utilized to purchase the Lear jets
needed to serve as the backbone fleet for the executive contract
flying service. These funds were advanced under a basic agreement
whereby principal and interest payments were deferred until 1970,
with the level of interest payments geared to the earnings of EJA.
Security for these advances initially was the airplanes themselves.
However, when outside financing, principally from commercial banks,
became necessary, P R R agreed to subordinate its security interest
in the airplanes to these later investors.
P R R ' s investments in E J A are detailed in table I below:
TABLE I.—American Contract Co., Investments in Executive Jet Aviation,
Incorporated
Explanation:
Amount
1965 advances
$11, 182, 596. 00
1966 advances
6, 251, 518. 25
Total advance through December 31, 1966
17, 434, 114. 25
Plus:
Interest on certain notes
277, 224. 56
Advances after December 31, 1966
4, 086, 544. 00
Total
Less:
Repayments

21, 797, 882. 81

Total direct advances by American Contract Co
Plus: Advances to E.J.A. through Detroit bank

16, 695, 877. 31
4, 316, 000. 00

Total.



5, 102, 005. 50

21,011,877.31

6
In point of fact, the P R It was at all times extremely loose in their
dealings as the principal creditor of EJA. Not until June of 1965, seven
months after its initial investment, did P R R enter into a formal
written agreement with E J A for purchase of stock in that company.
With an eye toward the CAB jurisdictional question, P R R (through
ACC) purchased 655,960 shares of class B nonvoting stock for approximately $328,000, which constituted 58 percent of the total
equity of EJA. Glore Forgan also purchased a limited amount of
class B nonvoting stock, and ACC and Giore Forgan remain the only
class B stockholders. While class B stock is nonvoting, class B stockholders were given the right to purchase additional shares which
would enable them to retain the 58:42% "equity ratio." If the original
class B stockholders sold their interest to another party, or if the
Congress could be persuaded to change the law, then the shares of
class B stock could become convertible to shares of class A voting
stock. This stockholder arrangement became extremely important in
future deliberations of the CAB.
How did these funds advanced by ACC find their way into EJA?
Were these substantial advances authorized by the board of directors
of the P R R ? The facts are somewhat confusing, but it appears that
the circumstances were substantially those disclosed by the Cole
report, quoted above: David Bevan had full authority over E J A
investments.
Independent staff inquiry confirms the following statement in the
Cole Report:
By practice, it appears to have been assumed or implied that the chairman of
the finance committee [David Bevan] had unlimited authority to make such
investments and full discretion as to whether they should be reported to the Board.

Interviews with bank loan officers and other participants in the
E J A venture evidence quite clearly that David Bevan, chief financial
officer, and William Gerstnecker, treasurer of the Penn Central Co.
(and the P R R prior to the merger) retained the decision-making
authority with respect to the P R R ' s investment in EJA. This fact
becomes important in the analysis of further developments in the
E J A venture.
Purchase of Johnson Flying Service certificate
The entire nature of the E J A operation, and with it the P R R ' s
involvement with EJA, changed dramatically in August of 1966.
Up to that time, E J A restricted itself to its original business jet concept, albeit not very successfully. As of August 31, 1966, EJA's 12month figures showed revenues of about $2.8 million and a net loss
of $1.8 million. (The losses have continued to mount with accumulated
losses at the end of 1969 totaling about $12.5 million.)
In August of 1966, EJA successfully negotiated for the acquisition
of 80 percent of Johnson Flying Service (JFS), a supplemental air
carrier. Johnson Flying Service, based in Missoula, Mont., had as its
principal business client the U.S. Forest Service, for which it engaged
in numerous phases of firefighting. Its principal asset, however, was its
permanent certificate as a supplemental airline granted by the CAB in
May of 1966. Of the 10 carriers granted such status, Johnson was one
of the smallest and, therefore, relatively inexpensive to purchase.
E J A offered $1.75 million for controlling interest in the airline. Acqui-




7
sition of this certificate would permit EJA, and therefore P R R , to
engage in the air charter and cargo business, the phase of airline
operations they appeared to be most interested in.
While the acquisition was certainly discussed with David Bevan,
portions of an August 19, 1966, letter from General Lassiter to Mr.
Bevan, quoted below, reveal the haste with which this transaction
was consummated:
The purpose of this letter is to set down in one place our thoughts concerning
the future activities of EJA, particularly with respect to the large jet aircraft
and Johnson Flying Service. I know the recent acquisition of the Johnson group
must have seemed like a Chinese fire drill to you—and in some respects it did
seem like that to us, also. However, I am firmly convinced that the acquisition of
a supplemental air ticket, coupled together with the acquisition of larger aircraft,
will be a very profitable venture. The short notice we were able to give you to do
your planning was partially due to the fact that the option we wanted to pick-up
was due to expire. After careful review of the Johnson and Vance groups, it was
our unanimous opinion that the Johnson group offered us the most potential;
however, the time was shortest to take advantage of the option for the Johnson
operation.
You and I have discussed large aircraft at some length in the past * * *.

The question of whether E J A was legally an "air carrier," examined
at the initial stage of P R R ' s investment in EJA, was no longer an
important issue, since Johnson Flying Service was without question
an "air carrier" under the Federal Aviation Act. Acquisition of that
airline by E J A would clearly require CAB approval. Again, legal
counsel was sought from Mr. Hugh Cox of the law firm of Covington &
Burling. He stated in a letter dated August 4, 1966:
We believe that the question whether the Pennsylvania controls EJA is very
likely to be the subject of inquiry in the CAB proceeding on EJA's application
to acquire control of a supplemental air carrier. It is quite possible that other
supplemental air carriers will oppose EJA's proposed acquisition and will attempt
to show that the acquired company would have the financial backing of the Pennsylvania, thereby giving it an unfair competitive advantage. In any event, we
believe that the CAB's economic bureau will inquire into the relationship between EJA and the Pennsylvania, notwithstanding the earlier investigation of
the matter by the Board's enforcement bureau.
As we have said, we believe there is a reasonable chance that the CAB would
hold that the Pennsylvania does not control EJA. However, if the CAB were to
find that EJA was controlled by the Pennsylvania, it would undoubtedly not
approve the acquisition of the supplemental air carrier since it would view the
transaction as an acquisition by the Pennsylvania and the requirement of the
second provision of section 408(b) of the Federal Aviation Act could not be met.

The expected opposition from other supplemental airlines did
materialize out of their concern that such an acquisition would produce
a competitor having the financial backing of the then solvent Pennsylvania Railroad. They argued that P R R controlled EJA, and alternately that EJA was a common carrier and had violated the law by not
obtaining prior CAB approval. What would normally have been a
routine hearing before the CAB was transformed into a most complex
and protracted administrative proceeding.
Even though fully aware of the potential for delay—and the possibility of CAB disapproval—General Lassiter, David Bevan, and
William Gerstnecker decided in the fall of 1966 to commit EJA to the
purchase of large aircraft, specifically two Boeing 707 and two Boeing
727 jets. The total cost on delivery was $26.2 million, with the first
plane to be delivered in May of 1967 and the last in November of that
year. Unless and until the CAB approved EJA's acquisition of John-




8
son, E J A had absolutely no use for these planes. Because of this fact,
the decision to purchase the large aircraft at this time proved to be a
most serious blunder. General Lassiter was also interested in purchasing the Lockheed L-500, the civilian counterpart of the C-5A, and at
one point signed a letter of intent with Lockheed for six of them at a
total cost of $136,500,000. He obviously thought the P R R had an
extremely deep pocket.
CAB's examiner decision
The import of this blunder was not long in coming. On April 11,
1967, the examiner handed down his decision on the Johnson Flying
Service acquisition request by EJA (docket No. 17657 et al.). The
examiner found that P R R was in control of EJA in violation of section
408(a)(5) of the Federal Aviation Act of 1958 (49 U.S.C. 1378(a)(5) ).
Therefore, the acquisition of Johnson by EJA was dependent on the
filing of an acceptable plan for divestiture of P R R interest in EJA.
Control of EJA by P R R was found to exist by virtue of the following:
(1) The nonvoting stock held by P R R (through ACC), constituting
a 58-percent equity interest in EJA, could under certain conditions be
converted to voting stock; (2) the size and nature of the debt obligation of E J A to P R R allowed the railroad to control the day-to-day
operations of E J A ; (3) two of the 11 directors of EJA, General Charles
Hodge and Sam Hartwell, were members of the investment firm of
Glore Forgan, Wm. R. Staats, Inc., which had a longstanding relationship with the P R R , thus making Glore Forgan the "alter ego" of
P R R ; and (4) the treasurer of EJA, A. W. Estes, was a former employee of the P R R , which potentially could afford the P R R access to
confidential information.
On June 30, 1967, the CAB in Order No. 25371, adopted the
examiner's initial decision, with limited exceptions such as the granting
of an exemption to operate certain larger aircraft (not the 707 or 727
jets), and allowed 6 months for the filing of an acceptable plan of
divestiture.
As soon as the examiner's decision was handed down, various plans
for divestiture were discussed. At an April 13, 1967, meeting of the
E J A board of directors, all agreed that General Hodge and Sam Hartwell should resign from the EJA board, but the terms of the financial
divestiture remained in doubt. The plan finally adopted can best be
summarized in a memorandum written to Stuart Saunders, chairman
of the board of P R R , by David Bevan on August 9, 1967:
Much work has been done and every effort has been made to put together a
financial plan for Executive Jet Aviation which can be submitted to the CAB at
the earliest possible date.
In summary, General Hodge and Sam Hartwell (one of Glore Forgan's partners)
will resign from the executive jet board and Glore Forgan's class A stock, which
is now voting stock, will be exchanged for class B nonvoting stock. Both these
moves will meet objections raised by the CAB examiner and eliminate any possible claim that Hodge and Hartwell are * 'tools" of ours and eliminate their stock
from any vote in the affairs of Executive Jet.
The total cash requirement is approximately $45 million. Under the plan, $23
million will be raised through senior financing in the form of lease arrangements for
the two 727's and two 707's. Leasing of one of the 707's has been consummated
and we believe we have attractive leases available for the other three. The balance
of $22 million will be required primarily for working capital, down payments on
the four airplanes, spare parts, and repayment of loans made by us to Executive
Jet since the first of this year. This $22 million would be raised through the sale of
$11 million of debentures and $11 million of common stock. It is hoped that the




9
debentures can be sold at a 7 percent interest rate with warrants to purchase 30
shares of common stock per $1,000 debenture at a price still to be determined but
probably at $10 a share. The $11 million of common stock will be sold at $10 a
share (you will recall our present stock which amounts to 659,405 shares, representing 58 percent of the total outstanding, was subscribed for by us at 50^ a
share).
Under the plan, we will receive approximately $8,500,000 of debentures similar
to those which are to be sold to the public and approximately $4,500,000 of
additional nonvoting stock at a value of $10 per share in exchange for the debt
executive jet owed us at the end of last year amounting to approximately $13
million. About $2,500,000 will come back to us in cash.
As a result of this kind of transaction we would own initially about 39 percent
of the company after the financing and Glore Forgan would own 4 percent or a
total of 43 percent. It is believed by Howard Westwood of Covington & Burling
and by Bruce Sundlun that such total percentage holding by us and Glore Forgan
of nonvoting stock would meet the requirements of the CAB primarily because it
would mean that our total ownership would be equivalent to the amount of stock
being sold to new investors.
Under the plan, the debentures we receive will include warrants for the purchase of additional stock on the same basis as the debentures being sold to the
public so that we will be protected against a dilution in our equity position if and
when the warrants are eventually exercised.

At all times, Glore Forgan remained the investment banking firm
in charge of obtaining the financial commitments for the new funds,
and was the underwriter for the proposed EJA common stock offering
(Form S-l) filed with the SEC on November 7, 1967. Glore Forgan
obtained firm commitments for $17 million of the $22 million financing
package from the following parties:
Amount

Colonial Management of Boston
Keystone Custodian Fund
Old Suez Co. Group
Reliance Insurance
Individual investors for amounts under $500,000

$5,000,000
4,000,000
2, 000, 000
1, 000, 000
5, 000, 000

On October 27, 1967, EJA filed a motion, enclosing the financing and
divestiture plan, requesting CAB approval of the J F S acquisition plan.
All of this came to naught, as the CAB on December 22, 1967, issued
an order (No. E-26170) holding that the proposed plan did not comply
with the Board's previous order. Pertinent portions of that opinion
follow:
On the basis of its motion and accompanying documents, there is substantial
doubt that EJA has made a prima facie showing that it has complied with either of
the requirements of our previous order. In the memorandum accompanying its
motion EJA sets forth five steps which it has taken to accomplish divestiture:
(1) amendment of EJA's articles of incorporation to prevent P R R or Glore Forgan
from converting their class B common stock to class A voting common stock so
long as that stock is held by them or someone Under their control; (2) conversion of
all stock held by Glore Forgan to class B common stock; (3) the resignation of two
officers of Glore Forgan from the EJA board of directors; (4) election of a new
director from one of the proposed new investors in EJA; and (5) approval of the
issuance of various new securities pursuant to the proposed financial reorganization
plan. Although clearly designed to meet some of the aspects of control which the examiner
described in his initial decision, these actions appear to us to fall short of accomplishing
divestiture. PRR continues as the largest stockholder with 57 percent of the outstanding
common stock; it continues as by far the largest single debt holder—$16 million of $25
million; and EJA seems to continue to be dependent on PRR u financial support, as
for
evidenced by cash advancements of over $2,200,000 made on open account" by PRR
over the period January 1 through October 25, 1967—and the uopen account" continues. Even though the majority block of stock held by P R R is nominally nonvoting, it could give P R R a substantial power to control EJA management. In
addition to the right of "nonvoting" stock to vote in certain cases on matters which
may affect it, the power P R R has to sell its stock to a third party who could vote
51-903 O—70—pt. 2



3

10
the existing management out of power gives P R R a substantial influence over that
management. Even the steps already taken in the refinancing plan disclose a continuing close association with P R R and, more important, an apparent reliance by
EJA on P R R and Glore Forgan, P R R ' s alter ego in dealings with EJA. * * *
Considering the past history of the relationships and the policy of PRR to control the
companies in which it maintains sizable investments^ we are inclined to believe that
only complete liquidation of all or the vast bulk of PRR's financial interest will insure
divestiture of the control relationship. (Emphasis supplied.)
In situations analogous to this, it has been the Board's practice in the past
to insist upon complete divestiture or liquidation of its holdings by the controlling
party in the illegal relationship. To avoid distress sales and limit, to the extent
possible, the possibility of loss, we have frequently approved liquidating voting
trusts as providing an effective means of insulating control pending final sale
of the interest. We believe that such a liquidating trust or comparable arrangement would be appropriate in this case.
Leasing of large aircraft
While the question of approval of the acquisition of J F S was delayed by the lengthy proceeding before the CAB, the Boeing Co.
was completing delivery of the two 707 and two 727 jets under their
contract at a total cost of $26.2 million. Leasing of these planes
became essential, since E J A did not then have the requisite authority
to operate these planes. Various leasing agreements were entered
into with Airlift International (707) through July 1, 1968, United
Airlines (two 727's) through M a y 1968, and Boeing leased back the
other 707 until June 1, 1968. Nothing in these leasing agreements
appears to be unusual, b u t the question of what to do with these
planes by mid-1968 became a pressing one.
PRR advances to EJA after mid-1967
After the CAB decision in June of 1967, it would seem reasonable to
expect that the P R R would become much more cautious in their
financial transactions with EJA. The contrary appears to be the case.
As the findings of the Cole report, quoted below, indicate, any change
in P R R ' s dealings with E J A was more of form than substance. Through
what appear to border on deceptive bookkeeping practices substantial additional sums were invested by P R R in E J A after the
CAB order.
The method of supplying funds to EJA changed abruptly after September 27,
1967, and the treasurer's report presented at the next (PRR) meeting (on Oct.
25, 1967) indicates that American Contract repaid P R R $16.2 million. Concurrently, American Contract borrowed $16.3 million from Pennsylvania Co.
Thereafter, the only funds that we have been able to identify originated in
Pennsylvania Co. The Pennsylvania Co. bylaws do not require reporting of
advances to subsidiaries and while EJA's indebtedness to American Contract
increased by an estimated $5-$8 million during 1968 and 1969, we were able to
find only one advance for $200,000 from Pennsylvania Co. to American Contract,
this advance being noted in the treasurer's report submitted to the Pennsylvania
Co. board at its meeting on June 26. It is probable that the money being supplied
to American Contract in this period was reflected in the Pennsylvania Co.'s
treasurer's report as 'loans to subsidiaries," since the totals reported in corresponding accounts roughly match. If this is the case, these transactions were recorded
in the wrong account (American Contract is not a subsidiary of Pennsylvania Co.)
and at no time is either the source or destination of these funds into or out of
Pennsylvania Co. explained in such a way that the closest scrutiny would reveal
that they were ultimately intended for EJA.
The significance of this change in the method of obtaining funds for EJA is that
it came shortly after P R R was required to eliminate its economic domination of
EJA, a time when those not wise to the ways of finance might have been surprised
to learn this investment was steadily increasing.




11
What was also surprising was the fact that the increased EJA
indebtedness in the years 1967, 1968 and 1969 was not reported by
the railroad to the ICC in Form A annual reports. All investments in
short-term obligations of other companies and commercial paper must
be filed with ICC, and this was done for EJA investments in 1965
and 1966.
"WORLD OPERATING RIGHTS" PROGRAM

What proved to be the fatal flaw in EJA's effort to win approval
of the J F S acquisition was the decision to establish a worldwide
network of air carriers prior to winning such approval. While the
CAB found, in a later decision, that such activities began on or about
the date of the December 22, 1967, CAB order, evidence obtained by
the staff indicates such activities began in the middle of 1967. The
complexity of these dealings is truly mind-boggling, and this report
will only attempt to summarize them. The detailed background information is on file with the CAB or in the possession of the staff.
The first mention of European acquisitions is found in the minutes
of the EJA board of directors meeting of July 20, 1967. In the discussion of the new financing plan to be submitted to the CAB, General
Hodge indicates that "possible European investments" will require a
portion of the new money to be raised. Also at that meeting, the
board adopted a resolution authorizing acquisition of Sudwestflug,
a German supplemental air carrier.
Immediately after that meeting, General Lassiter and General
Hodge went to Europe "to investigate the formation and/or purchase
of European companies for our world operation rights objective."
One of the meetings, and there were many, centered on the Sudwestflug acquisition. Present were Fidel Goetz, a German national
controlling numerous Liechtenstein corporations, conveniently known
as the Goetz group; Francis S. Rosenbaum, a Washington, D.C. attorney now serving 10 years in prison for defrauding the U.S. Government through foreign corporate and bank transactions; Carl Hirschmann, a wealthy Swiss financier (vice-chairman of EJA, S.A., in 1968
and 1969); and Perry Hoisington, an EJA, S.A., officer in Europe.
EJA, S.A. was a wholly owned subsidiary of EJA located in Switzerland, which proceeded, like the parent company, to lose over $2 million
during its existence.
The deal agreed to at this meeting was that Goetz would purchase
100 percent of Sudwestflug until CAB approval of the J F S acquisition,
then 48 percent would be purchased by EJA. All of these gentlemen,
along with Joseph Rosenbaum—the brother of Francis and a partner
in the same law firm—figured substantially in all of the consummated
foreign EJA transactions.
In a memorandum written in July 1967 by General Lassiter on the
results of the European trip, with copies sent to David Bevan and
William Gerstnecker of P R R , he states:
Although we are a minority partner in the companies shown on the enclosed
chart [including Sudwestflug], Charlie (Hodge), Perry (Hoisington) and I unanimously agree that we have absolute and positive operational control of each of
them.

Further evidence of foreign acquisition plans is found in a^Septembber 11, 1967, telegram from Bruce Sundlun to Perry Hoisington stating:
Charlie [Hodge] and Dick [Lassiter] agree that we should spread the flag whereever possible.



12
The documents on file with the CAB clearly indicate that Bruce
Sundlun, now the president of EJA, was fully aware of all these foreign
transactions and, in fact, played a substantial role in many of them.
Also, a memorandum to the file written by a First National City
Bank loan officer, who had already loaned $16 million to EJA, on
February 28, 1968, discloses the following:
On January 10, EJA's Board voted to withdraw its S-l Form in connection
with the proposed public sale of $22 million of financing from registration so that
it did not have to disclose its plans for overseas expansion. . . . The major plans
for overseas operations include (1) the purchase of four supplemental airlines
owned by "friendly hands" and located, respectively, in the Netherlands, Spain,
Switzerland and Germany (financing reportedly has been arranged abroad);
(2) the purchase of International Air Bahamas, a non-IATA Carrier, with routes
from Nassau to Luxembourg; (3) the formation of a new company to operate as
the flag carrier of Panama.

There was almost no limit to the number of people and countries
visited in hopes of securing some interest in foreign carriers. Some,
like the Sudwestflug deal, came close to fruition, while others never got
off the ground. Discussions were held with supplemental carriers in
Spain, Germany, Switzerland, Panama, Saudi Arabia, France, Netherland Antilles, and even Indonesia.
Two of the proposed acquisitions did come to pass: E J A acquired
control of Transavia Holland and International Air Bahamas (IAB)
and, in fact, the two E J A 707's found their way to these carriers under
separate lease agreements. The similarities between the two transactions does not end there. Both airlines were controlled at one time by
the Swiss banker Carl Hirschmann, both were acquired with the help
of E J A funds, both were later sold to companies controlled by Fidel
Goetz and both ran up enormous debts to E J A under their lease
agreements which were later settled for a fraction of the face amount of
the debts.
Transavia
In February 1968, Carl Hirschmann purchased approximately 90
percent of the stock of Transavia. He put up $200,000 of the $400,000
down payment, the rest being borrowed from the Commercial Credit
Bank of Zurich, which Mr. Hirschmann controlled. E J A supposedly
was to show its "good faith" by depositing $660,000 for the account
of EJA, S.A., in the Commercial Credit Bank's account in the Bank of
America, International Division, New York. At least $500,000 of that
amount was advanced by the PRE, with the full knowledge and approval of David Bevan and William Gerstnecker, and without the
advice of counsel. Within 2 weeks, after counsel had objected, the
money was returned to the P R R .
On July 29, 1968, Hirschmann's shares in Transavia were sold to a
company controlled by Goetz. Goetz later sold these shares back to
the Amsterdam Credit Bank but the majority of the shares found
their way back to a Liechtenstein company—Stichting Transavia en
Luchtvaart. (Liechtenstein corporations and banks are able to maintain complete secrecy as to the real parties in interest. This fact was
highlighted in hearings before this committee in consideration of the
Foreign Bank Secrecy bill, now Public Law 91-508).
The CAB also found that the leased 707 jet was delivered to Transavia prior to seeking approval from the CAB, and that the approval
was improperly obtained by failing to "disclose the control which




13
EJA had acquired over Transavia" since Hirschmann was found to be
"acting as a representative and associate of EJA pursuant to agreement with General 0 . F. Lassiter." Also, on two separate occasions
the CAB found that "707 aircraft leased to Transavia have been used
in foreign air transportation without board approval."
Transavia continually fell behind in its lease payments to EJA and
efforts to collect this money were thwarted by General Lassiter for
undetermined reasons. The final sale of Transavia included a note in
the amount of $100,000 given to EJA in settlement of the debt. This
did not even represent one-tenth of the total amount owed to EJA.
The CAB found that EJA and PRR violated sections 408(a)(2), (6)
and (7) by virtue of its acquiring control of Transavia and leasing the
707 jet without the proper authority from the board.
International Air Bahama
IAB, at the time E J A became interested in acquiring it, was not an
operating airline. Its only asset was the landing rights in Nassau and
Luxembourg which could allow transatlantic service at rates well
below those charged by members of the International Air Transport
Association.
On March 11, 1968, Carl Hirschmann purchased 70 percent of the
common stock of IAB for $200,000, with $100,000 as a down payment.
Payment was made with money again borrowed from the Commercial
Credit Bank of Zurich, which Mr. Hirschmann controlled, a pattern
similar to the Transavia acquisition. Mr. Goetz lent $650,000 to EJA
for which he received a note bearing warrants for 40,000 shares of
E J A common stock, exercisable at $10 per share. This money was also
deposited in the Commercial Credit Bank of Zurich to show EJA's
"good faith." This loan was repaid to Goetz on July 29, 1968.
Why EJA had to deposit "good faith" money to its own account in
Mr. Hirschmann's bank for both the Transavia and IAB acquisition
is never fully explained. Both David Bevan and William Gerstnecker
admitted it was unusual, but offered no further explanation to the
CAB.
EJA, acting through Hirschmann, contributed $50,000 to IAB for
working capital. This was the beginning of a constant pattern of a
debt buildup owing to EJA. IAB failed to make its lease payments
and efforts to collect this debt—which finally grew to $2,600,000—
by officers of EJA were always blocked by the president of EJA,
General Lassiter. Control of IAB was achieved through agreements
with Hirschmann and the total economic domination represented by
the debt owing EJA.
By July 20, 1968, IAB had begun flight operations directed by two
individuals, I. H. Mansfield and A. N. Thompson, acting as consultants
to EJA. Mansfield and Thompson came to E J A by virtue of their combined 20 percent stock interest in Johnson Flying Service. Handling
the Bahamian portion of IAB affairs was Walter Johnson, of a firm
called Infoplan, under the direction of General Lassiter. By virtue of
the wet-lease of the 707 to IAB (the term "wet lease" refers to a lease
where the airplane crew is furnished by and is under the direction of
the lessor, in this case EJA) and the managerial personnel placed by
EJA, complete operational control in IAB was retained by EJA. I n
addition, EJA, through an investment group called Penphil, controlled
a travel agency (Holiday International Tours) organized to sell




14
tickets on IAB flights. This relationship will be discussed more fully in
a later section of this report.
On September 3, 1968, Hirschmann's stock in IAB was transferred
to Ovid Anstalt, a Liechtenstein corporation, controlled by Fidel
Goetz and represented by Joseph Rosenbaum. The role played by
Francis Rosenbaum, and later by Joseph Rosenbaum, in these foreign
transactions deserves special mention. First of all, Joseph Rosenbaum
has had continuous dealings with the Penn Central Co. (formerly the
P R R ) through equipment trust transactions involving freight cars of
the railroad. Joseph Rosenbaum was a principal and agent in many
conditional sales agreements, where new and used freight cars were
purchased by him and then leased back to the railroad. The used cars
were allegedly rehabilitated in the Penn Central yards and then
leased back to the railroad. General Hodge was a participant in at
least a portion of these transactions.
In the Sudwestflug acquisition, the Rosenbaum "group," under
the direction of Francis Rosenbaum (who was not then in prison),
was to be the purchaser of that airline for the purpose of achieving
control by EJA. The next association with EJA came about when
Joseph Rosenbaum acted as Fidel Goetz's attorney in the Ovid
Anstalt acquisition of Transavia and IAB, as well as being associated
with Hirschmann. Goetz and Hirschmann were found by the CAB
to be financial associates of EJA.
After IAB was in financial ruin, owing $2,600,000 to EJA, Joseph
Rosenbaum represented Ovid Anstalt in the sale of IAB. At one
meeting held to discuss the sale of IAB, Mr. Rosenbaum allegedly
offered the officers of the First National Bank of Lake Worth, Fla.,
a chance to purchase some of the Penn Central used freight cars at
an attractive price. At this same meeting, with no representatives of
EJA present, Mr. Rosenbaum stated that EJA would be willing to
settle for 10 cents on the dollar for the IAB debt to EJA.
The sale was finally consummated with Icelandic Airlines through
their holding company, Hekla Holdings, Ltd. What is particularly
puzzling is the fact that Icelandic had already become the general
sales agent for IAB and was intimately involved in the management
of IAB. The president of Icelandic Airlines, Sigurdur Helgason, who
was known to be on very close terms with General Lassiter, testified
in a U.S. District Court in Miami that he was the general manager
and chief executive officer of IAB. The terms of the sale were a
$400,000 note to Ovid Anstalt, a $400,000 note to EJA (which E J A
mysteriously sold back to Hekla Holdings at a substantial discount),
a check for $225,000 to EJA and an agreement to pay 10 percent of
IAB's profit to EJA, if any, for 10 years. This latter portion of the
agreement permitted E J A to rescind this method of discharge of
IAB's indebtedness. However, the CAB has refused to permit E J A
to exercise this option. The record shows other parties interested in
acquiring IAB from Ovid Anstalt, but in a letter from Mr. Rosenbaum to Icelandic dated March 5, 1969, Rosenbaum states:
Neither Ovid Anstalt nor myself ever received the concurrence of Executive
Jet Aviation to contract with any of the groups named above, (i.e. Norris group
and Boileau group.) (Emphasis added.)

Suffice it to say that the entire transaction lacks those features which
would allow it to be described as an arms length agreement. Other
individuals interviewed by the staff have indicated that, in their




15
opinion, Icelandic purchased IAB for an "extremely reasonable''
price. The attorney for Major Ricketts, the original owner of IAB,
made the following statement:
T h e documents on file here in Nassau prove t h a t t h e other principals in t h e
case are involved in m u c h secrecy to t r y and cover t h e trail of w h a t t u r n s out to
be t h e most illegal move in aviation history.

Purchase of third Boeing 707
Joseph Rosenbaum's involvement with E J A does not end there.
In January of 1968, Mr. Rosenbaum was intimately involved with
the proposed financing by E J A for a third Boeing 707. In an April
1968, memorandum to Bruce Sundlun from Bardyl Tirana (an associate in Sundlun's law firm), the following appears:
On J a n u a r y 16, 1968, M r . Conace a n d Mr. Estes ( E J A officers) telephoned
me to explain orally t h a t General Lassiter had m a d e an informal c o m m i t m e n t
with Joseph R o s e n b a u m for 12-year 100 percent financing. I was told t h a t General
Lassiter was working t h r o u g h H e n r y Glendenning, Jr., a t Butcher a n d Sherrerd
[Mr. Howard Butcher, a senior p a r t n e r of this brokerage firm, was then a member
of t h e board of t h e P R R ] in Philadelphia. P e r m a n e n t financing was to be effected
b y t h e R o s e n b a u m group t h r o u g h t h e Provident National B a n k [on whose board
Bevan and Gerstnecker then sat] or through their offices. Because of a possible
CAB problem, a n d [sic] a l t e r n a t e source of senior financing was I n t e r n a t i o n a l
Utilities [the president of which, J o h n Seabrook, was on t h e board of t h e New
York Central soon to be merged with t h e P R R ] . * * *
CONCLUSION

At all times during t h e history of t h e proposed acquisition of t h e third Boeing
707, E J S ' s [an E J A subsidiary] principal officers, Mr. Estes a n d Mr. Conace, and
this office, were advised n o t to insist on t h e normal documentation and preparation
t h a t is required for an $8,000,000 transaction. Instructions were given to us to
rely upon t h e conclusion of all necessary details b y Joseph Rosenbaum, or b y
Mr. H e n r y Glendenning in Philadelphia. We h a d no initiative in this m a t t e r .
E J A was placed in a position of depending totally on an informal understanding
between General Lassiter a n d Joseph R o s e n b a u m or Henrj^ Glendenning.
PENN CENTRALES FAILURE TO COMPLY IN GOOD FAITH WITH CAB <mDER
TO DIVEST ITSELF OF EJA CONTROL

While the implementation of the "World Operating Rights'' program was proceeding rapidly with the full knowledge of certain Penn
Central officers, the railroad was ostensibly attempting to locate a
potential buyer for its interest in EJA in conformity with the CAB
decision of December 22, 1967. Many large corporations were contacted but all seemed to lose interest when Penn Central insisted on
some form of buy-back rights. This came to be an absolute condition
in any divestiture plan. As William Gerstnecker later told the CAB:
We are saying t h a t in our opinion we could not get any kind of a purchase agreement with anybody which would assure us in any way of our being able to come
out of this whole, or with the profit that we were entitled to, except by taking something less t h a n dollars for the sale and being enabled to stay in it a n d get it later.
(Emphasis supplied.)

On June 3, 1968, an agreement was signed with United States Steel
and Burlington Industries, by which they would equally purchase Penn
Central's interest in EJA but, at the same time, also giving Penn
Central the right to repurchase (at $4 a share) up to 659,405 shares of
EJA common stock, the full block of 58 percent then owned by Penn
Central. Also, in August of 1968 a Voting Trust was established
between Penn Central (through ACC) and the Detroit Bank & Trust
Co. This bank was chosen, the staff has been informed, simply because



16
it was one of the few major banks in the entire country not having an
interlocking relationship with the Penn Central Co., and even this
choice necessitated the resignation of one of the bank's officers from
the board of a subsidiary railroad of Penn Central.
CAB hearings
CAB hearings reopened in November of 1968 in order to obtain
approval of these steps taken toward divestiture of the P R R ' s interest
in EJA. At the outset of these hearings, it became apparent that the
intervening supplemental carriers (and even Pan American World
Airways, after a time) had knowledge of the international acquisitions
of EJA. As quoted in a "Business Week" article of August 16, 1969,
a supplemental airline lawyer remarked, "Pan Am has an intelligence
system that makes the CIA look like a bunch of little boys reading
graffiti on the bathroom wall." After hearing the testimony of General
Lassiter, General Hodge, and William Gerstnecker of Penn Central,
the CAB ordered a recess to permit a file search of EJA, Penn Central,
Glore Forgan, and others, since new and damaging evidence about the
overseas adventures of E J A was continually being uncovered throughout the course of the hearing.
When the hearing was reconvened in January of 1969, and the results
of the file search were distributed to the parties, E J A immediately
moved to withdraw its application for approval of the Johnson Flying
Service acquisition. David Bevan was scheduled to be the next witness.
Penn Central and E J A spent the next 9 months bargaining with the
CAB on the language of the soon-to-be-issued CAB order. They were
not very successful as the CAB, on October 14, 1969, handed down its
cease-and-desist order finding 13 separate violations of the Federal
Aviation Act. Penn Central was fined $65,000 and E J A $5,000. As the
CAB stated "the acceptance of a lower penalty from E J A than from
P R R is based on differences in the size and ability to pay of the two
companies and should not be construed as an expression of the board's
views as to the relative culpability of the two companies." To put the
size of the fine in perspective, the only higher penalty ever imposed by
the CAB for violations of the Federal Aviation Act was $75,000.
The order found the P R R had full knowledge and, in fact, controlled
E J A while engaging in these unlawful activities. The CAB ordered that
the voting and liquidating trust be amended to make it an irrevocable
one, and the trustee was given all power necessary to liquidate P R R ' s
interest in EJA before March 1, 1971.
PENN CENTRAL AND EJA AFTER JANUARY 1969

Even after January 1969, when the J F S acquisition attempt was
finally dropped, Penn Central continued to feed funds into EJA.
Presumably, this was done to keep EJA afloat, as no other source of
financing was possible. The Cole report (cited previously) put it this
way:
Resolutions of American Contract dated Feburary 21, 1969, approve and ratify
$2,324,000 which had been previously furnished the trustees and authorize an
additional $2 million to the trustees. These amounts roughly, correspond to the
increased indebtedness of EJA in the last 2 years. We see no significance to the fact
that funds were channeled to American Contract [from the Penn Central] through
the trust rather than directly, as it apparently did not impede the flow of money to
EJA and was probably only done to demonstrate that the further investments were
not a device for regaining control.




17
Attempted Zimet acquisition
The CAB cease-and-desist order required divestiture of the Penn
Central interest in E J A by March 1, 1971, before which all such interest was to be held by Detroit Bank & Trust Co. in an irrevocable
trust with full powers of disposition. As of the date of this report, such
divestiture has not been accomplished. However, one attempted
disposition is of particular interest.
Some time in March of 1970, Penn Central began negotiating with a
Sydney Zimet for the acquisition of its interest in EJA. There are
many puzzling features surrounding this entire transaction, starting
with Mr. Zimet himself. He is alternately addressed as the chairman of
the board of Security Equities Corp., and as the head of Investors
Diversified Growth Ltd. Inquiries to the SEC reveal absolutely no
information on either of these corporations, although Investors
Diversified Growth Ltd. is described as a Grenada, West Indies, corporation in one of the documents obtained by the staff. Zimet, on the
other hand, is well known by the SEC. On two separate occasions,
Zimet was permanently enjoined by the U.S. District Court for the
Southern District of New York from further violations of the antifraud
provisions of the Securities Act of 1933 in connection with the sale of
fractional undivided interests in oil and gas leaseholds through a corporation known as Zimoco Petroleum Corp. He was charged with
making false and misleading statements about the nature of the assets
of Zimoco Petroleum. I t would be charitable to say t h a t Mr. Zimet
was a man of questionable business character, as he was described to
the staff by loan officers of First National City Bank, whose consent
was required before any assets of E J A were transferred to a third
party.
The terms of the Zimet transaction were as mysterious as the participants themselves. The inducement for the entire transaction was
the exchange by Penn Central's subsidiary, Pennsylvania Co., of two
$10.4 million Norfolk and Western 4^§ percent subordinated convertible debentures maturing June 1, 1984, and June 1, 1985, respectively,
for $27.5 million in noninterest bearing bank paper from Zimet;
$2.5 million payable in 9 years and $25 million in 10 years. If the
bonds were negotiable at 60 percent of par, as they were said to be
by Penn Central, Zimet would realize $12,480,000, while the bank
paper discounted at 9 percent would be worth only $11,500,000. The
profit to Zimet would be almost a million dollars, which was all he
would need to fulfill his obligations in the remaining portions of the
deal. I t was essentially a riskless transaction for Zimet. If he could
sell the bonds at 60, he would have acquired EJA for nothing, but if
he could not, all Penn Central could do was sue Investors Diversified
Growth, Ltd. of Grenada, which was just a shell of a corporation
having no assets. Penn Central had the covering rationale of realizing
cash for bonds which they were required to sell under an earlier ICC
order of divestiture by Penn Central of N. & W. securities. Zimet
allegedly insisted on the bond swap as compensation for an earlier
basically similar bond deal that did not materialize.
A second part of the transaction was a loan to EJA by Zimet of
$500,000 for 60 days at an interest rate 2 percent over the prime rate.
This loan originated from the North & South Trust Co. of Liechtenstein (Liechtenstein business entities always seem to be involved in
51-903 O—70—pt. 2



4

18
E J A deals) but no indication is given how Zimet obtained this commitment.
The third part of the transaction—these three parts to occur
simultaneously—was a personel loan by Zimet to Lassiter of $300,000.
One hundred fifty thousand dollars was to be paid to E J A in repayment
of advances made by EJA to Lassiter Aircraft Corp. (the authorization for which was in dispute as will be more fully described in a later
section of the report), and $150,000 to Lassiter personally for unspecified purposes.
All parties were fully aware that these three elements were mutually
interdependent, but in order to satisfy the CAB, it was publicly
stated that the swap of the bonds and bank paper could stand alone.
The final step in the transaction described below, would certainly
require CAB approval. Therefore, it was decided to delay the consummation of this step until a respectable amount of time had passed
after the bond swap.
The final step involved the cash purchase by Zimet of the EJA
stock held by Penn Central for $330,000, release of all debt of E J A
held by Penn Central for $18 million in 6 percent cumulative subordinated income debentures due in 20 years and certain receivables
allegedly worth $3.5 million. (These were the IAB and Transavia
receivables which were already reduced to $325,000 in the sale of
these air carriers.) In addition, Zimet pledged an additional $1 million
in loans to E J A evidenced by notes which could be converted into
E J A common stock at a later date.
The deal was planned to be executed by June 4, 1970, but the price
of the N. & W. bonds began falling precipitously, due to the public
awareness of the financial condition of Penn Central. Zimet left for
Europe to secure the bank paper from a European branch of a New
York bank; a bank large enough to convince Penn Central that the
paper could be discounted for cash. The price of the N. & W. bonds
fell to 50 on or about June 8, 1970, when David Bevan and Stuart
Saunders were fired by the Penn Central board. T h a t same day a
stop order was placed on the bond transaction, and the escrow agent,
First National City Bank of New York, sent the papers back to
Penn Central, since Zimet had not been able to deliver the bank
paper by that date.
The negotiations had the personal attention of David Bevan, who
lists two dinners with Sydney Zimet on his expense account reports of
April 11 and 13. I t was Bevan who agreed to sell the entire Penn
Central interest in EJA (over $21 million) for $330,000 cash, practically worthless accounts receivable and $18 million in debentures not
payable until 1990. On June 3, 1970, David Bevan received clearance
from the Pennsylvania Co. board to proceed with the transaction.
There was at all times a deliberate attempt to conceal the nature of
the transaction from the CAB. When the general counsel of EJA
objected to certain provisions, the deal was changed to substitute
Lassiter personally for E J A so that CAB approval could be forestalled.
There was an air of great urgency and panic surrounding the entire
transaction as the financial condition of EJA and Lassiter grew more
desperate. Unless Lassiter received a quick dose of funds to repay the
disputed advances to Lassiter Aircraft Corp. by EJA, public disclosure of these missing funds through the soon-to-be released financial
statements of E J A was a certainty.



19
Zimet threatened suit when the deal was called off but Penn Central
countered by appointing the law firm of Mudge, Rose, Guthrie &
Alexander to represent Penn Central's interest in EJA. No suit was
ever brought, since there was a termination clause in the executed
agreements. The entire matter was put to rest at the next board
meeting of the Penn Central Transportation Co. on June 15, 1970,
when the chairman of the board, Paul Gorman, commenting on the
Zimet transaction, "explained that the agreement executed (the bond
sale) appeared to be different in several important respects from the
one authorized by the board of Directors of Pennsylvania Co. and that
the transaction was being held in abeyance pending a further study
of the matter."
FINANCING SECURED FOR EJA BY PRR

Bank loans to EJA
While a major portion of EJA's financing came from the railroad
itself, banks also played a substantial role in the financing of EJA.
The three banks involved were the National Newark and Essex
Bank, Philadelphia National Bank, and First National City Bank of
New York, the latter by far being the most deeply committed. (Table
I I below lists the amount of bank loans obtained by EJA.)
TABLE II.—BANK LOANS TO EXECUTIVE JET AVIATION

Year and bank
1965
1966

Philadelphia Nat'l Bank...
Philadelphia Nat'l Bank...

Total
Nat'l. Newark & Essex
Bank
1967 First Nat'l. City Bank
1968 First Nat'l. City Bank

Original
amount

Total
original
amount

1,069,448
1,019,176

Principal
balance at
Jan. 1,
1970

Total
principal
balance at
Jan. 1,
1970

Principal
balance at
Nov. 30,
1970

501,912
562,304
2,088,624

Total
principal
balance at
Nov. 30,
1970

368,230
421,728
1,064,216

789,958

1965

1,076,968
13,550,000
1,100,734

1,076,968

605,830
2,276,792
274,045

605,830

Total

14,650,734
17,816,326

4,220,883

471,208

2,550,837

Total

471,208

Without question, all three bank loan commitments
made on the basis of the bank's relationship with the
Railroad (later the Penn Central Transportation Co.).
a memorandum of September 19, 1969, from the files
delphia National Bank clearly evidences this fact:

1,261,166

to E J A were
Pennsylvania
For example,
of the Phila-

We then discussed the company's [EJA] relationship with PNB [Philadelphia
National Bank] and I pointed out that our loans * * * were really granted at
the request of the Penn Central and based on the balance treatment which we
have from them. If ownership should be changing hands, we would feel that we
should be adequately compensated through balances by the new owners.

The initial First National City Bank (FNCB) loan of $8,365,000
is another case in point. On January 29, 1967, just 4 days before a
progress payment was due from E J A to Boeing on one of the large
707 jets, David Be van and William Gerstnecker of the P R R called
on F N C B to request a major loan commitment from F N C B to EJA.
Without talking to the management of EJA or examining the financial
statements of the company, F N C B approved the loan by the February




20
2 deadline. F N C B loan officers freely admitted to the staff that the
loan was granted solely on the request of these two P R R officers.
The entire EJA credit line was considered at all times to be a Penn
Central obligation, and was, in fact, so evaluated for purposes of the
legal lending limit of F N C B to any one company. F N C B also judged
EJA to be part of the P R R corporate complex in determining whether
compensating balances were adequate to support loans outstanding.
These facts are documented in the F N C B internal memoranda
obtained by the staff.
In order to get F N C B to make the loan, the P R R waived its security interest in the planes then covered under earlier agreements,
leaving P R R with absolutely no collateral for the loans outstanding to
EJA. A further inducement for the loan was an oral commitment
from the P R R to F N C B to invest an additional $2 million in E J A to
satisfy F N C B if the permanent financing was not to FNCB's liking.
As it happened, this oral commitment was found not to be legally
binding, and when the CAB made the finding of P R R control of
EJA, the railroad contended that payment of the $2 million would
violate the CAB order. I t was one of the few times the P R R officers
heeded CAB admonitions; predictably, when it was to their advantage.
At one point, EJA's obligation to F N C B totaled nearly $15 million.
Naturally, the bank became concerned about the CAB proceedings,
since it was the potential air cargo concept rather than the original
business jet operation which was attractive to F N C B . In a September
27, 1967, letter from F N C B , Vice President Robert Rice to David
Be van, this becomes quite obvious:
However, as you can imagine, we are relying heavily on your and Bill Gerstnecker's statements to us to get us out if the CAB does not approve the purchase
of Johnson Flying Service by EJA.

After the unfavorable CAB decisions, F N C B clearly appreciated
the potential for nonpayment of its loans to EJA. They had a security
interest in many of the planes and urged that they be sold. David
Bevan and William Gerstnecker found it necessary to contact the
loan officers at F N C B very frequently in order to placate them and
obtain their approval for certain transactions. An example of this was
a request for approval of a lease of one of the 707's to Transavia.
When the original lease to Transavia was signed in April of 1968,
F N C B had no information as to Transavia's ownership or credit
strength. This is evidenced by an August 22, 1969, internal memorandum from the F N C B files written by Neil Volweider, assistant
cashier, stating that he spoke with a Mr. Currie of Gatx/Boothe—a
company interested in purchasing a Boeing 707—asking about
Transavia. He stated that "after some deliberation, Currie elected
to shed some light on Transavia." They were certainly not alone in
their ignorance, but one would expect the bank holding the security interest in a plane worth millions of dollars to know about those
to whom the plane was being leased.
F N C B , in late 1969, informed Penn Central that it had "exhausted
its patience , , with respect to the EJA loans. During these discussions,
the cash picture at Penn Central was a lively topic. John O/Herron,




21
who had then just become the first assistant to David Bevan, was
asked about the cash produced from the real estate subsidiaries. Contrary to the public utterances on the subject, O'Herron, according to a
memo in the F N C B files, "indicated that each real estate subsidiary
itself needed to use most of the cash it generated to expand internally."
The present outstanding debt owed to F N C B by EJA is approximately $2.5 million, reduced substantially by the sale of one of EJA's
Boeing 707 to Caledonian Airways. There is still concern over this
amount, however. Foreclosure was considered, but it is apparent from
the following March 6, 1970, internal memorandum that the Penn
Central relationship was still paramount:
In consideration of the future Penn Central relationship and certain assurances
from the railroad's financial officers. FNCB has agreed to postpone liquidation of
collateral for a period of time in order to permit the railroad to locate a credit
worthy purchaser for EJA. Hence, it is our recent decision to be cooperative with
the railroad's financial officers, given their present efforts to work out this situation.

F N C B was contacted about the Zimet acquisition by David Bevan
and would only agree to the sale if completely repaid. The bank's
information on Sydney Zimet was of a highly unsatisfactory nature,
but the bank contends it wouldn't have objected if the bank's loan was
paid off. A June 4, 1970, internal F N C B memorandum indicates that
David Bevan evidenced to F N C B some skepticism about the Zimet
transaction yet, the day before, he had urged and secured approval
from the Pennsylvania Co. board to proceed with it.
When asked by the staff whether F N C B would ever have lent $15
million to E J A if it were not controlled by the P R R , the loan officer
replied it was highly unlikely. The loan was actually granted on the
word of David Bevan, according to this same F N C B official. Not
only did the loan approvals prove to be bad judgment on the part of
the banks, the railroad also suffered since the approximately $18
million lent by the banks to E J A at the urging of P R R officials
eliminated any chance of the railroad obtaining that much more
credit when the need for borrowed funds became critical in the spring
of 1970.
Other outside financing
The cost of the large Boeing aircraft necessitated seeking funds
from other large financial institutions and, again, it was the P R R
which used its substantial influence in the investment field to secure
these loans. The 727 jets were principally financed by C I T Corp.
with a loan of $12.3 million. While the investment was secured by the
planes themselves it is clear from the written documentation that the
railroad played a vital role in this financial commitment. One Boeing
707 was purchased by John Ledbetter representing a group of investors
including Northwestern Mutual Insurance Co. and Ford Credit Corp.,
and leased back to EJA. I t must be remembered that the financed
planes were to be utilized by a company, EJA, which at that time did
not possess the requisite CAB authority to fly them. I t is highly
understandable why General Lassiter wrote to David Bevan on
January 11, 1967, thanking him for all his help in securing these
financial commitments even to the point of "laying your career on
the line." This statement proved to be prophetic.




22
RECENT EVENTS

Change of management at EJA
No financial statements were issued by EJA for the years 1968 and
1969. In the spring of this year, Penn Central sent a team of auditors
to Columbus, Ohio, to prepare a financial accounting of EJA. Besides
the continual losses (about $4 million for 1968 and 1969) which everyone had come to expect as commonplace for EJA, there appeared
another unusual item. I t was listed as a receivable from General
Lassiter of $131,303 for funds forwarded to Lassiter Aircraft Corp., a
company allegedly attempting to develop a supersonic jet made of
fiber glass material. Bruce Sundlun, who was by this time the only
outside director of EJA, noticed this and wrote to Michael Mandish,
the treasurer of EJA, for an explanation. Mr. Mandish replied that
he assumed Mr. Sundlun knew about these advances. In fact, Sundlun
had never heard about this item at all.
Mr. Sundlun called a special meeting of the board of EJA on June
27, 1970, at which he was told by General Lassiter that these advances were authorized by the EJA executive committee in June of
1969. An attempt to authenticate such approval failed when it was
found t h a t a post-dated note from Lassiter Aircraft Corp. to E J A
contained the signatures of people not then on the E J A executive
committee. That this note was a complete fabrication was sworn to
in an affidavit signed by Michael Mandish.
Armed with this affidavit and other evidence of wrongdoings, Mr.
Sundlun went to the trust officer of the Detroit Bank & Trust Co.,
Harry Pratt. Mr. Pratt, voting the shares held in trust for the Penn
Central, authorized the removal of General Lassister, two other retired Air Force generals, W. P. Swancutt and Perry Hoisington, and
others from executive positions in EJA. Mr. Sundlun was named
president and in a midnight raid on July 1, 1970, took physical control
of the Columbus headquarters.
Stockholder derivative suits were brought by Mr. Sundlun in
Delaware and also California, where a house costing $116,000 allegedly
bought with EJA funds for use of Lassiter's current fiancee is
located. Litigation is proceeding in both jurisdictions with the question
of who rightfully controls E J A at issue.
General Lassiter attempted to physically regain control of E J A
headquarters with the help of armed guards on July 23, 1970, but was
thwarted by hired personnel under the direction of the present management. The Delaware court has since enjoined General Lassiter from
any further attempts to regain physical control of EJA.
Present situation at EJA
Wholesale personnel changes, a ban on administrative flying, and
other cost-cutting procedures have allowed E J A to get into the black
in recent months. However, there is still the problem of the enormous
debt outstanding and the necessity for divesting of the Penn Central
interest in EJA. Also, two 727's originally costing $12 million are
still owned by EJA. Attempted sales have all fallen through, as the
market for used nonstretch 727's is very soft at this time. One of the
planes is under lease, but the other is just sitting at the Columbus
airport draining the already limited resources of EJA.
As of this time, no buyers have been found for the Penn Central
interest in EJA. The most optimistic estimate of its value by the present management of E J A is $2 million; a fraction of the $21 million



23
invested by Penn Central. I t appears that every investment in an
EJA venture resulted in a 10 cents on the dollar (see Transavia and
IAB ventures) settlement. To say, as David Be van did, before the
Senate Commerce Committee in June of this year that the Penn
Central investment in E J A was not a good one, is a masterpiece of
understatement.
A MISSING $4 MILLION

In September of 1969, David Bevan secured a $10 million loan from
a consortium of foreign banks, headed by the Berliner Bank
Aktiengesellschaft. The money was to be used to finance the rehabilitation of used Penn Central freight cars under conditional sales
agreements issued in favor of American Contract Co., although the
Transportation Co. actually financed the transaction. The money
was then transferred to a Chemical Bank of New York account in the
Allgemeine Bank Gesellschaft A.G. of Frankfurt, Germany. From
there, the entire $10 million was transferred to a Liechtenstein trust
to be invested pending the finalization of the conditional sales agreements on the cars. Of the conditional sales paper, $6 million was
actually delivered to the Berliner Bank Aktiengesellschaft as security
for the loan. A funny thing happened to the other $4 million. None
other than Fidel Goetz, the chief operative in the illegal E J A foreign
acquisition program, presented the managers of the Liechtenstein
trust with an accounting showing that he lost over $4 million in the
various EJA ventures, and was therefore entitled to this money.
Somehow, and the details are not at this time known to the staff,
Goetz was able to transfer the $4 million to an account in his name in
Liechtenstein, and presumably that is where the money is today.
Goetz contends that he was assured by David Bevan that he would
be made whole for any losses incurred in the E J A airline acquisitions.
Since no distinction was made between E J A and Penn Central in his
dealings, he considered the Penn Central funds on deposit with the
Liechtenstein trust, funds of EJA.
David Bevan, on the other hand, contends that the money was
funnelled through the Liechtenstein trust as a compensating balance to
show "good faith" to Goetz (Liechtenstein entities and "good faith"
money always seem to crop up in E J A transactions). Bevan alleges he
did not know Goetz could get the money transferred to him. I t was
not until June 1970 (Goetz appropriated the money in September 1969)
that David Bevan informed the chairman of the board of Penn
Central, Paul Gorman, of the missing funds. This is especially strange,
since the Penn Central's Annual Report Form A as of December 31,
1969, prepared under the direction of David Bevan, lists the entire $10
million conditional sales agreement from the Berliner Bank Aktiengesellschaft as a completed transaction.
All the parties involved in this highly unusual transaction have been
contacted by the trustees of the railroad and recovery of the missing
$4 million has been demanded. To this date, the effort has not been
successful. I t is known, however, that the filing of suit against the
parties in question is imminent unless full restitution is made.
HOLIDAY INTERNATIONAL TOURS I THE INSIDERS' CREATION

The foregoing material in this report established these facts:
Penn Central dominated and controlled Executive Jet Airways
(EJA) and International Air Bahama (IAB).



24
IAB to all intents and purposes was essentially an extension of
EJA.
The men primarily responsible for Penn Central investments in
these corporations and who exercised the control afforded by the
investments were David Bevan, chief financial officer of the railroad,
and Charles Hodge, a ranking member of the investment banking
firm of Glore Forgan, William R. Staats (now F . I. DuPont-Glore
Forgan), the principal investment adviser serving the Penn Central in
its program to diversify into nonrailroad interests.
The Penphil Club
These men, together with David Bevan's brother, Thomas, a
Philadelphia attorney, constituted the leadership and exercised control over what David Bevan has described as "a private investment
club'' called Penphil, formed in 1962. The membership of this private
club is composed almost entirely of persons affiliated with the Penn
Central, Glore Forgan and companies in which Penn Central and
Penphil had invested. Penphil held 51 percent of the stock of a Miami
travel service, Holiday International Tours, which was designed to be
the general sales agent for and to control all ticket sales for IAB.
Penphil stockholders are:
Thomas R. Bevan, Penphil president, and a partner in the law
firm of Duane, Morris, and Hecksher.
David C. Bevan (brother of Thomas Bevan) former chairman
of the P R R Finance Committee; former director of the Pennsylvania Co., a Penn Central subsidiary; former director of Arvida
and Great Southwest companies, more than 50 percent of the
stock of which is owned by the Pennsylvania Co.; former director
of Tropical Gas and Kaneb Pipeline Co., of which the Pennsylvania Co. is a major stockholder.
William R. Gerstnecker, vice chairman, Provident National
Bank of Philadelphia; former vice president, P R R ; former director of Arvida and Great Southwest.
Robert Haslett, vice president, P R R investments.
Cornelius A. Dorsey, assistant to Haslett.
Mrs. Dorothy H. Warner, wife of T. K. Warner, former vice
president, accounting, for the P R R .
Paul D. Fox, former vice president, administration, P R R .
Mrs. Marie L. Hodge, wife of Charles J. Hodge, senior partner
in Glore Forgan, chief Penn Central investment adviser; chairman
of the board of Tropical Gas; a member of the Arvida and Great
Southwest boards of directors.
Alfonso Manero, former partner in Glore Forgan.
Hobart C. Ramsey, vice president, Glore Forgan.
O. F. Lassiter, president and chairman of the board of E J A .
Angus G. Wynne, president and chief executive officer ot Great
Southwest and a member of the Arvida board of directors.
Brown L. Whatley, Arvida president and chairman of the board
of Stockton, Whatley, Davin & Co., which manages Arvida and
which is the second largest Arvida stockholder.
Joseph W. Davin, vice president and a director of Arvida; first
vice president of Stockton, Whatley, Davin & Co.
Thomas F . Fleming, Jr., chairman of the Board of First
Bancshares of Florida, Inc., a Boca Raton, Fla., bank holding
company in which Penphil is a major stockholder. Bancshares is




25
comprised of four Florida banks, one of which, First Bank and
Trust Co. of Boca Raton, extended a $1 million line of credit to
the Boca Raton Hotel and Club which is owned by Arvida.
Benjamin F . Sawin, chairman of the board of Provident
International, a division of Provident National Bank of Philadelphia which held substantial loan and deposit accounts for the
P R R Railroad. Sawin is also a member of the board of First
Bank and Trust and University National Bank of Boca Raton,
two of the four banks comprising First Bancshares.
Fred H. Billups (deceased), formerly president of Tropical Gas.
Herbert E. Fisher, chairman of the Board of Kaneb Pipeline.
Samuel A. Breene, Oil City, Pa., attorney.
Mrs. Dorothy B. Stevens, wife of the late Lawrence M. Stevens,
former partner in Hornblower & Weeks-Hemphill, Noyes.
Warren H. Bodman, partner, Yarnall, Biddle & Co., Philadelphia investment brokers.
Francis A. Cannon, administrative vice president, First Boston
Corp.
Edwin B. Horner, First Colony Life Insurance Co.
Harry F . Ortlipp, president, Harry T. Ortlipp Co.
Vince G. Kling, Philadelphia architect.
Frederick B. Holmes, vice president of Gladfelter Paper Co.
Penphil stockholders who were not directly connected with the Penn
Central or its subsidiary holdings were friends of those stockholders
who did have such ties and were there by invitation from the insiders.
The beginning of HIT
The chain of events which led to Penphil control of Holiday International Tours (HIT) began in 1967. As a Penphil stockholder, Lassiter was aware of the Penphil's interest in the travel field by virtue
of its effort to acquire the Fugazy Travel Bureau, one of the largest
in the world. He was contacted by a friend, Julian Lifsey, a Tampa,
Fla., attorney who informed Lassiter of the possibility of investing
in Bowen Travel Services, Inc., of Tampa, a firm operated by Mrs.
Irene Bowen. Meetings were held between Mrs. Bowen, Lassiter,
David Bevan, Hodge and William Gerstnecker with the result that
Penphil purchased a 51-percent interest in Bowen Travel Services
for $25,000 early in 1968. The remaining 49 percent of the stock was
held equally by Mrs. Bowen and Lifsey. The name of the firm was
changed to Holiday International Tours, and its offices were moved
from Tampa to Miami where it was to be funded with loans from
Penphil under a $200,000 line of credit, payable within 5 years.
Mrs. Bowen was made president of the corporation and Lifsey was
chairman of the board.
That the operation of H I T was to have been of fundamental importance to both EJA and IAB is borne out in the files of correspondence held by Penphil principals. I n a letter dated March 26,
1968, from Lifsey to Hodge, Lifsey stated:
Immediately after receiving your approval and authorization to proceed,
we met with officials of IAB in Miami and were informed that the company had
been capitalized and activated. In these initial meetings we were asked to act as
the general tour operator and were requested to organize a tour program on a
priority basis and to dedicate our initial first efforts to that program.
After some negotiation we agreed to give top priority to their program for the
first 3 months with the understanding that IAB would pay all of the expenses
51-903 O—70—pt. 2




5

26
incident thereto. Subsequently we were asked to consider acting as their general
sales agent, and to assist in everything from hiring of reservation personnel to the
ordering of ticket stock, flight bags, baggage checks, boarding cards, and so forth,
for a fee of 3}i percent of gross sales.
On Saturday of last week, at a meeting in Miami, we finally concluded our
agreement with IAB, which agreement provides that for a period of 3 months we
will dedicate the entire efforts of our staff to getting IAB off the ground. Since
their schedule has not yet become operative we are to receive a fee of $5,000 per
month for the initial 3 months, and they are to pay all expenses. The $5,000 fee is
to be charged against the 3)4 percent commission which has been established as our
continuing fee for acting as their general agent.

I t should be noted that the $5,000 a month fee to be charged IAB is
the total monthly sum required to meet H I T ' s projected salary requirements for 1968 and 1969. In other words, if the relationship with IAB
had developed along the lines envisioned, H I T would need no other
accounts or clients to sustain its staff financially during the firm's
initial years of operation, if not longer.
A further description of the H I T concept and how it was to be
executed is contained in a letter to Thomas Bevan from John Germany,
a member of the law firm of Holland & Knight of Tampa, Fla.,
representing H I T . I t contains the following statement:
As discussed with you on the telephone, the initial concept as outlined by
General Lassiter was that Executive Jet Aviation would lease the airplane or
airplanes to International Air Bahama who in turn would fly them and Holiday
International Tours was set up to be the agent for sales. Under this concept
there would be no need for IAB to trouble itself with a sales manager or sales
at all.

Moving downhill
From this point—March of 1968—HITs relationship with IAB
began heading toward collapse and the internal situation at H I T
deteriorated to a severe degree.
The agreement designating H I T as IAB's general sales agent had
not yet been signed, even though Lifsey said he had drafted the
contract and had submitted it for approval to the airline. Bruce G.
Sundlun, then EJA's secretary and general counsel, and Lassiter,
were involved in both H I T ' s agreement with IAB and H I T ' s internal
problems.
At Lifsey's request, Sundlun reviewed the general agency agreement
drafted by Lifsey and made the following comment in a letter to Lifsey
dated July 10, 1968:
My chief problem with this agreement is that I do not know from which side
to approach it, the IAB or HIT side. Actually, I represent EJA, and that company
should have an interest in neither IAB nor HIT. On the assumption that some time
in the future EJA may have a desire to acquire an interest in IAB, and on the fact
that EJA has currently had close business relationships with IAB, I feel that the
proposed agency agreement is excessively favorable to HIT and detrimental to
IAB.

Sundlun's quandary about which point of view he should adopt was
further complicated by what he saw as lack of clarity regarding H I T ' s
commitment to IAB and the reflection of this condition in Lifsey's
draft of the contract. Sundlun remarked:
* * * again there is no clear definition of duties between IAB and HIT. Is H I T
to be an exclusive agent for IAB or not? According to my conversation with you,
I understand the answer to be "yes"; whereas General Lassiter and Frank Conace
[an EJA vice president] indicate the answer is "no". This difference must be
cleared up.




27
Having raised this question, Sundlun then went on to say that in
his opinion there should be no connection between EJA and H I T .
The last paragraph of his letter reads:
One thing about HIT concerns me, and I would like you to reassure me in
writing if you can. I know it is going to be involved in the EJA/JFS case [EJA's
effort to obtain the Johnson Flying Service license]. I must have a statement in
writing that EJA, its officers, directors and employees own no partof HIT. Will
you please forward to me that statement on HIT letterhead as soon as you can.

The request was, to say the least, a strange one to make in view of
the fact that Sundlun, in the same letter, indicated an awareness of
Lassiter's connection with H I T , and inasmuch as Sundlun knew or
should have known that Lassiter, Hodge and Fred Billups were on
the EJA board and stockholders in Penphil which controlled H I T .
Moreover, Sundlun knew or should have known of David Bevan's
direct link to both EJA through Penn Central's financial domination
of the air service and to H I T through his stockholdings and management position in Penphil.
Business in reverse
The Sundlun letter was written shortly after H I T had concluded
the 3-month period during which the travel agency was to have
devoted all of its personnel to IAB sales promotion. But instead of
receiving $15,000 plus expenses, as prescribed under the terms of the
so-called oral agreement, H I T , according to Lifsey in a letter dated
June 18, 1968, to Thomas Bevan, had been paid $7,000 by IAB but
was owed more than three times this amount by the airlines. In that
letter Lifsey said:
We have, on direction, accepted their account receivable at face value ajid have
depleted our treasury on their behalf. The obligations of International Air Bahama
to Holiday International Tours as of June 1 was $23,133 and is evidenced by the
enclosed promissory note due on or before July 15. We are continuing to incur
expenses on their behalf at the rate of about $20,000 per month. In addition to
these expenses they are obligated to us for the advance of $5,000 per month which
means that International Air Bahama will owe us another $25,000 as of July 1,
less a cash payment received today of $7,000 or a net of about $18,000.
In order to continue to assist International Air Bahama and to keep our company on a sound financial basis, I wish to request an advance of $40,000 against
the enclosed endorsed note and against the subordinated note from Holiday International Tours for the balance.

That letter had been written following a meeting in Miami between
Lassiter, Lifsey, Mrs. Bowen, Albert Engle, then general manager and
now president of H I T ; and Robert F . Blake, then general manager
of IAB. During that meeting Lassiter told H I T principals to meet the
loan requests of IAB, and Penphil would reimburse H I T . Lassiter is
quoted as saying that such an arrangement had been approved by
David Bevan.
The $40,000 requested by Lifsey was advanced to H I T by Penphil
through a transfer of funds from a Swiss bank to the City National
Bank of Miami. Engle has said he did not know why a Swiss bank
figured in the transaction but that he understood that Lassiter had
been meeting with Swiss bankers on EJA business trips to Europe.
No sales contract agreement
By late summer 1968 IAB had not only failed to sign the contract
based on the oral sales agreement, it was denying that such an agree-




28
merit had ever been made. On September 14, Alexander P. Maillis,
IAB president, wrote to Mrs. Bowen:
Your attorney, Judge Germany, telephoned me on Wednesday, September 11,
1968, regarding formalizing a sales agency agreement between our companies.
My recollection is that he mentioned world wide sales, but upon discussing
this matter with Mr. Mansfield and Mr. Thompson [IAB representatives] I am
advised that this has never been considered. They did state that discussions have
taken place dating back to March 1968, re a general sales agency agreement with
Holiday International Tours for the seven Southern States of Alabama, Georgia,
Louisiana, Mississippi, South Carolina, Tennessee, and Texas, but due to conflicting interests within your organization, nothing was ever finalized.
I regret that I was not involved in the discussions and therefore must delegate
Mr. Mansfield and Mr. Thompson to continue the negotiations to a logical conclusion. I will feel obliged to abide by their recommendations.

Prolonged discussions over a sales agency agreement between H I T
and IAB were further complicated by the appearance on the scene
of Icelandic Airlines, which purchased IAB the following year. The
argument was finally resolved when H I T filed a breach of contract
suit against IAB and Icelandic and settled out of court, agreeing to
accept $150,000.
Meanwhile, inside HIT
The internal problems of H I T centered on a running argument between Mrs. Bowen and Lifsey as to who was to have overall executive
authority in the firm. Mrs. Bowen's chief complaint was based on the
contention that Lifsey's absence from the office prevented him from
fulfilling this role. As will be seen from the following excerpts from
correspondence, Lassiter played a prominent role in the controversy.
On June 17, 1968, Mrs. Bowen wrote a memorandum to John
Germany describing a meeting that took place the same day between
her, Lassiter, Lifsey, and Engle. Mrs. Bowen said:
* * * Lassiter agreed that there could only be one chief executive officer and
that was to be Julian [Lifsey]. I pointed out that no one could administer a business of this size on an absentee basis and Lassiter did warn Julian that he must
put at least 90 percent of his time in on this business. I have been told that I must
not be feminine about this and must work with Julian and Lassister is going to
draw up a directive setting out our respective responsibilities.

Hide and seek with the CAB
Lassiter's position regarding H I T is further described in a letter to
him from Lifsey, dated July 25, 1968, in which Lifsey said:
As you know, we had a meeting in Miami at which meeting all parties with any
beneficial interest in HIT were present in person or by proxy, and you stated at
the meeting that you were representing the Penphil group, and in very clear
terms outlined your views as to how you wanted the corporation operated.

A meeting between Mrs. Bowen, Lassiter, Lifsey, and Germany was
held July 31, 1968. In a memorandum written to the other three,
Germany wrote:
General Lassiter presented to Mrs. Bowen and Mr. Lifsey job descriptions for
the chairman of the board and chief executive officer and the president [sic] and
they were asked to review these and inform him as to either their suggestions for
change or acceptance.

Other matters discussed at the meeting included Lassiter's contention that he, personally, was to receive 10 percent of H I T ' s stock.
Germany wrote that during the course of the meeting, while Lassiter
was telling Mrs. Bowen and Lifsey how he wanted H I T to be run—
General Lassiter stated that he did not want to be shown to be representing
51 percent of the stock of Penphil.



29
The request can only be described as peculiar because Lassiter could
not rightfully issue such directives to officers of H I T unless he did in
fact represent Penphil stockholders and their 51 percent interest in the
travel agency. Lassiter* s wish to avoid connection with the meeting was
obviously to prevent the CAB from discovering the true relationship
that existed between the Penn Central, Penphil, EJA, H I T , and I A B .
The effort to deceive the CAB is also evident in a memorandum
written August 12, 1968, by Mrs. Bowen to Germany. She stated:
* * * General Lassiter has given strict instruction to both Lifsey and myself
that all correspondence between General Lassiter and either of us must be addressed to his home and there must be no copies in existence anywhere. However,
for what it's worth, there is a file full of letters in the Miami office. Mr. Lifsey has
most certainly not destroyed copies of these letters.
Capitalizing on the Penn Central
The fact that Penphil intended to have H I T capitalize on the Penn
Central's investment in the E J A - I A B operation was also indicated in
Mrs. Bowen's memorandum where she wrote:
It was asked quite clearly of Mr. Lifsey at a meeting we had at Boca Raton
before Penphil invested in Holiday International Tours whether Mr. Lifsey did
intend to devote full time to the agency. Mr. Lifsey tried very hard to make them
agree to putting the office in Tampa and at the time General Hodge said they
did not want an office in Tampa and General Lassiter further reiterated this to me.
This was clarified by the fact that they have no business interests on the west
coast of Florida. They all come down to southern Florida frequently and some of
them have homes in Boca Raton. Therefore, it was quite clearly understood that
our office and operation had to be out of Miami. In any case, bearing in mind
that this (IAB) is an international airline and the center of international airlines
for the South is Miami, there could be no other reasonable choice.
Lifsey departs
B y this time (mid-August 1968) Mrs. Bowen was demanding t h a t
Lifsey be separated from H I T , an attitude t h a t Lassiter also came to
adopt. I n a letter written to Thomas Bevan by Germany, August 27,
it was stated:
As a consideration of his [Lifsey's] complete elimination she [Mrs. Bowen]
would forego a $2,500 debt which Lifsey owes her. [Lifsey had contended he was
not indebted to her for this sum.]
Lifsey stated his intention to resign from H I T in a letter written
August 14 to Lassiter. I n that letter he complained of what he viewed
as Lassiter's interference in the affairs of H I T :
I would like to say that my view of what I intended to do was to operate as an
executive running a company parallel to yours and not that of having you as a
super executive listening to all the people in my company and thereafter judging
and passing upon everything that I was charged with doing, prior to my doing it.
In other words, I expected to be put in the position of an executive with authority
to perform and after the performance, I would expect to be held accountable for
the performance of my company and for the people under me. So long as people
under an executive are able to successfully challenge this authority, it is my opinion that no company can exist.
Arrangements were made to purchase Lifsey's stock in H I T —
arrangements that Lassiter claimed to have engineered. The following
month, Lassiter wrote to Lifsey saying:
This stock was issued to you in consideration of your service in conceiving,
organizing and setting up that company [HIT]. On behalf of the controlling stockholders of that company [Penphil], I worked out the agreement with you which
has now been concluded whereby the company purchased your stock from you
for $12,250.




30
"Sale" of HIT stock
The arrangement was one of the last, if not the last act performed by
Lassiter in his role as chief arbitrator for H I T . His letter to Lifsey
was written 16 days after Penphil sold its 51 percent interest in H I T
to Mrs. Bowen. EJA's application to the CAB for approval to purchase
the Johnson Flying Service license had reached a crucial stage by
late August. The warning voiced by Sundlun in his letter to Lassiter
earlier in the summer was now being viewed in a more serious light
with regard to the Penn Central—EJA game plan.
On August 28, Thomas Bevan wrote Germany:
* * * enclosing certificate No. 1 for 51,000 shares of Holiday International
Tours, Inc., in the name of Penphil Co. which is endorsed over to Mrs. Irene
Bowen.
Also enclosed is a simple form of demand promissary note in the amount of
$25,000 which I would appreciate your having Mrs. Bowen sign and return to
me * * *. The amount of $25,000 is the amount we paid for the stock.
The note was interest free.
This left Mrs. Bowen in the position of being controlling stockholder
in H I T , something the leaders of Penphil were to regret because they
had no intention of really divesting themselves of their interest in the
travel agency. The sale of stock to Mrs. Bowen was designed to be a
ruse to temporarily hide from the CAB their investment and control
of H I T .
This maneuver was disclosed in a letter from Germany to Mrs.
Bowen, dated October 30, 1968, describing meetings earlier in the
month with EJA, Penphil, and IAB principals. Germany wrote:
On Thursday, October 10, while I was in New York, I received a telephone
call from Bruce Sundlun asking me to attend a meeting with him and General
Lassiter at the headquarters of EJA at 555 Madison Avenue * * *.
When I arrived General Lassiter had not returned from lunch but he did
return shortly and with him were Bruce Sundlun and Buck Mansfield [a representative of IAB, formerly with EJA as a supplemental airlines expert].
Most of the time at the conference was spent [sic] as to whether or not there
had been an agreement that Holiday International Tours would be the general
sales agent for IAB. I continually pressed the point that from the correspondence
we would make out a case that such was the intent of the parties at the time of
the initial negotiations and had been acquiesced in by all parties in subsequent
actions. One of the points that I raised was the difficulty in attempting to do
business with IAB due to the lack of a person in authority that we could call. I
pointed out that Mrs. Bowen and I had been told by General Lassiter at a poolside conference that Mr. Blake [general manager of IAB] was the individual with
whom we should deal and that he was no longer with the company and that we
had been receiving cablegrams from Mr. Maillis telling us to do or not to do
certain things. At this point in the conversation Mr. Mansfield stated that we
should have known that he was the person that spoke for IAB and that actually
the cablegrams, although signed by Maillis, were written by him. Finally at the
end General Lassiter said that it was not Mr. Bevan who was making the decisions as to H I T but Lassiter himself spoke for the investors. (This statement
was later denied by Lassiter when I brought it up in front of the investors at the
Philadelphia conference.)
At the conclusion of the meeting, when I said that I had to leave, General
Lassiter said that he wanted certain things. He enumerated the first of these to
be that a new chief executive officer be hired by HIT and that Mrs. Bowen could
remain an officer and part of the operating team but not as chief executive officer;
second, that Mrs. Bowen remain out of Nassau and discontinue making any
connection with the operational efforts of IAB. I reminded General Lassiter that
Mrs. Bowen was 100 percent owner of the stock of H I T and that under no circumstances would she step down as chief executive officer. The conference was
then concluded on this indecisive note.




31
On Friday, October 11, after my return to Tampa, I was called by Tom
Bevan and asked if I would meet with the investors in Philadelphia at noon on
October 17. Later that afternoon I went to Miami to meet with Mrs. Bowen in
preparation for a conference which we attended in Nassau on Saturday, October 12. At this time I informed her of the request of the investors to meet in
Philadelphia on Thursday. It was agreed that as a settlement between IAB and
H I T we would ask for all expenses and a $5,000 agent's fee through the 31st of
October 1968. This figure would amount to approximately $85,000. We would
then request a written 2-year agency agreement with IAB in which H I T would
receive 25 percent commission on all sales made in the United States. H I T would
charge 5 percent of the gross on charter sales and H I T would guarantee an
average eastbound load figure of 100 passengers per flight with such average to
be determined at the anniversary date of the contract. There would also be a
requirement for IAB to spend additional sums of money for advertising to reinstate the image of a flying airline which they had lost due to the mishandling of
negotiations in the Bahamas.
I met with Mr. Tom Bevan at his office on Thursday, October 17, at approximately 10:30 in the morning. We reviewed the different positions on all sides,
and it appeared that the major controversy would be as to whether or not Mrs.
Bowen would remain as the chief executive officer of HIT. At approximately noon
we met with Mr. [David] Bevan, General Lassiter, and General Hodge for lunch
and discussed the various problems concerning all of the parties present. Mr.
[David] Bevan opened the conversation by saying that it was never his intention
nor of any of the investors that H I T devote all of its energies to IAB and that
such a contract in his opinion would have to come before the board of directors
for approval and that as it had not been approved, then H I T could not claim
that it had been operating under a valid contract to devote all of its services to
IAB. I pointed out to Mr. [David] Bevan that one of the negotiators for this
exclusive contract was General Lassiter, who was not only involved in IAB but
was a member of the investor group.
The question * * * arose as to who should be the chief executive officer for
HIT and the question was asked if I would approve the new chief executive officer
would Mrs. Bowen step down. I told them that I would in no way be involved and
that Mrs. Bowen should continue as chief executive officer. We then discussed the
transfer of stock, and General Hodge stated that while it appeared there was no
legal requirement that Mrs. Bowen should return the stock, there was certainly a
moral obligation for her to do so. There was discussion as to their repurchase of the
stock and placing 51 percent in a voting trust, and they asked if I would vote this
trust. I stated once again that I would not become involved in this matter except
from an attorney-client relationship and that I had no desire to vote such stock.
Engle disclosed to staff investigators that about a year later, in
September of 1969, David Bevan telephoned Mrs. Bowen demanding
payment on the $25,000 note or the return of the H I T stock to
Penphil. This incident occurred shortly after Icelandic Airlines purchased IAB and it was no longer necessary to hide the Penphil-HIT
connection. Mrs. Bowen refused to comply with either request and
instead replied t h a t the $25,000 note should be written off by Penphil
because of what she claimed was the damage her business reputation
had suffered through association with Lifsey, Lassiter, Hodge and the
Bevans.
Engle said he wrote to Penphil last fall asking about the availability
of the remaining $160,000 line of credit to H I T promised by Penphil—
$200,000 less the $40,000 advanced in 1968. No reply was received.
H I T has not repaid any of the $40,000 because it views the sum as
part of the money due from Penphil and payable in 1973. No request
for payment has been made by Penphil.
Conclusions
The facts of the Penphil-HIT case make the following conclusions
inescapable:
H I T was established and controlled by Penphil primarily if not
entirely for the purpose of profiting from the exclusive ticket sales




32
rights on IAB flights. The H I T concept as it was outlined to Penphil
relied very heavily on sales of IAB flights between Nassau and Luxembourg. Indeed, had the plan gone according to schedule, H I T
would have been in virtual control of IAB through control of all
ticket sales and reservations. Moreover, it is not beyond the realm of
possibility that H I T would have played the same role on a global
scale had the Lassiter-David Bevan-Hodge dream of a worldwide air
service been realized.
Three men controlled Penphil and therefore controlled H I T :
Thomas Bevan, David Bevan, and Charles Hodge. Two of these men,
David Bevan and Hodge, dominated the Penn Central's investment
diversification program and exercised control over E J A and thereby
control over IAB, in contravention of the Federal Aviation Act. EJA,
which relied entirely on Penn Central financial resources for existence,
was being made to serve the private business interests of Bevan and
Hodge.
The potentially enormous profits of the Penphil-HIT-IAB arrangement would accrue directly to Penphil stockholders. All of the power
and the additional financial advantages provided by such power would
have been enjoyed and exercised by the men who controlled Penphil:
David Bevan and Charles Hodge.
A detailed description of Penphil and its relationship to the P R R
and P R R subsidiaries will be given in Part I I I of the staff report.
INSIDE EJA

The never ending struggle to overcome a red ink operation and the
question of Lassiter's ability to provide leadership to this end has
haunted the executive staff of E J A almost since the inception of the air
service in 1965. For Lassiter, the chief executive and board chairman
of EJA, the problem of deficit financing was compounded by mounting
pressure from David Bevan and Charles Hodge to move E J A into
the status of profitmaker to justify the continuing heavy investments
by P R R . By early 1967, the deficit situation was a well established
fact of life at E J A and the possibility of change was something that
Lassiter was impatiently watching to see come over his business
horizon.
Early in the year 1967 Lassiter complained to David Bevan about
the failure of E J A to develop approaches that would change the imbalance between costs and revenue. Bevan suggested that Lassiter
contact the Wharton School of Finance at the University of Pennsylvania to seek help. Lassiter accepted the suggestion and turned the
project over to Frank Conace, vice president in charge of administration and finance at EJA. Conace, in turn, contacted W. W. Abendroth,
executive officer at the Wharton School's Management Science Center
and an agreement was reached whereby Abendroth, and when necessary other members of the school's staff, would conduct a 3-month
study. Abendroth was retained on a private basis and the Wharton
School was not directly involved in the project. In a letter dated
February 13, 1967, Abendroth wrote to Conace and said:
Our efforts will be focused on the marketing, promotional, sales, and price aspects of the business, including employee effectiveness and organizational structure.

T h a t Bevan was well aware of the study is indicated by a note
written by Abendroth to Conace 5 days earlier:




33
* * * I've had an opportunity to meet with our Dean Willis Winn and Mr.
David Bevan. The former is willing to have us offer our services to you individually,
and the latter takes the position that as long as the confrontation is requested by
Executive Jet Aviation, more power to them. He, of course, is bending over backward to avoid any implications of his requesting the effort.

The letter is interesting for three reasons:
(1) I t establishes Be van's knowlege of the study.
(2) I t indicates Bevan's expectation that some of the recommendations in the study would be critical of Lassiter's executive ability.
(3) I t is another example of Bevan's efforts to maintain an illusion
that the Penn Central was not controlling EJA in contravention of
CAB regulations.
Further evidence that Bevan was aware of the study was supplied
by Dean Winn. He said that he and Bevan had known each other
socially and professionally for a long time. Winn is currently Chairman
of the Board of the Philadelphia Federal Reserve Bank. He has been
a Board member since 1960. Bevan was a Board member from 1960
to 1964. Winn said he had seen Bevan several times on social occasions
during the 3-month period the study was being made and they had
casually discussed it. Winn said he knew a few details of the study
from having talked about it with Abendroth and that he (Winn)
joked about the study and Penn Central's connection with E J A .
Bevan, said Winn, tried to cut him off by saying that Winn really
didn't know what was in the report.
The report'*s recommendations
The Abendroth report with its mouth-filling title, "Some Observations on Executive Jet Aviation as a Business Enterprise and on its
Marketing Services/' was completed May 31, 1967, and submitted
to Lassiter. Lassiter circulated copies of the report among EJA
executives, but only after he had removed the first two pages.
Those pages contained the recommended changes that Abendroth
considered necessary to follow if EJA was to achieve a self-sustaining
position. Chief among the suggestions for change was a politely worded
recommendation that in effect said that Lassiter should be fired as
EJA's top administrator and kicked upstairs into a "planning and
strategy position." The full text of the first two recommendations
read as follows:
The most pressing needs of EJA are, in order:
A chief administrator, with a record of achievement developed totally in the
business world, empowered to make all tactical decisions now made by the
President, solely responsible on a day-to-day basis, for the profitable conduct of
the company's affairs, including the integration of the Marketing and Operating
functions, and in the short term context, the financial department as well.
Complete release of the President to full involvement with long-range corporate
planning and strategy. Continued participation in a day to day tactical decisions
represents, at this point in the company's emergence, a dissipation qf creative
talent and an underutilization of the company's most valuable resource.

The other recommendations called for employment of a "marketing
vice president and two assistant vice presidents sufficiently well
accepted in the industrial world to have ready access to the corporate
level of decisionmaking, establishment of a management information
system, a marketing analysis section, and hiring an applicationsoriented-field-sales-service force capable of proving the dollar payoff
of EJA services.
Of the six recommendations only two—those dealing with a marketing vice president and a sales force—have been utilized and they have
5 1 - 9 0 3 O—70—pt. 2




6

34
been only partially enacted. The other four recommendations, including removal of Lassiter, were ignored.
There is no record as to whether a copy of the report, with or without
the recommendations, was ever submitted to Bevan. But his failure
to see the report, especially the recommendations, can only be counted
as a failure on his part as much as that of Lassiter or any other executive in EJA, inasmuch as Bevan knew the study was being made and
expected that recommendations would be presented calling for significant personnel changes in the company which at that point was
indebted in the amount of $17 million to the P R R .
Responsibility for recovery of those investments, to say nothing
of achieving a profit for the P R R , rested with Bevan. I t could be
argued that Bevan would have violated CAB regulations had he
exercised authority or influence regarding implementation of the
recommendations. But the argument does not hold when it is recognized that Penn Central has always dominated E J A and that, in
fact, EJA's existence was due entirely to P R R financing, either directly
or secured by P R R from banks and other financial institutions.
A second set of recommendations
Six and a half months later Abendroth was involved in another
effort to improve EJA's financial situation as indicated in a memorandum written to Lassiter by John Kunkel, EJA's vice president for
operations, A. W. Estes, the firm's treasurer, and Conace. The
document reads in part:
A few days ago you requested that we consider how EJA's P. & L. (profit and
loss) performance could be improved. The three of us closeted ourselves (and
Bill Abendroth) in the board room most of the day on November 15, 1967, and
examined and discussed areas about what major changes need to be made.
Our principal recommendations aimed at getting EJA into profit territory are
presented below, in order of importance with respect to timing and the action
itself:
1. In the best interests of EJA we believe it is absolutely essential that
final authority to make all decisions with respect to day-to-day, month-tomonth operations of EJA be vested in someone else, whose qualifications
should be from the business world, and someone who could devote most of
his time to management problems in Columbus. It is our opinion that this
change must be made in order for EJA to become profitable.

Other recommendations urged a reduction of the European business
jet operations, halting the stationing of business jet aircraft on the
west coast of the United States, negotiating the company out of
acceptance of a third Boeing 707, eliminating various regional offices
and two E J A departments, reducing the payroll 15 percent, holding
administrative flights (nonrevenue producing flights) to an absolute
minimum, and drastically cutting executive travel expenses.
The last two recommendations, like the first, were aimed directly
at Lassiter. A subsequent analysis of the administrative flights for
the year 1968 showed that out of a total of 668, over half, 355, were
made by Lassiter himself at a minimum out-of-pocket cost of $133,000
and that virtually all of the flights, costing a total out-of-pocket
expense to E J A of nearly $300,000, were authorized by him. To these
sums must be added revenue lost because aircraft being used for
administrative flight purposes were not available for revenue flights.
By the same token most of the cost of executive travel expenses
was incurred by Lassiter. The recommendation dealing with this
point asserted:




35
We understand that you want to tackle this area yourself so we will simply
point out here that the month to month executive travel expense in recent months
has been running from $5,000 to $10,000, which is approximate^ 25 to 40 percent
of the traveling expenses of all our airplane crews.

A summary of E J A administrative flights for the years 1968, 1969,
and the first 6 months of 1970 was made for E J A by Lybrand, Ross
Bros. & Montgomery, certified public accountants, following the
Sundlun takeover of the company. T h a t summary, dealing with
these nonrevenue hours flown, miles flown, and the cost of such
flights to E J A is as follows:
SCHEDULE VIM.—ADMINISTRATIVE FLYING
Year ended December
1968

Lear:
Miles flown
Hours flown
Company's actual cost per hour flown1
Estimated cost
Falcon:
Miles flown
Hoursflown
Company's actual cost per hour flown i
Estimated cost
:
JetStar:
Milesflown
Hoursflown
Company's actual cost per hour flown1
Estimated cost
Total:
Milesflown
Hoursflown
Estimated cost

1969

6 months
ended
June 30,
1970

224,764
546.4
$407
$222,385

100,039
249.1
$505
$125,796

33,032
82.1
$555
$45,566

23,934
61.4
$677
$41,568

5,224
12.8
$725
$9,280

2,686
8.0
$1,132
$9,056

9,428
23.1
$1,547
$35,736
258,126
630.9
$299,689

Total

357,835
877.6
$393,747
31,844
82.2
$59,904
9,428
23.1
$35,736

105,263
261.9
$135,067

35,718
90.1
$54,622

399,107
982.9
$489,387

1
The company's actual cost per hour is based upon historical data and includes all costs, Such costs have been converted to an hourly rate based upon total miles flown and the average speed of the aircraft per hour flown.

Note: The above summary of administrative flying is recorded in the company's mechanical flight log by individual
flight and is further supported by a flight request and itinerary and a flight summary prepared by the flight pilot.

One of EJA's better customers was the P R R . During the period
1965 to June 30, 1970, P R R through its wholly owned subsidiary,
Manor Real Estate, paid $395,330 in flights for P R R officials. At
least half of these flights were of less than 500 miles in length and
many of them were less than 300 miles. A glance at the following table
will indicate the high cost of such short hop flying. For example, a
flight from Newark to Philadelphia, a distance of 105 miles, cost $162.
This is not to imply that longer flights were inexpensive. A number of
flights from Philadelphia to Boca Raton, Fla., where Bevan and
Hodge both had business interests and condominium apartments, cost
P R R $1,350 per flight. The extensive use of such costly transportation
is highly questionable given the financial condition, especially in
recent years, of P R R .
The following are a series of schedules which show EJA flights made
by top executives and board members of P R R , and in some instances,
flights made by people with P R R business connections. Out of the
total of $395,330 paid by P R R for such flights, 60 percent, or
$234,148.98, was charged for EJA flights made by David Bevan,
William Gerstnecker and Charles Hodge. The number of flights
involved in the above expenditure was 348.




TABLE lll.-SCHEDULE OF FLIGHTS PAID BY MANOR REAL ESTATE CO.

Passengers

Date

From—

Invoice
No. T o -

A ire raft

Statute
miles

Invoice addressee

Rate

Amount
charged
for flight
as per Bevan (and
invoice
parties)

Hodge

Gerstnecker

Others

1970
Mr. Bevan
Do
Hodge Gerstnecker,
Herron, Bevan
Bevan
Do
Do
Do
Do
Do
Bevan + 1
Bevan + 3
Bevan
Gen. Hodge
W. R. Gerstnecker
C.J.Hodge

May 15 Newark...
do
Pittsburgh
May 12

5-18040
5-18040
11637

Apr. 16
do
Apr. 21
do
Apr. 24
do
Apr. 29
do
do
do
Apr. 17

4-17736
4-17736
4-17736
4-17736
4-17736
4-17736
4-17736
4-17736
4-17736
4-17736

Newark
Philadelphia
Miami
Boca Raton
Philadelphia
Pittsburgh
Newark
Philadelphia
Fort Worth
Philadelphia

- . Apr. 29 New Y o r k . . .

Pittsburgh
Philadelphia
GSC Board Meeting
Philadelphia
Boca Raton
— d o
Philadelphia
Pittsburgh
Newark
Philadelphia
Fort Worth
Philadelphia
Newark
Miami

. Lear
..._do
Lear
...do..
___do..
...do..
...do..
...do..
...do..
...do..
...do..
...do..

11637

W. R. Gerstnecker

do

Philadelphia.

Dallas (and return).
11637
do

J. O'Herron
David C. Bevan

do.
do..

do....
New York.

11637
11637

Bevan + 2
General Hodge
Griffiths+1...
Bevan+3
Bevan + 2
Do
R. Lepley
Bevan + 1
Bevan+2
Do
Bevan+1
Bevan + 3

Mar. 9
...do
Mar. 21
Feb. 4
do
Feb. 27
Feb. 19
Feb. 28
- J a n . 12
Jan. 16
Jan. 23
do..




Boca Raton
Philadelphia
Indianapolis
Fort Worth
Philadelphia
Newark
Philadelphia
do
Boca Raton
Newark
White Plains
Pittsburgh

3- •17249
3- 17249
3- •17249
2- •16814
2- •16814
2- •16814
2- •16814
2- •16814
1- 16512
.. . d o —
.. .do—
.. . d o -

.—do.
Dallas (to Philadelphia and return).
Philadelphia
Newark
Palm Beach
Philadelphia
Fort Worth
Washington.
Miami.
Boca Raton.
Philadelphia
Pittsburgh
do._
Philadelphia

Lear...
...do...
...do...
Falcon..
Lear...
_._do—
...do...
—do...
...do—
...do...
...do...
...do...

329 Manor Real Estate C o . . $155
275 .
do
U55
Penn Central (Payee)
for $884.10
105 Manor Real Estate Co.. 155
155
999
do
155
66
do
155
do
999
155
275
do
155
329
do
155
105 ____do
155
do
1,328
155
do
1,328
155
do
105
Penn Central (payee)
for $91.35.2
Penn Central (payee)
for $228.90.2
Penn Central (payee)
for $216.30.2
do
Penn Central (payee)
for $222.60.2
1,000
108
995
1,330
1,330
227
1,042
1,000
1,000
330
356
276

Manor Real Estate C o . .
....do
....do
....do
....do
do
do
— .do....
....do
do
do
. — .do

155
155
155
345
155
155
155
155
155
do
do
do

$509.95
551.25
162.75
1,548.45
102.30
1,548.45
426.25
509.95
162.75
2,058.40
2,058.40
162.75
91.35

$509.95
551.25 .
162.75
1,548.45
102.30
1,548.45
426.25
509.95
162.75
2,058.40
2,058.40

8
$162.75 .
$91.35 .
228.90

228.90

216.30 .

216.30
216.30 .
222.60

$216.30
222.60.

1,550.00 .
1, 550.1
1.00
167.40 .
.40
.25
1,542.25 .
.50
4,588.50 .
4, 588.!
».00
2,615.00 .
2,615.0
.85
351.85
351.1.
1,615.10
1, 550.00
1,550.0
.00
1,550. 00 .
1,550. f
1.00
511.50
511.!
.50
551.80 .
.80
551.8
.80
427.80 .
427.8

167.40 .
1,542.25

— -

1,615.10

1969
Bevan
Dec. 19 Philadelphia
Do
do.. Pittsburgh
Bevan + 3
Dec. 26 Philadelphia
do
Saunders+3.._
Nov. 17 .
Detroit
Do
do
Bevan..
Nov. 20 N e w a r k . . . .
Do
. . - Nov. 21 PittsburghBevan + 1
Oct. 16 Burbank..Do
Oct. 20 Boca Raton
Bevan
Oct. 24 Washington
Gen. Hodge
Sept. 12 Newark...
Bevan..
d o — Philadelphia
Columbus..
Barton
...do
Bevan+2
Sept. 13 Latrobe
Philadelphia
Do
do
Bevan..
Sept. 19 Pittsburgh...
Philadelphia
Do
..do
do....
Bevan + 2
Sept.20 .
Bevan + 1
Aug. 9 Nassau
Latrobe.
Do.
Aug. 13
Bevan
d o — Philadelphia
do—.
Bevan -f-1
do
Bevan+3
. . A u g . 2 Norfolk..Philadelphia
Bevan
...do
Bevan + 1
July 1 White Plains
Bevan + (additional
pass, not numbered).
July 8 Newark..
Bevan + 1
- d o — Philadelphia
Washington
Do
do
Vaughn+7
July 14 Syracuse.
Vaughn...
d o — Philadelphia
Vaughn+7..
July 15 Chicago
IndianapolisVaughn
do
Do
July 14 Cleveland
Bevan+2
July 15 Philadelphia
Bevan+4
July 25 Chicago..
Bevan 4 - 3 . . .
._do__. Philadelphia
Bevan+2
July 16 Columbus.
Bevan
July 18 Philadelphia
Bevan + 1
_
June 5
do
do
Do
do....
Bevan
June 6
do
Do
June 12
do
Pittsburgh
Do
do
Do
June 13 Philadelphia
Do
June 14 Latrobe..
Do.
_
June 20 Philadelphia
See footnotes at end of table, p. 47.




12-16156
do...
do...
11-15714
11-15714
11-15714
11-15714
10-15328
10-15328
10-15328
9-14829
9-14829
9-14829
9-14829
9-14829
9-14829
9-14829
9-14829
8-14387
8-14387
8-14387
8-14387
7-14023

Pittsburgh
Philadelphia
Boca Raton
Detroit...
Philadelphia
Pittsburgh
Newark..
Boca Raton..
Philadelphia
do
do..
Latrobe
Washington
Philadelphia...
Newark...
Philadelphia
Pittsburgh
Santa Ana
Washington
Philadelphia
Newark
Latrobe
Philadelphia
Newark
Washington

7-14023
7-14023
7-14023
7-14023
7-14023
7-14023
7-14023
7-14023
7-14023
7-14023
7-14023
7-14023
7-14023
6-13617
6-13617
6-13617
6-13617
6-13617
6-13617
6-13617
6 13617

Philadelphia
Washington..
Philadelphia
Cleveland
Syracuse
Indianapolis
Pittsburgh
Detroit..
Columbus
Philadelphia
Chicago
Philadelphia
Pittsburgh
Latrobe
Philadelphia
do
Pittsburgh
Philadelphia
Latrobe
Philadelphia
Pittsburgh.

8-14387
8-14387

do...
do...
Falcon_
Falcon.
do...
Lear
do
do
do...
_do...
do...
do...
do
do...
do...
do...
do._.
do...
do
do...
do
do
...do
...do...
do...
..do...
do...
do...
Falcon
do...
do
..do....
do
Lear
._do__.
-_do__.
do...
do...
..do...
do...
do
Falcon..
Lear
..do...
do...
do...

3 155

155
345
345
345
155
155
155

155
155
155
155
155
155
155
155
155
155
155
155
155
155
155
155
155
155
155
4 155

345
345
345
345
345
155
155
155
155
155
5 130

130
130
6 130

130
130
130
130

715.00
465.00
3,450. 00
1,652.50
1,652. 50
511. 50
511.50
3,651.80
1,550.00
226.30
167.40
382. 85
544.05
382.85
167.40
427.80
455.70
3,740.15
1,556.20
382.85
167.40
382. 85
373. 55
167.40
403.00
167.40
226.30
351.30
1,148.85
876.30
648.60
1,207.50
438.15
671.15
1,074.15
1,074.15
671.15
427.80
390. 00
390. 00
390.00
390. 00
390. 00
390. 00
390. 00
390.00

715.00
465.00
3,450.00
1,652.50
1,652.50
511.50
511.50
3,651.80
1,550.00
226.30
167.40
382.85
.
382.85
167.40
427.80
455.70
3,740.15
1,556.20
382.85
167.40
382.85
373.55
167.40
403.00
167.40
226.30
351.30

.

.

544.05

<• «

::::::::::::::::::::: £?
—
^4
...
1,148.85
876.30
648.60
1,207.50
438.15

671.15
1,074.15
1,074.15
671.15
427.80
390.00
390.00
390. 00
390.00
390.00
390.00
390.00
390.00

TABLE lll.-SCHEDULE OF FLIGHTS PAID BY MANOR REAL ESTATE CO.-Continued

Passengers

Date

Invoice
No. To—

Statute
Aircraft
miles Invoice addressee

Rate

Amount
for flight
as per Bevan (and
invoice
parties)

Hodge

Gerstnecker

Other

1969
May 14 Detroit
May 15 Philadelphia
.do
Cincinnati
May 16 Philadelphia
do
Pittsburgh.
. . . d o . . . . Philadelphia
May 22 Jacksonville.
Apr 14 Los Angeles

Saunders+2
Bevan
Do..
Do
Bevan + 2 . .
Bevan.. _
Baxter+2
Perlman + 5
Perlman
Do.
Gen. Hodge
Bevan + 4
Perlman + 5 . .
Bevan+1
Perlman + 7
Do
Bevan & Hodge
Bevan..
Bevan+1
Do
Rosenbaum
Bevan
Perlman-fl
Bevan+2—_
Bevan + 4
Do
1-Pax(?)
Rosenbaum
Bevan
Rosenbaum
Bryan
Do
Do
Hodge
Bevan
Hodge+1

Apr 16 San Francisco
Apr 18 Houston
. A p r 17 Newark
do
Philadelphia.
do
Dallas
Apr 30 Boca Raton
Mar 5 Pittsburgh
do
Cleveland
Mar 4 Ocean Reef
do
Boca Raton
Mar 7 Newark
d o . . . . Philadelphia
Mar. 19 Newark
Mar. 21 Philadelphia
. . . . . d o . - . Cincinnati
Mar. 28 Philadelphia
...do
Chicago
d o . . . . Philadelphia
Feb. 5
do
...do
Washington
Feb. 14 Philadelphia
Feb. 13
do
Feb. 17 Newark....
d o . . . . Philadelphia
d o . . . . Miami
do
Philadelphia
_. Feb. 21 ...do
Feb. 28 Newark




5-13061
5,13061
5-13061
5-13061
5-13061
5-13061
5-13061
4-12528

Newark
Cincinnati
Allentown...
Pittsburgh
Philadelphia
White Plains
Philadelphia
San Francisco

Falcon__
Lear
do
do
do
do

4-12528
4-12528
4-12528
4-12528
4-12538
4-12528
3-12016
3-12061
3-12016
3-12016
3-12016
3-12016
3-12016
3-12016
3-12016
3-12016
3-12016
3-12016
2-11477
2-11477
2-11477
2-11477
2-11477
2-11477
2-11477
2-11477
2-11477
2-11477

Portland
Windsor Locks
Philadelphia
Boca Raton
Seattle
Philadelphia
Cleveland
Indianapolis
Boca Raton
Philadelphia
do
Washington
do
Pittsburgh
New York
Chicago
Philadelphia
New York
Washington..
Newark
Pittsburgh
Washington
Philadelphia
Miami
Philadelphia
Newark
Pittsburgh
Philadelphia

do
do
Lear
do
Falcon..
Lear
Falcon..
do
Lear
do
do
do
Falcon..
Lear
do
do
do
do
Falcon..
Lear
do
Jet Star.
Lear
..do
do
do
Falcon..
..Lear...

Falcon..

514
do....
518
do
514
do.
300
do..
394
do
142
do
773
do
365 Manor Real Estate
Company.
577
do...
1,543 . - . . . d o
108
do
1,000 . . . . . d o
1,694
do
1,000 . . . . . d o
300
do
300
do
98
do
1,000
do
300
do
300
do..
300
do
300
do
594
do
693
do
693
do
121
do
300
do....
300
do
300
do
300
do....
108 Manor Real Estate
1,042
do
1,042
do
108
do
300
do....
108
do-..

$245
5 130
130
130
130
130
135
245

$1,259.30
673.40
668.20
390. 00
382.20
184.60
1,043.50
894.25

245
245
135
135
245
135
245
245
135
135
135
135
245
135
135
135
135
135
245
135
135
M35
135
135
135
135
.-.46135
135

1,413. 65
3,780. 35
145. 80
1,350.
4,150.
1,350.
735.
735.
132.
1,350.
405.
405.
735.
405.
801.
935.
935.
163.
735.
405.
405.
405.
145.
1,046,
1,046.
145.
530.
145.

$1,259.30
$673.40
668.20
390.00
382.20
184.60

.
.
.
.
:

1,043.50
894.25
1,413.65
3,780,35
$145.80

1,350.00
4,150.30
1,350.00 .
735.00
735.00
66.15
1,350.00 .
405.00 .
405.00 .
.

66.15

735. 00
405.00
801.90
935.55
935.55
163.35
735.00
405. 00
405.00
405. 00
145.80 .
1,046.70 .
1,046.70 .
145.80
530.00
145.80 .

JS
GO

Hodge+2
Do
Perlman+1
Perlman
Do
Bevan+ 2
Sanders+ 5
Sanders+ 7
Sanders+ 4 —
Sanders+ 2
Bevan
Do..
Do
,
Do
Do
G en. Hodge + 3 — .
Bevan+4
^erstnecker.

.do____ Philadelphia.
do
Boca Raton
d o . - . . White Plains
— d o _ — Philadelphia
- . d o . . - . Washington
Jan. 5 Ft. Lauderdale
Jan. 7 Baltimore
d o . - . . Windsor Locks
___do__.. Boston
. . . . d o . . . . Windsor Locks
Jan. 17 Philadelphia
d o . . . . Pittsburgh
Jan. 22 Newark
Jan. 24 Pittsburgh
Jan. 25 Washington
Jan. 26 Philadelphia
do
Columbus
Jan. 24 Pittsburgh

..

2-11477
2-11477
2-11477
2-11477
2-11477
1-11007
1-11007
1-11007
1-11007
1-11007
1-11007
1-11007
1-11007
1-11007
1-11007
1-11007
1-11007
1-11007

Boca Raton
Ocean Reef
Philadelphia.
Washington
White Plains
Philadelphia
Windsor Locks
Boston
Windsor Locks
Philadelphia
Pittsburgh
Philadelphia
do
do
do
Columbus
Los Angeles
Pittsburgh.-.

do
-do
do
do—
do
Lear
Falcon _.
do
do
do
Lear
do
Falcon...
Lear
do
do
Jet Star..
Lear

1,000
do
—
135
300
do
135
300
do
135
300
do
135
300
do
135
1,020
do
. - - - 135
310
do
245
121
do
245
121
do
245
222
do
245
300
do
135
300
do
135
300
do
6135
300
do
135
300
do
135
541 MACCO
135
2,018 . . . - d o
47135
300 Manor Real Estate Co.. 135

1,350.00
405.00
405.00
405.00
405.00
1,377.00
759.50
296.45
296.45
543.90
405.00
405.00
405.00
405.00
405.00
730.35
2,849.30
405.00

Philadelphia
do
Boca Raton
Pittsburgh
Philadelphia
Boca Raton
do
New York
Philadelphia
Pittsburgh
Boca Raton
Chicago
Philadelphia
Washington
do
do
New York
Washington
Phoenix
Philadelphia.
Pittsburgh
Boca Raton
Newark
Washington
Philadelphia
Pittsburgh
Philadelphia..
Wilmington
Little Rock
Philadelphia

Falcon...
Lear
Falcon...
Lear
do
do
Falcon...
do
Lear
do
do
do
Falcon...
Lear
do
do
do
Falcon...
Lear
..do
do
do
do
do
do
do
..do
do
do
do

479
1,000
1,000
300
300
1,123
1,104
1,081
1,000
300
1,000
693
693
906
300
906
300
300
1,468
2,098
300
1,000
108
146
146
300
300
144
1,002
1,026

1,173.55
1,350.00
1,350.00
405.00
405.00
1,516.05
1,490.40
1,459.35
1,350.00
405.00
1,350.00
935.55
935.55
1,223.10
405.00
1,223.10
405.00
735.00
2,356.80
2,832.30
405.00
1,350.00
145.80
197.10
197.10
405.00
405.00
194.40
1,352.70
1,385.10

1,350.00
405.00
405.00
405.00
405.00
1,377.00
759.50
296.45
296.45
543.90
405.00
405.00
405.00
405.00
405.00
730.35
2,849.30
405.00

1968
Large + 4
Gerstnecker + 2
Bevan+1
Bevan
Do
Do
Roth + 1
Roth
Bevan -f~l
Bevan
Gerstnecker.
Taylor+2
Taylor 4-4
Gerstnecker
Bevan
Gerstnecker
Grant
Mr. Saunders
Bevan+3
Bevan+1
Bevan
Mr. & Mrs. Bevan
Bevan
Gerstnecker 4-1
Do-..-.
Bevan
Do
Seabrook
Do
Seabrook + 3

Dec. 4 Detroit
. . . D e c . 7 Boca Raton
Dec. 27 Philadelphia
Dec. 20
do
Pittsburgh
--do
Dec. 21 Bridgeport
Nov. 5 White Plains
d o . . . . Boca Raton
do
Nov. 13
Nov. 15 Philadelphia
do
Nov. 21
Nov. 22
do
Chicago
-do
Nov. 24 Boca Raton
Philadelphia
do
Nov. 25 Washington..
Nov. 28 Philadelphia
Oct. 1 Winston Salem....
Oct 12 Chicago
Oct. 16 Phoenix
Oct. 18 Philadelphia
Oct. 25
do
Sept. 11
do
do
Sept. 10
do.__ Washington
Sept. 13 Philadelphia.
Pittsburgh
..do
Sept. 18 New York
Wilmington
do
Sept. 19 Pine Bluff

See footnotes at end of table, p. 47.




1-11007
1-11007
1-11007
1-11007
1-11007
1-11007
11-10124
11-10124
11-10124
11-10124
11-10124
11-10124
11-10124
11-10124
11-10124
11-10124
11-10124
10-9656
10-9656
10-9656
10-9656
10-9656
9-9023
9-9023
9-9023
9-9023
9-9023
9-9023
9-9023
9-9023

do
do
do
.....do
do
do
do
do
dodo
....do
....do
do
....do
....do
...do.
...do
do
dodo
.
_dodo
do
do
do
do
do
do
do
do

245
135
6135
135
135
135
6 135
6135
135
135
135
. . . - 135
6135
135
135
135
135
245
U35
135
. - . 135
135
135
135
135
135
135
135
135
135

1,173.55
1,350.00
1,350.00
405.00
405.00
1,516.05
1,490.40
1,459.35
1,350.00
405.00
.

1,350.00
935.55
935.55
1,223.10

405.00
1,223.10.
405.00
735.00
2,356.80
2,832.30
405.00
1,350.00
145.80
197.10
197.10
405.00
405.00
194.40
1,352.70
1,385.10

TABLE lll.-SCHEDULE OF FLIGHTS PAID BY MANOR REAL ESTATE CO.-Continued

Passengers

From-

Date

In voice
No. To—

Aircraft

Jet Star..
Falcon...
Lear
..do
do
do
Jet Star..
Lear
do
do
Jet Star...

Rate

Amount
charged
for flight
as per Bevan (and
parties)
invoice

300 Manor Real Estate Co..
945
do
do.
1,049
388
do....
121
do
467
do
121
do
do
1,593
do
241
241
do
108
do
925
do

$135
9 245
245
135
135
135
135
8 245
135
135
135
300

$405.00
2,315.25
2,570.05
523.80
163.35
630.45
163.35
3,902.85
325.35
325.35
145.80
2,775.00

Mr. W. R.
Gerstnecker,
Manor Real Estate
Co.
377
do....
348
do
306
do...
276
do..
693
do
693
do....
146
do....
222 Mr. W. R. Gerstnecker,
Manor Real Estate
Co.
146
do.
146
do...
146
do
1,000
do..
1,000
do..
276
do
276
do....
108 Manor Real Estate Co..
276
do
276
do
518
do
580
do..
do....

9 245

1,697.85

Statute
miles

Invoice addressee

Hodge

Gerstnecker

Others

1968
Bevan
Saunders+1
Schneider+7
Bevans + 3
Bevan
Do
Do
Bevan + 5
Bevan.
Bevan+5
Bevan..
Bevan, Hodge, Haslett

Sept. 20
Aug. 1
Aug. 2
Aug. 19
do
do
do
Aug. 26
do
Aug. 27
do
Aug. 23

Philadelphia
Kansas City
Indianapolis
Philadelphia
Cleveland
Detroit
Philadelphia
Denver.. _
Philadelphia
Norfolk.
Philadelphia
Chicago. _

9-9023
8-8491
8-8491
8-8491
8-8491
8-8491
8-8491
8-8491
8-8491
8-8491
8-8491
8-8491

Mr. Carney

July

Philadelphia

7-7980 Chicago

+3.

Do
Mr. Carney+9
Bevan+1
--Bevan.
Mr. Bevan+2
Mr. Bevan
Bevan+2
Bevan+1..

1

do
..July 2
July 11
July 19
July 26
.do....
July 31
May 1

Bevan
Bevan+1
Bevan
Bevan + 1 Bevan + 1 . .
Bevan
Do
Bevan
Do
Do
Do.
Do
Pkgfor Bevan




do
May
...do
May 10
May 16
May 17
..do....
May 24
May 29
do . .
Apr. 2
do
Apr. 10

Pittsburgh
Washington... . . . .
Miami
Cleveland
Detroit
Philadelphia..
New York
Philadelphia.. . . . .
Norfolk
Philadelphia...
Newark
Denver
....

Chicago
St. Louis
Philadelphia
do...
Chicago...
Philadelphia
do
Newark

7-7980
7-7980
7-7980
7-7980
7-7980
7-7980
7-7980
5-7028

St. Louis
Cincinnati
Boston
Pittsburgh
Philadelphia..
Chicago
Washington...
do

Washington.
Philadelphia
Washington
Philadelphia.
Boca Raton
Philadelphia
Pittsburgh...
Newark
Philadelphia
Pittsburgh
Philadelphia
Cincinnati
Columbus

5-7028
5-7028
5-7028
5-7028
5-7028
5-7028
5-7080
5-7028
5-7028
5-7028
4-6559
4-6559
4-6559

Philadelphia.
Washington..
Philadelphia
Boca Raton
Philadelphia
Pittsburgh
Philadelphia...
....do....
Pittsburgh
Philadelphia
Cincinnati
Newark
do

..do

do
do
Falcon...
Lear
do
do
do
do
....do..
....do..
do.
..do..
do..
do.
do..
do..
do..
do..
do..
do..
do..

$405.00
_
523.80
163.35
630.45
163.35
3,902.85
325.35
325.35
145.80
925.00

$2,315.25
2,570.05

$925.00

925.00
1,697.85

&
O

"245
9 245
«135
135
135
135
135
135

678.65
852.60
413.10
372.60
935.55
935.55
197.10
299.70

135
135
135
135
135
135
135
135
135
135
135
135
135

197.10
197.10
197.10
1,350.00
1,350.00
372.60
372.60
145.80
372.60
372.60
699.30
783.00
658.80

678.65
852.60
413.10
372.60
935.55
935.55
197.10
299.70
197.10
197.10
197.10
1,350.00
1,350.00
372.60
372.60
145.80
372.60 ...
372.60
699.30 ...
783.00
658.80

.

Bevan
Bevan + 1
Hodge+1
Hodge
Gerstnecker
Bevan.
Do
Gerstnecker + 1
Bevan.
Bevan+3
Bevan - H
Varner+3
Varner
Bevan + 2
Bevan 4 - 3 . . .
Grimshaw+1
Bevan
Do
McGruder
Bevan + 1
Bevan
Do
Bevan+1
Bevan
Bevan+2
Do
Bevan+1
Bevan
Mr. and Mrs. Patten
Do
Magruder+5
Bevan+3
Bevan -j-1
Bevan

Apr. 16 Philadelphia
do
Chicago
Apr. 17 Newark
Allentown
do
Apr. 18 Philadelphia
do
Apr. 26 .
Apr. 25 Newark
Apr. 28 Boca Raton
Apr. 29 Wilmington..
Mar. 1 Philadelphia
Mar. 6 Boca Raton
._ Mar 10 Eluthera
Miami
...do
Mar. 22 Philadelphia
Chicago
do
Mar. 27 Boca Raton
Mar. 25 Philadelphia
Newark...
..do
Mar. 27 Philadelphia
Jan. 17 Boca Raton
Jan. 19 Philadelphia
do.. Pittsburgh
Jan. 20 Philadelphia
Jan. 23 Boca Raton
Jan. 25 Philadelphia
do.. Washington
Jan. 31 Philadelphia
do._ Indianapolis
Feb. 9 White Plains
do.. Philadelphia
Feb. 11 Boca Raton.
Feb. 26 Philadelphia
do._ Washington
Feb. 29 Newark

4-6559
4-6559
4-6559
4-6559
4-6559

4-6559
-

4-6559
4-6559
4-6559
3-6150
3-6150
3-6150
3-6150
3-6150
3-6150
3-6150
3-6150
3-6150
3-6150
1-5392
1-5392
1-5392
1-5392
1-5392
1-5392
1-5392
1-5392
1-5392
2-5757
2-5757
2-5757
2-5757
2-5757
2-5757

Chicago
Philadelphia
Allentown
Newark
Boca Raton
Pittsburgh..
Allentown
Philadelphia
Newark
Boca Raton..
Philadelphia
Miami
Roanoke
Chicago
Philadelphia
.do
Newark
Philadelphia
Boca Raton
Philadelphia..
Pittsburgh
Philadelphia
Boca Raton
Philadelphia
Washington
Allentown
Indianapolis
Philadelphia
do
Boca Raton
Philadelphia..
Washington
Philadelphia
Allentown.

_-do.__
do...
do._.
do...
do...
...do...
do...
do...
do...
...do...
do...
Falcon.
do...
Lear...
do...
do...
_do.-.
...do-..
..-do...
..do...
do...
do...
do...
do...
do...
do...
do...
do...
Falcon.
do...
do...
Lear...
...do...
Falcon..

135
135

10

( )

935.55
935.55
300.00
300. 00
1,350.00
372.60
300.00
1,350.00
300.00
1,350.00
1,350.00
686.20
1,931.70
947.70
947.70
1,350.00
300.00
300.00
1,350.00
1,350.00
372.60
372.60
1, 350.00
1,350.00
300. 00
300. 00
827.55
827.55
343.10
2,350.00
2,350. 00
300.00
300. 00
300.00

135
235
235
135
235
135
135
235
135
135
135
135
135
135

1,350.00
5,790.40
857.75
1,043. 55
1,050.45
1,165.05
1,659.15
2,883.45
935. 55
935. 55
372.60
372.60
935.55
372.60

0°)
0°)
135
135

(10)

135
(10)

135

135
235
?35
135
135
135
(10)
(10)

135

135
135
135
135
135

(10)
(10)
135

135
235
235
235

(10)
(10)

935.55
935.55
300.00 .
300.00 .
$1,350.00
372.60
300.00
1,350.00
300.00
1,350.00
1,350,00
686.20
1,931.70
947.70
947.70
1,350.00
300.00
300.00

. ...
1,350.00

1,350.00
372.60
372.60
1,350.00
1,350.00
300.00
300.00
827.55
827.55
343.10
2,350.00
2,350.00
300.00
300.00
300.00

1967
3 Boco Raton..
8 Washington
San Francisco
9 Jacksonville
San Francisco
Jacksonville
10 Wichita
Los Angeles
Nov. 15 Philadelphia
. . . d o — Chicago
Nov. 17 Philadelphia
Pittsburgh
do
Dec. 4 Philadelphia
do..
Dec. 15

Prizer & Snyder + 1
Nov.
Large+2
Nov.
Large
...do
Butcher+4
Nov.
Saunders.
do
Seabrook + 3
do
Large, Talbot & Carney-. Nov.
Large 4 - 1 . .
do

Bevan+1

Bevan
Do
Do
Do.
Do

See footnotes at end of table, p. 47.




11-4638
11-4638
11-4638
11-4638
11-4638
11-4638
11-4638
11-4638
11-4638
11-4638
11-4638
11-4638
12-5119

Philadelphia
San Francisco
Los Angeles
Philadelphia
Palm Springs
New York
Philadelphia
Wichita
Chicago
Philadelphia
Pittsburgh
Philadelphia
Chicago
12-5119 Pittsburgh

Lear
Falcon..
do._.
Lear
Falcon..
Lear
do...
Falcon.
Lear
do...
do...
do...
.do...
do...

1,350.00
5,790.40
857.75
1,043.55
1,050.45
1,165.05
1,659.15
2,883.45
935.55
935.55
372.60
372.60
935.55 .

. ..
.. .

TABLE lll.-SCHEDULE OF FLIGHTS PAID BY MANOR REAL ESTATE CO.-Continued

Pa»sengers

Date

Invoice
No. To-

From—

A ire raft

Statute
miles

Invoice addressee

Rate

Amount
charged
for flight
as per Bevan (and
invoice
parties)

Hodge

Gerstnecker

Others

1967
Mr. and Mrs. Bevan, Mr. Dec. 28 Philadelphia
and Mrs. Gerstnecker.
Bevan-t-2
Oct. 4 Newark
Bevan
do
Philadelphia
Do
Oct. 6 Newport News
Butcher, Bennet, SeaOct. 10 Jacksonville
brook.
Bevan and Robert
Oct. 18 Philadelphia
Do
do__._ Cleveland
Bevan
Oct. 20 Philadelphia
Do
_ . , _ d o - _ - Pittsburgh
Large
Oct. 24 Boca Raton
Bevan + 5
Oct. 26 Philadelphia
Bevan+4
Oct. 30 Boca Raton
Do
do
Philadelphia
Mr. Prizer+1
Oct.3L.
do
Mr. Bevan
Sept.29. . - - d o
Do
Sept.20. Latrobe
Do,
Aug. 24 . Atlantic City
Do
do-,. Newark
Mr. Bevan+1
Aug. 3 1 . Latrobe
Do..
do
Philadelphia
Gerstnecker - f 1
July 7 . . - - d o
Gerstnecker
..do
Latrobe
Gerstnecker + 1
July 8 Pittsburgh
Gerstnecker
do
Latrobe...
Bevan -+- Gerstnecker
luly 17 Philadelphia
Do
.do
Newark
Saunders
July 20 Philadelphia
Bevan
July 21
do
Saunders+1
July 30 Santa Rosa
Names not listed "
May 18 Philadelphia
Do."
May 23 Boca Raton
Do."
Apr 20 Philadelphia
Do."
. . . d o . . . - Charlottesville
Do«
Apr. 23 Boca Raton




12-5119

Boca Raton

11-4301 Philadelphia
11-4301 Newport News
11-4301 Philadelphia
11-4301
do

.

11-4301
11-4301
11-4301
11-4301
11-4301
11-4301
11-4301
11-4301
11-4301
9-3717
9-3717
9-3340
9-3340
9-3340
9-3340
8-2934
8-2934
8-2934
8-2934
8-2934
8-2934
8-2934
8-2934
8-2934
6-2144
6-2144
4-1651
4-1651
4-1651

Cleveland
Philadelphia
Pittsburgh
Philadelphia
Harrisburg
Boca Raton
Philadelphia
Newark
BocaRaton
Latrobe
Philadelphia
Newark
Philadelphia
do
Newark
Latrobe
Pittsburgh
Latrobe
Philadelphia
New York
Philadelphia
Santa Rosa
Pittsburgh..
Philadelphia
BocaRaton
Philadelphia
Charlottesville
Boca Raton
Philadelphia

Leha
...do
do
do
do
do
do
do
do
do
do
do
do
do.
do
do
do
do
do
do
Lear
do
do
do
do
do
Falcon...
Lear
Falcon. _.
Lear
do
do
do
do

1,000 Manor Real Estate Co.. $135
108
229
229
773

do
do
do
do

382
do
382
do
276
do
276
do
1,,000
do
1,,000
do
1,r 000
do
108
do
1, 000
do
247
do
247
do
122
do
108
do
247
do
108
do
247
do
75
do
75
do
247
do....
121
do
108
do
2, 545
do
276
do
2, 545
do
1, 000 Pennsylvania R.R
1, 000
do
237
do
844
do
1, 000
do

$1,350.00

$675.00

135
135
135
135

145.80
309.15
309.15
1,043.55

145.80
309.15
309.15

135
135
135
135
135
135
135
135
135
135
135
(io)
C°)
135
135
135
135
135
135
C°)
00)
235
135
235
116
116
116
116
116

515. 70
515. 70
372. 60
372. 60
1,350. 00
1,350. 00
1,350. 00
145. 80
1,350. 00
333.
333.
300.
300.
333.
145.
333.
101.
101.
333.
300.
300.
5,980. 75
372. 60
5,980. 75
1,160. 00
1,160. 00
274. 92
979. 04
1,160. 00

$675.00.

257.85
257.85
372.60
372.60

$1,043.55
257.85
257.85
ft
"^
1,350.00
1,350.00
1,350.00
145.80
1,350.00
333.45
333.45
300. 00
300. 00 .
333.45
145.80

150.00
150.00

333.45
101.25
101.25
333.45
150.00 .
150.00
5,980.75

372.60

..

...

5,980.75
1,160.00
1,160.00
274.92
979.04
1,160.00

Do"
Do"
Do."
Do.11
Do."
Do."
Do."
Do."
Do."
Do."
Do."
Do."
Do."
Bevan+3
Bevan + 1
Do
-.
Do
Taylor+2 1
3
Taylor+313--.
Bevan+2
Bevan 4-3..
Mr. Greenough
Do
Fox
Do
Bevan+1
Bevan 4-2
Reiter+1
Butcher+9._
Mr. Vore+7
Do
Bevan

- Apr. 26
Apr. 27
--do
---do
do
do
do
-do
Apr. 28
-do-_do....
Apr. 30
do
.Mar. 3
Mar. 7
-_do-Mar. 9
Mar. 17
do....
Mar. 20
...do
Mar. 28
. — Mar. 29
Mar. 30
do....
Feb. 4
do
Feb. 10
Feb. 8
Feb. 26
do
Jan. 15

Philadelphia
Indianapolis
Chicago..-Philadelphia
do
Miami.Philadelphia
Talahassee..
Boca Raton
do
do
do
do
Philadelphia.
Boca Raton
Charlottesville
Philadelphia...
do
Chicago
Philadelphia
Allegheny
Philadelphia
Fairhope
Sarasota
Washington
Philadelphia
Pittsburgh
Philadelphia
New York
Rock Sound
Fort Lauderdale...
Boca Raton

4-1651
4-1651
4-1651
4-1651
4-1651
4-1651
4-1651
4-1651
4-1651
4-1651
4-1651
4-1651
4-1651

2-0971
2-0971
2-0971
2-0971
2-0971
2-0971
1-0618

Boca Raton
do...
Miami.
do—
Boca Raton
do—
do..
—do—
Miami
. Falcon..
Boca Raton
..._do—
Miami—.
do...
Boca Raton
....do—
Indianapolis
_ Lear...
Chicago.
__-do—
Philadelphia
. Falcon..
....do...
do—.
....do...
.--do....
Boca Raton
. Lear
Charlottesville... . . . . d o . . . .
....do...
Philadelphia
....do....
Newark
....do...
Chicago
....do....
Philadelphia
.-.do....
Allegheny
....do...
Philadelphia
....do...
Fairhope
....do—.
Philadelphia
—do...
Washington.
....do—
Sarasota
_ Lear
Pittsburgh.
....do...
Philadelphia
....do....
do
_ Falcon..
Jacksonville
Fort Lauderdale.. . . . . d o . . .
....do....
Pittsburgh..
. Lear
Philadelphia

1,000
do
1,049
do
1,191
do.
1,000
do.
1,042
do
75
do
1,042
do....
405
do
1,015
do.
1,191*
do
1,000
do.
1,000
do
1,000
do
1,000 Manor Real Estate Co..
844
do
237
do
108
do
693
do
693
do
276
do
276
do
1,015
do
1,015
do.
879
do..
879
do
276
do.276
do......
980
do.
859
do
322
do..
1,021
do..
1,000
do..

116
116
116
116
200
200
200
200
116
116
200
200
200
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
200
200
200
116

1,160.00..
1,216.84
1,381.56
._
1,160.00
2,084.00
150.00
2,084.00
810.00
1,177.40
1,381.56
2,000.00
2,000.00
2,000.00
1,160.00
1,160.00
979.04
979.04.
274.92
274.92
125.28
125.28
803.88
803.88
320.16
320.16
320.16
320.16
1,177.40
1,177.40
1,019.64
1,019.64
320.16
320.16..
320.16
320.16
1,136.80
1,718.00
644.00
2,042.00
1,160.00
1,160.00

1,000
do
2,275
do
305
do..
227
do..
1,389
do
1,330
do
108
do...
108
do
108
do
1,000
do
1,000 W. R. Gerstnecker c/o
Manor Real Estate
Co.
2,275
do

116
200
116
116
116
116
116
116
116
116
116

1,160.00
4,550.00
354.96
263.32
1,611.24
1,542.80
125.28
125.28
125.28
1,160.00
1,160.00

200

4,550.00

_

401.94
401.94

1,160.00
1,216.84
1,381.56
1,160.00
2,084.00
150.00
2,084.00
810.00
1,177.40
1,3*1.56
2,000.00
2,000.00
2,000.00

401.94
401.94
1,177.40
1,177.40
1,019.64
1,019.64
1,136.80
1,718.00
644.00
2,042.00

1966
Bevan"
Nov.
Morris, Irvin, Hartley « . . . Nov.
Bevan
Dec.
Do
— .do
Bevan, Hodge.
Dec.
Bevan
Dec.
Do
—
Dec.
Do
Dec.
Bevan + Hodge
Dec.
Do
do
Bevan"
Nov.
Messrs Morris, Irvin,
Hartley.

20 Boca Raton
8 Pittsburgh5 Philadelphia..
Boston
6 Newark
7 Fort Worth
8 Philadelphia
14
do
29 Newark
Philadelphia
20 Boca Raton

Nov. 8

Pittsburgh

See footnotes at end of table, p. 47.




11-0166
do
11-0166 San Francisco
Boston
Newark
Dallas
Philadelphia
Newark
do
Philadelphia
Boca Raton
11-0166 Philadelphia

do....
Falcon..
Lear
do....
.do...
do—
do...
do...
...do—
do...
Lear...

11-0166 San Francisco

Falcon.

1,160.00
4,550.00
354.96
263.32
805.62
$805.62
1,542.80....
125.28
125.28
62.64
62.64
580.00
580.00...
1,160.00
4,550.00

TABLE III.—SCHEDULE OF FLIGHTS PAID BY MANOR REAL ESTATE CO.-Continued

Passengers

Date

From-

Invoice
No. T o -

Aircraft

Statute
miles

Invoice addressee

Rate

Amount
charged
for flight
as per Bevan (and
parties)
invoice

Hodge

Gerstnecker

Others

1966
Bevan
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do...
Do..
Do.
Do.
Do
Passengers not listed
Do
Bevan
Do
Hodge
Bevan
Do
Do
Do
Do
Do
Do.
Do
Do
Do
Mr. Large
Bevan, Hodge, Wynn
Bevan...
Do.
Do
Do
Do




Oct. 15
Oct. 16
Oct. 17
do
Oct. 27
do
Sept. 9
_,do
Sept. 10
...do
Sept. 16
do
Sept. 23
Sept. 24
Sept. 29
do
Aug. 22
do
Aug. 2
do
..do
Aug. 18
Aug. 22
...do
Aug. 25
do
July 15
do
do
..do
do
July 19
July 29
June 24
June 25
June 9
do
June 10

Philadelphia
Bridgeport
Philadelphia
Pittsburgh
Newark...
Philadelphia
White Plains
Philadelphia
Latrobe..
Philadelphia
do.
Chicago. _
Philadelphia,.
.
do
.
do....
Willoughby, Ohio
Boca Raton
Jacksonville, Fla
Santa Monica
Houston...
Philadelphia...
... .do..
Boca Raton
Jacksonville
Philadelphia
Newark
Philadelphia.
Chicago...
Philadelphia
Washington
Philadelphia
Orlando...
Newark
Philadelphia
Latrobe.. _
Philadelphia
AHentown
Boston

.do
do
do
do
do
do
do
do
do
do
do
do
do
do
do
...do
__do
July
do
do
...do
do

Bridgeport
Philadelphia
Pittsburgh
Philadelphia
do..
Boca Raton
Philadelphia
Latrobe
Philadelphia
White Plains
Chicago..
Philadelphia
Latrobe
New York
Cleveland
Philadelphia
Jacksonville
Philadelphia
Houston...
Philadelphia
Newark
Boca Raton
Jacksonville
Philadelphia
Newark
Philadelphia
Chicago..
Philadelphia
Washington
Philadelphia
Boca Raton
Philadelphia
Burbank..
7 Latrobe
Philadelphia
AHentown
Boston
AHentown

Lear
do
do
do
do
do
do
do
do
do
do
...do
do
...do
do
do
Falcon...
do
Lear
do
do
do
...do
...do
do
do
do
do
do
do
do
..do
Falcon...

169
169
276
276
108
1,000
142
247
247
142
693
693
247
121
388
883
321
773
1,412
1,361
108
1,000
321
773
108
108
693
693
146
146
1,000
882
2,475
247
247
— Falcon...
86
do
285
do
285

Manor Real Estate Co.. $116
....do
116
....do
116
....do
116
....do..
116
....do
116
....do
116
....do..
116
....do
116
....do
116
....do
116
....do..
116
....do
116
....do..
116
....do...
116
....do
116
....do
200
....do..
200
....do....
116
....do...
116
....do..
116
....do
116
....do
116
....do
116
....do
116
....do
116
....do
116
....do
116
....do
116
....do
116
....do116
....do
116
....do
i2135
....do
116
....do
116
....do
200
....do—
200
....do
200

$196.04
196.04
320.16
320.16
125.28
1,160.00
164.72
286.52
286.52
164.72
803.88
803.88
286.52
140.36
450.
450.
642. 00
1,546. 00
1,637. 92
1,578. 76
125. 28
1,160. 00
372.36
896.68
125.28
125.28
803.88
803.88
169.36
169.36
1,160.00
1,023.12.
3,341.25
286.52
286.52
172.00
570.00
570.00

$196.04 .
196.04 .
320.16 .
320.16 .
125.28 .
1,160.00 .
164.72 .
286. 52 .
286. 52 .
164.72
803.88 .
803. 88 .
286.52 .
140.36 .
450.08 .
450.08 .

fc
$642.00
1,546.00

1,637.92
1,578.76
$125.28
1,160.00
372.36 .
896.68 .
125.28 .
125.28 .
803.88 .
803.88 .
169.36 .
169.36 .
1,160. 00 .
1,113.75
1,113.75
286. 52
286. 52
172. 00 .
570. 00 .
570. 00 .

1, 023.12
1,113.75

Do.
Do.
Do.
Do.

....do.... Allentown.
. June 3 Philadelphia
-_.do-_- Johnstown
June 6 Philadelphia

Do.

....do.— Naval War

Philadelphia
.—do
. June 28 Latrobe
Philadelphia
—do
—do
Naval War
College, Prov.
...do
Philadelphia

May 5... Philadelphia
do
May 6 —
Lebanon
do
May 12.. Newark
Philadelphia
do
Atlanta
do
May 15.. Boca Raton
May 16.. Dallas
Philadelphia
do
do
May 19..
--.do Cincinnati
May 23 Newark
Philadelphia
do
Dallas
do
May 25 Santa Monica
..do.... St. Louis
Apr. 7Philadelphia
Apr. 10 Palm Springs
Mar. 1Philadelphia
Mar. 2
do
do.... Boston
Mar. 6 Boca Raton
Philadelphia
do
Mar. 11 Boca Raton
d o — Philadelphia
do
do
Atlanta...
do
Mar. 15 Washington
Mar. 17 Philadelphia
Mar. 18 Chicago
Mar. 22 Philadelphia
Feb. 14 Newark
Philadelphia
do
Feb. 15 Dallas
do
Philadelphia
Feb. 17 Newark
do
Philadelphia
Feb. 22 West Palm Beach.
—_do
Philadelphia
Jan. 27
do
-.do.... Washington
Jan. 29 Philadelphia
Newark
-do

May 1966. Pittsburgh
Lebanon, N.H
.do.
Philadelphia
—do
do
—do
Atlanta
-.do
Boca Raton
...do
Dallas
-.do
Philadelphia
—do
Newark
...do
Cincinnati
-.do
Philadelphia
....do
do
Dallas (G.SW.)....
—do
Burbank
...do
St. Louis
...do
...do
Philadelphia
May
5 Palm Springs
Philadelphia
Mar. 1966" Newark...
Boston
...do
...do
Newark
...do
Philadelphia
Bridgeport
...do
Philadelphia
...do
...do
Boca Raton
—do
Atlanta
—do
Philadelphia
—do
Newark
—do
Chicago
Philadelphia
—do
Newark
—do
Mar. 2 Philadelphia
Dallas
—do
Philadelphia
—do
Newark
—do
Philadelphia
—do
Boca Raton
—do
Philadelphia
—do
Newark
— do
. Feb. 18 Washington
Philadelphia
—do
Newark.
...do
Philadelphia
...do

200

.do.
247
220
254

?o
n
116
llfi

172. 00
286. 52
255.20
294.64

254

116

294.64

294.64

276
326
326
108
692
591
1,136
1,330
108
518
518
108
1,346
1,254
1,616
838
2,379
2,379
85
241
212
1,085
145
1,085
1,085
684
684
238
693
693
85
85
1,299
1,299
85
85
1,085
1,067
85
134
134
85
85

116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116

320.16
378.16
378.16
125.28
802.72
685. 56
1,317.76
1,542.80
125. 28
600. 88
600.88
125.28
1,561.36
1,454.64
1,874.56
972.08
4, 758.00
4, 758.00
98.60
279.56
245.92
1,258.60
168.20
1,258.60
1,258.60
793.44
793.44
276. 08
803.88
803.88
98.60
98.60
1,506.84
1,506.84
98.60
98.60
1,258.60
1,237.72
98.60
155.44
155.44
98.60
98.60

320.16
378.16
378.16
125.28
802.72
685.56
1,317. 76
1,542.80
125. 28
600.88
600.88
125.28
1,561.36
1,454.64
1,874.56
972.08

172.00
286. 52
255. 20
294.64

College.

Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Do
Saunders
Do.
Bevan
Do
Do
Do
Do
Mr. Carpi
Do
Bevan
Do
Gerstnecker
Bevan
Do
__
.
Do
Hodge. Bevan
Do
Do
Do
Do
Do
Do
Do
Bevan
Do
Do
Do.

See footnotes at end of table, p. 47.




Falcon. _
Jet Star.

?n
o
200
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116

....

4,758.00
4,758.00

98.60
279.56
245.92
1, 258.60
168.20

Jf^

m
1,258.60
1,258.60

793.44
793.44
$276.08
803.88
803.88
98.60
49.30
49.30
753.42
753.42
753.42
753.42
49.30
49.30
49.30
49.30
629.30
629.30
618.86
618.86
49.30
49.30
155.44
155.44
98.60
98.60 ..

TABLE III.—SCHEDULE OF FLIGHTS PAID BY MANOR REAL ESTATE CO.-Continued

Passengers

Date

From-

Invoice
No.

To-

Aircraft

Rate

Amount
charged
for flight
as per
invoice

Bevan (and
parties)

Hodge

478 Manor Real Estate C o . - . $116
1,126
do_.
116
1,093
do
116
267
do
116
116
97
do.
116
1,272
do
116
1,287
do

$554.48
1, 306.16
1,267.88
309.72
112.52
1475.52
1,492.92

$184.83
435.39
422.63
103.24
37.51
491.84
497.64

$184.83
435.39
422.63
103.24
37.51
491.84
497.64

Statute
mites

Invoice addressee

Gerstnecker

Others

1966
Bevan, Hodge, Wynn
Do.
Do
Do
Do
Do
Do.

Jan. 21
do
..do
Jan. 23
--.do—
Jan. 26
do....

Newark
Columbus
FortWorth.
LasVegas.
Burbank
Santa Monica
Dallas

Feb. 1 8 . - .
do
.do
do
do
...do
do

Columbus.
FortWorth.
Las Vegas
Burbank
Santa Ana
Dallas.
Philadelphia

Philadelphia
Washington
Philadelphia
Chicago
Allentown
Zurich

Jan.
17
do
do
do
do
Dec. 22

Washington..
Philadelphia.
Chicago
Allentown...
Philadelphia.
Basel

134
134
724
652
55
55

do..
...do..
..do..
do..
do..
Sept. 28
do
Sept. 29
do
do
Oct.
2
Oct.
5
Oct.
9
do
Oct. 10
do.___
Sept. 9

Basel
Zurich..
Pisa
Hamburg
Rotterdam
Philadelphia
Cleveland
Cincinnati
Cleveland
Newark
Philadelphia
Chicago ( M i d w a y )
Morristown, N.J
Philadelphia
Craig Field
Philadelphia
Newark

do
do
do
do
do
Nov. 19
do
do
do
do
do
do
do
do
do
do
Oct. 22

Zurich

55
237
722
274
273
420
235
235
416
85
704
724
75
776
776
75

do
Sept. 13
do

Philadelphia
Boca Raton
Philadelphia

.
.
.
.
.
.

$184.82
435.38
422.62
103.24
37.50
491.84
497.46

1965
Bevan
Do
Do..
Do
Do
Passengers not listed

Dec.

1
do..
Dec. 15
.do..
do..
Nov.

11-16
Do.
Do
Do
Do
Do....
Bevan
Do
Do
Do
Do
Bevan + 1
Do
Hodge
.
Bevan
Do
C. J. Hodge
Mr. and Mrs. Hodge, Mr.
Bevan.
Do
Do
Do




do
do
do

Venice
Hamburg
Rotterdam
Brussels
Cleveland
Cincinnati
Cleveland
Newark
Philadelphia
Chicago ( O ' H a r a ) . .
Philadelphia
do
Craig Field, Fla
Philadelphia
Morristown
Philadelphia
Boca Raton
Philadelphia
Newark

85
1,095
1,095
85

Manor Real Estate C o .
....do
....do
....do....
....do
do....

do..
do
do
do
do
do
do
do
do
do
do
do
do
do
do
do..
Pennsylvania RR
do
do
do

116
116
116
116
116
116

155.44
155.44
839.84
756.32
63.80
63.80 .

116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116

63.
274.
837.
317.
316.
487.
272.
272.
482.
98.
816.
839.
87.
900.
900.
87.

.
.
.
.
.
63.80
63.80
274.92
837.52
317.84
316.68

487.20 .
272.60 .
272.60 .
482. 56 .
98.60 .
816.64 .
839.84 .
87.00 .
900.16 .
900.16 .
49.30

116
116
116
116

155.44
155.44
839.84
756.32
63.80

1,270.20
1,270.20
98.60

87.00 .
49.30 .

635.10
635.10
49.30

635.10 .
635.10 .
49.30 .

Mr. Bevan+party
Do
Do.
Saunders, Funkhouser___
Bevan+Gerstnecker
Do
Bevan+party
Do
Do
Hodge
Do
Passengers not listed
Do
Bevan
C.J.Hodge
Hodge + Gerstnecker
Bevan
Gerstnecker..
Bevan + Hodge
Bevan
_„
Do
Do

Sept. 14
do
do
Sept. 2 1 .
do
do
Sept. 2 4 .
Sept. 2 5 .
do
Aug. 5__
Aug. 6__
July 27
July 28
June 16
May 19
do
May 20
do
do.
May 22
May 23
-do

do.
Chicago
Newark...
Gary
Philadelphia
Boston
Philadelphia
Latrobe
Philadelphia
Cody, Wyo
Philadelphia..
Portland, Oreg
Santa Ana, Calif
Philadelphia..
Newark
Philadelphia..
do
Houston
do
Boca Raton, F l a . . .
Washington, D.C
Philadelphia, Pa

Grand t o t a l .
1

Half-hour waiting time, $125 plus.
2Total for Penn Central (payee) $884.10.
3 1 hour waiting time, $250 plus.
* $125 waiting charge.
5 Volume rate reduction through June only.
• Falcon at Lear rates.
7 Jet Star at Lear rates.
s Waiting charge of $250 per hour for \% hours, $375.




do
__do
do
...do
...do
do
do
do
do
Oct. 5
do
Aug.
do
July
July
do
do
do
do
June
do
do

27
20
13

11

Chicago
_.
Newark
Philadelphia
..do
Boston
Philadelphia.
Latrobe
Philadelphia
Newark
_.
Philadelphia.
Cody, Wyo
_.
Burbank, Calif
Greensboro, S.C
Chicago ( M i d w a y ) . .
Philadelphia
Houston..
Houston (2 flights)..
Fort Worth
Boca Raton
Washington, D . C — .
Philadelphia
_.
Bridgeport

724
745
85
672
241

do
do
do
do
do
241 .
do
do
253
253 .
do
85 .
do
2,019 The Pennsylvania RR._
2,019 .
do
862 Pennsylvania RR
2,228 .. . — d o
do
724
84 .
do
1,390 .. . — d o
1,390 .
do
do
273 .
1,125 .
do..
955 .
do
140 .
do
do
146 .

116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116
116

839.84
839.84
864.20
864.20
98.60
98.60
779.52
279.56
139.78
279.56
139.78
293.48
293.48
293.48
293.48
98.60
98.60
2,342.04
2,342.04 —
999.92
2,584.48
839.84
839.84
97.44
1,612.40
1,612.40
1,612.40
316.68
1,305.00
652.50
1,107.80
1,107.80
162.40
162.40
169.36
169.36

779.52
$139.78139.78

2,342.04
2,342.04
999.92
2,584.48
97.44
806.20

806.20
316.68

652.50

395,330.85 200,033.19 20,835.94 13,279.85 161,181.87
«Jet Star at Falcon rates, $245 per hour.
io Minimum charge of $300.
u These flights were taken from EJA duplicate invoices. Because they are duplicate invoices the
words "Duplicate do not pay" appear on the bottom. It is assumed that the original invoices were
paid by the invoice addressee.
12 Special rate.
13 " W . R . G . " was in parentheses beside " + 2 " ; assumed to be W. R. Gerstnecker.

^

*a
*"

48
A month later a third recommendation for Lassiter's dismissal from
EJA's top administrative position was made to Charles Hodge.
Hodge was endeavoring to make arrangements for the sale of $22
million in EJA common stock and debentures. In this connection he
had approached James H. Orr, president of Colonial Management
Associates of Boston, an investment advisory corporation.
In a letter dated December 19, 1967, Orr wrote Hodge:
Following our visit with you on December 11 in New York I have had Glenn
Strehle and Jerry Hunsaker restudy the financing of Executive Jet Aviation.
You have been aware of our concern over the substantial increase in losses in
the business aircraft operation above those expected last summer. As a result,
it is impossible for us to continue to recommend the purchase of the 7}i percent
senior subordinated debentures of EJA to our clients without a change in the
financing plans and management of the company.
We feel the following changes must be accomplished if our purchase recommendation to our clients is to be maintained:
(1) The company must obtain a new chief executive officer and president
with business experience who is satisfactory to us. The role of the present
senior management should be determined by the new chief executive in
coordination with the board of directors.

Orr also said that:
The European based operations and proposed operations of EJA must be
terminated immediately.
The 20-percent minority interest in Johnson Flying Service must be acquired
by EJA for a reasonable cash price or exchange of common stock as a condition
of financing.

Orr later was asked to present the recommendations together with
supporting material at an E J A board meeting early in 1968. He
described the meeting as being "pretty uncomfortable" because
Lassiter, as expected, challenged the recommendations and argued
against them.
Summary
In summary, three separate sets of recommendations, all calling
for removal of Lassiter as president of EJA were made to Lassiter,
to Hodge, and to the E J A board within an 8-month period ending
early in 1968. I t is inconceivable that David Bevan could remain
completely unaware of what had taken place especially since he and
Hodge provided the leadership for the Penn Central diversification
program and since most of the members if not the entire E J A board,
of which Hodge was a member, were aware of the Orr proposals.
Despite these incidents, no discernible change occurred in the flow of
PRE, financial resources to EJA.
Hodge himself told staff investigators that he had recognized what
he said was Lassiter's lack of administrative ability and that in
1968 he recommended to Bevan that Hodge be removed as EJA's
top administrator. Hodge said that, "Bevan didn't like the recommendation." When asked why, Hodge replied he did not know.
THE PALACE REVOLT

As evidenced by the November 1967 memorandum from Kunkel,
Estes, and Conace to Lassiter, a fullfledged palace revolt on the part of
these EJA executives had been underway for some time. Lassiter
came to dub them the "Three Musketeers." What follows is the




49
narration of some of the events that fostered that revolt and led to a
dramatic but unsuccessful attempt to persuade the E J A board to
remove Lassiter about one year later.
I t is also the chronicle of the loss of millions of dollars provided E J A
by the Pennsylvania Railroad and the banks which made loans to
E J A on P R E credit.
Memorandum from Lassiter to EJA executives, dated July 30, 1965:
I viewed the bills by company personnel with great alarm. I wish to make it
clear that this company is not providing entertainment for its employees. * * *
As I have mentioned many times, we are a new company and we have many
knowledgeable and qualified advisers on the board—Glore Forgan, Pennsylvania
Railroad. Therefore it is imperative that our expenses can be viewed as absolutely
essential and not one of living it up.
I have notified the treasurer to return each expense account to any person who
is not within the reasonable grounds. I do not want group expense reports as it is
necessary to break up the responsibility of each charge to specific persons.

Memorandum from Estes to Lassiter, dated November 23, 1965:
As you know I have sent quite a number of hotel bills, restaurant bills, and certain credit card charges back to you from time to time requesting that you indicate
the business purpose on each of the charge tickets.
To take a case in point, I recently returned a Carte Blanche statement with
attached tickets to you involving charges totaling $268.71. One of the tickets
involved in that charge was for $262.52 and was incurred at the Beverly Hilton.
The notation written on the ticket was "trip to west coast to review sales." I think
that type of information is useful but I don't think it is going to enable you to
avoid personal tax problems in the future if such items are challenged by the
Internal Revenue Service.

Memorandum from Kunkel to E J A staff members dated September 21, 1966:
All purchase requisitions will be accompanied with a transmittal slip indicating:
Office for which purchased.
Who requested.
Reason and necessity for purchase.
Are items in budget?
As final approval on purchase requisitions are made by General Lassiter, he has
indicated you had better be '.1**$/./. sure it can be justified if the originator is
called into his office to stand up and say you can't do without it.

Memorandum from Estes to Lassiter, dated February 8, 1967:
In the interest of protecting your tax posture as well as EJA's position with the
Internal Revenue Service, I have written to you in the past on the subject of
substantiation of expense charges, and the inclusion of sufficient information to
establish the business purpose of various expenditures . . . The only purpose of
this memo is to keep you aware of my concern for substantiation of these items
for your own protection.

Memorandum from Estes to Lassiter dated November 18, 1967:
This is my periodic memo to you lamenting your personal exposure to the
Internal Revenue Service in connection with your travel expenses.
The lack of adequate substantiation of your travel expenses continues to be a
source of concern for me, for EJA as a company and for you personally.
In 1967, your travel expenses have averaged between $3,000 and $4,000 a
month. For the year, the total will likely come to roughly $40,000. If even half of
that $40,000 were declared to be personal income to you the additional Federal
income tax which you would be called upon to pay could easily be as much as
$10,000 in a 50 percent tax bracket.
A recent case in point is an American Express bill for $1,827, nearly all of
which was for hotel charges at the Century Plaza in Los Angeles. You indicated
that $83.75 of those charges were personal and you paid for them with a personal
check. The balance, however, was charged to EJA with no business purpose or
other justification for the expense being established, at least in EJA's records.




50
Memorandum from Lassiter to all E J A personnel, dated M a y 29,
1968:
In order to conserve our cash from now until we acquire Johnson Flying Service,
I want everyone to limit their requirements to the minimum essential to do their
job. Additionally, I want to procure only those items necessary to prevent a work
stoppage. Your cooperation in this area will help greatly in strengthening the
company's financial position during this important period.
Memorandum from Estes to Lassiter, dated September 12, 1968:
I would like to request that the attached purchase requisition, No. 7759, which
you approved on approximately September 5, 1968, be withdrawn at this time.
The requisition as you can see is for 1,200 EJA tie tacks and lapel pins for a total
cash commitment of $2,421. I see no way to stretch our imagination to justify
spending critically needed funds for this type of thing. As you know, our cash
balance is always at a critical level in relation to our obligations. At the present
time we have $44,000 in cash available, compared with $3,600,000 in current
liabilities, of which nearly $1 million is in the overdue category.
In the face of the above facts, our day to day struggle for survival and a deteriorating morale in EJA caused by unbridled spending habits, I strongly urge
that this requisition be withdrawn and all others that are not necessary to keep
operating be withheld at least until after the memo of understanding is implemented.
Memorandum from Estes to Lassiter, dated September 24, 1968:
Since I have written to you on this matter a number of times in the past, I
realize you are pretty much aware of the requirements of the Internal Revenue
Service for substantiation of travel and entertainment expenses, and the requirements on the part of EJA that such expenses must be documented.
As you know, you are traveling away from* Columbus nearly all the time now,
and therefore you are incurring substantial charges to EJA as a result.
Attached is a sample of what I am referring to; namely, a bill from Carte
Blanche for a total of $1,085.87, which includes three tickets * * * One of the
tickets is for $830.77 from the Eden Roc Hotel in Miami Beach, with no information other than the notation, "IAB Wet Lease." The other two tickets from the
Atlanta Hilton for $204.83 and $64.77 respectively each have the notation on
them "Lockheed-Georgia." There is no way to * * * establish from the information
shown what was actually being done for whatever period of time was involved
with either IAB or Lockheed.
LASSITER'S

EXPENSES

Although Estes, throughout his memorandums to Lassiter, expressed
concern about the possibility of needless trouble with the Internal
Revenue Service, he was also saying in effect that the E J A treasurer's
office was not sure that these and similar charges to the company were
legitimate business expenses.
An analysis performed by the E J A treasurer's office of Lassiter's
expenses for calendar year 1968 shows the following:
Expense reports
$11, 662
Air travel
8,929
Car rentals
1, 035
Aircraft rentals
728
Credit card payments
8, 764
Limousine service
2, 221
Hotels
7,044
Restaurants
3, 456
Clubs
1,463
Other
12,525
Total




57, 827

51
When these expenses are coupled with his salary of $58,000, Lassiter's cost of E J A for calendar year 1968 comes to $115,827. The
EJA treasurer's office compared that total with reports on compensation and expenses of airline presidents filed for the year 1967 with
the CAB on form G-42 reports. The comparison shows that Lassiter
received $74,380 more than the average paid the chief of eight supplemental air carriers. The average salary paid to these men was
$36,409 and their average expenses came to $5,038.
The total of Lassiter's salary and expenses even exceeded by several
thousand dollars the combined salaries and expenses for the presidents
of Pan American, United Air Lines, and World Airways in 1967. I t is
interesting to note that the expenses reported for these men did not
exceed $7,000 in any one case.
Another part of the Lassiter expense file involved what can only be
labeled as a unique arrangement involving a New York City apartment
leased by Lassiter personally with what he stated was the approval of
Bevan and Hodge, and used intermittently for EJA business purposes.
The rationale for the apartment was based on the idea that E J A
conducted much of its business in New York, and although the firm
had an office there, it also needed to have an apartment available for
business meetings and to accommodate EJA officials when they visited
the city for business purposes. The use of a hotel was rejected because
it was said that good hotel accommodations were frequently difficult if
not impossible to obtain on short notice.
Located at 400 East 56th Street, Lassiter rented the apartment for
$635 a month. The rent was billed to EJA, which in turn charged it as a
personal expense to Lassiter. He negotiated the purchase of $2,850
worth of used furniture which was paid for and owned by EJA. The
furniture was seized by the landlord of its previous owner for nonpayment of rent and in order to free the furniture for use, E J A paid $815
in legal fees and expenses.
Under the terms of an arrangement between Lassiter and EJA,
Lassiter was to be paid $50 a day for each day the apartment was used
for business purposes.
Construction work was being performed on the building after
Lassiter leased the New York apartment. In order to hasten completion of the apartment, he authorized work to be done by EJA
personnel and intended E J A to pay the attendant costs. Two EJA
employees were flown to New York at various times and before they
were through the cost of their labor and other expenses totaled
$1,200.40.
Expense reports stating the purpose of the work was to "coordinate
EJA facilities," and with Lassiter's signature of approval came to
Estes attention. In a memorandum, dated October 23, 1968, to a
subordinate, a copy of which went to Lassiter, Estes said:
* * * the work * * * from everything I can determine had nothing to do
with EJA business or property, and since I understand that the work was performed at General Lassiter's personal apartment, the charges should be charged
to General Lassiter.
In the future, on items which are not EJA business, will Mr. Jenson [Cal Jensen,
director of EJA's Facilities Department] please handle them directly with General
Lassiter or whomever the work is being performed for, so that cash requirements




52
on t h e p a r t of E J A are
to live u p to involving
t h e P e n n Central Co.
required to be spent in

n o t generated in this fashion. We h a v e a t r u s t a g r e e m e n t
E J A , t h e Civil Aeronautics Board, a Detroit bank, a n d
which requires E J A to spend no funds unless t h e y a r e
order to " m a i n t a i n t h e s t a t u s q u o . "

To say the least, the arrangement under which Lassiter was
renting the apartment and in turn rerenting it to EJA, was a good
deal for him. As an example, Lassiter's secretary issued a transmittal
slip to the EJA treasurer's department on November 10, 1969, stating:
A t t a c h e d is a request for a check for $1,400 to cover the stays of those m e n tioned in the New Y o r k a p a r t m e n t since the first of the year.

The bill reflected the use of the apartment by six persons who were
either EJA employees or had business connections with the company
for 28 days during the first 4 months of 1969. Apparently Lassiter
thought that the apartment service to EJA had even greater value to
the firm because his secretary wrote in the transmittal slip:
General has decided t h a t p a y m e n t in the future will be made on the basis of
m a n - d a y s r a t h e r t h a n t h e procedure we have been using.

I n effect, Lassiter intended to raise the rent to an astronomical
level. Under his proposal it would have cost EJA $50 per day per
man for use of the apartment. Two men occupying the apartment
for 5 days would have cost EJA the sum of $500.
The game plan on the apartment also included another stage,
indicated in Lassiter's testimony when a deposition was taken from
him in the fall of 1970 in connection with litigation following the
Sundlun takeover of EJA. The pertinent material in that document
reads as follows:
Question. I am going to show you a document entitled uRequest for a check" dated
September 24, 1969, and ask you if you can identify that and the signature on it.
Is the signature your signature?
Answer. Yes, it is.
Question. Plaintiff's exhibit 26 for identification is a request for a check apparently in the amount of $2,000 as follows: General Lassiter is to receive $1,000 when
the New York apartment is utilized for 1 or more days during the course of any given
month. Attached is a complete breakdown for the month of August and September
through the ninth of the month. We are, therefore, requesting payment for the month of
August and September, $2,000.
Can you explain this language in this request for a check signed by you in the light
of your testimony that you only should receive $50 a night?
Answer. Well, it's simple * * * $50 a night per person [using] t h e a p a r t m e n t is
reasonable * * * b u t a m i n i m u m of a t h o u s a n d dollars a m o n t h which was m y
expense. T h a t was a m i n i m u m expense no m a t t e r if no one stayed there a t all.
T h e r e was furniture purchased, et cetera. * * *
Question. Who paid for the furniture in the apartment?
Answer. $2,800 of it was paid b y t h e c o m p a n y . $18,000 to do t h e rest was done
by me.

No explanation of the $18,000 investment is given.
The following is a summary of authorized and unauthorized E J A
expenditures connected with Lassiter's New York apartment for the
30-month period ending June 30, 1970. The data was compiled for
E J A by Lybrand, Ross Brothers, and Montgomery, certified public
accountants.




53
SCHEDULE II—NEW YORK CITY APARTMENT—0. F. LASSITER
Year ended Dec. 31—
1968
Amount
paid i

October-December 1968:19
days occupancy at $50 per
day
January-June 1969:
103 man-days based on
$50 per day per person
occupancy
72 days occupancy at $50
per day
July-December 1969:
$1,000 per month each
month utilized for 1 day
ormore
57 days occupancy at $50
per day
January-March 1970:
$1,000 per month each
month utilized for 1 day
ormore
24 days occupancy at $50
per day
April and May 1970:
84 man-days based on $50
per day per person
occupancy—
44 days occupancy at $50
per day
Total

Amount
Authorized 2

$950

Description

6 months ended
June 30,1970

1969

Total

Amount
paid 1

Amount
authorized 2

$5,150

Amount
paid i

Amount
authorized 2

$950

$950

Amount
paid i

Amount
authorized 2

$950

5,150
$3,600

3,600

6,000

6,000
2,850

2,850

$3,000

3,000
$1,200

4,200

1,200

4,200
2,200

.

950

950

11,150

6,450

7J>00

3^400

2,200
19,300

10,800

i Payments made directly to 0. F. Lassiter, at his request, for use of New York apartment.
2 On Jan. 31,1969, the board of directors approved expenses attendant to the New York apartment at the rate of $50
per day.

Estes wrote a second memorandum to his subordinate on October 23,
1968, to block the possibility of E J A payment for work done on a
home which Lassiter had recently purchased in Miami. Performed by
E J A employees who were flown to Miami, the work cost totaled
$1,241.24. Again the expense reports came through with the stated
purpose of "coordinating E J A facilities," and again they carried
Lassiter's signature of approval.
Not only did Lassiter want E J A to pay for work done on the house,
he wanted the company to pay the expense of moving his wife to
Miami as well. On October 31, 1968, Estes wrote a memorandum to
Lassiter, saying:
Dick, the attached invoice for $3,077.05 from Allied Van Lines for moving your
household effects from Columbus to Miami recently in no way can be construed as
and EJA expense. The only justifiable means of processing this invoice through
EJA is to book it as additional income to you and report it in that fashion in
the proper manner to Internal Revenue Service.

Another highwater mark was reached the following month in the
Lassiter-EJA expense account battle. John H. Perdue, an E J A treasurer's department employee who felt he had been thrust into the
middle of the fight was trying to defend himself, when he wrote to
Estes:
This will confirm various conversations relative to deductions from General
Lassiter's checks for items billed to him on his personal account and such items
as outlined in your letters of October 23, 1968. [The memorandum dealing with
the New York apartment and Miami moving expenses.] We have been deducting




54
invoices billed to General Lassiter from the $1,500 expense allowance given to
him each month.
I have been told by General Lassiter that no deductions are to be made from
the $1,500 expense allowance check. In no uncertain terms, I have been told
that this check is to be given to him intact.
I am passing this information on to you so you will be fully aware of the position
I am in.
Nine days later, on November 22, 1968, Estes shot off the following
memorandum to Lassiter:
Approximately 8 months ago you indicated to me that you would prefer to have
personal charges which have been paid by EJA invoiced to you, rather than
deducted from your $1,500 per month expense allowance. We began doing that
but we never received payments from you for items charged to you on an EJA
invoice. Therefore, several months ago, I instructed John Perdue to resume the
practice of deducting such items from your monthly expense allowance. Without
such a procedure the accounts receivable from you would continue to build up
into many thousands of dollars.
As a result of your instructions to John, items chargeable to you personally
have accumulated to nearly $5,000 while at the same time you have recently
approved and sent through for payment an additional $337 worth of charges
which are personal. These include a doctor's bill of yours for $20, two doctor's
bills for Helene Falk [an EJA employee and friend of Lassiter's] for $32, over $250
in items for your New York apartment such as carpet installation, coffeemaker,
iron, toaster, waffle baker, towels, and so on. The payment requests mentioned
above were sent to us in the normal "EJA expense" manner, whereas they are
clearly personal charges and should be paid directly by you without involving
EJA funds, the Detroit Bank Trusteeship, and so on.
In the light of everything mentioned in this memo as well as all of EJA's other
problems, I refer your attention to purchase requisition No. 8945, approved by
you, attached. It requests the purchase of one Model No. 1GP3200W 32, "The
Diplomat Classic Globe" (same as the one in your office) at a cost of $800, to be
shipped to General Hodge in New Jersey. Will you please advise whether it is
your intention for this globe to be billed to General Hodge, paid for by you, or
charged to EJA expense? If the latter, how do we justify it to the trustee of the
voting and liquidating trust as necessary to maintain the status quo?
CORPORATE WASTE

The case OJN366EJ
Other interoffice battles were also taking place at Columbus,
among them ones centering on Lassiter's decisions to develop a highly
sophisticated electronics system for Lear jets and to purchase a fourengine, 10-passenger Lockheed Jets tar.
Designated N 366 E J , the Lear in question had "Gen. O. F . Lassi ter" painted on its side and was heavily used by Lassiter for administrative flights around the country. In January of 1968, N 366 E J
was rolled into the E J A hangar at Columbus and work was planned to
make it one of the most, if not the most, electronically complete
aircraft of its kind in the world.
The concept, with Lassiter as its chief originator, involved the
installation of a vast array of electronic gear provided by the Collins
Radio Co. E J A was to use N 366 E J as a prototype and tentatively
planned to modify additional fleet units in the future as well as install
the package for other privately owned Lear jets.
On April 5, 1968, Conace surveyed a number of E J A executives
about the N 366 E J program. Estes sent back the following comment:
I question the economic feasibility of this whole project, without challenging
whether it is required from an, operational or maintenance standpoint. I don't
see how we can recover our investment unless we fly 21,000 statute miles per year
additional (over everything already projected) for each aircraft of EJA we modify,




55
or it would take an increase of 10 cents per revenue mile for the life of the aircraft
to recoup the cost of this installation. Therefore, the decision to go ahead with the
project depends primarily on,
(1) Whether other Lear jet owners would pay 20 percent or so of the original
cost of the aircraft for this modification (seems doubtful).
(2) Whether it is required for operation or maintenance purposes.
An E J A document states t h a t :
As of the 28th day of January 1969 the man-hours utilized in aircraft N 366
EJ to convert the aircraft to category II configuration, and to have this Lear Jet
the most modern and up-to-date business jet in being has cost Executive Jet
Aviation, Inc., a total of 8,394.3 man-hours, of which 5,189.5 were from other
modifications being accomplished on the aircraft.
The value of the equipment being installed is approximately $166,000.
The document showed that the labor cost E J A $35,674.50 and that
30 hours of flying time at $200 an hour cost an additional $6,000 for
a total of $41,000 directly financed by EJA.
Sources at E J A told staff investigators that the FAA never approved
of the modification "because the work was not done in the right way."
The agency did, however, say that N 366 E J could be returned to
normal service if it was restored to its original condition—something
that would have cost $100,000. Rather than incur these additional
costs, E J A returned the electronic equipment used for the modification to Collins Radio and sold the plane for $275,000, slightly less
than half of what it cost new.
All in all EJA's losses on the plane totaled more than $300,000.
The Jetstar case
The Lockheed Jetstar was delivered in October of 1967, despite well
established and solid E J A staff opposition to Lassiter regarding the
need for such a plane.
More than a year earlier, on September 2, 1966, W. C. Lewis, then
director of marketing for EJA, circulated a memorandum to Lassiter
and. other E J A staff members, laying out the following case against
taking the Jetstar:
Early in 1964, you [Lassiter] asked me to prepare and submit a cost study of
various business aircraft particularly in the turbine field. When the study was
completed I had operating figures from Hercules Powder, Celanese Corp., Corning
Glass, and Texaco in the Jetstar category. * * * The lowest, and I repeat, the
lowest cost per operating mile was approximately $2.90, with the highest running
$3.50, and the average of all of them about $3.20. This is for even^ single mile
flown regardless of the nature or character of the trip. It costs $45 to make a
15-mile circle of an airport or $45 to fly from Newark to JFK with 10 passengers.
On today's flight schedule, we are making a trip for Norfolk & Western from
Billings, Mont., to St. Louis. The aircraft we are using is positioned in Chicago.
Let us assume that we will charge $3 per mile for positioning and deadhead and
$3.50 per mile live. It would be necessary to charge $3,255 for positioning, $3,752
for the live mileage, and $1,305 to return the airplane to Columbus (certainly you
will agree that we must charge for all miles in this airplane). The trip, therefore,
costs Norfolk & Western $8,312. Dick, I just don't believe that we can keep a
Jetstar that busy. A couple of months ago I sent a memo to each sales office
asking them to sample their markets as to who might be possible Jetstar users.
[Five regional sales office representatives replied in the negative, one did not reply
at all.] In a meeting earlier this year, you agreed to my suggestion that we not
purchase a Lockheed Jetstar unless we had it firmly committed, and the purchase
of a Jetstar on speculation places an unjust and insupportable burden on your
sales department simply because 90 percent of the people who can afford Jetstar
prices already own one.




56
On October 18, 1966, the following month, Sam A. Hartwell, a
Glore Forgan vice president and then a member of the E J A board,
wrote a memorandum suggesting certain steps that could be taken to
achieve economies in EJA. The memorandum was circulated among
E J A executives and, because one copy was initialed " C J H " (Charles J.
Hodge) it was apparently also distributed to E J A board members. I n
that memorandum Hartwell wrote:
There is unanimous opinion, throughout the organization, that we should
kill the Jetstar. The marketing people are against it as well as the finance people.
Despite this advice, Lassiter in a letter to Hodge dated M a y 26,
1967, said:
There is strong interest on the part of Weyerhauser Timber Co. to lease a
Jetstar with an EJA furnished crew for a period of 6 months * * * We hope to
make a profit on the Weyerhauser deal of about $7,000 per month, or a total of
$42,000. Assuming that the deal goes through, Lockheed will then use our Jetstar
as their demonstrator for the 6 months period or until we have CAB approval to
operate it in our regular service. This way it won't cost us any money until we
have the operating rights.
I think the Jetstar is an important addition to our fleet, as well as being a
prestige item, and I believe we will derive substantial profit from its operation.
Further, Lockheed has agreed to protect us from incurring any expense until we
have the right to operate the airplane.
The plane arrived with an interior decorated in Pennsylvania
Railroad red, so certain was Lassiter that the aircraft would receive
heavy use by the P R R . B u t as it turned out, no one used it very much
and before the plan was sold 16 months later E J A suffered a loss of
approximately $480,000. P a r t of the total Jetstar loss was incurred
because E J A ended up selling the plane for $96,000 less than the price
it had to pay in order to dissolve its lease. Sale of the plane occurred
in March of 1969.
A few weeks earlier, on January 27, 1969, Lassiter issued a memorandum to E J A executives indicating he was going to tighten up on
spending. The memorandum states:
My attention for some time has of necessity been primarily focused upon company financial matters and the CAB hearing. This resulted in frequent and sometimes lengthy absences from Columbus, thus precluding my keeping as closely
in touch with some of the other facets of the business as I would ordinarily do.
Now, in order that I may be more intimately aware of what is taking place, my
specific approval will be obtained prior to an employee taking any of the actions
that follow:
1. All expenditures and/or obligations of company funds in excess of
$1,000.
2. Expenditures and/or obligations of the company funds for property or
services in any amount of those items that are "nice to have" but not essential for conducting company business.
3. Employment, separation, and pay changes of personnel.
4. Utilizing company aircraft for administrative or personal flights.
5. Ferrying company aircraft for operations or maintenance where other
than crew members are to be carried.
6. Traveling at company expense. Crew members exempted.
In the event I am not present at the office, requisitions and/or requests in writing will be given to my office personnel, who will contact me for approval.
The Saga oj Soga
T h a t memorandum was written during the period in EJA's history
when what has been called The Saga of Soga, had reached a high point.
The title was invented by Conace for a one page report to his files.
The report reads as follows:




57
Wally Soga was placed on the payroll of EJA on June 17, 1968, at $700 per
month, which, when fringe benefits are added equates to about $800 per month.
His title is director of physical training. His pedigree is indicated on the attached
announcement of the EJA Health Spa.

That announcement was in the form of a memorandum from
Lassiter to all EJA employees, dated February 11, 1969, and reads:
The EJA Health Club is an attractive and superbly equipped facility under the
direction of Mr. Wally Soga, a nationally recognized authority on physical culture.
He holds a fourth degree black belt in judo and was assistant coach.and trainer
for the U.S. International Judo Team, Pan Am Judo Team, and Olympic Judo
Team. The exercise room contains the best obtainable weights and other exercise
equipment (privately owned but available for use of members). Showers and sauna
baths will be available in the near future.

Showers and sauna baths were, in fact, made available in the near
future.
Lassiter's memorandum continues:
In an effort to retain the services of our director (whose reasonable salary is our
principal club expense) it has been proposed that we establish minimum level
charges for membership. [The rates ranged from $3 to $5 a month for employees.]
The following facilities and services will be available to members and their
dependents:
Weight gaining and reducing exercise program on an individual basis, sauna
health baths and showers, massage on an appointment basis, handball, squash,
and paddleball court, classes in handball, judo, tennis, etc., will be conducted if
sufficient people are interested. Members will be canvassed in respect to the
requirements (charges) for these activities.
I hope we can get maximum participation in this activity. The President of the
United States and the medical community have emphasized the importance to the
country and to one's personal physical health and well being, of participating in a
regular program of physical activity. I strongly support this program and urge
your support.
Please fill in the blank below if you are interested in this program.

Back to Conace's Saga of Soga report:
The gymnasium was completed at a cost of several thousand dollars, none of
which was budgeted, most costs being "buried" in other accounts. It is now in
business, complete with rub down table, baby oil, baby powder and all the paraphenalia germane to a massage room, all of which were paid for by the company.
On January 30, 1969 [11 days prior to Lassiter's memorandum] action was
initiated to terminate Mr. Soga, but then suspended. See attached memo by
Gordon Shaffer, personnel director * * *.

The memorandum, written January 13, 1969, by Shaffer to Lassiter,
reads:
This will confirm our meeting and discussions on January 30 and on February 6
concerning Mr. Wally Soga. On January 30, I was requested to provide Mr.
Soga with a letter informing him that he was being laid off. Since there was a
vacancy in the supply department, it was decided to delay his February 1 layoff
and temporarily utilize him until the supply vacancy could be filled. The
vacancy was filled on February 6 at $2.50 an hour.
On February 6 you and I reviewed the present job openings with the objective
of placing Mr. Soga in another position for which he would be qualified at or near
his present salary. There are still no positions available and it looks doubtful
that any positions will materialize in the near future. Therefore in view of these
circumstances I would appreciate your advice on whether or not Mr. Soga should
be retained on the payroll at this time and if so, at what salary.

Once again, back to Conace's report:
The health spa announcement was issued on February 11, [1969]. Its fallacy is
obvious, since to defray its monthly cost will require every business jet employee,
including those away from Columbus, to be a member at the rates quoted. Membership of this size would quickly overtax the facilities, unless employees were




58
allowed time off during working hours to use them, which would, of course, increase the overall cost to the company.
On February 13, the vice president of maintenance and engineering was requested [by Lassiter] to place Mr. Soga on the maintenance payroll because of
"personal obligation." There's no requirement for additional help in maintenance
fitting Mr. Soga's qualifications, and his salary is equivalent to that of an aircraft inspector for which he is not qualified. Further, that department harbors
no illusions about his availability for continuous duty in the maintenance area
since he would be detached for gymnasium duty at will, thereby disrupting the
work proficiency as well as the morale of the rest of the force. This is the history
of (Cal) Jensen who was hired as a first officer on Lear jets, was seldom available,
and ended up as a sometimes available EJA facilities manager, recently changed
to director of civil engineering and real estate. How quaint! It was also the history of a few other employees of both sexes.
One of those other employees was retired Canadian Air Vice Marshall A. F. Lang who was employed by E J A on July 15, 1965, and was
paid as a full-time employee at $1,300 a month for the next 6 months.
During this period, Lang's most notable assignment was to investigate
establishment of an E J A business jet operation in Canada. He returned
after a short absence to announce that the situation did not look favorable inasmuch as Canadian law required such an operation to be controlled by Canadian citizens, something that could have been determined while sitting in the E J A office in Columbus. Lang was later
employed on a retainer basis at $125 a month. He was, according to his
contract, to "be available on a 24-hour basis for assignments/' whereupon he would be paid the assignment rate of compensation. The call
for assignment never came during the following 10 months he was on
the E J A roster. Lang departed E J A after having been paid a total of
$11,407.72.
Another case in point involves a former E J A secretary which inspired
the following memorandum from Conace to Lassiter, dated March 25,
1968:
We have a situation brewing now which has created a wave of dismay throughout the company and yet, I don't think that the many employees who are concerned will express their feelings to you. Since we have been friends for many years,
Dick, I feel obligated to call it to your attention.
I am referring to the recent rehiring of Rhea Sauselen as secretary at $350 per
month after she had been discharged for cause from her previous position of clerktypist at $275 per month. I know nothing about the pros and cons of the action,
and I assure you that all reactions were spontaneous and voluntary, with no
canvassing whatever on my part. The specific points of dismay are:
1. Her hiring was preceded by several contacts by Jensen in an attempt to
"peddle" her services.
2. She is not qualified as a secretary.
3. She was hired at $75 more than her previous salary, which she presumably
didn't earn.
4. She made her own payroll change form and "walked it through," the only
signature on it being yours when it was handed to accounting.
The credibility of our persistent cost control effort suffers seriously in a situation
of this type, and the morale of employees who stick with us while feeling underpaid
also suffers. The way they look at it, $350 per month would provide a 15 cent per
hour raise or a $25 per month raise to 14 people. As you know, our employee turnover rate is now approaching 100 percent and no company can possibly sustain this
rate very long and survive.
Aside from the above, Dick, which is intended purely as a report, there is something even more insidious which should concern you. The effectiveness of your
supervision can be destroyed by such incidents, and we will end up with anarchy
and organizational chaos. My greatest concern is that the result will be a fertile
climate for union organizers who may someday strike without warning and we'll
never know what hit us. No one man can develop personal allegiance strong
enough to combat a union, but effective supervision and high morale and esprit de
corps can.




59
Apparently Conace's memorandum had little, if any, effect. Six
months later, on October 10, 1968, in a memorandum to Lassiter,
Jensen requested and received approval for certain organizational
changes at EJA. The memorandum is as follows:
I request the following changes be made in the Executive Jet Aviation Roster.
Facilities Department (changed to) Engineering & Real Estate.
Calvin Jensen (be given the title of) director of civil engineering.
Rhea Sauselen (be designated) secretary.
George Young (be designated) supervisor.
DETERIORATING MORALE

Incidents that may have contributed to what Estes described as
"deteriorating morale" among members of the E J A staff include
certain aspects of Lassiter's personal life. I t was common knowledge
in the Columbus office that the company's chief executive developed
a number of friendships with E J A stewardesses and office personnel.
The women in question were known to have taken trips to New York
and to Europe with Lassiter, and to have spent considerable amounts
of time away from their jobs while they were on the E J A payroll.
In the case of at least two stewardesses, the time they were spending
with Lassiter increasingly prevented them from showing up for work
and they were finally discharged at the insistence of other E J A
executives.
Lassiter's friendship with Linda Vaughn is another case in point, but
in this instance one that is now known not only by the E J A staff but by
the entire Nation as well. Miss Vaughn is employed by the public relations department of the Hurst Performance Products Co., Westminster, Pa., and is widely known in auto racing circles as "Miss
Hurst Golden Shifter." One of her assignments is to ride around race
tracks on a large replica of a floor-mounted automobile gear shift lever
prior to the start of competition. Her connection with Lassiter was
disclosed in an article which appeared in the April 1970 issue of Car
and Driver magazine.
When interviewed by staff investigators, Miss Vaughn described
herself as having been engaged in 1968 to Lassiter after meeting him at
the Indianapolis 500 in 1967. Her recollections of their relationship
include numerous instances when Lassiter, flying in E J A planes, visited
her during racing events at various locations around the country. Miss
Vaughn also said she took two trips to Europe at E J A expense in 1968
to help promote the use of IAB by firms and individuals involved in
European and American auto racing. Her reasons for making the trips
appear questionable considering her position with and duties performed for Hurst Performance Products. In addition, there were a
number of instances when she was flown without cost aboard E J A
planes to and from her home in Georgia and to Nassau.
Lassiter's current fiancee, Helene Falk, came from the ranks of
IAB stewardesses employed by EJA under its wet lease contract
with the Nassau based airline. Miss Falk was "hired away" from IAB
by Lassiter and installed as an E J A secretary in New York. Later
she was placed on leave of absence without pay status and was given
title to a $116,000 home which Lassiter purchased in Beverly Hills,
Calif., in connection with his efforts to establish the Lassiter Aircraft Corp. in nearby Culver City, Calif. E J A money was used to
purchase the home.




60
The history of Lassiter's friendships with a variety of women in
recent years is chronicled in hundreds of colored photographic prints
and transparencies, the cost of which was charged by Lassiter to
E J A and which E J A in turn endeavored to have Lassiter pay. The
photographs, many of which show undraped women, were kept on
the E J A premises and were seized in the Sundlun takeover.
A final example regarding circumstances tending to demoralize
the E J A staff is the case of Barry Mahon, a self described "nudie
film maker" and personal friend of Lassiter. Mahon is now producing
children's movies in southern Florida—"Thumbelina" being one of
his latest efforts. The chronicle of the Barry Mahon account is contained in the following E J A correspondence, beginning with a memorandum written by R. A. Korn, an E J A employee, to Lassiter, dated
January 26, 1967:
Presently, Barry Mahon owes us $4,603.98 and, by his own admission he
can't pay us. * * * He called me and advised that he is having difficulty with
undistributed motion pictures and asked for some extension of time. * * *
The memorandum was returned to Korn after Lassiter had written
the following note at the bottom of the page:
Korn, I have discussed this with Mahon and given him additional time. I
I will handle this account. * * *
Estes took up the case on August 29, 1967, when he wrote a memorandum to Lassiter saying:
I believe we should pursue payment of this bill. * * * At the present time we
have no idea of what his (Mahon's) ability to repay really is because Ralph Korn
has not been permitted to follow the usual procedure in bringing about collection. Can we now get your approval to pursue collection of this account * * *?
The same day, August 27, 1967, Lassiter wrote the following to
Conace:
* * * I have told you I would personally handle this account. * * *
On December 12, 1967, Estes wrote to Lassiter:
* * * This account is now 15 months old and I again request that we be permitted to take whatever action is required to collect. * * *
On December 28, 1967, Mahon wrote a letter to Lassiter in which
he said:
Without a lot of B.S. I would like to reply to your letter of December 21, 1967
which embarrasses me considerably due to our relationship. I certainly understand
your position and have not tried to take advantage of it. When this indebtedness
was incurred a good portion was based on promotion which I felt at the time
had a mutual benefit, such as Life magazine for the Piantinida jump, Charlie Heine
with International Latex and a flight from the west coast to St. Louis with a
fellow named Shaunessy who is president of a large advertising corporation. Don't
misunderstand me, the advantages were mostly mine and at the time we intended
to pay within 60 days.
I have never once walked away from a debt, contrary to what others may think.
But, several times in my business life I have banked heavily or shall we say gambled on certain happenings which when viewed beforehand seemed very logical
and consequently caused certain business decisions to be made. You must be
familiar with this as in my limited knowledge of your type of business and from
what I've heard you say, events don't always take place as scheduled.
First, in a series of unforeseen events was Nick's death in South Dakota. This
not only cost the company $50,000 but the revenues of approximately $100,000 had
it been successful.
Second, Hal Evans had given me $100,000 in December and just as we embarked on this project to make television pictures, his wife's estate was attached
and so far the money has not been released, even though we have taken legal
action.



61
Third, we entered into a four-picture deal with some clients of Roy Cohen, the
original amount being $100,000 and because of Cohen's problems with Internal
Revenue and the 5th Avenue Transit Co., the papers were never completed and
the escrow was returned to the investors.
All in all, an outlook of $350,000 cash flow plus the resulting profits from such
that didn't materialize. Each was a valid contract, each had either been paid to us
or was being held in escrow and each blew up.
On the good side, by robbing Peter to pay Paul, I managed to make four exploitation pictures in color, all of which are now finished and will start returning
what appears to be over a quarter of a million dollars. As soon as any money comes
into my hands that can be spent as I wish, I intend to pay you and several others
in full, regardless of what legal pressures have been brought to bear.
Incidentally, until August of this year, no one has ever had to be refused some
payment on our outstanding indebtedness. So far, only two people have taken
legal action and both of these amounts were not for merchandise or services we
received, they were guarantees. In the past, with other companies, I, as executive
officer, had to do what I saw fit. In the case of Exploit Films, after Errol Flynn
died, and in the case of Cinema Syndicate after the broker misappropriated the
proceeds of their public offering.
General, I'm not trying to rationalize the position. When the cash flow is short,
I myself take very little out of the business and attempt to disburse the balance
fairly to keep things going. I will start sending you as much as I can in January.

Mahon wrote EJA on February 9, 1968:
Please hold this check [a check for $500] until March 1, then deposit.

E. E. Sizmur, EJA's assistant treasurer, wrote to Mahon February 26, 1968:
* * * We are proposing to deposit the check in our account at the end of this
week and at this time we request your further check * * *.

On March 14, 1968, Sizmur wrote to Estes:
* * * We received a check early in February from Barry Mahon * * * I have
today received from our bank, Mr. Mahon's check marked "returned for insufficient funds * * *"

On March 15, 1968, Estes wrote back:
* * * Suggest you call Barry Mahon and ask him what he intends to do about
the check that bounced. Depending on his response, I think we should pursue
collection through Furst & Furst * * *.

Sizmur wrote to Estes on April 9, 1968:
I would like your permission to turn the account over to Furst & Furst.

A note at the bottom of the page reads:
Hold off 30 days per OFL. Go ahead, per OFL June 6, 1968.

Sizmur made the following request to Estes on May 29, 1968:
I believe we should waste no further time on this account, but give it to Furst
& Furst.

A note at the bottom of the page states:
OFL still says hold.

On June 6, 1968, Richard E. Colley, of General American Credits,
Inc., wrote to EJA:
Thank you for this account. Collection procedures have started * * *

The same day American Credit wrote Mahon:
Your past due account has been placed with us for collection. Please remit in
full * * *




62
Later that month—on June 20, 1968, Richard G. Henderson of
American Credit, Commercial Division, wrote Sizmur:
Pursuant to our conversation of this date, Mr. Mahon informed me that he
had spent this past Sunday in company with your General Lassiter at the races
in New York. Mr. Mahon informed me that the General instructed him to disregard our original collection letter and to forward same to him as he would
take care of it.

On July 21, 1968, Estes wrote to Lassiter:
Our collection effort on Mahon for $4,400 is stymied by your instructions that
collection letter be disregarded and you "would take care of it."

American Credit, gave up the account on August 29, 1968. Henderson wrote to Sizmur:
Since placement of the above styled account for collection on June 15, 1968, we
have been restrained from effecting collection.''

J. H. Ricciardi, who worked for EJA in the company's New York
office in the summer of 1967, was among those EJA employees who
noted the unpaid Barry Mahon account and brought it to Lassiter's
attention. Ricciardi quoted Lassiter as saying that, "Mahon is important to us for other reasons/' Those "other reasons" were never disclosed to the EJA staff.
Mahon told staff investigators in October that he thinks the bill is
an unjustified charge but that he will pay it anyway to remove any
blot it may have caused to Lassiter's reputation at EJA.
An EJA document titled "Executive Jet Aviation Employee Turnover since February 1965," shows that the turnover within the company ranged from a low of 50 percent in the facilities department, to
107 percent for pilots, to 158 percent in the avionics (electronics)
division of the maintenance department to 322 percent in the marketing department. The figures apply to the period ending December 31,
1968.
The document contained the assertion that the cost of this turnover in terms of recruiting, hiring, training, and orientation totaled
$1,068,000.
Presentation to the board
Almost all of the items and incidents listed in this section of the
staff report were presented in document form to the EJA Board of
Directors by Conace, Estes, and Kunkel early in 1969. Their stated
purpose was to inform the board about conditions inside EJA, but it is
easy to assume that real objective was to have Lassiter removed from
the post of EJA's chief administrative executive. The situation was
even more complicated by the fact that Lassiter apparently knew what
was coming, as indicated by a letter later written to Sundlun by Kunkel
and Conace, dated April 8, 1969. (Estes had submitted his resignation
late in 1968 with the understanding he would leave E J A the following
March):
The pleas of Messrs. Kunkel and Conace are based on the events which transpired on January 19, 1969, and immediately thereafter. Late in the afternoon of
the 19th, each of us received a telephone call from General Lassiter in Columbus,
advising us that he had conferred by telephone with Mr. Rathbone [an EJA
director], and as the result of that conference, it had been agreed that our presence
at the January 20 meeting was not required. Since we had reason to believe that
this was not an accurate statement of what had transpired, we elected to proceed
to New York with the hope that we would there be invited to the meeting, and for




63
the first time be afforded the opportunity to speak freely and present to the board
of directors information vital to them to properly discharge their responsibilities.
At New York, after two last minute changes in location of the meeting, we were
met at the conference room door and advised by General Lassiter that the board
had decided that our presence was not desired, which surprised us since, at the time
the meeting had not even started.

Conace, Kunkel, and Estes waited outside the meeting room. Later
Rathbone came out to tell them that the board knew they were present
and that a special board meeting had been called for January 31,
1969, in the Glore Forgan office in New York so that they could make
their presentation. The letter continues:
Our sincere belief is that as the result of the January 31 meeting, the board of
directors have been more fully informed than theretofore about the affairs of
EJA * * *. Therefore, we are distressed by the punitive action represented by
the enclosed invoices, and hope that the board of directors will see fit to direct
their cancellation.

The "punitive action" referred to in the letter can be explained by
a memorandum written March 24, 1969, by Lassiter to John Perdue
in the EJA treasurer's office:
As stated in my memo of March 8, 1969, the trips to New York on January 19,
1969, taken by Messrs. Kunkel, Conace, and Estes were unauthorized. Therefore, the company is not obligated for their expenses even though they may have
visited other business in the area.

The invoices of the three state they visited Ledbetter Associates
[airplane leasing,] Sperry Rand [backup equipment for an E J A
Falcon jet], and the New York EJA office [regarding sales in that
office].
The punitive action went a step further. At the April meeting of the
EJA board, Lassiter asked for and received approval to demand
KunkeFs resignation. Kunkel left the following month.
LASSITER AIRCRAFT CORP.

During 1969 Lassiter formed the Lassiter Aircraft Corp., located
at Culver City, Calif. The purpose of the firm was to design and develop an airplane that he said "would do the job for Executive Jet in
the best manner possible, an airplane that would have superb performance, cost approximately the same price as the Falcon today and
would have cheaper operating costs mainly because we would build
airplanes with composite material and the manufacturing would be
somewhat automated." By early spring of 1969 "we had a commitment
to finance the production of the airplanes."
Details about Lassiter Aircraft and the way it was funded were
given by Lassiter in the deposition taken from him in the fall of 1970
in connection with litigation involving the Sundlun takeover of EJA.
On this point the deposition reads:
Q. When you say "We" whom do you mean, General Lassiter?
A. Well, myself and the people of the airplane company, Lassiter Aircraft.
* * * In addition, they were going to buy Penn Central's shares in Executive Jet.
Q. Who is this that you are referring to when you say "They"?
A. Well, it is a group from the Far East that do not want to be identified.
Then the Far East situation got more critical and the thing kept getting delayed
and delayed. By this time I put some money of my own into the project. That is
how it originally got going. I had quite a few people who spent their off-time
from various companies.




64
Q. What time are you referring to now?
A. Oh, I'd say after March or April [1969] that we actively pursued the project.
* * * The key staff [of EJA] thought it was mandatory for survival of Executive
Jet to keep this project going.
I spent most of my time and effort trying to sell the Penn Central shares [in
EJA] or have someone buy them. I briefed many corporations. * * * Without
the airplane company they had very little interest in Executive Jet but they saw
a great future for this new [airplane production] technique.
The financing that was promised by this mid-East group * * * continued to
be delayed. In order to keep the program going, I talked to General Swancutt
and tried to get hold of [Sundlun] but he was never available. * * * I'd say at
least two dozen times he was unavailable.
Q. What time are you referring to when you spoke to General Swancutt?
A. In the summer of 1969. It was in the best interest of Executive Jet to support
this program for the reason that I have just outlined, but in order to do it we'd
have to give Executive Jet some consideration. The [EJA] executive committee—
in the absence of Mr. Sundlun, Swancutt and I are the other two members of the
executive committee—[decided] to go ahead and pump some funds into this thing
until it was financed. In the beginning they were modest amounts. This is the way
it started * * *.
Q. * * * You said you could see that Executive Jet would have to get some consideration for this?
A. Yes.
Q. What was that?
A. For this they would have the first refusal for these advances. They would
have the first refusal on the franchise of the worldwide marketing for sales, service,
and parts.
Q. You are referring to a contract now?
A. No. There was no written contract. This was just an agreement.
Q. Who was the agreement between, what people?
A. Well, myself as principal of the airplane company and General Swancutt
as principal of Executive Jet.
Q. Was there any * * * any kind of written memorandum or other document
* * * made of it at the time you say this agreement was entered? * * * Anything
which evidences any kind of agreement between Lassiter Aircraft Corp. and Executive
Jet as described by General Lassiter * * * that existed in mid-1969?
A. Yes. It is the brochure outlining the complete concept, organization, cash
flow, profit, and so forth, where it commits itself to having this franchise with
Executive Jet on a first refusal basis.
Q. When was it first printed?
A. Back in the summer of 1969.
Q. Do you have any copies of that?
A. Yes, and so does Mr. Sundlun.

The executive committee
Q. Was there any acceptance by Executive Jet other than in the brochure to which
you refer?
A. Yes, the ratification of the executive committee meeting and the minutes
[of the EJA board meeting] on the 27th of June.
Q. In 1970.
A. Yes.
Q. But I am asking you about 1969.
A. Well, the executive committee accepted the agreement for the advances.
Q. Are there minutes of that meeting?
A. I'm not sure. I don't have the records.
Q. Did you ever see minutes of that meeting?
A. I can't answer that question. I don't know.
Q. What is the approximate date of that meeting?
A. In the summer of 1969.
Q. Who was present at the executive committee meeting where the approval of the
transaction was tentatively described?
A. General Swancutt and myself.* * * I think Colonel Steinmann was there
and Mandish * * * It wasn't just one meeting. It was several meetings.
Q. Who is Mandish?
A. He was the treasurer [replacing Estes].* * * We had been working on an
agreement for quite some time with a law firm to establish a more formal first
refusal.




65
Q. Who did that firm represent?
A. T h e y represented m e personally.
Q. Am I correct that during this period no one represented Executive Jet in this
matter?
A. Y e s ; General S w a n c u t t did because I deferred from making a c o m m i t m e n t
since I was involved in t h e other company.
Q. But no lawyer or law firm represented Executive Jet in connection with the
discussion?
A. We a t t e m p t e d to get our counsel [Sundlun], b u t he was never available.
Q. Did you at any time submit to your counsel any outline or memorandum or
summary of a proposed agreement between Lassiter Aircraft and Executive Jet?
A. N o . * * * I never s u b m i t t e d it to M r . Sundlun * * * because I h a d no
confidence [in his firm]. He m a d e so manj^ legal errors in t h e history of Executive
Jet, I went to other people.
Q. * * * There was no attorney on the other side representing Executive Jet in
this matter?
A. Well, as a major stockholder of Executive J e t I was interested t h a t t h e y
get t h e best deal possible.
Q. So it was just a determination to make advances but in an amount not specified
at that time?
A. An a m o u n t t h a t was within t h e authorization of me personally.
Q. What was that amount?
A. $25,000.
Q. Was the decision then to make advances up to but not exceeding $25,000?
A. I t h i n k t h a t would b e basically t h e decision.
Q. And Executive Jet was to get in return for this commitment of an amount not
exceeding $25,000 a franchise to market the aircraft being developed by Lassiter?
A. Sales, service and p a r t s .
Q. As of the time of the executive committee meeting to which you referred was there
a Lassiter Aircraft Corp?
A. I c a n ' t answer except [from] m y memory. W i t h o u t having a n y t h i n g to refer
t o I d o n ' t know.
Q. As of the time of the executive committee meeting to which you referred} what
was the plan with respect to the stockownership of Lassiter Aircraft Corp.?
A. The financier and myself a n d some of the directors of Executive J e t . * * *
There was no concrete plan because * * * the people p u t t i n g up the money dictate
where the stock goes.
Q. The plan was, in any event, that you would be a substantial stockholder, was
it not?
A. I conceived the c o m p a n y a n d the project j u s t like Executive J e t . Yes,
[but] this of course has t o be judged b y the Civil Aeronautics Board * * * a t t h e
the point when it is determined t h a t we are in a phase of aeronautics [and] t h e r e
has to be some ruling by t h e m of directorship a n d stock ownership a n d so
forth. * * * We are n o t in the phase of aeronautics yet.
Q. Are you the owner of all the outstanding stock of Lassiter
Aircraft?
A. Yes.
Q. Who holds options of Lassiter
Aircraft?
A. There are probably half a dozen people. * * * I can n a m e a couple of t h e m * * *
Mr. Fuerst a n d a gentleman b y the name of Leachman.
Q. That's Myron M. Fuerst?
A. Yes.
Q. How did he happen to be an option holder?
A. He loaned money t o the c o m p a n y .
Q. How did you happen to get in touch with him in connection with the company?
A. H e is t h e brother-in-law of General S w a n c u t t . I briefed him on t h e project
a n d he likes t h e idea.
Q. And the other option holder is Leland Leachman, is he not?
A. If you say so.
Q. How did you happen to get in touch with him?
A. T h r o u g h Mr. Fuerst.
Q. Do they have any relationship to EJA?
A. N o .
Q. Does Swancutt hold any interest in Lassiter Aircraft Corp.?
A. N o .
Q. Specifically, has he loaned money to the corporation?
A. Yes, he has. * * * N o t to t h e corporation b u t t o me personally.
Q. Is there any evidence of that loan?
A. T h e r e is a d e m a n d n o t e * * * [for] $5,000.




66
Q. Was that money used for the corporation?
A. Well, it's hard t o determine whether it is t h e airplane company or myself.
I a m paying for t h e airplane c o m p a n y from m y personal checks. I could have used
his money for m y own personal expenses, I d o n ' t know.
Q. I'm going to show you a photostatic copy of the certified copy of the certificate of
incorporation of Lassiter Aircraft Corp. indicating that it was filed on September 22,
1969, and ask vou if you have ever seen that before.
A. Well, w i t h o u t going t h r o u g h all of it, it appears to be t h e incorporation of
t h e airplane company.
Q. Was that before or after the executive committee meeting to which you referred?
A. Yes, b u t * * *. There were people under salary or consultants fees way in
advance of this. T h e project was well underway.
Q. When were the first advances of money by Executive Jet to Lassiter
Aircraft
Corp., General Lassiter?
A. I would just guess August of 1969.
Q. We have already seen that the corporation was not even incorporated
until
September of 1969. Were there advances to the project before the corporation was
actually formed?
A. Yes.
Q. At that time what security or what evidence of the advances was transmitted by
Lasstier Aircraft Corp. to Executive Jet, if any?
A. I c a n ' t answer t h e question. I don't know.
Q. Were there even canceled checks at that time to show to whom the money was
advanced?
A. I ' m sure there was.
Q. To whom was the money advanced before the corporation was incorporated?
A.* * * I t was to t h e consultants t h a t were assisting in t h e development of t h e
airplane program.
Q. Did the money go through your personal bank account or how was it handled
and distributed to the consultants9
A. I believe it went t h r o u g h t h e airplane company's b a n k account.
Q. Well, we have seen that the corporation was not even formed at that time.
A. T h e n it m u s t have gone t h r o u g h m y personal account.
Q. I see. After the corporation was formed were the advances made to the corporation
itself?
A. I n some cases; in some cases it wasn't.
Q. Were there any papers prepared at that time, that is in August of 1969, when
the first advances were made to show whether these advances were loans, or gifts, or
purchases of stock, or some other type of disbursement?
A. I d o n ' t know how it was handled. All I know is t h e principal, t h e principal
concept a n d w h a t was being done * * *. T h e administration of it I ' m n o t familiar
with because I don't h a v e t h e records * * *. I have characterized it since t h a t t i m e
as loans and considered it as an obligation and have signed a note for it a n d collateralized it with m y stock.
Q. What stock are you talking about as being used as collateral?
A. Initially, it was stock in Executive J e t and then it was changed to stock in
t h e airplane company.
Q. Was there a collateral agreement entered into?
A. Well, I think t h e minutes of t h e meeting of t h e 27th outline t h e whole
transaction.
Q. The meeting of 1970?
A. Yes.
Q. Are there any pieces of paper in 1969 that suggest or confirm that there was a
collateral agreement?

Delaying a board decision
A. There was a purpose between the board meeting of * * * J u n e 1970, and
n o t having a board meeting to ratify this transaction earlier. This was because
there were several eminent transactions t h a t [could result in the sale of] P e n n
Central's stock and d e b t in Executive J e t * * *. We were advised b y M r . Sundlun's p a r t n e r not to do a n y t h i n g until these transactions were completed. Finally
in April a m a n by the n a m e of Zimet m a d e an offer which was consummated in
J u n e or in M a y * * * . T h e P e n n Central shares were sold, new money was p u t
in Executive J e t and a loan of $300,000 was given to me to pay back Executive
J e t ' s $150,000 [advance] and p u t t h e other $150,000 into t h e airplane company.
M r . Zimet was in Europe funding this. T h e papers were in escrow. Mr. Sundlun's
partner, Tirana, was p a r t of t h e t r a n s a c t i o n a n d represented Executive J e t and




67
even assisted me in t h e drawing u p of papers t o repay t h e loan to Executive J e t .
Mr. Sundlun's firm was advising us all t h e time to wait until the completion of
these dealings before we have any meetings or annual meeting or p u t out an a n n u a l
report because this would affect t h e company substantially and, therefore, hold u p
on it * * *. Mr. Zimet still claims he has a deal and is suing t h e P e n n Central a n d
Executive J e t accordingly [because] this transaction has n o t [been] upheld. T h e n
M r . O'Herron of the P e n n Central sent a wire to Mr. Zimet after he had a l r e a d y
funded the project to hold u p because of t h e situation we all knew t h a t happened a t
P e n n Central. Mr. Bevan was released and Saunders, and so forth.
On t h e one h a n d we were getting advice from Mr. Sundlun's firm as to w h a t n o t
to do, then t h e y t u r n around and go to t h e Detroit B a n k & T r u s t a n d represent
t h a t we h a d done this on our own volition.
* * * [The] potential purchasers [of Executive Jet] knew t h a t I h a d borrowed
money from t h e company, from Executive Jet, for t h e airplane company.
aQ * * * Let me once again a s & vou if during 1969 there was ever any piece of
paper prepared which evidences [that in effect] you had supplied collateral to secure the
loan from Executive Jet to Lassiter Aircraft Corp.?
A. I believe there was b u t I d o n ' t know for sure.
"Q. You don't remember signing any stock power or any note which was a collateral
note, do you?
A. I t u r n e d t h e stock over to t h e m .
Q. To whom did you deliver itt
A. I delivered it to General S w a n c u t t who in t u r n delivered it to t h e t r e a s u r e r .
This was done in 1969.
Q. What stock are you referring to?
A. T h e [Lassiter] airplane company stock.
Q. In fact, was there any stock of Lassiter Aircraft Corp. issued in 1969?
A. Yes, I believe there was.
Q. I am going to show you a document which is the annual report of Lassiter Aircraft Corp. * * * dated December 31, 1969, and ask you if you can identify it.
A. * * * I t is an a n n u a l report of the Delaware corporation.
Q. [I ask you if] that refreshes your recollection that no stock had been issued by
Lassiter Aircraft Corp. at least as of the end of 1969.
A. Yes. I t refreshes m y recollection. I would like to add it is very difficult for
me to remember these exact dates. You people have all the records a n d I d o n ' t
have a n y t h i n g to r u n a memory test from. I know t h a t certainly if it wasn't in
the latter stages of 1969 * * * t h e n it was in the early stages of 1970 * * * no
later t h a n J a n u a r y .
Q. In any event, there was no Lassiter Aircraft Corp. stock pledged to support any
loan from Executive Jet in 1969?
A. N o . Executive J e t [stock] was pledged a t t h a t time t h a t was the first t r a n s a c tion.
Q. But you don't know of any document that establishes that Executive Jet stock
was pledged?
A. Yes, there is a document from Penn Central Railroad requesting t h a t I p u t
the stock, Executive J e t stock, u p as collateral.
Q. When was that?
A. * * * Apparently it is in the early p a r t of 1970.
Q. I am going to show you a document which appears to be a photostatic copy of
the Lassiter Aircraft Corp. stock records and ask you if the stub there refreshes your
recollection that in fact Lassiter Aircraft Corp. stock was not issued in January of 1970
either; no issuance was made until April of 1970.
A. All right. I d o n ' t have t h e m [the records] available. I a m saying the loan w a s
collateralized b y Executive J e t stock from the beginning and placed in the h a n d s
of the treasurer.

The Bevan letter
At this point in the proceedings Lassiter was shown a letter from
Bevan dated February 27, 1970, to Executive Jet and marked for
Lassiter's attention.
Q. The first paragraph reads as follows: uWe have just been advised that funds
were withdrawn from the account of Executive Jet Aviation, Inc., and deposited in
the account of or otherwise used for the benefit of a totally unconnected
company,
Lassiter Aircraft Corp." Do you know how Mr. Bevan or Penn Central happened to
be advised of this?




68
A. * * * I briefed M r . Be van and Mr. O'Herron on the airplane project in 1969.
Q. Did your briefing include a description of the proposed advances and whatever
advances have been made there?
A. N o . We d i d n ' t h a v e plans to make any advances a t t h a t time.
Q. When was your briefing?
A. * * * I think it was in t h e s u m m e r of 1969, and t h a t ' s the best I can remember.
Q. My question really was directed to whether or not you were the person that
brought to the attention of Penn Central the fact that Executive Jet had in fact advanced money to Lassiter Aircraft * * *.
A. When t h e y asked me I told t h e m t h a t there h a d been money d e m a n d s .
Whether I was the initial person t h a t told t h e m I d o n ' t know.
Q. Had you told them as of the time you received this letter?
A. I told t h e m in advance of this letter * * * As a major stock holder in
Executive Jet, I felt obligated to let t h e m know m y activities * * *.
Q. Did you inform the directors informally of the nature and extent of the loan as
it grew?
A. I t ' s m y opinion t h a t I did.
Q. Can you tell us when you informed each of the other directors?
A. I would hesitate to guess.
Q. Did you inform any of them in writing?
A. N o . I m i g h t a d d t h a t a lot of our actions in Executive J e t from t h e beginning,
following t h e example of our secretary a n d counsel [were informally executed].
Q. Did you inform General Hoisington about this loan?
A. I t is m y opinion t h a t I did.
Q. Did you inform Mr. France about the loan and the nature and extent of it?
A. Yes.
Q. Do you recall when you informed him?
A. I t would be a guess. I would r a t h e r for him to testify.
Q. Did you inform him before June of 1970?
A. Yes.
Q. Do you know how much before?
A. No.
Q. The second sentence of Mr. Bevari*s letter of February 27 says: "In view of the
deficit position of EJA and its substantial indebtedness to one of our subsidiaries, we
must demand that immediate steps be taken to assure that Lassiter Aircraft
Corp.
repays to Executive Jet, Inc., all of the sums involved with interest and that no further
loans or advances be made by EJA to Lassiter Aircraft Corp. or to any other party."
Was EJA in a deficit position at that time?
A. Yes.
Q. As of the date of this letter, February 27, had Lassiter Aircraft Corp. furnished
any sort of security by way of promissory note to Executive Jet?
A. I don't recall the d a t e of the promissory n o t e . I think t h e note will speak for
itself.
Q. I am going to show you a note which is dated October 1, 1989, and ask you if that
is the note to which you refer?
A. Yes.
Q * * * j)0 y0U recall when it was actually prepared?
A. I would imagine a r o u n d t h e d a t e * * *. P a r t of [the note] was personal
expenses t h a t t h e company [EJA] bills me for things t h a t I did outside of t h e
n o r m a l course of business. I t h i n k t h e accounting as of t h e last t i m e I saw it
was $43,000 of t h e t o t a l d e b t was just personal bills. I t h a d nothing t o do w i t h
Executive J e t and were n o t advances, just what I owed t h e c o m p a n y .
Q. Was this note from Lassiter Aircraft Corp. designed to cover those also?
A. Yes: because I used funds of m y own personal salary and so forth t o a d v a n c e
t o t h e company to keep it going until it was financed.
Q. The note is in the amount of $135,000. Is that the amount that Lassiter
Aircraft
Corp., the promissor, owed as of October 1, 19691
A. I d o n ' t know. I w o u l d imagine t h a t it would be something approximating
t h a t because t h e u l t i m a t e a m o u n t was, by t h e time when we m a d e no more
advances, it got u p t o a r o u n d $150,000. Obviously this was m a d e in a d v a n c e of
t h a t time.
Q. What was done with the note after it was executed by you on behalf of Lassiter
Aircraft Corp.?
A. I t was given t o Mandish.
Q. Have you ever seen an affidavit prepared by Mr. Mandish in this lawsuit?
A. Yes. I vehemently disagree with it.




69
Q. You know that Mr. Mandish says that he first saw the note on June 24, 1970,
when it was handed to him by General Swancutt?
A. T h a t ' s incorrect.
Q. You mentioned that you had collateralized the note initially with Executive Jet
stock and later with Lassiter Aircraft stock * * *. Do you know where that collateral
is now?
A.* * * Mr. Sundlun's group moved [in] t h e P i n k e r t o n guards and t o o k
everything and locked t h e doors—General S w a n c u t t h a d t h e d o c u m e n t in t h e
New York office in his briefcase * * *.
Q. How did General Swancutt happen to have the collateral for an Executive Jet
loan in his briefcase in [June] of 1970?
A. You'd better ask him.
Q. As of the end of 1969, what were the total gross assets of Lassiter Aircraft Corp.?
A. I d o n ' t know.
Q. Vm going to show you Plaintiff's exhibit 4 for identification [which] states that
the total gross assets of Lassiter Aircraft Corporation as of December 31, 1969, were
$13,968. Is it your recollection that this is inaccurate?
A. Yes.
Q. Can you tell us what the total gross assets of Lassiter Aircraft Corp. were at the
end of 1969?
A. * * * I would say t h e y were substantially different [than $13,968].
Q. More or less?
A. More.
Q. I am going to show you a document dated May 7, 1970 * * *. It is a letter
from you to Mr. Sidney Zimet, and ask you if you can identify that as a letter that
you wrote at or about the date given on it.
A. Yes.
Q. General Lassiter, I assume that at the time you prepared this letter the figures
you furnished were as correct as you could make them * * *.
A. I tried to make t h e m as accurate as I could.
Q. So as of May 7, Executive Jet was owed $154,605 by Lassiter
Aircraft?
A. Well * * * a t a later date I went through it [and found t h a t ] I was charged,
or the airplane company [was charged] for some expenses for Executive J e t which
were withdrawn from this $154,000 and reduced it to something like $149,000 * * *.
Q. Do you know what the $154,000 was used for?
A. I sure do * * * the development of the airplane program.
Q. Was it used for any other purposes?
A. W h a t do you m e a n b y other purposes?
Q. Let me ask you about one other item * * * expended by Lassiter Aircraft Corp.
Down at the bottom is an item, unaccountable out-of-pocket expenses of $50,000.
What are those?
A. I a m glad you asked me t h a t question.
Q. I am glad to please you, General Lassiter.
A. I d o n ' t know where you gain your knowledge t o do any p a r t i c u l a r project * * *. B y and large you do it with association w i t h people who have brains
and advanced technology in their particular field. Spending an evening w i t h a
guy like Al White, for instance, who flew t h e first B-70, t a k i n g him t o dinner, or
entertaining him in your house, or spending t h e weekend with him at t h e beach,
or socializing with t h e chief engineer of t h e Boeing Airplane Co. * * *. By and
large you d o n ' t get there for nothing. You have t o entertain people, spend money
t o get there and expose yourself.
Q. You have already mentioned * * * you were aware of the limitation on your
power to authorize expenditures of $25,000 * * *?
A. At a n y one point.
Q. Did the loans * * * exceed the $25,000 amount at some point?
A. As I mentioned, t h e funds expended never exceeded t o t h e best of m y
knowledge around $5,000 or $10,000, somewhere in t h a t vicinity. I t was stretched
over a period of several m o n t h s .
The total of advances
Q. As of May 7, 1970, when you estimated the advances to be in the neighborhood
of $150,000, had you received any authority to go beyond $25,000?
A. Yes, from t h e Executive Committee.
Q. That's from you and Swancutt?
A. T h a t is right.




70
Q. So General Swancutt participated fully in your plan to continue these advances
beyond the $25,000?
A. I think I have already testified that our judgment was substantiated by the
potential customers and purchasers, therefore we proceeded.

The following are two schedules compiled by Lybrand, Ross Bros,
and Montgomery, CPA, for EJA showing money owed the company
by Lassiter Aircraft Corp. and money owed EJA by Lassiter personally:
SCHEDULE VII.—LASSITER AIRCRAFT CORP.
6 months
Year ended
ended
Dec. 31,1969 June 30,1970

Description
Cash advances:
Security Pacific Bank deposit account of Lassiter Aircraft Corp..
Mitchell Bobrick
0. F. Lassiter
Other payments:
Services rendered:
Mitchell Bobrick
W. C. Lewis
Gordon Israel
Travel expenses:
W.C.Lewis
.
F. C. Steinman
C.Jensen
A. DeBolt
Miscellaneous:
Don Winkler Studio
Loving Chevrolet
Carte Blanche
Trans World Airlines
Use of Executive Jet Aviation, I nc, Lear jet at $200 per hour
Total

$40, 000
22,000 ...

$15,000
5,000

14,500 ...
5,000
2, 000

625

Total

$55, 000
22,000
5 000
14, 500
5,625
2,000
3,383

3, 383
83 .
27? .
246

232
575
31

83
273
246
232
575
305
924

274
924
1,440

1,440

23,509

88,077

111,586

Notes: The above amounts represent an analysis of the balance reflected in the company's records as being a receivable
from the Lassiter Aircraft Corp., a nonaffiliated company formed by 0. F. Lassiter. Amounts disbursed to Security Pacific
Bank, Mitchell Bobrick, and 0. F. Lassiter were cash advances. Other disbursements were made in satisfaction of Lassiter
Aircraft Corp. obligations.
On Jan. 31,1969, the board of directors passed the following resolution:
"The powers of each officer of this corporation to act on behalf of the corporation will be limited as follows:
"(i) No expenditures of capital funds other than those included in an approved budget will be authorized for any
project amounting to more than $25,000 in the aggregate, whether for a single transaction or a series of transactions
involving the same project, without the approval of the full board of directors or the executive committee of the
board of directors acting in its place.
"(ii) No personnel shall be hired at a salary in excess of $20,000 per annum without the approval of the board of
directors or of the executive committee of the board of directors."
All expenditures listed above were made subsequent to Jan. 31,1969. No approval for such expenditures was recorded
in the board of directors minutes.
SCHEDULE VI.—ACCOUNT RECEIVABLE FROM O. F. LASSITER

Description
1

Salary advances
Expense advances
Payment of personal obligations:
Oil companies
American Express
Diners Club
Carte Blanche
Airtravel
Legal fees
Camera equipment
Automobile tires
New York apartment rent advance
Radio supplies
Kitchen supplies
Sporting goods equipment
Sam LaMacchin
Federal income taxes
Credit for expendable tools and photographic equipment owned by O. F.
Lassiter and lost by the company

Year ended
Dec. 31,1969

Total

$3,077

$25,000
500

$28,077

543

914

1, 540

371
1,879
1,421
877
380

205

350

Total
1

6 months
ended
June 30,1970

1,679
1,056

151 .
114 .
318 .

253

21

29 .

500
3,558
2,477

877
1,920

555
151
114
318
274
29
35
450

35
450
5,552

8,965

5,552

(2,182)

(2,182)

34,654

43,619

No approval for such advances was recorded in the board of directors minutes.

Note: The above amounts represent an analysis of charges reflected in the company's records as being receivable
from 0. F. Lassiter. Salary and expense advances were paid directly to O. F. Lassiter. Other amounts represent payments
to vendors and others, by the company, deemed to be personal obligations of O. F. Lassiter. Such amounts have been
invoiced to O. F. Lassiter by the company and are presented in the period according to invoice date.




71
The Middle East group
Q. General Lassiter, [earlier] you referred to certain negotiations with a group which
you described being from the Far East or from the Middle East?
A. * * * If I said t h e F a r E a s t it was a mistake.
Q. Who in addition to yourself carried on negotiations with that group?
A. Steinmann was in on t h e meeting, Arthur D e Bolt, General L e M a y , Mitchell
Bobrick—there were several other people a t this meeting * * *. Let me tell you
t h e story then it will ease your mind considerably, I think, as to t h e legitimacy
of t h e project.
I was approached by a group of people requesting t h a t Executive J e t develop a
program for an industry, an aviation i n d u s t r y in t h e trucial states which includes
all of t h e states around t h e Persian Gulf * * *. [There was] a representative of
t h e President, t h e shiek apparently, who w a n t e d to t a k e t h e m o n e y t h e y h a d
developed from t h e oil business and improve their [country]. One of their problems,
of course, is t h a t all t h e A r a b nations have been quite backward in t h e developm e n t of t r a n s p o r t a t i o n * * *.
T h e idea was to go in and set up an air university t h a t would include a t r a d e
school which would be developing mechanics, t h e basic labor to support an air
industrjr. T h e second p a r t of t h e university would be m u c h like our Air Force
Academy t h a t would develop engineers and t h e technical levels. T h e t h i r d p a r t
would be t h e development of t h e crews, b o t h flight crews and t h e air arm, so t o
speak * * *. This was to be a 25-year program depending on t h e motivation
and t h e educational level. We would s t a r t right from scratch.
T h e shiek was to come to California and he was t o visit Governor R e a g a n .
We were included as p a r t of t h e p a r t y . I t wound up to be quite a bit of m o n e y .
We spent a lot of effort, time, and energjr on developing this whole program.
At this time t h e Middle E a s t problem got r a t h e r critical and t h e unification of
these trucial states was having some problems. One thing led to another a n d we
dropped t h e program * * *.
Q. How did Lassiter Aircraft Corp. fit in?
A. I t d i d n ' t . T h a t was an Executive J e t project.
Q. * * * I thought you were referring to a Middle East group with whom you
discussed financing for Lassiter
Aircraft?
A. I did * * * t h e airplane company would be financed * * * we would
ultimately move manufacturing into their area.
Q. By "we" you mean Lassiter Aircraft Corp?
A. Yes * * *.

Testimony taken from Lassiter also dealt with $12,000 sum advanced by EJA to provide him with funds for a purchase option on a
home.
Q. Do you recall this transaction, General Lassiter?
A. Surely. T h e h e a d q u a r t e r s of t h e airplane c o m p a n y was in Culver City,
Calif. We h a d two offices. One office is t h e engineering office where we have all
engineers, computers, administrative work a n d so forth. T h e other office is in m y
so-called home which we used for practically all of our meetings with potential
customers * * *. T h e concept of making t h e home a joint office * * * was done
on the basis t h a t we did not know where our u l t i m a t e h e a d q u a r t e r s was going to
be. As a m a t t e r of fact, t h e plans envisioned t h e airplane company manufacturing
facility to be built a t Palomar. T h a t is between San Diego a n d Los Angeles. We
h a d a verbal option on t h e purchase of 400 acres of land next to t h e P a l o m a r
airport * * *. T h e $12,000 was p a y m e n t for, I think, 6 m o n t h s lease or something
of this n a t u r e with an option to purchase.
Q. Was the house eventually purchased by Lassiter Aircraft
Corporation?
A. Yes. I t was purchased a n d t h e guarantee b y Lassiter Aircraft Corporation
was behind it. I t was p u t in t h e n a m e of m y fiancee Helene Falk * * *. She h a s
legal title. Hopefully (our marriage) will t a k e place soon. I t (the house) will be
c o m m u n i t y p r o p e r t y then.
Q. When you initially undertook to spend this money on that house had you intended to place it in the name of Helene Falk or in the name of Lassiter
Aircraft
Corporation?
A. No. I w a n t e d to p u t it in t h e airplane c o m p a n y ' s n a m e , b u t I was going
through a divorce proceeding a t t h a t particular time. J u s t for reasons of m y own
I just p u t it in her n a m e .
Q. What was the full purchase price paid for the house?
A. $116,000.
Q. PP hat was the source of these funds, General Lassiter?
A. I t ' s a combination of m y own money a n d advances t o t h e airplane company,
or money from t h e airplane company.



72
Q. Is there any document that you know of or have seen which suggests that Lassiter
Aircraft Corp. has any right to obtain conveyance of the property from Helene Falk?
A. Well, since I own t h e airplane company and since Miss F a l k will be m y wife
I d o n ' t see t h a t t h a t is a n y problem.
Q. But you know of no such document?
A. I d i d n ' t need a document t o m a k e a transaction with myself.
Q. Does Helene Falk have any relationship to Lassiter Aircraft Corp. as stockholder,
director, officer or employee?
A. She will be a director as soon as we are married.
Q. Does the house appear on the list of moneys expended by Lassiter
Aircraft
Corp. which you furnished to Mr. Zimet?
A. Yes, because it is included in t h e total obligation of t h e $149,000 * * *.
Q. So the house was paid for by advances from Executive Jet solely?
A. Yes. I have said t h a t before.
Q. I must have misunderstood your testimony.

Lassiter Aircraft

Corpus payroll

Q. Whose payroll was Mr. [W. C] Lewis on?
A. Lassiter Aircraft Corp.
Q. Was he also on Executive Jet's payroll?
A. Yes * * * he was hired as an executive assistant t o me back in t h e d a y s
when United States Steel and Burlington were [going to purchase] t h e P e n n C e n t r a l
share (of E J A ) and we were a t t e m p t i n g t o become a worldwide freight carrier * * *.
I knew t h a t we had t o have a general manager for t h e airplane company. When he
was transferred t o t h e west coast I just assumed t h a t [his salary is p a r t of t h e
$149,000 obligation to E J A ] .
Q. But he was paid from the Executive Jet payroll for a period of time after he
began to work for Lassiter Aircraft Corp.?
A. I think there might have been 30 days or so t h a t this happened, it m i g h t
have been longer b u t it w a s n ' t m u c h longer t h a n t h a t .
Personal expenses
Q. General Lassiter, during 1969 and 1970 in addition to the salary
payments
that were due to you and paid to you; did you also receive salary advances?
A. Yes.
Q. Do you know the magnitude of those during 1970?
A. N o .
Q. I am going to show you plaintiff's exhibit 1 for identification, which is the
Lybrand, Ross Brothers (auditors) letter and direct your attention to page 3, item 2,
indicating advance from Executive Jet Aviation, $25,000. Does that accord with your
own general recollection of the magnitude of the advances in the first 6 months of 1970?
A. The only thing t h a t I can refer t o is the total of $43,000 which represents, as
far as m y knowledge is concerned, m y t o t a l obligation to Executive Jet.
Q. Were the salary advances to you authorized by any board action?
A. This is, again, the executive committee authorization for t h e purpose of
development of the airplane * * *.
Q. When you say executive committee authorization, you are referring to yourself
and General Swancutt?
A. Yes.

*

*

*

*

*

*

*

The preceding material in this section of the report reveals that
E J A was suffering from a chronic administrative problem that if left
unchecked would have been, and may yet prove to be, a terminal
illness for the company. The fact that Lassiter, the man who fathered
the EJA concept and was its chief administrative executive, was
responsible for the company's fantastic internal problems is made
ironically clear by the examples cited. Indeed, the large and unusual
problems that developed within EJA led the staff to decide to tell
most of the EJA story in the words of its own documents, or legal
documents relating to the company and its personnel to make the
report as accurate and convincing as possible.
Once convinced that the material presented here is authentic, the
reader must conclude:




73
Lassiter's poor judgment caused EJA and, therefore, the Pennsylvania Railroad, its stockholders and the banks extending credit to
EJA through the Pennsylvania Railroad to lose millions of dollars in
wasted financial, material, and human resources.
Lassiter consistently and insistently attempted to palm his monumental living expenses off on EJA through the credit card expense
account route.
His conduct, both professional and private, constituted a major, if
not the sole, factor in the demoralization of the EJA staff, resulting in
an appalling turnover rate.
His decision to transfer funds from EJA to Lassiter Aircraft was,
to say the least, highly irregular and questions about the legality of
such action cannot be avoided.
Overriding all of this is the fact that David Bevan, the key person
keeping EJA alive with a constant flow of money from the P R R ,
knew much of what was happening and failed to act. His failure to
force Lassiter's removal from EJA after recommendations had been
repeatedly made for such action and after he discovered Lassiter was
transferring EJA funds to Lassiter Aircraft raises questions of the
most serious nature regarding the elements of his relationship with
Lassiter.
T H E RICCIARDI C A S E

In October 1970, Lassiter asserted in a legal deposition that, in his
opinion, David C. Bevan and Charles J. Hodge had been threatened
with public disclosure of certain personal activities which might have
proved embarrassing to their reputations. This threat was alleged to
have been made in connection with a law suit brought by a former
employee of EJA against EJA. The man Lassiter accused of making
this threat is J. H. Ricciardi of Miami, Fla.
The record of the circumstances connecting Ricciardi to Lassiter,
Bevan, and Hodge is contained in a deposition that was taken under
oath from Ricciardi in connection with a $42,000 law suit he filed
against EJA for recovery of salary and expenses. The suit was settled
in February 1969. Information on this subject was also obtained from
a deposition taken from Lassiter in the fall of 1970 in connection with
pending litigation following the Sundlun takeover of EJA in the
summer of 1970.
What follows is a portion of the testimony contained in the Ricciardi
deposition. 1
In addition, several persons in a position to have knowledge of the
facts as stated in the Ricciardi and Lassiter depositions have been
interviewed by staff investigators in order to verify the basic facts.
Lassiter and Ricciardi meet
Ricciardi met Lassiter in 1964 when he came to Ricciardi's houseboat in Miami, accompanied by Jane
. He and Lassiter saw
each other socially a number of times in the following 3 years and
during these occasions Lassiter discussed the E J A concept with him
and asked Ricciardi if he was interested in joining the company.
1
The identity of the women mentioned in the deposition is known to staff investigators, but the last names
of those who have not been otherwise publicly identified have been withheld to prevent needless invasion of
their privacy.




74
Ricciardi did not seriously consider the proposal until June of 1967
when, during a dinner in Miami with Lassiter and Jane
and
others, he told Lassiter, "Yes, I'm serious about it now. I think maybe
we could do something/'
Lassiter was not suie what position Ricciardi was best suited for
but there was discussion of work in customer and public relations,
marketing and sales and personnel recruitment. In describing his
background, Ricciardi said that between 1947 and 1967 he had been
a real estate developer, a stock broker and owner of a service finance
company providing student tuition loans, the owner of charter plane
and boat services, the owner of slenderizing salons, the holder of 10
Arthur Murray Dance Studio franchises, an agent for movie companies, a representative of two steamship lines, and a court-appointed
assistant trustee in two bankruptcy cases—all of this in Florida, except for one dance studio which was in Mississippi.
On July 5, 1967, Ricciardi, Lassiter and Julian Lifsey took off from
Miami aboard an E J A Lear jet, dropped Lifsey off at Tampa and
continued on to Columbus where Ricciardi was given a familiarization
tour of the E J A facilities by Lassiter. T h a t evening he, Lassiter and
Michelle
, an E J A stewardess, had dinner together in Columbus. The next day the three took a commercial airlines flight to New
York City. Lassiter said he wanted Ricciardi to be indoctrinated at
the New York office because most of EJA's sales activity at that time
was developing there.
The Ricciardi Deposition
Q. Did he [Lassiter] indicate in any way specifically what services you would
perform for EJA?
A. I t would be one of three [personnel, sales or public relations] or all three a t
t h e time.
Q. I understand. But they are fairly broad fields. Marketing is very broad, sales is
very broad.
A. Marketing a n d sales is actually selling.
Q. You would be then soliciting charter business
A. Yes.
Q. —for EJA. Is that the idea?
A. T h a t ' s p a r t of it, yes.
Q. What would the other part have been?
A. Personnel. Since I h a d p a s t experience with personnel in hiring young ladies,
I would be very good in hiring . . . stewardesses.
Q. Hiring
stewardesses.
A. Yes.
Q. Anything else?
A. And public relations.
Q. By public relations, do you mean preparation of advertising copy or supervision
of advertising?
A. P a r t of advertising, b u t primarily I would say social engagements.
Q. I don't undsrstand what that means.
A. Well, if I was ever needed to get a group together for cocktails or to help
to assist with personnel or possible future customers. I d i d n ' t know exactly how
it would work.
Q. To put a group together for a party, you mean you would organize a party and
rent a hall?
A. I d o n ' t know. I d i d n ' t know exactly w h a t p a r t of public relations I'd best be
suited for.
Q. I still don't understand. I wonder if you would explain to me how your background suited you to organizing parties.
A. Well, I d o n ' t know. I've given some very successful parties in the [past]
for public relations . . . a n d he did mention the public relations p a r t of customer
relations, t h a t he t h o u g h t I'd possibly be suited to iron out any difficulties Executive J e t Aviation was having with their clientele, with their contracted customers.




75
Q. By those difficulties you mean objections to price?
A. Or maybe something t h a t happened during one of the service flights, a
complaint.
Q. And you would be the guy who would go and smooth the ruffled feathers of the
customers?
A. T h a t ' s correct. General Lassiter t h o u g h t I might help in t h a t area.

Ricciardi meets Bevan and Hodge
In describing his activities in New York on the day of arrival,
Ricciardi said:
T h a t same d a y — I ' m trying to follow t h e sequence. General Lassiter w a n t e d
me to meet a gentleman called David Bevan of t h e Pennsylvania Railroad, who
is chairman of t h e executive committee and executive vice president. We went to
his private pullman car a t t h e Penns3dvania R a i l r o a d . "
Q. You mean at the terminal?
A. Yes. H e was trying to show me t h e t y p e of people I ' d be associated with.
Q. What transpired at that meeting? First who was present?
A. At first when we arrived there David Bevan was there b y himself, a n d he
introduced me.
Q. You} General Lassiter and Bevan.
A. Yes. H e introduced me as a new employee of Executive J e t a n d I ' d be in
New York a n d he wanted me to get acquainted with him. And a b o u t a half h o u r
later Charlie Hodge joined us.
Q. General Hodge?
A. Yes.
Q. Was General Hodge then in the Army?
A. No.
Q. Glore Forgan.
A. Glore Forgan.
Q. That's four of you now.
A. T h a t ' s correct.
Q. What was discussed?
A. Oh, they had a discussion. I just sat down a n d listened to t h e last s t a t e m e n t
of Executive J e t and some of t h e difficulties t h e y were having trying to get out
of t h e red. And then we discussed having cocktails and dinner all together t h a t
evening.
Q. And did you?
A. Yes.
Q. Where did you have this?
A. We had dinner a t Jose's.
Q. Who was present at dinner?
A. General Lassiter, General Hodge, D a v e Bevan, myself a n d dates.
Q. Everybody had a date? Do you remember their names?
A. General Lassiter was with his girlfriend a t t h e time, Michelle. I h a d a young
lady, Carol
, with m e ; a n d General Hodge a n d David Bevan h a d two
young ladies. I d o n ' t recall their names.
Q. What was discussed at this dinner?
A. J u s t light chatter, no business.
Q. When was the next occasion when you had any contact with EJA?
A. On t h e next d a y I spent t h e whole d a y with General Lassiter in t h e office
and a t t h e c o m p a n y a p a r t m e n t , and it was then he said to " G e t back to Florida,
pick u p t h e rest of your things and come u p to New Y o r k . "
Q. Did you do that?
A. Yes. I left a b o u t 2 days later after being in New York, went to Florida
for a couple of days and t h e n came back to New York.
Q. Did EJA reimburse you for your expenses in connection with this trip to Florida?
A. T h e y paid m y airline ticket, yes, m a y b e a n y cab expenses."

Ricciardi''s understanding
Ricciardi then described his subleasing of an apartment for himself
in New York City.
Q. Were you reimbursed for any of these moneys that you paid for the sublease
rental?
A. N o .




76
Q. Was there any understanding that you would bet
A. At t h e time I assumed I was on salary and I'd be reimbursed for a n y expenses
incurred.
Q. You assumed you were on salary.
A. Yes, because I d i d n ' t know how long I was going to be in New York, whether
it was a few weeks or a few m o n t h s .
Q. What salary did you assume you were on?
A. A m i n i m u m of $18,000 a year.
Q. Payable how?
A. However t h e company pays. At t h e time I believe they paid m o n t h l y .
Q. Did you receive this salary?
A. N o t while I was in New York.
Q. It was your assumption that you were a salaried employee as of, I guess, that
flight to New York? Is that what your testimony is?
A. Yes.
Q. Did you get a salary check in August?
A. No.
Q. Did you get a salary check in September?
A. N o .
Q. Did you think you should have?
A. I assumed I should have, yes.
Q. Did you do anythina about it at the time?
A. During this period General Lassiter came back and forth to New York
a b o u t every week or two and it was, I'd say, about a m o n t h later I asked him when
will I be receiving m y salary, and he said—"I'll t a k e care of i t . " H e said, " D o n ' t
worry. I'll take care of i t . "
Q. If you assumed you were to be on salary as a salaried employee, did you assume
also that you would be reimbursed for your normal personal living expenses?
A. Yes. H e told me to keep expenses down. Those were his words.
Q. During this period in July and August in New York, did you go to the office of
EJA on a daily basis?
A. I was there every day.
Q. What did you do there?
A. I primarily was being indoctrinated by t h e Secretary, who was very capable.
Q. This is Miss
A. Korenakas. I listened t o everything t h a t was going on, whether it was a
personal contact with customers, primarily by listening on the telephone conversations which was a t the time approved.
Q. Whose telephone conversations were these?
A. Between primarily Miss Korenakas a n d any customer, contract customer,
who is requesting information, getting ready to sign a contract or renew a contract.
Q. In addition to sitting in the office and listening on the telephone calls and talking
to Miss Korenakas, what else did you do?
A. During this period, t h r o u g h General Lassiter's request, I was looking for a
c o m p a n y a p a r t m e n t . I h a d applicants fill out applications a n d interviewed
Q. Applicants for what?
A. F o r airline stewardesses, which I have there, starting with, I think, one in
August.

I n addition to this work, Ricciardi said he arranged meetings between Lassiter and Hodge and officials of Warner Brothers-Seven Arts
in an unsuccessful effort to obtain loan funds totaling $4 million to
$5 million for the acquisition of large jet planes and for EJA working
capital.
Ricciardi'fs social arrangements
Q. What else did you do while you were in New York for EJA?
A. I could possibly refer t o this as public relations. During t h e first d a y I was
here in New York General Lassiter said I could be of great, great service t o him
if I would help in t h e social life of General Hodge and D a v e Bevan, since he
[Lassiter] was under a lot of pressure from t h e m due to t h e company having
financial problems in n o t getting their supplemental ticket, a n d t o possibly
alleviate some of t h e pressure he was under if I could see to it while t h e y [Hodge
a n d Bevan] were in New York and they w a n t e d some companionship, t h a t I do
w h a t I could to assist.
Q. Did you do any of this?
A. Yes.




77
Q. What did you do?
A. On one occasion General Hodge asked if I knew of any young ladies who would
go on a business trip to Europe t h a t he was taking with General Lassiter.
Q. And did you tell him that you did?
A. I said I ' d see w h a t I could do.
Q. Did you do anything?
A. Yes.
Q. What did you do?
A. I found a young lady t h a t I — t h a t was agreeable t o t a k i n g a E u r o p e a n t r i p
with an amiable group.
Q. Do you know her name?
A. Yes, Helene
.
Q. Do you know her address?
A. I t ' s , I believe
.
Q. Do you know her phone number?
A. I d o n ' t have it here, b u t I could get it.
Q. When did this take place?
A. This took place some time, I believe, August, early August or late J u l y . I
d o n ' t recall.
Q. You say that General Lassiter asked you to do this to take the pressure off him.
What pressure was he referring to?
A. He was under pressure from D a v i d Bevan, who represented P e n n s y l v a n i a
Railroad a n d t h a t supplied moneys to s t a r t Executive Jet, a n d t h e y d i d n ' t seem
to be too h a p p y with t h e m o n t h l y s t a t e m e n t s . There d i d n ' t seem to be a n y
i m p r o v e m e n t in business a n d t h a t they were having difficulty with t h e F A A on
acquiring a supplemental certificate a n d I guess they h a d to keep pouring m o r e
money every m o n t h into Executive J e t Aviation, a n d he felt t h a t if t h e y were
socially h a p p y it would t a k e some of t h e pressure off t h e m a n d off of him a n d
m a k e t h e m very h a p p y .

Another former E J A employee who was a personal friend of
Lassiter's told staff investigators that Lassiter was constantly looking
for girls for Bevan and Hodge.
Q. While you were in New York, were there other occasionst where you assisted in
this regard?
A. T h a t young lady did go with General Hodge, a n d General Lassiter b r o u g h t
a young lady with him to E u r o p e . I believe it was t h e same young lady, Michelle.
Yes, it was.
Q. How long a trip was it?
A. I ' d say approximately a week or 10 days, because I remember t h a t t h e
tickets were acquired t h r o u g h t h e New York office for everyone.
Q. Did EJA pay the air fare?
A. I believe so, yes.
Q. For all four people?
A. Yes; as far as I recall. I n fact, I took a ride—I w e n t t o t h e airport w i t h all
of t h e m to see t h e m off.
Q. Were there any other occasions where you performed those public relations
functions?
A. Yes.
Q. This is still in New York?
A. Yes. I would say approximately in August t h e y were acquiring a new J e t
Star and t h e y were planning a trip to Las Vegas a n d Los Angeles, and again
General Lassiter asked me if I would find suitable companionship for D a v i d B e v a n
and General Hodge, which I proceeded—I found a couple of young ladies t h a t
were willing to t a k e t h e t r i p . One was called B e t h
. She was with General
H o d g e — a n d a young lady called Corrinne
. And General Lassiter.
Q. You said General Lassiter and then I
A. I said General Lassiter w a s with t h e young lady, w i t h t h e same young lady,
Michelle. I w e n t b y myself.
Q. You were on this trip?
A. Yes. I was asked to go on t h e trip t o get acquainted possibly with t h e Los
Angeles office in t h e event I was stationed there, and also to assist in a n y of t h e
social activities because during t h e s t a y in Los Angeles t h e three gentlemen h a d t o
m a k e a special trip to Long Beach overnight, a business trip, a n d t h e y w a n t e d [me]
to s t a y with t h e young ladies and see t h a t t h e y were suitably entertained t h a t one
night t h a t all of t h e m were gone.




78
Q. About when was this trip?
A. I'd say t h e latter p a r t of August or possibly early September. I d o n ' t recall
too well. M a y b e it was t h e latter p a r t of September. I t m a y have been t h e l a t t e r
p a r t of September.
Q. But sometime in August or September '67?
A. Yes.
Q. Any other occasions where you performed these public relations
functions?
A. During m y whole s t a y in N e w York I did, on several occasions, h a v e dinner
with General Hodge a n d D a v i d Bevan a n d m a n y times with General Hodge and
his d a t e . H e seemed t o enjoy [the company of] this young lady, B e t h
very
much.
Q. You say these dinners were with Hodge and Bevanf
A. On some occasions t h e whole group together sometimes with General Hodge.
Q. Any other occasions in New York that you performed these functions?
A. Yes. I once got a d a t e for David Bevan with a young lady called N o r m a
Q. Do you remember her address and phone?
A. She lives on E a s t
.
Q. Any others?
A. I d o n ' t believe so.
Q. Did you pay for any of the dinners or drinks?
A. N o .
Q. Did you pay any moneys to these girls?
A. N o .
Q. To your knowledge, did anyone pay any money to these girls?
A. I d o n ' t know. T h e y all went their own way so I d o n ' t know.
Q. Then it would be fair to say these public relations functions involved fixing up
these particular individuals with dates?
A. As I said, General Lassiter said he was doing this himself b u t he d i d n ' t
h a v e t h e time. He told me he h a d gotten several dates for t h e m in t h e past b u t
he j u s t was under such pressure with his own business and doing so m u c h t h a t
would I please assist him.
Q. During this period in New York, were there any further discussions of your
employment with the company in terms of salary or expenses or placement or job or
where you would be located, any of those things?
A. On every occasion t h a t General Lassiter came to town, which I would say
was approximately every two weeks, I did bring it up and asked him if he h a d
m a d e a decision, because I was getting apprehensive.
Q. Decision as to what?
A. Where I was going t o be located, w h a t m y position was, when I was going
t o s t a r t realizing some money. And on e a c h — I t h o u g h t I'd be here only a couple
of weeks. And, of course, it was extended to about 14 weeks. And each time he
asked me to bear with him because he was under pressure, he d i d n ' t know exactly
where [what] I'd be best suited for and t o just be patient, t h a t everything would
work out well.
Q. And as you understood it, you were going to Florida to take over the Flordia office.
A. Correct.
Q. Was the salary fixed at this time?
A. At t h e time General Lassiter said t h a t all t h e y could p a y a t t h e t i m e was, I
think, a t h o u s a n d a m o n t h or twelve t h o u s a n d for t h e year. I d o n ' t recall. I t
came t o a thousand a m o n t h . And I said, " H o w are we going to m a k e u p t h e difference of a m i n i m u m of $18,000?" And he said he would t a k e care of it, just again
work with him and t r y to be cooperative with him, b u t he would t a k e care of all
this. T h e main thing was—he was still under pressure, t h a t t h e y were waiting
for a supplemental ticket. He h a d some way to compute it, how to work it out,
how t o reimburse me for t h e difference. I assumed t h a t t h e job in t h a t area only
paid t h a t .

Ricciardi's evaluation
In September 1967, before Kicciardi was transferred to the EJA
Fort Lauderdale office, he was sent to Columbus to be evaluated for
employment by Conace. In a memorandum addressed "To Whom I t
M a y Concern," and dated December 9, 1968, Conace wrote:
At t h e end of t h e interview I explained to Mr. Ricciardi t h a t despite his own
evaluation of himself, I t h o u g h t his qualifications as a sales representative were
far below t h a t which we h a d been looking for, a n d t h a t we already h a d several




n
sales representatives on our payroll who were performing reasonably well and
certainly better than could be expected of him for the foreseeable future, who were
earning far less than he suggested ($20,000 per year in Miami). I further explained
to him that I could not recommend his being hired by the company, although
this was subject to being overruled by General Lassister, but, in any event, the
maximum starting salary he could command here was $12,000 per year. Mr. Ricciardi was obviously perturbed by my reaction and advised me that he would have
to discuss the matter further with General Lassiter.
Following this interview, I heard nothing further from him nor about him until
October 12, 1967, when I was directed by General Lassiter to place him on the payroll at $12,000 per year for employment in the Fort Lauderdale sales office.
Shortly after he was hired, we asked our consultant, Mr. W. W. Abendroth
of the Wharton School of Business Administration in Philadelphia (University
of Pennsylvania) to interview and evaluate Mr. Ricciardi. Mr. Abendroth's
evaluation of Mr. Ricciardi was that he was not qualified as a sales representative
for EJA.
I n a memorandum dated December 12, 1967, J. K. Wetherbee,
then EJA vice president for marketing for EJA, wrote of Ricciardi:
From what I have been able to observe, he is almost completely lacking in sales
ability, he does not have contacts with industrial firms, he is not cognizant of the
peculiarities of private jet transportation and he does not have the stature to sell
contracts to industrial leaders regardless of the geographical location to which he
might be assigaed. I am concerned about his performance following his receipt of
the letter from O. F. Lassiter telling him that he is to report to Mr. Weill [Max
Weill, supervisor of the Fort Lauderdale EJA office]—he has not been back to the
office from that da,y to this.
The following section of the transcript contains testimony about the
work performed by Ricciardi for E J A in Florida. This included writing
business letters, contacting prospective industrial, business, and travel
agency customers. I t was brought out that at one point Ricciardi was
ordered by the E J A headquarters in Columbus to stop approaching
business and industrial prospects and concentrate solely on hotels and
travel agencies in south Florida. I t was also established that during all
of the time he worked for EJA, Ricciardi was able to sell only two
EJA contracts.
Ricciardi in Florida
Q. What else did you do for EJA in Florida?
A. That was it conclusively.
Q. Did you perform any of what you described in New York as public relations
work while you were in Florida?
A. Yes. General Lassiter called me up on a couple of occasions and told me that
General Hodge and also Dave Bevan would be visiting in Florida and that while
they are there if I could assist in any way in getting them some companionship, to
please cooperate.
Q. Did you do that?
A. On one occasion; yes.
Q. When was that, approximately?
A. I'd say approximately October.
Q. Shortly after you got down there?
A. I'd say November.
Q. What was that occasion?
A. General Hodge had called up and asked if I knew of anybody that would like
to take a trip to Europe with him.
Q. And did you?
A. I came up with a young lad}^ who was willing to go, and she had lunch with
him.
Q. She had lunch with him?
A. Yes.
Q. What was her name?
A. Vonnie
.
Q. Do you know her address and phone number?
A. I don't have it with me.
Q. Is there something special about Vonnie
?
A. No, there's nothing.
Q. You said that this Vonnie
had lunch with General Hodge.



80
A. Yes. She spent t h e afternoon with him having lunch.
Q. Did she go to Europe with him?
A. I d o n ' t t h i n k so. I know she h a d agreed to go because he asked me to a r r a n g e
t h e t r a n s p o r t a t i o n . As far as I know, t h e a r r a n g e m e n t s were waiting for her to
come to New York. I remember purchasing a ticket for her a n d t h e n her t r a n s portation to E u r o p e would continue. B u t w h a t subsequently happened, I d o n ' t
know.
Q. Did you pay her any money?
A. N o .
Q. To your knowledge, did anybody pay her any money f
A. No, I d o n ' t know. I think—yes, she told me t h a t — I think General Hodge
told me he gave her money to purchase her ticket to N e w York, plus expense
money.
Q. Any other occasions when you performed these public relations duties in Florida?
A. I think t h a t was it. General Lassiter had one of t h e girls t h a t applied as a
stewardess come to Columbus for a personal interview.
Q. Do you know who that was?
A. L y n n
. She told me w h a t subsequently happened. He sent her a
first-class ticket to Columbus. I t was cold t h a t day. He b o u g h t her a $100 coat,
p u t her up in a hotel room, h a d dinner t h a t night. She wanted to go to her h o m e
in Toronto. She was flown b y Executive J e t to Toronto and she was given a firstclass ticket from Toronto to Miami, all at t h e expense of Executive Jet.
Q. These services you arranged for?
A. N o . I just was told about it.
Q. Other than what you have testified to so far today, did you perform any other
services of any kind for Executive Jet Aviation?
A. I think t h a t ' s it.

There follows extensive testimony dealing with Ricciardi's understanding that he was to ultimately receive a salary of $18,000 a year
plus expenses while living in New York City and $32,000 worth of
stock options. During discussions with Lassiter about money owed to
Ricciardi it was agreed that Ricciardi, because of EJA's money problems, would accept payment of $25 a day for his living expenses in New
York. The total to be paid him was $2,500. Lassiter later reduced the
sum to $1,500.
In October Ricciardi was transferred to Florida to work in EJA's
Fort Lauderdale office. I t was after the move from New York that
the $1,500 figure was stated in a letter written to Ricciardi by Lassiter
which had the following postscript:
Charlie mentioned t h a t you h a d discussed t h e salary situation with him a n d
were somewhat annoyed. I suggest t h a t m a t t e r s like this you let me handle.

Ricciardi testified as follows:
Q. Is that General Lassiter's monogram at the bottom?
A. Yes.
Q. Who is Charlie?
A. Charles Hodge, General Hodge. At t h e time it was taking so long to get a n y
answer from General Lassiter t h a t on a couple of occasions, when I was talking
t o General Hodge I asked him if he could help expedite it.
Q. He said someone was annoyed. Was he referring to you being annoyed or Hodge
being annoyed?
A. I have no idea.
Q. What did you do next about your expenses after you got this letter?
A. I was waiting for m y full $2,500.
Q. What you did was nothing?
A. N o . I n subsequent telephone conversations I told him I wouldn't accept
less t h a n 2,500.
Q. That's what I'm asking you. What did you do next? Did you say, "General
Lassiter, I want more money," or, "I want my $2,500?"
A. I said I cut it to t h e bone as it was and I know it m u s t have cost me more
t h a n t h a t while I was in New York and I was being reasonable and I t h i n k I was
only being fair. I was really cooperating with him a t t h e time a t his suggestion
a n d I accepted it a n d here he's trying to cut me down even more, which I t h o u g h t
was unfair. And he said, "All right, we'll straighten it o u t . "




81
The Fort Lauderdale office of E J A was closed in December 1967,
for economic reasons, and Ricciardi was eliminated from the E J A
payroll. W h a t happened next is indicated in a letter written J a n u a r y
6, 1969, by Lassiter to Elihu Inselbuch a New York attorney who
represented EJA.
Pressure on Lassiter
There were many telephone calls from Ricciardi afterwards * * * Ricciardi
started making demands, using threatening overtones. It appeared to me that he
was having financial difficulties and saw a possible opportunity for a shakedown.
He started talking about $1,000 a week for every week that he worked for us
and threatened me by saying that if he were not paid he would disclose to the
press certain social arrangements that he had made. His comments were irrational,
almost as if he were losing his mind. Finally, I would not accept any of his calls.
He went to Charles Hodge and started the same tactics there. Hodge intimated
to Ricciardi that he would ask me to settle with him and somehow had gotten
up to a figure of $5,000. When Hodge called me, I told him that I would settle
with him for exactly what I thought he was worth and that would be paid expenses
for the days that he had contributed something to the company. Finally, he
annoyed Hodge and myself so much that I contacted an attorney in Florida,
Judge Harold Van, who referred me to the former assistant district attorney of
Miami, Max B. Kogan. Kogan and I met with Ricciardi and told him that if
there were any more threatening calls, we would refer the matter to the DA as
extortion. Further, we recommended that if he had a complaint about remuneration for his services, he should take it to a lawyer and handle it as a normal civil
case and we would be glad to respond. After his meeting with the lawyer in Miami,
he again called Hodge, creating quite a problem by having him called out of an
important board meeting on the west coast.* * *
I am concerned only because of our present status with the Civil Aeronautics
Board and the hearings that are in progress. Any publicity caused at this time
could be quite detrimental. Therefore, it is most desirous that we delay this suit
as long as possible. I believe you are aware that we agreed to settle for $2,500,
but this was not accepted.
Ricciardi himself admitted to staff investigators that he threatened
to call a press conference and detail the "social arrangements/'
Subsequently, Ricciardi filed suit against EJA.
Lassiter's view of the situation is represented by his testimony
given in the fall of 1970 in the deposition taken from him in connection
with legal action centering on the Sundlun takeover of E J A the
preceding summer.
Lassiter's deposition
Q. Do you recall a trip you took in 1968 to Europe with Mr. Charles Hodge?
A. I took several trips to Europe with Mr. Charles Hodge. I probably took
in 1968 two or three trips with General Hodge.
Q. To Europe?
A. Yes.
Q. On one or more of these were you accompanied by girls?
A. Yes * * * There were plenty of females on the airplanes.
Q. In 1968 when you went to Europe with Charles Hodge} on one of the trips you
took Michelle
and Helene
, did you not?
A. Miss
worked for Executive Jet.
Q. In what capacity?
A. She was a stewardess.
Q. And did she go on this trip as a stewardess?
A. She went on the trip 7as inspector of our European facility.
Q. Was she in stewardess uniform?
A. No, I don't believe she was.
Q. And how about Helene
?
A. I don't know Helene
.
Q. Was there another girl on the trip to which you refer where Michelle
was along as an inspector?
A. Well, you have to specify the trip.
Q. How many trips did Michelle
accompany you to Europe on?
A. One, as I recall.




82
In response to questions on this subject, Harold E. Wonnell,
attorney for Michelle
, wrote staff investigators stating:
"Miss
recalls she went to E u r o p e twice. T h e first time was in
April, 1967, with General Hodge a n d General Lassiter. T h e second t r i p
was m a d e J u l y 27, 1967, with General Hodge a n d General Lassiter a n d
a n o t h e r girl who did n o t s t a y with t h e m during their trip to E u r o p e nor did
she r e t u r n with t h e m . Miss
does n o t recall t h e identity of t h e other
girl. According to Miss
, b o t h trips were necessitated because
General Lassiter was endeavoring to p u t an airline together."
Q. Was there another girl on that trip?
A. I d o n ' t remember on t h a t particular trip w h e t h e r there was or n o t .
Q. Who paid Michelle
commercial ticket expense to and from Europe?
A. Executive J e t .

Flying to Europe
Lassiter's testimony continued on the following day when additional questions were asked about a trip to Europe with Michelle
.
Q. General Lassiter, yesterday we were talking about the purpose of one Michelle
accompanying you on a trip to Europe in 1967, and you said that she had gone
along in order to conduct an inspection. Do you recall what she was inspecting?
A. Surely. We were getting ready to transfer either a Falcon or b u y a Falcon
or two to p u t in service in E u r o p e . Miss
was t h e chief stewardess of
Executive J e t * * *, m a n u a l s have to be written, plans have to be m a d e a n d this
was t h e purpose she took t h e trip.
Q * * * [n ^ a s oeen brought to my attention that] I misstated the date. I said 1967.
I believe you testified yesterday that the trip took place in 1968. Do you recall when
A. I didn't testify any such thing as far as t h e date is concerned. You asked me
I believe, such and such a d a t e did I t a k e a trip with somebody, and I ' m not t e s t i fying as to when it was. I d o n ' t know when it was.
Q. Was she actually employed by Executive Jet at the time she took this trip?
A. I believe so.
Q. Do you know when she terminated her employment?
A. No.
Q. According to my records, General Lassiter, she terminated her employment in
the spring, specifically on April 30, 1967, and the trip took place in 1968. Does that
refresh your recollection?
A. I t doesn't change t h e purpose of t h e t r i p . Regardless of when she t e r m i n a t e d ,
she was still a very capable, talented individual, and it would m a k e no difference * * * she would have done t h e job. She was * * * most capable. She was t h e
first stewardess we had on Executive J e t .
Q. And do you know if Executive Jet paid the expenses of any other girl going to
Europe?
A. I c a n ' t answer t h e question. * * * I d o n ' t recall.
Q. Is it perfectly possible that Executive Jet paid the expenses of a girl not an
employee of Executive Jet for the purpose of going along on that trip?
A. I say unless it was for a special purpose it would be unusual.
Linda Vaughn
Q. Were you accompanied by Linda Vaughn on a trip to Europe in 1969 on
Executive Jet business?
A. Yes, I was.
Q. Who paid her expenses?
A. Executive Jet.
Q. And that includes not only her commercial trip over but also her ticket back?
A. There was no Executive J e t p a y m e n t of Miss Vaughn's trip to Europe back
a n d forth. She went on I n t e r n a t i o n a l (Air) B a h a m a and there was no charge.
Q. Was she traveling on Executive Jet business?
A. Yes she was.
Q. And what was her assignment?
A. Well, Miss Vaughn * * * is a m e m b e r of t h e racing world, p r e t t y well
known, and she was accompanying her boss, Mr. Duffy, who was assisting
us * * * in t h e racing world with companies like F i a t a n d Maserati, a n d we
wound up on a couple of occasions getting substantial business from these people
in Europe as a result of their introduction t o t h e racing world.




83
Q. Was Miss Vaughn on the Executive Jet payroll at that time?
A. N o .
Q. Has she ever been?
A. N o .
Q. In 1969j did you also take Helene Folk to Europe?
A. On I n t e r n a t i o n a l [Air] B a h a m a , and it was not paid b y Executive J e t .
Q. Did she pay for it?
A. She d i d n ' t have to p a y for it. She was a stewardess on I n t e r n a t i o n a l [Air]
Bahama.
Q. Was she on the International [Air] Bahama payroll at that time?
A. She was on leave a n d was entitled to free passage.
Q. Did her parents go also?
A. Yes.
Q. Did they pay for the trip?
A. N o . T h e policy of t h e c o m p a n y is t h a t t h e stewardesses and their p a r e n t s on
space available can fly in t h e airplane which is t h e same policy t h a t every other
airline has t h a t I know.
Q. In 1970 did you take a girl to the Plaza Hotel and bill her accomodations at the
Plaza Hotel to Executive Jet?
A. Well, I h a v e t a k e n several people several places. T h e Plaza Hotel? I d o n ' t
know w h a t you're talking a b o u t . Be specific.
Q. I was talking about Drema
.
A. Miss
was an employee of Executive J e t . She was there to assist us
in t h e workload for Executive J e t business.
Q. How long did she stay at the Plaza Hotel?
A. I have no idea.
Q. About a month?
A. I would say if it was over two days it would be strange.
Q. And did you authorize her to charge everything to Executive Jet?
A. As a m a t t e r of fact * * * I h a v e paid t h a t bill a n d it is not Executive J e t
t h a t has paid t h a t bill.
Q. Why did you say it was [an] Executive Jet expense?
A. Because it was. B u t j u s t to keep t h e thing from being t a k e n out of context
like you're trying to present it, I paid t h e bill.
Q. Did she threaten to sue Executive Jet if her bill was not paid?
A. N o t to m y knowledge.
Flight to Las Vegas
Q. Did you take a trip to Las Vegas at any time with Hodge and Bevan and some
girls and charge it to Executive Jet?
A. Yes.
Q. When was it?
A. I d o n ' t remember t h e date, b u t it was n o t charged to Executive J e t . We were
running proving runs on t h e J e t Star.
Q. At Las Vegas?
A. I t d i d n ' t m a k e any difference where I ran t h e m . We had to fly t h e airplane
50 hours before we could p u t it in service, which is an F A A requirement. General
Hodge and M r . Bevan had some company, and it was n o t charged to Executive
Jet.
Q. Who arranged the company for them?
A. You'll have to ask t h e m * * * I ' m n o t sure.
Q. Do you know Beth
?
A. Yes, I've m e t Miss
.
Q. And under what circumstances did you meet her?
A. At a social function.
Q. Did she take a trip on Executive Jet aircraft?
A. I really d o n ' t know * * * t h e n a m e doesn't register. * * *"
Q. Do you know if she took any trips on Executive Jet aircraft * * *.
A. I d o n ' t even know her.
Q. Who is Joseph
Ricciardi?
A. Well, I ' m n o t sure t h a t I can aptly describe him. H e was to be an employee
of Executive J e t .
Q. What did he do for Executive Jet?
A. Well, he tried t o do quite a bit, b u t he was quite unsuccessful. H e was
dismissed.
Q. What did you ask him to to do for Executive Jet?
A. T o get business as I described t o you.




84
Q. What else?
A. Well, it would depend on whose version you w a n t to listen t o .
Q. I would like to hear your version, General Lassiter.
A. I just told you m y version.
Q. Did you ask Ricciardi to locate a girl to go to Europe with General Hodge?
A. I d i d n ' t ask him; no.
Q. Did anyone on behalf of Executive Jetf
A. Well, you'll have to ask anyone. I don't know.
Q. Do you know?
A. I ' m n o t sure.
Q. Who do you think did itt
A. Well, I said I d o n ' t know. I ' m not going to m a k e a statement t h a t I a m n o t
sure of.
Q. And do you know who he arranged to go to Europe with General Hodge?
A. Oh, I remember t h a t there was someone t h a t he arranged, b u t I d o n ' t
remember her name. I never saw her again.
Q. You were along on the trip though, weren't you?
A. Yes.
Q. And her name was Helene
, wasn't it?
A. I have already answered your question once. I do not know.
Q. Who did you take on the trip with you?
A. Miss Michelle
.
Q. Miss
?
A. W e n t on the trip, I think you said who t h e other p a r t y was. * * *
Q. All right. Did Ricciardi arrange for other girls to accompany Hodge or Bevan?
A. You'll have to ask t h e m .
Q. Well, you know whether he arranged it or not, don't you?
A. N o . I don't know for sure w h a t arrangements were m a d e between Hodge
a n d Bevan and Ricciardi. You had b e t t e r ask t h e m .
Q. * * * Vm asking you to search your recollection.
A. I ' m not sure.
Q. Did you ask Ricciardi to make these arrangements for you?
A. I can m a k e m y own arrangements. I d o n ' t h a v e to ask a n y b o d y to m a k e m y
arrangements. To t h e best of m y recollection, t h e request was m a d e b y whomever
w a n t e d something done.
Q. Did Ricciardi later take the position that Executive Jet owed him substantial
sums of money as a result of his making these arrangements purportedly pursuant to
instructions from you?
A. Would you repeat t h e question? Owed him substantial m o n e y for w h a t ?
Q. For getting the girls for Bevan and Hodge pursuant to your
instructions.
Ricciardi sues
A. Well, he sued t h e company, a n d I ' m sure you h a v e a copy of t h e complaint
a n d a deposition. I t was a pure case of blackmail. T h a t ' s m y answer.
Q. And the suit was for, among other things, the services which he allegedly performed
for you in getting these girls for Bevan and Hodge, was it not?
A. T h a t ' s u n t r u e . T h a t is incorrect.
Q. This was not part of Ricciardi's
allegation?
A. Well, it's p a r t of his allegations, b u t I ' m saying it's n o t factual.
Q. I see. Now, was that suit settled?
A. Ricciardi withdrew t h e suit.
Q. And was he paid anything on account of the suit or in connection with the withdrawal of the suit?
A. I believe t h a t he was.
Q. And who paid him?
A. You'll h a v e to ask t h e people who paid him.
Q. Did you participate in any way in the settlement of that suit?
A. I h a v e n ' t yet.
Q. And what is your
participation?
A. I was to pay a portion of t h e money t h a t was paid to Ricciardi.
Q. How much were you to pay?
A. $5,000.
Q. And how much was paid by the others?
A. You'll h a v e t o ask t h e m .
Q. Do you know?
A. N o .




85
Q. Were you toldt
A. No.
Q. You mean that you were advised that your share of the settlement was $5,000 but
you weren't told what the others were going to pay?
A. I assume they paid the same amount.
Q. Who were the others who made payments or were to make payments?
A. Hodge and Bevan.
Q. Have they paid their $5,000 each?
A. You'll have to ask them.
Q. Do you know?
A. I do not know.
Q. Was the settlement of the suit pursuant to any written document or release?
A. I can't answer the question. I didn't handle it.
Q. Did you ever see any release or written document which settled the suit?
A. I'm not sure that I did.
Q. Did you sign any document undertaking to make payment of $5,000?
A. I can't answer the question. I don't remember. I wasn't concerned about the
suit because it didn't mean anything to me except for the blackmailing of this man
against two pretty fine people.
Q. Did Executive Jet pay any part of the settlement?
A. They absolutely did not.
Q. Who was going to pay the $5,000 that you were supposed to pay?
A. I was.
Q. And is that still your intention, that it should be paid by you personally?
A. Executive Jet hasn't paid any money.
Q. Well, neither have you, have you?
A. No, net yet.
Q. Well, where did the money come from that settled the suit?
A. I guess from Hodge and Bevan.
Q. Did any part of it come from Lassiter Aircraft Corp.?
A. No. This is long before then.

Staff investigators asked Ricciardi's law firm, Siegel & Crowe of
New York City, whether settlement had been made and, if so, in what
amount and by whom. The reply was that settlement had been made
by a single check in the amount of $13,000, half of which was retained
by the law firm for its services, the remaining $6,500 being turned
over to Ricciardi. There was said to be no recollection or record of
who made the settlement payment.
Both Sundlun and Conace confirmed Lassiter's statement that EJA
had paid nothing in settlement of the Ricciardi suit. When questioned
by staff investigators, Hodge denied all of the Ricciardi allegations
regarding Ricciardi's efforts to provide him with female companions.
Hodge said that he did know Beth
, but not in the way described by Ricciardi. He also said he was unaware that any settlement
of the Ricciardi suit had been made. " I heard the suit was dropped/'
he said.
Bevan's attorney, Edward C. German, said that Bevan also denied
the Ricciardi allegations about providing female companionship for
Bevan. German said that Bevan did not contribute to the settlement
payment nor does he know who made the payment. Bevan himself
was unavailable for questioning on this point, although repeated
attempts were made to contact him.
This leaves unanswered the question of who paid the settlement
money. However, no other parties, other than those indicated above,
have been identified with the suit.
Conclusion
The question cries out to be answered why a man of David Bevan's
apparent shrewdness, financial acumen, and reputation in the business
world would have continued to have P R R make additional heavy




86
investments in E J A after the CAB proceeding made it amply clear
that the flow of funds should have been drastically curtailed; and
would have continued to the end to resist having Lassiter removed as
chief executive officer of E J A despite the repeated advice of reliable
management experts and the firsthand knowledge possessed by him of
corporate waste and the disastrous management problems at EJA. In
short, Be van's actions did not make good business sense.
How, then, can it be explained. Under the circumstances, consideration must be given to the possibility that public revelation of certain
personal activities that might have been extremely embarrassing to
Bevan is inevitably linked to the question of why Bevan acted in the
strange way he did throughout the deteriorating E J A catastrophe.

o

7765-6
75-5?




Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102