Secrets of the Black Budget Scandal
A MadCowMorningNews investigation has learned that the company which owned the DC9 airliner caught carrying 5.5 tons of cocaine at an airport in Mexico’s Yucatan last year was engaged in other illegal activities as well, including massive “pump and dump” stock fraud involving a network of companies led by scandal-ridden San Diego defense contractor Titan Corp.
Between 2003 and 2005 Titan Corp and a group of allied firms combined to issue a steady drumbeat of phony press releases, announcing multi-million contracts to purchase products which didn't exist, and major deals which never took place, as part of a concerted effort to "pump up" the price of stock in SkyWay Aircraft of St Petersburg, FL.
The goal was to inflate SkyWay’s stock price--the pump--in advance of a massive sell-off--the dump-– by company insiders.
The coup de grace was delivered by company principals, who stripped the company’s remaining assets before filing bankruptcy through sweetheart deals with officers from other companies in the network.
The network of companies looted over one billion dollars through financial fraud; the sum easily eclipses the drug trafficking payout generated by moving 5.5 tons of cocaine.
Jeb Bush & "Enterprise Florida"
Several of the companies involved in the SkyWay stock fraud scheme have received extraordinary government assistance at both the state and federal level.
Triton Network Systems, for example, closely-related to SkyWay through shared management, was not exactly a triumph for free enterprise…
Instead, the firm was a “double-dipper." It was founded with money from the CIA, and also pocketed cash from a quasi-public state entity called “Enterprise Florida,” controlled by Florida Governor Jeb Bush.
This insider status may help explain why officers and directors of the companies in the network which engaged in blatant stock fraud-– not to mention 5.5 ton shipments of cocaine--have been operating with seeming impunity.
CIA moving in on Mob turf?
Some of the companies involved in the SkyWay pump & dump fraud were also implicated in the epic prosecution of major Wall Street brokerage houses by Elliot Spitzer, then the Attorney General of New York State.
Spitzer charged dozens of Wall Street brokers who defrauded unwary investors of tens of millions of dollars. Major brokerage houses paid over one billion dollars in fines to avoid criminal prosecution.
"This is a horror show. And that is why we as prosecutors feel so determined to root out the merger of organized crime and Wall Street," said New York Atty. Gen. Elliot Spitzer.
Spitzer named more than thirty corporations whose stock was run up and then dumped in the scheme. Little attention seems to have been paid to how these companies were chosen.
However three of the companies involved in Spitzer's probe also are part of the network which "busted out" SkyWay: L-3 Communications, Net Command Tech Inc, and Triton Network Systems Inc.
Its called a 'get out of jail free' card
According to Mexican authorities, the DC9 airliner busted with 5.5 tons of cocaine made at least seven round trips to Venezuela with stop-overs at airports in Mexico before being caught.
The airliner had even been painted in the familiar blue and white colors used on official U.S. Government aircraft, complete with an official-looking Seal: an impressive-looking American eagle surrounded by the inscription: "Sky Way Aircraft — Protection of America's Skies."
"We never could figure out how they could get away with that," one SkyWay employee told us. "They had the same seal on the fleet of Hummers, and Tampa cops pulled them over and made them take it off."
Yet the DC9 sat on the tarmac at Clearwater-St. Petersburg International Airport less than one hundred yards from the U.S. Coast Guard’s major Caribbean air station, with no questions asked or interference from the Coast Guard.
When questioned, officials at the Coast Guard Station refused to comment.
An American-registered airliner caught with 5.5 tons of cocaine is not an everyday occurrence, even in Florida.
But like Coast Guard officials, top DEA officials were tongue-tied.
We phoned and emailed Oscar Negron, the DEA’s press liaison officer in Miami, almost three weeks ago, politely inquiring about the status of the investigation, if any, into the huge seizure.
“Just to let you know,” he emailed back, “I am waiting for information from our HQ.”
Oscar is presumably still waiting. So are we.
Definition of "milk run"
One reason for the silence may be that the DC9 bust carrying 5.5 tons of cocaine and represents an historic opportunity to shine a spotlight on some dark corners of America’s Deep Politics and expose the plane's politically well-connected ownership.
Because the DC9's bust is not a romantic tale of daring pilots in drug-laden aircraft skimming the surging waves of the Gulf of Mexico. The days of the cocaine cowboys are long gone, and there is nothing romantic, if there ever was, about their escapades.
The process of flying narcotics into the United States today is no more eventful than flying a commuter jet between Houston and Dallas.
Now they fly airliners. The pilots even wear uniforms.
This is a business story.
The discovery that Skyway's owners were involve in massive financial fraud as well as drug trafficking raises the stakes.
And it raises a question, as well…
Where does all the money go?
Buck Rogers meets Elmer Gantry
SkyWay Aircraft was not a real business, in the sense of being a company engaging in commerce and selling a product for profit. The company didn’t have one.
Instead, they boasted a nearly worthless patent that a court last month—citing criminal intent—ruled belonged to another company, Satellite Access Systems.
Glenn Kovar and his son, Brent Kovar, who ran SkyWay as Chairman and President, respectively, also ran Satellite Access Systems (SAS), a scam amazingly similar to SkyWay, with the same result: investors losing millions of dollars.
Like SkyWay, SAS was touting a gee-whiz product: software supposed to enable people to send or receive data by radio wave at 103 times the speed of ultra-fast T1 lines.
If they ever go straight, these guys clearly have enough imagination to found a new science-fiction religion. Scientology, beware.
A lot of bankruptcies, no doubt about it
Of course, the SAS story also ended badly, with the stock trading at about three one-thousands of a penny per share. It then became a wholly owned subsidiary of Corsaire, Inc., which changed its name in 1999 to Net Command Tech Inc.
Net Command also employed the Kovars, as well as other SkyWay principals. The two firms were more than “kissing cousins.”
And Net Command was where we first saw the network of corporations to which SkyWay belongs in action, after we came across, for the second time, the name of Frank Musolino, aka Frank Musilino.
In a SkyWay bankruptcy filing we'd discovered his then-unfamiliar name. Frank Musolino was listed as a SkyWay company insider. So Musolino had a (presumably sweet) deal with SkyWay…
Musilino also had deals with SkyWay’s sister firm, Net Command Tech Inc., and Triton, and Buzzeo, and…the list goes on.
Cash out early… and often
The U.S. Securities and Exchange Commission has started proceedings to revoke the registration of Net Command Tech Inc.
The SEC says the company has not filed any financial results since 1999.
Net Command flew to a $29.50 high in April, 1999.
Alas, it last traded at just under a penny.
When Net Command Tech went bankrupt, Frank Musolino had already cashed out. He came out smelling like a rose, and made a big payday before the company went belly-up.
So too with Triton Systems. When Triton Network Systems walked the plank, investors lost $200 million.
Not Frank Musolino
Triton Network Systems was liquidated several years ago after raising $250 million in venture capital.
Before going bankrupt Triton issued a press release:
“Triton Network Systems, Inc. (the “Company”) has settled a lawsuit with a shareholder, Frank Musolino, resulting in a cash payment to the shareholder of $3.65 million.”
Triton was a joint effort between Tampa-based Military Command Technologies Inc. and Lockheed Martin. Triton was the largest recipient of money from Enterprise Florida. Its initial funding from Finova Capital, which has long been another way of saying CIA.
(SEE Thursday’s story for details.)
Spitzer was right
Here we recall that Level 3 (which has since purchased Titan) XO Communications and Triton Network Systems Inc. were all cited by Elliot Spitzer, then the Attorney General of New York State, as having been used by Wall Street brokers in “pump and dump” schemes which cost unwary investors tens of millions of dollars.
And this is where things really begin to get interesting.
XO Communications issued press releases touting its purchase of $6.5 million worth of Sky Way products.
XO Communications also issued a press release announcing it was using equipment from Triton Network Systems Inc.
Frank Musolino got a settlement from XO Communications. The company's stock was around $65 in March 2000. It was recently hovering, the page note, a little bitterly, at around $0.07.
On the Internet you can purchase beautifully engraved stock certificates “worth more as a collectible than the redeemable value of the stock” from XO Communications as part of the “Boy, did I get the Wrong Number Package.”
A generic dummy front company
The question of whether there "might could" be a Central Intelligence Agency connection to the DC0 airliner stuffed with 5.5 tons of cocaine is, for some, akin to asking whether the Pope might be Catholic.
An overwhelming body of evidence points directly towards this conclusion. But, even if SkyWay Aircraft wasn't a CIA front, someone appears to have gone to some little trouble to make them appear as if they were.
- The CIA's In-Q-Tel was set up in 1999.
- SkyWay’s journey to infamy began that same year, when a Brooklyn attorney named Michael Farkas began
- setting up dozens of shell companies.
- Farkas even incorporated a company called Shell Corporations.com, Inc.
- One of these shells, which became SkyWay Aircraft, immediately attracted an investment from crooked defense contractor Titan Corp of San Diego, which became a subsidiary of L-3 Communications.
- According to SEC documents, in early February of 2000 Titan put up $72,386 for restricted shares of a shell company Farkas created which later became SkyWay.
- At the time, according to SEC filings, Farkas’ company had only one full time employee: himself. He mentions Titan five times in the company’s business plan.
What could excited the early interest of a San Diego defense contractor in a two-man corporate shell?
Three years later Titan issued a press release offering to pay $500 million to a company going bankrupt for a product which didn’t exist.
Why did Titan Corp. blatantly and fraudulently plump the prospects of a soon-to-be-bankrupt company with no product and no prospects located a continent away?
If the Democrats are serious about taking back the government for the people, this would be a good question to ask, and a good place to start.
Any friend of Brent Wilkes…
A May 13, 2004 press release, since removed from Titan’s site, gushed: “We are excited about the possibilities Sky Way Aircraft System technology offers," said Titan's David Stinson.
David Stinson has ties to another figure involved in current scandal: Brent Wilkes.
Before signing on with Titan, Stinson was the executive vice president of Intergraph, whose Original Equipment Manufacturer (OEM) deal with Brent Wilke’s ADCS Inc. first opened the money spigot for which Wilkes is about to go on trial.
Titan is also, of course, the biggest donor to a raft of U.S. Congressmen from Southern California, either convicted (Randy Cunningham) or mentioned as possible targets of the thwarted investigation of fired San Diego U.S. Attorney Carol Lam.
Several top executives of SkyWays Aircraft, the American firm which owned the DC9 in partnership with Royal Sons Inc. of St Petersburg, FL. including the company’s President, James Kent, are former members of U.S. military intelligence.
Chairman Glenn Kovar liked to boast about his long-standing ties to the CIA.
Not the smartest spooks in Spooktown
The plane's registered owner, “Royal Sons LLC,” a Florida air charter company, at one time used the address of a hanger at the Venice Fl. Airport owned by infamous flight school Huffman Aviation. No one at the Venice Airport remembered them.
Of course “Royal Sons” was not the first phantom firm we had discovered hiding inside Huffman Aviation. Britannia Aviation was also “housed” inside the flight school, and was the subject of a major brouhaha in Jerry Falwell’s hometown of Lynchburg, Virginia, when the virtually non-existent firm, with total assets of $750, was awarded a fat government contract over a local firm much better qualified.
Then, too, Skyway leased a 70,000 square foot “repair” facility at DFW Airport in Dallas for more than $20,000 a month in a building owned by a Richard Rainwater, called “George W. Bush’s biggest supporter” and “the power behind the throne” during Bush’s first Presidential campaign.
One of the chief shareholders in SkyWay Aircraft was a private investment bank near Dallas, Argyll Equities LLC, which raised funds for a Mexican industrialist with ties to narcotics traffickers in both the Cali Columbia and Juarez Mexico Cartels.
Secrets of the black box budget
Individuals involved in the operation have extensive and wide-ranging connections to each other which pre-date the brief life span of the company, revealing the outlines of a larger and previously secret organization.
Michael Farkas, the company’s founder, for example, has longstanding ties to Adnan Khashoggi and his lieutenant Ramy El-Batrawi, who supplied one of the two DC9’s used in the operation, who at one time ran a CIA subsidiary airline used to ferry TOW missiles to the Ayatollah Khomeini’s regime in Iran.
Both Khashoggi and El Batrawi are currently on the lam in the $300 million Stockwalk scam, which precipitated what news reports called the “largest brokerage industry failure in more than 30 years.”
The fraud involved the stock of GenesisIntermedia, a company incorporated by the long-time attorney of a man once called the biggest drug smuggler in American history, CIA pilot Barry Seal.
Along with GenesisIntermedia, the stock of just two other companies was used to generate fraudulent loans in the scam: Holiday RV. Stores and Imperial Credit Industries.
Michael Farkas, founder of SkyWay Aircraft, owns both companies.
THURSDAY: THINGS GET SORDID. REALLY SORDID.