FAPA.aero | Guest editorial: The Worldwide Entertainment case: one pilot's opinion

Money Matters

Guest editorial: The Worldwide Entertainment case: one pilot's opinion

Andy Simonds

Editor's Note: The following is a guest editorial by Andy Simonds, a first officer for American Airlines, who has followed the Worldwide Entertainment case and writes about it from a pilot's perspective. It is important to note that there have not been any criminal charges brought against Worldwide's principal, Jack Utsick. The opinions expressed in this editorial are not necessarily those of FAPA.aero. Furthermore, this article, and other FAPA.aero coverage of the Worldwide case, should not be construed as financial or legal advice.

Why is it that we, as pilots, will allow perfect strangers to drive 200 tons of steel, jet fuel and people toward the ground at 135 knots and have complete trust and faith that this person will flare?

On the job, there is a basic level of trust that is generated by the other pilot merely showing up for the trip. We know that he wouldn’t be there unless he has the minimum training required for the job; the same training that we went through. So, while I believe the other pilot can shoot an ILS (and flare), there is still some proving and confidence-building to be done. Our profession demands risk/reward calculations. Sometimes, those calculations come at a pretty fast clip but most often, we have the luxury of time to expand our research into resources that include experience, academics (the "book"), peer knowledge, and common sense.

It appears one of our colleagues has taken a number of other colleagues for a bumpy and fruitless ride down "I’ve got mine" lane. We’re smart guys. How could this happen?

Because we automatically bestow the ultimate trust to these strangers, it makes sense that we will trust them with things of lesser value (money). The generic sense in our professional community is that airline pilots are notoriously bad at making sound investment decisions. But, when someone who has already earned your confidence (arguably the most powerful tool in the kitbag) wants to share other wisdom and good fortune (I now tie my shoe laces differently because of another pilot’s recommendations.), it makes perfect sense that you would want to learn as much as you can about improving other aspects of your life, specifically and especially, finances.

Let’s be clear about this. All of us are good at some things. Some of us are good at many things. But none of us are good at all things (There’s a Pythagorean Theorem in here somewhere, but I’m not good enough to know that.). Just because the person is a great pilot doesn’t mean that he has anything in common with Warren Buffet. I have had the pleasure and, indeed, honor to fly with some of the smartest people I have ever met. I have also flown with others that must be good at other things. Even so, I would never automatically trust and assume that these fine fellows should get anywhere close to my financial reservoir (With some, I’m not entirely thrilled with their proximity to the yoke.).

A small percentage have tried. We have probably all flown with people who are involved with multi-level marketing programs. While trying very hard not to judge these programs here, they make very few people wealthy at the expense of the majority. They also make your friends into customers under the banner of trying to improve your life with skin care products, magnets, soap and cash. While not illegal, ethics should be considered. Other pilots have discussed real estate, mortgage brokering, retail outlets, mall stores, franchises, car wash facilities, web-based services, auto/aircraft brokering and, my personal favorite, the hunt for the Golden Buddha (You can’t make this stuff up.).

To be fair, some of these ventures are very successful, very ethical, and demand lots of work and investment of both money and time. Some of these guys have worked extraordinarily hard to make these "second" incomes come to fruition. But there are those that just want your money because it’s far easier to let someone else do the work while they cash the checks. If you are going to seriously consider investing time or money in any situation, invest in research and recommendations first. Any reputable business proprietor, general partner, and financial planner would demand the due diligence that ensures you have the most information and knowledge to make the most accurate risk/reward decision. Most of them will even require you to sign a statement acknowledging the same.

The catalyst for this piece comes from the recent exposure of an investigation into the questionable business practices of a former TWA pilot-turned-entrepreneur. This article on the SEC website addresses the civil injunctive action filed against Jack Utsick. This pilot resigned from TWA in 1988. Since then, he has been involved in concert promotions, of sorts (mostly promoting his own financial portfolio) and built a house of cards designed, in principle, by the failed (and dead) financial architect Charles Ponzi. The charges are based on a "fraudulent offering that raised over $300 million from over 3,300 investors nationwide." Let me do the math for you. That’s an average of almost $91,000 per taker (or giver).

In short, the "Ponzi Scheme" is designed to float enough money to keep just enough people happy. Happy people generate happy thoughts and tell their friends, bringing in more money. The problem is, there doesn’t have to be a real business that invests in anything real or unreal and, in the end, there isn’t enough money to return the investments to all participants. The only thing required is investors with money and confidence. It may be no surprise to anybody that, after getting caught in the United States and spending many years making big rocks into little rocks, one of Ponzi’s many failures included losing his Italian airline job after trying to muscle in on internal airline graft. Shooting himself squarely in the foot, he followed through with a threat to drop dime on the guys he was blackmailing. The airline shut down and he was unemployed. He went on to future swindling when he returned to the U.S. He died a few years later with just enough money to pay for his funeral.

In this specific alleged fraudulent offering, according to one investor who asked to remain anonymous, it was suggested to him and others that the long-term interest would come to about 18 percent or more. For an investment, this is not grossly unusual. It’s enough to bait the hook without looking too fishy, as it were. Some people were actually getting their money back with interest. In some cases where money was in an IRA (individual retirement account), these investors were just rolling their money over and reinvesting the earnings. Reportedly, another entity was investing World Wide Entertainment’s accumulated assets in a less-than-responsible and non-refundable way (read: stealing) which put additional pressure on Utsick to generate additional funds to keep all the spinning plates up in the air. In other words, the scammer was getting robbed. Consequently, Utsick who was now starting to feel the heat began playing the options market and, like most desperate people trying to make the quick big buck, ended up losing big time to the tune of around $17 million. Oops. This was where things started to unravel and led to the ultimate exposure of the plot.

So, what’s with guys like this? We all say the same thing. I’m smart. That will never happen to me. How can a colleague be suspect of anything so untoward? The answers are easy. We’re human. As George Orwell would say: some are more human than others. More than that, we are trusting humans. It’s our nature. Just as the other guy in the cockpit who has earned your automatic and immediate trust, he earns your confidence. That’s the reason why those that make off with your money on false pretenses are called Confidence Men (women too, but all references to gender here are interchangeable.). Remember that the pilot community is large and representative of virtually all segments of society. Along with the geniuses, we have simpletons. Along with the most reverend and ordained, we have the sociopaths. We have doctors, dentists, Ph.D.s, lawyers, musicians, craftsmen, builders, fathers and mothers who have (and are) sons and daughters who have (and are) sons and daughters. There are regular guys and gals, irregular guys and gals, guys who want to be gals, heterosexuals, homosexuals, introverts, extroverts, Republicans, Democrats, Independents, Socialists, apolitical, atheist, antiestablishment and the "Average Joe." Some have gone to jail. Some have committed the most heinous of crimes. But, most of all, we are a great group of trusting and committed professionals in pursuit of an honorable life filled with professional and personal integrity. And that’s what makes us the finest of targets. In short, after doctors and athletes who are statistically more gullible, we are the dream mark.

So what can I do? (I hear you cry.)

1. Believe nothing of what you hear and only half of what you see. Go to the Securities and Exchange Commission (SEC) website and search for any documents that might be related to the people asking for your money.

2. Read this: SEC Testimony: The Commission's Role in Empowering Americans to Make Informed Financial Decisions (Susan Ferris Wyderko). This is what the SEC does and how they can protect you from scams, liars, cheats, _________ (fill-in-the-blank) and confidence artists.

3. Talk to those that have been hit. Many are embarrassed by their mistakenly placed trust. Many are angry enough to want to tell the world. For those that have suffered the loss, you have suffered enough. You made an honest mistake with dishonest entities. Don’t beat yourself up any longer. You are in the best position to help those that are trying to help themselves. Tell your story. Tell 10 more people to tell your story. Most likely, you will recover financially. Helping others will hasten the emotional healing and anger and might stop one person from heading down the wrong path. You might even help catch one of the bad guys.

4. Use the Internet. When Jack Utsick started his quest for your money, there were few resources to verify his claims. The Internet now provides a wealth of information that is anecdotal, legally accurate, and arms you with the necessary tools to make the most educated, comfortable and logical decisions. Don’t go exclusively to the websites suggested by the company wanting your money. They are not going to send you a web destination that offers anything other than high praise. In fact, some website links can look official but are built by the con artist and designed to make you believe you are somewhere else. (Their hyperlinks in any email should be suspect.) Get your own website addresses and talk to government officials via phone numbers that you found, independent of the guy who wants your money.

5. Discuss any serious financial commitments with those you trust most, especially those that serve as the devil’s advocate. Get perspectives from all sides. Get someone you trust to try and talk you out of it. Then take your discussion to your trusted financial planner (the one with a good track record), your lawyer and your spouse/partner/friend or pet. Listen to yourself tell the story and be as objective as possible. People fall in love with their investments. Remember that the investment has no love for you. It is an inanimate object worthy of your consideration but not your heart.

6. There are always other investments. Don’t be lured by the sweet offerings that are always too good to be true. Just think how good it will feel when you find out that the investment you passed on ultimately failed and your money is safe in your bank. Just think of the guys that told Utsick to go pound sand. How great it must feel to see their money safe and Utsick stopped by the SEC and, perhaps, on his way to a place that serves food on trays that would make a crew meal look like a candlelight dinner at the Ritz with Kim Bassinger. For clarity and fairness, the case against Utsick is, at this point, a civil matter and is not yet a criminal case. The parties involved, without admitting or denying the SEC's allegations, have consented to the entry of a judgment of permanent injunction and other relief (the "judgment").

7. If you are the one looking for investors, expect that your potential clients will be asking for all this information. Offer it up front. As any pilot would want to know, discuss risk/reward percentages and calculations. Be open and honest about your history, legal troubles or issues. Ensure that your potential investor knows the absolute risks involved. Above all, understand that this person you are talking to is a colleague and do not jeopardize the important and imperative aspect of the pilot-pilot relationship: trust. If you can call this person your friend, understand that money changes all relationships. Be certain of what you are willing to risk in trade for possible financial gain.

8. If you get scammed, contact the authorities. Just like an abort on the runway, stop the airplane and stop the damage. You can minimize your exposure by getting legal assistance as soon as possible. If you have already had legal representation in this investment, contact that attorney and discuss your options. Ask your lawyer or CPA about a Section 165 filing which is designed to assist a taxpayer who has sustained a "disaster loss" to make certain deductions (in an amended return) for the year preceding the loss. There are, of course, very specific parameters which will allow these deductions which are also related to decisions made by the receiver.* Additionally, there are firms designed to assist you in recovery of your losses. These programs are usually fee-based and, depending on the size of the claim, may or may not take your case. They are usually accountants, attorneys or both and can, at least, give you an idea what kind of financial recovery is possible.

Look out for yourself first. Worry about the partnership later. If there are automatic withdrawals from your bank associated with this project, shut that down by calling your bank immediately. Move your money to another account if necessary. Understand that due to preferences lawsuits you might be exposed to a liability associated with returning funds to the courts. This is usually associated with various state regulations pertaining to the Assignment of Benefits to Creditors or the ABC law. In short, this law is designed to "help" all creditors feel equal amounts of pain when it comes to dividing assets from an organization in receivership that are still available or recoverable. If you got out early with most, if not all of your money, you may have to give a percentage of that money back so that other creditors, who were not so lucky, get something back.

Most importantly, common sense demands an abundance of objective thinking. It’s fair to say that most people are honest. It’s fair to say that honest people make mistakes or bad decisions. It’s also fair to say that some of the best decisions end up with some of the worst consequences. That means that some investments, while honest and well-intentioned, fail. There may be no assignable blame. It’s just another horse race and, ultimately, the cost of doing business. Risk vs. reward.

You wouldn’t shoot a CAT III approach with equipment and people that weren’t triple-checking each other as well as all the roads that lead to the path ahead. Take the same precautions and make the same considerations with your investments. It’s your money. You have already risked enough to get it. You surely deserve to keep it.

Note: According to government reports, Utsick fled to Brazil in 2006. The FBI reported on December 8, 2014 he was extradited from Brazil to the U.S. to stand trial for securities & mail fraud.

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KarenFloyd

Karen joined the FAPA team in May of 2013 to work alongside Judy Tarver and Claudette Carroll helping our Premier members turn their interviews into job offers.  She comes to FAPA after working for a number of years as a Pilot Recruiter at American Eagle Airlines.  During this time, Karen worked closely with Claudette Carroll in the hiring of several thousand pilots for American Eagle.

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