777 & Flair Fraud Claim

[Live4Flying787]

Unbelievable. Josimar says that Jones is lying about Flair owing custom duties and has the receipts to back it up. The article below says there are no customs duties on aircraft on commercial aircraft in Canada. It would be pretty easy for Flair to deny if it was not true.

It says that Flair has fraudulently taken money from taxpayers!

That is, Flair does not just “owe” 67 million Canadian Dollars for unpaid duties. It filed fraudulent rebate claims to withdraw 67 million Canadian Dollars from the government and has been operating the airline on taxpayers’ dime. This money has been spent on, among other things, making lease payments to its investor 777, which is running a Ponzi scheme of a global scale.

How did Flair / 777 perpetuate their latest fraud? Airlines in Canada have to pay 5% GST on new aircraft, which is fully refundable. Flair never paid the GST, but took money out of government accounts. Flair did this 20 times over different aircraft before the government shut it down and threatened to seize its assets. Summary pasted below with full article to follow.

The problem is that, as shown below, Canada does not impose duty on imported aircraft.

So where do these 67.2 million come from, and why would Jones say that ‘import duties’ were to blame, when they are not applicable?

As Jones said in his BNN Bloomberg interview, twenty Boeing aircraft were purchased for Flair, each of them costing 50 million US dollars, which is equivalent to just over 67 million Canadian dollars. The total value of the order was 1 billion US dollars, that is 1.34 billion Canadian dollars. Canada’s equivalent of VAT is GST, “Goods and Services Tax”, whose current rate is 5 percent. 5 percent of 1.34 billion Canadian dollars is 67 million, the exact amount which the Canadian authorities are now recouping from Flair. It’d be an extraordinary coincidence if the 67 million did not correspond to the GST bill for the aircraft – a bill which has nothing to do with non-existent ‘import duties’.

Why Jones is anxious to blame ‘accrued import duties’ rather than GST for the 67.2 million bill is understandable. There is a significant difference between being late paying a tax bill and being in an irregular situation with GST claims and obligations. GST- or VAT- registered companies can legitimately claim that tax back from the state, as it is ultimately levied on individual consumers, not commercial entities. Flair could therefore claim back their entire GST bill, that is 67 million Canadian dollars, for the purchase of the fifty Boeing aircraft which were imported from the US. Separate independent sources suggested to Josimar that the problem, in this case, could be that Flair did not pay the GST to start with, and that 777 took out the 67 million ‘reimbursed’ by the Canadian state as if it were money earned by their affiliate company, which they could dispose of as they wished. It is one thing to be late in paying one’s tax, it is another to appropriate – at least for a while – money raised from ordinary taxpayers which the state could use to fund schools and public health services.



https://josimarfootball.com/2024/02/19/ ... ght-world/

Credit in the straight world
Credit Rating agency AM Best has slashed the rating of 777re, one of 777 Partners’s main sources of financing, from ‘fair’ to ‘weak’ and ‘very weak’, casting more doubts around the US group’s ability to sustain its current commitments, in football and elsewhere.

By Philippe Auclair and Paul Brown

Perhaps it shouldn’t come as a shock, given that Bermudan regulator BMA had recently stepped in to place 777re into administrative control, pending an investigation into suspected breaches of financial rules. But the brutality of AM Best’s credit rating slash will send danger signals throughout all of 777 Partners as a group – as well as through the seven clubs they own wholly or in part, not to mention the Premier League, which has yet to assent to the US group’s takeover of Everton FC.

Until last November, 777re, a reinsurance company with a multi-billion dollar portfolio, was thought to be the most profitable of Steven Pasko’s and Josh Wander’s assets, and was rated A- (excellent) by the agency. As of 16 February, this rating is now C-, indicating ‘weak’ or ‘very weak’. As Josimar has already explained, 777re is a vital source of funding for 777 Partners and their football operations.

Between April 2019 and December 2021, for example, 777 and certain of its affiliates withdrew at least 570 million US dollars from 777re, with Sevillistas Unidos SL one of those to benefit. Sevillistas Unidos is the entity tied to 777’s ownership of Sevilla FC and Genoa CFC. 777 has also utilised 777re funds to issue its own loans at rates of 15 to 19 percent per annum. Independent financial analysis suggests that by 31 December 2022, 777-controlled entities owed more than 1.5 billion dollars to 777re. Among these loans is another, for 103 million dollars, to 777-affiliate Nutmeg Acquisition LLC, the holding company for all its current football clubs.

The AM Best report explains the agency’s decision to deal such a blow to 777re’s credit standing, suggesting that the interdependency between the two entities is at the heart of their problematic situation. To quote from the full version of this report accessed by Josimar, under the heading “Balance Sheet Strength: Very Weak”, “the company [i.e. 777re] has a materially significant exposure to affiliated assets originated by its ultimate parent 777 Partners, and this exposure is the primary reason for the significant drop in risk-adjusted capitalization […] There is a great deal of uncertainty around the liquidity of the affiliated investments.”

AM Best is also concerned by the lack of clarity and transparency of 777 Partners’ current financial situation, something which had also troubled the Belgium Licensing Commission, as reported here. This is, according to sources, one of the key reasons behind the Premier League’s clear reluctance to greenlight the group’s purchase of Everton FC. “777 Partners LLC has not provided audited financial statements since 2020 and Bricknell Insurance Holdings, the immediate holding company, was unable to provide audited financial statements for 2022”.

Surprisingly, 777re’s Operating Performance is rated as ‘marginal’, despite a net income of 119 million dollars in 2022, following solid showings in the previous two years. AM Best judges that the company is too exposed to private affiliated investments, which it considers “somewhat illiquid”. Because of that, “these positive trends are not expected to continue”.

Another problem highlighted by AM Best, as reported by Josimar here, is the very high turnover of executives within the US Group. Chief Financial Officer Damien Alfalla being the latest to tend his resignation, just a few days ago, following the departure of other key personnel such as chief strategist Juan Arciniegas in June of last year, managing director Peter Meyers a month later, and, on the football side, Head of Analytics Mladen Sormaz at the beginning of February 2024. Whilst it can be expected that a company such as 777 should experience regular changes within its staff, the sheer volume of departures (and the fact that many of the vacated positions have yet to be filled) has started to look like an exodus. AM Best goes as far as saying as part of its assessment of 777re’s ‘weak’ Enterprise Risk Management that the company “does not maintain an appropriate structure for its risk profile”.

Moreover, the credit rating agency goes as far as suggesting that this exposure to risk was linked to the company’s board – which includes Wander and Pasko – choosing to ignore and even bypass its own guidelines, “which led to a material decline […] and a significant exposure to affiliated assets”, assets which are mostly related to 777 Partners. And while AM Best recognises that 777re intends to reduce this exposure, this comes with a stern caveat. “However, there are significant execution risks which expose the company to further operational risks,” the report says.

One of these affiliated assets is troubled super-low-cost Canadian airline Flair, who 777re had loaned 37.6 million US dollars as of 31 December 2021, and which finds itself confronted with a 67.2 million Canadian dollars (46,7 million euro/50,3 million US dollars) problem which looks to be far more serious than its President and CEO Stephen Jones admitted in a recent interview.

Keep Flair In The Air, How You Do It I Don’t Care
777 Partners hold a 25 percent share of Flair, the maximum which is allowed for a foreign investor by Canadian law, but wield a greater influence than this share suggests. The airline is familiar with controversy and allegations of wrongdoing, which the company says are orchestrated by competitors who fear that their lucrative hold on the Canadian market could be challenged by a “disruptor”. They even speak of a “conspiracy”. While it is true that Canadian customers using domestic flights face comparatively higher fares than their US neighbours, and that this might suit established airlines, this does not explain why four of Flair’s Boeing jets were repossessed in March 2023 and why, almost a year later, they still are the subject of a court action launched by three aircraft lessors. Late payments are to blame, and, beyond that, financial results which lag way behind 777’s expectations.

The poor performance of the airline, which is said to lose at least 10 million dollars a month (some sources say twice as much and more), can be illustrated by publicly-available information obtained from the Cirium aviation database. There was, for example, a spectacular decline in the number of flights operated and passengers transported by Flair between August 2023 and January 2024.

Industry sources told Josimar that this decrease could not be explained by seasonal factors alone, and might be linked to the record number of complaints lodged by their passengers in the first quarter of 2023, which led national broadcaster CBC to label Flair “Canada’s worst airline” in this report.

When asked by BNN Bloomberg TV to detail the current financial situation of the company (which, as it is privately-owned, does not have to make its accounts public), Flair’s president and CEO Stephen Jones declined to answer, stressing how Flair had delivered considerable savings to Canadian travellers instead. But Jones appeared more forthcoming on the subject of the 67.2 million Canadian dollars demand which Flair received from the federal tax authorities in November 2023, which the country’s most widely read daily The Globe and Mail had been first to report on at the end of January. As can be seen in the document below, a writ of seizure had also been issued by Canada’s Federal Court, which gave the Sheriff of Alberta, the province in which Flair is HQed, the power “to seize and sell the real property and immovables and the personal property of moveables within your jurisdiction of Flair Airlines Ltd”, up to the 67,174,123,37 Canadian dollars which were due.

According to Jones, this was old news, and a gross exaggeration of the problems his company was facing. Flair was sticking to a monthly repayment schedule agreed with the Canadian Revenue Agency (CRA) which (Jones kept this information out) had apparently been discussed and set up following discussions between Flair’s lobbyists and the Canadian authorities. Lobbying activity is a matter of public record in Canada, and filings seen by Josimar, of which this is an example, show that Flair used the services of a company called StrategyCorp Inc. to approach government officials on forty-eight occasions between 6 April 2022 and 20 November 2023, and that at least nine of these meetings, held between 14 May and 28 September 2023 dealt with taxation questions.

Jones did not give numbers or particulars, but insisted that these 67.2 million were due as unpaid ‘import duties’ linked to the purchase of twenty Boeing aircraft which had been manufactured in the USA, each of them worth 50 million US dollars.

The problem is that, as shown below, Canada does not impose duty on imported aircraft.

So where do these 67.2 million come from, and why would Jones say that ‘import duties’ were to blame, when they are not applicable?

As Jones said in his BNN Bloomberg interview, twenty Boeing aircraft were purchased for Flair, each of them costing 50 million US dollars, which is equivalent to just over 67 million Canadian dollars. The total value of the order was 1 billion US dollars, that is 1.34 billion Canadian dollars. Canada’s equivalent of VAT is GST, “Goods and Services Tax”, whose current rate is 5 percent. 5 percent of 1.34 billion Canadian dollars is 67 million, the exact amount which the Canadian authorities are now recouping from Flair. It’d be an extraordinary coincidence if the 67 million did not correspond to the GST bill for the aircraft – a bill which has nothing to do with non-existent ‘import duties’.

Why Jones is anxious to blame ‘accrued import duties’ rather than GST for the 67.2 million bill is understandable. There is a significant difference between being late paying a tax bill and being in an irregular situation with GST claims and obligations. GST- or VAT- registered companies can legitimately claim that tax back from the state, as it is ultimately levied on individual consumers, not commercial entities. Flair could therefore claim back their entire GST bill, that is 67 million Canadian dollars, for the purchase of the fifty Boeing aircraft which were imported from the US. Separate independent sources suggested to Josimar that the problem, in this case, could be that Flair did not pay the GST to start with, and that 777 took out the 67 million ‘reimbursed’ by the Canadian state as if it were money earned by their affiliate company, which they could dispose of as they wished. It is one thing to be late in paying one’s tax, it is another to appropriate – at least for a while – money raised from ordinary taxpayers which the state could use to fund schools and public health services.

Perhaps it is no wonder that Flair should point the finger at ‘import duties’ and that AM Best should consider some of 777 Partners affiliates to carry unwarranted risk.

Josimar approached Flair for comment.

After publication, Portland Communications, who represents all three aircraft leasing companies provided this statement:

“Despite being repeatedly notified of their financial obligations, 777 Partners have continued to ignore calls to settle outstanding payments of almost $30 million. 777 Partners cannot just ignore its financial and contractual obligations. This legal action is a last resort”

[straight2thepoint]

Perhaps it shouldn’t come as a shock, given that Bermudan regulator

Bermudian

[Red_Comet]

Thanks for the article, this really does not bode well for Flair. 777 looks like a Ponzi scheme in full collapse, as they're likely using the 67 million GST "rebate" they stole from Revenue Canada to pay off the interest on their various debts for as long as possible. Ironically, the GST money may be the only thing keeping 777, and by extension Flair, alive at present. Once it's used up, 777 is toast. Now that I think of it, the name "777" likely alludes to their casino gambling "yolo" strategy of going all-in on a ponzi scheme. Maybe they're banking on the book/movie deals a la Wolf of Wallstreet?

Sad, as I've enjoyed flying on Flair regardless of all the flak they get. Great fares and no-frills for those of us who can remember to bring our own water and snacks aboard the plane

[accountant]

I would find it highly surprising that CRA would allow Flair to take the 67 Mil as an ITC while full well knowing they owed on another end. Refunds this large are always reviewed by multiple hands and would have had to have been signed off on by section / regional heads given the size of refund. Add to that they have a right of offset on tax liabilities in many cases, particularly where it's trust funds (ie, GST, Payroll). There is simply no way they would have given Flair that cash without a deeper review.

In all likelyhood, the amount owing was probably GST on the planes owing at import that Flair probably hadn't paid but the planes were released to them (maybe they had a bond in place saying they would pay).... in which case they can't claim the ITC kickback if they hadn't paid it... (you have to prove you've paid the tax owing to claim the ITC in any review)

CRA likely saw the repossessions on a few leases and said "Oh crap, better protect our interests" then went to court to secure the neccessary orders. Things spiralled from there. Their first goal is not to shut a company down if they can prove they can make the repayments reasonable (and CRA is protected)

I could be wrong, but I think that's the most likely case.

Current interest they'd be paying is 10% if it's GST, 8% if it's excise tax.... 10% if they haven't paid the Air Travellers Security charge.

Hefty amount of interest for a small airline....

[Realitychex]

https://www.goodisonnews.com/2024/03/13 ... er-league/

These sorts of connections won't ingratiate 777 partners to anyone in Ottawa when Flair come looking for a bailout.

Thank goodness there are still journalists who actually do research in the UK.

Canadian journalists prefer to regurgitate the pablum feed to them.