Taken for a ride
Helicopter school crashes and burns; students pick up the pieces
It seemed like such a good deal at the time, a chance for Dave Sipes to pursue his dream job.
“I’ve been wanting to fly helicopters all my life,” said the 26-year-old Sacramentan. After he heard a spot on 98 Rock for an outfit called Silver State Helicopters, he went to the company’s offices at the old McClellan Air Force Base and signed up.
A big part of Silver State’s appeal was that the company took care of all the financing. “They said: ‘This is the lender. This is what you’re approved for,’” and Silver State did all the paperwork, Sipes explained.
The helpful lender, Student Loan Xpress, started cutting big checks, disbursing $23,000 every three months to Silver State. Like all Silver State students, Sipes paid for his tuition up front. As a pilot, Sipes was told, he’d soon be making more than enough to pay the loans back.
But on February 4, with no warning, Silver State shut its doors and fired all of its flight instructors. The next day, the company filed for bankruptcy. Sipes is now $70,000 in debt and has no pilot’s license to show for it. He is just one of perhaps 200 Sacramento Silver State students left holding the bag, one of about 2,000 nationwide.
What happened? Las Vegas-based Silver State boasted of being the largest chain of helicopter flight schools in the world, with 30 locations in 15 states. In 2006, it was one of the fastest-growing companies in the United States, and the company reportedly had revenue of more than $70 million.
Silver State’s founder, Jerry Airola, was named just last month to the State of Nevada’s Economic Development Advisory Board, and was a big player in Nevada Republican politics.
Now the company says it has no money to pay its creditors, including hundreds of students like Dave Sipes.
The company’s phones at its Las Vegas headquarters are going unanswered. The company’s Web site has been taken down. The company’s bankruptcy attorney referred SN&R to a public-relations company called Mass Media Communications. There, a PR consultant refused to answer SN&R’s questions, instead forwarding a terse statement that blamed the company’s financial meltdown on “the recent loss of financial institutions utilized by the organization for funding.” When pressed for more information, the consultant referred SN&R to the company’s now defunct Web site.
It seems the once high-flying, high-profile Airola has figuratively, if not literally, unplugged the phone and pulled the covers up over his head.
Silver State students might have seen this coming. Long before his company cratered, Airola was building a dubious reputation.
In 2006, he spent more than $3 million of his own money running for sheriff of Clark County, Nev. In one of his campaign spots on TV, he told voters, “We need a sheriff who can run that department like a business.” But voters rejected Airola after it was revealed he had exaggerated his law-enforcement credentials.
Also during that campaign, his opponents made hay about Airola’s ties to the Church of Scientology. Airola denied being a member, but according to Las Vegas TV station KVBC, he “admits to being involved with one of Scientology’s front groups that teaches business strategies.”
At the same time, Airola was hit with a class-action lawsuit by Silver State students in Arizona.
“It was a pyramid scheme,” said Pete Lown, an attorney representing the Arizona students.
Lown said that the company never invested enough in helicopters and was much better at taking money than training pilots. “Worst-case scenario, I had a guy who trained for 14 months and flew just one hour. These folks found themselves years into the program and miles away from the qualifications they were promised. Meanwhile, [Airola] is getting all the money upfront.”
The Arizona students had agreed to negotiate a settlement, but with the bankruptcy Lown expects to file a new lawsuit against Silver State soon.
SN&R contacted Student Loan Xpress spokesperson Jennifer Stark to ask what kinds of procedures were followed, to ensure that Silver State was reputable and in good financial shape before making such large upfront loans.
Stark replied that she couldn’t answer that and e-mailed a statement saying that her company was monitoring the bankruptcy. “We also encourage those students who finance their tuition with SLX and who have not received their degrees to contact SLX to implement satisfactory repayment plans,” Stark wrote.
Lown believes lenders like SLX are culpable. “The conditions of the student-loan program are abominable. There’s this whole level of lenders that are financing these trade schools of questionable repute. That’s what enabled him,” Lown said. “I’d like to see some pressure put on these lenders to give people some relief.”
Because soon enough, those lenders will be putting pressure on the students. “Everybody is worried. The banks are going to start coming after the students. But we’re not going to be able to go after the company,” Sipes said.