Investigations

On November 28, 2018, two former executives at Myrtle Beach Direct Air and Tours (Direct Air), a now-defunct air charter operator, were sentenced in U.S. District Court, Newark, New Jersey, for stealing millions of dollars from an escrow account set up to pay for passengers’ future travel. Kay Ellison, former vice president and managing partner, was sentenced to 94 months’ imprisonment, 60 months’ supervised release, an $800 special assessment fee, and $19.6 million in restitution. Ellison was convicted of conspiracy, wire fraud, and bank fraud in March 2018. Robert Keilman, former chief financial officer, was sentenced to 60 months’ probation, a $100 special assessment fee, a $10,000 fine, and part of the $19.6 million in restitution. Specifically, Keilman was found to be responsible for no more than 5 percent of the total restitution ($983,171.48), and solely responsible for $2,214.74 in losses incurred by four victims. He pleaded guilty to conspiracy charges in September 2015.

 

In March 2012, Direct Air ceased its public charter operations and filed for bankruptcy protection. After the bankruptcy filing, the Office of the Secretary of Transportation learned that Direct Air officials may have misappropriated pre-booked ticket revenue that, per DOT regulations, was supposed to be kept in an escrow account.

 

Evidence presented at trial showed that from October 2007 through March 2012, Ellison and Judy Tull, Direct Air’s former chief executive officer, artificially inflated the amount Direct Air was entitled to receive from the escrow account. They sent the falsified amount in a letter that asked the escrow bank to release the funds. To cover up their fraud, Ellis and Tull falsified profit and loss statements to suggest the company was making money. They sent the falsified documents to credit card companies and banks to trick them into continuing their business relationships with Direct Air.

 

Testimony at trial established that two financial institutions incurred losses of nearly $30 million because they had to issue refunds to the thousands of passengers whose money was stolen by the defendants.

 

DOT-OIG conducted this investigation with the Department of Justice Criminal Division Fraud Section’s Securities and Financial Fraud Unit.