Airline Pilot Central Forums - View Single Post - Mesa Mesa Mesa...the standard of the industry

10-01-2007, 09:12 AM

ERJ Driver

Gets Weekends Off

Joined APC: Jul 2007

Position: ERJ CA

Posts: 299

Mesa admitted that they did not follow an electronic document retention policy and that the IT department was not made aware that they should be looking for or retaining documents until August of this year when the Murnane issue arose. Pappaianou did inform J.O., Lotz, and Murnane that they should be preserving docs in March of last year. The company relied on voluntary copying of files into a network folder, and did not ffirmatively search for relevant documents until recently.

Notes: Mesa's argument is that although Murnane deleted documents, these documents were produced by Mesa through backups or other means and therefore Mesa should not be sanctioned for the lack of production. Levinson/ HAL did a credible job of showing that the documents produced by Mesa were not complete, and were not exactly the same as the ones deleted by Murnane. Yesterday's testimony that Murnane asked how to delete files so that the fact of their deletion was undetectable, his e of drive-scrubing software, and his back-dating of the computer clocks was unchallenged. HAL will probably also argue that Murnane's recent unavailability due to possible criminal charges is his and Mesa's own fault/ intentional doing and should not prejudice HAL's case. Murnane was obviously a central player in the HAL misconduct/ Hawaii launch of go!

JONATHAN ORNSTEIN's testimony.

[Some of spectators briefly hummed the Darth Vadar theme song as J.O. strolled up to the stand]

Comment: The proceedings evidence a lack of client control by Max Blecher who was at various times flustered by J.O.'s presentation of evidence. I suspect that it was J.O.'s idea to take the stand, as he really had nothing to offer that in any way exculpated Mesa in this motion. I suspect he was trying to show how strong Mesa's case is to convince both HAL and Aloha to back off of their lawsuits and settle. To say that he failed miserably is an understatement.

When J.O. first took the stand, Blecher reminded him that the testimony he was giving today was strictly in relation to the motion for sanctions for spoliation of evidence, and was not the same as general trial testimony which would begin later. This admonition was a waste of time, though, as the first hour of J.O.'s testimony was spent discussing various aspects of Mesa's entry into the Hawaii market.

HAL spent a good deal of time getting J.O. to admit that Murnane played a key role in Mesa's entry into the Hawaii market, while J.O. tried to minimize Murnane's participation. (To mitigate the perceived damage of Murnane's document deletion.)

J.O. testified that Mesa's entry into the Hawaii market was based on a QSI (Quality Service Index) formula that would mathematically determine profitability. He argued that using .5 for aircraft load factor in the formula, instead of .9 resulted in Murnane's conclusion that 'this project makes no sense with 4 airlines in the market.'

J.O. stated a few times that he had known Murnane for 30 years that they had gone to college together, out to dinner, knew families, etc., and that Murnane was always honest. In this vein J.O. also mentioned that he had gone to Iraq with Murnane and that Murnane helped J.O. with his handicapped son. (Not a dry eye in the house. . . ) On cross examination it was established that J.O. was the driving force behind bringing Murnane on board, that Murnane reports to J.O., and that they work in adjacent offices.

Murnane prepared an offering memo which used information that was identical in every way to HAL information that Mesa was supposed to have destroyed. J.O. explained that Murnane said the info probably came from others in bits and pieces and that he had destroyed the docs.

When asked about the evidence destruction by Murnane last year, J.O. said that Murnane's explanation was convoluted and that he did not understand that computer jargon. He said that he referred this to outside counsel. It was determined that Murnane should have his own attorney.

Murnane was put on 90 days paid administrative leave on 9/18/2007, one week prior to trial commencing, per J.O.'s recommendation to the Board of Directors.

HAL raised Sarbanes Oxley issues when they showed J.O. a recent Mesa press release (http://phx.corporate-ir.net/phoenix.zhtml?c=78947&p=irol-newsArticle&ID=1054417) in which, while stating that Mesa maintains the "highest ethical standards," Mesa fails to disclose to shareholders that Mesa's CFO – the person responsible for public shareholder reports – was facing allegations of destruction of evidence that he was federally-mandated to preserve. J.O. admitted that he had reviewed and approved this press release. J.O. got flustered here and blurted out that they had no responsibility to issue any information at all under NASDAQ rules.

HAL then established that in spite of Mesa's “highest ethical standards” they did nothing in the face of Faris' ruling that Murnane had lied. HAL brilliantly confronted J.O. with the Wall Street Journal article in which J.O. stated that 'he took exception with the court's conclusions'. As 'the court' was Judge Faris -- the very man that J.O. was sitting in front of -- this caused a bit of squirming on the Mesa bench.

When asked about Murnane's copying of HAL's confidential info, J.O. defended it as an 'honest mistake'. (HAL has a brilliant counter for this, discussed later.) He stated that Murnane is the 'highest quality people'. He stated that other than asking Murnane to re-write the declaration that Faris found to be untruthful, he did nothing to investigate Murnane until July of this year when the drive scrubbing issue arose.

Next there was discussion of a 9/23/05 press release (http://starbulletin.com/2005/09/23/news/story1.html) that was curiously timed in light of Aloha's announcement of Yucaipa's investment (http://starbulletin.com/2005/09/23/news/index2.html). HAL proved that J.O. had lied when he said that the timing of this press release was coincidental and that it was not intended to forestall investment in Aloha by investors. Mesa Board of Directors minutes from a meeting attended by J.O. in which the impact of the announcement on a potential investment in Aloha was discussed. J.O. countered that they were trying to send a message to other investors that they should work with Mesa, not against Mesa. Murnane wrote an e-mail to Mesa's consultant, Mo Garfinkle stating “Mo – wanted to give you a quick heads-up. In an effort to forestall any potential investment in Aloha we have decided to issue a press release.”

At this point J.O. was thoroughly ridiculed when he tried to argue that “forestall” meant “cooperate and invite”. Some of us almost fell off our benches laughing.

Levinson: “Does your own false testimony make you less likely to investigate Murnane?” J.O.: “No.”

More brilliant questions. “Does tampering with and manipulating evidence constitute “highest ethical standards?”

Q: “Why was Murnane not put on admin leave until 9/18 when the report of his tampering first surfaced in July?”

Note: I think that HAL is trying to analogize the skillful timing of the 9/23 press release which dropped a bomb on the Aloha-Yucaipa deal, with the timing of this administrative leave – one week before the trial – as an obvious attempt to influence the court. They make another good analogy later.

One of the many J.O. inconsistencies: While decrying the legal mumbo-jumbo, and going so far as to say that he had not read any of the court's opinions, was not sure what the preliminary injunction motion was about last year, and was not sure what this motion was about, when asked why Murnane should seek independent counsel J.O. stated “My grandfather was a lawyer, and he told me that if you're paying for legal advice you should take it.” Surely Mesa's attorney Blecher must be wishing at this point that J.O. would take his own advice, listen to his attorneys, and shut his yapper . . .

It was determined that J.O. recommended to the B.O.D. to enter the Hawaii market. J.O. waxed romantic about how he had wanted to come here for a long time, that it was an attractive place, etc. He stated that an analysis was prepared by Mesa executives and employees. Mickey Bowman (marketing V.P.) prepared the QSI showing that Hawaii could be profitable for Mesa. While J.O. tried to argue that Murnane was not involved, it is apparent that he was very involved. J.O. also testified that in spite of his romantic pining for Hawaii he did not review the Hawaiian Information Memorandum (“H.I.M.”), and did not review charts showing that Mesa could bleed money longer than Aloha in a fare war. This in spite of the fact that the H.I.M. was sent to him as an e-mail attachment.

On re-direct J.O. testified that he was “good friends with Yucaipa” that he had dinner on them the night of the closing of the Aloha deal. He testified that as Burkle is worth over $3.5 billion he did not think his 9/23/05 press release would dissuade Burkle from investing in Aloha. He testified that he offered $20 million to participate in the Aloha deal, but “unfortunately our offer did not reach [Mr. Burkle].”

He testified that at the time of the 9/23 press release Mesa was not interested in coming to Hawaii independently but rather wanted to participate in a 'block seat sale' with Aloha, as 'Aloha Express' wherein Aloha would pull some 737s off of the routes, allowing Mesa to operate its R.J.s. There was a great deal of discussion as to whether Mesa intended to put Aloha out of business. Again, J.O. reiterated that the .5 vs. .9 figure in the QSI formula was the reason that Mesa concluded that Aloha had to go out of business for Mesa to succeed. Mesa observed that at the time of Discovery Air, air fares were only $28 while at this time the lowest was $86, due to reduced competition due to Aloha/HAL cooperation to reduce capacity.

Finally Trial Exhibit #1 was presented. This was the NISD/SEC conviction of J.O. for securities violations 17 years ago. This was again brilliantly presented by HAL to show that J.O. is a lifetime liar with no regard for the law or the courts. The SEC found that J.O. had not been forthright in their investigation. They did not believe J.O.'s explanation that this was a 'misunderstanding.' When Blecher objected due to the age of the conviction, Levinson pointed out that the 10 year rule referred to by Blecher applies in criminal cases, and that this information was being offered to show that as Murnane's supervisor, J.O. was doing the exact same thing he had done 17 years ago. Dismissing illegal conduct as an 'honest mistake' and lying to a tribunal. Brilliant.

= we're done for.