Former head of airline sentenced to prison for fraud

 

Date: February 20, 2020

Contact: newsroom@ci.irs.gov

NEWPORT NEWS, Va. – A Suffolk man was sentenced today to two years in prison for fraud in connection with the failure of People Express Airlines in 2014 and the filing of a false income tax return.

According to court documents, Michael Morisi was the former president of People Express Airlines, Inc. (PEX), which engaged in failed start-up operations at the Newport News/Williamsburg International Airport. Morisi led the push to get PEX operational, despite a failed track record of obtaining private investments and significant outstanding liabilities. A switch to a focus on the public commitment of funds led to PEX obtaining a $5 million loan from TowneBank that was guaranteed by the Peninsula Airport Commission (PAC). The loan was funded in June 2014. Within a month, PEX had drawn down nearly the entire loan amount. PEX operated for approximately three months before suspending service due. In the aftermath of the suspension of operations, various creditors sought repayment from PEX in 2014 and 2015.

At the same time, Morisi opened new bank accounts to receive insurance proceeds and avoid the seizure of funds. Morisi provided false representations to creditors (including the PAC, which paid over $4 million to satisfy the TowneBank loan) claiming that no funds were available. He made large purported back salary payments to himself and other executives in lieu of paying creditors. When the first bank account was made subject to a state tax lien, Morisi moved accounts again so that he could receive and divert additional insurance proceeds. He also filed false tax returns for three years omitting income and failed to file returns for two additional years.

Kelly R. Jackson, Special Agent in Charge, Washington, D.C. Field Office, IRS-Criminal Investigation (IRS-CI) made the announcement after sentencing by U.S. District Judge Arenda Wright Allen. Assistant U.S. Attorneys Lisa R. McKeel and Brian J. Samuels prosecuted the case.