The Cedar City flight school owned by brothers Cole and Jared Faddis abruptly closed in March 2009, leaving dozens of students on the hook for educational loans for training they didn't get.
But when Iron County prosecutors targeting fraud head to court later this week, the brothers won't appear as defendants.
Under a deal that spares them prison and a felony conviction, they are expected to testify against General Manager J. Robert Tripp, whom police allege helped pilot the school into crime.
But Tripp's lawyer, Jim Bradshaw of Salt Lake City, says his client did not control National Pilot Academy's (NPA) accounts, its structure or procedures, nor did the Faddises warn him they were about to close the school as its debts began mounting in late 2008. It toppled it into bankruptcy the next spring.
Bradshaw contends prosecutors, in their zeal to net Tripp, let the bigger fish swim away.
"The focus, especially in white-collar cases, is on those who got the money, made the decisions and owned the enterprise," Bradshaw says.
Iron County Attorney Scott Garrett says Tripp didn't fully cooperate when Cedar City police were investigating the school three years ago.
"We believe we are doing what is right. We are going where the evidence is taking us," Garrett says.
Making a case, cutting a deal • Tripp, 31, is now a third-year law student at the University of South Dakota. A felony conviction could derail his legal career before it starts.
In a strange twist, Garrett provided a law school recommendation for Tripp in early 2010 when police were investigating the NPA, but before detectives recommended charges against Tripp. Detective Nate Williams then considered Tripp a witness, the investigator testified in an earlier hearing.
Garrett's deputy, G. Michael Edwards, is prosecuting the case.
According to charges Edwards filed a year ago, the academy operated like a Ponzi scheme. It charged students, most whom hoped to become professional pilots, up to $60,000 in tuition up front, despite warnings from state regulators.
Under regulations enacted in 2006, flight schools may not charge up-front tuition without registering with the state Division of Consumer Protection and obtaining a bond. The school had not taken those steps.
Meanwhile, instead of being reserved for their instruction, students' money covered the school's ongoing expenses and paid off impatient vendors, charges allege.
On Friday, the Faddises, the lawyers and Tripp are due back in 5th District Judge Michael Westfall's courtroom to finish a preliminary hearing that started on March 29.
The judge will decide whether the testimony supports trying Tripp, free on $50,000 bail, on 25 second-degree felony charges of communications fraud and unlawful dealing by a fiduciary.
In a plea deal that has mystified some students and their parents, the owners pleaded guilty to a single fraud count each. In exchange for paying $115,000 in restitution and testifying truthfully against Tripp, their convictions will be reduced to class A misdemeanors, and Edwards will not request jail time.
"That makes me angry that they are able to walk away," says Matthew Wise, who took out three loans totalling $60,000 in July 2008. He trained at NPA's Tucson location but left a few months later when he realized the school could not provide the promised instruction.
The $115,000 paid in restitution by the Faddises on Friday covers much of the losses suffered by the dozen students named in the criminal case. They signed up after June 2008, when the state had ordered the school to stop recruiting students.
Other students, including Wise, will be saddled with payments to lenders for years. Student loans cannot be discharged in bankruptcy.
From manager to defendant • NPA left $1.3 million in claims hanging when its Chapter 7 bankruptcy closed earlier this year. Most creditors are students, but others include vendors and employees. Tripp himself is owed $5,000 and has a priority claim, meaning he would be paid, along with the IRS, before any of the students. The bankruptcy trustee recovered about $8,000, which went toward expenses.
Tripp, a Cedar City native, joined the school in the mid-2000s after graduating from Southern Utah University. Initially Cole Faddis hired him to handle sales, then had him manage the school's Cedar City location, one of four. Tripp, who had no prior experience with flying or proprietary schools, was soon promoted to general manager.
Cole Faddis later moved to Florida to start another flight school, delegating key authority to Tripp, according to earlier testimony.
Critical to the state's fraud case was NPA's failure to register with the state and get a bond. The Faddises contend Tripp mishandled the registration application.
Detective Williams first interviewed Tripp in July 2009, then again in March 2010 with Garrett present. On neither occasion did Tripp have legal representation. His sister, Salt Lake City lawyer Leasa Tripp, insisted a third interview would be conducted only in her presence, but Williams scratched it and recommended Tripp be prosecuted. The detective has testified Tripp was "evasive."
Bradshaw says he offered his client's testimony against the Faddises months ago, but prosecutors did not respond. Only on the day of the March 29 hearing did he learn that the brothers had cut a deal to testify against Tripp.
"I don't understand how you reach a deal where the owners get off with a misdemeanor in exchange for testimony against a [salaried] employee who had no control and didn't get the money," Bradshaw says.
National Pilot Academy
Police began investigating the Cedar City-based flight school after it closed down in 2009, leaving many students deep in debt for training they didn't receive. Iron County prosecutors are now using testimony from school owners Cole and Jared Faddis in their effort to convict manager Robert Tripp of fraud. The Faddis brothers have paid $115,000 in restitution and are to testify Sept. 7.