Schrameck

When Rick Schrameck brought his amateur aircraft manufacturing business to Bend, he was met with widespread support.

As the CEO and public face of Epic Air, he got state backing for infrastructure improvements at the airport. He secured deals with companies from South Africa to the former Soviet republic of Georgia, agreeing to help amateur aviators all over the world put together kit planes.

But the business unraveled, and five years after Aircraft Investor Resources LLC, Epic’s parent company, declared bankruptcy, some of Schrameck’s activities ran afoul of the FBI. Last year, a federal indictment alleged Schrameck deliberately defrauded customers of more than $14 million.

Schrameck, considered a flight risk and in custody while awaiting trial, has left behind a paper trail of civil lawsuits, bankruptcy filings and agreements with the state and the city of Bend. Although some of these obligations appear to have been met, others appear indicative of Schrameck’s financial miscalculations. The FBI declined to comment on the case Monday.

Schrameck obtained a $140,000 loan from the state, which was eventually forgiven , and in the wake of the fallout of Aircraft Investor Resources and its subsidiaries, Epic Air and Aircraft Completion Services, the city adjusted the terms of a combined $1.2 million loan and grant agreement with the state to make improvements at the municipal airport.

Epic Air was purchased and renamed Epic Aircraft in 2010 by a group of its former customers and a Chinese aircraft company.

Public money

In 2004, the state gave Schrameck a $140,000 loan, which was forgiven in February 2009 after the Oregon Economic & Community Development Department found that Aircraft Investor Resources LLC maintained for a year 159 full-time jobs, 19 more than were required under the terms and conditions of the loan.

“We are pleased to have been a part of your project, which has been successful in strengthening the local and state economy,” wrote Karen Wilde Goddin, the managing director of the department’s Business, Innovation & Trade Division, in a letter to Schrameck.

But 159 jobs weren’t sufficient under the original terms of a 2005 contract between the city and the state for infrastructure improvements at the municipal airport.

The state and the city of Bend had entered into an agreement wherein the city received a $747,000 loan and a $500,000 grant for infrastructure improvements at the city’s airport. Most of that sum was set aside for construction. For the city to retain the grant, Epic was supposed to create and maintain 214 jobs at its Bend facility for at least one year by June 30, 2007. If Epic failed to do so, the city was to pay the state a sum equal to the number of jobs Epic had failed to create multiplied by $2,500.

Between 2006 and 2013, the city got extensions on the loan agreement and altogether removed Epic from the contract language, replacing it with “businesses served by the project.”

In 2013, the contract was amended to state that the required number of jobs was 159 and the amount of grant per job increased to $3,145. According to Mike Solt, a regional coordinator for the Infrastructure Finance Authority, the maximum amount of grant money per job permitted is $5,000, so the company was well within that limit in spite of its failure to produce 214 jobs.

“In this case, the city was awarded $500,000 so they got the maximum amount of grant per project,” said Solt in an interview last week. “Since Epic came in very highly motivated and enthusiastic about what they would be able to create, I decided to hold it to them in soft terms. They initially promised 1,000 (jobs); in the end they never really go to the 200 mark.”

Assistant City Attorney Gary Firestone said Monday that under the 2013 amendment, the $747,000 loan was effectively converted into a grant and the city has no outstanding payments to the state for the aircraft infrastructure project.

Now that Schrameck faces fraud charges, the question of whether he fraudulently reported employment numbers is up in the air.

According to Ryan Frank, a spokesman for Business Oregon, of which the Infrastructure Finance Authority is a component, the authority confirms employment data with the Oregon Employment Department. In the specific case of the $140,000 loan forgiven in 2009, the state also received a report from a third party that employed some of Aircraft Investor Resources’ workers , Frank wrote in an email Monday.

LLCs under fire

Court records show Schrameck and his various companies were in hot water years before his bankruptcy in 2009 and indictment in 2014.

Aircraft Investor Resources LLC and its two subsidiaries, Epic Air LLC and Aircraft Completion Services LLC, and Schrameck himself are variously named as defendants in nearly 20 civil complaints filed in state and federal court between 2005 and 2010. Some were dismissed without payments to either party, whereas others resulted in cash awards to plaintiffs.

Various companies — from an airplane manufacturing business to Kitplanes Magazine — sued Aircraft Investor Resources and its subsidiaries, claiming thousands in unpaid bills and broken financial promises, including one employee’s failed attempt to collect overtime pay. Some of these companies were awarded money by default when the aircraft company simply didn’t respond to the allegations.

According to William Angelley, a Dallas attorney who specializes in aviation litigation, the number of civil complaints against Schrameck and his companies was exceptionally high.

“That’s a lot,” said Angelley, who added it was especially so for a smaller company making $1 million kit planes. “Big engine manufacturers and airplane manufacturers, over a period of years, could run up big numbers like that, but even for them that’s a lot.”

According to court records, some employees suspected foul play in the handling of the company’s financial matters.

David Hice, who was general manager of Aircraft Investor Resources from 2004 to 2009, said in a September 2009 affidavit — included in a motion filed in the company’s bankruptcy proceedings — that when he was hired in January 2004, the company failed to secure enough capital to get its manufacturing enterprise off the ground.

Deposits from customers at an August 2004 air show in Oshkosh, Wisconsin, helped the company “avert disaster,” Hice stated in the affidavit. Between then and when Hice was terminated in 2009 after Schrameck allegedly “physically attacked” him, Hice described how Schrameck managed to secure support from the city and state for infrastructure improvements while scrambling to pay for plane parts, materials and a down payment on a building. Schrameck also had employees build him his own “Victory Jet” on overtime, without paying for all costs, Hice stated.

David Clark was hired in January 2008 to oversee financial matters at Aircraft Investor Resources, according to a 2009 affidavit included in the bankruptcy filing.

Clark said he “immediately” became aware Aircraft Investor Resources needed at least $5 million to complete existing airplane contracts and was unable to make past due payments to vendors or pay its employees. By the time Clark left the company in July 2009, he estimated it was in need of between $20 million and $25 million to “square things up,” owing builders more than $15 million in parts.

The bankruptcy in turn seemed to spur more conflict between those who’d been promised planes. Deschutes County Sheriff’s deputies responded to a report of a physical dispute at the Bend Municipal Airport in October 2009 between Michael Lindsay and Douglas King, who were customers of Epic Air, and Sean McHale, who managed the Epic Air Building, court records show.

“These gentlemen had purchased aircraft from Epic Air and the aircraft were never completed or delivered,” then-Lt. Shane Nelson wrote in a report.

Nelson went on to describe how Lindsay and King — who is now the CEO of Epic Aircraft LLC, an aircraft company independent of Schrameck’s venture located at the municipal airport — observed Schrameck leaving the Epic building, although a federal bankruptcy judge had just advised the parties that no one was to be in the building. King was among the creditors of the business when it went into bankruptcy, court records show.

Lindsay allegedly threatened to kill McHale after he pushed Lindsay out of the door, where he was trying to get a look into the building. He told a sheriff’s technician he had paid $1.5 million for a plane.

Failing to deliver on those planes was a risky prospect in several respects. Not only was Epic Air frequently sued , according to Angelley, but Epic’s purported swapping of parts between planes also could have resulted in safety issues.

“Unfortunately, aviation has its share of those sorts of operators,” Angelley said. “It’s frustrating from a standpoint of a customer, but it’s also very unsafe.”

Schrameck is scheduled to go to trial for the federal money-laundering and fraud allegations at the end of June.

— Reporter: 541-383-0376, cwithycombe@bendbulletin.com