Five businesses and 21 Chinese tourists have filed a $50-million racketeering lawsuit in federal court against the owner and officials of XTRA Airways and several others for allegedly engaging in a fraudulent scheme by pretending to participate in a plan to bring vacationing tourists from China to Saipan via charter aircraft, but in fact deliberately sabotaging such plan by failing to take the steps necessary for it to succeed.
The five complaining businesses are Dream Pacific Aviation Services Hong Kong Ltd.; Evelen U.S.A. Corp., owner of Impression Tour; Bright Investment LLC, owner of Saipan Restaurant; Rionda Company Ltd., owner of New Shin Restaurant; and BW International Inc., owner of BW Car Rental.
The 21 Chinese tourists are Cui Xing, Kong Fanjing, Li Huakun, Li Xiuxia, Liang Wei, Luo Feng, Meng Jie, Qian Dongyuan, Qian Yutian, Shi Songzhen, Song Guangsen, Wang Fang, Wang Mingqiang, Wang Qianduo, Wang Yaming, Wang Yelan, Yang Shiping, Zhang Guifeng, Zhang Lin, Zhang Shuangli, and Zhao Jingjian.
Eleven of the 21 are “stranded” tourists. They traveled from China to Saipan via XTRA Airways prior to Nov. 4, 2017, and were scheduled to return to China via XTRA Airways on or after that date, but instead were allegedly abandoned by XTRA on Saipan.
They rest are intending tourists who allegedly had booked and/or paid for flights on XTRA Airways charter flights from China to Saipan and back to China. Their charter flights, which were scheduled for the time period between Nov. 4, 2017, and Dec. 10, 2017, never flew due to XTRA’s alleged abandonment of the Saipan routes.
Named as defendants are Frank J. Visconti, Nicolas Finazzo, and Andrew Lotter, who are all citizens and residents of Florida. They all allegedly personally authorized and actively participated in the fraudulent and wrongful conduct against plaintiffs.
Visconti was president and chief executive officer of XTRA Airways.
Finazzo was a director of XTRA Airways and AerSale Inc. He was also chief executive officer of AerSale Inc. and a member of AerLine Holdings LLC.
Lotter was chief operating officer and director of operations for XTRA Airways.
Also sued are TEM Enterprises Inc., AerSale Inc.; and AerLine, Holdings LLC. The companies are all based in Coral Gables, Florida.
TEM Enterprises owns XTRA Airways.
AerSale Inc. has operated and controlled XTRA Airways. It was the registered owner of the B-737-800 aircraft that XTRA Airways used for the Saipan/China flights.
AerLine Holdings LLC is the owner and parent corporation owner of XTRA Airways.
Also sued is Carlton Conkling, a citizen and resident of the State of Texas. He was employed as a pilot by XTRA Airways and served as captain of several XTRA Airways flights between Saipan and China.
Various other corporations and individuals are unnamed co-defendants being alleged co-conspirators in the offenses.
Attorney Robert J. O’Connor and the Torres Brothers law firm are counsel for the plaintiffs.
The plaintiffs are suing the defendants for allegedly violating the Racketeer Influenced and Corrupt Organizations Act, fraud, violating the CNMI Consumer Protection/Unfair Competition Act, and negligence.
In addition, plaintiff Dream Pacific are suing the defendants for breach of contract/interference with contract, unjust enrichment, and conversion.
The plaintiffs asked the U.S. District Court for the NMI to hold the defendants liable to pay them $50 million in punitive damages, plus other damages, attorney’s fees, and court costs.
According to O’Connor in the complaint, in 2016 and 2017, Dream Pacific engaged in negotiations with XTRA Airways for XTRA to provide charter air services between Saipan and China for the purpose of transporting Chinese tourists visiting Saipan.
Pursuant to these negotiations, Dream Pacific and XTRA entered into an Aircraft Charter Agreement on March 18, 2017.
Under the deal, XTRA agreed to make one aircraft, with crew, available to Dream Pacific for charter flights according to schedule: three weekly flights between Saipan and Nanjing; three weekly flights between Saipan and Tianjin; and one weekly flight between Saipan and Changsha.
Dream Pacific agreed to pay for the use of the plane for the minimum number of hours, at an agreed rate, and regardless of the number of passengers on the flight.
The agreement required XTRA, among other things, to be fully authorized and licensed to operate the aircraft for all the purposed required by the charter agreement.
Pursuant to the agreement, O’Connor said, Dream Pacific deposited $1 million into an escrow account to accrue aircraft availability.
The money, O’Connor said, was wired from China to XTRA Airways’ bank account at the Wilmington Savings Fund Society, FSB, in Washington, Delaware, on March 31, 2017.
After entering into the agreement, but before charter flights commenced, defendants Visconti, Finazzo and Lotter allegedly determined that XTRA’s contractual relationship with Dream Pacific was dissatisfactory and disadvantageous to XTRA.
Visconti, Finazzo, and Lotter allegedly dissolved and conspired together to terminate the relationship by fraudulent means.
Visconti, Finazzo, and Lotter, allegedly directly or through agents, encouraged and induced Dream Pacific to agree to an amendment to the Aircraft Charter Agreement, whereby the charter project would ostensibly be expanded to include a second plane and additional flights and destinations.
On Aug. 15, 2017, Dream Pacific and XTRA executed an addendum 1 which amended the original Aircraft Charter Agreement by providing for two aircraft rather than one; and by changing the schedule of charter flights to include three weekly flights between Saipan and each of four cities in China: Nanjing, Tianjin, Wuhan, and Shenzhen.
Under addendum 1, one plane would begin flying the Nanjing and Tianjin routes in late September 2017, while the second plane would begin flying the Shenzhen and Wuhan routes in late October 2017.
The minimum monthly hours were set at 230 hours per plane.
O’Connor said the five business plaintiffs agreed with each other to arrange and provide for the entertainment, food and lodging of an anticipated average of 2,000 Chinese tourists per month to be transported to Saipan via XTRA Airways charter flights.
Dream Pacific sold air tickets and travel packages to and from Saipan to the tourist plaintiffs.
Charter flights on XTRA Airways between Saipan and China plan began in September 2017, and several round-trip flights took place in September and October 2017 between Saipan and Nanjing, and between Saipan and Tianjin.
Rather than the agreed two aircraft, however, XTRA allegedly supplied only one plane to provide service for charter flights; a two-engine B373-800 passenger aircraft, with 186 passenger seats.
O’Connor said Visconti, Finazzo, and Lotter, directly or through agents, continued to falsely represent to Dream Pacific that a second plane would be provided, even after, the second aircraft that they had originally claimed was intended for the Saipan routes had been leased by XTRA to another company.
Furthermore, O’Connor said, even the single plane XTRA provided was not fit for its intended purpose.
O’Connor said the route from the U.S. followed by the plane on its way to Saipan, as well as the planned routes between Saipan and China, indicates substantial distances over the Pacific Ocean more than one hour’s flying time from any adequate airport, but the plane provided by defendants was not extended-range twin-engine operation regulations, or ETOPS, certified.
Visconti, Finazzo and Lotter, directly or through agents, allegedly represented to Dream Pacific that the planned routes between Saipan and China did not require its aircraft to be ETOPS certified because there was an adequate airport at Iwo Jima.
O’Connor said in fact plaintiffs believe that the Iwo Jima airport, was not an adequate airport for ETOPS purposes, due to its inadequate runway surface and length, lack of weather forecasting service, frequent closures, and other reasons.
In addition, the lawyer said, XTRA operated its Saipan/China flights in violation of other Civil Aviation Administration of China (CAAC) and U.S. Federal Aviation Administration (FAA) safety regulations, including but not limited to regulations concerning duty times and crew rest requirements.
XTRA allegedly never flew the extra routes contemplated by addendum 1, such as the routes to and from Shenzhen and Wuhan.
Nor did XTRA ever obtain the government approval necessary to fly the Shenzhen and Wuhan routes, according to O’Connor.
In fact, XTRA never even applied to either the Civil Aviation Administration of China (CAAC) or the U.S. FAA for authorization to fly the routes between Saipan and Shenzhen or Wuhan.
On Sept. 24, 2017, the CAAC assessed eight demerits against XTRA Airways for its failure to satisfactorily address various permitting concerns under CAAC regulations.
These demerits, O’Connor said, made it extremely unlikely that the CAAC would allow XTRA Airways to expand its operations from Nanjing and Tianjin to any other airports in China, including the airports in Shenzhen and Wuhan, even if it had sought such approval.
On Nov. 4, 2017, XTRA advised Dream Pacific that its sole plane on Saipan had suffered a mechanical problem, which required parts that could only be obtained in the mainland U.S.
The passengers on the Nov. 4, 2017 flight from Saipan to Tianjin had already boarded the plane on Saipan expecting to return to China, but were deplaned at the Saipan airport due to this reported problem.
O’Connor said XTRA had no second plane available for the deplaned passengers, or for the other stranded tourists.
He said XTRA refused to feed, house, or otherwise accommodate the stranded tourists, including the stranded tourist plaintiffs.
XTRA also allegedly refused to repatriate or pay for the repatriation of the stranded tourists back to China, forcing Dream Pacific to house, feed and repatriate them.
O’Connor said that, on Nov. 10, 2017, after the plane was repaired, XTRA flew it back to the U.S., declared the aircraft charter agreement and addendum 1 terminated, and provided no further charter services to or from Saipan.
Dream Pacific asked XTRA to resume air charter services, but XTRA refused to do so.
As of Nov. 10, 2017, O’Connor said, approximately 2,000 intending tourists, including the intending tourist plaintiffs, had signed up and paid to fly round trip from China to Saipan and back via XTRA Airways on various dates between Nov. 10 and Dec. 10, 2017, and all of their flights had to be cancelled.
Many of these passengers were coming to Saipan for weddings and vacation.
On Sept. 11, 2017, Dream Pacific caused an additional “security deposit” in the amount of $200,000 to be wired to and deposited in XTRA’s Wells Fargo Bank account in San Francisco, California.
In September and October 2017, Visconti, Finazzo, and Lotter, directly or through agents, represented to Dream Pacific that the latter needed to wire extra deposit monies to cover XTRA’s expenses in applying for authorization to fly between Saipan and Shenzhen and Wuhan.
In reliance on the misrepresentation, O’Connor said, Dream Pacific wired the money from Hong Kong and Beijing and deposited into XTRA’s account at the Wilmington Savings Fund Society in Wilmington, Delaware, on Oct. 25 and 26, 2017.
After XTRA flew its aircraft back to the U.S. and declared the aircraft charter agreement terminated, Dream Pacific requested XTRA to refund the monies that Dream Pacific had wired, but XTRA refused to do so.
XTRA also refused to pay the fees and deposits required for ground handling at the Nanjing Airport, forcing Dream Pacific to pay Nanjing Airport authorities $100,000 for these expenses.
O’Connor said XTRA also refused to pay LSG for supplying food and beverage for the charter services, so Dream Pacific was forced to make these payments as well.