Insiders talk about the sweet idea that suddenly went sour.
It’s been a little more than a year since Silver State Helicopters (SSH) abruptly shut its doors on Feb. 3, 2008 and went out of business. That day also marked the last time that approx. 2,000 of its flight academy students saw any hope of getting the training they had paid nearly $70,000 for in advance.
The perceived – and very probably factual - scam has been the talk of the helicopter industry every since. In fact, it has become a verb in some places: "If I sign up for lessons, you’d better not do a Silver State on me!"
SSH was founded by Jerry Airola, a former police officer for the City of Los Banos, Calif. Airola had managed to fall in love with flying helicopters while, at the same time, falling out of love with police work. So, according to the biography that used to be posted on SSH’s official Web site, Airola turned in his badge, moved to Las Vegas and founded a water purification company that quickly became the largest of its kind in the country.
By the late 1980s, Airola’s love for flying drew him away from that business and led him to start SSH. In 2006, the helicopter outfit ranked 12th on Inc. magazine’s list of the top 500 privately held companies in America. He would end up selling the company to EOS Partners in 2007, leaving the post of president and CEO to become the general manager.
But back in 2003 or so, Airola decided to start a flying academy that would rival the U.S. Army’s famous Fort Rucker helicopter training program. If successful, he would put a school in every state in the U.S., providing world-class training that would be the gold standard.
Airola began marketing his flight school in places like Dallas, Fort Lauderdale and Los Angeles by running television and radio ads inviting people to come to a recruiting seminar to learn more about an exciting career flying helicopters.
According to former employees, SSH expected about 100 people to attend its first seminar. But when over 1,000 showed up, Airola knew he was on to something bigger than he thought. Soon, seminars where popping up all over the country, attracting large crowds eager to hear the charismatic, self-made millionaire talk about their future in helicopters.
According to former students, those who attended the recruiting events found a carnival-like atmosphere.
"They were giving helicopter rides and they had several people standing around to talk to before the sales pitch started," said Bill Howard, a then 49-year old electrician living near Dallas who wanted to make a career change. "And then, of course, Jerry came out; very excited, very upbeat. And that’s when he started talking about the school."
Airola, or sometimes a high-ranking staff members, would explain to attendees that for $69,900 - a figure they called an "investment" - Silver State Helicopter Academy would take them from having no license, to a commercial rotorcraft license with a certified instructor and instrument rating in 18 months. It would be accomplished through classroom instruction, unlimited access to an on-site flight simulator, and approximately 10 hours per week of actual flight time in a company-owned Robinson R22 and R44 helicopter.
The icing on the cake was Airola’s promise that SSH would hire the vast majority of its students as pilots once they successfully completed their training. It was the part of the sales pitch that sold Howard and many others in attendance.
According to Howard, prospective students were given admission applications and loan prescreening paperwork to complete and leave at the event. A few days later, a letter of acceptance would arrive, along with a loan application from Student Loan Express, which had to be competed and returned with a $500 fee.
Once the loan was approved, the newly accepted student would sign a training code of conduct agreement, which included a requirement to attend classes as schedule, said Howard. A start date for class would then be given. The total time between the seminar and the first day of class was approximately three weeks.
By November of 2007, SSH had 2,900 students enrolled at 34 flight training locations. And while some had paid cash for the $69,900 course, most took out loans that were to be repaid at a rate of $1,000 per month once instruction had concluded.
"Silver State didn’t care about providing the service. Silver State cared about getting paid for the service." – Randy Rowles, former V.P., Silver State Helicopters
The fine print of the loan agreement, however, said that 30 days after classes commenced, the school would receive the first of three $23,300-payouts, followed by similar payouts during each of the following two 30-day periods, provided training was still being received. This meant that as long as the student was in attendance for the first 90 days, SSH would be in receipt of the full $69,900 tuition, which, by the terms of the loan agreement signed by the students, belonged to SSH, regardless of whether the student completed his or her training.
Meanwhile, SSH’s upper management was in a state of transition. By August 2007, Airola had virtually stopped holding the recruiting seminars, sold his company to New York-based EOS Partners, and remained onboard as SSH’s general manager. EOS hired several executives to help run the 800-employee business, including Randy Rowles, who was brought on as the VP of training operations in the fall.
In an exclusive interview for this article, Rowles told Rotor & Wing that one of his goals was to have SSH’s training program qualify as a U.S. Veterans Administration-approved flight school. But in order to do that, the company would have to meet a strict set of government-mandated guidelines, including one that prohibits disbursing 100-percent of a student loan before 100 percent of the training has been received. Rowles met with his bosses to discuss the matter.
"I just told them we need to change the refund policy, because the [Veteran’s Administration] mandates a fair and equitable refund policy [that says] unused dollars get returned," explained Rowles. "The answer I got was, ‘We only want about 20 percent of these people to finish.’"
According to Rowles, he was told that it was in SSH’s best interest to leave the student loan disbursement system the way it was, because if a student left after the third month, their entire $69,900 would be in the company’s possession, and SSH would have no legal obligation to refund a dollar of it. As for the student, if they left prior to the completion of training, SSH would tell the lender that they had abandoned their training, thus beginning the student’s obligation repay the loan at $1,000 per month. In essence, the school would have the entire tuition without having to provide the entire program of training. It was easy money.
And what would make a student leave without completing the 18-month course? Thanks to the big recruiting pushes and subsequent enrollments, most of the school were trying to operate above capacity. This resulted in frustrated students leaving because of over-crowded classrooms, a lack of available aircraft and, in the case of students who had already gone beyond the 18-month training mark without getting their ratings, the need to generate an income elsewhere in order to support themselves.
Rowles said the obvious solution to students abandoning their training was to reduce the influx of new students and concentrate on properly completing the training of those already enrolled. But the company chose to overrule him and reignite the nationwide recruiting drives.
"The fact that they were marketing to people was not as big a concern to me as when I found out [the schools] were completely understaffed and under-equipped to do the work, said Rowles. "That was a huge issue to me."
But the problems ran deeper, still. While examining the company’s books, Rowles discovered that SSH’s contract, charter and tourism business was not what it appeared to be. Of the 800 hours put on their turbine aircraft over the period that he looked at, half or less generated any money. So, if they weren’t out there flying revenue-producing missions, what were they being used for? Rowles said he found that the company’s turbine fleet was often being flown from one recruiting seminar to the next to give attendees the impression that the helicopters they saw at the event were based there. This, he said, meant two things. First, the turbine fleet was losing money. Second, SSH would not be able to hire anywhere near as many of its graduates as Airola said it would during the recruiting events.
"There was no way they could hire those many people," said Rowles. "There was no doubt that he knew that this could not be done, and that was one of the reasons I wanted the seminars stopped!"
By December 2007, SSH was holding recruiting events in more areas than ever before and continued to make the same promises of an 18-month commercial license with a certified flight instructor and instrument rating, almost always followed by a job with the company that trained them – a job they would need in order to build hours and to pay back their student loans.
According to Rowles, the relationship between him and company had deteriorated to the point where he felt he could not steer the company in a different direction with regard to the school, so he went to the CEO with his resignation papers.
SSH asked Rowles to stay on for just another month, which he agreed to do. It ended up giving him an unwanted front row seat to one of the most embarrassing days ever seen by the helicopter industry.
Rowles, along with one or two other executives, noticed the company’s sudden desire to sell off or refinance SSH’s assets. The already under-equipped flight schools – 37 in 17 states by mid-January of 2008 – saw a reduction in available aircraft and orders for new simulators being cancelled. At the Robinson Helicopter Company in Torrence, Calif., a dozen brand new helicopters in SSH livery gathered dust as requests to come pick them up were ignored.
Then, around halftime of the Super Bowl on Feb. 3, 2008, the wheels officially fell off the SSH wagon.
Jerry Airola, the man who had started Silver State Helicopters, emailed a letter to employees saying the company would be going out of business effective at 5:00 P.M. that same day and that their jobs would be terminated at that time. Two days later came the announcement that Silver State had filed for protection from its creditors under Chapter 7 bankruptcy laws.
"This action followed a rapid, unprecedented downturn in the U.S. credit markets, which severely curtailed the availability of student loans for the company’s flight academy students and resulted in a sharp and sudden downturn in new student enrollment," read the Feb. 4 press release issued on SSH’s behalf by its marketing firm. After that, the company’s phone went unanswered, the Web site was taken down, and corporate leaders could not be found.
Word spread quickly to everyone from students to upper-level managers. All were surprised. None were happy, especially not Bill Howard.
"That hurt," said Bill Howard, who had earned his commercial license but had not finished his instrument training. "I’m 50. That’s why things are hitting me kind of hard."
Howard said that he and others from SSH’s Dallas area schools met to discuss their plight, which was not good. Many did not receive their licenses. Most who did, never earned enough hours to find employment as pilots.
Worst of all, the companies that underwrote many of the student loans considered the closure of SSH the end of training, signaling the start of the loan repayment phase. But a class action suit filed by the students led to a court-ordered injunction freezing the repayment of the loans while a criminal investigation into SSH’s actions are conducted.
For now, only a few former students found the capital to complete their training at other schools, but still struggle to find employment in any field. All are in fear that a judge will someday decide that they must repay loans for services they never received from SSH.
Howard has been trying to find permanent employment as an electrician, but while working a temporary job, he injured himself and is temporarily unable to work.
Rowles returned to Texas to find employment.
R&W reached out to EOS Partners and Jerry Airola for their comments. EOS did not return our calls and Airola could not be located. Meanwhile, as Silver States aircraft and vehicles sit in a secure hangar near Dallas, the FBI, the Nevada Office of the Attorney General and lawyers representing the students are investigating the matter.