General Electric Slapped with Lawsuit by Russian Billionaire
Russian billionaire Alexander Lebedev has taken GE (NYSE:GE) to court in the UK following the failure of his Blue Wings airline in hopes of seeking $75 million in damages. When the company could not afford to maintain the mortgage on several Airbus planes, Lebedev’s legal team claims GE simply sold the aircraft back to themselves at a discount and then leased them off, squeezing Blue Wings out of any money it hoped to recoup.
GE’s Capital Aviation Services (GECAS) is defending its actions in British court, arguing it did its due diligence in getting a high price on the Airbus planes it seized as part of foreclosure proceedings. When the owners of Blue Wings, Alpstream, did not make payments on its loan, GE quickly sold the planes back to another part of its own company in order to lease them to JetBlue (NASDAQ:JBLU) — but not before completing major refurbishments — according to the argument of the plaintiffs.
Which actions does Alpstream consider fraudulent? The company is questioning why GECAS never took another bid on the aircraft when reportedly more than 40 offers were on the table. Alpstream’s legal team noted in the proceedings that executives in its own company received offers for planes, which were ignored when GE decided how it would handle the foreclosure. Alpstream counsel grilled one GE executive involved with the deal over compliments she received on its work…
“You are a highly intelligent and capable employee and if you chose to ignore [the offers for the Airbus planes], it was at the time it did not fit in with your plan…” the Alpstream lawyer said. The GECAS executive denied deliberately ignoring any leads that could have netted the company a better price on the planes.
Why would GECAS executives receive praise from within their company when they didn’t take any bids on planes headed for auction? That question has yet to be answered in court. Nonetheless, the deal ended up being very profitable for GE while Blue Wings received next to nothing as it went out of business. It remains to be seen whether Alpstream counsel can prove the actions of GECAS were to intentionally commit fraud.
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