US DOT questions Boston-Maine's ethics after bond issue

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Questions about Boston-Maine Airways’ management oversight and ethical standards have been raised by the US DOT after information surfaced that one of the carrier’s former top executives signed and issued an apparently fraudulent bond to the Air Line Pilots Association (ALPA).

The regulator, which is considering Boston-Maine’s long-standing request to expand operations with a larger fleet of Boeing 727s, has instructed the carrier to explain in detail the circumstances surrounding the bond issue, and disclose if anyone else at the carrier or its now defunct sister Pan American Airways was involved in the transaction.

Boston-Maine last month informed the DOT that senior VP and general counsel John Nadolny resigned in May after taking responsibility for “irregularities” affecting the procurement of a performance bond delivered to ALPA’s counsel in connection with a negotiated settlement agreement between the union and Pan Am.

The carrier’s revelation came only after ALPA alerted the DOT to the apparent fraud. The union, which opposes Boston-Maine’s application to operate a larger 727 fleet, also accuses the company of shifting 727 flying operated by Pan Am to non-unionized Boston-Maine in anticipation of Pan Am’s November 2004 closure.

In a July 20 letter to Boston-Maine’s acting senior VP and general counsel Robert Culliford, the DOT says Nadolny’s conduct “presents questions about the carrier’s oversight of its management and its adoption and enforcement of ethical standards for carrier employees”. The regulator has asked the airline to disclose what kind of practices were in place at Boston-Maine and Pan Am when Nadolny engaged “in his improper conduct”.

In addition, the DOT has requested statements describing what remedial actions have been taken by Boston-Maine to prevent future occurrences, and if Nadolny is employed by or continues to have a business relationship with Boston-Maine, Pan Am, or any affiliated corporation.

Significantly, the agency also wants a statement signed by a senior officer of the company verifying the accuracy of all the carrier’s filings to the regulator between January 7 and June 3, which were officially submitted under the names of Nadolny and the carrier’s outside counsel.

“We are unwilling to accept the factual statements made in those pleadings without some additional assurance from the carrier that the facts stated in those pleadings are true and correct.”

Boston-Maine has until July 27 to respond to the DOT.

Culliford says the company plans to submit a reply to the regulator. However, he declines to comment on the nature of that response.