Plan proponents convicted in Hawaiian Airlines bankruptcy fraud case

William H. Spencer and Paul Boghosian were convicted on numerous federal charges relating to their fraudulent conduct in proposing a reorganization plan in the 2003 Hawaiian Airlines bankruptcy case.  Spencer was convicted following a two-week jury trial in Manhattan.  Boghosian pleaded guilty on October 29th.

According to trial evidence, in connection with a bankruptcy court's consideration of two competing reorganization plans, one backed by Hawaiian Investment Partners Group LLC ("HIP Plan") and another jointly backed by the trustee and Hawaiian Holdings Inc., Spencer submitted false affidavits to the bankruptcy court claiming he could provide between $300 and $500 million to fund the HIP Plan through a trust that he controlled. He later submitted a supplemental affidavit, with attached purported bank records, in which he represented that the trust had agreed to commit $500 million to fund the HIP Plan, and that the money was being held in a Netherlands bank account.  Both defendants also gave false deposition testimony and used the false affidavits to solicit interested parties to support the HIP Plan.

As it turned out, the funds did not exist and the documents submitted to the bankruptcy court were completely fraudulent.

Sentencing is scheduled for January 30, 2009