Former CEO And Managing Partner Of Public Charter Company Both Charged With Defrauding New Jersey Bank, Other Financial Institutions Out Of Millions Of Dollars

NEWARK, N.J. – The former CEO and Managing Partner of a now-defunct South Carolina public charter operator were charged today with using fraudulent documents and “ghost” reservations to collect millions in passenger payments to which they were not entitled. 

Judy Tull, 70, of Denton, Texas, and Kay Ellison, 55, of Kentucky, were each indicted by a federal grand jury in Newark federal court with one count of conspiring to commit wire fraud and bank fraud, seven counts of wire fraud and seven counts of bank fraud.

New Jersey U.S. Attorney Paul J. Fishman, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Special Agent in Charge Todd A. Damiani of the U.S. Department of Transportation, Office of Inspector General, made the announcement today.

According to the indictment:

Tull and Ellison co-founded Southern Air & Tours, d/b/a Myrtle Beach Direct Air & Tours, also known as “Direct Air,” a public charter operator headquartered in Myrtle Beach, South Carolina. In 2007, Direct Air began booking airline reservations and arranging for charter flights to be flown by contracted airline carriers. Direct Air offered airline services in a number of cities, including Newark. Tull served as Direct Air’s Chief Executive Officer, handled its flight operations, and dealt with its credit card processors and corporate bank. Ellison served as Direct Air’s Managing Partner and was involved in customer reservations.  

U.S. Department of Transportation regulations required charter operators to protect passengers financially by posting a security or keeping passenger payments for future flights in a designated depository with an approved bank. As such, Direct Air maintained an escrow account at a New Jersey bank, identified in the complaint as “Bank 1.” Passenger payments for future flights were deposited into the account. Direct Air and the “Bank 1” agreed that these payments would not be released to Direct Air until completion of the flights. Also, the requests for payment had to include a summary detailing the flights and passengers purportedly flown.

As part of the scheme, Tull and Ellison allegedly employed a variety of techniques designed to overstate the revenues associated with recently completed flights, including making “ghost” reservations for fictitious passengers in Direct Air’s reservation system and submitting fraudulent summary reports to the bank. They also “double-dipped” by submitting release requests for passenger payments designated as “membership fees” prior to the completion of the flights, and then after the flights were completed, submitted release requests for the same funds. Lastly, they concealed their criminal activity by sending fraudulent financial statements to credit card processing companies and investors.

Direct Air ceased operations in March 2012 and filed for bankruptcy. At the time it ceased operations, passengers had purchased tens of thousands of tickets for future travel. As a result, pursuant to the DOT regulations, there should have been $30 million held in the Bank #1 escrow account. Instead, there was only $1 million in the account.

Each count of the indictment is punishable by a maximum potential penalty of 30 years in prison and a $1 million fine. 

The charges and allegations contained in the indictment are merely accusations, and the defendants are considered innocent unless and until proven guilty. 

U .S. Attorney Fishman credited law enforcement agents with the U.S. Department of Transportation, Office of the Inspector General, under the direction of Special Agent in Charge Todd Damiani, with the investigation leading to today’s charges. 

The government is represented by Deputy Chief Scott McBride and Assistant U.S. Attorney Andrew Kogan of the U.S. Attorney’s Office Economic Crimes Unit, Acting Chief Barbara Ward of the Asset Forfeiture and Money Laundering Unit and Trial Attorneys L. Rush Atkinson and Carol L. Sipperly of the U.S. Department of Justice’s Criminal Division, Fraud Section.  

Defense counsel:

Tull: Clinton W. Smith Esq., Charleston, West Virginia

Ellison: James B. Lees Jr. Esq., Charleston, West Virginia